SBS Holdings 2384

SBSホールディングス

Recent Updates

2021-11-11

Q3 FY12/21 flash update

2021-09-29

1H FY12/21 report update

2021-08-06

Revisions to its full-year earnings and dividend forecasts for FY12/21

Get in touch

Olinas Tower,1-3 Taihei 4-chome, Sumida-ku,Tokyo, Japan 130-0012

https://www.sbs-group.co.jp

03-3829-2222

Summary

SBS is a pure holding company. Its group companies are involved in logistics and ancillary support. The Logistics business primarily offers B2B general logistics, food logistics, and specialty logistics services. The main logistics support service is in property management—SBS develops and sells logistics facilities, and manages rental properties.

Air Freight & Logistics

Key dates

2014-04-10

Coverage initiation

Full Report

2021-11-11

Q3 FY12/21 flash update

2021-11-11

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Executive summary

Business: pure holding company involved in logistics and ancillary support

SBS is a pure holding company with group companies involved in logistics and ancillary support businesses. Under its Logistics business, the company offers B2B general logistics, food logistics, and specialty logistics services. Its main logistics support service is Property Management, where SBS develops and sells logistics facilities, and manages rental properties. In FY12/20, the Logistics segment accounted for 93.6% of sales and 55.5% of operating profit, and the Property Management segment accounted for 3.6% of sales and 42.2% of operating profit.

The Logistics segment offers B2B transportation of materials, products, and merchandise, as well as storage, cargo handling, packaging, distribution processing and information management. In recent years, home deliveries for online retailers (over the last mile) and same-day deliveries (small deliveries for companies) have been increasing. Separately, the 3PL business, where the company proposes logistics solutions to customer companies, accounts for around 50% of sales in the segment and is the chief driver of growth. The low-temperature distribution business is resistant to market fluctuations, providing a stable earnings source.

The Property Management segment includes the group’s leasing business and its development business. Under the leasing business (23.3% of segment sales and 27.5% of operating profit in FY12/20) the company leases its warehouses, offices, and residences. Under the development business (76.7% of segment sales, 72.5% of operating profit), the company develops logistics facilities and sells them to funds and institutional investors.

The development business also plans and develops logistics facilities for the company’s own use, aiming for average annual yields of 6.0–7.0%. After a logistics facility is completed, the company uses it for its 3PL business. When the company sells these facilities, it securitizes them as properties with high utilization rates, thereby securing earnings, recovering capital, and acquiring assets necessary for expansion while preventing asset buildup.

Trends

In FY12/20, the company reported full-year consolidated sales of JPY257.2bn (+0.6% YoY), operating profit of JPY11.0bn (+7.7% YoY), recurring profit of JPY10.9bn (+7.0% YoY), and net income attributable to owners of the parent of JPY6.8bn (+12.3% YoY). Sales in the Logistics segment were unchanged and operating profit declined YoY, but sales and profit increased YoY in the Property Management segment.

In August 2021, the company announced revisions to its FY12/21 full-year earnings forecast. The revised forecasts call for sales of JPY400.0bn (+55.5% YoY), operating profit of JPY20.0bn (+82.5% YoY), recurring profit of JPY19.5bn (+79.2% YoY), and net income attributable to owners of the parent of JPY10.7bn (+56.8% YoY). Compared with the previous forecast (announced May 2021), the company raised its forecast for sales, operating profit, recurring profit, and net income attributable to owners of the parent by JPY10.0bn, JPY1.0bn, JPY500mn, and JPY100mn, respectively. The 3PL and 4PL businesses in the Logistics segment grew at a pace faster than company expectations.

SBS Holdings has not released a medium-term business plan, but has indicated that it is looking to become the largest domestic logistics service provider and, towards that end, is working to enhance its logistics infrastructure and further implement logistics and information technology. Shared Research sees its 3PL business, development business, and acquisitions driving growth over the medium term. In August 2018, the company made Ricoh Logistics System Co., Ltd. (now SBS Ricoh Logistics System Co., Ltd.) a subsidiary, and in November 2020, it made Toshiba Logistics (now SBS Toshiba Logistics) a subsidiary, which enabled it to bolster its nationwide and international networks.

Strengths and weaknesses

Shared Research believes the strengths of the company to be ambitious management hungry for growth, a solid track record in developing logistics facilities, and a history of successful M&A deals and post-merger integration. Weaknesses of the company are an inherent difficulty in lifting profitability, a need for financial fortification, and limited opportunities for growth due to insufficient personnel. (See Strengths and weaknesses)

Key financial data

Income statement		FY12/11	FY12/12	FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20	FY12/21
(JPYmn)		Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Est.
Sales		121,148	127,935	132,205	141,535	157,996	149,054	152,870	203,516	255,548	257,192	400,000
	YoY	1.1%	5.6%	3.3%	7.1%	11.6%	-5.7%	2.6%	33.1%	25.6%	0.6%	55.5%
Gross profit		11,254	12,566	13,459	14,276	17,555	16,977	16,013	21,351	26,028	26,802
	YoY	-9.5%	11.7%	7.1%	6.1%	23.0%	-3.3%	-5.7%	33.3%	21.9%	3.0%
	Gross profit margin	9.3%	9.8%	10.2%	10.1%	11.1%	11.4%	10.5%	10.5%	10.2%	10.4%
Operating profit		2,153	2,877	4,116	4,098	5,347	7,514	6,229	8,240	10,176	10,960	20,000
	YoY	-49.4%	33.6%	43.1%	-0.4%	30.5%	40.5%	-17.1%	32.3%	23.5%	7.7%	82.5%
	Operating profit margin	1.8%	2.2%	3.1%	2.9%	3.4%	5.0%	4.1%	4.0%	4.0%	4.3%	5.0%
Recurring profit		1,633	2,746	3,779	3,648	5,772	7,832	6,475	7,607	10,172	10,883	19,500
	YoY	-62.9%	68.1%	37.6%	-3.5%	58.2%	35.7%	-17.3%	17.5%	33.7%	7.0%	79.2%
	Recurring profit margin	1.3%	2.1%	2.9%	2.6%	3.7%	5.3%	4.2%	3.7%	4.0%	4.2%	4.9%
Net income		2,502	1,626	1,549	2,726	-3,815	5,111	4,446	4,409	6,079	6,826	10,700
	YoY	11.0%	-35.0%	-4.7%	75.9%	-	-	-13.0%	-0.8%	37.9%	12.3%	56.8%
	Net margin	2.1%	1.3%	1.2%	1.9%	-	3.4%	2.9%	2.2%	2.4%	2.7%	2.7%
Per-share data (JPY)
Shares issued (year-end)		39,205,200	39,205,200	39,613,200	39,703,200	39,703,200	39,703,200	39,718,200	39,718,200	39,718,200	39,718,200
EPS		68.4	44.1	40.9	70.4	-96.8	128.9	111.9	111.0	153.1	171.9	269.4
EPS (fully diluted)		-	-	13.6	70.3	-	-	-	-	-	-
Dividend per share		10.0	13.3	13.3	15.0	-	33.0	21.0	22.0	30.0	35.0	54.0
Book value per share		665.7	715.8	743.9	815.2	706.3	818.6	916.5	1,001.1	1,136.2	1,277.9
Balance sheet (JPYmn)
	Cash and deposits	9,219	10,181	10,339	11,098	8,990	9,388	11,539	16,310	18,503	27,543
Total current assets		39,727	39,150	39,663	53,847	51,601	46,512	47,350	62,871	64,376	104,530
Tangible fixed assets		52,301	54,523	58,019	60,241	60,800	64,730	69,076	85,373	89,599	96,179
Investments and other assets		6,384	9,016	8,897	10,324	11,131	10,044	10,311	13,292	15,635	20,345
Intangible assets		2,336	1,778	1,774	6,706	1,285	1,042	1,064	10,818	10,436	33,495
Total assets		100,747	104,467	108,354	131,120	124,817	122,330	127,802	172,355	180,047	254,550
	Accounts payable	7,601	7,627	7,721	8,767	9,584	7,697	8,204	13,555	14,751	30,828
	Short-term debt	30,385	27,082	28,749	36,061	30,527	24,493	24,004	26,150	28,060	53,430
Total current liabilities		44,442	41,330	43,969	54,990	52,994	41,596	42,323	58,501	62,896	111,102
	Long-term debt	21,219	24,421	23,755	28,837	31,876	33,497	33,709	49,628	47,438	47,399
Total fixed liabilities		31,240	35,386	35,120	40,884	41,875	46,199	46,968	65,680	63,074	75,301
Total liabilities		75,682	76,716	79,089	95,874	94,870	87,796	89,291	124,182	125,970	186,404
Total net assets		25,138	27,781	29,219	35,091	29,947	34,533	38,510	48,173	54,077	68,146
Total interest-bearing debt		51,604	51,503	52,504	64,898	62,403	57,990	57,713	75,778	75,498	100,829
Cash flow statement (JPYmn)
Cash flows from operating activities		3,712	7,317	6,243	6,603	7,728	12,201	11,671	12,398	16,872	17,262
Cash flows from investing activities		-3,766	-5,520	-6,214	-15,101	-7,081	-10,043	-8,127	-22,433	-12,579	-30,480
Cash flows from financing activities		1,884	-816	92	8,893	-2,685	-1,733	-1,420	14,815	-2,048	22,726
Financial ratios
ROA (RP-based)		1.7%	2.7%	3.6%	3.0%	4.5%	6.3%	5.2%	5.1%	5.8%	5.0%
ROE		10.7%	6.3%	5.6%	9.0%	-12.7%	16.9%	12.9%	11.6%	14.3%	14.2%
Equity ratio		24.6%	26.3%	26.7%	24.3%	22.5%	26.6%	28.5%	23.1%	25.1%	19.9%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: In June 2014, the company conducted a 3-for-1 stock split.

Recent updates

Q3 FY12/21 flash update

2021-11-11

On November 10, 2021, SBS Holdings, Inc. announced earnings results for Q3 FY12/21; see the results section for details.

