Research Coverage Report by Shared Research Inc.

Transcription

1 esearch eport by Shared esearch Inc. 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 January 9, 2019, Tri-Stage Inc. announced earnings results for Q3 FY02/19. Cumulative FY02/17 FY02/18 FY02/19 FY02/19 % of FY FY Est. Sales 10,558 22,704 35,199 47,302 13,209 27,808 42,284 55,776 13,874 27,538 40, % 53,214 YoY 19.6% 22.8% 26.6% 27.4% 25.1% 22.5% 20.1% 17.9% 5.0% -1.0% -3.7% -4.6% Gross profit 1,155 2,489 3,877 5,152 1,415 2,789 4,243 5,613 1,470 2,891 4,398 GPM 10.9% 11.0% 11.0% 10.9% 10.7% 10.0% 10.0% 10.1% 10.6% 10.5% 10.8% SG&A expenses 777 1,629 2,606 3,757 1,135 2,235 3,378 4,581 1,244 2,502 3,746 YoY 6.9% 16.5% 26.9% 40.3% 46.0% 37.2% 29.6% 21.9% 9.7% 11.9% 10.9% SG&A ratio 7.4% 7.2% 7.4% 7.9% 8.6% 8.0% 8.0% 8.2% 9.0% 9.1% 9.2% Operating profit ,271 1, , % 658 YoY 70.6% 52.7% 64.7% 55.3% -25.8% -35.6% -31.9% -26.0% -19.6% -29.7% -24.6% -36.3% OPM 3.6% 3.8% 3.6% 2.9% 2.1% 2.0% 2.0% 1.9% 1.6% 1.4% 1.6% 1.2% ecurring profit ,252 1, % 111 YoY 65.5% 49.1% 63.0% 53.5% -30.7% % -33.5% % -87.8% PM 3.5% 3.7% 3.6% 2.9% 1.9% -0.3% 0.4% 1.6% % 0.3% - Net income attributable to parent company shareholders ,340-1, ,179 YoY 88.3% 58.8% 75.8% 60.3% -46.6% % Net margin 2.0% 2.2% 2.1% 1.6% 0.9% % Quarterly FY02/17 FY02/18 FY02/19 Sales 10,558 12,146 12,495 12,103 13,209 14,598 14,477 13,491 13,874 13,665 13,174 YoY 19.6% 25.7% 34.0% 29.9% 25.1% 20.2% 15.9% 11.5% 5.0% -6.4% -9.0% Gross profit 1,155 1,334 1,388 1,275 1,415 1,374 1,454 1,370 1,470 1,421 1,507 GPM 10.9% 11.0% 11.1% 10.5% 10.7% 9.4% 10.0% 10.2% 10.6% 10.4% 11.4% SG&A expenses ,151 1,135 1,101 1,143 1,203 1,244 1,257 1,244 YoY 6.9% 26.9% 49.2% 84.1% 46.0% 29.3% 17.0% 4.5% 9.7% 14.2% 8.8% SG&A ratio 7.4% 7.0% 7.8% 9.5% 8.6% 7.5% 7.9% 8.9% 9.0% 9.2% 9.4% Operating profit YoY 70.6% 41.1% 97.2% -2.1% -25.8% -43.3% -24.2% 34.9% -19.6% -40.1% -15.4% OPM 3.6% 4.0% 3.3% 1.0% 2.1% 1.9% 2.2% 1.2% 1.6% 1.2% 2.0% ecurring profit YoY 65.5% 38.5% 101.4% -6.2% -30.7% % -42.7% 547.8% % PM 3.5% 3.9% 3.3% 1.0% 1.9% -2.2% 1.6% 5.5% - 0.9% 2.2% Net income attributable to parent company shareholders YoY 88.3% 42.2% 126.8% -71.1% -46.6% % 3,466.2% % Net margin 2.0% 2.4% 1.9% 0.1% 0.9% - 0.4% 3.8% % Segments (cumulative) FY02/17 FY02/18 FY02/19 Sales 10,558 22,704 35,199 47,302 13,209 27,808 42,284 55,776 13,874 27,538 40,713 Direct Marketing Support 7,541 16,510 25,428 33,875 8,778 18,197 27,302 35,420 8,100 16,337 23,976 Direct Mailing 2,747 5,622 8,659 11,536 3,677 8,139 12,722 17,144 4,843 9,319 13,926 Overseas ,218 1, ,438 Mail Order Others , ,014 1, ,094 YoY 19.6% 22.8% 26.6% 27.4% 25.1% 22.5% 20.1% 17.9% 5.0% -1.0% -3.7% Direct Marketing Support 8.4% 14.2% 19.2% 19.9% 16.4% 10.2% 7.4% 4.6% -7.7% -10.2% -12.2% Direct Mailing 46.9% 39.2% 34.1% 30.6% 33.8% 44.8% 46.9% 48.6% 31.7% 14.5% 9.5% Overseas % % 355.8% 162.6% 26.3% 30.9% 18.1% Others % 34.2% 20.0% 13.7% 2.2% 3.6% 7.8% Operating profit ,271 1, , Direct Marketing Support ,406 1, ,041 1, Direct Mailing Overseas Mail Order Others Adjustments OPM 3.6% 3.8% 3.6% 2.9% 2.1% 2.0% 2.0% 1.9% 1.6% 1.4% 1.6% Direct Marketing Support 5.3% 5.5% 5.5% 4.8% 3.8% 3.7% 3.8% 3.6% 3.5% 3.8% 3.9% Direct Mailing 0.9% 0.9% 0.8% 0.5% 1.6% 1.7% 1.8% 1.6% 1.8% 2.1% 2.2% Overseas % -22.3% -19.4% -17.9% -10.8% -24.3% -21.8% Others 1.0% 2.5% - 0.4% 4.1% 2.1% 0.7% 1.7% 3.0% 