esearch eport by Shared esearch Inc. https://sharedresearch.jp This PDF document is an updated note on the company. A comprehensive version of the report on the company, including this latest update, is available on our website and various professional platforms. On November 5, 2018, Grandy House Corp. announced earnings results for 1H. (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 % of FY FY Est. Sales 10,196 22,289 32,839 44,726 10,341 21,268 44.3% 48,000 YoY -8.2% -1.4% -2.4% 1.7% 1.4% -4.6% 7.3% Gross profit 1,795 3,849 5,596 7,644 1,943 3,917 YoY -10.4% -2.4% -4.4% 1.4% 8.3% 1.8% GPM 17.6% 17.3% 17.0% 17.1% 18.8% 18.4% SG&A expenses 1,268 2,519 3,739 4,949 1,234 2,452 YoY 7.9% 3.6% 3.3% 2.5% -2.7% -2.6% SG&A ratio 12.4% 11.3% 11.4% 11.1% 11.9% 11.5% Operating profit 526 1,330 1,857 2,695 709 1,465 50.5% 2,900 YoY -36.4% -12.1% -16.9% -0.7% 34.7% 10.1% 7.6% OPM 5.2% 6.0% 5.7% 6.0% 6.9% 6.9% 6.0% ecurring profit 555 1,379 1,933 2,796 744 1,533 51.1% 3,000 YoY -35.5% -12.2% -16.4% -0.3% 34.2% 11.2% 7.3% PM 5.4% 6.2% 5.9% 6.3% 7.2% 7.2% 6.3% Net income 371 928 1,283 1,828 294 830 49.4% 1,680 YoY -33.5% -9.5% -9.3% 4.8% -20.8% -10.6% -8.1% Net margin 3.6% 4.2% 3.9% 4.1% 2.8% 3.9% 3.5% (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Sales 10,196 12,094 10,550 11,887 10,341 10,927 YoY -8.2% 5.0% -4.4% 15.2% 1.4% -9.6% Gross profit 1,795 2,054 1,747 2,048 1,943 1,974 YoY -10.4% 5.8% -8.4% 21.1% 8.3% -3.9% GPM 17.6% 17.0% 16.6% 17.2% 18.8% 18.1% SG&A expenses 1,268 1,251 1,220 1,210 1,234 1,218 YoY 7.9% -0.4% 2.8% 0.1% -2.7% -2.6% SG&A ratio 12.4% 10.3% 11.6% 10.2% 11.9% 11.1% Operating profit 526 804 527 838 709 756 YoY -36.4% 17.0% -26.8% 74.0% 34.7% -6.0% OPM 5.2% 6.6% 5.0% 7.1% 6.9% 6.9% ecurring profit 555 824 554 863 744 788 YoY -35.5% 15.9% -25.4% 75.5% 34.2% -4.3% PM 5.4% 6.8% 5.3% 7.3% 7.2% 7.2% Net income 371 557 355 545 294 536 YoY -33.5% 19.3% -8.9% 65.3% -20.8% -3.8% Net margin 3.6% 4.6% 3.4% 4.6% 2.8% 4.9% Source: Shared esearch based on company data Note: Company forecasts are the most recent figures. 1/7
esearch eport by Shared esearch Inc. https://sharedresearch.jp trends and results by segment (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Sales 10,196 22,289 32,839 44,726 10,341 21,268 YoY -8.2% -1.4% -2.4% 1.7% 1.4% -4.6% eal Estate Sales 9,402 20,739 30,439 41,492 9,522 19,545 YoY -8.6% -1.1% -2.3% 2.0% 1.3% -5.8% Pre-cut Parts 728 1,419 2,202 2,971 756 1,596 YoY -2.8% -6.1% -3.6% -2.0% 3.9% 12.5% eal Estate Leasing 66 132 198 263 63 127 YoY 3.6% 2.5% 2.8% 1.8% -4.7% -3.9% Segment operating profit 555 1,379 1,933 2,796 744 1,533 YoY -35.5% -12.2% -16.4% -0.3% 34.2% 11.2% eal Estate Sales 469 1,216 1,698 2,485 664 1,362 YoY -40.2% -14.4% -18.5% -0.5% 41.7% 12.1% Segment OPM 5.0% 5.9% 5.6% 6.0% 7.0% 7.0% Pre-cut Parts 43 75 108 148 47 100 YoY -10.6% -5.0% -0.8% -0.3% 8.5% 33.9% eal Estate Leasing 45 90 133 173 43 85 YoY 54.6% 26.1% 19.5% 11.0% -5.4% -6.4% Adjustments 2-2 -6-9 -10-14 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Sales 10,196 12,094 10,550 11,887 10,341 10,927 YoY -8.2% 5.0% -4.4% 15.2% 1.4% -9.6% eal Estate Sales 9,402 11,337 9,701 11,053 9,522 10,023 YoY -8.6% 6.1% -4.8% 16.3% 1.3% -11.6% Pre-cut Parts 728 691 783 769 756 840 YoY -2.8% -9.4% 1.4% 2.9% 3.9% 