Trends and outlook

Quarterly trends and results

Cumulative		FY12/20				FY12/21				FY12/21
(JPYmn)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Sales		68,809	129,139	191,619	257,192	93,002	202,244	299,761		74.9%	400,000
	YoY	6.5%	1.7%	0.5%	0.6%	35.2%	56.6%	56.4%			55.5%
Gross profit		9,009	14,174	20,289	26,802	10,537	25,951	35,928
	YoY	15.9%	5.3%	3.5%	3.0%	17.0%	83.1%	77.1%
	Gross profit margin	13.1%	11.0%	10.6%	10.4%	11.3%	12.8%	12.0%
SG&A expenses		3,929	7,930	11,726	15,841	5,800	11,981	18,369
	YoY	-0.1%	0.2%	-0.7%	-0.1%	47.6%	51.1%	56.7%
	SG&A ratio	5.7%	6.1%	6.1%	6.2%	6.2%	5.9%	6.1%
Operating profit		5,079	6,243	8,562	10,960	4,737	13,969	17,559		87.8%	20,000
	YoY	32.4%	12.5%	9.8%	7.7%	-6.7%	123.8%	105.1%			82.5%
	Operating profit margin	7.4%	4.8%	4.5%	4.3%	5.1%	6.9%	5.9%			5.0%
Recurring profit		5,064	6,277	8,440	10,883	4,703	13,936	17,772		91.1%	19,500
	YoY	35.8%	14.7%	8.5%	7.0%	-7.1%	122.0%	110.6%			79.2%
	Recurring profit margin	7.4%	4.9%	4.4%	4.2%	5.1%	6.9%	5.9%			4.9%
Net income		3,073	4,131	5,363	6,826	2,220	7,809	9,769		91.3%	10,700
	YoY	36.2%	23.1%	13.5%	12.3%	-27.8%	89.0%	82.2%			56.8%
	Net margin	4.5%	3.2%	2.8%	2.7%	2.4%	3.9%	3.3%			2.7%
Quarterly		FY12/20				FY12/21
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Sales		68,809	60,330	62,480	65,573	93,002	109,242	97,517
	YoY	6.5%	-3.2%	-2.1%	1.2%	35.2%	81.1%	56.1%
Gross profit		9,009	5,165	6,115	6,513	10,537	15,414	9,977
	YoY	15.9%	-9.3%	-0.5%	1.4%	17.0%	198.4%	63.2%
	Gross profit margin	13.1%	8.6%	9.8%	9.9%	11.3%	14.1%	10.2%
SG&A expenses		3,929	4,001	3,796	4,115	5,800	6,181	6,388
	YoY	-0.1%	0.5%	-2.4%	1.7%	47.6%	54.5%	68.3%
	SG&A ratio	5.7%	6.6%	6.1%	6.3%	6.2%	5.7%	6.6%
Operating profit		5,079	1,164	2,319	2,398	4,737	9,232	3,590
	YoY	32.4%	-31.9%	2.9%	1.0%	-6.7%	693.1%	54.8%
	Operating profit margin	7.4%	1.9%	3.7%	3.7%	5.1%	8.5%	3.7%
Recurring profit		5,064	1,213	2,163	2,443	4,703	9,233	3,836
	YoY	35.8%	-30.4%	-6.2%	2.0%	-7.1%	661.2%	77.3%
	Recurring profit margin	7.4%	2.0%	3.5%	3.7%	5.1%	8.5%	3.9%
Net income		3,073	1,058	1,232	1,463	2,220	5,589	1,960
	YoY	36.2%	-3.8%	-10.1%	8.2%	-27.8%	428.3%	59.1%
	Net margin	4.5%	1.8%	2.0%	2.2%	2.4%	5.1%	2.0%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Quarterly results: breakdown by segment

Segment sales and profit (cumulative)			FY12/20				FY12/21
(JPYmn)			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4
Sales			68,809	129,139	191,619	257,192	93,002	202,244	299,761
	YoY		6.5%	1.7%	0.5%	0.6%	35.2%	56.6%	56.4%
	Logistics		59,345	117,504	177,767	240,818	90,632	182,538	277,453
		YoY	4.1%	0.4%	-0.4%	0.0%	52.7%	55.3%	56.1%
	Property Management		7,721	8,255	8,827	9,349	528	15,924	16,476
		YoY	29.4%	25.4%	22.7%	19.8%	-93.2%	92.9%	86.7%
	Other		1,742	3,380	5,025	7,024	1,841	3,780	5,831
		YoY	6.0%	0.5%	-2.7%	0.7%	5.7%	11.8%	16.0%
Operating profit			5,079	6,243	8,562	10,960	4,737	13,969	17,559
	YoY		32.4%	12.5%	9.8%	7.7%	-6.7%	123.8%	105.1%
	Logistics		1,392	2,153	3,994	5,990	4,299	8,173	11,542
		YoY	21.9%	-7.1%	-4.4%	-4.6%	208.8%	279.6%	189.0%
		Operating profit margin	2.3%	1.8%	2.2%	2.5%	4.7%	4.5%	4.2%
	Property Management		3,615	3,929	4,256	4,558	308	5,680	6,001
		YoY	30.6%	27.3%	24.3%	20.4%	-91.5%	44.6%	41.0%
		Operating profit margin	46.8%	47.6%	48.2%	48.8%	58.3%	35.7%	36.4%
	Other		89	151	168	254	113	222	306
		YoY	74.5%	5.6%	-26.6%	36.6%	27.0%	47.0%	82.1%
		Operating profit margin	5.1%	4.5%	3.3%	3.6%	6.1%	5.9%	5.2%
	Adjustments		-16	9	141	157	15	-107	-291
Segment sales and profit			FY12/20				FY12/21
(JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Sales			68,809	60,330	62,480	65,573	93,002	109,242	97,517
	YoY		6.5%	-3.2%	-2.1%	1.2%	35.2%	81.1%	56.1%
	Logistics		59,345	58,159	60,263	63,051	90,632	91,906	94,915
		YoY	4.1%	-3.0%	-1.8%	1.1%	52.7%	58.0%	57.5%
	Property Management		7,721	534	572	522	528	15,396	552
		YoY	29.4%	-13.5%	-6.2%	-14.3%	-93.2%	2,783.1%	-3.5%
	Other		1,742	1,638	1,645	1,999	1,841	1,939	2,051
		YoY	6.0%	-4.7%	-8.8%	10.7%	5.7%	18.4%	24.7%
Operating profit			5,079	1,164	2,319	2,398	4,737	9,232	3,590
	YoY		32.4%	-31.9%	2.9%	1.0%	-6.7%	693.1%	54.8%
	Operating profit margin		7.4%	1.9%	3.7%	3.7%	5.1%	8.5%	3.7%
	Logistics		1,392	761	1,841	1,996	4,299	3,874	3,369
		YoY	21.9%	-35.2%	-1.2%	-4.9%	208.8%	409.1%	83.0%
		Operating profit margin	2.3%	1.3%	3.1%	3.2%	4.7%	4.2%	3.5%
	Property Management		3,615	314	327	302	308	5,372	321
		YoY	30.6%	-1.3%	-3.0%	-17.0%	-91.5%	1,610.8%	-1.8%
		Operating profit margin	46.8%	58.8%	57.2%	57.9%	58.3%	34.9%	58.2%
	Other		89	62	17	86	113	109	84
		YoY	74.5%	-32.6%	-80.2%	-	27.0%	75.8%	394.1%
		Operating profit margin	5.1%	3.8%	1.0%	4.3%	6.1%	5.6%	4.1%
	Adjustments		-16	25	132	16	15	-122	-184

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Property Management segment: breakdown of results by business line

Property Management (JPYmn)			FY12/20				FY12/21
Cumulative			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4
Sales			7,721	8,255	8,827	9,349	528	15,924
	YoY		29.4%	25.4%	22.7%	19.8%	-93.2%	92.9%
	Rental		551	1,085	1,657	2,179	528	1,069
		YoY	-6.3%	-10.0%	-8.8%	-10.1%	-4.2%	-1.5%
	Development		7,170	7,170	7,170	7,170	-	14,855
		YoY	33.3%	33.3%	33.3%	33.3%	-	107.2%
Operating profit			3,615	3,929	4,256	4,558	308	5,680
	YoY		30.6%	27.3%	24.3%	20.4%	-91.5%	44.6%
	Operating profit margin		46.8%	47.6%	48.2%	48.8%	58.3%	35.7%
	Rental		309	624	951	1,253	308	621
		YoY	-11.7%	-6.7%	-5.5%	-8.5%	-0.3%	-0.5%
		Operating profit margin	56.1%	57.5%	57.4%	57.5%	58.3%	58.1%
	Development		3,305	3,305	3,305	3,305	-	5,059
		YoY	36.7%	36.7%	36.7%	36.7%	-	53.1%
		Operating profit margin	46.1%	46.1%	46.1%	46.1%	-	34.1%
			FY12/20				FY12/21
Quarterly			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Sales			7,721	534	572	522	528	15,396
	YoY		29.4%	-13.5%	-6.2%	-14.3%	-93.2%	2,783.1%
	Rental		551	534	572	522	528	541
		YoY	-6.3%	-13.6%	-6.2%	-14.3%	-4.2%	1.3%
	Development		7,170	-	-	-	-	14,855
		YoY	33.3%	-	-	-	-	-
Operating profit			3,615	314	327	302	308	5,372
	YoY		30.6%	-1.3%	-3.0%	-17.0%	-91.5%	1,610.8%
	Operating profit margin		46.8%	58.8%	57.2%	57.9%	58.3%	34.9%
	Rental		309	315	327	302	308	313
		YoY	-11.7%	-1.3%	-3.0%	-16.8%	-0.3%	-0.6%
		Operating profit margin	56.1%	59.0%	57.2%	57.9%	58.3%	57.9%
	Development		3,305	-	-	-	-	5,059
		YoY	36.7%	-	-	-	-	-
		Operating profit margin	46.1%	-	-	-	-	34.1%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Q3 FY12/21 results

Sales: JPY299.8bn (+56.4% YoY)
Operating profit: JPY17.6bn (+105.1% YoY)
Recurring profit: JPY17.8bn (+110.6% YoY)
Net income attributable to owners of the parent: JPY9.8bn (+82.2% YoY)

In cumulative Q3 FY12/21, sales and profit were up YoY. In addition to solid performance in the group's Logistics segment, the company generated higher earnings YoY due to consolidation of new group companies (see below) and securitization of logistics properties.

In terms of the market environment, the spread of COVID-19 and state of emergency declarations in various regions in Japan had an impact on economic activity. At the same time, the e-commerce market continued to grow as online shopping and logistics demand for daily necessities expanded. The company worked to capitalize on that demand while taking steps to prevent infection and maintain safety.

Since end-2020, starting with SBS Toshiba Logistics Corp., the company added to its group Toyo Warehouse & Transportation Co., Ltd., K-U-K Line, Hinomaru Kyuso, and Jass Co., Ltd. Through these additions, the company was able to enhance its service lineup and establish infrastructure to support the logistics supply chain.

Logistics

Sales: JPY277.5bn (+56.1%YoY)
Operating profit: JPY11.5bn (+189.0% YoY)

In the Logistics segment, the company expanded business with existing clients while also working on winning over new customers looking for sophisticated logistical functions. Cumulative Q3 earnings benefited from the consolidation of profits from SBS Toshiba Logistics and Toyo Warehouse & Transportation. In addition, there was a recovery in B2B logistics both domestically and overseas, which suffered the impacts of COVID-19 in Q3 FY12/20, and the company successfully captured the e-commerce demand with its same-day delivery services. Expanding demand related to daily necessities distribution and online supermarkets also fueled solid earnings performance.

Property Management

Sales: JPY16.5bn (+86.7% YoY)
Operating profit: JPY6.0bn (+41.0% YoY)

In Q2 (April–June 2021) , the company transferred its trust beneficiary rights in the Osaka Nanko Logistics Center. Cumulative Q3 sales and profit rose YoY as earnings from the transfer surpassed the logistics property securitization earnings in FY12/20.

Other

Sales: JPY5.8bn (+16.0% YoY)
Operating profit: JPY306mn (+82.1% YoY)

Full-year company forecast

		FY12/19			FY12/20			FY12/21
(JPYmn)		1H Act.	2H Act.	FY Act.	1H Act.	2H Act.	FY Act.	1H Act.	2H Est.	FY Est.
Sales		126,944	128,604	255,548	129,139	128,053	257,192	202,244	197,756	400,000
	YoY	64.5%	1.8%	25.6%	1.7%	-0.4%	0.6%	56.6%	54.4%	55.5%
Cost of sales		113,480	121,440	234,920	114,965	115,425	230,390	176,292
Gross profit		13,463	7,165	20,628	14,174	12,628	26,802	25,951
	YoY	78.8%	-48.2%	-3.4%	5.3%	76.2%	29.9%	83.1%
	Gross profit margin	10.6%	5.6%	8.1%	11.0%	9.9%	10.4%	12.8%
SG&A expenses		7,916	7,935	15,851	7,930	7,911	15,841	11,981
	SG&A ratio	6.2%	6.2%	6.2%	6.1%	6.2%	6.2%	5.9%
Operating profit		5,547	4,629	10,176	6,243	4,717	10,960	13,969	6,031	20,000
	YoY	137.4%	-21.6%	23.5%	12.5%	1.9%	7.7%	123.8%	27.9%	82.5%
	Operating profit margin	4.4%	3.6%	4.0%	4.8%	3.7%	4.3%	6.9%	3.0%	5.0%
Recurring profit		5,472	4,700	10,172	6,277	4,606	10,883	13,936	5,564	19,500
	YoY	145.1%	-12.5%	33.7%	14.7%	-2.0%	7.0%	122.0%	20.8%	79.2%
	Recurring profit margin	4.3%	3.7%	4.0%	4.9%	3.6%	4.2%	6.9%	2.8%	4.9%
Net income		3,356	2,723	6,079	4,131	2,695	6,826	7,809	2,891	10,700
	YoY	174.9%	-14.6%	37.9%	23.1%	-1.0%	12.3%	89.0%	7.3%	56.8%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

In August 2021, the company announced revisions to its FY12/21 full-year earnings forecast. This was the second revision of these forecasts, following earlier revisions in May 2021. The revised full-year forecasts call for sales of JPY400.0bn (+55.5% YoY), operating profit of JPY20.0bn (+82.5% YoY), recurring profit of JPY19.5bn (+79.2% YoY), and net income attributable to owners of the parent of JPY10.7bn (+56.8% YoY).

Compared with the previous forecast (announced May 2021), the company raised its forecast for sales, operating profit, recurring profit, and net income attributable to owners of the parent by JPY10.0bn, JPY1.0bn, JPY500mn, and JPY100mn, respectively. The 3PL and 4PL businesses in the Logistics segment grew at a pace faster than company expectations.

The May 2021 revisions increased initial full-year forecasts by JPY10.0bn for sales, JPY4.0bn for operating profit, JPY4.2bn for recurring profit, and JPY2.2bn for net income attributable to owners of the parent.

Segment forecasts

				FY12/20			FY12/21
(JPYmn)				1H Act.	2H Act.	FY Act.	1H Act.	2H Est.	FY Est.
Sales				129,139	128,053	257,192	202,244	197,756	400,000
	Logistics			117,504	123,314	240,818	182,538	192,262	374,800
	Property Management			8,255	1,094	9,349	15,924	1,076	17,000
		Leasing		1,085	1,094	2,179	1,069	1,076	2,145
		Development		7,170	-	7,170	14,855	-	14,855
	Other			3,380	3,644	7,024	3,780	4,420	8,200
Operating profit				6,243	4,717	10,960	13,969	6,031	20,000
	Operating profit margin			4.8%	3.7%	4.3%	6.9%	3.0%	5.0%
	Logistics			2,153	3,837	5,990	8,173	5,327	13,500
		Operating profit margin		1.8%	3.1%	2.5%	4.5%	2.8%	3.6%
	Property Management			3,929	629	4,558	5,680	520	6,200
		Operating profit margin		47.6%	57.5%	48.8%	35.7%	48.3%	36.5%
		Leasing		624	629	1,253	621	520	1,141
			Operating profit margin	57.5%	57.5%	57.5%	58.1%	48.3%	53.2%
		Development		3,305	-	3,305	5,059	-	5,059
			Operating profit margin	46.1%	-	46.1%	34.1%	-	34.1%
	Other			151	103	254	222	128	350
		Operating profit margin		4.5%	2.8%	3.6%	5.9%	2.9%	4.3%
	Adjustments			9	149	158	-107	57	-50

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Logistics business

The company forecasts sales of JPY374.8bn (+55.6% YoY), operating profit of JPY13.5bn (+125.4% YoY), and OPM of 3.6% (+1.1pp YoY). The revision to the full-year company forecasts announced in May 2021 increased forecasts for sales by JPY10.0bn and operating profit by JPY4.0bn compared to the initial forecasts. The revision announced in August 2021 increased the forecasts for full-year sales by JPY10.0bn and operating profit by JPY1.0bn compared to the previous forecast. This revision reflects positive results in 1H FY12/21.

The company expects Logistics business sales and profit to grow primarily due to the consolidation of SBS Toshiba Logistics and Toyo Warehouse & Transportation. It expects sales and profit growth in its existing business on an anticipated recovery in logistics volume following a COVID-19 driven decline in FY12/20, increased home delivery services accompanying growth in e-commerce, the opening of new logistics facilities, and ongoing new customer acquisition.

SBS Toshiba Logistics became a subsidiary in November 2020. In the initial FY12/21 full-year forecasts, the company forecasted FY12/21 sales at about JPY105.0bn and operating profit after goodwill of about JPY2.0bn. In 1H, the company booked JPY55.5bn in sales, operating profit of JPY3.6bn, and operating profit after amortization of goodwill of JPY3.2bn, surpassing initial forecasts. This was a major reason for the revision to FY12/21 full-year company forecasts. A former member of the Toshiba group, SBS Toshiba Logistics transports heavy items such as electrical power equipment, medical equipment, and semiconductors and provides packaging and import-export services. The company said it was not affected by the coronavirus pandemic. The acquisition involved goodwill of JPY3.8bn and customer-related assets of JPY18.9bn. The company said goodwill depreciation would take place over 20 years and amortization of customer-related assets over 30 years, and it planned to book an annual charge of JPY830mn related to these items.

Toyo Warehouse & Transportation became a subsidiary in January 2021. The company forecasts FY12/21 sales of about JPY2.4bn and operating profit after goodwill of about JPY200mn. A former member of the SMC group, Toyo Warehouse & Transportation has two large warehouses with waterfront locations in the Tokyo area—one in Higashiogishima in Kawasaki (Kanagawa) and the other in Wakasu (Koto-ku, Tokyo).

Recovery of existing logistics business: In FY12/20, negative factors associated with COVID-19, such as stagnation in B2B logistics (depressed demand for office machines and office supplies) and disruption of overseas supply networks, brought sales down by approximately JPY10.0bn, and were a drag on operating profit of roughly JPY2.0bn. The company expects a rebound from the negative impact of the coronavirus pandemic in FY12/21. In 1H, if one excludes SBS Toshiba Logistics, Logistics sales were JPY127.1bn (+8.1% YoY), operating profit was JPY5.3bn (+113.9% YoY), and operating profit after the amortization of goodwill was JPY5.0bn (+130.1% YoY). Results in SBS Ricoh Logistics recovered from the same period of the previous year, when it was impacted by the COVID-19 pandemic.

The company plans to complete building its new Yokohama Kanazawa Center logistics facility in July 2021 and start operations from late November. The majority of the space is planned to be used for 3PL business servicing office supply distributors by SBS Ricoh Logistics. The company plans to install large-capacity AutoStore equipment (an automated warehouse picking system featuring densely packed specialized containers with storage and retrieval performed by robots) to boost processing capacity.

Logistics business 1H results and 2H forecasts

The Logistics business recorded 1H sales of JPY182.5bn (+55.3% YoY) and operating profit of JPY8.2bn (+279.6% YoY). Meanwhile, 2H forecasts call for sales of JPY192.3bn (+55.9% YoY) and operating profit of JPY5.3bn (+38.8% YoY), meaning that 2H sales are expected to exceed 1H results but 2H operating profit is expected to fall short of 1H results. According to the company, distribution of consumer electronics by SBS Toshiba Logistics Corporation increased in 1H due to a rise in stay-at-home consumption caused by the spread of the COVID-19 virus, but that stay-at-home consumption is expected to fall away in 2H when compared against 1H. The revisions also incorporate a decrease to volume overseas due to a deficiency in the supply of containers. Additionally, the company plans to relocate its HQ from the end of 2021 to the beginning of 2022, and expects to record approximately JPY1.0bn in costs associated with that relocation in 2H FY12/21.

Property Management business

The company forecasts sales of JPY17.0bn (+81.8% YoY), operating profit of JPY6.2bn (+36.0% YoY), and OPM of 36.5% (-12.3pp YoY). In the Property Management business, leasing income will decline due to the sale of logistics facilities, but the company plans to sell the Osaka Nanko Logistics Center in the development business, so expects growth in sales and profit.

Shared Research understands that the company expects sales of JPY2.2bn (+1.0% YoY) and operating profit of JPY1.2bn (-4.2% YoY) in the leasing business.

The company forecasts sales of JPY14.8bn (+106.4% YoY) and operating profit of JPY5.0bn (+51.3% YoY) in the development business. In March 2021, the company announced the transfer of all trust beneficiary rights in the Osaka Nanko Logistics Center. It plans to book gains of roughly JPY5.0bn resulting from the transfer as operating profit in the property development business in Q2 FY12/21. These are included in the revised company forecasts.

Other business

The company forecasts sales of JPY8.2bn (+16.7% YoY), operating profit of JPY350mn (+37.8% YoY), and OPM of 4.3% (+0.7pp YoY). In FY12/20, sales and profit fell in the personnel business as demand for temporary workers declined amid the pandemic, but the company expects a rebound in FY12/21. It expects a solid performance in the solar power generation business and growth in marketing business earnings due to strong sales of pet products.

Outlook

Growth strategy for SBS group

The company has not announced a medium-term business plan since completing its “SBS Growth 2017” plan in FY12/17. Instead, during its presentation for FY12/20 results in February 2021, the company outlined its group growth strategy as it seeks to become the largest domestic provider of logistics services.

