4. Medium- to long-term strategy evaluation

Our company also evaluates that there is rationality and probability in the direction of aiming to strengthen the fund business by utilizing external funds. The fund business is an intellectual capital type business where success or failure is determined by how intangible assets such as know-how and networks can be converted into stable profits without using own funds as much as possible, and although upside is limited, it can be said that capital efficiency and business scalability are also excellent. Therefore, it is necessary to view future changes in the profit structure as an issue that will have a major impact on investment decisions (stock price valuations) against the company. The current change in business policy can also be viewed as proof that we have strengthened the financial base that we have been working on until now and that we have grasped a certain response to project investment, but if we take into account that there was a sense of blockage in the air for further business expansion, there is a possibility that we will reach a major turning point as new networks and know-how have been added due to the transition to a new system and successive business alliances. Since it can be said that the external environment surrounding the investment business is generally booming when viewed from both the various funding needs of companies (including M&A, business revitalization, etc.) and management needs from domestic and foreign investors, how to uncover a wide range of projects based on the business portfolio set out in the new medium-term management plan and match them with domestic and foreign investor needs will be the key to fund formation.

■Company Overview

1. Business Overview

Japan Asia Investment (8518) is an independent comprehensive investment company spanning Japan and Asia, and in addition to PE investments, it also handles project investments (real asset investments) such as renewable energy. While utilizing our abundant investment experience and business infrastructure such as brands, networks, human resources, business partners, etc., we have contributed to industrial revitalization and expansion of economic partnerships in both Japan and Asia through investment and growth support for venture companies and small and medium-sized enterprises, etc. that have innovative technology and business models and have high growth potential.

The company group mainly invests from “investment business associations (funds)” formed by investors from financial institutions, etc., and the fund management balance managed and managed by the company group is 12596 million yen (7 funds) (as of the end of September 2024).

The business segment is a single investment business, but it is divided into three businesses: “investment development business,” “investment management business,” and “fund platform business,” depending on the business area.

An overview of each business is as follows.

(1) Investment development business

It is an investment business where funds are raised through fund formation and loans, investments are made in SPC (special purpose companies) that own equipment, and equipment is operated or sold after equipment is constructed, but in the future, it will switch to investment through funds. The main investment targets are energy (renewable energy power plants, power storage plants), infrastructure (logistics facilities), health care (group homes for people with disabilities), etc. AUM at the end of 2024/9 will rise to 16.8 billion yen.

(2) Investment management business

It is an investment business targeting marketable securities issued by companies. Funds are formed by utilizing the company's strengths, and in addition to carrying out buyout investments, PIPEs, etc. targeting listed stocks and listed bonds, venture investments and buyout investments are carried out in unlisted companies. AUM at the end of 2024/9 will rise to 11.2 billion yen.

(3) Fund and program business

A middle back service for fund management provided by JBS, a subsidiary. JBS provides administrative contract services to management companies such as PE funds based on skills and experience accumulated over many years as a back office division of funds operated by the company group, and has a track record of over 20 years. The AUA at the end of 2024/9 will rise to 255.4 billion yen.

2. HISTORY

Japan ASEAN Investment Co., Ltd., the predecessor of the company, was established in 1981/7 with the parent body of the Association of Corporate Executives. The reason for the establishment was to promote private investment between Japan and ASEAN. In 1985/12, due to capital participation from the Overseas Economic Cooperation Fund (OECF), it became a semi-public and half-private system (however, shares held by the OECF were sold to private companies in 1989/10).

From around 1988, we established bases in ASEAN countries and started investment business in ASEAN for the purpose of playing a part in the “return of funds from trade surpluses” promised by the government at that time. In 1991/6, the trade name was changed to the current Japan Asia Investment Co., Ltd., and the investment target area limited to ASEAN was expanded to Japan, Taiwan, and South Korea. Business continued to expand steadily thereafter, and stocks were registered as over-the-counter trading stocks with the Japan Securities Dealers Association in 1996/9. From 2005, we entered the investment business in China in earnest, and established a Chinese subsidiary in 2007/12. After being listed on the first section of the Tokyo Stock Exchange in 2008/6, investment in renewable energy projects began in 2012 to expand stable profits. Since then, the types of projects to be invested have been diversified, such as health care (facilities for the elderly and group homes for people with disabilities), smart agriculture (plant factories), and distribution centers (logistics facilities).

In 2024/6, it transitioned to a new system along with the change of president.

3. Company characteristics

(1) Profit model

Although there are differences in investment targets in both the investment development business and the investment management business, the company's profit structure is common in that it is a fund business utilizing external funds, and AM fees for AUM managed and operated by the company group are a stable source of income. Furthermore, the fund platform business also has characteristics where stable profits can be obtained, and the pursuit of economies of scale leads to improved profitability. Regarding the investment management business, success rewards (rewards paid when management results exceed a certain level) can be expected as an upside, and since both the investment development business and the investment management business hold a fixed percentage of AUM as in-house equity (GP commit), that part generates temporary capital gains (or losses) when assets are sold. Note that the characteristics of risk and return are determined by the asset class for company equity, but in general, assets with relatively stable cash flow, such as real asset investments, can be said to be middle risk middle return, and securities investments (especially venture investments) are high risk and high return. Therefore, while the company's profit structure is centered on stable earnings due to the expansion of AUM, it can be said that it is a multi-layered profit structure that aims for upside through success rewards and in-house shares at a fixed ratio.

* The company plans that the GP commitment for the investment development business is 20% of AUM, and the investment management business is 3.3% of AUM.

(Written by FISCO Visiting Analyst Ikuo Shibata)