RLAST UPDATE【2016/11/1】

Tamagawa Holdings | 6838 |Research Report by Shared Research Inc.
Shared Research Inc. has produced this report by request from the company discussed in the report. The
aim is to provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide
an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data
and findings. We will always present opinions from company management as such. Our views are ours
where stated. We do not try to convince or influence, only inform. We appreciate your suggestions andfeedback. Write to us at sr_inquiries@sharedresearch.jp or find us on Bloomberg.

www.sharedresearch.jp

R

Tamagawa Holdings | 6838 |Shared Research Report

LAST UPDATE【2016/11/1】

INDEX
Key financial data ----------------------------------------------------------------------------------------------------- 3
Recent updates --------------------------------------------------------------------------------------------------------- 4
Highlights ----------------------------------------------------------------------------------------------------------------------- 4
Trends and outlook --------------------------------------------------------------------------------------------------- 6
Business ----------------------------------------------------------------------------------------------------------------- 18
Business description ------------------------------------------------------------------------------------------------------- 18
Business segments---------------------------------------------------------------------------------------------------------- 19
Strengths and weaknesses ----------------------------------------------------------------------------------------------- 25
Market and value chain --------------------------------------------------------------------------------------------------- 27
Strategy ------------------------------------------------------------------------------------------------------------------------ 31
Past performance ----------------------------------------------------------------------------------------------------------- 32
Income statement ---------------------------------------------------------------------------------------------------------- 39
Balance sheet----------------------------------------------------------------------------------------------------------------- 40
Cash flows --------------------------------------------------------------------------------------------------------------------- 42
Other information---------------------------------------------------------------------------------------------------- 43
History -------------------------------------------------------------------------------------------------------------------------- 43
News and topics ------------------------------------------------------------------------------------------------------------ 43
Other --------------------------------------------------------------------------------------------------------------------------- 58
Major shareholders --------------------------------------------------------------------------------------------------------- 59
Company profile ------------------------------------------------------------------------------------------------------------ 60

www.sharedresearch.jp

02/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Key financial data

LAST UPDATE【2016/11/1】

Key financial data
Income statement

FY03/10

FY03/11

FY03/12

FY03/13

FY03/14

FY03/15

FY03/16(JPYmn)

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Est.

Total sales

2,803

2,640

3,106

3,672

4,171

5,095

7,260

6,633
-8.6%

YoY

-34.8%

-5.8%

17.7%

18.2%

13.6%

22.1%

42.5%

Gross profit

392

326

590

1,049

1,198

1,479

1,550

YoY

-58.8%-16.8%

81.1%

77.8%

14.3%

23.4%

4.8%

GPM

14.0%

12.3%

19.0%

28.6%

28.7%

29.0%

21.3%

Operating profit

FY03/17

-227

-286

-30

373

477

531

280

354

YoY

-

-

-

-

27.8%

11.3%

-47.4%

26.6%

OPM

-8.1%

-10.8%

-1.0%

10.2%

11.4%

10.4%

3.9%

5.3%

-224

-284

-24

375

478

514

211

260

YoY

-

-

-

-

27.6%

7.5%

-58.9%

23.0%

RPM

-8.0%

-10.8%

-0.8%

10.2%

11.5%

10.1%

2.9%

3.9%

Net Income

-570

-351

-37

340

436

427

165

192

-

-

-

-

28.5%

-2.2%

-61.3%

16.1%-20.3%-13.3%

-1.2%

9.3%

10.5%

8.4%

2.3%

2.9%

No. of shares ('000)

6,774

6,774

6,774

10,753

41,25942,031

42,598

EPS

-35.1

-17.8

-1.9

15.7

11.7

10.4

4.0

-

-

-

14.8

10.6

10.2

3.9

Recurring Profit

YoY
Net Margin
Per share data

EPS (fully diluted)
Dividend per share
Book value per share

-

-

-

-

-

1.0

1.5

58.9

40.6

38.6

54.3

64.8

75.4

78.1

4.6
1.0-3.0

Balance sheet(JPYmn)
Cash and equivalents

665

493

56

390

1,764

1,524

2,737

Total current assets

1,918

1,530

1,293

2,114

3,421

3,606

4,221

Tangible fixed assets, net

295

205

133

564

718

2,410

2,464

Other fixed assets

89

30

18

27

38

154

169

Intangible assets

39

-

-

1

31

194

309
7,164

Total assets

2,341

1,766

1,445

2,709

4,210

6,376

Accounts payable

443

430

364

386

474

620

321

Short-term debt

433

203

30

40

323

300

1,395

Total current liabilities

2,049

1,026

884

598

708

1,130

1,481

Long-term debt

67

-

-

151

294

539

612

Total fixed liabilities

153

83

85

251

442

1,733

1,820

Total liabilities

1,179

967

683

959

1,572

3,215

3,869

Net assets

1,162

799

761

1,751

2,638

3,161

3,295

500

203

30

192

618

839

2,007

Interest-bearing debt
Cash flow statement(JPYmn)
Cash flows from operating activities

-1

68

-332

36

764

387

1,614

Cash flows from investing activities

12

93

77

-454

-265

-865

-392

Cash flows from financing activities

-82

-299

-168

783

875

238

-2

ROA

-8.4%

-13.8%

-1.5%

18.0%

13.8%

9.7%

3.1%

ROE

-43.4%-35.8%

-4.7%

27.4%

20.1%

14.8%

5.2%

Equity ratio

49.6%

45.3%

52.7%

64.6%

62.7%

49.6%

46.0%

Financial ratios

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

www.sharedresearch.jp

03/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Recent updates

LAST UPDATE【2016/11/1】

Recent updates
Highlights
On November 1, 2016, Tamagawa Holdings Co., Ltd. announced that it received an order for a subsystem that will be
used in a next generation weather instrument.
The company received an order from Toshiba Corporation for a subsystem that will be used in a next-generation weather
instrument. This device is part of the “research and development of technology to predict heavy rains and tornadoes,” oneitem of the national project “Enhancement of Societal Resiliency against Natural Disasters” under the Strategic Innovation
Promotion Program (SIP). The results of this project are expected to be used in the 2020 Tokyo Olympics and Paralympics.

Resiliency is used in this case to refer to the ability of a society to recover and withstand natural disasters that result from climate change.

On October 31, 2016, the company made an announcement regarding the acquisition of fixed assets (mega-solar
electricity generation facilities) through a lease.
GP Energy 6 Co., Ltd., a subsidiary of Tamagawa Holdings’ consolidated subsidiary GP Energy Co., Ltd,, has passed a
resolution to acquire the mega-solar power plant in Noboribetsu city, a facility with an output of approximately 2MW thatthe company has been planning for construction in Hokkaido’s Noboribetsu city. GP Energy 6 intends to acquire the power
generation plant by entering into a contract with Ricoh Leasing Company, Ltd., with the lease planned to begin in August
2017.
The mega-solar electricity generation facility in Noboribetsu city, Hokkaido occupies a favorable site approximately
72,000sqm in area, and will be able to sell electricity at a fixed feed-in tariff of JPY40 per kW (excluding consumption tax) for
twenty years, with an expected yearly generation revenue (planned) of approximately JPY94mn. Further, twelve units oftracking systems that can be anticipated to improve the efficiency of solar energy power generation are planned for
installation within the same site, and are expected to contribute to earnings of the company. KCCS Mobile Engineering Co.,
Ltd., the company responsible for construction of this power generation facility, is a Kyocera group company that has
worked on installation and construction of public and industrial solar power generation system facilities throughout Japan.
Shared Research believes that the construction of this facility to proceed in a rapid, reliable manner.
Description of assets to be leased (mega solar power generation facility in Noboribetsu city, Hokkaido)Operator: GP Energy 6 Co., Ltd.

EPC operator: KCCS Mobile Engineering Co., Ltd.



Capacity: Approximately 2 MWFirst year output (planned): About 2,350,000 kWhOutline of leased assets and total lease fee: Solar power generation systems for JPY711mn

Acquisition cost equivalent: JPY490mn

On October 6, 2016, the company announced the operational launch of a system for which the company had earlier won
a consignment contract in the public and social infrastructure field.

www.sharedresearch.jp

04/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞

LAST UPDATE【2016/11/1】

The company’s Tamagawa Electronics Co., Ltd. unit (Tamagawa Electronics), sought to win more contracts in the public
and social infrastructure field to expand its business territory. As a result, the company received an order from Nippon
Airport Radio Service Co., Ltd. for development and production of an optic distributed antenna system (DAS) for an airport
multi-channel access (MCA) radio network. The system has begun operation at Narita International Airport.
Tamagawa Electronics supplied the DAS system, an optical transmission device for dead zones aimed at increasing thenumber of communications lines and enhancing the overall network functionality. One of the major features of this systemis that it can be expanded with the addition of more units, allowing the user to easily enlarge the wireless communications
area. The system can also be used with a surveillance application using the ethernet to monitor various devices inoperation.

On September 12, 2016, the company announced the status of its mega solar power plant in Noboribetsu, Hokkaido
Prefecture.

Status of the mega solar power plant in Noboribetsu
The company already received certification for the land and power sales business at the mega solar power plant inNoboribetsu, Hokkaido Prefecture. It had been applying for development permits and preparing for construction. It
received permission from Hokkaido Prefecture to develop forested area necessary to build a large solar power plant.
The price has been approved under METI’s feed-in tariff scheme for renewable energy, at JPY40 per kWh (excl. tax; fixed for
20 years).

Overview of the plant
Capacity:

About 2 MW

Feed-in tariff (fixed for 20 years): JPY40/kWh (excl. tax)
Generation revenue (planned):

About JPY94mn/year

First-year output:

About 2,350.000kW

On September 2, 2016, Shared Research updated this report following interviews with the company.
On August 12, 2016, the company announced earnings results for Q1 FY03/17; see the results section for details.

