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Tokyu Construction

Tokyu Construction 1720

東急建設
Tokyu Construction Co., Ltd.
Recent Updates
2022-05-12
Rolling of its long-term management plan “To zero, from zero”
2022-05-12
Full-year FY03/22 flash update
2022-04-25
Revisions to full-year FY03/22 earnings and dividend forecasts
Get in touch
1-16-14, Shibuya, Shibuya-ku, Tokyo 150-8340, Japan
https://www.tokyu-cnst.co.jp/index.html
03(5466)5061
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
Full Report
2022-05-12
Full-year FY03/22 flash update
2022-05-12
Q3 FY03/22 flash update
2022-02-09
1H FY03/22 flash update
2021-11-09
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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

Income statementFY03/13FY03/14FY03/15FY03/16FY03/17FY03/18FY03/19FY03/20FY03/21FY03/22FY03/23
(JPYmn)Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Est.
Revenue228,570226,164262,815296,393243,618320,711331,437322,170231,483258,083289,000
YoY0.3%-1.1%16.2%12.8%-17.8%31.6%3.3%-2.8%-28.1%11.5%12.0%
Revenue from completed construction226,784223,969260,454294,063237,749318,707329,548320,083229,016255,547-
Revenue from real estate sales1,7862,1952,3602,3295,8692,0031,8882,0862,4672,536-
Gross profit12,00213,24116,96831,08830,34435,72036,07336,17318,1709,716-
YoY-2.2%10.3%28.1%83.2%-2.4%17.7%1.0%0.3%-49.8%-46.5%-
Gross profit margin5.3%5.9%6.5%10.5%12.5%11.1%10.9%11.2%7.8%3.8%-
Gross profit from completed construction11,40612,48017,04930,51128,64835,12635,90035,88519,34311,071-
Gross profit from real estate business595760-805771,695593172288-1,172-1,354-
Operating profit1,1542,6306,00918,17817,21121,41621,98720,3153,549-6,0784,000
YoY-26.6%127.9%128.5%202.5%-5.3%24.4%2.7%-7.6%-82.5%--
Operating profit margin0.5%1.2%2.3%6.1%7.1%6.7%6.6%6.3%1.5%-1.4%
Recurring profit2,3013,5598,02419,76818,83922,12822,93221,9694,891-5,1324,500
YoY22.1%54.7%125.5%146.4%-4.7%17.5%3.6%-4.2%-77.7%--
Recurring profit margin1.0%1.6%3.1%6.7%7.7%6.9%6.9%6.8%2.1%-1.6%
Net income-5662,6855,80513,34013,69116,11815,50414,9032,647-7,4593,500
YoY--116.2%129.8%2.6%17.7%-3.8%-3.9%-82.2%--
Net margin
-1.2%2.2%4.5%5.6%5.0%4.7%4.6%1.1%-1.2%
Per-share data (split-adjusted; JPY)
No. of shares outstanding at end of period ('000 shares ) 106,761106,761106,761106,761106,761106,761106,761106,761106,761106,761-
EPS (JPY)-5.325.254.4125.0128.3151.1145.4139.825.0-71.333.4
EPS (fully diluted; JPY)-----------
Dividend per share (JPY)-5.013.025.026.031.030.030.010.025.036.0
Book value per share (JPY)304329419506620740869949984883-
Balance sheet (JPYmn)
Cash and cash equivalents23,09718,21518,31850,67422,58228,86549,14529,54934,17338,648
Total current assets118,854131,556146,079171,041155,983197,473204,971171,125158,454173,963
Tangible fixed assets14,17417,14518,22817,75619,20421,63426,16332,03334,34229,675
Investments and other assets20,84920,67027,55825,31128,93329,79033,01731,76032,56832,782
Intangible assets3163133594166928588449761,2021,390
Total assets154,195169,685192,226214,526204,813249,756264,996235,897226,568237,811
Short-term debt2327,1824,1311153,13017017825,1795,264189
Total current liabilities114,100127,784136,838150,799130,624165,688165,955127,57895,046115,004
Long-term debt2,5132,0684,9374,8431,8591,8791,7521,59021,65422,468
Total fixed liabilities7,6076,64310,5269,4887,8084,8936,0596,61428,01229,742
Total liabilities121,707134,427147,364160,288138,433170,581172,014134,193123,058144,747
Shareholders' equity32,41035,15344,67354,00366,15278,95092,634101,215102,96492,490
Total net assets32,48735,25844,86154,23866,38079,17592,981101,703103,50993,064
Total interest-bearing debt2,7459,2509,0684,9584,9892,0491,93026,76926,91822,657
Cash flow statement(JPYmn)
Cash flows from operating activities14,264-9,3022,11139,003-23,54516,22629,694-33,43911,62912,499
Cash flows from investing activities-619-2,072-1,525-334-1,717-3,383-5,786-7,488-3,753-773
Cash flows from financing activities-8,5696,476-675-6,035-2,788-6,457-3,57521,604-3,308-7,531
Financial ratios
ROA (RP-based)1.5%2.2%4.4%9.7%9.0%9.7%8.9%8.8%2.1%-2.2%
ROE-1.8%7.9%14.5%27.0%22.8%22.2%18.1%15.4%2.6%-7.6%
Equity ratio21.0%20.7%23.2%25.2%32.3%31.6%35.0%42.9%45.4%38.9%
Total asset turnover148.1%139.7%145.2%145.7%116.2%141.1%128.8%128.6%100.1%111.2%
Net margin-0.2%1.2%2.2%4.5%5.6%5.0%4.7%4.6%1.1%-2.9%
Source: Shared Research based on company 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”

