8909 - Shinoken Group Co

[RetroRanger]

New stuff from Shinoken:

https://www.shinoken.co.jp/press_ens/get_img/185/file1_path/20210226_185.pdf

 

Shinoken Office Service (Further referred to as SKO), a subsidiary of

Shinoken Group Co., Ltd. (Tokyo Headquarters: Minato-ku, Tokyo, President

Hideaki Shinohara, TSE Ticker 8909, further referred to as Shinoken, including

the whole group) has acquired all shares and subsidiarized Computer

System Co., Ltd. (Headquarters: Shinjuku-ku, Tokyo, CEO Keiichi Tamura,

further referred to as CSC) as of today, February 26th, 2021. SKO initiates

information system and shared services of administration operations, and

CSC is a software developer.

 

So an aquisition for their internal digital transformation they need to improve in order to make Reit as a service work in the future :)

 

[zuminsan]

Thanks for the new stuff

[RetroRanger]

https://www.smartkarma.com/insights/shinoken-8909-cheap-stock-growth-lag-governance-hiccup-gift-to-foundation-unlikely-to-pass

 

Anyone got access to SmartKarma would be interesting to read that insight?

Also anyone has access to the MOI Global talk of Shinoken?

 

https://moiglobal.com/mike-kruger-202101/

[Thelilyinvestor]

Hi guys, new to COBF.

 

Just wondering if anyone has a rough idea of how much the Japanese and Indonesian REITs could earn for Shinoken? I guess it would be an additional stream of income, but will it be something very small or does it have real potential?

 

I would love to know your thoughts and will be glad to discuss perspectives.

 

PS: Shinoken I believe is "Heads I win, Tails I win a little bit" thanks Mohnish!!

[RetroRanger]

You should probably look into their mid-long Term prospect of September . Its on their page!

[Thelilyinvestor]

You should probably look into their mid-long Term prospect of September . Its on their page!

 

Thanks for the quick response RetroRanger,

 

Yeah I have looked at their mid-long term prospect and for what I understand, they believe it could add "tens of billions yen" in revenues, so if I had to guess, if they execute nicely the REITs could add 1 or 2 billion yen in profits over the next 5 to 10 years.

 

Time will tell, but I feel the REITs are a free lunch!

[RetroRanger]

"Time will tell, but I feel the REITs are a free lunch!"

 

Thats exactly how you should see it and how i see it. :)

[TheThinkingInvestor]

https://www.smartkarma.com/insights/shinoken-8909-cheap-stock-growth-lag-governance-hiccup-gift-to-foundation-unlikely-to-pass

 

Anyone got access to SmartKarma would be interesting to read that insight?

Also anyone has access to the MOI Global talk of Shinoken?

 

https://moiglobal.com/mike-kruger-202101/

 

Some guys on Twitter were asking John Mihaljevic if he would release the MOI deck privately and he said he would but I PM'd him and never got a response.

[misterkrusty]

here's the email from the MOI slide deck: mkruger@mpkpartners.com

[RetroRanger]

Thank you for that,i try to contact him :)

[RetroRanger]

So mike answered me :) To respect his wish and MOI Global, i cannot share the presentation, but i wrote down a summery of his insight and stuff.

 

 

Shinoken is no value trap ( currently over 25% payout ratio and a high payout rate in the last 17 years)

Aquires often unsually formed land and builds on them with their specialied buildings ( to use the rare space to a max)

70% of construction is done by Ogawa Construction ( which they aquired in 2014). But 80% of Ogawas income is not

coming through Shinoken --> Shinoken bought this business back then , now at a 1,5LTM Ebit , which is amazing (Merger-->Spawner stuff)

 

Shinoken still manages over 70% of the properties they sold. 

The rents are 5% under market price on purpose to guarantee a high occupancy of 99% (versus the average of 82% of the market)

5% of the rent is the fee used for the management by Shinoken ( renewed every two years)

Only 2% of the people do not renew ( which is rare, i know that people in japan move very often, because normally

they have to pay a big fee to the landloard after a defined amount of years.)

Those people also get gas and electricty from shinoken (around 80%) and some insurance products (rent guarantee)

Shinoken has a good relationship with their customers!