For corporate releases over three months old, see the News and topics section.

www.sharedresearch.jp

05/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Trends and outlook

LAST UPDATE【2016/11/1】

Trends and outlook
Quarterly trends and results
Quarterly performance (cumulative)(JPYmn)FY03/16Q1

FY03/17

Q2

Q3

Q4

Q1

Sales

682

1,108

3,341

7,260

476

YoY

-18.3%-42.4%

7.7%

42.5%

-30.2%

225

353

776

1,550

132

YoY

-13.8%-42.7%-22.1%

4.8%-41.1%

GPM

33.0%

31.9%

23.2%

21.3%

27.8%

247

514

866

1,270

237

YoY

21.4%

27.1%

38.8%

34.0%

-4.1%

SG&A-to-sales ratio

36.2%

46.4%

25.9%

17.5%

49.7%

-22

-161

-90

280

-104

-

-

-

-47.4%-

Gross profit

SG&A expenses

Operating profit
YoY
OPM
Recurring profit
YoY

-

-

-

3.9%

-

-32

-190

-138

211

-129

-

-

-

-58.9%

-

RPM

-

-

-

2.9%

-

Net income

-38

-249

-180

165

-90

YoY

-

-

-

-61.3%-Net margin

-

-

-

2.3%

-

Quarterly performance

FY03/16
Q1

Q2

Q3

Q4

Q1

Sales

682

426

2,233

3,919

476

YoY

-18.3%-60.9%

89.6%

96.6%

-30.2%

225

128

423

774

132

YoY

-13.8%-63.9%

11.4%

60.4%

-41.1%

GPM

33.0%

30.2%

18.9%

19.7%

27.8%

247

267

352

404

237

YoY

21.4%

33.0%

60.4%

24.8%

-4.1%

SG&A-to-sales ratio

36.2%

62.7%

15.8%

10.3%

49.7%

-22

-139

71

370

-104

YoY

-

-

-55.9%

132.6%

-

OPM

-

-

3.2%

9.4%

-

-32

-158

53

349

-129

YoY

-

-

-66.0%

133.2%

-

RPM

-

-

2.4%

8.9%

-

Net income

-38

-211

69

346

-90

YoY

-

-

-51.1%

108.1%-Net margin

-

-

3.1%

8.8%

-

SG&A expenses

Operating profit

Recurring profit

FY03/17
Q3

Q4% of FY FY Est.
7.2%

6,633
-8.6%

354

-

26.6%
5.3%

-

260
23.0%
3.9%

-

192
16.1%
2.9%

FY03/17(JPYmn)Gross profit

Q2

Q2

Q3

Q4

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.
Net income is net income attributable to the parent company shareholders.

www.sharedresearch.jp

06/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Trends and outlook

LAST UPDATE【2016/11/1】

Segment breakdown (cumulative)

FY03/16

FY03/17(JPYmn)

Q1

Q2

Q3

Q4

Q1

Sales

682

1,108

3,341

7,260

476

YoY

-18.3%-42.4%

7.7%

42.5%

-30.2%

594

946

1,374

2,091

402

-23.5%-45.7%-50.0%-38.5%-32.4%

Electronics and Telecoms Equipment
YoY
Renewable Energy System Sales
YoY
Solar Power Plant Operations
YoY
Geothermal Power Plant Operations
Operating Profit
YoY
Electronics and Telecoms Equipment
YoY
Renewable Energy System Sales
YoY
Solar Power Plant Operations

17

27

1,786

4,938

8

-47.2%-80.1%

509.0%

207.5%-56.4%

71

135

180

230

67

179.8%

197.9%

202.7%

161.8%

-5.0%

-

-

-

-

-

-22

-161

-90

280

-104

-138.6%-175.8%-124.3%-47.4%

372.0%

5

-90

-102

-12

-22

-95.0%

-

-

-

-

-46

-109

-28

287

-64

-

-

-

155.9%

-

29

51

56

57

29
-1.9%

179.3%

217.1%

258.6%

155.2%

Geothermal Power Plant Operations

-0

-0

-0

-21

-

Adjustments

-10

-12

-16

-31

-46

YoY

Segment breakdown (quarterly)

FY03/16
Q1

Q2

Q3

Q4

Q1

Sales

682

426

2,233

3,919

476

YoY

-18.3%-60.9%

89.6%

96.6%

-30.2%

594

351

428

717

402

-23.5%-63.6%-57.4%

9.9%-32.4%

17

10

1,759

3,152

8

-47.2%-90.4%-

140.1%-56.4%

YoY
Renewable Energy System Sales
YoY
Solar Power Plant Operations
YoY
Geothermal Power Plant Operations
Operating Profit

71

65

45

50

67

179.8%

220.5%

218.4%

76.0%

-5.0%

-

-

-

-

-

-22

-139

71

370

-104

YoY

-

-

-

-

-

Electronics and Telecoms Equipment

5

-95

-12

91

-22

YoY
Renewable Energy System Sales
YoY
Solar Power Plant Operations
YoY

Q3

Q4

Q3

Q4

FY03/17(JPYmn)Electronics and Telecoms Equipment

Q2-95.0%

-

-

-

-

-46

-63

82

314

-64

-

-

-

140.6%

-

29

22

5

1

29

179.3%

287.6%--91.8%-1.9%

Geothermal Power Plant Operations

-0

-0

-0

-21

-

Adjustments

-10

-2

-4

-15

-46

Q2

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
As of Q1 FY03/15, Tamagawa’s reporting segments comprised Electronics and Telecoms Equipment, Solar System Sales, Solar Power Plant
Operations, and Geothermal Power Plant Operations, but from Q1 FY03/16, the Solar System Sales segment has been renamed Renewable
Energy System Sales.

www.sharedresearch.jp

07/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Trends and outlook

LAST UPDATE【2016/11/1】

Q1 FY03/17 results
Sales:JPY476mn (-30.2% YoY)

Operating loss:

JPY104mn (operating loss of JPY22mn in Q1 FY03/16)

Recurring loss:

JPY129mn (recurring loss of JPY32mn in Q1 FY03/16)

Net loss*:

JPY90mn (net loss of JPY38mn in Q1 FY03/16)(*Net loss refers to net loss attributable to parent company’s shareholders.)

Electronics and Telecoms Equipment
Orders:JPY481mn (+5.9% YoY)

Sales:

JPY402mn (-32.4% YoY)

Operating loss:

JPY22mn (operating profit of JPY5mn in Q1 FY03/16)

Mobile telecom providers continued to restrain capital investment on base stations from Q4 of the previous year, leading toa drop in both segment sales and profit.

Renewable Energy System Sales
Orders:

JPY127mn (-36.9% YoY)

Sales:

JPY8mn (-56.4% YoY)

Operating loss:

JPY64mn (operating loss of JPY46mn in Q1 FY03/16)

As major sales projects are concentrated in 2H, the segment saw reductions in sales and profit.

Solar Power Plant Operations
Sales:

JPY67mn (-5.0% YoY)

Operating profit:

JPY29mn (-1.9% YoY)

The segment booked electricity sales from mega solar power plants in Shimonoseki, Tateyama, and Sodegaura

Geothermal Power Plant Operations
No sales or expenses were booked, as the company prepares to start operations of geothermal power plants.

For details on previous quarterly and annual results, see the Historical financial statements section.

www.sharedresearch.jp

08/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Trends and outlook

LAST UPDATE【2016/11/1】

Full-year company forecasts
FY03/16FY Act.
7,260(JPYmn)Sales

FY03/17FY Est.
6,633

CoGS
Gross profit
GPM
SG&A
SG&A-to-sales ratio
Operating profit
OPM
Recurring profit
RPM
Net income

5,710
1,550

280
3.9%
211
2.9%
165

354
5.3%
260
3.9%
192

Net margin

2.3%

2.9%

1,270

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Company forecasts by segment
Forecasts by Segment(JPYmn)
Sales
Electronics and Telecoms Equipment
Renewable Energy Systems Sales
Solar modules
Power plants (subdivision)

Solar Power Plant Operations
Geothermal Power Plant Operations
Operating Profit
Electronics and Telecoms Equipment
Renewable Energy Systems Sales
Solar Power Plant Operations
Geothermal Power Plant Operations
Adjustments

FY03/16
Act.
7,260
2,108
4,965
28
4,937
230
0
280
-12
287
57
-21
-31

FY03/17FY Est.
6,633
2,600
3,787
3,787
246
0
354
214
223
61
-144

YoY
-8.6%
23.3%
-23.7%-23.3%
6.8%
26.6%-22.2%
7.7%-

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

FY03/17 forecast
Sales:

JPY6.6bn (-8.6% YoY)

Operating profit:

JPY354mn (+26.6% YoY)

Recurring profit:

JPY260mn (+23.0% YoY)

Net income:

JPY192mn (+16.1%YoY)

Forecasts by segment are as follows.

