Seek 100 baggers (100x stocks)! March 1, 2021 issue
【This Week's video is here】
Note: The video is 35 minutes long.
1. 100 Baggers Candidate Stocks
SRE Holdings 2980
Listed on TSE First Section
Stock Code Stock Name Listing Year
2980 SRE Holdings 2019
Minimum Market Cap (billion JPY) Current Market Cap (billion JPY) 100x Market Cap (billion JPY)
207 720 20,700
Business Model
Primarily provides AI analysis of transaction data in real estate brokerage. Expanding from traditional IT/AI-enabled real estate operations to AI consulting serving finance, IT, and travel industries. The business is shifting from real estate tech to an AI provider.
※ Listing year indicates the listing date on the TSE First Section, Second Section, Mothers, or JASDAQ.
※ 100x market cap is calculated from the minimum market cap.
2. Key Points
1. A real estate tech company founded with Sony as the parent, pushing for operational efficiency and AI adoption in an industry that had lagged in DX. Real estate, unlike financial products, has no two identical assets, making tech-based asset appraisal challenging; however, as a “tech company with real business,” its extensive data gives it an edge.
2. From the company’s founding history and major shareholders, it is similar to M3 [2413], which grew rapidly via online MR in the 2010s, and is often referred to as the “second M3” by the market. Real estate requires credibility on par with healthcare, and with Sony and Z Holdings (Yahoo) as major shareholders, the company has strong credibility and is well positioned to advance in real estate tech.
3. The company’s former name was Sony Real Estate; in June 2019, it changed to its current name, SRE Holdings. It has evolved from a real estate tech company to an AI company with a real business backbone, and its AI & Consulting business operates at an impressive operating margin of 74%. Going forward, AI & Consulting is expected to be a core growth driver.
4. The appeal of the business lies not only in its rapidly growing AI operations, but also in its extremely low cancellation rate. The average churn rate over the most recent 12 months is 0.5%, so acquiring new contracts leads to a high revenue buildup, resulting in very high revenue stability.
5. The company's value continues to grow due to its competitive advantages. Since its Mothers market listing in December 2019, its market capitalization has doubled. The current market cap in the high hundreds of billions of JPY implies a stock price reflecting about 30% annual earnings growth four quarters ahead, and in the short term it trades at a somewhat premium level. However, compared to U.S. real estate tech leader Zillow Group [Ticker: Z], there is potential upside to around ¥7,662 stock price or about ¥117.0 billion market cap within one year.
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