21.6% eal Estate Leasing 66 66 66 65 63 64 YoY 3.6% 1.5% 3.2% -1.2% -4.7% -3.2% Segment operating profit 555 824 554 863 744 788 YoY -35.5% 15.9% -25.4% 75.5% 34.2% -4.3% eal Estate Sales 469 747 483 787 664 698 YoY -40.2% 17.5% -27.3% 90.3% 41.7% -6.5% Segment OPM 5.0% 6.6% 5.0% 7.1% 7.0% 7.0% Pre-cut Parts 43 32 33 40 47 54 YoY -10.6% 3.7% 10.5% 0.9% 8.5% 68.3% eal Estate Leasing 45 45 43 40 43 42 YoY 54.6% 6.2% 7.6% -10.3% -5.4% -7.4% Adjustments 2-4 -4-4 -10-5 Source: Shared esearch based on company data Homes sold (Units) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Total new homes sold 306 666 989 1,341 308 637 YoY -8.1% -2.8% -4.4% -0.4% 0.7% -4.4% Total pre-owned homes sold 30 74 98 138 31 72 YoY -23.1% -1.3% -2.0% 1.5% 3.3% -2.7% (Units) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Total new homes sold 306 360 323 352 308 329 YoY -8.1% 2.3% -7.4% -1.4% 0.7% -8.6% Total pre-owned homes sold 30 44 24 40 31 41 YoY -23.1% 22.2% -4.0% 5.3% 3.3% -6.8% Source: Shared esearch based on company data. 2/7
esearch eport by Shared esearch Inc. https://sharedresearch.jp New housing starts for detached homes (units) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Kanto region 18,335 36,145 54,716 70,898 18,533 YoY 6.2% 0.6% 2.6% 1.8% 1.1% Three North Kanto prefectures 1,967 3,936 6,110 8,081 2,193 YoY 6.0% 7.5% 10.3% 9.1% 11.5% Tochigi 594 1,106 1,800 2,433 632 YoY 22.5% 6.2% 8.6% 3.5% 6.4% Ibaraki 765 1,624 2,432 3,152 869 YoY -3.3% 7.0% 8.5% 10.7% 13.6% Gunma 608 1,206 1,878 2,496 692 YoY 5.0% 9.3% 14.7% 13.0% 13.8% (units) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Kanto region 18,335 17,810 18,571 16,182 18,533 YoY 6.2% -4.6% 6.5% -0.7% 1.1% Three North Kanto prefectures 1,967 1,969 2,174 1,971 2,193 YoY 6.0% 9.0% 15.9% 5.4% 11.5% Tochigi 594 512 694 633 632 YoY 22.5% -7.9% 12.7% -8.8% 6.4% Ibaraki 765 859 808 720 869 YoY -3.3% 18.2% 11.6% 19.0% 13.6% Gunma 608 598 672 618 692 Source: Shared esearch based on Ministry of Land, Transport, Infrastructure and Tourism data Number of households Source: Shared esearch based on statistical data from each prefecture Jobs-to-applicants ratio Source: Shared esearch based on data from the Ministry of Health, Labour and Welfare Flat 35 interest rates YoY 5.0% 14.1% 25.6% 8.2% 13.8% 2017 2017 2017 2018 2018 2018 2018 2019 ('000) Jun Sep Dec Mar Jun Sep Dec Mar Tochigi 824 826 827 828 832 YoY 1.1% 1.1% 1.1% 1.0% 0.9% Ibaraki 1,146 1,149 1,152 1,152 1,158 YoY 1.1% 1.1% 1.1% 1.2% 1.1% Southern Ibaraki 406 407 408 409 412 YoY 1.3% 1.4% 1.4% 1.6% 1.5% Gunma 838 840 841 843 847 YoY 1.0% 1.1% 1.1% 1.0% 1.0% Chiba 2,680 2,685 2,692 2,693 2,719 YoY 1.5% 1.5% 1.5% 1.5% 1.5% Kashiwa 182 182 183 183 185 YoY 2.0% 2.0% 2.0% 2.0% 1.9% (Times) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Nationwide 1.49 1.52 1.57 1.59 1.60 YoY change (points) 0.14 0.15 0.16 0.15 0.11 Tochigi 1.34 1.35 1.38 1.40 1.44 YoY change (points) 0.17 0.16 0.14 0.12 0.10 Ibaraki 1.43 1.48 1.53 1.57 1.60 YoY change (points) 0.21 0.22 0.24 0.22 0.17 Gunma 1.61 1.62 1.65 1.62 1.74 YoY change (points) 0.18 0.16 0.17 0.05 0.13 2017 2017 2017 2018 2018 2018 2018 2019 Jun Sep Dec Mar Jun Sep Dec Mar Flat 35 (term 21 35 years) 1.09% 1.08% 1.34% 1.36% 1.37% YoY change -0.01pp 0.06pp 0.24pp 0.24pp 