■Management initiatives that are conscious of capital costs
Create Restaurants Holdings (3387) has been promoting management that is conscious of capital costs since the past, and ROE, which indicates capital profitability, has remained at a level that exceeds shareholders' cost of equity 7.9% (estimated by the company) *1. The reason behind this is the application of strict new store investment standards and withdrawal standards, and for example, the IRR (internal rate of return) for 34 new stores in the 2024/2 fiscal year is about 24%, which greatly exceeds WACC (domestic 10.5%, US 18.6%) *2 before tax. Also, when expectations at the time of investment are off and it becomes unprofitable, rules for promptly implementing business type changes and store exits have been thoroughly implemented. As a result, an ROE of over 10% has been maintained, and PBR has also been moving at over 5 times.
*1 ROE for the 2022/2 fiscal year is 12.1%, and 15.4% for the 2024/2 fiscal year.
*2 Abbreviation for Weighted Average Cost of Capital. Weighted average of shareholders' cost of equity and cost of debt.
(Written by FISCO Visiting Analyst Ikuo Shibata)