Tokyu Construction 1720
東急建設
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1-16-14, Shibuya, Shibuya-ku, Tokyo 150-8340, Japan
Summary
Tokyu Construction is a second-tier general contractor. A member of the Tokyu Group, Tokyu Construction focuses on areas along Tokyu train lines, from the southwestern part of Tokyo’s 23 wards to northern Yokohama.
Construction & Engineering
Key dates
2020-04-24
Coverage initiation
Executive summary
Business overview
Tokyu Construction is a second-tier general contractor (see paragraph below). A member of the Tokyu Group, Tokyu Construction is an equity-method affiliate of Tokyu Corporation (TSE1: 9005), which owns a 15.3% stake in the company (including indirect holdings). Most revenue comes from private-sector construction projects. In FY03/21, the Building Construction segment accounted for 66.2% of consolidated revenue. The Civil Engineering segment, which includes railway construction, accounted for 32.7%, and the Real Estate segment provided 1.1%. Nearly 20% of construction orders come from other companies in the Tokyu Group. Tokyu Construction focuses on areas along Tokyu train lines, from the southwestern part of Tokyo’s 23 wards to northern Yokohama.
A general contractor is a construction company that accepts all-in contracts for building construction and civil engineering work. After receiving such contracts from companies or government/municipal bodies, general contractors subcontract work to specialized construction companies (subcontractors), managing the overall process. The scale of business is large; revenues from individual projects may run from billions to tens of billions of JPY. Construction periods on office building, railway, or roadway projects typically last from one to three years. Private-sector construction tends to be vulnerable to fluctuations in the operating environment. Public-sector projects tend to be more stable, with government entities continuing to place orders even in economically difficult times. The Japanese construction industry has been growing in recent years, benefiting from increased investment in construction, notably for business related to the Tokyo Olympics. Once this private-sector demand slows down, the company expects general contractors to prioritize relatively solid demand involving public-sector and overseas projects, and expansion of non-building construction business.
The Building Construction segment accounted for 66.2% of consolidated revenue (FY03/21). In this segment, the company constructs buildings throughout Japan, including office buildings, government offices, and schools. Operating in a buoyant construction market, recently the company has constructed a number of major office buildings near Shibuya Station. Notable projects include Shibuya Hikarie (completed in 2012), Shibuya Scramble Square (completed in 2019), Shibuya Stream (completed in 2018), and other high-rise office buildings that are part of a Shibuya Station redevelopment project. The company has a sales team that concentrates specifically on the Shibuya area. This team has been instrumental in such projects as Qfront (1999), which is a landmark near Shibuya’s Hachiko crossing, and Shibuya 109 (1979). The company has also handled projects for educational institutions, such as Tokyu-affiliated Asia and Tokyo City universities, as well as Nippon Sport Science University.
The Civil Engineering segment generated 32.7% of consolidated revenue (FY03/21). In this segment, the company focuses on businesses characterized by stable demand and good profitability, such as railway and road construction. Tokyu Construction says it has industry-leading technological expertise in these areas. Recent railway construction projects include continuous elevated railway work near Keikyu Kamata Station (completed in 2016) and subway construction on the Tokyu Toyoko Line between Shibuya and Daikanyama (2014). The company explains that its railway construction technologies allow it to build complex multilevel crossings, and that it has earned a strong reputation for sophisticated technologies that enable new routes to be built at night without interfering in the operation of existing routes. Road construction projects include the Atsugi Minami Interchange on the Shin-Tomei Expressway (2018) and the Ohashi Junction on the Shinjuku Line of the Metropolitan Expressway Central Circular Route (2010).
Key overseas projects include the Jakarta Mass Rapid Transit Project (completed in 2019, Indonesia), the Bangkok MRT Purple Line (completed in 2014, Thailand), the Vo Nguyen Giap Road (2014, Vietnam), and the Causeway Point Shopping Center (2012, Singapore). Civil engineering work tends to be concentrated on ODA projects. In recent years, the company has focused on obtaining orders for high-rise buildings.
