May 8th, 2015

HOTLAND (MOTHERS・3196）

Takoyaki goes global

－A fast expanding chain of snack eateries－

CEO at K Asset Executive Summary

MARKET ANALYST, CMA
Kenichi Hirano
• Hotland operates a variety of food store formats.
Takoyaki (octopus dumpling) store “Tsukiji Gindako” is
Corporate Profile
the mainline. Also, it operates Taiyaki (fish-shaped cake
Location Chuo-ku, Tokyo filled with red bean paste filling) store “Gin no an” and
President & CEO ice cream “COLD STONE CREAMERY (CSC).” As of
Representative December 2014, it operated 557 stores in Japan and 31
Morio Sase
overseas.
June 1991
Established
（Founded in 1988）
• The company views its strengths as high recognition of
Capital ¥1,641 million its products, which appeal to a broad range of consumers,
Listing September 30, 2014 and the wide variety of store formats. The space-saving,
low cost store format Gindako Style enables store
URL http://www.hotland.co.jp/
network expansion.
Sector Retail(Food-service)
• To combat pricing pressure, the company has been
developing purchasing routes and improvements to the
processing of the main octopus ingredient. Also, it is
Stock Price Data
engaged in the world’s first octopus farming project to
(closing price on May 8） help secure stable supply. By opening collaboration
Stock Price ¥4,250 stores such as taiyaki and ice cream it aims to reduce
seasonal risks.
Outstanding shares 9,056,900 shares
Trade unit 100 shares • Despite the ongoing contraction of the eat-out industry,
Market Cap ¥38,491 million earnings have been on an upward trend, and the company
believes there is plenty of room for further expansion of
Dividend (F) ¥0.00 space-saving stores and differentiated store formats. The
PER (Forecast) 38.30 X company plans to accelerate overseas operations and to
roll-out a new brand in Japan: “Coffee Bean and Tea
PBR(Actual) 10.52 X
Leaf.” The competition is fragmented in this segment of
the eat out industry and the company is confident of
medium term earnings growth.

1 Copyright © Finantec Co., Ltd. All Right Reserved

 May 8th, 2015

HISTORY / BUSINESS SUMMARY

■COMPANY HISTORY
Hotland was established in 1988 by the current president Morio Sase. The first store “Hotland” was opened
in Kiryu, Tochigi prefecture, as a Japanese fast food store which served Onigiri (rice ball) and Yakisoba
(fried noodle). The takoyaki specialty store “Tsukiji Gindako” was opened in 1997. To avoid disposal losses,
the shop served only takoyaki, which attracts a wide-range of loyal customers. The next year, Mr. Sase
merged his family’s iron works company and developed an original takoyaki baking machine. The company
then quickly expanded its store network supported by mass production of takoyaki machines. While
developing new brands, such as “Gin no an” and “Gindako Highball Sakaba (pub),” the company started
overseas operations, mainly in Asia. To further expansion of takoyaki business and to accelerate overseas
operations, it acquired Osaka-based Oogamaya in 2013. This chain has an automated takoyaki making
machine which facilitates expansion overseas. In addition, it acquired COLD STONE CREAMERY JAPAN
and set up a JV with Aeon Mall (8905), Hotland holds 66% stakes, to operate a popular US coffee chain to
decrease seasonal risks.
（※）Takoyaki
■BUSINESS SUMMARY
●“Gindako Style”
Tsukiji Gindako stores include directly managed, outsourced and franchise operations. The company has
succeeded in establishing a strong position in the industry on the back of original merchandizing “Gindako
Style.” The business model is to control both upstream to downstream operations. The company considers its
key strengths its “characteristic products”, “wide-range of customers” ,“original machines” and
“demonstration sales.” The space-saving store format and simple operation allows short employee training
periods and rapid store expansion. The chain operation and the custom made machines (developed by the
company for each product) are a barrier to entry for potential competitors. Hotland is replicating this
Gindako Style success to its other brands. As of December 2014, there are 557 shops in Japan (Tsukiji
Gindako 416, Gin no an 45, CSC 34, Oogamaya 24, Tempura Karari 16, Yakitori Hottoya 9, Others 13,) and
31 shops overseas (HK 14, Taiwan 5, Korea 4, Thailand 3, Singapore 2, Cambodia 3.) Overseas it operate
curry shops.
Procurement and processing
of octopus as ingredients

