SBS Holdings 2384

SBSホールディングス

Recent Updates

2022-05-16

Q1 FY12/22 flash update

2022-04-18

FY12/21 report update

2022-02-14

Dividend of surplus (dividend increase) 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

2022-05-16

Q1 FY12/22 flash update

2022-05-16

Full-year FY12/21 flash update

2022-02-14

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 FY12/21, the Logistics segment accounted for 93.8% of sales and 69.7% of operating profit (before deducting adjustments), and the Property Management segment accounted for 4.2% of sales and 28.4% of operating profit (before deducting adjustments).

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 (12.8% of segment sales and 20.1% of operating profit in FY12/21) the company leases its warehouses, offices, and residences. Under the development business (87.2% of segment sales, 79.9% 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% (rent/total investment). Immediately after the completion of the logistics facility, the company will operate a 3PL business contracted by itself at the facility. After the post-development sale of the logistics facility, the company will continue to lease the facility as a long-term tenant and continue the 3PL business. This enables the company to liquidate logistics facilities as properties with high utilization rates, thereby securing earnings, recovering capital, and acquiring assets necessary for expansion while preventing asset buildup.

Trends

In FY12/21, the company reported full-year consolidated sales of JPY403.5bn (+56.9% YoY), operating profit of JPY20.7bn (+88.9% YoY), recurring profit of JPY20.5bn (+88.3% YoY), and net income attributable to owners of the parent of JPY10.8bn (+58.1% YoY). The company posted double-digit sales and profit growth in all segments. The increases in sales and profits were driven by the consolidation of SBS Toshiba Logistics, increased cargo volume, the operation of new logistics facilities, and price revisions.

For FY12/22, the company forecasts sales of JPY430.0bn (+6.6% YoY), operating profit of JPY21.5bn (+3.8% YoY), recurring profit of JPY20.6bn (+0.5% YoY), and net income attributable to owners of the parent of JPY11.7bn (+8.4% YoY). The consolidation of SBS Furukawa Logistics is expected to be a factor in the increase in sales. In terms of profit, the company expects an increase in gains on sales in the Property Management segment, but forecasts operating profit to remain essentially unchanged YoY due to an increase in one-time expenses related to HQ relocation, uniform renewal, and post-merger integration (PMI).

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		FY12/12	FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20	FY12/21	FY12/22
(JPYmn)		Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Est.
Sales		127,935	132,205	141,535	157,996	149,054	152,870	203,516	255,548	257,192	403,485	430,000
	YoY	5.6%	3.3%	7.1%	11.6%	-5.7%	2.6%	33.1%	25.6%	0.6%	56.9%	6.6%
Gross profit		12,566	13,459	14,276	17,555	16,977	16,013	21,351	26,028	26,802	46,716
	YoY	11.7%	7.1%	6.1%	23.0%	-3.3%	-5.7%	33.3%	21.9%	3.0%	74.3%
	Gross profit margin	9.8%	10.2%	10.1%	11.1%	11.4%	10.5%	10.5%	10.2%	10.4%	11.6%
Operating profit		2,877	4,116	4,098	5,347	7,514	6,229	8,240	10,176	10,960	20,706	21,500
	YoY	33.6%	43.1%	-0.4%	30.5%	40.5%	-17.1%	32.3%	23.5%	7.7%	88.9%	3.8%
	Operating profit margin	2.2%	3.1%	2.9%	3.4%	5.0%	4.1%	4.0%	4.0%	4.3%	5.1%	5.0%
Recurring profit		2,746	3,779	3,648	5,772	7,832	6,475	7,607	10,172	10,883	20,489	20,600
	YoY	68.1%	37.6%	-3.5%	58.2%	35.7%	-17.3%	17.5%	33.7%	7.0%	88.3%	0.5%
	Recurring profit margin	2.1%	2.9%	2.6%	3.7%	5.3%	4.2%	3.7%	4.0%	4.2%	5.1%	4.8%
Net income		1,626	1,549	2,726	-3,815	5,111	4,446	4,409	6,079	6,826	10,790	11,700
	YoY	-35.0%	-4.7%	75.9%	-	-	-13.0%	-0.8%	37.9%	12.3%	58.1%	8.4%
	Net margin	1.3%	1.2%	1.9%	-	3.4%	2.9%	2.2%	2.4%	2.7%	2.7%	2.7%
Per-share data (JPY)
Shares issued (year-end)		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	39,718,200
EPS		44.1	40.9	70.4	-96.8	128.9	111.9	111.0	153.1	171.9	271.7	294.6
EPS (fully diluted)		-	13.6	70.3	-	-	-	-	-	-	-
Dividend per share		13.3	13.3	15.0	-	33.0	21.0	22.0	30.0	35.0	55.0	59.0
Book value per share		715.8	743.9	815.2	706.3	818.6	916.5	1,001.1	1,136.2	1,277.9	1,527.6
Balance sheet (JPYmn)
	Cash and deposits	10,181	10,339	11,098	8,990	9,388	11,539	16,310	18,503	27,543	23,800
Total current assets		39,150	39,663	53,847	51,601	46,512	47,350	62,871	64,376	104,530	121,541
Tangible fixed assets		54,523	58,019	60,241	60,800	64,730	69,076	85,373	89,599	96,179	96,877
Investments and other assets		9,016	8,897	10,324	11,131	10,044	10,311	13,292	15,635	20,345	23,126
Intangible assets		1,778	1,774	6,706	1,285	1,042	1,064	10,818	10,436	33,495	35,651
Total assets		104,467	108,354	131,120	124,817	122,330	127,802	172,355	180,047	254,550	277,197
	Accounts payable	7,627	7,721	8,767	9,584	7,697	8,204	13,555	14,751	30,828	34,193
	Short-term debt	27,082	28,749	36,061	30,527	24,493	24,004	26,150	28,060	53,430	38,514
Total current liabilities		41,330	43,969	54,990	52,994	41,596	42,323	58,501	62,896	111,102	106,082
	Long-term debt	24,421	23,755	28,837	31,876	33,497	33,709	49,628	47,438	47,399	60,142
Total fixed liabilities		35,386	35,120	40,884	41,875	46,199	46,968	65,680	63,074	75,301	90,406
Total liabilities		76,716	79,089	95,874	94,870	87,796	89,291	124,182	125,970	186,404	196,489
Total net assets		27,781	29,219	35,091	29,947	34,533	38,510	48,173	54,077	68,146	80,707
Total interest-bearing debt		51,503	52,504	64,898	62,403	57,990	57,713	75,778	75,498	100,829	98,656
Cash flow statement (JPYmn)
Cash flows from operating activities		7,317	6,243	6,603	7,728	12,201	11,671	12,398	16,872	17,262	27,472
Cash flows from investing activities		-5,520	-6,214	-15,101	-7,081	-10,043	-8,127	-22,433	-12,579	-30,480	-22,343
Cash flows from financing activities		-816	92	8,893	-2,685	-1,733	-1,420	14,815	-2,048	22,726	-9,278
Financial ratios
ROA (RP-based)		2.7%	3.6%	3.0%	4.5%	6.3%	5.2%	5.1%	5.8%	5.0%	7.7%
ROE		6.3%	5.6%	9.0%	-12.7%	16.9%	12.9%	11.6%	14.3%	14.2%	19.4%
Equity ratio		26.3%	26.7%	24.3%	22.5%	26.6%	28.5%	23.1%	25.1%	19.9%	21.9%