 

Nothing new regarding the retail scandal of 2018

Shinoken has elimited its debt AND transformed to a service based company during thise phase. The margins on those services

has risen well in the last 5 years . Business was finally coming back to normal --> then covid came

but it had not a big impact on Shinoken.

 

CEO did buybacks ( minor ones ) and established a high payout ratio (> 20%)

 

The new REIT in 2020 was established with a combination of private and institutional money ( 10 billion yen was collected, bought

condominiums for 6 billion from Shinoken and 4 billion from Properst (3236), Shinoken owns 35% of Properst)

They plan to grow this into 100 billion AUM and Shinoken profits directly from the growing real estate / services etc.

The REIT could potentially also build more expensive buildings ( even closer to a train station) than Shinoken normally is

doing ( they have a max cost of 100 million per unit inside such a condo tower)

 

For the remaining year Q42020-Q32021 Mike assumes no further sellings to the REIT and he still assumes rather

low sales to customers ( to be conservative) and calculate Covid impact. No further outlook but points out to the under 5x P/E

The new Life Care segment and expansion to Indonesia is still small but could be bigger in the future.

 

EDIT: i forgot to mention that Mike has no Problems with the Share spending to the foundation. The reason is, that in Japan foundations are always sponsored in such a way. Its a culture thing. Japanese companies tend to minimize this with stock buybacks.

 

 

[Arski]

Thanks RetroRanger, your efforts are appreciated!

[md8]

Do you happen to know Li Lu's Fund code?

 

Brad,

You can find all Edinet Codes here (2 CSV files)

 

https://disclosure.edinet-fsa.go.jp/E01EW/BLMainController.jsp?uji.bean=ee.bean.W1E62071.EEW1E62071Bean&uji.verb=W1E62071InitDisplay&TID=W1E62072&PID=currentPage&SESSIONKEY=&lgKbn=1&dflg=0&iflg=0

[nik_explores]

Thanks RetroRanger for the effort. I have been looking for Mike's presentation. The explanation in your email seems to be sufficient.

 

Long Shinoken

 

[Fahrweid]

Do you happen to know Li Lu's Fund code?

 

Brad,

You can find all Edinet Codes here (2 CSV files)

 

https://disclosure.edinet-fsa.go.jp/E01EW/BLMainController.jsp?uji.bean=ee.bean.W1E62071.EEW1E62071Bean&uji.verb=W1E62071InitDisplay&TID=W1E62072&PID=currentPage&SESSIONKEY=&lgKbn=1&dflg=0&iflg=0

 

Can someone please help me figure this out.

The characters seems off. I can't make any sense of them. The the EDINET Code List for Example. Pabrais number is E36293. If you open the CSV and go to the column for E36293 this is what you get:

 

E36293 ŠO‘–@lE‘g‡i—L‰¿ØŒ”•ñ‘“™‚Ì’ño‹`–±ŽÒˆÈŠOj 672 ‚c‚‚Œ‚‚Œ@‚r‚”‚’‚…‚…‚”C@‚k‚k‚bD ƒ_ƒ‰ƒ‹ƒXƒgƒŠ[ƒgƒGƒ‹ƒGƒ‹ƒV[ ƒAƒƒŠƒJ‡O‘ƒJƒŠƒtƒHƒ‹ƒjƒAB‚X‚Q‚U‚Q‚OAƒA[ƒoƒCƒ“Aƒ‹[ƒYƒxƒ‹ƒg‚P‚Q‚Q‚OAƒXƒC[ƒg‚Q‚O‚O Others

 

 

You can't see that this form pabrai. I can't decipher the characters back to pabrai. (You only get the E36293 but no dala street, or pabrai in the characters to link it back to.)

Also it seems impossible to get li lu out of that list, with these characters.  :P

 

Any Ideas?

[RetroRanger]

This could be an encoding problem :) will look into it later!

[Fahrweid]

This could be an encoding problem :) will look into it later!

 

Thank you RetroRanger. Also a big thanks for contacting mike an sharing his answer with us!

[RetroRanger]

https://digitalreadymarketing.com/open-chinese-japanese-encoding-gwmt-csv-file/

 

my excel auto-detects 932 Japanese ( as encoding)

 

There you can see D a l a i

 

Will be hard to find anything like that for Li Lu without any clue to search for!

[Thelilyinvestor]

Hi guys,

 

I would like to open a debate of where is Shinoken going to be in some years.