1.3% -1.7% Segments (quarterly) FY02/17 FY02/18 FY02/19 Sales 10,558 12,146 12,495 12,103 13,209 14,598 14,477 13,491 13,874 13,665 13,174 Direct Marketing Support 7,541 8,968 8,918 8,448 8,778 9,419 9,105 8,117 8,100 8,237 7,639 Direct Mailing 2,747 2,875 3,037 2,877 3,677 4,462 4,584 4,422 4,843 4,475 4,608 Overseas Mail Order Other YoY 19.6% 25.7% 34.0% 29.9% 25.1% 20.2% 15.9% 11.5% 5.0% -6.4% -9.0% Direct Marketing Support 8.4% 19.7% 29.6% 21.9% 16.4% 5.0% 2.1% -3.9% -7.7% -12.6% -16.1% Direct Mailing 46.9% 32.6% 25.6% 21.2% 33.8% 55.2% 50.9% 53.7% 31.7% 0.3% 0.5% Overseas % % 107.1% 34.0% 26.3% 35.7% -2.8% Other % 24.2% -3.5% -0.4% 2.2% 5.1% 17.6% Operating profit Direct Marketing Support Direct Mailing Overseas Mail Order na Other Adjustments OPM 3.6% 4.0% 3.3% 1.0% 2.1% 1.9% 2.2% 1.2% 1.6% 1.2% 2.0% Direct Marketing Support 5.3% 5.6% 5.6% 2.7% 3.8% 3.6% 4.0% 3.1% 3.5% 4.0% 4.2% Direct Mailing 0.9% 0.9% 0.6% -0.2% 1.6% 1.8% 1.9% 1.1% 1.8% 2.4% 2.3% Overseas % -24.0% -14.5% -14.9% -10.8% -37.8% -16.2% Other 1.0% 3.9% - 1.5% 4.1% % 4.0% 3.0% % Source: Shared esearch based on company data Note: Figures may differ from company data due to differences in rounding methods. Note: From Q3 FY02/17, the Overseas segment is displayed separately from the Direct Marketing Support segment as an independent segment. From Q1 FY02/18, the Mail Order business, which had been included in the Other segment, is displayed separately as an independent segment. YoY comparisons have been rearranged based on the categories after these changes. From consolidated Q1 FY02/19, the company reviewed its distribution standards for shared expenses and changed the calculation method for segment profit or loss in order to improve the assessment of results for each reported segment. YoY comparisons are made using the calculation method after this change. 1/6

2 esearch eport by Shared esearch Inc. SG&A by segment (cumulative) FY02/17 FY02/18 FY02/19 SG&A expenses 777 1,629 2,606 3,757 1,135 2,235 3,378 4,581 1,244 2,501 3,745 Personnel expenses ,260 1, ,013 1,578 2, ,153 ent Advertising expenses Depreciation Goodwill amortization Other , , SG&A ratio 7.4% 7.2% 7.4% 7.9% 8.6% 8.0% 8.0% 8.2% 9.0% 9.1% 9.2% Personnel expenses 3.7% 3.7% 3.6% 3.8% 3.8% 3.6% 3.7% 3.8% 4.0% 4.2% ent 0.8% 0.8% 0.8% 0.8% 0.9% 0.9% 0.9% 0.9% 0.9% 0.9% Advertising expenses 0.0% 0.0% 0.2% 0.3% 0.4% 0.4% 0.4% 0.5% 0.4% 0.5% Depreciation 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.3% 0.3% Goodwill amortization 0.3% 0.3% 0.3% 0.3% 0.4% 0.4% 0.4% 0.4% 0.3% 0.3% Other 2.3% 2.2% 2.3% 2.4% 2.8% 2.4% 2.2% 2.4% 3.0% 2.8% SG&A by segment (quarterly) FY02/17 FY02/18 FY02/19 SG&A expenses ,151 1,135 1,101 1,143 1,203 1,244 1,257 1,244 Personnel expenses ent Advertising expenses Depreciation Goodwill amortization Other SG&A ratio 7.4% 7.0% 7.8% 9.5% 8.6% 7.5% 7.9% 8.9% 9.0% 9.2% 9.4% Personnel expenses 3.7% 3.6% 3.4% 4.6% 3.8% 3.5% 3.9% 3.9% 4.0% 4.4% ent 0.8% 0.7% 0.8% 1.0% 0.9% 0.9% 0.9% 0.9% 0.9% 1.0% Advertising expenses 0.0% 0.0% 0.6% 0.6% 0.4% 0.4% 0.5% 0.5% 0.4% 0.5% Depreciation 0.2% 0.2% 0.2% 0.3% 0.2% 0.2% 0.2% 0.2% 0.3% 0.3% Goodwill amortization 0.3% 0.3% 0.2% 0.5% 0.4% 0.4% 0.4% 0.4% 0.3% 0.3% Other 2.3% 2.1% 2.5% 2.6% 2.8% 2.0% 1.9% 3.0% 3.0% 2.7% Source: Shared esearch based on company data Note: Figures may differ from company data due to differences in rounding