Electronics and Telecoms Equipment
Sales:

JPY2.6bn (+23.3% YoY)

Operating profit*:

JPY214mn (operating loss of JPY12mn during FY03/16)*Operating profit includes corporate distributed costs; the same applies throughout.

www.sharedresearch.jp

09/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Trends and outlook

LAST UPDATE【2016/11/1】

According to the company, its balance of orders as of end May 2016 was 54.3% higher year-on-year, the result of focusing
on capturing orders in the telecoms and broadcasting industries in the public and private sectors. The company projects
that results for FY03/17 will be skewed toward the second half, owing to a high percentage of sales being booked in thesecond half for products targeting the public sector.
Although sales of mobile-related products are forecast to decline, sales of optical equipment in the transportation
sector—which includes railway and airports—are projected to increase, while sales are also forecast to rise in defense-relatedareas and testing equipment for power semiconductors.
In mobile-related products, mobile telecommunications providers are working to enrich base station facilities for 4G
services such as LTE-Advanced and WiMAX2+, but as the company’s ability to provide products compatible with thesecommunications standards are limited, sales are forecast to decrease. However, mobile-related sales decreased during
FY03/16 and the sales composition declined to 23.1%, signaling a lower contribution from this product family to overall
segment results.
In the transportation sector (railway and airports), Tamagawa has been focusing on capturing orders from FY03/16 in areasthat utilize optical transmission technologies, which it had been developing for many years in cooperation with Tamagawa
Electronics. As a result, sales of optical equipment for airport facilities are projected to increase in FY03/17. In
defense-related areas, sales were subdued in FY03/16 as it was a trough period for major projects, but a recovery is
projected for FY03/17 in line with contributions from new projects. In testing equipment for power semiconductors, thecompany was also successful in acquiring orders for products in the aerospace sector; sales are estimated to double
year-on-year.

Renewable Energy Systems Sales
Sales:

JPY3.8bn (-23.7% YoY)

Operating profit*:

JPY223mn (-22.2% YoY)

The Renewable Energy Systems segment saw strong results in FY03/16 due to increasing sales activity of equipment forsolar power plants. In FY03/17, sales and profits are forecast to decline year-on-year, owing to the booking of sales for solar
power plant equipment in FY03/16 that was initially projected to be recorded during FY03/17.
Sales of small-scale wind power generation equipment—scheduled to begin in FY03/17—are forecast to reach JPY830mn,
factoring in only sales with a high degree of certainty. As of June 2016, small-scale wind power generation equipment wasundergoing test installation at the Tateyama plant, and Tamagawa is gathering data to use in its promotional activities.

Solar Power Plant Operations and Geothermal Power Plant Operations
Sales:

JPY246mn (+6.8% YoY)

Operating profit*:

JPY64mn (+7.7% YoY)

Higher power output from solar tracker generation systems and small-scale wind power generation is forecast to contributeto higher sales and profits. Although the Noboribetsu plant in Hokkaido Prefecture (Power output: 1.99MW; Feed-in tariff:
JPY40/kWh) is to begin operation during Q4 FY03/17, revenue generated by this plant is not incorporated into thecompany’s forecasts.

www.sharedresearch.jp

10/61

R

Shared Research Report

Tamagawa Holdings ＞ Trends and outlook

Tamagawa Holdings | 6838 |LAST UPDATE【2016/11/1】

The Misawa plant (Aomori Prefecture) is also scheduled to begin operation in Q4, and this plant is projected to contributeto investment income in affiliates due to the company’s 30% ownership stake.

Dividends
Tamagawa projects dividends of between JPY1.0 and JPY3.0 per share.

www.sharedresearch.jp

11/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Trends and outlook

LAST UPDATE【2016/11/1】

Long-term outlook
In June 2016, Tamagawa announced its medium-term plan for FY03/17–FY03/20. Targets for FY03/20 are sales of JPY10.1bn
and operating profit of JPY1.1bn. Goals by segment are as shown in the table below.

Medium-term plan sales and profit targets by segment
Long-Term Outlook

FY03/16

FY03/17 vs. FY03/16

FY03/20 vs. FY03/16(JPYmn)Ac t .

Plan

ChangesPlan

Changes

Sales

7,259

6,633

-8.6%

10,14039.7%

Electronics and Telecoms Equipment

2,091

2,600

24.3%

3,500

67.4%

Renewable Energy System Sales

4,938

3,787

-23.3%

5,100

3.3%

230

246

7.0%

1,190

417.4%

Solar Power Plant Operations

-

-

-

350

-

279

354

26.9%

1,090

290.7%New Businesses
Operating Profit
Electronics and Telecoms Equipment

-11

214

-

350

-

Renewable Energy System Sales

286

223

-22.0%

370

29.4%

Solar Power Plant Operations

56

61

8.9%

335

498.2%New Businesses

-

-

-

35

-

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Electronics and Telecoms Equipment
Under the medium-term plan, Tamagawa will aim for sales of JPY3.5bn (+67.4% versus FY03/16) and operating profit of
JPY350mn (operating loss of JPY11mn in FY03/16) in FY03/20.
Since Masanori Kobayashi—CEO of Tamagawa Electronics—became a director at Tamagawa Holdings in June 2011, the plan
has been to exit unprofitable projects, strengthen R&D, and launch new products to expand sales, while stepping up salesof more profitable Tamagawa-brand products.
In FY03/16, sales decreased due to lower sales to mobile telecoms companies, which lowered their spending on basestations. Defense related sales also decreased due to fizzling demand for facility renewal. However, to cope with
year-on-year declines in sales, Tamagawa worked to restrain fixed costs and R&D expenses from the July–September quarter
onward. According to the company, acquisition has been steady during FY03/16 for contracts of public works projects inmobile telecoms and broadcasting. As a result, although sales dipped in FY03/16, these are forecast to be covered byhigher sales and profits in FY03/17 and beyond, driven by confirmed orders in FY03/16 for optical transmission equipment
for trains.
◤

Mobile network operators (MNOs) are likely to accelerate base station upgrades as they launch LTE-Advanced
high-speed data transmission services around 2016, so it expects renewal demand. According to the company, in
preparation for the 2020 Tokyo Summer Olympics there is expected to be an increase in demand, driven by demand
for small-cell infrastructure that can handle high-speed data traffic. For 5G (Fifth-Generation Mobile Communications
System), technologies such as the SHF band, submillimeter and millimeter waves, carrier aggregation, massive-MIMO,
beam forming, and NOMA are scheduled to be implemented in order to reach transmission speeds of up to 100 times
those that are currently available, and the company is moving forward with development to meet these technologicalneeds.

◤In terms of optical transmission equipment for trains, Tamagawa in FY03/16 has increased efforts to win contracts forwww.sharedresearch.jp

12/61

R

Shared Research Report

Tamagawa Holdings | 6838 |Tamagawa Holdings ＞ Trends and outlook

LAST UPDATE【2016/11/1】

telecoms and broadcasting-related public works projects to minimize the impact of restrained capex spending on themobile-phone infrastructure market. As a result, the company has won an order. According to Tamagawa, it is analog
optical transmission equipment. One of its benefits is the cost effectiveness due to system simplification: They enablewireless signals that are the same as radio waves to be directly converted to optical signals and transmitted. Further,compared to coaxial cables, optical fiber is suitable for transmitting wireless signals over long distances because of its
high frequency characteristics, in addition to fewer signal losses. This technology has been applied for use in airports,
with a wireless system delivered in FY03/16. The company expects the development of these products to boost
earnings from FY03/17–FY03/19.
◤

Since FY03/14, the company has increased investments in R&D for products of its own brand. It started sales of testing
equipment for power semiconductors and a high-definition-image monitoring system in FY03/15. For the medium
term, Tamagawa has been developing new products related to heavy particle accelerators for cancer treatment in the
medical field, and electric noise resistance testing in the automotive sector.

◤

In March 2015, Tamagawa established a second-tier subsidiary in Vietnam, Tamagawa Electronics Vietnam Co., Ltd.
The subsidiary began operation in October 2015. Following its launch, the company began production ofhigh-quality, high-frequency passive components for use in telecoms and broadcasting, as well as mobile basestations, geared toward the Japanese market. Reduced costs through increased local procurement are planned to leadto improvements in price competitiveness, yielding an increase in orders. Before long, the company aims to expand
business into Southeast Asia and the Middle East, focusing on capturing orders for overseas mobile infrastructuredevices via low-cost proposals.

◤

In other areas, the medium-term plan calls for acquiring orders via product proposals in the areas of AM/FM
rebroadcasting equipment for dead zones and subsystems for next-generation digital terrestrial broadcasting
equipment ahead of the Tokyo Olympics. Expansion of business via M&A in related areas is also a possibility.

Renewable Energy System Sales
Under the medium-term plan, Tamagawa will aim for sales of JPY5.1bn (+3.3% versus FY03/16) and operating profit of
JPY370mn (+29.4% versus FY03/16) in FY03/20. The company plans for contributions from sales of small-scale wind power
generation equipment and development contracting fees in solar power plant development.

Selling solar power plant equipment
In FY03/15, Tamagawa obtained certain rights to sites for solar power plants and the Feed-in Tariff (FIT) scheme, and after
the construction of solar power plants started sales of solar power plant equipment. The company reported sales of
JPY1.1bn from selling 2.2MW equipment in FY03/15, and in FY03/16, sales of JPY5.0bn were booked through the sale of
10.2MW equipment.

When tax incentives for promoting investments in facilities to improve productivity, under which a solar power producer
can immediately have related facilities fully depreciated, expired at the end of March 2016, the percentage of deprecation lfell to 50% from April onwards. While Tamagawa still believes that it will be able to promote the selling of solar power plant
equipment as a lucrative business in FY03/17, the company is anticipating a sales decline. Being proactive, however, it plans
to offset the sales decline by adding the sale of small-scale wind power generation equipment (see below for details) to its
portfolio from FY03/18 onward. Entering the market for secondhand solar power generation plants is also included in themedium-term plan.

www.sharedresearch.jp

13/61

R

Shared Research Report

Tamagawa Holdings ＞ Trends and outlook

Tamagawa Holdings | 6838 |LAST UPDATE【2016/11/1】

Selling small-scale wind power generation equipment
Tamagawa will start selling small-scale wind power generation equipment, with projected sales of about 100 units (=approx. JPY3.0bn) over the medium term.