 

2020 EPS has been 170, roughly 45% construction (75 EPS) and 55% recurring revenues (95 EPS).

 

Recurring Revenues have been growing around 15% per year, but as they are building less apartments, those recurring revenues might start slowing down. Hopefully the REITs management fees will start bringing some income, my take is that recurring revenues as a whole will keep growing around the 15% mark over the next couple of years.

 

If we take that assumption, those 95 EPS of recurring revenues will be around 180 in 5 years. If we add some construction income + some acquisitions will make the total EPS around 250 to 350 per year by 2025.

 

Does anyone agree with my view? Are you more positive or negative? I would love to hear different opinions and lets see if we can get to some conclusion together.

 

 

[misterkrusty]

it depends on the success of the REIT.  without the REIT, they're still growing the base of units by low double digits (%).  all new units come with a mgmt contract, gas, and electric.  only about 2% of units don't renew their mgmt contract each year.  not sure about gas and electric.  also, there is operating leverage in Services and Energy segments.  margins were down in Services in 2020 due to Covid

[RetroRanger]

Its all depending on the REIT and the increase in services. If WE see post covid growth that would be a huge Driver, but please consider we also have around a 70-80% MoS just with

the current equity. We have a brilliant heads i win much , tails i dont loose much scenario.

 

[Thelilyinvestor]

Thank guys for replying.

 

Lets see over the next couple of years how the management services and REITs evolve...

 

Another thing I am excited about is the Trust DX. I think it accomplishes a couple of things:

 

1) Easiness of buying a property, maybe leading to more properties being developed (specially for chinese investors)

2) Easiness of managing rental properties for both Shinoken and Owners, leading to a better Shinoken experience and consequently gaining market share.

3) As transactions and management of properties will be done more online, it will lead to lower costs and higher margins.

 

 

 

[samwise]

I own this, and like the old business model and management seems honest.

 

BUT

 

anyone sees similarities between the new business model and the following?

1. externally managed REITS and their scandals

2. MLPS dependent on drop downs and their issues

3. Sunedison and Terraform.

4. NSAM and NRF (or did I forget the tickers? Basically the north start companies which eventually got sold to Colony)

I am sure there are there examples.

 

IS anyone concerned. Why not? Hasn't the firm moved from selling a product to end-users, to selling a product to public company investors. Somehow this second model seems to have run into trouble consistently.

 

The old model made sense. Individual investors lent out their balance sheet credit rating in exchange for income. It was basically free for them (zero down, close to zero interest rates), with zero hassle (Shinoken builds and manages). That is a good deal for them and they build up an income stream. For Reit investors, aren't they better off internalizing management?

 

[RetroRanger]

1. externally managed REITS and their scandals  --> do you mean the 2018 scandal or something different?

3. what has the bankrupcy of those todo with Shinoken?

4. NSAM and NRF , also here i dont see any connection to Shinoken.

 

 

"It was basically free for them (zero down, close to zero interest rates), with zero hassle (Shinoken builds and manages)"

Yeah until the loan scandal occured and the whole market "crashed".

 

What they now do , is diversify their company to be more robust during those times. Shinoken still generates 48% of income during that traditional business and still profits in general from building/restoring locations ( within Ogawa constructions ).

But with the shift on generating new businesses and new income streams ( but still related to their business ) , it totally makes sense. They generate income for many many years with gas/power contracts, with insurance against the loss of the job ( so they make sure they get their rents no matter what). The growth rate of these sections where high , resulting now in nearly 50% of their income stream.

 

And to give this "animal" new food, they created a new REIT in 2020, which is exactly their for the stuff like in the old business model.

 

Shinoken want to be a full service company. And thats a good thing. If you think about the future, services is where the money lies. Everything will be tied into services

and Shinoken will benefit from this. Japan is way further than other countries here, thats why they seem to start expanding only to similar countries ( like indonesia).

 

It is surely a pilot, which if succeeds could expand further.

 

 

 

 

 

[md8]

https://digitalreadymarketing.com/open-chinese-japanese-encoding-gwmt-csv-file/

 

my excel auto-detects 932 Japanese ( as encoding)

 

There you can see D a l a i

 

Will be hard to find anything like that for Li Lu without any clue to search for!

 

I did not find "Li Lu" or "Himalaya" in the CSV files.