AZoom 3496
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2022-05-02
2022-03-03
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Summary
AZoom uses information technology to put idle real estate to productive use. Its target properties are mainly parking lots rented on a monthly basis. Since its inception, the company has built up a database of information on available monthly parking lots and their potential renters, which it now uses to operate one of the most extensive online parking space matching systems in Japan with some 50,000 listings.
Real Estate Management & Development
Key dates
2019-04-22
Coverage initiation
Executive summary
Business overview
AZoom Co., Ltd. uses information technology to put idle real estate to productive use. Its target properties are mainly parking lots rented on a monthly basis. Since its inception, the company has built up a database of information on available monthly parking lots and their potential renters, which it now uses to operate one of the most extensive online parking space matching systems in Japan with some 50,000 listings. Still, given that Japan has some 5mn parking spaces available, the company has ample room to grow, and hence, it continues to expand its scope of information in both urban and rural areas.
The company has two business segments: the Idle Real Estate Utilization business (97.3% of sales in FY09/21) and the Visualization business (2.7%). The mainstay parking lot business accounts for roughly 98% of Idle Real Estate Utilization business sales, or about 96% of total company sales. The parking lot business comprises two businesses in order of introduction. First, the Monthly Parking Lot Subleasing Service covers the entire nation and matches vacant parking spaces registered on its system with potential users also registered on its system. The company earns commissions from parties involved when a rental agreement is entered into (accounts for 10.1% of parking lot business sales). The second, the Monthly Parking Lot Subleasing Service, entails the company leasing parking lots from owners in the Tokyo metropolitan area which it subleases to users using its system (89.9% of sales).
The company leverages its parking lot search website (the online parking lot introduction service) to increase the number of parking spaces it can introduce. The site acts as a marketplace for parking lots in Japan, providing applicants with vacancy information. In the subleasing service, the company guarantees the parking lot owners a certain amount of rental income for the parking spaces it leases. AZoom’s main source of earnings is the difference between the rental income paid to these owners and that received from the renters (introduced through its search website). This sort of service has expanded rapidly in recent years to alleviate the problem of vacancies in parking lots, including lots for condo residents and building parking lots erected to conform to urban planning requirements. (See the “Market and value chain” section.)
AZoom’s property management system for its subleasing service differs from those of other companies in a key way: it allows the company to monitor the rental status of properties in detail through the duration of their contracts. Using the information on parking spaces that are currently vacant and those that will become vacant, the company tailors its sales efforts and efficiently manages and prevents vacancies. The company also taps into the information gathered through its search website, and applies the big data on parking lots throughout Japan and on registered users to optimize its property management system. Such data allows it to grasp parking-lot market prices in target locations and helps distinguish the company’s subleasing service.
The Visualization business was added in FY09/20 (please refer to History section for details), principally under CGWorks, established in March 2019, and AZoom Vietnam, established in September 2019. CGWorks uses 3D computer graphics (3DCG) to produce architectural perspective data showing how real estate spaces might be put to use. AZoom Vietnam is responsible for the group’s internal development activities offshore. In FY09/21, sales were JPY132mn (+84.6% YoY) and segment profit was JPY6mn (segment loss of JPY29mn in FY09/20).
Trends and outlook
FY09/21 results: The company reported record-high sales and earnings for FY09/21, with full-year consolidated sales coming in at JPY5.0bn (+30.4% YoY), operating profit coming in at JPY507mn (+126.1% YoY), recurring profit coming in at JPY505mn (+126.5% YoY), and net income coming in at JPY326mn (+133.9% YoY). The top-line gains were driven by a combination of increases in the number of parking spaces subleased to end-users at its Monthly Parking Lot Subleasing Service business and increases in the number of referrals from its Monthly Parking Lot Introduction Service and the resulting increase in both the number of parking spaces under contract and subleased to end-users. On the earnings front, the company benefited from the strong top-line growth and, even after front-loading extra marketing expenses into SG&A expenses in Q4, still managed to more than double its operating profit over the previous fiscal year.
