■Growth Strategy

1. Market trends

As an environment surrounding the Japanese real estate market, it is expected that long-term inflation trends in the real estate market will be promoted by macro factors, such as rising land prices and rent increases centered around the metropolitan area, rising prices due to historical depreciation of the yen, and entering an inflation cycle involving wage increases for the first time in 20 years. Furthermore, the business environment surrounding Sheila Technologies is thought to be good, with the inflow of investment funds into the real estate market associated with the flow of “savings to investment” led by the government, and an increase in overseas large investors focusing on the sense of cheapness in the Japanese real estate market.

Along with this business environment in the real estate market, DX in the real estate investment market that the company targets is also expected to accelerate. The ban on online real estate contracts was lifted in 2022/5 due to law revisions. In Japan, there are not many people who have invested in real estate, including REITs, compared to overseas, but in the future, an inflow of real estate investment money utilizing crowdfunding is expected in Japan as well, as an increase in awareness of crowdfunding. Furthermore, according to the company's data, it is expected that the size of the real estate crowdfunding market in Japan will expand from 50.8 billion yen in 2022 to 150 billion yen in 2026.

2. Growth Strategy “Predicted 2026”

The company announced the growth strategy “Fiscal 2026” (2024/12 to 2026/12) centered on M&A in 2024/1. As management target values, sales for the fiscal year ending 2024/12 are 27.5 billion yen to 30 billion yen, sales for the fiscal year ending 2025/12 are 34 billion yen, and sales for the fiscal year ending 2026/12 are 41 billion yen (none of which include M&A). As a basic strategy, it is a policy to promote organic growth of 20% or more aimed at expanding sales, expansion of in-house services and products, and strategic M&A (inorganic growth), and also promote an increase in profit margins due to in-house manufacturing of real estate construction and growth in “Yifuri-kun” related businesses.

In terms of business-specific strategies, in real estate developer-related businesses, in addition to collaborating with BlackRock's private placement fund in the US, expanding the real estate development business with Kumica and area complementing, and promoting new product development, we aim to grow and expand the real estate development business including our own brand “SYFORME” series. In the “Yigeri-kun” related business, we anticipate an increase in the number of members due to improvements in convenience through the “Yigeri-kun” exclusive application released in 2024/2 and the “Yield Kun Coin” linked with Rakuten points, etc., and further suppressing advertising costs by utilizing digital marketing, in addition to suppressing advertising costs by utilizing digital marketing, new investment and reinvestment will be promoted through nurturing new members and existing members. Also, as project formation using bank loans became possible from 2023/11, it is a policy to promote the formation of large funds and promote scale expansion per case. The target for 2026 is a cumulative number of members 0.5 million and a cumulative fund formation value (AUM basis) of 60.6 billion yen. In the renewable energy-related business, we will promote business expansion due to full-scale development of non-FIT solar power sources, which is our main force.

The M&A strategy focuses on the growth potential of target businesses as one means of expanding in-house products and services, and actively carries out M&A. As an implementation judgment standard for M&A, the conditions include companies whose PBR is less than 1 times, but synergy with the company's technology is expected, and companies whose net assets are underestimated in relation to the fair value of owned real estate, etc. are expected to contribute profits at the same time as acquisition. Furthermore, recent M&A includes the transfer of the “IETTY” business, the transfer of the architectural coating FC business “Star Paint”, and a capital and business alliance with Kumica.

3. Our point of view

The company is a proptech company that develops “Yield Kun” operations based on the real estate developer business. Since it was directly listed on the US NASDAQ, it is not familiar to Japanese investors, but it is possible to achieve target real estate off-balance and performance fluctuation risk reduction by utilizing “yield kun” management, and it features a business model that is a stable revenue source along with APBM income continuously obtained after property sales and rent income obtained from real estate owned by the company. We are evaluating this business model. Furthermore, as a growth strategy, it is a policy to expand scale and increase profit margins by utilizing M&A and creating group synergy, and we would like to pay attention to the progress of that growth strategy.

(Author: FISCO Visiting Analyst Masashi Mizuta Exhibition)