■Direction of the New Medium-Term Management Plan

Japan Asia Investment Co. Ltd. <8518> has announced a new three-year medium-term management plan under the new system. The business areas have been redefined into three categories: "Investment Development Business (Real Asset Investment)", "Investment Management Business (Securities Investment)", and "Fund and Platform Business (Fund Administration)" and there are plans to expand business based on a new business policy. In addition, after organizing external environments and revenue opportunities, a complementary and alternative business portfolio will be constructed, focusing on the development and operation of investment assets and financial products that can respond to various economic environments. A significant difference from the past is the thorough use of external funds through fund formation and loan procurement. Previously, due to the inability to establish funds, investments were made using self-funds (project investments and strategic investments into PE investments), and the utilization of loan funds was not sufficient. In the future, there are plans to strongly position itself as a fund business that provides attractive investment opportunities and investment services to domestic and overseas investors. While suppressing and compressing investments using self-funded resources, it aims to increase AUM in the investment development business and investment management business, accumulate stable revenue through AM fees, and further improve financial soundness.

1. Business Policy

(1) Investment Development Business

Amidst ongoing uncertain economic conditions due to skyrocketing energy prices, labor shortages causing inflationary pressures, and rising interest rates, private real assets that possess inflation hedging properties and defensive characteristics not only serve as strong diversification targets for investors but also contribute to achieving responsible investment goals. The company plans to focus on equity procurement through loan procurement and fund formation, accumulating private real assets with inflation hedging properties (such as renewable energy) and defensive characteristics (such as health care and infrastructure) as part of an expansion into the fund business. While earning stable revenue through AM fees, the revenue model aims for upside through temporary capital gains during asset sales (the company's equity). For the KPI concerning AUM, the goal is to accumulate 5 billion yen annually (gross) to achieve a total of 15 billion yen by the final year.

※ Institutions are required to consider ESG elements such as Environment, Social, and Governance in investment decision-making and shareholder behavior. For example, this includes investments in social project bonds backed by group homes for people with disabilities.

(2) Investment Management Business

The company intends to provide asset management services and financial products utilizing its strengths in both traditional and non-traditional asset classes for domestic and overseas institutions and family offices/affluent individuals. For traditional assets (listed stocks, corporate bonds, etc.), funds related to buyouts (TOB, MBO, MEBO) and PIPEs (private placement of shares in listed companies), which are in high demand from companies, will be formed, and the aim is to offer exclusive investment services that go beyond financial products not only to domestic investors but also to overseas investors (corporate entities) who find it difficult to access the Japanese market. On the other hand, for non-traditional assets (such as PE funds and venture buyouts), leveraging the know-how acquired from forming and operating venture funds, support for overseas expansion centered on Asia and China, and M&A brokerage services, the company aims to engage in venture buyouts, M&A funds, RBO, etc. This business also seeks to earn stable revenue through AM fees while aiming for upside through success fees and temporary capital gains during asset sales (the company’s equity). For the KPI concerning AUM, the goal is to achieve a total of 30 billion yen by the final year through an annual accumulation of 10 billion yen (gross).

By acquiring a significant number of shares in venture companies, involvement in management is achieved, and value-up is performed through hands-on support.

To support the growth of domestic mid-sized companies and venture companies through M&A, the company will form a fund that will handle everything from sourcing investment targets to raising external funds and execution in accordance with their growth strategy.

Abbreviation for Regional Buy Out. It identifies exit options for local companies facing challenges such as unstable shareholder composition, weak financial strength, and market shrinkage due to declining birth rates and aging populations with local large enterprises, management, employees, and founding families, enabling smooth de-listing while maintaining business continuity and management consistency.

(3) Fund Platform Business

At Jaik Administrative Services Co., Ltd. (hereinafter referred to as JBS), which has many years of experience as a fund administrator, solutions for middle and back office operations in fund management are provided. There are few business companies specializing in administrative outsourcing of funds, with accounting firms being the main competitors, but with an increasing trend in the formation of VC funds including CVC, the demand for outsourcing middle and back office operations is large, and it is differentiated from accounting firms specializing in bookkeeping. Since it is a Revenue Model that stabilizes administrative outsourcing fees as a stable source of income, the number of outsourced services and AUA (Assets Under Administration) become KPIs. The goal is to achieve 80 outsourced services and an AUA balance of 400 billion yen in the final fiscal year.

2. Direction of the Business Portfolio

Based on the business policy above, there is a plan to build a business portfolio that can secure revenue in line with changes in the economic environment. Specifically, the economic environment is divided into four phenomena: "High Inflation & High Growth," "Low Growth & High Inflation," "Low Growth & Low Inflation," and "High Growth & Low Inflation." Moreover, in "High Inflation & High Growth," traditional assets (listed stocks, corporate bonds, etc.) will be the focus; in "Low Growth & High Inflation," the focus will be on the energy sector (Rechargeable Battery, renewable energy, etc.) with inflation hedge characteristics; in "Low Growth & Low Inflation," investments will target the infrastructure sector (logistics facilities, etc.) and the health care sector (group homes for disabled individuals, etc.) with defensive characteristics; in "High Growth & Low Inflation," the focus will be on non-traditional assets (PE funds, venture buyouts, etc.) with a view to balanced investments responsive to various economic environments (business cycles).

3. Numerical Plan

Due to the expansion of stable revenue and the improvement of investment income, performance is recovering, aiming for operating revenue of 2,800 million yen, gross operating profit of 2,200 million yen, operating profit of 1,250 million yen, recurring profit of 1,250 million yen, and net income attributable to shareholders of the parent company of 1,000 million yen in the final year (consolidated standard as previously stated. The same applies below). However, the performance in the second year (fiscal year ending March 2026) will temporarily be at a standstill due to the timing of project sales. However, it is expected that stable revenue will steadily accumulate due to the expansion of AUM, and among the operating gross profit of 2.2 billion yen in the final year, 0.8 billion yen is expected to come from stable revenue (AM fees + administrative entrusted fees). Regarding the financial condition, the policy is to promote the expansion of equity capital and the reduction of liabilities without inflating total assets, aiming for total assets of 11.3 billion yen (an increase of 0.9 billion yen compared to the end of March 2024), net assets of 8.8 billion yen (an increase of 3.2 billion yen), borrowings of 1.8 billion yen (a decrease of 2.5 billion yen), and cash deposits of 4.7 billion yen (an increase of 3.6 billion yen), with the intention of achieving zero net borrowings. The ROE, which indicates capital efficiency, is also expected to improve to 12.7%.

(Written by Fisco Guest Analyst Ikuo Shibata)