Summary of small-scale wind power generation equipment
Small-scale wind power generation refers to wind power generation equipment producing less than 20kW of electricity. As
of February 2016, the purchase period for a wind power generation equipment of less than 20kW is 20 years, at the price of
JPY55/kWh. Provided that wind speeds are sufficient, wind power generation can generate electricity during the night,
differentiating it from solar power generation.
Small-scale wind power generation equipment sold by Tamagawa utilizes wind turbines supplied by C&F Green Energy.
According to the company, these turbines have the highest output out of all small-scale wind power generation equipmentthat have obtained ClassNK approval from the Nippon Kaui Kyokai, a required certification for facilities to be used in the
fixed-rate guarantee program. Seven companies in Japan are first-tier sales agents for C&F Green Energy, and the only
publicly listed company that specializes in renewable energy among these seven is Tamagawa. In order to demonstrate thereliability and functionality of this product, the company plans to construct and operate Small-scale Wind Power Generator
Facility No. 1 (power output: 19.5kW) on grounds available at its Tateyama plant (power output: approx. 2,000kW). The
wind turbines are supplied by C&F Green Energy, the manufacturer of models the company plans to sell.

C&F Green Energy—a C&F Group member company based in Ireland—is set to provide wind turbines to Tamagawa. C&F Green Energy began
development, production, and installation of small and medium scale wind power generation equipment in 2006. It has installed over 1,000 windturbines across Europe, including in Ireland, the United Kingdom, Italy, France, and Switzerland. The C&F Group began design, manufacturing, andsupply of metal and chrome parts for automotive applications in 1989, and provides its products to companies across the globe. The current windturbine units—manufactured by C&F Green Energy—to be provided to Tamagawa have received ClassNK approval from Nippon Kaiji Kyokai, anecessity for facilities to receive approval under the feed-in tariff system.

C&F Green Energy small-scale wind power generation equipment (Tateyama plant)

Source: Company data

Sales plans
The unit price of Tamagawa’s small-scale wind power generation equipment is about JPY30mn. Sales—scheduled to begin
in FY03/17—are forecast to reach JPY830mn, factoring in only sales with a high degree of certainty.

www.sharedresearch.jp

14/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Trends and outlook

LAST UPDATE【2016/11/1】

Development contracting fees in solar power plant development
For large-scale solar power generation projects with capacity of about 10MW or more, the company has a policy of securing
funding through joint development. During joint development of mega solar power generation facilities, the company
generates revenue not only from selling power, but by transferring ownership of the land to be used for the plant. Sales alsocome in the form of development contracting fees, which include fees received on disposal of land ownership rights and forthe preparation of requisite legal documentation. The company plans to receive such fees from the Misawa plant (power
output of 9.5MW), scheduled to begin operation in FY03/17.
As of June 2016, the company estimates that there is latent demand for solar power generation projects—much like theMisawa plant—equivalent to about 100MW of output. By being involved in development of latent projects over the
medium term, Tamagawa aims to acquire development contracting fees. In June 2016, with the intent of establishing aproprietary project financing system for the development of renewable energy power generation plants, the company
newly established a dedicated project financing office.

Solar and Geothermal Power Plant Operations
Under the medium-term plan, Tamagawa will aim for sales of JPY1.2bn (+417.4% versus FY03/16) and operating profit of
JPY335mn (+498.2% versus FY03/16) in FY03/20. Plans call for combined power output of solar, geothermal, andsmall-scale wind power generation to grow from 4.8MW in FY03/16 to 20.0MW in FY03/19. The company also plans to
consider renewable power generation businesses within Asia during the medium-term plan.

Power output under the medium-term plan

Solar power plants

FY03/16

FY03/19

4.8MW

16.2MW-

850kW (equivalent to 6.8MW of solar power)-

351kW (equivalent to 2.8MW of solar power)

Geothermal power plants
Small-scale wind power plants
Source: Shared Research based on company data

Generating capacity of solar power plants
As of June 2016, the company’s solar power facilities, including those already in operation and those planned forconstruction, had a combined generating capacity of 11.4MW (see “Solar power plant generation in the Business section”),
in addition to total output of 4.8MW from solar power plants. Land and rights to develop have already been secured tomeet the goal of 16.2MW in generating capacity set forth as a target for FY03/19 under the medium-term plan.
In the development of solar power generation facilities, the company utilized its own funds in the development of the solar
power generation plant at Shimonoseki—its first venture—but from the Tateyama plant onward, Tamagawa has made use ofleases and joint development initiatives to secure funding for facilities development. If a solar power plant is constructedunder a leasing arrangement, the internal rate of return (IRR) is improved; compared with an IRR of 7.5% for the
Shimonoseki plant, the Tateyama plant achieved an IRR of 16.5%.
For large-scale solar power generation plants with generating capacity of about 10.0MW or more, the company has as its
policy to acquire funding via joint development. In June 2015, Tamagawa established an SPC via joint investment with
Etrion Japan for development of the Misawa plant (Aomori Prefecture), with Tamagawa holding a 30% stake. The Misawa
plant is scheduled to begin operation in February 2017 with power generating capacity of about 9.5MW (Tamagawa will

www.sharedresearch.jp

15/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Trends and outlook

LAST UPDATE【2016/11/1】

hold 3.0MW), and it is expected to generate approximately JPY390mn per year in revenue. Earnings from the plant, to bebooked as equity-method investment profit, are expected to start making contributions from 2H FY03/17 onward.

Outline of Etrion Energy 5 LLC

EPC / O&M
Sumitomo Mitsui Trust Bank

Hitachi High-Technologies
Corporation

000

EPC / O&M contracts

Project finance

Misawa power plant 10MW
(Etrion Energy 5 LLC)
Development service agreement

Sale ofelectric power

IncomeSponsors (equity holders)Tamagawa Holding
groupElectric powercompanies

Etrion Japan 60%
Tamagawa Holdings 30%
Hitachi High-Technologies 10%

Source: Company materials*EPC refers to businesses comprehensively undertaking construction projects across the fields of engineering, procurement, and construction*O&M refers to businesses that undertake operation and maintenance of facilities after construction is complete

Geothermal power generation business
Under the medium-term plan, Tamagawa will aim for geothermal power generation of 850kW (equivalent to 6.8MW ofsolar power) in FY03/19.

Geothermal power generation
Geothermal power generation involves using steam and hot water produced under the earth’s surface to drive steam
turbines connected to electricity generators. This type of generation produces less carbon dioxide than thermal power
stations. Another advantage is that geothermal generation is not affected by the depletion or rising prices of fuel, and it canbe used in perpetuity. Geothermal generation also provides stable power; it is not affected by the weather, seasons, or
day/night fluctuations like other major renewable energy sources such as solar and wind power.
According to the company, the Japanese government mulled over next-generation energy sources during the oil shocks in
the 1970s and determined nuclear power as a core source of electricity in Japan. However, due to the New Energy andIndustrial Technology Development Organization (NEDO)’s accumulation of data on geothermal power generation, it is
now considered a source of energy with high potential in Japan.
The two main methods of geothermal power generation are steam and binary generation.

◤

Steam generation: With this method, turbines are driven directly by natural steam at temperatures of 200–300C or
more. Subterranean water at high temperatures and pressures is dominated by either steam or hot water. With theformer, moisture can be easily removed and the dry steam routed to turbines to generate electricity. If the source isdominated by hot water, the fluid is first run through a flasher, which separates the steam from the hot water. In a

www.sharedresearch.jp

16/61

R

Shared Research Report

Tamagawa Holdings | 6838 |Tamagawa Holdings ＞ Trends and outlook

LAST UPDATE【2016/11/1】

double-flash cycle, turbines are driven by both high- and low-pressure steam.
◤Binary generation: This method is used when hot water and steam temperatures are 150C or less, and thus cannot
drive turbines directly. Heat is exchanged from the geothermal fluid to a medium that has a lower boiling point thanwater (such as a water/ammonia mixture), and steam from that medium drives turbines to generate electricity.

Feed-in tariff system for geothermal power generation
Under the FY 2016 feed-in tariff system, the price for electricity produced by solar power plants is JPY24 per kilowatt andthe purchase period is 20 years (consumption tax not included for 10kW or more). In contrast, the price for electricity
produced by geothermal power plants is JPY40 per kilowatt and the purchase period is 15 years (consumption tax notincluded for 15,000kW or less).
According to the company, a 1MW solar power plant, which needs capital spending worth JPY301mn (on assumption thatthe site is rented), generates annual electricity sales of JPY29mn (on assumption of an average daily quantity of solar
radiation of 3.7kWh/sqm), annual operating profit of JPY3mn, and an average yield of 6.3%, for a payout period of 15.7
years. Meanwhile, a 125kW geothermal plant (which generates electricity roughly equivalent to a 1MW solar power plant)
needs capital spending worth JPY205mn (the site on rent) and generates annual sales of JPY41mn, annual operating profitof JPY18mn, and an average yield of 15.5% for an expected payout period of 6.4 years.

Beppu geothermal power plant achievements
In January 2015, the company announced that it planned to build a total of seven geothermal power plants, and to this end
acquired a total of seven separate plots of land. The company moved forward on construction at two of the seven sites butchanged its plan in December 2015. The company sold the two plants currently under construction to a third-party andsold back the sites acquired for the five other geothermal power plants to their original owners.
Against risks of drilling springs, the company apparently considers a method of drilling based on joint investments, which
will have no direct effect on the company’s business results but will enable the company to secure preferential rights tosprings.

Other businessHydrogen power
In January 2016, Tamagawa announced that it would establish in internal division to prepare for future developments inhydrogen power. Plans call for research and exploration of methods to store power generated via hydrogen.
In the renewable energy field, limitations imposed by the impact of weather conditions on systems such as solar power andwind power generation are an ongoing concern. Hydrogen power storage systems produce hydrogen from excess power
generated by solar and wind power generation systems, and store this hydrogen for future use. The stored hydrogen isthen combined with fuel cells, to release power as needed. Conventional batteries lose charge over time, buthydrogen—stored in tanks—can be stored for much greater lengths of time, allowing for efficient energy storage. This
stored energy can then be provided to various areas on an as-needed basis.

www.sharedresearch.jp

17/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Business

LAST UPDATE【2016/11/1】

Business
Business description
Tamagawa has three business segments: 1) Electronics and Telecoms Equipment business, which it has been involved insince the founding of consolidated subsidiary Tamagawa Electronics Co., Ltd. in 1968; 2) Solar Business, launched in
FY03/12; and 3) Geothermal Power Generation Business, launched in FY03/15.

