Company overview of Sparks Group <8739>
3. Strengths of the Company Group
As strengths of the Company Group, (1) bottom-up corporate research and excellent hypothesis building abilities, (2) excellent questioning abilities, (3) high return on investment, (4) talent development through an open corporate culture, and (5) long-term perspective on management are listed.
(1) Bottom-up corporate research and excellent hypothesis building abilities
Based on the investment philosophy that "macro is the integration of micro", which has penetrated throughout the company, there are "thorough corporate research from the bottom up" and "excellent hypothesis-building ability". As mentioned, "macro is the integration of micro" means that "by accumulating thorough corporate research, you can see major trends". Due to the detailed analysis of many companies, it is possible to build appropriate hypotheses and find companies that are necessary for society, namely companies with high growth potential. From the viewpoint of forming new funds or developing new investment trusts, it is possible to find investment areas with value even investors themselves are not aware of. Although investment management companies often have a division of labor where analysts are in charge of corporate research and fund managers are in charge of operation, the Company Group emphasizes the "bottom-up corporate research" and fund managers also conduct their own corporate research based on their hypothesis.
(2) Excellent questioning abilities
Thorough corporate research leads to "excellent questioning abilities" and becomes a strength. Due to thorough corporate research, it becomes possible to have deep discussions by asking more fundamental questions to the target investment companies, rather than superficial discussions such as short-term stock price volatility or next fiscal year's performance. By obtaining more important information through essential questions, appropriate discussions for improving the performance of the target investment companies can be conducted, which also leads to excellent engagement strategies, which is how our company views it.
(3) High return on investment
As a strength of the Company Group, the accompanying ratio of balance compensation rate and success compensation rate to operating asset balance is highlighted. Whether balance compensation rate or success compensation rate is attached to the fund is determined by negotiations with customers, but in the case of investment trusts, negotiations with sales companies such as securities companies and banks determine it. The Company Group's funds can set high balance compensation rates (0.75% in 2020, 0.69% in 2021, 0.69% in 2022, 0.73% in 2023 and 0.71% in 2024) due to the excellent returns of the target investment companies through thorough corporate research. The success compensation rate also reaches a high of 35.3% (2024 fiscal year) because funds with success compensation can be set up due to excellent operation with high returns. As a result, the operating margin rate is also high at 45.3% (same).
(4) Talent development through an open corporate culture
In the Japanese equity research department of the Company Group, meetings are held every morning to share the progress of corporate research. Additionally, separate meetings are held every week for sharing hypotheses, investment action and discussion. Our company believes that this is of great significance as talent development. Due to sharp comments from experienced operation personnel, it is possible to learn things lacking in one's self and the approach to research when studying. A method of corporate research, the method of building hypotheses, etc., which are difficult to manualize and tend to become subjective, are shared through discussion. This enables to improve the level of operation personnel and accumulate excellent personnel. The Company Group places a great deal of emphasis on personnel development and considers taking time to develop personnel as its creed, which is why it is characteristic that the tenure is long. In the asset management industry where the ability of operation personnel has a great influence on the profit of the company, talent development through an open corporate culture and information sharing becomes a strength and leads to excellent business performance, which is how our company views it.
(5) Long-term perspective on management
The Company Group believes that by investing from a long-term perspective, it can build a relationship of trust with the target investment companies and enhance their corporate value. Due to long-term operation, the impact of temporary events such as a decline in the stock market due to events can be mitigated, and as a result, return can be provided to investors. In addition, in long-term funds with a period of operation of 20 years, operating assets balance and balance compensation are stably increased, which leads to the stability of income.
4. The company's position in the market of the group.
In addition to the above strengths, the company is unique among independent active asset management companies listed in Japan in that its investment targets range from Japanese stocks to tangible assets such as solar power generation and unlisted stocks. Rarely a company is promoting a wide range of strategies ranging from traditional investment strategies such as selected investment in stocks and long-term shareholding to alternative investments such as renewable energy and engagement strategies within one group. By handling alternative investments in addition to traditional strategies, our company believes that we can not only increase our stable operating asset balance, but also achieve high profitability. The investment strategy for tangible assets such as renewable energy generation businesses, which targets large-scale infrastructure, contributes to increasing the operating asset balance and the balance of investment is large. In fact, the operating asset balance (12-month average) that was 38.2 billion yen in March 2014 has risen rapidly to 277.4 billion yen or 7.2 times by March 2024, and the ratio to the total operating asset balance has also increased to 16.6%. Asset management is based on the basic principle of risk diversification through diversified investments. In that respect, the company is smoothing out the risk of excessive fluctuations in the operating asset balance by handling a range of securities with relatively high volatility from listed to unlisted stocks within its own group, to stable tangible assets. Looking at the trend of the company's operating asset balance and the growth rate of the operating asset balance, it can be seen that it is stable.
Private equity for venture capital investment is relatively high in balance fee rate as one of the company's investment strategies, which means that its profitability is also high. Although it cannot be compared directly due to differences in business models and major customer segments, our company believes that the high profitability of the company is also due to the incorporation of alternative assets into its investment portfolio in addition to traditional investment strategies. Profit is the basis for stock price calculation and dividend origin. In this sense, the company's investment strategy portfolio and business model, which can create profits efficiently and stably, are attractive to investors.
(Written by FISCO Guest Analyst Yoichiro Shimizu)