2022-05-12

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.

KPIs in long-term management plan (revised on May 12, 2022)
Management indicatorFY2021 Act.FY2022FY2024FY2030
ProfitabilityOperating profit-JPY6.0bnJPY4.0bnJPY9.0bn or higherJPY22.0bn or higher
Operating profit margin-2.4%1.4%2.6% or higher5.0% or higher
EfficiencyROIC---7.0% or higher
ROE-3.8%7.3% or higher10.0% or higher
SoundnessDebt-to-equity ratio0.24倍0.5 or lower
Equity ratio38.9%Approx. 40–45%Approx. 45%
Non-financialEmployee engagementBBBBBAAAA
GHG emission-Reduce by 10.0%Reduce by 15.0%Reduce by 30.0%
Source: Shared Research based on company data
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.
Investment plans (revised on May 12, 2022)
InvestmentsAmountKey investments
10-year totalJPY107.0bn
Business strategy investment based on delivering three valuesCore BusinessJPY95.0bnInvestments in domestic, civil engineering, construction, and construction RN businesses
■Investments for technology development
■Investments in production systems innovation and DX
■M&A investments
Strategic BusinessInvestments in international, real estate, and new businesses
■M&A investments for international business expansion
■Acquisition of real estate emphasizing synergy with core businesses
■Investments in new business incubation
■Investments in concessions/PPP business
■Investments in venture businesses and venture funds
Investment in source of competitive advantage (human resources x DX)JPY12.0bnInvestments in HR system reform and human resources cultivation
Environment construction and systems infrastructure pertaining to companywide DX
Source: Shared Research based on company data

Revisions to full-year FY03/22 earnings and dividend forecasts

2022-04-25

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.

Cons.FY03/21FY03/22
As of Apr 22, 2022As of Feb 8, 2022
(JPYmn)1H Act.2H Act.FY Act.1H Act.2H Est.Revised full-year forecast ARevised full-year forecast BFY Est.YoYCompared to the previous forecast (A-B)
Revenue95,423136,060231,483111,614146,386258,000267,000285,00011.5%-9,000
Gross profit8,3239,84718,17041113,10023,700
Gross profit margin8.7%7.2%7.8%0.4%4.9%8.3%
SG&A expenses7,1307,49014,6207,56316,70016,700
SG&A ratio7.5%5.5%6.3%6.8%6.3%5.9%
Operating profit1,1922,3573,549-7,1521,052-6,100-3,6007,000-271.9%-2,500
Operating profit margin1.2%1.7%1.5%-6.4%0.7%--2.5%
Recurring profit1,6803,2114,891-7,1512,151-5,000-3,3007,300-202.2%-1,700
Recurring profit margin1.8%2.4%2.1%-6.4%1.5%--2.6%
Net income7591,8882,647-7,668168-7,500-4,8004,800-383.3%-2,700
Net margin0.8%1.4%1.1%-6.9%0.1%--1.7%
Source: Shared Research based on company data

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

2022-02-25

On February 24, 2022, Tokyu Construction Co., Ltd. announced planned changes to executive management.

Scheduled retirements of company directors

Current PositionNameRemarks
Director, Chairman Tsuneo IzukaAfter retiring from position as chairman, will become company advisor 
Director, Managing Executive Officer,  General Manager of Civil Engineering DivisionYushi TsukuiScheduled to retire from position as Managing Executive Officer on March 31, 2022