FY03/09

FY03/10

FY03/11

FY03/12

FY03/13

FY03/14

FY03/15(JPYmn)Earnings by segment

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Sales

4,299

2,803

2,640

3,106

3,672

4,171

5,095

7,260
42.5%

YoY

FY03/16

7.1%-34.8%

-5.8%

17.7%

18.2%

13.6%

22.1%

3,248

2,709

2,390

2,406

3,156

3,230

3,401

2,091

YoY

-14.2%-16.6%-11.8%

0.7%

31.2%

2.3%

5.3%

-38.5%% of total

75.6%

96.6%

90.5%

77.5%

85.9%

77.4%

66.7%

28.8%

-

-

-

19

441

890

1,606

4,938

YoY

-

-

-

-

-

101.8%

80.4%

207.5%% of total

-

-

-

0.6%

12.0%

21.3%

31.5%

68.0%

-

-

-

-

-

52

88

230

YoY

-

-

-

-

-

-

70.7%

161.8%% of total

-

-

-

-

-

1.2%

1.7%

3.2%

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-68

-227

-286

-30

373

477

531

280

-

-

-

-

-

27.8%

11.3%

-47.4%

Electronics and Telecoms Equipment

Renewable Energy System Sales

Solar Power Plant Operations

Geothermal Power Plant Operations
YoY
Operating profit
YoY
Electronics and Telecoms Equipment

-162

-292

-236

63

375

480

467

-12

YoY

-

-

-

-

497.4%

28.1%

-2.7%

-102.5%% of total

-

-

-

-

100.4%

100.7%

88.0%

-4.2%

-

-

-

-24

54

51

112

287

YoY

-

-

-

-

-

-5.5%

118.6%

155.9%% of total

-

-

-

-

14.5%

10.7%

21.1%

102.5%

-

-

-

-

-12

-20

22

57

YoY

-

-

-

-

-

-

-

155.2%% of total

-

-

-

-

-3.3%

-4.1%

4.2%

20.3%

-

-

-

-

-

-

0

-21

-

-

-

-

-

-

-

-

Renewable Energy System Sales

Solar Power Plant Operations

Geothermal Power Plant Operations
YoY

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: In FY03/14, the company changed segments to include Solar System Sales and Solar Power Plant Operations. Then in FY03/16, the Solar System
Sales segment was changed to the Renewable Energy System Sales segment.

www.sharedresearch.jp

18/61

R

Shared Research Report

Tamagawa Holdings | 6838 |Tamagawa Holdings ＞ Business

LAST UPDATE【2016/11/1】

Business segments
Electronics and Telecoms Equipment
28.8% of FY03/16 sales
Since the founding of consolidated subsidiary Tamagawa Electronics in 1968, Tamagawa has used its high-frequency
wireless technology to develop, manufacture and sell high-frequency devices (amplifiers, attenuators, filters, distributors
and frequency synthesizers). These products act as components in the wireless equipment used in mobile telecoms basestations, as well as in broadcasting, disaster prevention, and firefighting systems. High-frequency devices (circuits andmeasuring instruments) support an antenna’s radio wave transmissions by screening radio waves and adjusting signal
intensity.

Tamagawa Electronics products: Components for LTE-Advanced mobile telecom base stations (left); Universal FPGA board with high-frequency frontend
circuit (middle); and RoF system for optical power feeding (right)

Source: Company data

According to Tamagawa, high-frequency wireless is useful for data and video transmission as it uses wide-band radio waves,enabling fast transmission. In recent years, the usage of digital technology in telecoms and broadcasting equipment has
been rising. However, digital technology is still not suitable for use in parts intended to directly trade high-frequency
signals with front-end parts, being unable to process these signals. As a result, these parts often make use of high-frequency
analog technology, which Tamagawa holds as its specialization. While many vendors, including Tamagawa, are able toprovide digital technology, few companies specialize in making high-frequency analog technology products. Tamagawa
thus occupies a niche with high market share, with its market share in parts intended for mobile telecoms base stations
standing at around 15%.
Mobile telecoms base stations: Mobile telecoms networks are built around wireless base stations, which have large antennas connected towireless telecoms equipment joined to each other by fiber-optic and other cables. As mobile phone signals will only transmit over a limited
range, operators create a honeycomb shaped network by installing a large number of base stations throughout a service area. As of March 2015
Japan had 710,000 base stations (Source: The Ministry of Internal Affairs and Communications, SR Inc.)).

During FY03/16, approximately 23% of Electronics and Telecoms Equipment sales come from devices for mobile telecoms
base stations, about 33% from defense system-related sales, and 44% from devices for such areas as government services,
disaster prevention and terrestrial digital broadcasting. Tamagawa’s main devices for mobile telecom base stations are
high-frequency filters, distributors, synthesizers and attenuators, which identify radio waves of certain frequencies fromamong the diverse range of radio waves both transmitted and received by the antenna and amplify those specific radio
waves.

www.sharedresearch.jp

19/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Business

LAST UPDATE【2016/11/1】

Electronics and Telecoms Equipment sales by industry
FY03/13

FY03/14

FY03/15(JPYmn)

Act.

Act.

Act.

Act.

Total

3,155

3,233

3,400

2,108
-38.0%

YoY
Mobile telecoms
YoY% of total

FY03/16

-

2.5%

5.2%

1,924

1,422

1,404

486

-

-26.1%-1.3%-65.4%
23.1%

-

44.0%

41.3%

Defense

504

905

1,026

688

YoY

-

79.6%

13.4%

-32.9%
32.6%% of total

-

28.0%

30.2%

727

906

969

934

YoY

-

24.6%

7.0%

-3.6%

% of total

-

28.0%

28.5%

44.3%

Others (public sector, etc.)

Source: Shared Research based on company data

Renewable Energy System Sales
68.0% of FY03/16 sales; 102.5% of FY03/16 operating profit
This segment sells solar power modules and solar power equipment. During FY03/16, the main contributor to this segment
was sales of solar power equipment. From FY03/17 onward, revenue from development contracting fees is expected to bebooked in this segment.

Selling solar modules
In July 2011 Tamagawa entered an exclusive agreement to sell the solar modules of GPPV Solar Pte Ltd (GPPV below), andbegan selling GPPV solar systems (The exclusive selling agreement was changed to a selling agreement in February 2014, inorder to further the growth of both companies’ businesses).
Through sales agencies the company provides customers with photovoltaic (PV) modules and power conditioners. Where
necessary the company also negotiates with electric utilities on behalf of customers and assists with loan applications tofinancial institutions.
Sales activities are conducted by consolidated subsidiary Tamagawa Energy.

In Japan contracts under the Feed-in Tariff (FIT, for details see later in report) scheme of the Ministry of Economy, Trade and Industry (METI)
oblige electric utilities to buy electricity generated using 10-kilowatt or more solar power plants at a fixed price for 20 years. Prices and durations
are revised every year. In 2014 (April 2013 – March 2014) the price of solar electricity was JPY36 (excluding tax) per kW for 20 years. Prices for2015 (April 2014 – March 2015) have been lowered to JPY32 (excluding tax) per kW. Prices for 2016 are JPY29 (excluding tax) per kW whencontracts with utilities are done by June 2015 and JPY27 (excluding tax) per kW for contracts struck in July and later. The figure was later further
reduced to JPY24 (excluding tax) for contracts made during FY 2016 (April 2016 to March 2017). Generation facilities must obtain FIT
certifications from METI. If a solar power producer applies for Green Investment Tax Incentives, related facilities can be fully depreciatedimmediately. The government also has similar regulations in place for wind, hydroelectric, geothermal, and biomass generation.

Selling solar power plant equipment
The company began selling solar power plant equipment from FY03/15. Under this business, the company obtains certain
rights to sites for solar power plants and the FIT scheme from land and rights owners, then makes sales to outside
customers. By selling 2.3MW equipment, it reported sales of JPY1.1bn in FY03/15. In FY03/16, sales were JPY5.0bn, theresult of sales of 10.2MW in equipment.

www.sharedresearch.jp

20/61

R

Shared Research Report

Tamagawa Holdings ＞ BusinessTamagawa Holdings | 6838 |LAST UPDATE【2016/11/1】

The company sells equipment for solar systems for about JPY400,000 per kW of installed capacity. Sales are determined bymultiplying installed generating capacity (kW) by the price per kW of installed capacity. The solar system’s gross profit
margin is about 15%.

Development contracting fees in solar power plant development
For large-scale solar power generation projects with capacity of about 10MW or more, the company has a policy of securing
funding through joint development. During joint development of mega solar power generation facilities, the company
generates revenue not only from selling power, but by transferring ownership of the land to be used for the plant. Sales alsocome in the form of development contracting fees, which include fees received on disposal of land ownership rights and forthe preparation of requisite legal documentation.
The company plans to receive such fees from the Misawa plant (power output of 9.5MW), scheduled to begin operation in
FY03/17.

Solar Power Plant Operations
3.2% of FY03/16 sales; 20.3% of FY03/16 operating profit
The solar power plant operation business also includes the operation of mega solar (power generation solar parks) from
FY03/14.