In March 2021, the company formulated its corporate vision for 2030, “Vision 2030,” and in May 2021, it announced its 10-year long-term management plan, “To zero, from zero,” aimed at achieving Vision 2030. The company plans to invest JPY170bn in core and strategic businesses over the next ten years, aiming to achieve an operating profit of at least JPY22.0bn and ROE of 10% or higher in FY03/30. It also revised its shareholder returns policy. The company plans to pay dividends based on a dividend on equity (DOE) of at least 4.0%, which strikes a balance between the medium-term target of a minimum 10% ROE and consolidated dividend payout ratio of at least 40%. This is aimed at stabilizing the dividend amount and improving shareholder returns, taking into consideration capital efficiency. The company also plans to buy back shares flexibly, also taking into account capital efficiency.
Earnings trends
For FY03/22, the company reported consolidated revenue of JPY258.1bn (+11.5% YoY), operating loss of JPY6.1bn (versus profit of JPY3.6bn in FY03/21), recurring loss of JPY5.1bn (versus profit of JPY4.9bn in FY03/21), and net loss of JPY7.5bn (versus profit of JPY2.6bn in FY03/21). The company booked expected losses in connection with the cost of repairing defective work at a job in progress and the cost of repairs to work completed and delivered in past years, and in connection with margin deterioration on overseas projects and revisions to income projections for development projects in the real estate business.
The company’s forecast for FY03/23 calls for consolidated revenue of JPY289.0bn (+12.0% YoY), operating profit of JPY4.0bn (versus loss of JPY6.1bn in FY03/22), recurring profit of JPY4.5bn (versus loss of JPY5.1bn in FY03/22), and net income of JPY3.5bn (versus loss of JPY7.5bn in FY03/22).
Strengths and weaknesses
Shared Research identifies three strengths at Tokyu Construction: 1) nearly 20% of revenue due to business opportunities via the Tokyu Group, 2) a strong track record of projects completed in Shibuya and along the Tokyu lines, and 3) abundant experience with railway construction, which helps ensure stable earnings during economic doldrums. We also see three weaknesses: 1) outdone by super general contractors in its record for high-value-added construction work (such as large sports facilities, art museums, and long bridges), 2) a low percentage of revenue from public-sector civil engineering projects, which tend to be more profitable than private-sector construction and feature stable demand, and 3) despite a maturing domestic market, slow to build overseas and real estate businesses.
Key financial data
Note: Figures may differ from company materials due to differences in rounding methods.
Recent updates
Rolling of its long-term management plan “To zero, from zero”
On May 12, 2022, Tokyu Construction Co., Ltd. made an announcement concerning the rolling of its long-term management plan “To zero, from zero.”
The company revised its KPI and investment targets for three years hence, to reflect lower-than-expected FY03/22 earnings and the effects of both COVID-19 and the Ukraine crisis.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: ROIC " data-candidates="[{"type":2,"companyId":null,"_id":"62622f4dff7cb5c862e6be1a","en":"ROIC "}]" class="translated-term">ROIC = (NOPAT + non-operating income) / (shareholders’ equity + interest-bearing liabilities)
Note: Employee engagement rating by Link and Motivation Inc.'s “Motivation Cloud.” The rating is for all group employees, including subsidiaries. There are 11 ratings, and the current BBB rating is the fourth highest, after AAA, AA, and A.
Revisions to full-year FY03/22 earnings and dividend forecasts
On April 22, 2022, Tokyu Construction Co., Ltd. announced revisions to its full-year FY03/22 earnings forecast and its dividend forecast.
Downward revision to full-year earnings forecast
The company revised down the full-year earnings forecast mainly because, at the parent company level, orders for domestic civil engineering work came in later than expected and slow progress on construction work has led to some JPY7.0bn drop in forecast of revenue from completed construction. Cost increases stemming from construction delays has left several overseas construction projects in the red, and expected construction cost increases on real estate development projects has left its real estate business in the red as well. At the consolidated level, the company said the shortfall at the parent was further compounded by shortfalls at domestic subsidiaries, where delays in construction likewise left revenue below plan. Lower revenue pushed down profit.
Downward revision to the dividend forecast
With the company expecting to report net loss in FY03/22, it also revised down its year-end dividend forecast.
