Financial Partners Group enters into a partnership agreement with Yume Sports -February 06, 2025 at 09:38 am EST

Financial Partners Group, established in 2001 and headquartered in Tokyo, provides solutions that meet customers’ needs by leveraging its licenses in finance, real estate, etc. The Group’s primary pillar, the Leasing Fund Business, which contributed 27% of FY24 net sales, aids the cash flow management of SMEs by providing investment opportunities in the operating leasing business, which leases assets with stable demand, such as aircraft, marine containers, and ships. The Domestic Real Estate Fund Business, with 70% contribution, provides customers with real estate fractional ownership products, and the International Real Estate Fund Business, with 3% contribution, caters to cash flow management of SMEs, seeking diversified asset management portfolios.

Business credibility driven by index listings

‘Embracing the future through finance’ as its new corporate philosophy in recent years, the Group has enhanced its creditworthiness and expanded its lease arrangement capabilities, as well as fundraising capacity, aided by listing on JASDAQ in 2010 and subsequently moving up to the Tokyo Stock Exchange.

Additionally, adding weight to its credibility, the Group has been selected as a “JPX Nikkei Index 400” constituent for the first time in two years in 4QFY24. Buoyed by these positive aspects, Financial Partners Group is pursuing increased revenue and profit through growth in its Domestic Real Estate Fund Business and International Real Estate Fund Business fund business. In the Leasing Fund Business, the Group plans to continue to selectively arrange profitable projects, primarily focused on maritime projects.

Driven by sustained positive fundamentals, the company forecasts net sales to grow to JPY123.5bn in FY25, reflecting an increase of 14.6% YoY. The operating income is pegged to increase by 10.7% to JPY31.7bn, while net profit is projected to grow by 7.5% to JPY22bn.

Robust business performance

The company demonstrated solid revenue CAGR growth of 32.3% over the period FY19-24 to reach JPY108bn. The operating income grew at a CAGR of 14.7% during the same time to JPY28.6bn in FY24, whereas the net income surged at a CAGR of 15.3% to JPY20.5bn. However, the cash position remained flat during the same period, reaching JPY17.4bn as of FY24 end from JPY16.6bn as of FY19 end. This was owing to the group’s focus on capex and acquisitions.

Financial Partners Group performed better fundamentally, compared to its peer, JAFCO Group, which witnessed negative CAGR growth of 1.1% over the same period to JPY24.4bn. The operating income and net income too generated negative CAGR growth of 7.8% and 5.9% to reach JPY8.2bn and JPY7.5bn in FY24 respectively.

The Group delivered an impressive fundamental performance in 1QFY25, with net sales reaching a 1Q record high of JPY28bn, reflecting an increase of 14.6% YoY. The growth was driven by the Domestic Real Estate Fund Business and International Real Estate Fund Business. The Domestic Real Estate Fund Business performed well, growing net sales 32.7% YoY to JPY19bn. The International Real Estate Fund Business grew by leveraging ample initial inventory to clock net sales of JPY1.9bn, demonstrating 335.6% YoY growth.

Focus on returning shareholder wealth

The management has decided to pay a year-end dividend of JPY81.55, resulting in an annual dividend of JPY120.3 per share, which translates to a payout ratio of 50.1% and dividend yield of 5.42%. The company further plans to increase its dividend to JPY130.4 per share in FY25. The Group is also focused to return shareholder wealth through buy backs and has accordingly acquired treasury shares worth JPY2bn in FY24. In addition, the company has resolved to acquire up to 1mn treasury shares worth JPY2bn.

Positive outlook backed by analyst estimates

Financial Partners Group is trading at a lower P/E ratio of 9.1x based on the estimated FY25 EPS of JPY270.9, compared to a global peer average of 18.3x. The company’s peer, JAFCO, is trading comparatively higher at a P/E of 13.6x.

In the past one year the stock delivered robust returns of over 40%. The stock has a limited coverage, with just 1 analyst covering the stock for a ‘Buy’ recommendation for an average target price of JPY3,400. This indicates an upside potential of over 37% from the current levels. The analyst has consistently revised revenue and EPS estimates upwards for FY25/26 in the past one year, indicating the positive outlook enjoyed by the company.

Overall, the company looks poised to garner investor interest in the long term, driven by its solid fundamental performance, favourable valuation, and strong creditworthiness. Moreover, the management’s focus on returning investor wealth through dividends and buybacks should interest investors focused on creating long-term wealth. However, the company is prone to inherent risks present in the Leasing Fund Business including currency risks, failure of the leaseholder to pay the lease fees and risk of price volatility in the value of the leased property.