TODA CORPORATION Note: This document is a translation of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail.
November 30, 2023
Company: TODA CORPORATION
Representative: Seisuke Otani, President and Representative Director
(Securities Code: 1860 TSE Prime Market)
Contact: Toshiyuki Kubodera, General Manager, Financial & IR Div.
(Phone: 03-3535-1357)
Action to Implement Management that is Conscious of Cost of Capital and Stock Price
TODA CORPORATION hereby announces that it has set out today the action to implement management that is conscious of cost of capital and stock price.
1. Recognition of Current Situation
We believe it is necessary not only to strengthen our core business, but also to invest in new business areas in order to enhance our corporate value over the medium- to long-term. To achieve our target earnings of ROE of 8% or more, we are strengthening our business portfolio through investments in growth and intangible assets and promoting the appropriate allocation of capital.
However, our ROE for the past three years has not exceeded 8% and the stock price at the end of November was ¥844.3, with PBR of less than 1x.
We understand that the recent decline in ROE is mainly due to a temporary decrease in profits caused by soaring construction material prices. Furthermore, we also recognize that PBR of less than 1x was partly due to insufficient explanations to investors regarding the business validity of the growth strategy and efforts to improve capital efficiency.
Fiscal year ending | March | March | March | March | March | |
2019 | 2020 | 2021 | 2022 | 2023 | ||
Net sales | ¥ mil | 510,436 | 518,683 | 507,134 | 501,509 | 547,155 |
Net income | ¥ mil | 25,595 | 25,845 | 19,735 | 18,560 | 10,995 |
Net income margin on sales | % | 5.0 | 5.0 | 3.9 | 3.7 | 2.0 |
Asset turnover | ratio | 0.83 | 0.80 | 0.74 | 0.67 | 0.69 |
ROE | % | 10.0 | 9.6 | 6.8 | 5.9 | 3.5 |
Stock price | ¥ | 680 | 629 | 811 | 741 | 691 |
Net assets per share | ¥ | 868.13 | 883.35 | 1,011.02 | 1,027.12 | 1,023.64 |
PBR | times | 0.78 | 0.71 | 0.80 | 0.72 | 0.67 |
2. Policy for Improvement
Based on the recognition of the current situation, we will work to improve PBR, aiming for ROIC of 5% or more and ROE of 8% or more by securing earnings in the core construction business, improving capital efficiency through reallocation of assets and sales of cross-shareholdings, enhancing shareholder returns, and strengthening IR activities.
Progress will be verified and disclosed annually.
3. Specific Initiatives
- Pursuing growth and earning power
- Growth strategy and strategic investments to enhance corporate value
- Promotion of business portfolio management
- Business management using ROIC by segment as an internal indicator
- Improvement of capital efficiency
- Improvement of capital efficiency through reallocation of real estate assets etc (utilization of private placement funds)
- Sales of cross-shareholdings(Medium-Term Management Plan target: more than ¥10 bil per year)
- Optimal capital structure
- Maintain investment grade rating based on financial discipline (Medium-Term Management Plan target: D/E ratio of 0.8x or less)
- Stable and continuous shareholder returns
- Implementation of stable shareholder returns (Medium-Term Management Plan target: DOE of 2.5% or more and Total Return Ratio of 40% or more)
- Timely and appropriate acquisition of own shares in a flexible manner
- Initiatives to enhance stakeholder satisfaction
- Proactive dialogue with investors etc (more than 60 meetings per year)
- Enhancing disclosure and communication to customers, partner companies, shareholders/ investors, and employees
End
Action to Implement Management that is Conscious of Cost of Capital and Stock Price
November 30, 2023
TODA CORPORATION
1
Enhancing Our Corporate Value
Medium- to long-term growth strategies improve stakeholder value
Optimal capital structure
Investment for further growth
to enhance corporate value
Cash generation
Growth and earning power/ Capital efficiency
Shareholder returns
Investors
2
Recognition of Current Situation
PBR below 1x due to decline in capital efficiency (ROE)
PBR (times) PBR ＝ PER × ROE
Price Book-value Ratio | PBR1.0x |
0.80 | (Forecast) | |
0.78 | 0.79 |
0.71 0.72
0.67（Stock price
Fiscal year endas of end Sept） stock price（¥）
680 629 811 741 691 810
18 19 20 21 22 23（FY）
PBR＝Fiscal year end stock price（adjusted）÷ Net assets per share
(Net assets and total number of shares used are those at the end of the fiscal year.) * FY23 forecast is based on the stock price as of end Sept 2023.