FY09/22 forecast: For FY09/22, the company is projecting full-year consolidated sales of JPY6.4bn (+28.7% YoY), an operating profit of JPY850mn (+67.5% YoY), recurring profit of JPY850mn (+68.1% YoY), and net income of JPY540mn (+65.5% YoY). The company did not quantify the extent to which it expects any ongoing fallout from the coronavirus pandemic to act as a drag on business, but did say that it expected the domestic economy continuing to recover as more and more people were vaccinated and infection mitigation measures otherwise kept infections under control both at home and abroad, adding that it also expected people to continue using the internet to search for parking spaces now that they had gotten used to it. At its the mainstay of the Idle Real Estate Utilization business, the company is looking for continued strong growth in sales and earnings from its Monthly Parking Lot Subleasing Service operations, where it expects to continue expanding the number of parking spaces under contract with owners and subleased to end-users, and also sees further growth in earnings at its Visualization business.
In terms of its growth strategy, the company continues to believe three measures will drive growth: 1) increasing the quantity and quality of information in its parking lot database; 2) further penetrating existing markets and expanding the operating area for the subleasing service; and 3) expanding the scope of the company’s business through the creation of businesses that utilize other kinds of idle real estate than parking lots.
Strengths and weaknesses
Strengths
◤ Leverages technology to manage parking lots
◤ Maintains the trust of real estate management companies
◤ Portal site has extensive information on monthly parking lots
Weaknesses
◤ Subleasing business skewed toward certain property types
◤ A shortage of IT personnel familiar with parking lot leasing
◤ Brand recognition low compared to real estate-related websites
Key financial data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: The company moved to consolidated accounting in FY09/20. YoY changes shown for projected FY09/20 results reflect comparisons of consolidated results in FY09/20 with parent company results in FY09/19.
Note: The company plans to carry out a 2-for-1 stock split on February 1, 2021.
Recent updates
Decision on matters related to share repurchases
Azoom Co., Ltd. announced its decision on matters related to share repurchases.
Details of share repurchase
Class of shares to be acquired: AZoom Co., Ltd. common shares
Maximum number of shares to be acquired: Up to 20,000 shares (approximately 0.68% of total shares issued, excluding treasury shares)
Total amount of shares to be acquired: Up to JPY100mn
Acquisition period: May 2, 2022 to July 29, 2022
Method of acquisition: Market purchase on the Tokyo Stock Exchange
Trends and outlook
Quarterly trends and results
Note: Figures may differ from company materials due to differences in rounding methods.
Note: The company moved to consolidated accounting in FY09/20. YoY changes shown for projected FY09/20 results reflect comparisons of consolidated results in FY09/20 with parent company results in FY09/19.
Note: Figures displayed indicate financial year-end results; Average utilization rates were calculated using annual averages.
1H FY09/22 results (out April 28, 2022)
Overview
Consolidated results for 1H FY09/22 (October 2021–March 2022)
Industry trends and operating environment
At the Idle Real Estate Utilization segment, where its main focus is parking lots, the company saw continued growth in demand on both sides of its business with its online service generating more inquires from would-be users for parking spaces available to rent on a monthly basis, as well as more interest from property owners seeking to monetize the empty parking spaces at their office buildings, condominium complexes, and other properties. In years past, the company said most people looking for rental parking spaces would have made an inquiry at a real estate broker with a brick-and-mortar storefront. The COVID-19 pandemic changed that, and since the outbreak the company has been seeing more and more people do online searches for monthly rental parking spaces using its portal website, and this in turn has led to increases in the total number of rental parking space inquires it has received.
At its Visualization business, demand is picking up thanks to a recovery in the economy following the easing of restrictions on businesses and the government's efforts to get more people vaccinated. The favorable uptick in activity in Q1 notwithstanding, the company said the ongoing presence of new coronavirus variants has added an another element of uncertainty to its outlook for future levels of demand, and so it will continue to keep a very close watch on trends in its operating environment.
Investments for future growth continue
The company focuses on investments in areas that should lead to future growth in earnings. Much of the spending here goes to personnel, including ongoing training of existing personnel and more new hires for its sales team that will allow it to expand its customer outreach and be even more proactive in going after new business. At its Idle Real Estate Utilization business, the company launched a new business in November operated by a newly established subsidiary (Teppeki Co., Ltd.). The new business will help AZoom expand its service offerings into the area of rental guarantees for owners of monthly rental parking lots. At its Visualization business, investment spending is directed mainly towards subsidiary AZoom Vietnam Inc., where it goes to fund additional systems development work, enhancements to graphics data systems, and the development of new technology for an IT interface that will allow companies to continue carrying out sales activities even when faced with restrictions such as remote work environments.