The group’s growth strategy has several elements, as detailed below:

Mergers and acquisitions: The company has successfully grown sales and earnings with the help of M&A in the past. From FY12/21 onward, it plans to proceed with post-merger integration (PMI) for SBS Toshiba Logistics, a subsidiary since November 2020. It also plans to enhance its logistics infrastructure with small acquisitions.

Adoption of logistics technology and information technology: The company plans to streamline operations by introducing logistics technology and IT into its logistics facilities.

Expansion of delivery network: SBS plans to strengthen its delivery network with group synergies and collaborations with its partners.

Growth in 3PL business: The consolidation of SBS Toshiba Logistics puts the company in the top five Japanese 3PL operators. It aims for ongoing growth in the3PL business.

Development and securitization of logistics facilities: The company aims to double floor space at its logistics facilities in approximately five years with new developments. It also plans to continue developing and securitizing logistics facilities.

M&A still driving growth

M&A has been a major growth driver for SBS Holdings. Since its establishment, the company has invested JPY83.0bn to acquire 29 companies as of February 2021. Its approach to M&A is to avoid easy turnaround situations and grow earnings through structural reform from a long-term perspective, including reallocating personnel and other resources. Furthermore, after acquisitions the company consolidates offices and promotes exchange among existing staff and staff from the new subsidiary company, acting to complement the businesses of both companies, use facilities, and develop synergies.

In particular, it has acquired the subsidiaries of multiple major listed companies, such as Yukijirushi Butsuryu in 2004 (now SBS Flec), Tokyu Logistic in 2005 (now SBS Logicom), Ricoh Logistics System (now SBS Ricoh Logistics) in 2018, and Toshiba Logistics (currently SBS Toshiba Logistics) in 2020, and has often made companies more profitable after acquisition. Shared Research understands that the company’s attitude and track record in previous acquisitions flow through to success in subsequent deals.

Furthermore, the company has expanded the areas in which is conducts business through M&A, enabling a range of activities connected to logistics. Specifically, it is capable of the following activities in relation to transport, 3PL and 4PL, logistics facilities, and logistics DX (digital transformation).

Transport: Last mile delivery, B2B same day delivery, deliveries within three temperature ranges, super heavy goods transportation, line haul, and modal shift.

3PL and 4PL: International multimodal transportation, logistics center operations, and warehouse management systems (WMS).

Logistics facilities: Logistics facility development and securitization, real estate leasing, and solar power.

Logistics DX: Consulting on the introduction and development of logistics technology (LT), planning, development, and operation of vehicle allocation matching system iGOQ, and fulfillment services (logistics agency for e-commerce businesses).

Growth through M&A

Source: Shared Research based on company data

	FY12/03	FY12/04	FY12/05	FY12/06	FY12/07	FY12/08	FY12/09	FY12/10	FY12/11	FY12/12	FY12/13
Sales	19,360	45,124	89,319	142,643	147,097	139,406	115,711	119,824	121,148	127,935	132,205
Operating profit	431	668	1,507	5,950	6,794	3,326	2,889	4,257	2,153	2,877	4,116
	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20	FY12/21	FY12/xx	FY12/xx
Sales	141,535	157,996	149,054	152,870	203,516	255,548	257,192	380,000	400,000	500,000
Operating profit	4,098	5,347	7,514	6,229	8,240	10,176	10,960	15,000	16,000	21,000

Source: Shared Research based on company data

Results of major M&A

Company	Price (JPYmn)	Company	Price (JPYmn)
Yukijirushi Butsuryu	3,000	AC System	950
Tokyu Logistics	15,670	Nippon Record Center	2,100
Zentsu	200	Atlas Logistics	1,300
Victor Logistics	190	Traspole	7,500
Ricoh Logistics	18,000	Toshiba Logistics	20,000

Source: Shared Research based on company data

From FY12/21 onward, it plans to proceed with PMI for SBS Toshiba Logistics, a subsidiary since November 2020. It also plans to enhance its logistics infrastructure with small acquisitions.

Progress on post-merger integration at SBS Toshiba Logistics

In November 2020, SBS Holdings acquired 66.6% of the common shares of Toshiba Logistics Corporation (now SBS Toshiba Logistics) from Toshiba Corporation for JPY20.0bn, making it a consolidated subsidiary.

SBS Toshiba Logistics transports heavy items such as electrical power equipment, medical equipment, and semiconductors and provides packaging and import-export services. Overseas it has 14 local subsidiaries in nine countries. In addition to its 3PL business, providing customer companies with comprehensive logistics services and optimal logistics management and operations, SBS Toshiba Logistics provides 4PL services involving the planning and execution of logistics strategies for customers seeking outsourcing solutions. It provides a wide range of companies including members of the Toshiba Group with comprehensive logistics solutions not limited to warehouse operation and cargo handling and transport.

SBS Holdings seeks to gain Toshiba Logistics’ expertise in the 4PL business, expand its service lineup, and strengthen its overseas network. Even after the share acquisition, all of Toshiba Logistics’ full-time executives have retained their positions to ensure continuity of management. SBS Holdings is also dispatching part-time executives to assist in integrating Toshiba Logistics into the SBS group and expanding synergies.

Toshiba Logistics: recent three-year operating results and financial position (non-consolidated)

(JPYmn)	FY03/17	FY03/18	FY03/19
Net assets	4,405	7,367	5,122
Total assets	30,739	37,040	33,920
Sales	87,085	85,525	89,372
Operating profit	1,515	1,364	1,735
Recurring profit	2,421	3,850	2,964
Net income	-38	4,512	2,085

From FY12/21 onward, the company will carry on with PMI at SBS Toshiba Logistics to extract synergy benefits including mutual use of logistics warehouses, exploitation of logistics technology (further use of robotics), optimal allocation of overseas facilities, and integration of core systems.

Strengthening logistics infrastructure with small acquisitions

In FY12/20, in addition to the acquisition of SBS Toshiba Logistics, the company decided on or executed the following small acquisitions.

In August 2020, the company acquired 49% of the shares in Hinomaru Kyuso. It has a delivery network covering Shikoku primarily focused on food logistics in three temperature zones. It is highly complementary to the company’s services so SBS decided it would help strengthen its delivery network, reinforce its ability to support supply chain management, and have potential synergy benefits.

As discussed below, in November 2020, Japan Future Logistics Fund made its first investment, in Ai&Ai Chiba Chuo Co., Ltd.

In January 2021, the company acquired ordinary shares of Toyo Warehouse & Transportation, a group company of SMC, and made it a consolidated subsidiary. The company noted that Toyo Warehouse & Transportation has two large warehouses with waterfront locations in the Tokyo area—one in Higashiogishima in Kawasaki (Kanagawa Prefecture) and the other in Wakasu (Koto-ku, Tokyo)—and that both locations have warehouse development potential over the long term through collaborations with the company’s existing warehouses in these areas.

Adoption of IT and logistics technology

Project to bring IT and logistics technology on-site launched

In April 2020, the company decided to reorganize the information systems departments of SBS Holdings and SBS Ricoh Logistics to facilitate the strategic introduction of IT technologies.

The company plans to leverage IT to reform its logistics sites by bringing together all of the skills and expertise regarding logistics belonging to group companies, share knowledge, and develop next-generation logistics facilities. In its on-site IT and logistics technology project, it plans to streamline existing business and services using IT, and introduce robots to operating logistics facilities step-by-step. It has also started joint development through aggressive investment in and support for IT venture companies.

The company’s efforts to introduce and roll out IT and logistics technology will not contribute to earnings in the short term, but Shared Research thinks that they should improve workflow efficiency in the medium to long term, and streamline costs, potentially flowing through to sales growth and higher margins.

Project to bring IT and logistics technology on-site: Step-by-step introduction of robots at existing facilities

As of February 2021, the company was testing robots at its logistics facilities, and plans to introduce them step-by-step at the 3PL logistics facilities of consolidated subsidiary SBS Logicom starting in autumn 2021. SBS plans to have robots carry out tasks in logistics facilities as much as possible, and reallocate staff freed up to perform other duties.

Project to bring IT and logistics technology on-site: Introduction of logistics technology at new centers

The company plans to install large-capacity AutoStore equipment (entailing an automated warehouse picking system featuring densely packed specialized containers with storage and retrieval performed by robots) at its new Yokohama Kanazawa Center, scheduled for completion in July 2021. AutoStore aims to improve processing capacity using barcode inspection, a digital picking system (DPS), conveyors, and automatic packaging equipment.

Expanding delivery network

The company plans to strengthen its delivery network through group synergies and collaboration with partners.

Expanding delivery network through collaboration with partners: YC Delivery

In June 2019, the company joined forces with the publisher of the Yomiuri Shimbun newspaper to form YC Delivery, a package delivery service providing deliveries to private homes using the delivery personnel of Yomiuri Center (or YC, the exclusive sales company for the Yomiuri Shimbun). As of February 2021, YC Delivery was operating in the 23 Tokyo wards, and was preparing to expand into the Tama area.

YC Delivery collects packages from customer companies, sorts them by destination, and brings them to the Yomiuri Shimbun’s publishing center. From there the packages are redirected to the Yomiuri sales center nearest to the final destination, from where they are finally delivered by that locale’s delivery personnel to the designated household. The company says it can on receiving a certain level of package volume from major mail order/ecommerce companies.

Expanding delivery network through collaboration with partners: Japan Logistics Future Investment Fund

In March 2020, SBS Holdings and the Development Bank of Japan (DBJ) launched an investment fund to help facilitate the business succession of operators in the logistics industry and help resolve financing issues related to the maintenance of SBS’s regional distribution and delivery networks. The fund, the Japan Logistics Future Investment Fund, was capitalized at JPY4.0bn with SBS Holdings and the Development Bank of Japan each putting in JPY2.0bn.

With the establishment of the Japan Logistics Future Investment Fund, SBS is looking to assure the business succession and continuity of its regional distribution and delivery networks, most of which are second-tier or small/medium-sized companies that operate mainly within the regions in which they are headquartered, and are facing a multitude of challenges ranging from labor shortages to business succession issues. In the case of logistics business operators facing business succession issues, the Fund will be able to provide investment capital while SBS Holdings and the Development Bank of Japan provide their management expertise to help logistics business operators in which the Fund invests become more competitive with assistance from various value-added initiatives (including initiatives aimed at expanding business networks; raising income and lowering expenses while upgrading financial positions; and improving compliance mechanisms). The basic thinking is that, after carrying out these initiatives and bringing individual companies to the point where they are competitive, the Fund will be able exit its investment, with the buyer in most cases most being SBS Holdings or a member of the SBS group.

In November 2020, Japan Future Logistics Fund made its first investment, in Ai&Ai Chiba Chuo Co., Ltd. Ai&Ai, which has annual sales of JPY1.5bn, operates a light freight and general freight truck transport business providing light freight transportation services such as online supermarket deliveries, route deliveries, and dedicated corporate deliveries in Chiba Prefecture and eastern Tokyo. Ai&Ai will seek to strengthen its competitiveness by expanding its sales network, improving its earnings and financial performance, and developing a compliance system. In addition, after a certain period of time, SBS Holdings expects that Ai&Ai will exit the fund and join the SBS group.