BS items in FY23 forecast use figures at the end of the previous fiscal year.
10.0% | 9.6% | |||||||
(Forecast) | ||||||||
6.1% | ||||||||
ROE | 6.8% | 5.9% | ||||||
Return On Equity | 3.5% | |||||||
18 | 19 | 20 | 21 | 22 | 23 （FY） |
ROE＝Net income for the fiscal year ÷ Shareholders' equity (Average at the beginning and end of fiscal year) * BS items in FY23 forecast use figures at the end of the previous fiscal year.
PER（times） | 19.39 | Ref. | ||||||||
Average of 83 construction | ||||||||||
12.60 | companies listed on TSE | |||||||||
Prime Market (Sept 2023) | ||||||||||
Price Earnings Ratio | Average PER 15.0x | |||||||||
8.15 | 7.46 | Weighted PER 12.8x | ||||||||
12.26 | 12.81 | |||||||||
（Forecast) | ||||||||||
18 | 19 | 20 | 21 | 22 | 23 （FY） | |||||
PER＝ Fiscal year end stock price（adjusted) ÷ Net income per share | ||||||||||
(Total number of shares is the average during the fiscal year excluding own shares.) | ||||||||||
3 | ||||||||||
* BS items in FY23 forecast use figures at the end of the previous fiscal year. | ||||||||||
Estimation of Cost of Capital
Cost of shareholders' equity estimated at around 8.0%, weighted average cost of capital (WACC) at around 4.5%. Continuously aim for ROE 8.0%+ and ROIC 5.0%+ through capital efficiency-conscious management.
ROE
Return On Equity
ROIC
Return on Invested Capital
10.0%
9.6%
6.8%
5.9%
（in medium-term）
ROE 8.0%+
（Forecast）
6.1%
※The cost of shareholders' equity is recognized to be around 8.0%.
6.3% | （in medium-term） | |
6.7% | ROIC | |
5.0%+ | ||
※WACC is recognized | ||
4.6% | to be around 4.5%. | |
3.5% |
3.5%
Estimation by CAPM method/ inverse of PER
1.9% | 2.1% |
（Forecast） |
18 19 20 21 22 23 （FY）
18 19 20 21 22 23 （FY）
ROE＝Net income for the fiscal year ÷ Shareholders' equity (Average at the beginning and end of fiscal year.)
* BS items in FY23 forecast use figures at the end of the previous fiscal year.
ROIC = Operating income after tax ÷ Invested capital (interest-bearing debt + shareholders' equity)
- Invested capital is calculated as the average at the beginning and end of fiscal year, and the effective tax rate is assumed to be 30.5%.
4
Analysis of Current Situation
ROE enhancement requires pursuit of growth and earning powerand improvement of capital efficiency
Net income | Net income margin on sales | Pursuit of growth | ||||
5.0% | 5.0% | （Forecast） | ||||
on sales | and earning power | |||||
3.9% | 3.7% | 3.6% | ||||
Net income | 2.0% | FY18 | FY22 | |||
Net sales | 5.0% | → 2.0％ |
×
ROE
Return On Equity
Asset turnover
Net sales
Total assets
×
0.83
Asset turnover ratio (x) | Improvement of | ||||||||||
（Forecast） | capital efficiency | ||||||||||
0.80 | |||||||||||
FY18 | FY22 | ||||||||||
0.74 | |||||||||||
0.69 | 0.83 → | 0.69 | |||||||||
0.67 | 0.66 | ||||||||||
Financial | Financial leverage (x) | （Forecast） | Optimal | |||||||
leverage | 2.57 | 2.57 | capital structure | |||||||
Total assets | 2.40 | 2.43 | 2.36 | 2.39 | FY18 | FY22 | ||||
Shareholders' equity | 2.40x | → 2.57x | ||||||||
18 | 19 | 20 | 21 | 22 | 23（FY） | |||||
* Net sales and net income in FY23 forecast are based on disclosed figures. Total assets and shareholders' equity use figures as of the end of the previous fiscal year.