Fishing grounds Boiling and

Exclusive around the world cutting
machinery

Exclusive Original octopus

machinery dumplings machine
Personnel factory
strategies

Technical
Learning center training Gindako throughout the country Customer’s smile

2 Copyright © Finantec Co., Ltd. All Right Reserved

 May 8th, 2015

FEATURES

●Adding value
The company offers high quality food products at reasonable prices. The Takoyaki menu is simple, but
Tsukiji Gindako offers a variety of toppings such as egg salad and cheese. The menu variety helps ensure
repeat customers and supports average spending per customer. The formats attract different types of customer.
For example, the Gindako Hiball, pub style takoyaki format attracts businessmen. Also, the Croissant Taiyaki,
which is made of croissant dough, has become a popular product. Subsidiary CSC not only develops original
ice-candy but also sells them at street stalls.

●Purchasing route
The company is one of the world’s biggest consumer of octopus, procuring 3,000 ton per year. It originally
purchased this from trading houses, but has developed stable purchasing routes to reduce risks and costs. It is
now trying to farm octopus, which would be a world first he world first if successful. Processing is mainly in
China, but the company plans to establish a processing plant in Mauritania (the biggest octopus harvesting
area) for further cost reductions. The plan is to farm and process all its octopus within 5 years. The plan could
boost earnings and contribute significantly to Mauritania’s fishery industry. An octopus cultivating project in
Japan has already succeeded in egg hatching at a testing site in Fukushima. The plan is start a farm in the sea
in Kumamoto. The company hopes to add fresh cultivated octopus as a Sashimi item to its menu.

●Training and career support

The original training program and career pass plan (independent support rule) is another characteristic point
of the company. Employees with good understanding of company methods become partners this enables rapid
store expansion. As of July 2014, the training programme produced 78 store owners while 137 employees
have qualified to become owners. There are 31 franchisees that operate more than 2 shops.

【Career pass plan】 Qualification for

Sharing the Joining the Training in the becoming
Work in the store independent
principle company center

Persons who established

Independent qualification
Independent owners Moreover, at holders
a company the present
(78 people) (137 people)
(31 people)

3 Copyright © Finantec Co., Ltd. All Right Reserved

 May 8th, 2015

BRAND DESCRIPTION

Brand Outline

Specialty Takoyaki octopus dumpling chain. Range of toppings raise the fun
element to eating out (and boost average spending). Wide variety of store
formants, such as take-out in food courts, drive-through, station terminals,
pub-style, café-style, delivery.

Taiyaki fish-shaped cake filled with red bean pate. Red beans purchased
from contracted farms. Paste is made at own plant and baking is done at the
shops using original machines.

Taiyaki made with 24-layer croissant dough and caramel sauce.

Ice cream parlor chain from the U.S., serving customized ice cream as a
performance (entertainment). Hotland has developed an original menu for
Japanese tastes and is expanding the sales network.

Premium coffee chain from Los Angeles. Differentiated from competitors

due to sale of popular Japanese patissier’s sweets.

Using automated baking machine, this format serves Takoyaki quickly.

Shops are mainly in the Kansai area. The machine helps their quick
expansion in overseas.

Serving professional tempura at low prices.

Yakitori and other selected chicken snacks.

Curry shop. Started in HK and so far in overseas markets only.

4 Copyright © Finantec Co., Ltd. All Right Reserved

 May 8th, 2015

BUSINESS STRATEGY

■Business environment and growth strategy

The restaurant industry in Japan has been shrinking as the population declines and people opt to eat at home
more. This tough business environment looks unlikely to change. However, for Hotland, there are no
competitors that operate both upstream and downstream.
The open kitchens give customers a spectacle performance and reassures them that the food is freshly
cooked. Collaboration stores lower seasonal risks and enable optimal use of time (such as different formats
for lunch and dinner).
To increase market share in the takoyaki industry, Hotland plans to maintain the rapid expansion of its
mainline Tsukiji Gindako format from the Tokyo Metropolitan area into the Kanto region. In the Kansai
region, it plans to open Oogamaya. Also, collaboration openings of “CSC” and “Gin no an” will be
accelerated. The new brand “The Coffee Bean & Tea Leaf”, which is a JV with Aeon Mall, is also expected
to contribute earnings. Overseas, the company plans to expand in ASEAN and Middle East network through
tie-ups with local companies. In cooperation with Cold Store USA, Hotland plans to start operations in
Canada.
By “Gindako Style” store operation, it is expected to become a “Global operator of food chain from Japan.”