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.

Trends and outlook

Quarterly trends and results

Cumulative		FY12/21				FY12/22				FY12/22		FY12/22
(JPYmn)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	1H Est.	% of Est.	FY Est.
Sales		93,002	202,244	299,761	403,485	107,799				52.6%	205,000	25.1%	430,000
	YoY	35.2%	56.6%	56.4%	56.9%	15.9%					1.4%		6.6%
Gross profit		10,537	25,951	35,928	46,716	11,869
	YoY	17.0%	83.1%	77.1%	74.3%	12.6%
	Gross profit margin	11.3%	12.8%	12.0%	11.6%	11.0%
SG&A expenses		5,800	11,981	18,369	26,009	6,985
	YoY	47.6%	51.1%	56.7%	64.2%	20.4%
	SG&A ratio	6.2%	5.9%	6.1%	6.4%	6.5%
Operating profit		4,737	13,969	17,559	20,706	4,884				71.8%	6,800	22.7%	21,500
	YoY	-6.7%	123.8%	105.1%	88.9%	3.1%					-51.3%		3.8%
	Operating profit margin	5.1%	6.9%	5.9%	5.1%	4.5%					3.3%		5.0%
Recurring profit		4,703	13,936	17,772	20,489	4,744				76.5%	6,200	23.0%	20,600
	YoY	-7.1%	122.0%	110.6%	88.3%	0.9%					-55.5%		0.5%
	Recurring profit margin	5.1%	6.9%	5.9%	5.1%	4.4%					3.0%		4.8%
Net income		2,220	7,809	9,769	10,790	3,170				66.0%	4,800	27.1%	11,700
	YoY	-27.8%	89.0%	82.2%	58.1%	42.8%					-38.5%		8.4%
	Net margin	2.4%	3.9%	3.3%	2.7%	2.9%					2.3%		2.7%
Quarterly		FY12/21				FY12/22
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Sales		93,002	109,242	97,517	103,724	107,799
	YoY	35.2%	81.1%	56.1%	58.2%	15.9%
Gross profit		10,537	15,414	9,977	10,788	11,869
	YoY	17.0%	198.4%	63.2%	65.6%	12.6%
	Gross profit margin	11.3%	14.1%	10.2%	10.4%	11.0%
SG&A expenses		5,800	6,181	6,388	7,640	6,985
	YoY	47.6%	54.5%	68.3%	85.7%	20.4%
	SG&A ratio	6.2%	5.7%	6.6%	7.4%	6.5%
Operating profit		4,737	9,232	3,590	3,147	4,884
	YoY	-6.7%	693.1%	54.8%	31.2%	3.1%
	Operating profit margin	5.1%	8.5%	3.7%	3.0%	4.5%
Recurring profit		4,703	9,233	3,836	2,717	4,744
	YoY	-7.1%	661.2%	77.3%	11.2%	0.9%
	Recurring profit margin	5.1%	8.5%	3.9%	2.6%	4.4%
Net income		2,220	5,589	1,960	1,021	3,170
	YoY	-27.8%	428.3%	59.1%	-30.2%	42.8%
	Net margin	2.4%	5.1%	2.0%	1.0%	2.9%