5
Policy to Improve Return on Capital and Market Valuation
Aimto secure profitability in construction business, and improve capital efficiency through sales of cross-shareholdings and use of private placement funds
Key points for improvement
Pursuing growth
and earning power
Improvement of capital efficiency
Optimal capital structure
Stable and continuous shareholder returns
Initiatives to
enhance stakeholder satisfaction
Policy and indicators | Improvement | |
Growth strategy and strategic investments to enhance corporate value | ImprovementofROE | Improvement |
Improvement of capital efficiency through reallocation of real estate assetsetc | ||
(use of private placement funds etc) | ||
(Sales of assets held: Medium-Term Management Plan target: ¥67 bil / 3 years) | ||
Sales of cross-shareholdings (Medium-TermManagement Plan target: more than | ||
¥10 bil per year) | ||
Promotion of business portfolio management | ||
Business management using ROIC by segmentas an internal indicator | ||
Maintain investment grade ratingbased on financial discipline | ||
(Medium-Term Management Plan target: D/E ratio of 0.8x or less) | Improvement PER | ofPBR |
Implementation of stable shareholder returns(Medium-Term Management Plan | ||
target: DOE of 2.5% or more and Total Return Ratio of 40% or more) | ||
Timely and appropriate acquisition of own sharesin a flexible manner | ||
Proactive dialogue with investors etc(60+ meetings per year) | ||
Enhancing disclosure and communication to customers, partner companies, | ||
shareholders/investors, and employees | of | |
6
Internal Management using ROIC Reverse Tree
KSF（Key Successful Factors） | KPI |
Decomposition
ROE
Orders | |||
Pursuinggrowth and earningpower | Construction | ||
capacity | |||
Construction | |||
Investment | |||
and | |||
development | |||
revenue | |||
SG&A and | |||
R&D | |||
expenses | |||
efficiency | Improvement | ||
capital | Capital | ||
of | efficiency | ||
Medium-toLong-term Enhancementof CorporateValue | |||
Brand | |||
value | |||
- Selection and concentration of projects
- Understanding customer needs and improving the value provided to customers
- Securing construction personnel and improving capacity
- Strengthening supply chain
- Production technology development
- Expanding the use of BIM/CIM
- Securing real estate rental income
- Securing real estate sales income
- Evaluation of business using IRR etc
- Ensure appropriate profits when receiving orders
- Strengthening supply chain
- VE/CD activities
- Efforts to improve productivity
- Promotion of front-loading
- Reduction of redundant expenses
- Technology development, CVC investment etc leading to competitive advantage
- Optimization of payment terms
- Effective use of business assets
- Effective use/replacement of real estate, use of private placement funds
- Sales of cross-shareholdings
- Human capital investment, digital transformation investment etc to improve corporate competitiveness
- Addressing environmental, social and governance issues (ESG etc)
- Quality and safety initiatives
Construction orders received
Customer satisfaction
Completed construction
contracts
Completed construction
contracts per capita
Net sales of investment and
development business
Investment and development
business profit
Gross profit margin at time of
estimation
Gross profit margin ratio
SG&A ratio
Technology development
investment
Income and expenses of
construction
Investments and sales
Cross-shareholdings
CO2 reduction ratio
Labor productivity per
hour
Total accident frequency
rate/Accident frequency rate
Net sales
Gross profit
General and
administrative
expenses
Financial capital
Working capital turnover
Fixed capital turnover
Non-financial
capital
Factors contributing to medium- to long-term competitive advantage
Operating
income
（Operating income ratio）
Operating income
Net sales
Invested
capital
(Invested capital
turnover ratio/ days)
Net sales
Invested capital
Effective tax rate
ROIC
Operating income
after tax
Interest-bearing debt + shareholders' equity
7
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
TODA Corporation published this content on 12 December 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 December 2023 04:09:46 UTC.