What is mega solar?
Mega solar refers to solar power stations of 1MW-plus. Since the start of the FIT scheme for renewable energy in July 2012 it
has been easier to secure profits, and a number of players from different sectors have joined the fray. There is also a trend
for local governments and private-sector businesses to join forces and build mega solar businesses on vacant land. While
output varies with the location and amount of sunlight, a 1MW mega solar plant typically generates a minimum of 1,000
MkWh per year. A normal four-person household uses 5.5 MkWh per year; a 1MW mega solar plant can normally supply 300
households. Mega solar plants need land: a 1MW plant covers about 15,000sqm (Tokyo Dome: 47,000sqm).
To take advantage of the FIT scheme first the operator needs METI approval to certify that the generation facilities comply
with the law. The purchase price for power generated in the scheme depends on when the facilities were certified rather
than when operations started (In April 2015 and onward, the purchase price to be applied is that at the time whenconnection contracts with utilities are struck after the facilities are certified). Other than gaining licenses for the generating
facilities and equipment, operators face no special requirements to qualify to sell all the renewable power they generate
under FIT. While it is necessary to appoint a chief electrical engineer company operators do not need to have electricity
business experience.

Tamagawa’s solar power plant operating business
When Tamagawa was considering entering the mega solar business, in June 2012 it set up a planning office and in
September that year set up subsidiary GP Energy. Its first project—Shimonoseki power plant in Shimonoseki, Yamaguchi
prefecture—began operations in June 2013.
Tamagawa operates mega solar power plants in this subsegment, forming special-purpose companies (SPC). The SPC buys
or leases land on which it builds and runs solar power plants of 1MW-plus capacity. The SPC scheme enables separate

www.sharedresearch.jp

21/61

R

Shared Research Report

Tamagawa Holdings ＞ BusinessTamagawa Holdings | 6838 |LAST UPDATE【2016/11/1】

project financing, i.e., finance based on expected revenues for a particular project.
The company said upfront investment in mega solar plants—covering PV modules, supporting structures, electrical facilities
and labor—runs to JPY260–320mn per MW.
Electricity is sold to electric utilities. Revenue is selling price per kW multiplied by total amount of electricity sold. FIT defines
electric utilities’ purchase prices as JPY40.0 (excluding tax) per kW for electricity generated at facilities that were
FIT-certified in 2012, JPY36.0 (excluding tax) for those certified in 2013, and JPY32.0 (excluding tax) for those certified in
2014. In 2015, the purchase prices are JPY29 (excluding tax) per kW for contracts between FIT-certified facilities and power
utilities struck by June 2015 and JPY27 (excluding tax) per kW for contracts done in July and later. The figure was later
reduced again to JPY24 (excluding tax) for FY 2016 (April 2016 to March 2017), and purchase duration is fixed at 20 years.
However, the company received approval for its solar power generation plants in FY 2014 and before, and its average saleprice of electricity appears to be at least JPY32.0 (excluding tax) per kW.
If a solar plant generating 1.0GW to 1.4GW of electricity per year was FIT-certified in 2012, electric utilities will buy
electricity for JPY40 (excluding tax) per kW—implying revenues of JPY40mn. Weather and other factors impact the amountof power generated. Panel aging cuts output by 0.25-0.75% per year. The main costs are depreciation, land rent,
maintenance fees and insurance. Gross profit margins hover around 50% and the unlevered internal rate of return could be
9%.

Tamagawa’s solar power plants
As of June 2016, the company’s solar power facilities, including those already in operation and those planned forconstruction, had a combined generating capacity of 11.4MW (see “Solar power plant generation in the Business section”),
in addition to total output of 4.8MW from solar power plants. Land and rights to develop have already been secured tomeet the goal of 16.2MW in generating capacity set forth as a target for FY03/19 under the medium-term plan.
In the development of solar power generation facilities, the company utilized its own funds in the development of the solar
power generation plant at Shimonoseki—its first venture—but from the Tateyama plant onward, Tamagawa has made use ofleases and joint development initiatives to secure funding for facilities development. If a solar power plant is constructedunder a leasing arrangement, the internal rate of return (IRR) is improved; compared with an IRR of 7.5% for the
Shimonoseki plant, the Tateyama plant achieved an IRR of 16.5%.

Shimonoseki Solar Power Plant

Source: Shared Research based on company data

www.sharedresearch.jp

22/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Business

LAST UPDATE【2016/11/1】

Tamagawa Holdings solar power plants
Solar parks

Shimonoseki

Location
Shimonoseki,
Yamaguchi

Feed-in-tariff

OutputOperation

Sales(kW/JPY)

(MW)

start

(JPYmn)

40.0

1.6MW

Q1 FY03/13

77

Tateyama mega solar

Tateyama, Chiba

40.0

1.9MW

Q4 FY03/15

91

Sodegaura mega solar

Sodegaura, Chiba

36.0

1.3MW

Q4 FY03/15

56

40.0

2.0MW

Q4 FY03/17

96

36.0

3.0MW

Q4 FY03/18

130

36.0

5.3MW

Q3 FY03/18

229

40.0

1.0MW

Q2 FY03/19

48

Noboribetsu
MisawaGoto

Minamishimabara

Noboribetsu,
Hokkaido
Misawa, Aomori
Goto,
NagasakiMinamishimabara,
NagasakiTotal
16.2MW
631
Source: Shared Research based on company data
Shared Research estimate for sales, based on annual electricity sales of 1,200MW per 1MW solar power facility.

Joint development with Etrion JapanFor large-scale solar power generation plants with generating capacity of about 10.0MW or more, the company has as its
policy to acquire funding via joint development. In June 2015, Tamagawa established an SPC via joint investment with
Etrion Japan for development of the Misawa plant (Aomori Prefecture), with Tamagawa holding a 30% stake. The Misawa
plant is scheduled to begin operation in February 2017 with power generating capacity of about 9.5MW (Tamagawa willhold 3.0MW), and it is expected to generate approximately JPY390mn per year in revenue. Earnings from the plant, to bebooked as equity-method investment income, are expected to start making contributions from 2H FY03/17 onward.
The Misawa plant is to be developed and operated by Etrion 5 LLC, owned 30% by Tamagawa, 60% by Etrion, and 10% by
Hitachi High-Technologies Corporation. The EPC will be operated by Hitachi High-Technologies, and capital expendituresof JPY3.4bn will be covered by investments from the LLC and project financing from Sumitomo Mitsui Trust Bank Ltd.
According to the company, the alliance with Etrion Japan enables Tamagawa to expand valuation for businessdevelopment, including fund procurement, and to build large solar parks. As of June 2016, the company estimates that
there are latent solar power generation projects—much like the Misawa plant—equivalent to about 100MW of output. By
being involved in development of latent projects over the medium term, Tamagawa aims to gain development contracting
fees. In June 2016, with the intent of establishing a proprietary project financing system for the development of renewableenergy power generation plants, the company newly established a project financing office.

Etrion Japan KK is part of the Etrion Group under parent company Etrion Corporation, which constructs, owns, and operates full-scale solar
power plants. It is an independent power producer (IPP) with solar power plants totaling 139MW in output in Italy and Chile, and is listed on theToronto and Stockholm stock exchanges. Etrion is also a part of the Lundin Group, an acclaimed resource group in the oil, gas, mining, andenergy sectors. The Lundin Group is composed of 11 group companies and has operations in 25 countries worldwide. The top shareholder in
Etrion is the Lundin Group, owning about 24%. Etrion has become the most significant renewable energy company within the group.

www.sharedresearch.jp

23/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Business

LAST UPDATE【2016/11/1】

Misawa power plant details
Solar parks
MisawaLocation
Misawa,Feed-in-tariff(kW/JPY)

Output
(MW)

Area

(sqm)

Operation
start

Investment(JPYbn)36.0
9.5
153,000
FY03/17
Aomori
Source: Shared Research based on company data
Shared Research estimate for sales, based on annual electricity sales of 1,200MW per 1MW solar power facility.

3.4

Sales

(JPYmn)390

Fundraising in solar power generation business
For the five years from FY03/08 Tamagawa posted back-to-back net losses, making debt funding difficult. To launch the
Shimonoseki solar power plant, it raised JPY901mn (assuming all options exercised) via share placement and share option
issuance in January 2013. The company is trying different operating models.
According to Tamagawa Holdings, it has an increasing number of financing options, owing to its three consecutive years of
profitability as of FY03/15, and earnings results at the three solar power plants.
The 1.9MW solar power plant in Tateyama, Chiba Prefecture, has been operating since February 2015. For solar power
generation systems being used at this facility, the company has entered into a lease agreement with Ricoh Leasing in theamount of JPY901mn.

www.sharedresearch.jp

24/61

R

Shared Research Report

Tamagawa Holdings ＞ BusinessTamagawa Holdings | 6838 |LAST UPDATE【2016/11/1】

Strengths and weaknesses
Strengths◤

Benefiting from stable demand the electronics business has regained competitiveness: The company said it
has regained its competitive edge in high-frequency devices. Selling higher value-added products via original
equipment manufacturer (OEM) channels and measures to cope with new product development and public (defense
and disaster prevention) demand has borne fruit. In public demand a preference for Japanese suppliers lends
Tamagawa an advantage over overseas rivals. Restarting R&D and selling under its own brand should enhanceearnings.

◤

Real-world achievements and latent projects in solar power: Although Tamagawa has built its solar power
generation business from scratch, it already has experience in solar installations and project financing. As of June 2016,
funds allowing, it has the equivalent of about 180MW in latent projects that can be developed for mega solar power
generation applications or used for sales of solar power generation equipment, and commercialization of theseprojects can be a significant contributor to increasing earnings.

◤

Entrepreneurial management wants to rekindle investor trust: Shared Research flags a resolve to get it right thistime. It has entrepreneurial energy although is aware of investor skepticism. Liaising with investors and partners,
Tamagawa wants to rebuild its image. According to the company, investors appreciate its full disclosure.