methods. Parent earnings (cumulative) FY02/17 FY02/18 FY02/19 Sales 7,560 16,554 25,486 33,952 8,807 17,609 25,676 33,215 7,551 15,224 Cost of sales 6,620 14,515 22,405 30,006 7,853 15,844 23,088 29,896 6,672 13,434 Media costs (TV programs) 4,220 8,915 13,837 18,668 4,928 9,660 14,080 18,174 3,812 7,338 Media costs (TV commercials) 1,223 3,097 4,790 6,481 1,715 3,678 5,250 6,721 1,688 3,776 Media costs (other) Outsourcing expenses 973 2,063 3,133 4, ,054 3,040 4, ,755 Cost of merchandise Gross profit 940 2,038 3,080 3, ,764 2,588 3, ,790 GPM 12.4% 12.3% 12.1% 11.6% 10.8% 10.0% 10.1% 10.0% 11.6% 11.8% Parent earnings (quarterly) FY02/17 FY02/18 FY02/19 Sales 7,560 8,993 8,932 8,465 8,807 8,801 8,067 7,539 7,551 7,673 Cost of sales 6,620 7,895 7,890 7,601 7,853 7,991 7,243 6,808 6,672 6,762 Media costs (TV programs) 4,220 4,695 4,922 4,831 4,928 4,732 4,420 4,094 3,812 3,526 Media costs (TV commercials) 1,223 1,874 1,693 1,691 1,715 1,963 1,572 1,471 1,688 2,088 Media costs (other) Outsourcing expenses 973 1,090 1, , Cost of merchandise Gross profit 940 1,098 1, GPM 12.4% 12.2% 11.7% 10.2% 10.8% 9.2% 10.2% 9.7% 11.6% 11.9% Parent sales (cumulative) FY02/17 FY02/18 FY02/19 Sales 7,560 16,554 25,486 33,952 8,807 17,609 25,676 33,215 7,551 15,224 New clients 1,015 2,303 4,130 5,602 1,316 2,059 2,828 3, ,000 Mid-tier clients 2,836 6,228 9,190 12,072 3,237 7,197 10,666 13,837 3,100 6,500 Top-tier clients 3,711 8,023 12,167 16,278 4,251 8,334 12,121 15,698 3,500 7,200 % of sales New clients 13.4% 25.6% 46.2% 66.2% 14.9% 11.7% 11.0% 10.7% 9.3% 6.6% Mid-tier clients 37.5% 69.3% 103.0% 142.7% 36.7% 40.9% 41.5% 41.7% 41.1% 42.7% Top-tier clients 49.1% 89.2% 136.2% 192.3% 48.3% 47.3% 47.2% 47.3% 46.4% 47.3% Parent sales (quarterly) FY02/17 FY02/18 FY02/19 Sales 7,560 8,993 8,932 8,465 8,807 8,801 8,067 7,539 7,551 7,673 New clients 1,015 1,288 1,827 1,472 1, Mid-tier clients 2,836 3,393 2,962 2,882 3,237 3,960 3,470 3,171 3,100 3,400 Top-tier clients 3,711 4,312 4,144 4,111 4,251 4,083 3,787 3,577 3,500 3,700 % of sales New clients 13.4% 14.3% 20.5% 17.4% 14.9% 8.4% 9.5% 9.7% 9.3% 3.9% Mid-tier clients 37.5% 37.7% 33.3% 34.1% 36.7% 45.0% 43.0% 42.1% 41.1% 44.3% Top-tier clients 49.1% 48.0% 46.4% 48.6% 48.3% 46.4% 46.9% 47.4% 46.4% 48.2% Source: Shared esearch based on company data Note: Figures may differ from company data due to differences in rounding methods. Q3 FY02/19 results (out January 9, 2019) Sales JPY40.7bn (-3.7% YoY) Operating profit JPY653mn (-24.6% YoY) ecurring profit JPY129mn (-21.3% YoY) Net loss* JPY1.1bn (JPY130mn net loss in Q3 FY02/18) *Net loss attributable to parent company shareholders 2/6

3 esearch eport by Shared esearch Inc. Cumulative Q3 sales reached 76.5% of the company forecast for full-year FY02/19 (75.8% of full-year FY02/18 results in the same period the previous year) while operating profit reached 99.2% (83.8%), and recurring profit 116.0% (18.0%). The company posted a net loss attributable to parent company shareholders of JPY1.1bn against a full-year forecast of JPY1.2bn in net loss. In Q1, the company booked JPY495mn in one-time amortization of an amount equivalent to goodwill following a steep drop in share price of its equity-method affiliate TV Direct Public Company Limited (TVD). Since the stock price remained at a low as of the end of Q3, the company booked JPY464mn in