0.28pp Source: Shared esearch based on Japan Housing Finance Agency materials *Flat 35 refers to fixed-rate mortgage loans for the full duration of the loan offered to consumers through a partnership between private financial institutions and the Japan Housing Finance Agency *Interest rates until September 2017 show the minimum interest rates where the borrowing period is 21 to 35 years and the loan amount is 90% or less. *Interest rates for December 2017 and later show the minimum interest rates where the borrowing period is 21 to 35 years, the loan amount is 90% or less, and the loan comes with an insurance policy to guarantee full repayment of mortgage in case the borrower falls seriously ill or dies. 3/7
esearch eport by Shared esearch Inc. https://sharedresearch.jp 1H results Sales: JPY21.3bn (-4.6% YoY) Operating profit: JPY1.5bn (+10.1% YoY) ecurring profit: JPY1.5bn (+11.2% YoY) Net income: JPY830mn (-10.6% YoY) (Net income refers to net income attributable to parent company shareholders.) Orders for both new and pre-owned homes were up YoY. However, with a higher number of properties due to be delivered from Q3 onwards, the number of homes sold fell YoY. Operating profit and recurring profit increased, underpinned by an improvement in gross profit as the company successfully reduced costs, and by lower SG&A expenses YoY. Net income attributable to parent company shareholders declined due to a booking of special merit bonus awarded to its founder as he stepped down from a director position. In the housing industry, the number of housing starts for detached homes was solid as the government continued its policies to prop up demand for housing, employment and income environment improved, and mortgage rates remained at low levels. However, competition among industry players continues to intensify. The company strove to expand and strengthen its business in accordance with its basic policies aimed at: continuous growth through reinforcing the core operation (new homes) and expansion of business through bolstering its recurring revenue model in its second medium-term plan ( to FY03/21). In its mainstay business (sales of new homes), the company aimed to improve profitability through initiatives to promote sales of strategic large-scale subdivided individual plots, enhance appeal of properties, and cut CoGS. It also worked on expanding the business into Saitama Prefecture by buying subdivided plots of land. For sales of pre-owned homes, continuing from, the company worked on boosting its inventories with an aim of increasing sales. eal Estate Sales segment Sales: JPY19.5bn (-5.8% YoY) Segment profit: JPY1.4bn (+12.1% YoY) Sales of new homes Orders for newly built houses came to 356 units and the number of houses sold amounted to 637 units (-27 units or -4.4% YoY). In terms of profit, cost reduction initiatives paid off and boosted profit. SG&A expenses also declined YoY. To support sales of new homes, the company started selling the remaining 2 blocks of the 4 blocks in the key area of Yotsuba No Mori (total of 211 sections in Tsukuba City, Ibaraki Prefecture) and opened a new model house. The company has looked to promote sales of large-scale properties in its Grand Beat Park Kaminokawa development project (a