Weaknesses◤

Reputation: Tamagawa has a history of business failures. CEO Toru Masuzawa is the subject of controversy.
Masuzawa has been a defendant in a number of civil lawsuits relating to his time at J Bridge, but asserts that he was a
victim of circumstance, and will rebuild his reputation and prove his management acumen. In addition to developing
procedures to deal with reputational risk, in February 2014, the company established a compliance committee, andcontracts with an outside legal firm for advisory services.

◤

Shortage of manpower in Renewable energy-related business: The renewable energy-related businesses had astaff of 9 as of May 2016. The complexity of projects requires personnel with high entrepreneurship, strong motivationand expansive knowledge from fundraising to electrical engineering. However, efforts to hire appropriate personnel
quickly may block sound corporate growth. Considering the downtrend in the feed-in-tariffs of renewable energy andlimited business opportunities, this lack of human resources is concerning.

◤

Potential rate cuts for fixed-rate feed-in tariffs: The fixed FIT rate has been lowered each consecutive year, and it
is likely that demand for solar power generation construction will decline in the medium term and that the expected
profitability of new solar parks will decrease. According to the company, it will combat these issues by improving
power conversion efficiency of its solar cells and other components in an effort to continue providing benefits to
consumers. Tamagawa also plans to develop businesses using other renewable energy sources than solar power,
including geothermal power and small-scale wind turbines businesses.

www.sharedresearch.jp

25/61

R

Shared Research Report

Tamagawa Holdings | 6838 |Tamagawa Holdings ＞ Business

LAST UPDATE【2016/11/1】

Group companies
At the end of June 2016, the group comprised Tamagawa Holdings Co., Ltd. and 14 consolidated subsidiaries.

Tamagawa Electronics Co., Ltd. (100%): electronic and telecoms equipment business.
Tamagawa Electronics Vietnam Co., Ltd. (100%): subsidiary of Tamagawa Electronics, electronic and telecoms
equipment manufacturing and sales.
Tamagawa Energy Co., Ltd. (100%): renewable energy system sale business.
GP Energy Co., Ltd., and other GP Energy companies (all 100%): solar power plant business, geothermal power plantbusiness.

www.sharedresearch.jp

26/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Business

LAST UPDATE【2016/11/1】

Market and value chain
Market overview
Wireless telecoms infrastructure
Smartphones and tablets are revolutionizing the wireless telecoms market. Smartphones generate 10-20x as muchdata traffic as traditional mobile phones. As bandwidth-hungry content mushrooms, data volumes swell. Dealing with thetraffic surge is a pressing issue, creating demand for network infrastructure that can handle serious data volumes andspeeds. Telecoms operators have rolled out high-speed mobile services like LTE and WiMAX. Spectrum reallocation is
helping too. There is also a nationwide trend toward data offloading—using wi-fi and the like to funnel data through thefixed-line network.
Mobile data traffic in Japan is accelerating rapidly alongside the proliferation of smartphones. However, according toprojections published in the Cisco Visual Networking Index, this trend is likely to continue, and mobile data traffic within
Japan during 2019 is projected to reach 1.5 exabytes per month, an increase of 5.3x versus the 282 petabytes per monthseen during 2014. It remains uncertain whether network infrastructure will keep up.

Capex trends at telecoms carriers
Actual investment trends at telecoms carriers are on an upward swing amid efforts to expand capacity and improve service,with focus on new technologies and new frequency bands. For example, in investment for LTE—the latest communications
technology—the number of LTE base stations operated by NTT DoCoMo, Inc. (TSE1: 9437) was about 24,400 as of end
March 2013, but this number grew to 55,300 at end March 2014, 97,400 at end March 2015, and 138,100 LTE basestations at end March 2016.
As the nationwide rollout of LTE is generally complete, capex at the various carriers declined during FY03/16. Total capex by
NTT DoCoMo during FY03/16 was down 10.1% YoY, to JPY595.2bn, and LTE-related capex was JPY365.4bn, also down
10.2%. Mobile telecom capex at KDDI during FY03/16 was JPY365.4bn, down 29.5% YoY, with a particular decline in
LTE-related investment. However, capex ahead of the rollout of next-generation LTE-advanced technology is projected toincrease from FY03/17 onward, as equipment must be updated to support new frequency bands.
Capex per company(JPYbn)NTT Docomo
YoY
LTE
YoY
KDDI
YoY
MobileYoY
OthersYoY
SoftBank
YoY

FY03/08

FY03/09

FY03/10

FY03/11

FY03/12

FY03/13

FY03/14

FY03/15

FY03/16

FY03/17Act.
758.7-18.8%
501.3
20.2%
391.7
19.1%
109.6
24.5%
293.7
-24.7%

Act.
737.6
-2.8%
575.1
14.7%
432.1
10.3%
140.6
28.3%
259.1
-11.8%

Act.
686.5
-6.9%
518.0
-9.9%
376.8
-12.8%
138.7
-1.4%
222.9
-14.0%

Act.
668.5
-2.6%
26.0
441.8
-14.7%
338.7-10.1%
103.1-25.7%
392.6
76.1%

Act.
726.8
8.7%
92.3
255.0%
421.6
-4.6%
304.2
-10.2%
115.6
12.1%
474.1
20.8%

Act.
753.7
3.7%
218.9
137.2%
467.0
10.8%
338.2
11.2%
128.8
11.4%
631.6
33.2%

Act.
703.1
-6.7%
331.1
51.3%
571.8
22.4%
374.0
10.6%
197.8
53.6%
712.5
12.8%

Act.
661.8
-5.9%
406.7
22.8%
667.7
479.1
188.6
583.7
-18.1%

Act.
595.2-10.1%
365.4-10.2%
531.4-20.4%
338.0-29.5%
193.4
2.5%
412.6
-29.3%

Target
585.0
-1.7%
339.0
-7.2%
560.0
5.4%
350.0
3.6%
210.0
8.6%
-

Source: Shared Research based on data from respective companies
Note: Capex at KDDI from FY03/15 onward includes portions consolidated from UQ Communications.
Note: SoftBank figures only include group telecoms companies within Japan

LTE Advanced
NTT DoCoMo, Inc. (TSE1: 9437) launched a new telecoms service in March 2015 using LTE-Advanced, the next-generation
mobile telecoms standard following LTE, paving the way for speedier data transmission. NTT DoCoMo began with urban

www.sharedresearch.jp

27/61

R

Shared Research Report

Tamagawa Holdings ＞ BusinessTamagawa Holdings | 6838 |LAST UPDATE【2016/11/1】

areas in 22 prefectures and expanded the service to major cities nationwide during FY2015. KDDI also began providing its
LTE-Advanced service during FY2015.
LTE Advanced is a fourth generation mobile telecoms standard recognized by the International Telecommunication Union(ITU)*, offering higher speeds than LTE which has spread globally. Under development, it aims at providing speeds of up to
1Gbps when the user is stationary and up to 100Mbps when moving on a train.
* In mobile and electronic telecoms the ITU aims to establish standards and regulations between countries. Main activities: standardization,
allocation of mobile spectrum and coordinating connections between countries to enable international telephone calls.

Evolution of Telecommunications Technology

Source: Shared Research based on Various data

Faster speeds under LTE Advanced will be attained by adding technical elements to existing LTE technology. Two elements
are key: upgrading the multiple-input and multiple-output (MIMO) technology used in spatial multiplexing, and carrier
aggregation to enable bandwidth expansion.
MIMO technology is used to increase the volume of data that can be handled at any one time by sending different data packets and separating
the mixed signals once received. In addition to the currently prescribed 2x2 MIMO and 4x4 MIMO, under LTE Advanced it will be possible toimplement 8x8 MIMO using eight pairs of antennas. The upshot: higher maximum transmission speeds. Under current LTE technology where
MIMO is not installed on the uplink side (sending data from the mobile device) it is handled by 2x2 MIMO and 4x4 MIMO.

It is Shared Research’s understanding that NTT DoCoMo’s current LTE network is composed mostly of 3G base stations thathave been updated with LTE components. In contrast, new frequency allocations are planned for the introduction of LTE
Advanced, and this will require changes to base stations, including the antennas. In the long term, it is reasonable to thinkthat demand for capital investment in mobile telecom equipment will increase, with NTT DoCoMo leading the way for
implementation of LTE Advanced.

New frequency bands for LTE-Advanced
In December 2014, the Ministry of Internal Affairs and Communications announced the allocation of 3.5GHz bandwidth for
the LTE-Advanced 4G mobile communications system to three companies: NTT DoCoMo, KDDI and SoftBank Mobile. KDDIplans to begin service in the 3,520–3,560MHz band, NTT DoCoMo plans on 3,480–3,520MHz, and SoftBank Mobile on
3,560–3,600MHz. According to documentation submitted to the Ministry of Internal Affairs and Communications by eachcompany, NTT DoCoMo plans to begin service in October 2016, KDDI in June 2016, and SoftBank Mobile in December
2016.

www.sharedresearch.jp

28/61

R

Shared Research Report

Tamagawa Holdings ＞ BusinessTamagawa Holdings | 6838 |LAST UPDATE【2016/11/1】

Solar power market
Japan’s policies to promote solar power
The Act on Special Measures Concerning Procurement of Renewable Electric Energy by Operators of Electric Utilities(abbreviated to FIT Act) was enacted in August 2011 and implemented in July 2012, and became fully eligible for the FIT
scheme.