The company reduced its year-end divided forecast to JPY5.0 per share versus previous forecast of JPY20.0 per share. The company is now expects to pay total dividends of JPY25.0 per share (an interim dividend of JPY20.0 per share and an year-end divided of JPY5 per share) for FY03/22.
Planned changes to executive management
On February 24, 2022, Tokyu Construction Co., Ltd. announced planned changes to executive management.
Scheduled retirements of company directors
Effective date: in late-June, 2022
Trends and outlook
Quarterly trends and results
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures may differ from company materials due to differences in rounding methods.
Full-year FY03/22 results
Summary
* Net loss attributable to owners of the parent
Key takeaways
In full-year FY03/22, the company received total orders of JPY274.7bn (-JPY32.0bn YoY) in the construction business. The company reported a JPY25.2bn YoY decline in domestic private-sector orders, a JPY701mn rise in domestic public works orders, and a JPY7.4bn decrease in overseas orders. By segment, the company reported a JPY21.5bn decline in orders at its Building Construction segment and a JPY10.4bn decrease in orders in the Civil Engineering segment.
Parent company revenue of JPY243.0bn was up JPY26.8bn YoY, with revenue in the Building Construction segment finishing up JPY45.4bn YoY and revenue in the Civil Engineering segment finishing down JPY18.7bn YoY. The strong revenue growth in the Building Construction segment reflected a JPY81.9bn increase in revenue from domestic private sector projects, with Tokyu group companies accounting for JPY4.9bn of this and other domestic companies accounting for JPY46.9bn.
The consolidated operating loss was JPY6.1bn. The company booked expected losses in connection with the cost of repairing defective work at a job in progress and the cost of repairs to work completed and delivered in past years, and in connection with margin deterioration on overseas projects and revisions to income projections for development projects in the real estate business.
As of end-FY03/22, the total value of construction carried forward at the parent was JPY362.8bn, up JPY19.2bn YoY. This comprised JPY272.4bn (+JPY35.5bn YoY) for the Building Construction segment and JPY90.4bn (-JPY16.3bn YoY) for the Civil Engineering segment.
Rolling of long-term management plan “To zero, from zero:” The company revised its long-term KPI and investment targets to reflect lower-than-expected FY03/22 earnings (see section on long-term management plan).
Company forecast for FY03/23 forecast
Company estimates
Note: Figures may differ from company materials due to differences in rounding methods.
The company’s forecast for full-year FY03/23 calls for consolidated revenue of JPY289.0bn (+12.0% YoY), operating profit of JPY4.0bn (versus loss of JPY6.1bn in FY03/22), recurring profit of JPY4.5bn (versus loss of JPY5.1bn in FY03/22), and net income of JPY3.5bn (versus net loss of JPY7.5bn in FY03/22).
Shared Research plans to update its view on the above FY03/23 forecast following interviews with the company.
Long-term management plan
Vision 2030 and Long-term management plan “To zero, from zero”
Formulation of Vision 2030
The company has formulated a vision every 10 years since 2000 with the aim of realizing its corporate philosophy. The company’s Vision 2020 of being “a general contractor that continues to embody ‘shinka’” (which translates roughly as “deepening and evolving in the pursuit of genuine value”) ended in FY03/21, so the company formulated “Vision 2030,” its new vision looking toward 2030.
Tokyu Construction formulated Vision 2030 with a keen awareness of the company’s purpose, derived from its founding spirit, the shared values (corporate philosophy and principles of conduct) in the organization and its behavior, achievements and challenges of Vision 2020, and solving of social issues, which is the company’s identity. The company set forth the Vision 2030 theme as “To zero, from zero, The environment and the excitement of the future.”
“To zero” means striving for zero carbon and waste emissions, and “from zero” expresses the company’s ambition to enter new fields. “To zero” encompasses the concept of a safe and comfortable environment, and “from zero” expresses the company’s desire to offer excitement and contribute to a sustainable society and to continue to strive to improve corporate value.
Long-term management plan “To zero, from zero”
In May 2021, the company disclosed its long-term management plan “To zero, from zero” which it will use to achieve goals in its Vision 2030.
Fundamental policies
The company positions its domestic civil engineering, building construction, and building renovation businesses as core businesses, and its international, real estate, and new businesses as strategic businesses.