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)			FY12/21				FY12/22
(JPYmn)			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4
Sales			93,002	202,244	299,761	403,485	107,799
	YoY		35.2%	56.6%	56.4%	56.9%	15.9%
	Logistics		90,632	182,538	277,453	378,335	105,159
		YoY	52.7%	55.3%	56.1%	57.1%	16.0%
	Property Management		528	15,924	16,476	17,043	527
		YoY	-93.2%	92.9%	86.7%	82.3%	-0.2%
	Other		1,841	3,780	5,831	8,106	2,112
		YoY	5.7%	11.8%	16.0%	15.4%	14.7%
Operating profit			4,737	13,969	17,559	20,706	4,884
	YoY		-6.7%	123.8%	105.1%	88.9%	3.1%
	Logistics		4,299	8,173	11,542	15,546	4,588
		YoY	208.8%	279.6%	189.0%	159.5%	6.7%
		Operating profit margin	4.7%	4.5%	4.2%	4.1%	4.4%
	Property Management		308	5,680	6,001	6,333	288
		YoY	-91.5%	44.6%	41.0%	38.9%	-6.5%
		Operating profit margin	58.3%	35.7%	36.4%	37.2%	54.6%
	Other		113	222	306	435	101
		YoY	27.0%	47.0%	82.1%	71.3%	-10.6%
		Operating profit margin	6.1%	5.9%	5.2%	5.4%	4.8%
	Adjustments		15	-107	-291	-1,609	-93
Segment sales and profit			FY12/21				FY12/22
(JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Sales			93,002	109,242	97,517	103,724	107,799
	YoY		35.2%	81.1%	56.1%	58.2%	15.9%
	Logistics		90,632	91,906	94,915	100,882	105,159
		YoY	52.7%	58.0%	57.5%	60.0%	16.0%
	Property Management		528	15,396	552	567	527
		YoY	-93.2%	2,783.1%	-3.5%	8.6%	-0.2%
	Other		1,841	1,939	2,051	2,275	2,112
		YoY	5.7%	18.4%	24.7%	13.8%	14.7%
Operating profit			4,737	9,232	3,590	3,147	4,884
	YoY		-6.7%	693.1%	54.8%	31.2%	3.1%
	Operating profit margin		5.1%	8.5%	3.7%	3.0%	4.5%
	Logistics		4,299	3,874	3,369	4,004	4,588
		YoY	208.8%	409.1%	83.0%	100.6%	6.7%
		Operating profit margin	4.7%	4.2%	3.5%	4.0%	4.4%
	Property Management		308	5,372	321	332	288
		YoY	-91.5%	1,610.8%	-1.8%	9.9%	-6.5%
		Operating profit margin	58.3%	34.9%	58.2%	58.6%	54.6%
	Other		113	109	84	129	101
		YoY	27.0%	75.8%	394.1%	50.0%	-10.6%
		Operating profit margin	6.1%	5.6%	4.1%	5.7%	4.8%
	Adjustments		15	-122	-184	-1,318	-93

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

Q1 FY12/22 results

Sales: JPY107.8bn (+15.9% YoY)
Operating profit: JPY4.9bn (+3.1% YoY)
Recurring profit: JPY4.7bn (+0.9% YoY)
Net income attributable to owners of the parent: JPY3.2bn (+42.8% YoY)

The company began applying the Accounting Standard for Revenue Recognition at the beginning of Q1 FY03/22. The application of the new accounting standard reduced sales and the cost of sales by JPY2.1bn each in comparison with the previous standard. The effects on SG&A expenses, operating profit, recurring profit, and profit before income taxes are negligible. YoY changes are based on comparisons with the results obtained under the previous standard.

Sales and profits rose YoY in Q1 FY12/22. The Logistics segment continued to perform well. SBS Furukawa Logistics, in which the company acquired a 66.6% stake in December 2021, began to contribute to the group, allowing the company to expand its service lineup to support the logistics supply chain.

Sales exceeded JPY100bn. This was the first time that Q1 sales reached this level. Net income attributable to owners of the parent rose JPY949mn (+42.7% YoY) to JPY3.2bn as the company posted extraordinary gains from the sale of fixed assets.

The market environment was such that, despite the prolonged economic impact of COVID-19 and a recent surge in fuel prices, e-commerce continued to grow as online shopping and demand for daily necessities expanded, and the company gained new business opportunities in its mainstay 3PL and 4PL operations.

Logistics

Sales: JPY105.2bn (+16.0%YoY)
Operating profit: JPY4.6bn (+6.7% YoY)

In the Logistics segment, the company made efforts to acquire new customers in need of advanced logistics capabilities, in addition to expanding transactions with existing customers. The segment posted an increase in sales and profit because B2B logistics, which suffered the impact of the pandemic, began to recover in Japan and overseas. The company also captured the e-commerce demand with same-day delivery services.

Property Management

Sales: JPY527mn (-0.2% YoY)
Operating profit: JPY288mn (-6.5% YoY)

The Property Management segment posted a decline in sales and profit.

The development business promotes the group’s 3PL and 4PL operations by building large warehouses that meet the customers’ logistics needs. It handles the entire building process from land acquisition to construction. In the leasing business, the company earns rental revenue from warehouses, office buildings, residential properties, etc. owned by the group. The company securitizes its logistics properties to recover funds for future investments. The earnings from securitization belong to the Property Management segment.

Other

Sales: JPY2.1bn (+14.7% YoY)
Operating profit: JPY101mn (-10.6% YoY)

The major operations in this segment are the personnel, marketing, solar power generation, and environmental businesses.