Collaboration shop in Karuizawa Collaboration shop in Narita

“Tsukiji Gindako,” “Croissant Taiyaki, and “CSC” “Tempura Karari,” “Tsukiji Gindko,” and “Yakitori
Hottoya”

South China (Company data) U.S. and China （Company data）

5 Copyright © Finantec Co., Ltd. All Right Reserved

 May 8th, 2015

EARNINGS TREND
■Earnings
In FY12/14 sales rose 33.0% yoy to ¥27.39bn and OP jumped 187.4% yoy to ¥1.78bn thanks to 77 store
openings (68 in Japan, 9 overseas) and favorable same store sales growth (+5.8% yoy) in Tsukiji Gindako.
The acquired CSC also contributed to sales growth. Improvements to processing and procurement
contributed to the profit increase. Cost to sales ratio improved 2.4pt to 37.9%. SGA costs/sales also
improved by 1.1pt and OPM was up from 3.0% to 6.5%.
Hotland plans to accelerate store openings in FY12/15, opening 100-plus in Japan and 70 overseas. As of
December 2015, it expects to operate 664 shops in Japan and about 100 shops overseas. The plan is to
actively expand the high margin Gindako Hiball stores and Croissant Taiyaki shops while increasing
collaboration openings (e.g. ice cream shop and taiyaki shop) in shopping malls. It plans to raise visibility of
the new brand “Coffee Bean & Tea Leaf.”
In the mid-term plan to December 2020, the sales target is ¥110bn with ¥70bn from Japan, and ¥40bn from
overseas, and the OPM target is 15.0%. Decentralization of octopus processing and cultivation are seen as
integral to achieving these targets.

● Existing stores keep YoY growth for the 18th consecutive months

● Earnings trend
YoY Operating YoY Recurring YoY Net profit YoY EPS ROE
（¥mn） Sales
(%) profit (%) profit (%) (%) (¥) (%)

FY2012 20,506 - 1,164 - 583 - -418 - -51.54 35.6

FY2013 20,588 0.4 620 60.0 1,034 77.3 134 - 16.48 12.5

FY2014 27,388 33.0 1,783 187.4 2,052 98.4 942 600.3 112.52 38.7

FY2015(F) 30,419 11.1 1,902 6.6 1,836 -10.5 1,000 6.1 110.95 -
※ Company estimation

6 Copyright © Finantec Co., Ltd. All Right Reserved

 May 8th, 2015

STOCK VALUATION
■Stock valuation
The share was listed on the TSE Mothers in September 2014. The opening price was ¥2,074, 1.7% below
the IPO price of ¥2,110. The share price hovered around ¥2,500 level, gradually rising on the back of good
results expectations. After hitting ¥5,090 on April 13, it has since moved in the ¥4,200-¥4,500 range. The
company guidance looks conservative and it is highly likely to revise upward. The company sees profit
growth of 30% per year as sustainable for the medium term. Shares still have room to go up on the back of
the mid-term growth potentials.

Stock price （historical）

Year’s High ¥5,090
（4/13/2015）
Year’s Low ¥2,801
（2/12/2015）
Record High ¥5,090
（4/13/2015）
Record Low ¥2,071
（9/30/2014）

Disclaimer
This report incorporates information that was received from the company covered at interviews at the company and other sources by
analysts who are doing work for FinanTec Co., Ltd. Assumptions and conclusions included in this report represent the analysis and
assessments of analysts who prepared this report and are not the positions of the company or companies covered in this report.

This report was prepared solely for the purpose of providing information that is useful for reaching investment decisions. This report is not
a solicitation or other inducement regarding securities transactions or any other activities.

Investors are always responsible for making judgments required to reach final investment decisions. FinanTec and the analysts that
prepared this report under contract for FinanTec have no responsibility whatsoever regarding these investment decisions. All information
in this report is current at the time this report was prepared and may be revised without prior notice.

This report is copyrighted material of FinanTec. Copying, selling, using, releasing to the public and/or distributing this report to others
without permission is prohibited by law.

For inquiries regarding this report, please contact:

IRSTREET FinanTec Co., Ltd. 2F, 8-1 Kayabacho 1-chome, Nihonbashi, Chuo-ku, Tokyo 103-0025
Mail: report@irstreet.com TEL:03-4500-6880 FAX：03-4500-6888

7 Copyright © Finantec Co., Ltd. All Right Reserved