Through the practice of “deepening knowledge” and “searching for knowledge,” and with human resources and digital technologies as sources of competitive advantage, the company aims to implement five key strategies centered on delivering three values (decarbonization, zero waste, and disaster prevention and mitigation).
The company aims to sustainably improve both financial and nonfinancial corporate value.
Five key strategies
Numerical targets
Note: Figures may differ from company materials due to differences in rounding methods.
Note: ROIC = (NOPAT + non-operating income) / (shareholders’ equity + interest-bearing liabilities)
Note: Employee engagement rating by Link and Motivation Inc.'s “Motivation Cloud.” The rating is for all group employees, including subsidiaries. There are 11 ratings, and the current BBB rating is the fourth highest, after AAA, AA, and A.
Shareholder return policy
The company recognizes the importance of having ample retained earnings to invest with a view to improving corporate value and further improvements in its financial position so it can withstand medium- to long-term risks. Meanwhile, as an important measure to provide shareholders with stable, ongoing returns of profits, the company’s previous dividend policy targeted a consolidated dividend payout ratio of at least 20% and a flexible shareholder returns element including share buybacks that took into account earnings performance. However, the company said that dividends based on past earnings led to instability in the dividend amount which was influenced by individual fiscal year earnings.
In its long-term plan, the company revised its previous shareholder return policy and disclosed a new one. It will target a dividend on equity ratio (DOE) of at least 4.0%, while striking a balance between its medium- to long-term performance target of ROE of 10% or more and consolidated dividend payout ratio of at least 40%. This is aimed at stabilizing the dividend amount and improving shareholder returns, taking into consideration capital efficiency. The company also plans to buy back shares flexibly, also taking into account capital efficiency.
Investment plans
The company plans to spend JPY170bn over 10 years on VISION 2030.
Delivering three values
With a primary focus on mitigating climate change risk, the company has set forth the delivery of three values: decarbonization, zero waste, and disaster prevention and mitigation, in the context of the UN’s SDGs as a starting point for solving social issues. The company aims to achieve decarbonization not just in the construction process itself but in the entire construction value chain and new business areas. It aims to contribute to a circular economy by curtailing CO2 emissions generated from waste incineration. The company also intends to contribute to the provision of infrastructure in addition to suppressing CO2 emissions which are a factor in major natural disasters.
As part of its decarbonization efforts, the company has been working to reduce emissions generated from electricity use in order to meet the greenhouse gas emission reduction targets certified by the Science Based Targets initiative (SBTi). In March 2021, the company joined the RE100 initiative, and targets a switch to renewable energy sources for all of the electricity used in its business activities, including construction sites and offices, by 2030. Since April 2021, the company resolved to use 100% renewable energy derived electricity in all of its new construction projects in principle. It also plans to accelerate the switch to renewable energy in its existing projects. Two large logistics warehouses the company started building in March 2021 (ESR Higashi Ogishima Distribution Center and ESR Kawasaki Ukishima Distribution Center) received electricity from renewable energy resources in April 2021, and all of the electricity used in construction work and offices comes from clean, CO2 emissions free sources.
Business strategy
Vision 2030, the company’s long-term management plan: What it may look like in practice
Tokyu Construction plans to review its earnings structure based on Vision 2030 and its long-term management plan. From FY03/22 onward it has positioned the domestic civil engineering, building construction, and building renovation businesses as core businesses, and its international, real estate, and new businesses as strategic businesses. The company wants to revamp its earnings structure from a core/strategic business split of 94:6 in FY03/20 to 75:25 in FY03/31.
In its core businesses, it plans to use building information modeling (BIM) and construction information modeling (CIM) as platforms and create a variety of added value through the value chain with personnel and digital technologies, and transform the building construction business model. It plans to transform its business portfolio through innovation in its international, real estate, and construction businesses and growth in new businesses that help solve social issues.
Deepening core businesses
The company said it aimed to strengthen its capabilities by strengthening problem-solving skills, construction and production system innovation, and strategic alliances.
IPD (integrated product delivery): A project where various related parties including the client, designer, construction companies, and specialist construction companies work under a single contract.