Full-year company forecast

		FY12/21			FY12/22
(JPYmn)		1H Act.	2H Act.	FY Act.	1H Est.	2H Est.	FY Est.
Sales		202,244	201,241	403,485	205,000	225,000	430,000
	YoY	56.6%	57.2%	56.9%	1.4%	11.8%	6.6%
Cost of sales		176,292	180,477	356,769
Gross profit		25,951	20,765	46,716
	YoY	83.1%	64.4%	74.3%
	Gross profit margin	12.8%	10.3%	11.6%
SG&A expenses		11,981	14,028	26,009
	SG&A ratio	5.9%	7.0%	6.4%
Operating profit		13,969	6,737	20,706	6,800	14,700	21,500
	YoY	123.8%	42.8%	88.9%	-51.3%	118.2%	3.8%
	Operating profit margin	6.9%	3.3%	5.1%	3.3%	6.5%	5.0%
Recurring profit		13,936	6,553	20,489	6,200	14,400	20,600
	YoY	122.0%	42.3%	88.3%	-55.5%	119.7%	0.5%
	Recurring profit margin	6.9%	3.3%	5.1%	3.0%	6.4%	4.8%
Net income		7,809	2,981	10,790	4,800	6,900	11,700
	YoY	89.0%	10.6%	58.1%	-38.5%	131.5%	8.4%

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

Segment forecasts

				FY12/21			FY12/22	YoY
(JPYmn)				1H Act.	2H Act.	FY Act.	FY Est.
Sales				202,244	201,241	403,485	430,000	26,515	6.6%
	Logistics			182,538	195,797	378,335	403,600	25,265	6.7%
	Property Management			15,924	1,119	17,043	17,100	57	0.3%
		Leasing		1,069	1,119	2,188
		Development		14,855	-	14,855
	Other			3,780	4,326	8,106	9,300	1,194	14.7%
Operating profit				13,969	6,737	20,706	21,500	794	3.8%
	Operating profit margin			6.9%	3.3%	5.1%	5.0%
	Logistics			8,173	7,373	15,546	13,900	-1,646	-10.6%
		Operating profit margin		4.5%	3.8%	4.1%	3.4%
	Property Management			5,680	653	6,333	7,500	1,167	18.4%
		Operating profit margin		35.7%	58.4%	37.2%	43.9%
		Leasing		621	654	1,275
			Operating profit margin	58.1%	58.4%	58.3%
		Development		5,059	-1	5,058
			Operating profit margin	34.1%		34.0%
	Other			222	213	435	400	-35	-8.0%
		Operating profit margin		5.9%	4.9%	5.4%	4.3%
	Adjustments			-107	-1,502	-1,609	-300	1,309	-

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 JPY403.6bn (+6.7% YoY), operating profit of JPY13.9bn (-10.6% YoY), and OPM of 3.4% (-0.7pp YoY).

The consolidation of SBS Furukawa Logistics is expected to be a factor in the increase in sales. In December 2021, SBS Holdings acquired 66.6% of the shares of Furukawa Logistics Corporation, making it a subsidiary; the company will begin consolidation from FY12/22. Furukawa Logistics had sales of JPY16.2bn and operating profit of JPY62mn (FY03/20). In addition, the operation of new logistics centers will help drive higher sales. Specifically, the company expects sales contributions from the Logistics Center Yokohama-Kanazawa (operational from October 2021), Ami No. 2 Logistics Center (Ibaraki Prefecture; scheduled to begin operations in June 2022; floor area of 17,521sqm [5,300 tsubo]), and Logistics Center Atsugi Mori no Sato (Kanagawa Prefecture; scheduled to begin operations in May 2022; 57,521sqm [17,400 tsubo]).

On the other hand, SBS Toshiba Logistics forecasts lower sales and profits. The company assumes that the Tokyo Olympics and the spread of COVID-19 created special demand for handling home appliances in FY12/21, and expects a reactionary decline in FY12/22. In addition, food product volume is also expected to decline in reaction to the special demand for the spread of COVID-19 in FY12/21.

Operating profit is expected to decline. In FY12/21, the company recorded expenses that should have been recorded in the Logistics segment (totaling JPY938mn, including head office relocation expenses and advertising expenses) as adjustments. Excluding this effect, the company expects a decrease of approximately JPY700mn from FY12/21. The main factors of the decrease are one-time costs, including JPY700mn for head office relocation costs, JPY550mn for uniform renewal costs, PMI costs for SBS Toshiba Logistics (system integration costs of approximately JPY800mn), and the company is forecasting an increase in profit in real terms.

Property Management business

The company forecasts sales of JPY17.1bn (+0.3% YoY), operating profit of JPY7.5bn (+18.4% YoY), and OPM of 43.9% (+6.7pp YoY). In the development business, the company plans to open a logistics center Yokohama Kanazawa (Kanagawa Prefecture; operational from October 2021; total floor area of 52,893sqm [16,000 tsubo]), and expects increases in sales and profits.

In FY12/21, the development business transferred 100% of the trust beneficiary rights to the Osaka Nanko Logistics Center (Osaka, 62,810sqm [19,000 tsubo]), resulting in sales of JPY14.9bn (+107.2% from FY12/20) and operating profit of JPY5.1bn (+53.0% from FY12/20).

Other business

The company forecasts sales of JPY9.3bn (+14.7% YoY), operating profit of JPY400mn (-8.0% YoY), and OPM of 4.3% (-1.1pp YoY).

Adjustments

The adjustment is expected to be -JPY300mn (-JPY1.6bn in FY12/21). One-time HQ relocation expenses and advertising expenses, which were incurred in FY12/21, will decrease (most of which will be recorded as expenses in the Logistics segments).

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. The SBS Group growth strategy is as follows.

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.

Launch of e-commerce logistics services: The company will launch e-commerce logistics services, a service in which it has unique strengths, during FY12/22. It aims for e-commerce logistics sales of JPY100.0bn by FY12/30 (e-commerce logistics sales in FY12/21 were JPY35.0-40.0bn).