large development project with a total of 141 lots in the town of Kaminokawa, Tochigi Prefecture) through offering a range of hands-on activities for visitors at its model houses. Grandy House has worked to differentiate its products from those of other companies by developing unique subdivided individual plots with themes, achieving unique appearances and harmonious look as a whole. The company also implemented new initiatives, for example, launching model houses equipped with IoT. In line with the plan to expand its business area into Saitama prefecture, the company acquired plots of land and established a sales base with a view to generating revenue from FY03/20 onwards. The cumulative number of newly built homes sold reached 15,000 units in July 2018. 4/7
esearch eport by Shared esearch Inc. https://sharedresearch.jp Sales of pre-owned homes Sales of pre-owned homes were 72 units (-two units or -2.7% YoY). As part of its initiatives to expand the number of properties sold, the company continued its efforts at bolstering inventories started in. Amid intensified competitions at auctions, the company worked to increase the total number of inventories with efforts to procure properties aimed at maintaining an inventory level of 70 completed properties at all times. The company steadily received orders in Q2. Pre-cut Parts segment Sales: JPY1.6bn (+12.5% YoY) Segment profit: JPY100mn (+33.9% YoY) In the Pre-cut Parts segment, the number of wooden-structured houses building starts (including ordered homes) has dropped each month compared to the previous year since July 2017. In terms of the cost of wood materials, prices of North American logs have been on a downward trend since May, and domestic prices are also expected to be weak for the rest of the year. The company continued to work on expanding sales of construction materials and housing equipment other than pre-cut parts, and aimed to increase its sales of construction materials to small- and medium-sized contractors. eal Estate Leasing segment Sales: JPY127mn (-3.9% YoY) Segment profit: JPY85mn (-6.4% YoY) In the office buildings market near Utsunomiya City, one of the company s main marketing areas, there were new store openings and relocations toward the center of the city. However, the vacancy rate increased as the company resumed marketing of properties for which it had stopped looking for tenants for a long time. In the parking lot market, competition between nearby parking lots continued. Under such circumstances, despite the company s efforts to improve the occupancy rate of existing assets and reduce property management costs, the impact of higher vacancy rates at the end of 2017 remained. As a result, segment sales and profit both decreased YoY. Full-year outlook forecast (JPYmn) 1H Act. 2H Act. FY Act. 1H Act. 2H Est. FY Est. Sales 22,289 22,437 44,726 21,268 26,732 48,000 YoY -1.4% 5.1% 1.7% -4.6% 19.1% 7.3% Cost of sales 18,440 18,642 37,082 17,351 Gross profit 3,849 3,795 7,644 3,917 YoY -2.4% 5.5% 1.4% 1.8% GPM 17.3% 16.9% 17.1% 18.4% SG&A expenses 2,519 2,430 4,949 2,452 SG&A ratio 11.3% 10.8% 11.1% 11.5% Operating profit 1,330 1,365 2,695 1,465 1,435 2,900 YoY -12.1% 13.6% -0.7% 10.1% 5.1% 7.6% OPM 6.0% 6.1% 6.0% 6.9% 5.4% 6.0% ecurring profit 1,379 1,417 2,796 1,533 1,467 3,000 YoY -12.2% 14.8% -0.3% 11.2% 3.5% 7.3% PM 6.2% 6.3% 6.3% 7.2% 5.5% 6.3% Net income 928 900 1,828 830 850 1,680 YoY -9.5% 25.1% 4.8% -10.6% -5.5% -8.1% Source: Shared esearch based on company data 5/7