Deepening domestic civil engineering business
Deepening domestic building construction and building renovation businesses
Cultivate the core area around Shibuya
The company plans to further cultivate demand around Shibuya* and along the Tokyu lines**.
Shibuya Station redevelopment work specifically includes Shibuya Scramble Square Central Tower and West Tower (scheduled for completion in FY03/28). Taken in the broader sense (the communities around Shibuya Station), the company expects redevelopment demand to persist over the medium to long term because the area has a large stock of aging small and medium-sized buildings. Major building redevelopments are opportunities to attract tenants, and the company thinks the Shibuya area has a growing need to add value to existing buildings. Tokyu Construction has created an extensive track record of building construction in the Shibuya area over the past 60 years. The company explains that this history, plus a dedicated sales team that communicates closely with people in this area, have enabled it to build solid relationships with town councils and commercial organizations in the area. By leveraging these strengths, the company is playing a central role in urban development in Shibuya in the broader sense. Further in the future, the company expects to extend its redevelopment business to areas around other major stations on the Tokyu lines, such as Sangenjaya and Mizonokuchi.
*Shibuya: Shibuya is one of Tokyo’s three major sub-centers, along with Shinjuku and Ikebukuro, and is one of the busiest areas in Tokyo. Shibuya Station is also one of the Tokyo’s largest railway stations, allowing passengers to transfer among Tokyu’s Den-en-toshi and Toyoko lines, Tokyo Metro’s Fukutoshin and Ginza lines, JR East’s Yamanote Line, and Keio railway lines. Average daily traffic through JR Shibuya Station is around 366,000 passengers (FY03/20: JR East survey).
Many small, older buildings around Shibuya Station(Right)
Source: Nippon.com website (photo courtesy of Tokyu Corporation)
Growing demand for renovation
The company expects demand for renovation to rise as the number of aging buildings grows. Seismic reinforcement and environmental considerations are driving demand for renovation. The company believes this trend will persist, centered on non-residential buildings. Tokyu Construction plans to cultivate this market through Tokyu Renewal Co., Ltd., a subsidiary that handles this business. Tokyu Construction intends to build a new customer base for commercial facilities and hotels by highlighting its construction technology capable of handling projects that are large in scale and difficult, as well as by leveraging its capabilities in interior construction planning and design. As it expects the construction market to shrink and demand for renovation to expand, the company considers it will need to make a functional change in the way it receives orders to accommodate more recurring-revenue business.
Urban Solutions business
In addition to enhancing cooperation with other companies in the Tokyu Group, the company says it plans to reinforce earnings by strengthening necessary solutions and building a comprehensive value chain through active personnel hiring, alliances, and M&A. In this area of business, the company collects information about the challenges and needs of local companies and landowners and proposes design, construction, and ways to utilize property, including leasing. Tokyu Construction works with partners on small-scale projects that are difficult for it to handle itself and forms alliances with top-tier general contractors in these areas. Tokyu Construction works with other companies in the Tokyu Group in such areas as tenant leasing and maintenance and management. By handling all aspects of the business, including renovation, the company aims to remain in contact with clients over the long term.
Infrastructure asset management
In this business, the company supports the maintenance, management, and renewal of infrastructure such as railways and roads from a long-term perspective, promoting the social value of efficient maintenance and management technologies. The company uses iTOREL*, a system for inspecting and examining entire cross sections of tunnels using leading-edge robotics and AI technologies.
Net zero-energy building (ZEB)
A net zero-energy building (ZEB) reduces energy consumption to nearly zero. The company carried out ZEB renovation on its Institute of Technology, which was completed 25 years ago, and whose energy efficiency was lower than for the most modern buildings. ZEB renovations carried out starting in 2016 were aimed at reducing building CO2 emissions during use. The company lowered the external heat load by employing a double-skin curtain wall, exterior thermal insulation, multilayered glass, and other measures. It also used energy sources other than fossil fuels (solar, geothermal, hydrogen) that it also used to generate power. In the process, Tokyu Construction became the first private-sector company in Japan to install a hydrogen production, storage, and power generation system. The company intends to push forward further to improve technologies, aiming for a truly net zero (100%) energy reduction. In FY03/20, it achieved 78% energy reduction, the highest level in Japan.