Feed-in Tariff (FIT) scheme
Under the FIT scheme, to promote the use of renewables, electric utilities are required to buy all the power generated by
five types of renewable energy sources, including solar and wind. Solar power was popular in Spain and Germany owing toa similar system. A high tariff is designed to stimulate the development of renewables. As of May 2016, surplus power fromsolar generated from sub 10kW systems is bought under FIT and all power from solar power generated from systems over
10kW is bought under FIT.
For less than 10kW solar power generated systems, the FIT scheme is applied, and surplus solar power generated byhouseholds is sold to electric utility companies. When the scheme was launched in 2009, the feed-in tariff for surplus power
was JPY48/kWh (including tax). The tariff remains fixed for 10 years from installation of the solar power system. The scheme
envisages annually lowering the tariff for newly installed generation capacity. For FY2016 (from April 2016 to March 2017),
the FIT for new installations was JPY31/kWh (for facilities not obliged to install output control equipment, excluding tax),
JPY33/kWh (for facilities obliged to install output control equipment, excluding tax), JPY27/kWh (for facilities combining
multiple systems, such as solar power generation, residential fuel cells, and gas engine power generation; including tax),
and JPY29/kWh (for facilities that are required to have equipment that limits output; including tax).
Installation of output control equipment is obliged at solar power facilities whose applications for grid connection contracts are approved on
April 1, 2015 and later in regions related to supply-and-demand control plans of Hokkaido Electric Power Co., Inc., Tohoku Electric Power Co.,
Inc., Hokuriku Electric Power Company, Chugoku Electric Power Co., Inc., Shikoku Electric Power Co., Inc., Kyushu Electric Power Co., Inc., andOkinawa Electric Power Company, Incorporated.

Separate from the surplus power FIT scheme (net metering), a different scheme covering all power generated by arenewable electricity producer has also been established. This scheme enables producers to sell all power generated
regardless of their own consumption. In Japan, a FIT scheme for over 10kW capacity was launched in July 2012. FIT tariff
rates for 2012 were JPY40 (excluding tax) per kWh, and power companies are required to purchase power at this rate for 20
years. Prices have since been pushed down, with the rate being JPY36 (excluding tax) per kWh in 2013 to JPY32 (excludingtax) per kWh in 2014. In 2015, the purchase prices is JPY29 (excluding tax) per kW for contracts between FIT-certified
facilities and power utilities struck by June 2015 and JPY27 (excluding tax) per kW for contracts done in July and later. The
figure was JPY24 (excluding tax) during 2016.
The tariff and purchase period set under the FIT schemes are set each year by METI before the start of the financial year. The
minister is required to take into account the opinions of a neutral, third-party committee (Feed-in Tariff Calculation
Committee), which conducts public deliberations.

Revised FIT Act passed in May 2016
Revisions to the FIT Act were passed by the Diet in May 2016, and the fixed-price purchasing scheme for renewable energy
will undergo changes from April 2017. It is Shared Research’s understanding that the revisions to take place from April 2017
onward that will have an impact on the company’s operations are changes to the methods employed to determine thewww.sharedresearch.jp

29/61

R

Shared Research Report

Tamagawa Holdings | 6838 |Tamagawa Holdings ＞ Business

LAST UPDATE【2016/11/1】

purchase price of power, and changes to approval procedures for power generation equipment.

Changes to methods employed to determine prices
Prior to the revisions, the purchase price was fixed as of the time the solar power generation facilities were approved, andpower would subsequently be purchased at that price for a fixed period, typically between 10 to 20 years.
After the revisions, for industrial power generation with capacity of 10kW or more in generating capacity will have thepurchase price revised on an annual basis, and for large-scale solar power generation plants with high capacity, a bidding
system will be introduced. This is to create conditions such as purchase volume and price limits on solar power generation,
causing solar power generation companies to request a purchase price and bid on power generation output, ultimately
allowing for companies with lower prices to win the auction and receive approval for the purchase system.

Changes to approval procedures for power generation equipment
Under the pre-revision FIT, the purchase price for power relied solely on the pricing that was obtained when approval was
granted for the equipment. As a result, some mega solar providers received approval in the early years of the
program—when the FIT price was JPY40/kWh (excluding tax)—but have yet to actually build any facilities.
After the revision in April 2017, even companies that have received approval will, in principle, lose their approvals if they
are unable to enter into connection contracts with power companies (including contracts for payment of construction
costs) by March 31, 2017.

Solar power operators to have difficulty in forecasting profitability due to output curtailment
In September 2014, electric power companies suspended approvals of applications for grid connection by operators of(non-residential) solar power facilities. The suspension came as the utilities were concerned over possible disruption tostable supply of electricity as expansion of approved solar power generating facilities may disturb the supply-demandbalance at a time when the burden of electricity demand remains light.
As a measure to cope with the situation, where some utilities had suspended acceptance of applications for grid connection
by operators of renewable energy facilities, the Agency for Natural Resources and Energy (ANRE) in January 2015 decided
to revise part of the Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources byElectricity Utilities (the "Renewable Energy Act") and renew the operation system for the FIT scheme under new output
control rules.
After the enforcement of revised ministerial ordinances (in January 2015 and later), solar power facilities calling for gridconnection are obliged to restrict output when needed and install equipment to curtail output when relevant utilities
require to do so.
Shared Research recognizes that the extended coverage of the curtailment of solar power purchases under the revised
ordinances make it difficult for operators of solar power plants to forecast volumes, revenues and profitability of electricity
to be sold by facilities that newly apply for grid connection.

www.sharedresearch.jp

30/61

R

Shared Research Report

Tamagawa Holdings ＞ BusinessTamagawa Holdings | 6838 |LAST UPDATE【2016/11/1】

Strategy
Tamagawa aims to be a company that contributes to the development of social infrastructure. The company engages in theElectronics and Telecoms Equipment business for the telecoms infrastructure, and the Renewable Energy System Sales,
Solar Power Plant Operations, and Geothermal Power Plant Operations for the electricity infrastructure.
Strengthening existing businesses. In Electronics and Telecoms Equipment, Tamagawa aims to increase sales andprofitability by fortifying optical transmission equipment for trains, in addition to existing businesses. In the electricity
infrastructure businesses (Renewable Energy System Sales, Solar Power Plant Operations, and Geothermal Power Plant
Operations), it hopes to grow via a bumper investment program. The company may also develop renewable energy
businesses besides solar power and geothermal power (such as biomass power generation, small-scale wind power
generation, and small-scale hydroelectric power generation).
Raise capital, build its own solar park. Solar Power Plant Operations and Geothermal Power Plant Operations provide
stable cash flows but need initial large-scale investments. Selling renewable energy systems (including solar power plant
equipment, geothermal power plants, and small-scale wind power generation equipment) does not require large upfront
capital, but does not provide long-term revenues. Accordingly, changes in profitability of Renewable Energy System Sales
may change the company’s business results.
Tamagawa recognizes its need to push forward with the solar and geothermal power plant businesses to generate funds forcapex—through loans from financial institutions and operating cash flows—as well as to cover personnel costs. To boost
investment efficiency, the company intends to restructure its portfolio with measures that include the partial sale of power
plant equipment.

www.sharedresearch.jp

31/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Business

LAST UPDATE【2016/11/1】

Past performance
FY03/16 full-year results
Sales:

JPY7.3bn (+42.5% YoY)

Operating profit:

JPY280mn (-47.4% YoY)

Recurring profit:

JPY211mn (-58.9% YoY)

Net income:

JPY165mn (-61.3% YoY)

Electronics and Telecoms Equipment
Orders:JPY2.2bn (-33.1% YoY)

Sales:

JPY2.1bn (-38.1% YoY)

Operating loss:

JPY12mn (operating profit of JPY467 in FY03/15)

Mobile telecom providers changed their construction plans for base stations and restrained capital investment, leading to adrop in both segment earnings and profits. In other areas (public sector, disaster prevention, measurement, etc.), orders
were acquired in the wireless transport (railway and airports) sector for fiber-optic products for use in airport facilities, andin Tamagawa-manufactured products, orders were favorable for testing equipment for power semiconductors.
A breakdown of sales is as follows:
Mobile telecoms:

JPY486mn (-65.4% YoY)

Defense:

JPY688mn (-32.9%)

Other (public sector, disaster prevention, measurement, etc.)

JPY934mn (-3.6%)

Renewable Energy System Sales
Orders:JPY4.9bn (+187.9% YoY)

Sales:

JPY5.0bn (+176.4% YoY)

Operating profit:

JPY287mn (+155.9% YoY)

The sale of equipment for solar power plants resulted in both sales and profits rising year-on-year.

Solar Power Plant Operations
Sales:

JPY230mn (+161.8% YoY)

Operating profit:

JPY57mn (+155.2% YoY)

Mega solar power plants in Shimonoseki, Tateyama, and Sodegaura sold electricity in line with forecasts.

Geothermal Power Plant Operations
No sales were recorded, and operating loss was JPY20mn due to various expenses.

www.sharedresearch.jp

32/61

R

Shared Research Report

Tamagawa Holdings ＞ BusinessTamagawa Holdings | 6838 |LAST UPDATE【2016/11/1】

Q3 FY03/16 results (announced February 10, 2016)
Sales:

JPY3.3bn (+7.7% YoY)

Operating loss: JPY90mn (operating profit of JPY372mn in Q3 FY03/15)
Recurring loss: JPY137mn (recurring profit of JPY364mn in Q3 FY03/15)
Net loss:

JPY180mn (net income of JPY260mn in Q3 FY03/15)

Tamagawa revised its FY03/16 full-year forecast in December 2015. Cumulative Q3 results were in line with the revised
figures.

Electronics and Telecoms Equipment
Orders:JPY1.5bn (-42.9% YoY)

Sales:

JPY1.4bn (-49.5%)

Operating loss: JPY102mn (operating profit of JPY435 in Q3 FY03/15)
Mobile telecom providers changed their construction plans for base stations and restrained investment, hurting segment
earnings. In other areas (i.e., government services, disaster prevention, analysis), particularly in wireless transport (railways
and airports), the company won orders for fiber optic-related products for use in airports. