(2) Strengths of the Company

The strengths of the company can be summarized into four points: a) history in Asia, b) cutting-edge industry information gathering ability, c) network with venture companies, d) finance scheme construction capability.

a) History in Asia

Since its establishment in 1981, based on the Economic Club, it has contributed to economic exchanges between Japan and Asia for over 40 years, holding a high profile in Asia.

b) Cutting-edge industry information gathering ability

Through the discovery of companies and projects that are potential investment candidates, it grasps highly specialized, cutting-edge trends in the industry.

c) Network with venture companies

With over 300 publicly listed companies in Japan and abroad, it has built close relationships with numerous venture companies through its investment activities to date. This network is utilized to support portfolio companies and form alliances when the company develops new GAINIANBANKUAI.

d) Ability to build finance schemes

It has a cumulative investment record of 330 billion yen both domestically and internationally. For project investments, a procurement scheme is built that includes not only investment funds from the company but also financing funds such as project finance.

■ Performance trends of Japan Asia Investment <8518>

1. Points to look at when assessing performance

The revenue that corresponds to that of a typical business company is the operating revenue, which is composed of recovery amounts (sales of operating investment securities) in investment operations, as well as interest, Dividends income, share of partnership profits (income gains), and management fees from fund operations. However, since the majority, which consists of the sales of operating investment securities, generates profit only when it exceeds the investment amount (acquisition cost), it does not necessarily mean that performance has improved just because operating revenue has increased.

Therefore, it is considered reasonable to focus on the operating total profit, which aggregates income gains, investment profits and losses after deducting acquisition costs, management fees, etc. Additionally, because operating total profit reflects 'evaluation losses of operating investment securities' and 'investment loss reserves' due to declines in the performance of investees and stunk in the stock market, it is necessary to note that these have been major downward factors for period profits and losses.

However, in the future, the policy is to boost stable revenues through the expansion of the fund Business, meaning that the weight of management fees in fund operations will increase, while realized capital gains and income gains in investment operations will decrease, and it is expected that performance downturn factors such as 'evaluation losses of operating investment securities' and 'investment loss reserves' will also be resolved.

2. Past performance trends

Looking back at past performance (consolidated accounting standards), the company has experienced unstable conditions influenced by global economic recession due to the Lehman shock, the Great East Japan Earthquake, and fluctuations in exchange rates. Since the fiscal year ending in March 2016, the company achieved black figures for seven consecutive terms due to the contribution of revenue from mega solar projects; however, for the fiscal years ending in March 2023 and March 2024, two consecutive terms of final losses were recorded due to a decline in stock sale profits and the recognition of valuation losses and reserves.

Stable revenue from Operation fees has been on a decreasing trend due to the reduction in fund management balance. On the other hand, investment income and losses (which take into account realized capital gains along with valuation losses and the amount for investment loss reserves) have fluctuated significantly. Notably, valuation losses and the investment loss reserve contribution have pressured investment income. However, since the fiscal year ending in March 2016, the movement has been relatively stable, reflecting a change in the holdings of managed assets to high-quality assets accumulated after the Lehman shock (which were acquired at more appropriate prices) and project investment assets in renewable energy, etc. The investment losses for the fiscal year ending in March 2024 are due to the early recognition of valuation losses and reserves related to funds in the Chinese-speaking area.

In response to the decline in performance and the deterioration of financial conditions due to the influence of the Lehman shock, efforts have been made to improve financial health and strengthen profitability, leading to a gradual decrease in balances of interest-bearing debt (borrowings, corporate bonds, and corporate bonds with subscription rights). There has also been a concerted effort to reduce selling, general and administrative expenses (especially personnel costs and rental expenses). The balance of interest-bearing debt has been reduced by approximately 64%, from 11,954 million yen during the fiscal year ending in March 2018 to 4,314 million yen in the fiscal year ending in March 2024, and although selling, general and administrative expenses briefly turned to an increase in the fiscal year ending in March 2022, they have generally followed a contraction trend.

In addition, alongside the reduction of interest-bearing debt, the equity ratio, which indicates the stability of the financial base, has significantly improved. Despite the reduction in total assets, improvement continues through the exercise of subscription rights and internal reserves, and the ratio for the fiscal year ending in March 2024 stands at 54.0%.

Shareholder return The dividend policy of NEC Capital Solution <8793> is based on maintaining stable dividends, while securing internal reserves necessary for investment in growth strategies and strengthening financial health, and reviewing appropriate dividend levels taking into account market trends and performance fluctuations. For the dividend of the 2024 fiscal year, a dividend of 130 yen per share (including an interim dividend of 65 yen) with a 20 yen increase compared to the previous fiscal year will be implemented. Regarding the dividend for the fiscal year ending March 2025, the company plans to pay a dividend of 150 yen per share (including an interim dividend of 75 yen) with a 20 yen increase compared to the dividend in the fiscal year ending March 2024, taking into account the profit forecast. The company plans to reward shareholders in accordance with the dividend policy, as it plans to achieve the highest profit on the profit side as a profit forecast. As a result, the company's dividend payout ratio reaches 40.4%. The actual PBR (price-to-book ratio) is in the 0.7x range and is below the PBR 1.0x that the Tokyo Stock Exchange is requesting improvement. Therefore, we believe that the company will actively pursue initiatives to strengthen shareholder return policies along with profit growth in the future, and the trend of increased dividends will continue.

There is a high likelihood that dividends will be postponed for the time being, but there are hopes for future reinstatement.

Since the company has recorded cumulative losses due to the decline in performance, there have been no dividends since the fiscal year ending in March 2009. The company plans to continue investing to improve its financial health through the reduction of interest-bearing debt and expand stable revenues; therefore, dividends as a form of shareholder return are likely to be postponed for a while. However, it is expected that if stable revenues increase alongside the expansion of the fund Business, not only will there be a future reinstatement of dividends, but regular dividends will also become possible.

(Written by Fisco Guest Analyst Ikuo Shibata)