equity-method investment losses under non-operating expenses. The total amount of equity-method investment losses was JPY505mn, mainly reflecting equity related to the performance of TVD. Further, for consolidated subsidiaries PT. Merdis International and JML Singapore Pte. Ltd., the company posted impairment losses amounting to JPY851mn as an extraordinary loss at the end of Q2, considering the subsidiaries progress versus business plans and future performance outlook. These impairment losses comprised JPY102mn in fixed assets and the entire balance of goodwill (the unamortized portion) recorded when the company acquired shares in both companies. In Q3, gross profit margin improved by 0.8pp YoY to 10.8%, but the SG&A to sales ratio increased by 1.2pp to 9.2%. OPM was down 0.4pp to 1.6%. From consolidated Q1 FY02/19, the company reviewed its distribution standards for shared expenses and changed the calculation method for segment profit or loss in order to improve the assessment of results for each reported segment. YoY comparisons are made using the calculation method after this change. Quarterly sales (JPYmn) 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Direct Marketing Support Direct Mailing Overseas Other YoY (right axis) 14,598 12,495 13,209 14,477 12,146 12,103 13,874 13,491 13,665 13, % 10, % 3,677 4, % 4,584 4, % 4,422 2,875 3, % 2, % 4,475 4,608 2, % 11.5% 5.0% -6.4% -9.0% 7,541 8,968 8,918 8,448 8,778 9,419 9,105 8,117 8,100 8,237 7,639 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY02/17 FY02/18 FY02/19 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% Source: Shared esearch based on company data Quarterly operating profit (JPYmn) (100) (200) (300) Direct Marketing Support Direct Mailing Overseas Other OPM (right axis) % 3.3% % % 2.1% 2.2% 1.6% 1.9% 1.2% 2.0% 1.2% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY02/17 FY02/18 FY02/19 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Source: Shared esearch based on company data Performance by segment Direct Marketing Support segment Segment sales were JPY24.0bn (-12.2% YoY). Operating profit was JPY939mn (-9.8% YoY). 3/6

4 esearch eport by Shared esearch Inc. In the TV business, the company made efforts to maximize TV shopping sales of customer companies through provision of optimal media based on data analysis, hit video production, and efficient order management, which are the company s strengths. egarding gross profit margin an area of focus in FY02/19 the company sought to mitigate risks by reviewing the terms of low margin, performance-based compensation agreements, which were one of the causes of lower gross profit margin in the previous fiscal year. It also succeeded in launching multiple high-margin programs and commercials for new and existing clients. As a result, gross profit margin improved by 1.9pp YoY. In the web business, the company s efforts centered around adflex communications inc. The company worked to increase transactions with existing clients and secure new clients and help them maximize their sales and earnings. To this end, it made proposals which utilized both TV and web and actively introduced AI. Its sales and gross profit, however, declined due to revisions to advertising placement at its main client companies. In September 2018, the company, as a service development partner of SOPHOLA Inc., started