Development and securitization of logistics facilities

The company aims to double floor space at its logistics facilities in approximately five years with new developments. It also plans to continue developing and securitizing logistics facilities.

Growth of 3PL business

3PL (third-party logistics) is the contracting of a third party that is neither manufacturer, wholesaler, nor retailer, to manage all logistics functions from transportation to distribution. This third party proposes ways to optimize efficiency and reduce costs. The domestic 3PL market has been expanding, and an average annual growth rate between 2009 and 2019 was 9.5%, with the market reaching JPY3.2tn in 2019 (+4.4% YoY).

SBS thinks its strength is providing 3PL services (logistics facility planning and development) that reflect the needs of customer companies, and improving warehouse efficiency. The company’s 3PL business accounts for about 50% of the sales of its domestic logistics business. SBS fully launched its 3PL business from 2006. In FY12/19, the 3PL business reported JPY123.3bn (+38.7% YoY) in sales. Sales at the company’s domestic logistics business grew by about JPY134.0bn between FY12/12 and FY12/19 (CAGR: +14.9%). The 3PL business was the main driver of growth, increasing by about JPY88.0bn (CAGR: +14.9%) during the same period.

For the medium term, the domestic logistics market is unlikely to expand given stagnant freight volume growth, demand from freight owners for reduced costs, and fierce competition. Still, Shared Research thinks that the 3PL market will grow in response to freight owners’ need for cost reduction. SBS plans to keep expanding its 3PL business through leveraging its ability to develop logistics facilities in-house and then actively use these facilities to contract 3PL projects.

In addition, as discussed, the company acquired common shares (66.6% share) of Toshiba Logistics Corporation from Toshiba Corporation in November 2020 and made it a consolidated subsidiary. SBS expects the consolidation of Toshiba Logistics Corporation to cause FY12/21 sales in the 3PL business to exceed JPY200bn, growing to account for 60–70% of logistics business sales, and vaulting it from the 10th largest position in the domestic 3PL market from fifth previously.

3PL: Sales growth

		FY12/12	FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20	FY12/21
(JPYmn)		Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Est.
3PL sales		44,300	46,100	48,500	51,200	54,700	58,800	88,900	123,317	120,632	223,200
	YoY	4.7%	4.1%	5.2%	5.6%	6.8%	7.5%	51.2%	38.7%	-2.2%	85.0%
	% of Logistics sales	37.1%	38.2%	37.3%	35.7%	41.3%	41.9%	47.1%	51.2%	50.1%	62.9%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: FY12/18 results onward include impact from the consolidation of SBS Ricoh Logistics System.

Logistics facilities expansion plans

Growth in the 3PL business requires expanding floor space. At its Q2 FY12/21 results briefing, SBS flagged its intentions to increase its logistics facilities by 3,305,800 sqm (1,000,000 tsubo) in the medium term. At end-June 2021, the company had floor space of 2,476,000 sqm (749,000 tsubo) at its logistics facilities. As shown in the following figure, properties scheduled for completion through 2024, and development plans for sites already purchased will bring aggregate floor space to 3,108,100 sqm (940,200 tsubo).

Floor space expansion plans at logistics facilities

Facility		Floor space (tsubo)	In operation	Type	User
Existing facilities (end-June 2021)		749,000
	SBS Toshiba Logistics	200,000	Jan. 2021	M&A	SBS Toshiba Logistics
	Toyo Warehouse & Transportation	18,000	Jan. 2021	M&A	Toyo Warehouse & Transportation
Planned expansion (1.-7.)		191,200
	Yokohama-Kanazawa	16,200	Nov. 2021	Development	SBS Ricoh Logistics/SBS Logicom
	Atugi Mori no Sato	17,400	May 2021	Rental	SBS Ricoh Logistics
	Noda-Seto A	50,800	Dec. 2023	Development	SBS Sokuhai Support/SBS Asset Management
	Noda-Seto B	39,500	2024 (planned)	Development	TBD
	Logistics Center Ichinomiya (tentative) (Aichi)	21,000	Apr. 2023	Development	SBS Ricoh Logistics
	Tomisato Land (Chiba)	30,000	TBD	Development	SBS Logicom, other
	Kazo Land (Saitama)	16,000	TBD	Development
Total (existing + planned expansion)		940,200

Source: Shared Research based on company data

Development and securitization of logistics facilities

In the development business in the Property Management segment, SBS leverages its logistics experience and understanding of the leasing market prices as a lessee. It acquires land at low prices taking advantage of the Act on Advancement of Integration and Streamlining of Distribution Business and other laws, and develops logistics facilities targeting yields of around 6.0–7.0%.

For the medium term, SBS plans to invest in and develop logistics facilities. The company also plans to conduct reinvestment while promoting capital recovery by selling logistics facilities without expanding assets.

The company can operate 3PL services at the facilities it develops, thus contributing to earnings in the Logistics segment. However, the greatest contribution to earnings comes from the sale of these facilities.

Development of logistics facilities: Diagram of reinvestment

Source: Company data

Targeting 30–50% gain on sale of facilities

SBS targets yields of around 6.0–7.0% per year from the development of logistics facilities. In contrast, it aims for gain on the sale of facilities of 30–50% when it securitizes facilities by selling at the capitalization rate of about 5.0%.
In FY12/13, SBS began booking sales and profits of the development business under the Property Management segment. The development business’ OPM has fluctuated in the 30–50% range. In FY12/21, the company plans to sell the Osaka Nanko Logistics Center for JPY14.8bn and book operating profit of JPY5.0bn.

Performance of the development business

		FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20	FY12/21
		Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.
Facilities sold		West Japan Logistics Center (51%)	West Japan Logistics Center (49%)	Noda Yoshiharu Logistics Center	Kawagoe Logistics Center	Yoshikawa Logistics Center	Nagatsuta Logistics Center(30%)	Nagatsuta Logistics Center(30%)	Nagatsuta Logistics Center(40%)	Osaka Nanko Logistics Center
				Tokorozawa Logistics Center		Chikuma Logistics Center
		Building: 11,397 tsubo	Building: 11,397 tsubo	Building: 9,431 tsubo	Building: 14,303 tsubo	Building: 5,008 tsubo	Building: 13,235 tsubo	Building: 13,235 tsubo	Building: 13,235 tsubo	Building: 18,537 tsubo
Sales (JPYmn)		2,881	2,818	5,956	7,570	3,063	5,377	5,377	7,170	14,800
Operating profit (JPYmn)		1,191	1,240	1,914	3,661	1,896	2,397	2,417	3,305	5,000
	Operating profit margin	41.3%	44.0%	32.1%	48.4%	61.9%	44.6%	45.0%	46.1%	33.8%

Source: Shared Research based on company data

Facilities to be securitized, facilities under construction

SBS thinks it can securitize facilities it has developed since 2004. The logistics facilities obtained prior to 2004 through acquisition have low book values and it might face tax liabilities upon transfer, so the company has no plans to securitize them.

The table below shows the primary facilities SBS believes it could securitize, as well as planned projects and projects under construction as of February 2021. The company believes this should yield stable and ongoing gains on sale for the next 14–15 years in the development business of the Property Management segment.

The total investment value for facilities that can be securitized was JPY25.4bn. The company’s currently operating, sellable facilities would generate JPY8.0–13.0bn if they were sold, assuming they were sold at profit margins of 30–50%.

Facilities that can be securitized

	Completion	Floor space (sqm)	Floor space (tsubo)	Investment	Contract type	Operations	Booked as	Held by
Shin-Sugita Logistics Center (Yokohama)	Feb. 2016	38,300	11,571	JPY6.6bn	Rent/internal use	Wine handling; apparel e-commerce fulfillment	Fixed asset	SBS Logicom
Nanko Logistics Center (Osaka)	Mar. 2019	61,274	18,535	JPY10.0bn	Internal use	Major department stores, retailers	Fixed asset	SBS Logicom
Other	-	51,700	15,651	JPY8.8bn	Internal use	-	Fixed asset	-
Total		151,300	45,800	JPY25.4bn

Source: Shared Research based on company data

Facilities under development (total investment of JPY43.0bn) are as shown in the table below, including the Yokohama Kanazawa Center and the Noda Seto Logistics Center. The company has also purchased land in Ichinomiya (Aichi) and Tomisato (Chiba), and is planning to develop logistics facilities there.

Facilities under construction, planned construction projects

Facility	Completion	Description	Investment	Booked as	Held by
			(planned)
Yokohama-Kanazawa Distribution Center	End Jul. 2021	53,000sqm logistics center under construction	JPY8.0bn	Fixed asset	SBS Logicom
Noda Seto Logistics Center (Chiba)	Building A: Nov. 2023	Building A: Four floors; 168,000sqm	JPY35.0bn	Fixed asset	SBS Sokuhai Support, SBS Asset Management
Noda Seto Logistics Center (Chiba)	Building B: TBD	Four floors; 106,000sqm	JPY35.0bn	Fixed asset	SBS Sokuhai Support, SBS Asset Management
Ichinomiya Land (Aichi)	Apr. 2023	69,000sqm	-	Fixed asset	SBS Ricoh Logistic
Tomisato Land (Chiba)	TBD	99,000sqm	-	Fixed asset	SBS Logicom, other
Total			JPY43.0bn

Source: Shared Research based on company data

The Noda Seto Logistics Center will be the largest logistics facility development for the company with an investment of roughly JPY35.0bn. It is located about seven minutes from the Joban Expressway Kashiwa exit and has two buildings (total floor area of 251,000 sqm), Building A (total floor area: 168,000 sqm) and Building B (total floor area: 106,000 sqm). The company expects e-commerce operators’ 3PL business to be a main tenant, and it is considering introduction of automation and robots on experimental basis at this facility. Industrial Market Research, released by Ichigo Real Estate Services, reported that the asking rent for logistics facilities in the Tokyo area (Ibaraki, Saitama, Chiba, Tokyo, and Kanagawa) was approximately JPY1,352 per sqm in July 2021. According to the April 2021 Japanese Real Estate Investor Survey published by Japan Real Estate Institute, the expected yield (cap rate) of the multi-tenant warehouse in inland area around Tokyo (Narita area in Chiba Prefecture) was 5.0%.

Business

Business overview

SBS operates a Logistics business, a Property Management business, and Other businesses. The Logistics and the Property Management segments contribute most of sales and profits. In FY12/20, Logistics accounted for 93.6% of overall sales and 55.5% of total operating profit, while Property Management contributed 3.6% and 42.2%, respectively. As the Property Management business includes profit (gain on sale of logistics facilities) from the relatively profitable development business, its contribution as a proportion of overall operating profit tends to be high.