Reflecting growing calls to move to a carbon-free society, the company plans to market itself as a ZEB planner.
Tokyo City University Building A
The company has designed a new building that will be one of the largest university buildings in Japan, with total floor area of more than 100,000sqm, using multiple elemental technologies it has developed. Construction began in June 2020.
Seikitokyu Kogyo head office
The company is working on a ZEB design for this urban office building, even though it is supposed a ZEB format will be difficult due to the limited space available. Construction is scheduled to begin in spring 2021.
Application of environmentally friendly concrete (CELBIC)
Tokyu Construction is one of 13 companies jointly developing environmentally friendly concrete. CELBIC stands for “Consideration for Environmental Load using Blast furnace slag In Concrete.” The low-carbon concrete uses powdered slag from steel manufacturers to reduce carbon dioxide emissions, and this is expected to reduce the amount of CO2 generated by concrete production by 40% in the case of the Ginza 5-chome Project (tentative name) where it will be used.
Digital shift
Tokyu Construction aims to accelerate business reforms through a greater uptake of IT, responding to the ongoing digitization of markets and customer needs. To do so, the company is forging alliances with the Tokyu Group and other partner companies, investing in startups, and actively pursuing M&A. A concrete example is innovation of construction and production systems originating with building information modeling (BIM) and construction information modeling (CIM). To that end, the company made Singapore-based BIM equipment design company Indochine Engineering a wholly owned subsidiary in October 2020 and acquired shares in Kawamura Sekisan, an estimating company, and made it a subsidiary. The company established Iwase Precast, a joint venture, to manufacture and sell precast concrete, which improves construction efficiency, and is working on end-to-end digital transformation in construction. In order to promote the use of BIM in construction across the entire company, the company is deploying the BIM first model, a BIM version of design documents, to worksites in Japan before construction begins.
Use of BIM and CIM systems
In January 2019, Tokyu Construction started developing the “BIM first model” and adopting BIM with the aim of innovation in construction and production systems. The BIM first model is data obtained by converting design documents into BIM, and can be used in day-to-day management starting with examination of a construction plan before work begins, evolving to construction plans actually used on-site. Initially, the system only handled structural BIM models, but from FY03/22 the company plans to roll out models for BIM data covering greater data volume, encompassing exteriors and some interiors, external structures, and facilities to all sites above a certain size. By deploying BIM throughout the entire value chain, the company plans to revamp its construction and production systems, and aims at improvements in construction productivity of 30% or more.
Moving from individual VR to shared VR
Using virtual reality (VR), the company is conducting a proof-of-concept experiment to speed up information sharing and consensus-building at construction sites by using a virtual space where several people can gather at the same time. This is facilitated by the Ricoh Virtual Workplace solution from Ricoh Co., Ltd. (TSE1: 7752), which uses a range of features to enable natural, free communication between people separated by physical distance. Tokyu Construction will verify the effectiveness of the solution for possible commercialization in the future.
Using MR in building confirmation
The company is conducting simulated screening in a joint trial with a confirmation inspection institution using a mixed reality (MR) device from Microsoft and BIM. It aims to boost inspection efficiency and accuracy by centrally comparing and confirming the actual structure against blueprint data.
Wooden construction business
The company is focusing on the business of building structures that give preference to the use of wood or that are of mixed wooden construction. In recent years, technologies mixing wooden and non-wooden methods (reinforced concrete and steel frame construction) have advanced, making the medium-sized wooden construction business more tenable. Amid regulatory reforms and increasing environmental demands, the company expects demand to increase for medium- to high-rise offices, residences, and commercial structures that mix reinforced concrete and wood. The company plans to pursue technological developments in this area from a medium- to long-term perspective, gradually addressing technical issues.
Daito Trust Construction Co., Ltd.’s (TSE1: 1878) “ROOFLAG Rental Housing Future Exhibition Hall” (in Tokyo’s Koto Ward) was completed in March 2020. This major wooden construction project features a lattice work roof with a span of up to 60 meters, one of the largest in Japan. The roof is made up of 128 pieces of cross laminated timber (CLT)* material and uses no stanchions, resulting in an unprecedentedly spacious interior. Digital technologies including building information modeling (BIM) are used for the construction.