Breakdown of 1H results by segment
Idle Real Estate Utilization segment
Earnings at the Idle Real Estate Utilization segment come mainly from the company's Monthly Parking Lot Introduction Service and its Monthly Parking Lot Subleasing Service (previously disclosed when the company reported on a non-consolidated basis).
For 1H FY09/22, the Idle Real Estate Utilization segment reported sales of JPY2.9bn (+29.3% YoY) and a segment operating profit of JPY416mn (+60.5% YoY).
Monthly Parking Lot Introduction Service
For 1H, the Monthly Parking Lot Introduction Service reported sales of JPY236mn (+1.3% YoY).
The number of inquiries about parking spaces continued to grow, rising 8.9% YoY to 129,677.
Monthly Parking Lot Subleasing Service
For 1H, the Monthly Parking Lot Subleasing Service reported sales of JPY2.7bn (+32.6% YoY).
Subleasing metrics: As of the end of 1H (March 2022), the number of leased parking spaces under management totaled 16,206; the number of spaces subleased to end-users totaled 14,985 for an occupancy rate of 92.5%.
Visualization segment
The Visualization segment consists mainly of the two new subsidiaries (CGWorks Co., Ltd. and Azoom Vietnam Inc.) that were included in the company's publically reported accounts when it began reporting on a consolidated basis.
For 1H FY09/22, the Visualization segment reported sales of JPY85mn (+47.1% YoY) and a segment operating profit of JPY7mn versus a loss of JPY5mn in 1H FY09/21.
The company focused on laying the groundwork for future growth by helping existing employees improve their technical skills and building out its sales team so as to be in a position to offer a wider variety of proposals to client companies.
Although the lingering fallout from the pandemic continues to cast a partial shadow over the operating environment, the company's Visualization business is starting to grow more steadily now. The company attributes this in part to the growing use of VR technology and the accompanying demand for its graphics imaging services, this trend being driven at this time by both the ongoing shift of consumers to online buying and improving business conditions at its customers in the display industry.
Company forecast for FY09/22
Note: Figures may differ from company materials due to differences in rounding methods.
At the time of its 1H FY09/22 results announcement, the company made no change to its initial forecast for full-year consolidated results for FY09/22 (shown below).
Idle Real Estate Utilization business
Based on its expectation that people will continue doing online searches for rental parking spaces now that they have gotten used to it, the company anticipates continued growth in parking space inquiries in the year ahead. With this providing a tailwind for continued growth in sales and earnings at both its monthly parking lot introduction and monthly parking lot subleasing services, the company plans to expand its marketing teams in both areas and improve occupancy at leased parking spaces under management to assure its sales targets are met.
The heart of the company's expansion plans in FY09/22 is geographic expansion outside the Tokyo metropolitan area. Plans here call for beefing up existing sales teams in major urban centers (outside of the Tokyo area) where the company already has a presence, starting this year with additions to the sales team at its Osaka sales office.
Visualization business
The Visualization business entails using 3D computer graphic processing and virtual reality technology to visually convey real estate information, including showing how spaces might be put to use and what finished properties will look like.
The company sees demand for its virtual reality technology service picking up in the year ahead as demand for computer imaging services recovers among large customers (particularly the display industry) and more consumption spending goes to online markets. In addition to the top-line growth, the company also sees production costs coming down and capacity utilization rates rising as more CG production work is done offshore by its subsidiary in Vietnam.
Medium-term business plan
With FY09/21 now in the rearview mirror, the company has moved into the final year of its current medium-term business plan, prompting it to issue a separate release in November 2021 outlining its business plans and prospects for future growth. The target figures for FY09/22 in the November release (consolidated sales of JPY6.5bn, an operating profit margin of 17%, and an ROE of 36%) closely match those in its FY09/22 forecast shown above. Over the five-year period through FY09/21, consolidated sales have grown at an average annual rate of 42.1% and operating profit at an average rate of 101.1%, with AZoom's parking lot business, particularly its subleasing service, serving as the main growth driver.
The company’s medium-term strategy also calls for growth on three fronts:
Expand the parking lot database
Increase the business area and service the area more thoroughly
Move into business areas that utilize idle real estate in other ways
The first two items refer to expansion of the company’s two existing services, the Monthly Parking Lot Introduction Service and the Monthly Parking Lot Subleasing Service. The company is currently searching for ways to enact the third strategy, of moving into areas other than parking lots. This business would fall under the “Other Services” category. Although some services are gaining traction, including its online conference room booking service "Smart Space Reservations," this category still accounts for less than 10% of total sales.
Expanding the parking lot database
One medium-term strategy is to expand listings on CarParking, the portal site that drives its monthly parking lot business, onto a nationwide scale. Increasing both the quality and quantity of information on parking spaces listed on the site should attract more people, the company thinks. A second aim in expanding the site is to obtain more information about people who wish to rent parking lots. This would help increase the quality of the database the company uses to analyze parking lot market prices. In fact, the company’s parking lot database is already nationwide, but it has relatively few listings outside the Tokyo metro area. In central Tokyo and regional hubs, parking lots are being built in line with the new construction of office buildings and condos, but many of these areas are not yet covered by the company’s database. The company plans to expand coverage by implementing the measures outlined below.
Gathering local information efficiently
Expanding the quantity of parking lot data is important to the company as it is a way to ensure AZoom’s site ranks highly on search websites. Gathering local parking lot data is labor-intensive, however. The company is addressing this situation by using the “coconi” framework to form a network of crowdworkers throughout Japan. Through this network, the company asks people who live in a specific region for the information it requires and pays a small monetary compensation for their service; local people take a moment from their daily routines to send local parking lot information to the company.
Using smartphones, these local contractors gather information on local parking lots, including dimensions, overview, image, local conditions, and other details that might be useful to people interested in renting out a parking space. This arrangement is well suited to so-called crowdworkers, as it requires little time or effort. At the same time, the company benefits by obtaining the information it needs inexpensively. The company's coconi system has three distinctive features.
A crowd service specialized for obtaining location information
Matches location information with the people who wish to use spaces (or their proxies)
Smartphones used to gather local information
Penetrate the existing business area more deeply and expand its scope
AZoom’s parking lot database covers all of Japan, but currently the Monthly Parking Lot Subleasing Service is focused mainly on the Tokyo metro area, which has numerous office buildings and condos. However, condos and office buildings are being built in major cities nationwide, and problems related to vacancies in parking lots are possible in these areas as well. Accordingly, the company plans to expand the coverage of its subleasing service to include these locations.
AZoom currently has five regional branches: Kanto (mainly Tokyo and Yokohama), Kansai (Osaka), Chubu Tokai (Nagoya), Kyushu (Fukuoka), and Hokkaido (Sapporo). To expand nationwide, the company plans to open more regional branches in Tohoku, Chugoku, Shikoku, and other areas.
AZoom says its strategy is to increase the stability of its earnings stream by shifting from a spot earnings model to a recurring-revenue model. The company receives one-time earnings for the online introduction of parking lots (receives commissions from both the property owner and the lessor when a rental contract is concluded). The amount of cash the company receives at the time of contract can also vary. For instance, the company sometimes discounts the introduction fee it receives from a property owner if the owner agrees to list his property on the company’s website. Owners also may not pay as expected.
The subleasing service generates a different type of cash flow. Once the company leases a property from an owner and subleases it to an end-user, the company continues to earn income as long as the contract with the owner remains in place. Increasing the number of owner contracts leads to more properties under management, increasing the likelihood of business growth.
That said, the parking lot introduction and subleasing businesses are interdependent. Having the introduction business makes the company’s subleasing service more efficient, it believes. Thus, AZoom plans to continue operating both businesses while shifting the weight of its business toward the recurring-revenue business, with the aim of stabilizing earnings.