Overview of SBS’ businesses

Business		Details
Logistics	General logistics	Logistics consulting (4PL), 3PL, truck transport, storage, warehouse/logistics center operation, international logistics, distribution processing, packaging, logistics technology, IT, and information systems design, others
	Food logistics	Nationwide deliveries with three temperature ranges, 3PL, distribution processing, home delivery service, consulting, others
	Specialty logistics	Same-day deliveries, e-commerce home deliveries, on-site logistics, company relocations, freight transport, others
Logistics support	Property Management	Rental of land, warehouses, and residences, development and sales of logistics facilities, others
Logistics support	Other	Personnel, environmental, marketing (e-commerce support such as fulfilment), solar power generation, others

Source: Shared Research based on company data

Main business segments

SBS has three reporting segments: Logistics, Property Management, and Other. The parent company is a pure holding company. The companies in the group are involved in logistics and ancillary support businesses.

Logistics: This segment comprises truck and rail transport, low-temperature and international logistics, logistics facility operation, distribution processing, corporate express deliveries, and home deliveries. The company also offers all of these activities under third-party logistics (3PL) contracts. This segment also covers logistics consulting and ancillary businesses.

Property Management: This segment rents company-owned property for office, residential and warehouse use, and also undertakes logistics facility development for sale to funds, REITs and businesses.

Other: Personnel, environmental, marketing, and solar power generation businesses.

Segment sales and profit			FY12/11	FY12/12	FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20
(JPYmn)			Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.
Sales			121,148	127,935	132,205	141,535	157,996	149,054	152,870	203,516	255,548	257,192
	YoY		1.1%	5.6%	3.3%	7.1%	11.6%	-5.7%	2.6%	33.1%	25.6%	0.6%
	Logistics		112,698	119,330	120,786	129,884	143,391	132,487	140,422	188,627	240,772	240,818
		YoY	5.6%	5.9%	1.2%	7.5%	10.4%	-7.6%	6.0%	34.3%	27.6%	0.0%
		% of total	93.0%	93.3%	91.4%	91.8%	90.8%	88.9%	91.9%	92.7%	94.2%	93.6%
	Property Management		2,392	2,504	5,554	5,103	8,641	10,278	5,745	8,172	7,802	9,349
		YoY	-60.7%	4.7%	121.8%	-8.1%	69.3%	18.9%	-44.1%	42.2%	-4.5%	19.8%
		% of total	2.0%	2.0%	4.2%	3.6%	5.5%	6.9%	3.8%	4.0%	3.1%	3.6%
	Other		6,057	6,100	5,865	6,548	5,963	6,288	6,703	6,716	6,972	7,024
		YoY	-14.1%	0.7%	-3.9%	11.6%	-8.9%	5.5%	6.6%	0.2%	3.8%	0.7%
		% of total	5.0%	4.8%	4.4%	4.6%	3.8%	4.2%	4.4%	3.3%	2.7%	2.7%
Operating profit			2,153	2,876	4,116	4,098	5,347	7,514	6,229	8,240	10,176	10,960
	YoY		-51.1%	33.6%	43.1%	-0.4%	30.5%	40.5%	-17.1%	32.3%	23.5%	7.7%
	Operating profit margin		1.8%	2.2%	3.1%	2.9%	3.4%	5.0%	4.1%	4.0%	4.0%	4.3%
	Logistics		1,265	1,728	1,219	1,624	2,072	2,266	2,692	4,572	6,278	5,990
		YoY	-28.2%	36.6%	-29.5%	33.2%	27.6%	9.4%	18.8%	69.8%	37.3%	-4.6%
		Operating profit margin	1.1%	1.4%	1.0%	1.3%	1.4%	1.7%	1.9%	2.4%	2.6%	2.5%
		% of total	58.7%	58.0%	30.7%	37.5%	37.0%	29.4%	42.2%	52.2%	61.2%	55.5%
	Property Management		1,101	1,206	2,550	2,359	3,292	5,108	3,278	3,913	3,787	4,558
		YoY	-51.3%	9.5%	111.4%	-7.5%	39.6%	55.2%	-35.8%	19.4%	-3.2%	20.4%
		Operating profit margin	46.0%	48.2%	45.9%	46.2%	38.1%	49.7%	57.1%	47.9%	48.5%	48.8%
		% of total	51.1%	40.5%	64.2%	54.5%	58.8%	66.4%	51.4%	44.7%	36.9%	42.2%
	Other		-211	44	202	344	238	321	413	273	186	254
		YoY	-249.6%	-120.9%	359.1%	70.3%	-30.8%	34.9%	28.7%	-33.9%	-31.9%	36.6%
		Operating profit margin	-3.5%	0.7%	3.4%	5.3%	4.0%	5.1%	6.2%	4.1%	2.7%	3.6%
		% of total	-9.8%	1.5%	5.1%	8.0%	4.2%	4.2%	6.5%	3.1%	1.8%	2.4%
	Adjustments							-182	-154	-519	-75	157

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures have been retroactively restated in line with a change in accounting methods for retirement benefit liabilities and service costs from Q1 FY12/15 to enable year-on-year comparisons.

Logistics: 93.6% of sales, 55.5% of operating profit (FY12/20)

The Logistics business accounts for more than 90% of sales and roughly 60% of operating profit. In this core segment the company offers business-to-business transportation of materials, products and merchandise, as well as storage, cargo handling, packaging, distribution processing and information management. While SBS does not disclose the exact breakdown of these services, Shared Research understands that truck transportation accounts for roughly half of segment sales. The main services in the Logistics segment are listed below.

Main logistics subsidiaries

Company	Subsidiary since	Prior to joining group	Business description
SBS Sokuhai Support	June 1992	Saitama Nissho: General waste treatment	Same-day B2B delivery in Tokyo, Kanagawa, Chiba, and Saitama. Also provides outsourced e-commerce B2C delivery services for e-commerce companies.
SBS Flec	May 2004	Yukijirushi Butsuryu, logistics company of Yukijirushi Group	Specializes in food distribution in three temperature zones: dry, chilled, and frozen.
SBS Logicom	April 2006	Tokyu Logistic, logistics subsidiary of Tokyu group	3PL, truck transport, center operations, warehouse services, international logistics.
SBS Zentsu	January 2006	Food logistics company Zentsu	Logistics for Japanese Consumers' Cooperative Union (Co-op).
SBS Ricoh Logistics	August 2018	Ricoh Logistics, logistics subsidiary of Ricoh group	3PL in Japan and overseas, manages all Ricoh group logistics. Operates Otsuka Corporation’s Tanomail under contract.
SBS Toshiba Logistics	November 2020	Toshiba Logistics, logistics subsidiary of Toshiba	In addition to 3PL, provides 4PL services to plan and execute logistics strategies for customers. Provides a wide range of companies including members of the Toshiba Group with comprehensive logistics solutions.
Toyo Warehouse & Transportation	January 2021	Toyo Warehouse & Transportation, warehouse subsidiary of SMC	Has two large waterfront warehouses in Tokyo area—one in Higashiogishima in Kawasaki (Kanagawa) and one in Wakasu (Koto-ku, Tokyo).

Services provided and main related subsidiaries and affiliates

Services	Service description	Related subsidiaries/affiliates
Truck transport	The company delivers nationwide, with a fleet of around 3,000 vehicles. Will transport anything from an entire train carriage to a single component.	SBS Toshiba Logistics, SBS Ricoh Logistics, SBS Logicom, SBS Flec, SBS Zentsu, SBS Freight Service
Railway transport	Long-distance container transport by rail	SBS Toshiba Logistics, SBS Logicom
Refrigerated logistics	A specialist food transport service with three temperature zones (dry, chilled, frozen)	SBS Flec, SBS Zentsu, SBS Logicom, SBS Freight Service
Logistics center operation	Comprehensive management contracts for logistics centers (both on an on-site and off-site basis)	SBS Toshiba Logistics, SBS Ricoh Logistics System, SBS Logicom, SBS Flec, SBS Zentsu, SBS Freight Service, Toyo Warehouse & Transportation
International logistics	Integrated international logistics services, from customs clearance to onward arrangements and local logistics	SBS Toshiba Logistics, SBS Ricoh Logistics System, SBS Logicom, SBS Global Network, Toyo Warehouse & Transportation
Distribution processing	Processing such as assembly, labels, grouping, and wrapping	SBS Toshiba Logistics, SBS Ricoh Logistics System, SBS Logicom, SBS Flec, SBS Zentsu
Business deliveries	SBS’ original express courier service and deliveries of packages from major online office supply retailers to other companies	SBS Sokuhai Support (same-day), SBS Ricoh Logistics
Home delivery (individuals)	Delivery of products to co-operative union members and online shoppers	SBS Zentsu, SBS Sokuhai Support (e-commerce home delivery), SBS Flec, SBS Ricoh Logistics
Equipment relocation and personal moving services	Relocation services for offices, public agencies, universities, and libraries, and moving service for individuals	SBS Toshiba Logistics, SBS Ricoh Logistics, SBS Logicom
Onsite logistics	Focusing on vehicles and goods entering and exiting large buildings, and making them more efficient through a unique system of collaborative delivery	SBS Logicom
Consulting	Investigation, analysis, and solutions for cost-cutting, lead time reduction, and streamlining	SBS Toshiba Logistics, SBS Logicom, SBS Flec, SBS Zentsu
3PL	Taking on the entirety of customers’ logistics operations	SBS Toshiba Logistics System, SBS Ricoh Logistics System, SBS Logicom, SBS Flec, SBS Zentsu, SBS Freight Service, Toyo Warehouse & Transportation

Source: Shared Research based on company data

Logistic segment performance

			FY12/11	FY12/12	FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20
(JPYmn)			Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.
Sales			112,698	119,330	120,786	129,884	143,391	132,487	140,422	188,627	240,772	240,818
	YoY		5.6%	5.9%	1.2%	7.5%	10.4%	-7.6%	6.0%	34.3%	27.6%	0.0%
	3PL		42,300	44,300	46,100	48,500	51,200	54,700	58,800	88,900	123,317	120,632
		YoY	19.5%	4.7%	4.1%	5.2%	5.6%	6.8%	7.5%	51.2%	38.7%	-2.2%
		% of total	37.5%	37.1%	38.2%	37.3%	35.7%	41.3%	41.9%	47.1%	51.2%	50.1%
Operating profit			1,265	1,728	1,219	1,624	2,072	2,266	2,692	4,572	6,278	5,990
	YoY		-28.2%	36.6%	-29.5%	33.2%	27.6%	9.4%	18.8%	69.8%	37.3%	-4.6%
	Operating profit margin		1.1%	1.4%	1.0%	1.3%	1.4%	1.7%	1.9%	2.4%	2.6%	2.5%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

3PL business drives growth, low-temperature distribution business secures stable revenue

SBS is focusing on 3PL, where it offers customers a comprehensive service to overhaul and improve their logistics activities. The low-temperature distribution business transports food across the three temperature zones—frozen (below -25° C), chilled (5° to 8° C), and room temperature (above 15° C). As food logistics are resistant to economic swings, this business provides a stable source of revenue.