Right: ROOFLAG Rental Housing Future Exhibition Hall (2020)
Strategic business growth
International business
The company plans to step up its efforts in railway and transportation infrastructure and transit oriented development (TOD) under official development assistance (ODA) programs primarily in Southeast and South Asia, leveraging the strengths it has cultivated in Japan in railway construction and urban development along the Tokyu railway lines
In private-sector construction, it aims to establish a high-margin business model tailored to individual countries’ market environment through partnerships with local companies and local human resources
Overseas projects
The company is pursuing the construction business overseas, in South and Southeast Asia (Thailand, Singapore, Indonesia, Myanmar, Vietnam, and Bangladesh). Overseas development assistance (ODA) projects and private-sector building construction projects are its focus. For ODA projects centering on railways and roads, the company has expanded its region of business concentration from Thailand, Indonesia, and Myanmar to other South Asian countries including Bangladesh. As for private-sector building construction projects, Tokyu Construction has participated in high-rise building projects of strong local developers and factory construction for Japanese companies operating overseas, as well as hotel construction projects. The company strives to enhance governance for the expansion of business, seeking to make the processes of business and risk management visible.
Takasago factory (Singapore, completed in 2013)(Right)
Real estate business
The company plans to grow the real estate business to exploit synergies with the construction business and ensure stable earnings
Based on the three values it provides (decarbonization, zero waste, and disaster prevention and mitigation), the company aims to target eco-conscious customers and develop real estate development/value adding businesses by leveraging synergies with the construction business.
In this business, the company acquires real estate to ensure stable future earnings. Taking on a certain degree of exposure, Tokyu Construction is reinforcing the real estate leasing business. Specifically, the company is focusing its leasing investments on office buildings and stores. The Tokyu Group is extensive, including such companies as Tokyu Corporation and Tokyu Land Corporation. By leveraging this groupwide information network, the company plans to concentrate on buying income properties that offer synergies with its small and medium-sized building construction in central Tokyo and along the Tokyu lines. The company intends to add value to the properties it purchases, renovating them to boost investment yields. To expand this business, the company is setting new investment standards and monitoring processes in the interest of managing risk. It plans to hire outside personnel to build up processes in terms of expertise, as well as on the organizational front.
Public–private partnerships
In the PPP/concession business, Tokyu Construction intends to concentrate on the water and sewerage business (an area of strength) and on developing the airport concession business. The company sees water and sewerage as a field with growth potential and one that has strong ties to the civil engineering business. It participates in the airport concession business through cooperation with other members of the Tokyu Group. In 2018, Tokyu Construction and four others set up a special-purpose company to operate a sewage treatment plant for the Seien area of Hamamatsu for the next 20 years. This project represents the first sewerage system privatization in Japan. The company plans to participate actively in new bidding projects, collaborating with the SPC and the project operating company (Hamamatsu Water Symphony K.K.), acquiring expertise, and training employees.
In December 2021, Mizumusubi Management Miyagi, of which ten companies including the company are shareholders, concluded an implementation contract with Miyagi Prefecture for the Miyagi Prefecture Integrated Water Supply, Industrial Waterworks, and Sewerage Public-Private Partnership Management Project. The project entrusts the operation of Miyagi Prefecture's water supply business, industrial waterworks business, as well as its sewerage business facilities to the private sector for a period of 20 years. The projects is set to commence in April 2022.
New businesses
The company plans to establish a “new business continuity creation function” and aggressively develop a succession of new business in areas that can contribute to growth in the three values the company provides, including renewable energy, and areas that use digital technologies
To that end, it plans to invest up to JPY5.0bn in venture businesses in Japan and overseas
The company plans to step up its efforts (through group collaboration) on concession projects for sewerage systems, airports, etc., and PPP initiatives such as smart cities
In 2012, the company entered a new area of business: bell pepper cultivation. Plantaardig farm Co., Ltd., a subsidiary, grows the bell peppers at a greenhouse in Miho-mura, Inashiki, Ibaraki Prefecture (one of the largest bell pepper nutriculture facilities in Japan) and sells it. The company aims to expand this business. It also intends to concentrate on searching for and developing other new businesses.