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 centers: Develop logistics centers, aiming to increase the total floor area of logistics facilities to 3,305,875sqm [1,000,000 tsubo] over the medium term (2,529,587sqm [765,200 tsubo] as of end-December 2021). The company will continue to develop and securitize 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 System) 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	FY12/22	FY12/23
Sales	141,535	157,996	149,054	152,870	203,516	255,548	257,192	403,485	430,000	500,000
Operating profit	4,098	5,347	7,514	6,229	8,240	10,176	10,960	20,706	21,500	-

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

In December 2021, SBS Toshiba Logistics had sales of JPY111.4bn and operating profit of JPY6.6bn. Profits increased due to a higher volume of goods handled during the COVID-19 pandemic, including home appliances, medical equipment, and semiconductors, as well as price revisions.

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. SBS Toshiba Logistics will move into the company's new HQ in February 2022, and the mutual interaction is expected to lead to synergy creation and new projects.

Progress on PMI with SBS Ricoh Logistics System

The company made SBS Ricoh Logistics System a subsidiary in August 2018, and its results through FY12/21 were as follows.

After joining the company group, SBS Ricoh Logistics System saw an increase in sales outside its former parent company Ricoh due to synergy creation and new customer acquisition. From FY12/18 to FY12/21, SBS Ricoh Logistics System's sales rose 23%. Of these, the share of sales to non-Ricoh customers was up from 38% in FY12/18 to 49% in FY12/21.

SBS Ricoh Logistics System is the last-mile logistics provider between Ricoh and e-commerce businesses. Utilizing this nationwide delivery network of office automation equipment and supplies, the company is taking orders for delivery services for major e-commerce companies.

The Logistics Technology (LT) Planning Department, which combines the IT and LT departments of SBS Ricoh Logistics System and the company's 3PL analysis team, has been established to promote analysis, mechanization, and robotization of the SBS Group's 3PL operations.

A logistics warehouse was built on SBS Logicom's land in Yokohama-Kanazawa (Kanagawa Prefecture), and in October 2021, SBS Ricoh Logistics System started operation of Logistics Center Yokohama-Kanazawa, a 3PL business exclusively for e-commerce businesses.

Strengthening logistics infrastructure with small acquisitions

Since the end of 2020, starting with SBS Toshiba Logistics, Toyo Warehouse & Transportation, K.U.K Line, Hinomaru Kyuso, Jass, and Furukawa Logistics were made subsidiaries.

Hinomaru Kyuso: 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. In January 2021, the company acquired the remaining shares and made Hinomaru Kyuso a subsidiary.

Toyo Warehouse & Transportation: 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.

K.U.K Line: Became a subsidiary by SBS Holdings acquiring all shares in April 2021. A logistics and warehousing company in Osaka Prefecture, K.U.K Line was made a subsidiary by the company to complement its trucking operations in Osaka.

Jass: Became a subsidiary by SBS Holdings acquiring all shares in May 2021. The company provides small-lot delivery services in Fukushima Prefecture, and the acquisition was for the purpose of strengthening its delivery network in preparation for e-commerce logistics.

SBS Furukawa Logistics: SBS Holdings acquired 66.6% of Furukawa Logistics' shares in December 2021; prior to its acquisition by the company, it was a logistics subsidiary of the Furukawa Electric Group. The company is engaged in the logistics business for electric wires and other telecommunications equipment.

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 System 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 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 2022, the company is testing robots at its logistics facilities. The following are examples of IT x LT installations in FY12/21. and plans to introduce them step-by-step at the 3PL logistics centers 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.

A shelf transport robot system and a batch image inspection system were introduced at SBS Toshiba Logistics.

At SBS Ricoh Logistics System, a loading navigation system for trunk line delivery was installed and a sorting center with a sorting robot began operation.

A cooperative Autonomous Mobile Robot (AMR) was introduced at SBS Logicom.

SBS Holdings introduced the Sais (SBS automobile information system), a vehicle database system to centrally manage group vehicle information.

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

The company's Logistics Center Yokohama-Kanazawa, which began operations in October 2021, provides 3PL services for e-commerce businesses. The facility has introduced a large-scale auto-store (entailing an automated warehouse picking system featuring densely packed specialized containers with storage and retrieval performed by robots). AutoStore aims to improve processing capacity using barcode inspection, a digital picking system (DPS), conveyors, and automatic packaging equipment. The facility has also installed state-of-the-art LT equipment, material handling, and AI tools.

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.

New Business Development: Launch of e-commerce logistics service

The company will launch an e-commerce logistics service during FY12/22, a service in which the company has unique strengths. Specifically, SBS Holdings will differentiate itself in terms of service prices and target demographics. Service prices are lower than those of industry competitors by developing and renting their own logistics centers and using them at rents lower than the market rate. The company will also reduce costs through the introduction of robots. The company expects to target start-up e-commerce companies with sales of approximately JPY1.0bn. The company provides fulfillment services at its own logistics centers by grouping together smaller customers.

According to the company, its e-commerce logistics sales in FY12/21 were between JPY35.0bn and JPY40.0bn. With the launch of the new e-commerce logistics service, the company aims to achieve JPY100.0bn in e-commerce logistics sales by FY12/30.

Fulfillment: a series of processes in e-commerce, encompassing everything from order acceptance and inquiry handling to payment, inventory management, logistics (picking, packing, and delivery), and follow-up services (support, handling returns and exchanges, etc.).