3PL: short for 3rd Party Logistics. An outsourcing business involving a third party that is neither a manufacturer nor a retailer taking over all the logistics functions from the freight owner, including proposing new logistical structures for ordering, optimization, and efficiency. SBS defines 3PL as direct long-term contracts with the freight owner for terms of at least three years to carry out at least two of the five major logistics functions: transport and delivery, storage, handling, packaging, and distribution processing.

Cargo handling: Refers to the process of loading/unloading goods from a truck etc. and moving them in and out of logistics facilities.

Distribution processing: In addition to general work such as attaching price tags to apparel, packing New Year’s and midsummer gifts in boxes, and replacing labels on imported goods, it can involve outsourcing some tasks that are often handled on the production line, such as simple assembly and finishing of products and shrink wrapping.

3PL business trends

The 3PL business accounts for around 50% of SBS’s logistics business revenue, of which about 80% is from comprehensive contracts where SBS performs all of the five major logistics functions: transport and delivery, storage, handling, packaging, and distribution processing. SBS entered the 3PL market in 2006, and booked FY12/20 sales of JPY120.6bn (-2.2% YoY). More of its 3PL customers are new customers rather than existing customers who renew their contracts.

3PL business sales

		FY12/12	FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20	FY12/21
(JPYmn)		Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Est.
3PL sales		44,300	46,100	48,500	51,200	54,700	58,800	88,900	123,317	120,632	223,200
	YoY	4.7%	4.1%	5.2%	5.6%	6.8%	7.5%	51.2%	38.7%	-2.2%	85.0%
	% of Logistics sales	37.1%	38.2%	37.3%	35.7%	41.3%	41.9%	47.1%	51.2%	50.1%	62.9%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

3PL business: competitive edge

SBS maintains that it can raise productivity and quality by improving the workflow in logistics centers, holding down inventory space, and effectively allocating personnel. The company has a track record of winning multiple awards at the All-Japan Logistics Improvement Case Study Convention by the Japan Institute of Logistics Systems, including the Logistics Rationalization Award and the Rationalization Endeavor Award. Subsidiary SBS Ricoh Logistics won awards in the Japan Packaging Contest sponsored by the Japan Packaging Institute and the Eco-drive Activities Contest sponsored by the Foundation for Promoting Personal Mobility and Ecological Transportation.

The key listed customers in this segment are Ricoh Co., Ltd. (TSE1: 7752), Otsuka Corporation (TSE1: 4768), Megmilk Snow Brand Co., Ltd. (TSE1: 2270), Seiko Optical Products Co., Ltd. (a subsidiary of Seiko Holdings Corporation [TSE1: 8050], developing and selling eyeglass lenses and products relating to eyeglasses), Kasumi Co., Ltd., subsidiary of United Super Market Holdings Inc., (TSE1: 3222), supermarket operating primarily in Ibaraki, and Tokyu Store Corporation, subsidiary of Tokyu Corporation (TSE1: 9005), operates supermarkets along Tokyu railway lines. Unlisted customers include Ken Depot Corporation (manages members-only construction materials wholesale stores), Tombow Pencil Company (manufacturer of writing instruments and stationery), and various convenience store, supermarket, and drug store chains and co-ops.

Low-temperature distribution business

SBS does not disclose sales of low-temperature distribution business, but it appears to account for over 60% of sales of the distribution business overall. As demand for food is relatively resistant to economic swings, food logistics tend to remain stable. The low-temperature distribution business is driven by consolidated subsidiaries SBS Flec and SBS Zentsu (see Main group companies for details).

Food logistics is divided into frozen food, chilled food, and room-temperature food. Customer companies include food manufacturers, food wholesalers, food retailers, and co-ops, for which the company provides temperature-controlled warehouse storage, logistics processing, and delivery services. Frozen food (below -25° C) encompasses instant rice and noodles dishes, ice cream, cakes and other confectionery, and frozen meat and fish. Chilled food (5° to 8° C) is primarily composed of cheese, butter, and other dairy products; beverages; soy-based products; ham and sausages; and other foods typically consumed on a regular basis.

Fee structure in logistics

SBS charges fees in three different ways:

A per-load fee charging a certain amount per load handled; a per-truck fee, where the customer is charged for the use of a whole truck; and a value-based fee. Fees may vary with length of contract and distance travelled. The value-based fees are typically 3–5% of the retail sales value of the goods that pass through SBS’s logistics facilities.

In the 3PL business, value-based fees are the norm. This is because it is easy for the shippers to understand and because different industries have different logistics patterns (large one-off deliveries, small frequent deliveries, store route deliveries and so on). Also, the lot quantities vary, so it is possible to display common prices across the shipping customer base with value-based fees.

Since the shippers (customers) dislike having distribution costs (including transport) becoming fixed costs, it is easy to get their agreement for charges that rise with sales. However, in the 3PL business, some customers employ a mix of per-load and per-truck fees for deliveries and value-based fees in the warehouse. Outside the 3PL business, it appears that there are slightly more contracts on a per-truck basis than a per-load basis.

Major customers

SBS has approximately 8,000 logistics customers. Food and beverage manufacturers and wholesalers accounted for around 34% of sales in the Logistics segment for food-related logisitics as of FY12/20.

Overseas subsidiaries

Entered Indian market in early 2000s before withdrawing in 2015

SBS made inroads into the Indian market by acquiring Atlas Logistics and making it a subsidiary in 2011. The company went on to acquire 66% of Transpole Logistics, likewise making it a subsidiary. However, in FY12/15, SBS concluded that Transpole was unable to recover debt claims related to large-scale transactions and booked the claims as an extraordinary loss for the year. SBS decided to dissolve its capital alliance with Transpole and withdraw from the company’s management. From FY12/16, Transpole and Atlas Logistics were excluded from consolidated accounting.

Consolidation of Ricoh Logistics and SBS Toshiba Logistics boosts number of international logistics centers

Overseas sales in FY12/20 amounted to JPY7.4bn (versus JPY10.4bn in FY12/19) due to the August 2018 consolidation of Ricoh Logistics System (now SBS Ricoh Logistics System Co., Ltd.). The company believes it can supplement its overseas network through collaboration with SBS Ricoh Logistics System, which has five logistics centers overseas. In FY12/20, overseas sales declined to JPY7.4bn. The company said that in FY12/21, overseas sales would grow due to the consolidation of SBS Toshiba Logistics (discussed later) and the weighting of overseas sales in the logistics business would climb to roughly 7% (from about 3% in FY12/20).

Toshiba Logistics (now SBS Toshiba Logistics) was consolidated in November 2020. It has international logistics operations with 14 overseas subsidiaries including China/Hong Kong, other Asia (Thailand, Philippines, Singapore, Vietnam, India, Malaysia), Europe, and North America.

Property Management: 3.6% of sales, 42.2% of operating profit (FY12/20)

The Property Management segment comprises the leasing and the development business. In the leasing business (23.3% of segment sales and 27.5% of operating profit in FY12/20) the company leases its facilities for use as warehouses, offices, and residences.

In the development business (76.7% of sales and 72.5% of operating profit in FY12/20) it develops logistics facilities and sells them to funds and institutional investors.

Services	Business description	Related subsidiaries/affiliates
Leasing	Leasing out its facilities as offices, accommodation, and warehouses	SBS Logicom, SBS Asset Management, other
Development	Developing and selling logistics facilities such as logistics centers (real estate securitization)	SBS Asset Management, SBS Logicom

Source: Shared Research based on company data

Property management performance

			FY12/11	FY12/12	FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20
(JPYmn)			Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.
Sales			2,392	2,504	5,554	5,103	8,641	10,278	5,745	8,172	7,802	9,349
	YoY		-60.7%	4.7%	121.8%	-8.1%	69.3%	18.9%	-44.1%	42.2%	-4.5%	19.8%
	Leasing		-	2,504	2,672	2,285	2,685	2,708	2,682	2,795	2,425	2,179
		YoY	-	-	6.7%	-14.5%	17.5%	0.9%	-1.0%	4.2%	-13.2%	-10.1%
		% of total	-	-	48.1%	44.8%	31.1%	26.3%	46.7%	34.2%	31.1%	23.3%
	Development		-	-	2,881	2,818	5,956	7,570	3,063	5,377	5,377	7,170
		YoY	-	-	-	-2.2%	111.4%	27.1%	-59.5%	75.5%	0.0%	33.3%
		% of total	-	-	51.9%	55.2%	68.9%	73.7%	53.3%	65.8%	68.9%	76.7%
Operating profit			1,101	1,206	2,550	2,359	3,292	5,108	3,278	3,913	3,787	4,558
	YoY		-51.3%	9.5%	111.4%	-7.5%	39.6%	55.2%	-35.8%	19.4%	-3.2%	20.4%
	Operating profit margin		46.0%	48.2%	45.9%	46.2%	38.1%	49.7%	57.1%	47.9%	48.5%	48.8%
	Leasing		-	1,206	1,358	1,119	1,378	1,447	1,388	1,516	1,369	1,253
		YoY	-	-	12.6%	-17.6%	23.1%	5.0%	-4.1%	9.2%	-9.7%	-8.5%
		Operating profit margin	-	48.2%	50.8%	49.0%	51.3%	53.4%	51.8%	54.2%	56.5%	57.5%
		% of total	-	-	53.3%	47.4%	41.9%	28.3%	42.3%	38.7%	36.1%	27.5%
	Development		-	-	1,191	1,240	1,914	3,661	1,889	2,379	2,417	3,305
		YoY	-	-	-	4.1%	54.4%	91.3%	-48.4%	25.9%	1.6%	36.7%
		Operating profit margin	-	-	41.3%	44.0%	32.1%	48.4%	61.7%	44.2%	45.0%	46.1%
		% of total	-	-	46.7%	52.6%	58.1%	71.7%	57.6%	60.8%	63.8%	72.5%
Real estate for rent (on balance sheet)			24,702	26,931	25,824	22,885	23,112	23,245	25,934	25,713	26,483
	YoY		6.8%	9.0%	-4.1%	-11.4%	1.0%	0.6%	11.6%	-0.9%	3.0%
Real estate for rent (market price)			25,253	27,183	26,006	23,070	23,344	27,584	30,721	30,545	33,456
	YoY		4.6%	7.6%	-4.3%	-11.3%	1.2%	18.2%	11.4%	-0.6%	9.5%
Difference (market price - BS)			551	252	182	185	232	4,339	4,787	4,832	6,973

Source: Shared Research based on company data
Note: Leasing income and loss refers to income or loss related to land and facilities.