providing a prioritized service in Japan for AdScale, an AI tool that optimizes listing ads. AdScale has a track record of being used at over 4,000 companies overseas. The company also hired aggressively in preparation for future growth, adding 10 employees to this segment since Q3 FY02/18. Direct Mailing segment In the Direct Mailing segment, sales were JPY13.9bn (+9.5% YoY). Operating profit was JPY300mn (+33.3% YoY). With Mail Customer Center Co., Ltd. (MCC) as the main player, the segment is involved in the direct mail agency business for Yu-Mail and Kuroneko DM Bin. While there were concerns on the impact of recent delivery price hikes in the market, transaction volume marked a record high for this segment on the back of steady acquisition of new clients. The company also worked to maintain and improve the GPM by revising sales prices for existing clients. Overseas segment In the Overseas segment, sales were JPY1.4bn (+18.1% YoY). The operating loss was JPY314mn (loss of JPY236mn in Q3 FY02/18). In ASEAN countries the company conducts product sales and wholesaling through retail, e-commerce, and televised home shopping primarily through PT. Merdis International and JML Singapore Pte. Ltd. Although the business environment remained difficult in Q3, the company has made progress revising its business strategies, since a local study it conducted was able to identify the existing issues. As a first step, it decided to dissolve Tri-Stage Merchandising (Thailand) Co., Ltd. as part of an effort to restructure the Thai business. The company will continue to revise its business strategies, including selection and concentration of businesses, and aim for a quick recovery of earnings. Mail Order business Sales were JPY278mn (JPY27mn in Q3 FY02/18) and the operating loss was JPY254mn (loss of JPY171mn in Q3 FY02/18). In the Mail Order business, the company sells general-use herbal medicine by mail while providing careful health counselling by a pharmacist, primarily in Nippon Health Care Advisors, Inc. The company is making efforts to expand the number of customers for the My Chinese Herbal Medicine product series using the media (TV, radio, and newspapers) to promote mail order. It is also focusing on counselling services to ensure repeat purchases. Other business In the Other business segment, sales were JPY1.1bn (+7.8% YoY), and the operating loss was JPY19mn (operating profit of JPY7mn in Q3 FY02/18). Nippon Department Store Inc. retails local specialties from various regions of Japan under the Nippon Department Store brand name. It is striving to strengthen the wholesale business and increase profits from each of its stores. In addition to the existing seven stores, in May 2018, it opened Sakaba in Tokyo Marunouchi, the first restaurant for Nippon Department Store. In 4/6

5 esearch eport by Shared esearch Inc. November 2018, it opened a food and sundries store Tonarini in the Hachioji Opa shopping center. Store-opening related expenses and personnel expenses aimed at strengthening management increased. This note is the most recent addition to the full report. 5/6

6 About Shared esearch Inc. esearch eport by Shared esearch Inc. 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 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 Sendagi Bunkyo-ku Tokyo, Japan Phone: +81 (0) info@sharedresearch.jp 6/6