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 3,305,785sqm (1,000,000 tsubo) in the medium term. At end-December 2021, the company had a floor space of 2,529,587sqm (765,200 tsubo) at its logistics facilities. As shown in the following figure, properties scheduled for completion from 2022 through 2024, and development plans for sites already purchased will bring aggregate floor space to 3,196,033sqm (966,800 tsubo).

Floor space expansion plans at logistics facilities

Facility		Floor space (tsubo)	In operation	Type	User
Exisiting facilities(December 31, 2021)		765,200
	SBS Toshiba Logistics	200,000	January 2021	M&A	SBS Toshiba Logistics
	Toyo Warehouse & Transportation	18,000	January 2021	M&A	Toyo Warehouse & Transportation
	Logistics Center Yokohama-Kanazawa(Kanagawa Prefecture)	16,200	November 2021	Development	SBS Ricoh Logistics System
Planned expansion		201,600
	SBS Furukawa Logistics	23,000	January 2022	M&A	SBS Furukawa Logistics
	Logistics Center Atugi Mori no Sato(Kanagawa Prefecture)	17,400	May 2021	Rental	SBS Ricoh Logistics System
	Ami 2nd Logistics Center(Ibaraki Prefecture)	5,300	June 2022	Development	SBS Flec
	Ichinomiya Logistics Center(Aichi Prefecture)	21,100	April 2023	Development	SBS Ricoh Logistics System/SBS Asset Management
	Noda-Seto A(Chiba Prefecture)	50,800	January 2024	Development	SBS Asset Management
	Noda-Seto B(Chiba Prefecture)	39,500	TBD	Development	SBS Asset Management
	Tomisato Land (Chiba)	30,000	TBD	Development	SBS Asset Management
	Tokorozawa Land A(Saitama Prefecturre)	10,000	TBD	Development	SBS Logicom
	Tokorozawa Land B(Saitama Prefecturre)	4,500	TBD	Development	SBS Sokuhai Support
Total (existing + planned expansion)		966,800

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 lease the facilities it develops and operate 3PL services there, 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 of the amount invested 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.

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.

By FY12/21, the company had developed 23 logistics facilities with a total floor area of approximately 628,099sqm (190,000 tsubo). Of this total, 12 properties with a total floor area of approximately 198,347sqm (60,000 tsubo) were under ownership, and 11 properties with a total floor area of approximately 429,752sqm (130,000 tsubo) were liquidated. Eight of the liquidated properties—with a total floor area of 347,107sqm (105,000 tsubo)—were leased back (leased continuously after sale).

As of February 2022, the main liquidatable facilities in operation and those under development are listed in the table below. The total investment in liquidation-ready facilities in operation amounts to JPY23.4bn. If these facilities were to be sold in the future at a profit margin of 30–50%, the company would already have an array of operational, saleable facilities that would generate JPY7.0bn–JPY12.0bn in gains on sale. According to the company, the development business in the Property Management segment has a pipeline that can generate stable and continuous gains on sales for 14 to 15 years.

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)	February 2016	38,300	11,571	JPY6.6bn	Rent/internal use	Wine handling; apparel e-commerce fulfillment	Fixed asset	SBS Logicom
Logistics Center Yokohama-Kanazawa(Kanagawa)	July 2021	26,612	16,283	JPY8.0bn	Internal use		Fixed asset	SBS Ricoh Logistics
Other	-	51,700	15,651	JPY8.8bn	Internal use	-	Fixed asset	-
Total		116,600	43,500	JPY23.4bn

Source: Shared Research based on company data

Facilities under development (total investment of JPY35.0bn) are as shown in the table below, including 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	Start of operation	Description	Investment	Held by
			(planned)
Ami 2nd Logistics Center(Ibaraki Prefecture)	June 2022	16,000sqm with three temperature zones	-	SBS Flec
Noda-Seto Logistics Center(Chiba Prefecture)	Building A: January 2024	Building A: Four floors, 168,000sqm	JPY35.0bn	SBS Asset Management
Noda-Seto Logistics Center(Chiba Prefecture)	Building B: TBD	Building B: Four floors, 132,000sqm	JPY35.0bn	SBS Asset Management
Ichinomiya Land (Aichi)	April 2023	69,000sqm	-	SBS Ricoh Logistics System, SBS Asset Management
Tomisato Land (Chiba)	TBD	99,000sqm	-	SBS Asset Management
Tokorozawa(Saitama Prefecturre) A	TBD	33,000sqm	-	SBS Logicom
Tokorozawa(Saitama Prefecturre) B	TBD	16,000sqm	-	SBS Sokuhai Support, SBS Asset Management
Total			JPY35.0bn

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.

According to "Logistics Rental Market Survey” released by Ichigo Real Estate Service, the asking rent for logistics facilities in the Tokyo area (Ibaraki, Saitama, Chiba, Tokyo, and Kanagawa) in January 2022 was JPY4,620 per tsubo (JPY1,397 per sqm). According to ”October 2021 Japanese Real Estate Investor Survey" published by Japan Real Estate Institute, the expected yield (expected cap rate) for multi-tenant warehouses in the inland areas surrounding Tokyo (Narita area in Chiba Prefecture) was 4.9%.