Leasing business (23.3% of Property Management sales and 27.5% of operating profit in FY12/20)

The leasing business (under the Property Management segment) involves the rental of assets acquired by the company through M&A, and rental of logistics facilities. Group companies that own real estate mainly in the Tokyo Metro Area, such as SBS Logicom, rent these properties to third parties. The rental buildings are mainly used for logistics, although there are also office buildings, residences and open land among them as well. The business currently leases around 40 properties.
However, some of the properties acquired through M&A have low book values. Book value of real estate held by subsidiaries acquired through M&A were evaluated at market value prior to the consolidation of those subsidiaries.

Leasing business sales affected by utilization rate and facility sales, not vacancy rate and rent fluctuation

Leasing business sales are rent x utilization rate

Rents are value of rental properties owned x rental yield. According to SBS, the yield on rental properties (relative to market values) is about 10% for offices, about 9% for residential property, and 6.0–7.0% for logistics facilities. As of end-FY12/19, the balance sheet value of rental and other properties was JPY26.5bn and their term-end market price was JPY33.5bn, putting unrealized gains on these properties (the difference between the two figures) at about JPY7.0bn.

Warehouse rents vary by region, but SBS said that they average around JPY3,000–4,000/tsubo. (Note: tsubo is a unit of area equating to about 3.3sqm.) Most of the residential property is rented by companies for worker accommodation, so vacancy rates are low there as well. For logistics facilities, only those customers that pay rent on warehouses are accounted for in the Property Management segment; warehouse storage undertaken as part of 3PL activities is accounted for under the Logistics segment.

Utilization rate is 1 - vacancy rate. According to SBS, the vacancy rates for offices and residential were both trending under 5%. Because the offices are in prime urban locations (such as Tokyo’s Shibuya Ward or Shinjuku Ward), the vacancy rate risk is low.

Leasing business sales tend to be affected by utilization rates and facility sales, and not as much by vacancy rates and rent fluctuations. In past years, the leasing business has consistently generated around JPY2.5bn in gross revenues and JP1.3bn in operating profit per annum.

Key rental properties

Source: Shared Research based on company data

Development of logistics facilities

In 2004, SBS established A-Max Inc., now SBS Asset Management Co., Ltd. (“SBS Asset Management”), a real estate securitizer and developer, and made it a subsidiary. SBS Asset Management and its subsidiaries are primarily responsible for planning and developing low-cost logistics facilities for corporate customers, mainly in Greater Tokyo. The company aims for average annual returns of 6.0–7.0%.

Logistics knowledge key to forecasting earnings from logistic facilities, acquiring land at low prices

SBS conducts the logistics development process in reverse; after determining the market price for rents of logistic facilities in a given area, SBS then decides how much to pay for land acquisition and construction costs. When the company considers the development of logistics facilities, it calculates costs and sets rents based on the assumption that it will become a leaseholder in the future.

The company also uses the legislative system such as the Act on Advancement of Integration and Streamlining of Distribution Business for developing facilities in urbanization control areas (with restrictions on new building construction and building extensions. Some warehouse construction is permitted under certain conditions depending on the municipal’s ordinances), which have relatively low land prices, and acquiring permission for distribution facility developments in locations near expressway interchanges. SBS can also acquire land at lower prices due to its ability to participate in auctions that are limited to participants with port operator licenses or warehousing registration. As such, SBS has experience developing facilities under conditions that are inaccessible to ordinary real estate developers.

The Act on Advancement of Integration and Streamlining of Distribution Business. According to the Ministry of Land, Infrastructure, Transport and Tourism, this law set the parameters for certification of and support mechanisms for certain business plans. The idea was to encourage plans that lowered distribution costs and reduced the burden on the environment in a comprehensive and efficient manner. The MLIT certifies projects that increase logistics efficiency overall, i.e., those that bundle transport, storage, cargo handling and distribution processing; streamline logistics centers and locate near expressways, harbors and airports; and rationalize the distribution network with shared transportation and delivery. Authorities take the above into account when considering permit applications for developing a special logistics business facility in an urbanization control zone.

This segment shows synergy with the Logistics segment, which gives the company the ability to comprehensively develop logistics facilities–a strength when seeking new customers in the 3PL business. In the 3PL business, project proposals to customers are differentiated from those of competitors through a multi-faceted approach, outlining ideal locations and specifications at rental rates that are lower than market prices.

Even after SBS sells a company-developed logistics facility to an external company or fund, it forms a long-term lease agreement with the buyer and continues 3PL operations. This process allows rental rates to be kept relatively low. SBS believes that the competitiveness of logistics facilities is the main factor in determining the total cost of 3PL.

Differences in cost items/amounts in the Logistics business before and after the sale of company-developed logistics facilities:
SBS records depreciation under the Logistics business for company-developed logistics facilities in the case that it holds them as fixed assets and utilizes them. If the company sells a logistics facility to an external company or fund and continues to use it after concluding a lease agreement, it will record rental payments to the buyer of the facility instead of depreciation. According to the company, rent generally exceeds depreciation for company-owned facilities.

High utilization rate owing to strategy of finding tenants and locking in 3PL contracts before facility development

SBS finds tenants or arranges use of the facility under a 3PL contract before starting facility development work. This strategy sets it apart from other logistics facilities developers such as Prologis and Mitsui Fudosan, which develop logistics facilities first and then seek customers. In principle, the company decides to move forward with facility development when it has determined that about 50% of the facility’s floor space will filled due to 3PL contracts or tenant acquisition. The remaining floor space is used for new customers, or for customers currently renting in a separate SBS facility to consolidate operations. In this way, facilities will be fully operational and rented immediately after development is complete. As a result, the company’s logistics facilities have a lower vacancy risk than logistics facilities developed by real estate developers. The quality and credit of tenants are also desirable, and such tenants can be expected to provide the company with stable cash flows over the medium to long term.

6.0–7.0% yield on initial investment from rental revenue

Contract periods on logistics facilities are generally 10 years or longer. Leasing rates are fixed during that time but may be increased if interest rates rise. Aside from a rental revenue, which provides a stable yield of around 6.0–7.0% per year on initial investment for land acquisition and construction, the company also counts operational revenue as a source of income. Operations cover actions undertaken at logistics facilities such as shipping and receiving, storage, distribution processing, and other 3PL contract services. SBS is also contracted for deliveries to and from the logistics facilities.

Development and securitization record

Facility	Location	Land space (tsubo)	Acquired	Securitized	Book value	Transfer price	Transferred to; other notes
		Floor space (tsubo)
Yoshikawa Logistics Center	Saitama	1,726	Apr. 1997	July 2017	JPY0.5bn	JPY1.9bn	United Urban Investment
		3,269
Omiya Center Building	Saitama	1,071	Nov. 2005	Dec 2006	JPY8.3bn	JPY12.0bn	(Office building)
		7,134		Jul. 2007	JPY8.0bn	JPY12.5bn
Kawagoe Warehouse	Saitama	1,000	April 2006	Held by SBS HD
		1,984
Western Japan Logistics Center (Kyotanabe)	Kyoto	7,821	Mar. 2007	Dec. 2013	JPY1.8bn	JPY2.8bn	SBS Logifund No.1
		11,397		Aug 2014	JPY1.8bn	JPY2.8bn
Chikuma Logistics Center	Nagano	3,369	Aug. 2007	Dec 2017	JPY0.6bn	JPY1.1bn	Private company
		1,905
Kawagoe Logistics Center	Saitama	9,881	Nov. 2007	Jun. 2016	JPY3.9bn	JPY7.6bn	United Urban Investment
		14,450
Iwatsuki Logistics Center	Saitama	12,103	Dec. 2007	Apr. 2008	JPY4.4bn	JPY4.7bn	Iwatsuki Capital
		9,069			Stake: 28.5％	Gain JPY0.2bn	Maple Tree
Iruma Logistics Center	Saitama	7,903	Jan. 2008	Sep 2010	JPY2.9bn	JPY3.4bn	Maple Tree
		7,926
Kimitsu Materials Warehouse III	Chiba	4,748	Mar. 2008	Held by SBS HD
		907
Toyohashi Logistics Center	Aichi	1,796	Apr. 2008	Held by SBS HD
		899
Noda Logistics Center	Chiba	7,279	Mar. 2009	Sep 2010	JPY4.6bn	JPY4.8bn	Maple Tree
		10,858
Tokorozawa Warehouse	Saitama	2,631	Nov. 2009	Mar. 2015	JPY1.1bn	JPY1.2bn	Private company
		1,755
Noda Yoshiharu Logistics Center	Chiba	2,202	Mar. 2009	Sep 2010	JPY3.0bn	JPY4.8bn	GLP J-REIT
		3,284
Nagatsuta Logistics Center	Kanagawa	14,392	Jan. 2015	Nov 2018	JPY3.0bn	JPY5.3bn	Private company (30%)
		13,236		January 2019	JPY2.9bn	JPY5.3bn	Private company (30%)
				Feb. 2020	JPY3.9bn	JPY7.1bn	Private company (40%)
Tokorozawa Logistics Center	Saitama	8,417	Mar. 2016	Held by SBS HD
		10,528
Shin-Sugita Logistics Center	Kanagawa	5,188	Jan 2016	Held by SBS HD
		11,575
Sendai Center (Miyagi)	Miyagi	2,179	Oct. 2016	Held by SBS HD
		2,522
Ami Logistics Center	Ibaraki	9,470	Jun. 2018	Held by SBS HD
		2,340
Osaka Nanko Logistics Center	Osaka	7,520	Mar. 2019	Mar. 2021	JPY9.8bn	JPY14.8bn
		5,072
Total					JPY60.5bn	JPY92.1bn

Source: Shared Research based on company data

Properties under development and planned for development

The company was planning development for the following facilities as of March 2021. Related investment is projected to be JPY43.0bn in total.

Facilities under construction, planned construction projects

Facility	Completion	Description	Investment	Booked as	Held by
			(planned)
Yokohama-Kanazawa Distribution Center	End July 2021	53,000sqm logistics center to be constructed	JPY8.0bn	Fixed asset	SBS Logicom
Noda Seto project (Chiba)	Building A: 2022–2023	Four floors; 155,00sqm	JPY35.0bn	Fixed asset	SBS Logicom
Noda Seto project (Chiba)	Building B: TBD	Four floors; 106,000sqm	JPY35.0bn	Fixed asset	SBS Logicom
Ichinomiya Land (Aichi)	TBD	60,000sqm	-	Fixed asset	SBS Ricoh Logistic
Tomisato Land (Chiba)	TBD	99,000sqm	-	Fixed asset	SBS Logicom, other
Total			JPY43.0bn

Source: Shared Research based on company data

Development of logistics facilities in Asia

SBS finished construction of a Thai logistics facility, the company’s first outside Japan, in June 2014. In addition, the company will complete construction of all three Thai warehouses by August 2015. SBS stated that it completed building the first and second warehouses in June and August 2014, respectively, and that a Japanese customer has been using the first warehouse. The second warehouse is being used by a Japanese-owned forwarder.

Thailand logistics facilities

First building, office building