Effective date: in late-June, 2022

Trends and outlook

Quarterly trends and results

CumulativeFY03/20FY03/21FY03/22FY03/22
(JPYmn)Q1Q1–Q2Q1–Q3Q1–Q4Q1Q1–Q2Q1–Q3Q1–Q4Q1Q1–Q2Q1–Q3Q1–Q4% of Est.Revised full-year Est.
Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.
Revenue78,722183,415248,190322,17042,68495,423154,667231,48356,333111,614181,296258,083100.0%258,000
YoY28.8%18.6%8.0%-2.8%-45.8%-48.0%-37.7%-28.1%32.0%17.0%17.2%11.5%11.5%
Revenue from completed construction78,172182,382246,689320,08342,05394,255152,959229,01655,721110,452179,582255,547
Revenue from real estate sales5491,0331,5002,0866301,1681,7082,4676121,1621,7142,536
Cost of revenue68,422159,487218,768285,99739,12187,100141,788213,31352,598111,203174,872248,367
YoY25.7%16.3%7.5%-3.2%-42.8%-45.4%-35.2%-25.4%34.4%27.7%23.3%16.4%
Cost of revenue from completed construction68,137158,900217,527284,19838,78886,438140,586209,67352,229110,507173,809244,476
Cost of real estate business2845861,2401,7973326611,2003,6393686951,0623,891
Gross profit10,30023,92829,42236,1733,5638,32312,87918,1703,7354116,4249,716
YoY53.6%36.2%11.7%0.3%-65.4%-65.2%-56.2%-49.8%4.8%-95.1%-50.1%-46.5%
Gross profit margin13.1%13.0%11.9%11.2%8.3%8.7%8.3%7.8%6.6%0.4%3.5%3.8%
Gross profit from completed construction10,03423,48129,16235,8853,2657,81712,37219,3433,492-555,77211,071
Gross profit from real estate business265446260288297506507-1,172243466652-1,354
SG&A expenses3,6647,60811,57715,8583,5297,13010,76314,6203,8027,56311,40715,794
YoY20.0%14.0%15.1%12.6%-3.7%-6.3%-7.0%-7.8%7.7%6.1%6.0%8.0%
SG&A ratio4.7%4.1%4.7%4.9%8.3%7.5%7.0%6.3%6.7%6.8%6.3%6.1%
Operating profit6,63616,32017,84520,315341,1922,1163,549-67-7,152-4,982-6,078--6,100
YoY81.7%49.8%9.7%-7.6%-99.5%-92.7%-88.1%-82.5%-----271.9%
Operating profit margin8.4%8.9%7.2%6.3%0.1%1.2%1.4%1.5%-----
Recurring profit7,00116,97218,94721,9692581,6802,7394,891-116-7,151-4,538-5,132--5,000
YoY80.7%49.3%11.5%-4.2%-96.3%-90.1%-85.5%-77.7%-----202.2%
Recurring profit margin8.9%9.3%7.6%6.8%0.6%1.8%1.8%2.1%-----
Net income4,83811,51612,66214,903607591,5462,647-267-7,668-5,452-7,459--7,500
YoY94.3%50.4%9.9%-3.9%-98.8%-93.4%-87.8%-82.2%-----383.3%
Net margin6.1%6.3%5.1%4.6%0.1%0.8%1.0%1.1%-----
QuarterlyFY03/20FY03/21FY03/22
(JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4
Revenue78,722104,69364,77573,98042,68452,73959,24476,81656,33355,28169,68276,787
YoY28.8%11.9%-13.8%-27.2%-45.8%-49.6%-8.5%3.8%32.0%4.8%17.6%0.0%
Revenue from completed construction78,172104,21064,30773,39442,05352,20258,70476,05755,72154,73169,13075,965
Revenue from real estate sales549484467586630538540759612550552822
Cost of revenue68,42291,06559,28167,22939,12147,97954,68871,52552,59858,60563,66973,495
YoY25.7%10.1%-10.7%-26.8%-42.8%-47.3%-7.7%6.4%34.4%22.1%16.4%2.8%
Cost of revenue from completed construction68,13790,76358,62766,67138,78847,65054,14869,08752,22958,27863,30270,667
Cost of real estate business2843026545573323295392,4393683273672,829
Gross profit10,30013,6285,4946,7513,5634,7604,5565,2913,735-3,3246,0133,292
YoY53.6%25.5%-37.3%-30.7%-65.4%-65.1%-17.1%-21.6%4.8%-169.8%32.0%-37.8%
Gross profit margin13.1%13.0%8.5%9.1%8.3%9.0%7.7%6.9%6.6%-6.0%8.6%4.3%
SG&A expenses3,6643,9443,9694,2813,5293,6013,6333,8573,8023,7613,8444,387
YoY20.0%9.0%17.2%6.3%-3.7%-8.7%-8.5%-9.9%7.7%4.4%5.8%13.7%
SG&A ratio4.7%3.8%6.1%5.8%8.3%6.8%6.1%5.0%6.7%6.8%5.5%5.7%
Operating profit6,6369,6841,5252,470341,1589241,433-67-7,0852,170-1,096
YoY81.7%33.7%-71.6%-56.8%-99.5%-88.0%-39.4%-42.0%--134.8%-
Operating profit margin8.4%9.2%2.4%3.3%0.1%2.2%1.6%1.9%--3.1%-
Recurring profit7,0019,9711,9753,0222581,4221,0592,152-116-7,0352,613-594
YoY80.7%33.1%-64.9%-49.1%-96.3%-85.7%-46.4%-28.8%--146.7%-
Recurring profit margin8.9%9.5%3.0%4.1%0.6%2.7%1.8%2.8%--3.7%-
Net income4,8386,6781,1462,241606997871,101-267-7,4012,216-2,007
YoY94.3%29.2%-70.3%-43.8%-98.8%-89.5%-31.3%-50.9%--181.6%-