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 FY12/21, Logistics accounted for 93.8% of overall sales and 69.7% of total operating profit, while Property Management contributed 4.2% and 28.4%, 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			FY12/13	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.
Sales			132,205	141,535	157,996	149,054	152,870	203,516	255,548	257,192	403,485
	YoY		3.3%	7.1%	11.6%	-5.7%	2.6%	33.1%	25.6%	0.6%	56.9%
	Logistics		120,786	129,884	143,391	132,487	140,422	188,627	240,772	240,818	378,335
		YoY	1.2%	7.5%	10.4%	-7.6%	6.0%	34.3%	27.6%	0.0%	57.1%
		% of total	91.4%	91.8%	90.8%	88.9%	91.9%	92.7%	94.2%	93.6%	93.8%
	Property Management		5,554	5,103	8,641	10,278	5,745	8,172	7,802	9,349	17,043
		YoY	121.8%	-8.1%	69.3%	18.9%	-44.1%	42.2%	-4.5%	19.8%	82.3%
		% of total	4.2%	3.6%	5.5%	6.9%	3.8%	4.0%	3.1%	3.6%	4.2%
	Other		5,865	6,548	5,963	6,288	6,703	6,716	6,972	7,024	8,106
		YoY	-3.9%	11.6%	-8.9%	5.5%	6.6%	0.2%	3.8%	0.7%	15.4%
		% of total	4.4%	4.6%	3.8%	4.2%	4.4%	3.3%	2.7%	2.7%	2.0%
Operating profit			4,116	4,098	5,347	7,514	6,229	8,240	10,176	10,960	20,706
	YoY		43.1%	-0.4%	30.5%	40.5%	-17.1%	32.3%	23.5%	7.7%	88.9%
	Operating profit margin		3.1%	2.9%	3.4%	5.0%	4.1%	4.0%	4.0%	4.3%	5.1%
	Logistics		1,219	1,624	2,072	2,266	2,692	4,572	6,278	5,990	15,546
		YoY	-29.5%	33.2%	27.6%	9.4%	18.8%	69.8%	37.3%	-4.6%	159.5%
		Operating profit margin	1.0%	1.3%	1.4%	1.7%	1.9%	2.4%	2.6%	2.5%	4.1%
		% of total	30.7%	37.5%	37.0%	29.4%	42.2%	52.2%	61.2%	55.5%	69.7%
	Property Management		2,550	2,359	3,292	5,108	3,278	3,913	3,787	4,558	6,333
		YoY	111.4%	-7.5%	39.6%	55.2%	-35.8%	19.4%	-3.2%	20.4%	38.9%
		Operating profit margin	45.9%	46.2%	38.1%	49.7%	57.1%	47.9%	48.5%	48.8%	37.2%
		% of total	64.2%	54.5%	58.8%	66.4%	51.4%	44.7%	36.9%	42.2%	28.4%
	Other		202	344	238	321	413	273	186	254	435
		YoY	359.1%	70.3%	-30.8%	34.9%	28.7%	-33.9%	-31.9%	36.6%	71.3%
		Operating profit margin	3.4%	5.3%	4.0%	5.1%	6.2%	4.1%	2.7%	3.6%	5.4%
		% of total	5.1%	8.0%	4.2%	4.2%	6.5%	3.1%	1.8%	2.4%	1.9%
	Adjustments					-182	-154	-519	-75	157	-1,609

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: 93.8% of sales, 69.7% of operating profit (FY12/21)

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 System	August 2018	Ricoh Logistics System, 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 System, 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 System
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 System
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 System, 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

			FY12/13	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.
Sales			120,786	129,884	143,391	132,487	140,422	188,627	240,772	240,818	378,335
	YoY		1.2%	7.5%	10.4%	-7.6%	6.0%	34.3%	27.6%	0.0%	57.1%
	3PL		46,100	48,500	51,200	54,700	58,800	88,900	123,317	120,632
		YoY	4.1%	5.2%	5.6%	6.8%	7.5%	51.2%	38.7%	-2.2%
		% of total	38.2%	37.3%	35.7%	41.3%	41.9%	47.1%	51.2%	50.1%
Operating profit			1,219	1,624	2,072	2,266	2,692	4,572	6,278	5,990	15,546
	YoY		-29.5%	33.2%	27.6%	9.4%	18.8%	69.8%	37.3%	-4.6%	159.5%
	Operating profit margin		1.0%	1.3%	1.4%	1.7%	1.9%	2.4%	2.6%	2.5%	4.1%
Number of employees			4,346	5,196	5,161	4,790	5,108	6,570	6,716	9,285	10,221
	YoY		0.2%	19.6%	-0.7%	-7.2%	6.6%	28.6%	2.2%	38.3%	10.1%
Sales per employee			28	25	27.8	27.7	27.5	28.7	35.9	25.9	37.0
Operating profit per employee			0.3	0.3	0.4	0.5	0.5	0.7	0.9	0.6	1.5

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. In FY12/21, subsidiary SBS Toshiba Logistics won Packaging Technology and Packaging Category Awards at the Japan Packaging Contest sponsored by the Japan Packaging Institute, and SBS Ricoh Logistics won a Packaging Category Award at the same contest.

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, the company says 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 dissolved 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 System 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.

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: 4.2% of sales, 28.4% of operating profit (FY12/21)

The Property Management segment comprises the leasing and the development business. In the leasing business (12.8% of segment sales and 20.1% of operating profit in FY12/21) the company leases its facilities for use as warehouses, offices, and residences.