Expanding from parking lots into other categories of real estate
The company currently utilizes idle real estate in a number of ways other than for parking spaces, but sales from these businesses are small. The company is also looking for new ways to create a new pillar of business by leveraging the expertise acquired through the parking lot business. Looking at various other ways to use idle real estate, the company has launched businesses involving information on hourly rate coin parking lots (setting up a website under the name "coinpa.jp"), open outdoor advertising space, and vacant parking lots for motorcycles, and an online conference room reservation system ("Smart Space Reservations"). Shared Research understands that each of these businesses uses know-how acquired through the parking lot business.
Business
Business model
The company combines information technology and real estate to realize its management philosophy of “putting idle real estate to productive use.” Businesses that make effective use of vacant parking spaces by matching property owners with renters account for the lion’s share of AZoom’s sales. The business model of the company’s Monthly Parking Lot Introduction and Monthly Parking Lot Subleasing services are explained below. AZoom focuses on monthly parking lots rather than lots where space is rented by the hour.
The company has a portal site, CarParking, which lists monthly parking lots, as well as a site called CarPark, which concentrates specifically on Tokyo’s 23 wards (below, referred to collectively as “CarParking”). The company provides two main services: Monthly Parking Lot Introduction and Monthly Parking Lot Subleasing. The first service involves matching property owners and renters through the CarParking platform; with the second, the company leases vacant parking spaces from property owners and subleases them to end-customers.
The company’s business model for the Monthly Parking Lot Introduction Service involves expanding its database of information on monthly parking sites throughout Japan through its portal site. As the number of introductions increases and the properties available for subleasing are added to the pool during the process, the number of people using the company’s services grows, boosting earnings. From another perspective, parking lot introductions generate spot earnings, while subleasing provides recurring revenue. In this sense, the company leverages information amassed through its Monthly Parking Lot Introduction Service (spot business model) to achieve business growth in the Monthly Parking Lot Subleasing Service (recurring-revenue business model).
Spot business model: Increase number of search website listings Increase number of introductions
Recurring-revenue business model: Increase spaces taken on for subleasing Increase number of subleased properties and the occupancy rate
Overview of business by segment
AZoom moved to consolidated accounting in Q1 FY09/20. Prior to that, the company only reported nonconsolidated results of AZoom Co., Ltd. Included in consolidated results are two subsidiaries established in 2019: CGworks Co., Ltd. (established in March 2019) and AZoom Vietnam Inc. (established in September 2019). The company’s two reportable segments are the Idle Real Estate Utilization business, which includes the Monthly Parking Lot Introduction and Monthly Parking Lot Subleasing services and related businesses run by the parent company, and the Visualization business operated chiefly by the newly consolidated CGworks and AZoom Vietnam.
Idle Real Estate Utilization business
This segment comprises the Monthly Parking Lot Introduction and Monthly Parking Lot Subleasing services and real estate utilization-related businesses. Sales and operating profit mostly derive from the two parking lot-related services, with the Monthly Parking Lot Introduction service generating 10.0% of the JPY4.8bn in sales in FY09/21, Monthly Parking Lot Subleasing service generating 88.3%, and other businesses generating 1.7%. The company does not report service-specific operating profit.
Monthly Parking Lot Introduction Service
With this service, the company matches the owners of available parking spaces with people who wish to rent them. When the introduction results in a rental agreement, the company receives parking space introduction fees from renters and, depending on their business practices, sometimes receives customer introduction fees from owners. This service is available nationwide, with data on vacant parking spaces throughout Japan listed on the company’s search website (vacancy statuses at the time of search must be individually verified).
Owners of monthly parking lots post information about available spaces on the site. People searching for monthly parking spaces can search for them via the company’s website, and, assuming that they wish to sign a rental agreement, fill in an inquiry form on the site (name, contact information, desired area, model of car, etc.). In this way, potential renters verify current parking space vacancy statuses and proceed with rental agreements. Earnings for the company are proportional to the number of agreements reached, so it works to make the site as attractive as possible to potential renters.
People who wish to rent a parking space have several options. They can physically go to look, contact a real estate agent directly, or conduct an internet search. Before the internet, people typically walked around their neighborhood looking for a spot and then contacted a management company (real estate agent) for an introduction. The internet has made it possible to list vacant spaces, expanded the pool of potential customers, and spawned numerous specialized search websites like the one AZoom provides. The company says that each of the three methods have advantages and disadvantages, but that internet searches are the most convenient for customers.
AZoom’s parking lot search website lists monthly parking lots around Japan. The company believes its site ranks higher than peer companies that publicize their number of listings and that its own site is the most extensive in Japan, by number of listings. The company explains it achieved this level of differentiation by concentrating its data gathering on monthly parking sites from early on and building a website based on this information. The structure of AZoom’s search website is not markedly different than those of similar companies. However, the company says it has created a virtuous cycle by being popular with users for its number of listings, which in turn attracts more listings.
Business model
With its Monthly Parking Lot Introduction Service, the company matches available parking lots with people who wish to rent them. For this reason, assembling registrations of parking lots from their owners is clearly important, but the company must also secure a higher number of inquiries from potential renters than its competitors. Consequently, gathering more data from parking lot owners and renters than other companies have is important. Having large amounts of data allows the company to be more active in proposing (introducing) parking lots to potential customers. The company does not disclose its rate of successful contracts relative to the number of inquiries it receives. Fees are success-based; when an introduction via its site results in a rental agreement, the company typically receives the equivalent of one month’s rent from the renter. The company sometimes receives parking lot introduction fees from owners, although this depends on each owner’s individual business practices. These fees are the main source of revenue for this business, which therefore generates spot earnings.
Monetization framework
AZoom earns introduction fees from inquiring users who locate properties using the portal site when the two parties conclude a rental agreement. AZoom is not a party to that agreement; it merely provides the introduction. The company receives no usage fees from inquiries alone, which generate no earnings on their own. Inquiring users must go on to sign rental contracts with parking lot owners and only then will the company to receive its referral fee. For the most part, rental agreements are formed between just property owners and inquiring users; however, the company will sometimes participate in the process in a variety of ways, including assisting with the paperwork and sending invoices.
Registered users contact owners (or owners’ real estate agents) via the website when they find a property that meets their requirements. Although AZoom is not involved in contracts between the property owner and renter, it requires a rental agreement confirmation document in order to bill the introduction fee. Based on that document, the company invoices the renter for the introduction fee, receiving cash in return. Every month thereafter, the individual pays rent directly to the owner.
Parking lot renters pay a commission to the company when a rental contract is concluded as the result of an introduction on the company’s site. Commission levels differ somewhat depending on the price of monthly rent, but they typically equal one month’s rent. Owners as well often pay introduction fees to the company that are equivalent to one month of the rent paid by the user. However, the rates for these introduction fees may vary due to differences in offers made by owners during negotiations regarding conditions for posting parking lot data.
AZoom’s search website (CarParking)
The parking lot data on the company’s CarParking website comes from local real estate agents and property owners throughout Japan. The site is configured to allow drill-down searches, but so are many of the sites operated by AZoom’s peers. Rather, the company’s differentiator is its number of listings.
The top page of the CarParking search website shows a map of Japan, divided into geographic regions. Selecting the target area takes the user to a more detailed map of that area. From there, s/he can decide what registered properties to view. The user can also select one of the green pointers to access further detail (property address, rental conditions, etc.). Some data is incomplete; some property records may not indicate monthly rents or other details (often, according to the owner’s wishes). In such cases, the potential renter needs to make direct contact to obtain more detailed information.
Whether a user decides on a specific lot or decides to continue browsing the site because s/he was unable to find an appropriate space, he or she must enter his or her personal information on the inquiry website and wait for a response. The inquiry site requires the user to enter his/her name, company name, contact information, and desired conditions. This information allows the company to verify that a person browsing the site is one of its own users and introduce suitable properties to that user.
AZoom uses the data provided by users to understand what sort of properties are sought after and organizes the information to determine market needs. The company does not disclose information about user registrations, but it does disclose the number of inquiries (when users contact the company by telephone or email to ask about a parking lot).
A rise in the number of inquiries suggests that the number of site searches is rising, implying more introductions. An increase in the number of inquiries can also be compared with the number of listings on the site, showing how the number of users rises in line with the amount of information listed. Hence an increase in the number of inquiries is tied to growth of the company’s Monthly Parking Lot Introduction Service.