Net margin6.1%6.4%1.8%3.0%0.1%1.3%1.3%1.4%--3.2%-
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Revenue (parent)
RevenueFY03/20FY03/21FY03/22
(JPYmn)Q1Q1–Q2Q1–Q3Q1–Q4Q1Q1–Q2Q1–Q3Q1–Q4Q1Q1–Q2Q1–Q3Q1–Q4
Total revenue74,382170,452230,015296,42639,54287,677144,004216,24552,674104,720171,271243,025
YoY25.7%15.3%6.3%-4.4%-46.8%-48.6%-37.4%-27.0%33.2%19.4%18.9%12.4%
Revenue from completed construction(Construction) 74,057169,777228,997295,03439,15086,899142,836214,56052,265103,901170,037241,294
YoY25.8%15.3%6.4%-4.4%-47.1%-48.8%-37.6%-27.3%33.5%19.6%19.0%12.5%
Domestic public14,02536,77551,50972,39310,48325,59640,53257,4308,73017,98828,29640,364
Domestic private55,928126,738168,292210,79826,05556,33495,142148,37341,54283,583137,622196,020
General private41,49992,389124,815159,22721,60646,77178,167118,87434,19170,815117,746165,467
Tokyu Group14,42834,34943,47651,5714,4489,56216,97429,4997,35112,76719,87530,553
Overseas4,1036,2639,19511,8402,6114,9687,1628,7571,9932,3284,1184,908
Building Construction56,587126,551167,577206,95626,01056,36091,391138,99139,61079,426131,097184,407
YoY23.5%6.2%-2.0%-13.1%-54.0%-55.5%-45.5%-32.8%52.3%40.9%43.4%32.7%
Domestic public3,6107,20911,43115,9043,3156,73110,89613,4111,3363,0174,5116,542
Domestic private52,651118,619155,303190,17422,69449,62980,464125,43038,23376,348126,309177,306
General private40,31889,690120,404151,69519,72143,44868,932104,32831,50065,354109,161151,271
Tokyu Group12,33228,92934,89938,4792,9736,18011,53221,1016,73210,99317,14826,035
Overseas32572284287600301504060276558
Civil Engineering17,47043,22661,42088,07813,13930,53851,44475,56812,65424,47538,93956,886
YoY33.9%53.8%38.9%25.1%-24.8%-29.4%-16.2%-14.2%-3.7%-19.9%-24.3%-24.7%
Domestic public10,41529,56540,07856,4897,16718,86429,63544,0197,39314,97123,78433,822
Domestic private3,2778,11812,98920,6243,3606,70414,67722,9433,3087,23511,31218,714
General private1,1812,6994,4117,5321,8853,3239,23514,5452,6905,4618,58514,196
Tokyu Group2,0965,4198,57713,0921,4753,3815,4418,3976181,7732,7274,517
Overseas3,7775,5418,35310,9642,6114,9687,1318,6061,9522,2683,8424,349
Revenue from real estate sales3246741,0171,3913927771,1671,6844098181,2331,731
YoY11.7%20.8%3.1%5.1%21.0%15.3%14.7%21.1%4.3%5.3%5.7%2.8%
RevenueFY03/20FY03/21FY03/22
(JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4
Total revenue74,38296,07059,56366,41139,54248,13556,32772,24152,67452,04666,55171,754
YoY25.7%8.4%-13.0%-29.1%-46.8%-49.9%-5.4%8.8%33.2%8.1%18.2%-0.7%
Revenue from completed construction(Construction) 74,05795,72059,22066,03739,15047,74955,93771,72452,26551,63666,13671,257
YoY25.8%8.3%-13.0%-29.2%-47.1%-50.1%-5.5%8.6%33.5%8.1%18.2%-0.7%
Domestic public14,02522,75014,73420,88410,48315,11314,93616,8988,7309,25810,30812,068
Domestic private55,92870,81041,55442,50626,05530,27938,80853,23141,54242,04154,03958,398
General private41,49950,89032,42634,41221,60625,16531,39640,70734,19136,62446,93147,721
Tokyu Group14,42819,9219,1278,0954,4485,1147,41212,5257,3515,4167,10810,678
Overseas4,1032,1602,9322,6452,6112,3572,1941,5951,9933351,790790
Building Construction56,58769,96441,02639,37926,01030,35035,03147,60039,61039,81651,67153,310
YoY23.5%-4.6%-21.0%-41.4%-54.0%-56.6%-14.6%20.9%52.3%31.2%47.5%12.0%
Domestic public3,6103,5994,2224,4733,3153,4164,1652,5151,3361,6811,4942,031
Domestic private52,65165,96836,68434,87122,69426,93530,83544,96638,23338,11549,96150,997
General private40,31849,37230,71431,29119,72123,72725,48435,39631,50033,85443,80742,110
Tokyu Group12,33216,5975,9703,5802,9733,2075,3529,5696,7324,2616,1558,887
Overseas32539712034--301204020216282
Civil Engineering17,47025,75618,19426,65813,13917,39920,90624,12412,65411,82114,46417,947
YoY33.9%71.0%12.8%1.9%-24.8%-32.4%14.9%-9.5%-3.7%-32.1%-30.8%-25.6%
Domestic public10,41519,15010,51316,4117,16711,69710,77114,3847,3937,5788,81310,038
Domestic private3,2774,8414,8717,6353,3603,3447,9738,2663,3083,9274,0777,402
General private1,1811,5181,7123,1211,8851,4385,9125,3102,6902,7713,1245,611
Tokyu Group2,0963,3233,1584,5151,4751,9062,0602,9566181,1559541,790
Overseas3,7771,7642,8122,6112,6112,3572,1631,4751,9523161,574507
Revenue from real estate sales324350343374392385390517409409415498
YoY11.7%30.6%-19.9%11.0%21.0%10.0%13.7%38.2%4.3%6.2%6.4%-3.7%
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Orders (parent)
OrdersFY03/20FY03/21FY03/22
(JPYmn)Q1Q1–Q2Q1–Q3Q1–Q4Q1Q1–Q2Q1–Q3Q1–Q4Q1Q1–Q2Q1–Q3Q1–Q4
Construction26,67971,738115,295193,31527,741122,357186,066306,63361,860119,771173,068274,663
YoY-39.7%-25.9%-22.7%-26.5%4.0%70.6%61.4%58.6%123.0%-2.1%-7.0%-10.4%
Domestic public3,8929,74119,65240,8182,00420,35632,75842,8317,81920,09635,53243,532
Domestic private21,28560,47793,024144,92425,135100,939151,747260,30953,71898,052135,629235,073
General private15,22848,03076,304120,96818,23688,717131,599230,38932,40767,689101,124186,396
Tokyu Group6,05612,44716,72023,9566,89912,22220,14729,92021,31130,36234,50448,676
Overseas1,5011,5182,6187,5716011,0611,5603,4923231,6211,906-3,942
Building Construction17,28143,18876,914128,70924,10197,608146,740242,92055,13394,047133,555221,382
YoY-48.8%-25.5%-22.6%-30.5%39.5%126.0%90.8%88.7%128.8%-3.6%-9.0%-8.9%
Domestic public3734,2038,9689,9941,0653,2035,3205,7313,9616,47110,18710,224
Domestic private16,92839,01367,972113,77222,33893,968140,797235,12550,91286,870122,461216,085
General private14,58431,68057,18198,96616,74483,802123,869209,63631,11362,47094,285176,417
Tokyu Group2,3447,33210,79014,8055,59410,16616,92725,48819,79924,39928,17639,667
Overseas-19-28-264,9426974366232,063259705906-4,927
Civil Engineering9,39728,55038,38164,6053,64024,74839,32563,7136,72725,72339,51353,281
YoY-10.6%-26.6%-23.1%-16.9%-61.3%-13.3%2.5%-1.4%84.8%3.9%0.5%-16.4%
Domestic public3,5185,53810,68330,82493817,15327,43837,0993,85813,62525,34533,308
Domestic private4,35721,46425,05231,1512,7976,97010,94925,1842,80511,18213,16718,987
General private64416,34919,12222,0011,4924,9157,72920,7521,2945,2196,8399,978
Tokyu Group3,7125,1145,9299,1501,3052,0553,2204,4321,5115,9626,3289,009
Overseas1,5211,5462,6452,629-956249371,429639161,000985
OrdersFY03/20FY03/21FY03/22
(JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4
Construction26,67945,05943,55778,02027,74194,61663,709120,56761,86057,91153,297101,595
YoY-39.7%-14.3%-16.9%-31.5%4.0%110.0%46.3%54.5%123.0%-38.8%-16.3%-15.7%
Domestic public3,8925,8499,91121,1662,00418,35212,40210,0737,81912,27715,4368,000
Domestic private21,28539,19232,54751,90025,13575,80450,808108,56253,71844,33437,57799,444
General private15,22832,80228,27444,66418,23670,48142,88298,79032,40735,28233,43585,272
Tokyu Group6,0566,3914,2737,2366,8995,3237,9259,77321,3119,0514,14214,172
Overseas1,501171,1004,9536014604991,9323231,298285-5,848
Building Construction17,28125,90733,72651,79524,10173,50749,13296,18055,13338,91439,50887,827
YoY-48.8%7.2%-18.5%-39.8%39.5%183.7%45.7%85.7%128.8%-47.1%-19.6%-8.7%
Domestic public3733,8304,7651,0261,0652,1382,1174113,9612,5103,71637
Domestic private16,92822,08528,95945,80022,33871,63046,82994,32850,91235,95835,59193,624
General private14,58417,09625,50141,78516,74467,05840,06785,76731,11331,35731,81582,132
Tokyu Group2,3444,9883,4584,0155,5944,5726,7618,56119,7994,6003,77711,491
Overseas-19-924,968697-2611871,440259446201-5,833
Civil Engineering9,39719,1539,83126,2243,64021,10814,57724,3886,72718,99613,79013,768
YoY-10.6%-32.5%-10.8%-5.8%-61.3%10.2%48.3%-7.0%84.8%-10.0%-5.4%-43.5%
Domestic public3,5182,0205,14520,14193816,21510,2859,6613,8589,76711,7207,963
Domestic private4,35717,1073,5886,0992,7974,1733,97914,2352,8058,3771,9855,820
General private64415,7052,7732,8791,4923,4232,81413,0231,2943,9251,6203,139
Tokyu Group3,7121,4028153,2211,3057501,1651,2121,5114,4513662,681
Overseas1,521251,099-16-957193134926385384-15
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Full-year FY03/22 results 

Summary

  • Revenue:                JPY258.1bn (+11.5% YoY; 100.0% of revised full-year estimate)
  • Operating loss:        JPY6.1bn  (versus profit of JPY3.5bn in FY03/21) 
  • Recurring loss:         JPY5.1bn  (versus profit of JPY4.9bn in FY03/21)
  • Net loss*:               JPY7.5bn  (versus net income of JPY2.6bn in FY03/21)
    * 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

Cons.FY03/21FY03/22FY03/23
(JPYmn)1H Act.2H Act.FY Act.1H Act.2H Act.FY Act.FY Est.
Revenue95,423136,060231,483111,614146,469258,083289,000
Gross profit8,3239,84718,1704119,3059,716
Gross profit margin8.7%7.2%7.8%0.4%6.4%3.8%
SG&A expenses7,1307,49014,6207,5638,23115,794
SG&A ratio7.5%5.5%6.3%6.8%5.6%6.1%
Operating profit1,1922,3573,549-7,1521,074-6,0784,000
Operating profit margin1.2%1.7%1.5%-6.4%0.7%-2.4%1.4%
Recurring profit1,6803,2114,891-7,1512,019-5,1324,500
Recurring profit margin1.8%2.4%2.1%-6.4%1.4%-2.0%1.6%
Net income7591,8882,647-7,668209-7,4593,500
Net margin0.8%1.4%1.1%-6.9%0.1%-2.9%1.2%
Source: Shared Research based on company data
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

  1. Promote and establish the Tokyu Construction brand: Visualize initiatives and achievements, and promote them internally and externally with a new brand message.
  2. Deepen core businesses: Strengthen capabilities by enhancing problem-solving skills, innovating construction production systems, and forming strategic alliances.
  3. Grow strategic businesses: Create new growth opportunities through initiatives and investments with a strong focus on producing synergies with core businesses.
  4. Human resources and organizational strategy: Achieve results and accelerate innovation through organizational and cultural reforms that are closely tied to the human resource strategy.
  5. Financial and capital strategy: Shift from a focus on enhancing financial foundations to a focus on improving capital efficiency (pursuing an optimal capital structure).

Numerical targets

KPIs in long-term management plan (revised on May 12, 2022)
Management indicatorFY2021 Act.FY2022FY2024FY2030
ProfitabilityOperating profit-JPY6.0bnJPY4.0bnJPY9.0bn or higherJPY22.0bn or higher
Operating profit margin-2.4%1.4%2.6% or higher5.0% or higher
EfficiencyROIC---7.0% or higher
ROE-3.8%7.3% or higher10.0% or higher
SoundnessDebt-to-equity ratio0.24倍0.5 or lower
Equity ratio38.9%Approx. 40–45%Approx. 45%
Non-financialEmployee engagementBBBBBAAAA
GHG emission-Reduce by 10.0%Reduce by 15.0%Reduce by 30.0%
Source: Shared Research based on company data
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.

Shareholder return policy
Up to FY03/21Long-term plan "To zero, from zero." (from FY03/22)
Shareholder return policyCons. payout ratio 20% or higherDOE 4.0% or higher
Flexible acquisition of treasury shares
Source: Shared Research based on company data

Investment plans

The company plans to spend JPY170bn over 10 years on VISION 2030.

Investment plans (revised on May 12, 2022)
InvestmentsAmountKey investments
10-year totalJPY107.0bn
Business strategy investment based on delivering three valuesCore BusinessJPY950bnInvestments in domestic, civil engineering, construction, and construction RN businesses
■Investments for technology development
■Investments in production systems innovation and DX
■M&A investments
Strategic BusinessInvestments in international, real estate, and new businesses
■M&A investments for international business expansion
■Acquisition of real estate emphasizing synergy with core businesses
■Investments in new business incubation
■Investments in concessions/PPP business
■Investments in venture businesses and venture funds
Investment in source of competitive advantage (human resources x DX)JPY12.0bnInvestments in HR system reform and human resources cultivation
Environment construction and systems infrastructure pertaining to companywide DX
Source: Shared Research based on company data

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.

KPIs pertinent to delivering three values
Provision of valuesKey measures2030 levels to be achieved
Decarbonization■Promotion of ZEB■GHG reduction target: Scope 1, 2, and 3: 30% cut
■Switch to renewables for all electricity used in business activities
■Enter renewal energy businesses
■Use non-fossil fuels for heavy machinery and dump trucks
■Decarbonization of construction materials
Zero waste■Develop timber construction business■Shift to renewables for all electricity used in business (first for Japanese general contractor)
■Development and operation of decarbonization technologies
■Reduce final disposal volume of waste plastic, etc.
■Promote use of recycled materials
■Develop and operate waste recycling technology
Disaster prevention and mitigation■Contribute to longer service life with infrastructure asset management■Financial impact: Aim to reduce risk and capture opportunities worth JPY12–16bn
■Extend building life using building health diagnosis technology and torrential rain damage prediction technology
■Build disaster simulation tools based on digital twins
Source: Shared Research based on company dataInvestment plansInvestment plans

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.

Science based targets (SBTs): SBTs are greenhouse gas emissions reductions targets for 5–15 years in the future set by companies. They are considered science-based if they are in line with what climate science deems necessary to meet the goals the Paris Agreement (to limit the global temperature rise to well below 2°C and targets limiting the rise to 1.5° C from pre-Industrial Revolution levels). The SBT governing bodies are the United Nations Global Compact, CDP, World Resources Institute (WRI) and Worldwide Fund for Nature (WWF).
RE100: An initiative involving globally influential companies that have adopted a goal of using electricity derived 100% from renewable energy sources in their business activities. The Tokyu Construction group has set a target of shifting to 100% renewable energy sources in all of the electricity used in its business activities by 2030, and is accelerating its efforts to bring about a decarbonized society as soon as possible.

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.

FY2021–FY2023FY2024–FY2026FY2027–FY2030
Core business strategiesProactive development of businesses that provide three values and creation of success storiesShift to proposal-based sales based on provision of three values to distinguish companySpearhead new construction schemes (e.g. IPD* ) based on accumulated data and results, and aim to break away from customer-led contracting industry
Maximize use of digital platforms based on BIM and CIMLeverage BIM and CIM data to grow business in value chain and maximize synergies between businesses
Source: Shared Research based on company data
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
  1. Securing construction capacity and strengthening problem-solving skills
  2. Strengthening overall evaluations, expansion in maintenance and repair, and participation in early contractor involvement (ECI): An ordering method that reflects the technical capabilities of constructors in design content from the design stage and aims to achieve cost reductions and shortening of the construction period
  3. Strengthening sales to other railways, including private railways and subways in Tokyo metropolitan area
  4. Environment-related initiatives and the commercialization of infrastructure asset management
  5. Promotion of front-end loading based on CIM
  6. Information sharing, visualization, and training of engineers
  7. Cooperation with external parties to complement the company’s weaknesses 
Deepening domestic building construction and building renovation businesses
  1. Strengthening relationships with customers through proposal-based sales
  2. Acquisition and strengthening of design proposal capabilities to meet customer needs
  3. Productivity enhancement to cut costs and reduce construction periods
  4. Promotion of front-end loading based on BIM
  5. Acquisition of maintenance and management expertise and strengthening of renovation handling capabilities
  6. Strengthening of ZEB and other environment-related equipment and technology
  7. Strengthening of cooperation with Tokyu Group companies
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). 

The Shibuya district is one of several popular areas for young people. Major shopping facilities include Tokyu Department Store, Shibuya 109, and Shibuya Parco.
**Along the Tokyu lines:
Tokyu Den-en-toshi Line (Shibuya, Ikejiri-Ohashi, Sangenjaya, Futako-Tamagawa, Mizonokuchi, Tama Plaza, Nagatsuta, Minami Machida Grandberry MallーChuorinkan)
Tokyu Toyoko Line (Shibuya, Daikanyama, Nakameguro, Jiyugaoka, Tamagawa, Musashi Kosugi, Hiyoshi, Tsunashima, Yokohama)
Tokyu Meguro Line (Meguro, Fudo-mae, Musashi-Koyama, Ookayama, Den-en-chofu)
Tokyu Oimachi Line (Futako-Tamagawa, Jiyugaoka, Ookayama, Hatanodai, Oimachi)
Tokyu Ikegami Line (Gotanda, Hatanodai, Kamata)
Tokyu Tamagawa Line (Tamagawa, Musashi-Nitta, Kamata) 

Shibuya Scramble Square Central and West Towers and the former Shibuya Station(Left)
Many small, older buildings around Shibuya Station(Right)
Source: Tokyu website (“Shibuya redevelopment”)
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.

Building maintenance and renovation work
Source: Shared Research, based on MLIT’s “Statistics Survey on Execution of Construction Works”
Percentage of infrastructure 50-plus years old
March 2013March 2023March 2033
Road bridges18%43%67%
Tunnels20%34%50%
River management facilities25%43%64%
Sewer pipes2%9%24%
Quay walls8%32%58%
Source: Company data
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.

*iTOREL (a system for inspecting and examining full cross sections of tunnels): This new technology uses testing robots that straddle the roadway inside a tunnel to conduct tests without interfering with vehicle traffic. Autodetection units that check for cracks or bubbles in concrete linings, and hammer testing units can be used to check for quantitative changes over time. Testing results are examined using the company’s expert system. The company uses this information to suggest repair methods that are cost-optimized, taking the tunnel’s life cycle cost into account.

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.

iTOREL system for inspecting the full cross sections of tunnels Institute of Technology following ZEB renovations
Source: Company website
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.

BIM: Building information modeling (BIM) is a solution for utilizing information in a building database produced by adding data regarding attributes, such as cost, finishing details, and management information, to a three-dimensional digital model of a building constructed on a computer during various types of construction processes, including design, construction, maintenance, and management.
To front-load construction work and streamline on-site operations, Tokyu Construction has started distributing a structural model that supports BIM as a “first model” at the start of construction. The distributed model is utilized at the site as a construction BIM, and applied to an examination of the construction plan. Visualizing work procedures and sharing BIM information with employees and on-site skilled construction workers makes it possible to select the best procedures, and helps to improve the efficiency and safety of the operations. BIM can also help ensure consistency among multiple drawings, such as architectural design, structural, and equipment plans, and prevent losses due to operational rework. Furthermore, it is possible to check work in detail and build a consensus with the client and designers in three dimensions, improving the speed of decision-making. The company says it plans to utilize the information provided by BIM to reduce the burden of on-site quantitative calculations. (Source: Tokyu Corporation’s Integrated Report 2019)
CIM: Construction information modeling (CIM) refers to applying the concept of BIM, which is taking hold in the construction field, in civil engineering.

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.

*Cross laminated timber (CLT) is a type of wooden construction material. Whereas in standard laminated timber, the layers are laminated together with the grain running in the same direction, in CLT, each layer is oriented perpendicular to the adjacent layers, resulting in panels with superior structural strength.

Left: Rebuilding the roof over Togoshi Ginza Station on the Tokyu Ikegami Line (2016).
Right: ROOFLAG Rental Housing Future Exhibition Hall (2020) 
Source: Company website

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.

Jakarta Mass Rapid Transit Project (Indonesia, 2019)(Left)
Takasago factory (Singapore, completed in 2013)(Right)
Source: Company website

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. 

Miyagi Prefecture Integrated Water Supply, Industrial Waterworks, and Sewerage Public-Private Partnership Management Project (Miyagi-style management & operation method):  
This is a public-private partnership model that uses concessions for the three businesses operated by Miyagi Prefecture: the water supply business, the industrial water supply business, and the sewerage business. Under this model, amendments in the Water Supply Act allow Miyagi Prefecture to delegate some water-related operations to private businesses while maintaining ultimate responsibility, with local governments permitted to create a mechanism in which private businesses are granted the rights to operate water-related facilities without the status of those water-related businesses changing. 

Seien sewage treatment plant
Source: City of Hamamatsu data

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.

Plantaardig farm’s Miho-mura plant (Miho-mura, Inashiki, Ibaraki Prefecture)