esearch eport by Shared esearch Inc. https://sharedresearch.jp esults forecasts by segment Forecasts by segment (JPYmn) 1H Act. 2H Act. FY Act. 1H Act. 2H Est. FY Est. Sales 22,289 22,437 44,726 21,268 26,732 48,000 YoY -1.4% 5.1% 1.7% -4.6% 19.1% 7.3% eal Estate Sales 20,739 20,754 41,492 19,545 25,100 44,645 YoY -1.1% 5.4% 2.0% -5.8% 20.9% 7.6% Pre-Cut Parts 1,419 1,552 2,971 1,596 1,504 3,100 YoY -6.1% 2.1% -2.0% 12.5% -3.1% 4.3% eal Estate Sales Leasing 132 131 263 127 128 255 YoY 2.5% 1.0% 1.8% -3.9% -2.1% -3.0% Segment profit 1,379 1,417 2,796 1,547 1,453 3,000 YoY -12.2% 14.8% -0.3% 12.2% 2.5% 7.3% eal Estate Sales 1,216 1,270 2,485 1,362 1,328 2,690 YoY -14.4% 17.8% -0.5% 12.1% 4.6% 8.2% Pre-Cut Parts 75 73 147.685 100 50 150 YoY -5.0% 5.0% -0.3% 33.9% -31.7% 1.6% eal Estate Sales Leasing 90 82 172.597 85 75 160 YoY 26.1% -1.8% 11.0% -6.4% -8.3% -7.3% Source: Shared esearch based on company data This note is the most recent addition to the full report. 6/7
About Shared esearch Inc. esearch eport by Shared esearch Inc. https://sharedresearch.jp We offer corporate clients comprehensive report coverage, a service that allows them to better inform investors and other stakeholders by presenting a continuously updated third-party view of business fundamentals, independent of investment biases. Shared esearch can be found on the web at http://www.sharedresearch.jp. Disclaimer This document is provided for informational purposes only. No investment opinion or advice is provided, intended, or solicited. Shared esearch Inc. offers no warranty, either expressed or implied, regarding the veracity of data or interpretations of data included in this report. We shall not be held responsible for any damage caused by the use of this report. The copyright of this report and the rights regarding the creation and exploitation of the derivative work of this and other Shared esearch eports belong to Shared esearch. This report may be reproduced or modified for personal use; distribution, transfer, or other uses of this report are strictly prohibited and a violation of the copyright of this report. Our officers and employees may currently, or in the future, have a position in securities of the companies mentioned in this report, which may affect this report s objectivity. Japanese Financial Instruments and Exchange Law (FIEL) Disclaimer The report has been prepared by Shared esearch under a contract with the company described in this report ( the company ). Opinions and views presented are ours where so stated. Such opinions and views attributed to the company are interpretations made by Shared esearch. We represent that if this report is deemed to include an opinion by us that could influence investment decisions in the company, such opinion may be in exchange for consideration or promise of consideration from the company to Shared esearch. Contact Details Shared esearch Inc. 3-31-12 Sendagi Bunkyo-ku Tokyo, Japan https://sharedresearch.jp Phone: +81 (0)3 5834-8787 Email: info@sharedresearch.jp 7/7