In the development business (87.2% of sales and 79.9% of operating profit in FY12/21) 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

			FY12/13	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.
Sales			5,554	5,103	8,641	10,278	5,745	8,172	7,802	9,349	17,043
	YoY		121.8%	-8.1%	69.3%	18.9%	-44.1%	42.2%	-4.5%	19.8%	82.3%
	Leasing		2,672	2,285	2,685	2,708	2,682	2,795	2,425	2,179	2,188
		YoY	6.7%	-14.5%	17.5%	0.9%	-1.0%	4.2%	-13.2%	-10.1%	0.4%
		% of total	48.1%	44.8%	31.1%	26.3%	46.7%	34.2%	31.1%	23.3%	12.8%
	Development		2,881	2,818	5,956	7,570	3,063	5,377	5,377	7,170	14,855
		YoY	-	-2.2%	111.4%	27.1%	-59.5%	75.5%	0.0%	33.3%	107.2%
		% of total	51.9%	55.2%	68.9%	73.7%	53.3%	65.8%	68.9%	76.7%	87.2%
Operating profit			2,550	2,359	3,292	5,108	3,278	3,913	3,787	4,558	6,333
	YoY		111.4%	-7.5%	39.6%	55.2%	-35.8%	19.4%	-3.2%	20.4%	38.9%
	Operating profit margin		45.9%	46.2%	38.1%	49.7%	57.1%	47.9%	48.5%	48.8%	37.2%
	Leasing		1,358	1,119	1,378	1,447	1,388	1,516	1,369	1,253	1,274
		YoY	12.6%	-17.6%	23.1%	5.0%	-4.1%	9.2%	-9.7%	-8.5%	1.7%
		Operating profit margin	50.8%	49.0%	51.3%	53.4%	51.8%	54.2%	56.5%	57.5%	58.2%
		% of total	53.3%	47.4%	41.9%	28.3%	42.3%	38.7%	36.1%	27.5%	20.1%
	Development		1,191	1,240	1,914	3,661	1,889	2,379	2,417	3,305	5,058
		YoY	-	4.1%	54.4%	91.3%	-48.4%	25.9%	1.6%	36.7%	53.0%
		Operating profit margin	41.3%	44.0%	32.1%	48.4%	61.7%	44.2%	45.0%	46.1%	34.0%
		% of total	46.7%	52.6%	58.1%	71.7%	57.6%	60.8%	63.8%	72.5%	79.9%
Real estate for rent (on balance sheet)			25,824	22,885	23,112	23,245	25,934	25,713	26,483	26,231	24,757
	YoY		-4.1%	-11.4%	1.0%	0.6%	11.6%	-0.9%	3.0%	-1.0%	-5.6%
Real estate for rent (market price)			26,006	23,070	23,344	27,584	30,721	30,545	33,456	34,354	32,018
	YoY		-4.3%	-11.3%	1.2%	18.2%	11.4%	-0.6%	9.5%	2.7%	-6.8%
Difference (market price - BS)			182	185	232	4,339	4,787	4,832	6,973	8,123	7,261

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

Leasing business (12.8% of Property Management sales and 20.1% of operating profit in FY12/21)

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.

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-FY12/21, the balance sheet value of rental and other properties was JPY24.8bn and their term-end market price was JPY32.0bn, putting unrealized gains on these properties (the difference between the two figures) at about JPY7.3bn. Book value of real estate held by subsidiaries acquired through M&A were evaluated at market value prior to the consolidation of those subsidiaries.

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.
Also, since the majority of the residences are leased en bloc to companies for employee housing, the risk of rent fluctuation due to changes in vacancy rates 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 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 business (87.2% of Property Management sales and 79.9% of operating profit in FY12/21)

In the development business of the Property Management segment, the company recovers investment funds and earns profits by selling logistics facilities it has developed and is operating as a leasing business and 3PL center to real estate funds and other investors. During the period from the acquisition and construction of the land for the logistics facility and other facilities to the operation of the facility after its completion, the assets are booked as tangible fixed assets on its balance sheet. However, once the company decides to sell such facilities and they become properties for sale, they are removed from fixed assets and booked as inventory items. Extraordinary gains are not recorded when a property is sold; Instead, the company records sales and operating profit in the development business.

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 so that it can secure the expected investment yield. When considering the development of logistics facilities, the company plans rents based on the assumption that it will be in the position of the lessee after the future sale of the facility (i.e., rents will be lower than the market rents in the surrounding area). This makes it possible to develop facilities that are profitable even during a real estate recession.

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. The company earns stable rental revenue, aiming to yield 6.0–7.0% on average per year on initial investment for land acquisition and construction (Property Management segment income). Also, the company counts operational revenue as a source of income by undertaking operations at such logistics facilities such as shipping and receiving, storage, distribution processing, and other 3PL contract services(Logistics segment income).

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 2022. Related investment is projected to be JPY35.0bn in total.

Facilities under construction, planned construction projects

Facility	Start of operation	Description	Investment	Held by
			(planned)
Ami 2nd Logistics Center(Ibaraki Prefecture)	June 2022	16,000sqm with three temperature zones	-	SBS Flec
Noda-Seto Logistics Center(Chiba Prefecture)	Building A: January 2024	Building A: Four floors, 168,000sqm	JPY35.0bn	SBS Asset Management
Noda-Seto Logistics Center(Chiba Prefecture)	Building B: TBD	Building B: Four floors, 132,000sqm	JPY35.0bn	SBS Asset Management
Ichinomiya Land (Aichi)	April 2023	69,000sqm	-	SBS Ricoh Logistics System, SBS Asset Management
Tomisato Land (Chiba)	TBD	99,000sqm	-	SBS Asset Management
Tokorozawa(Saitama Prefecturre) A	TBD	33,000sqm	-	SBS Logicom
Tokorozawa(Saitama Prefecturre) B	TBD	16,000sqm	-	SBS Sokuhai Support, SBS Asset Management
Total			JPY35.0bn

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

First truck loading dock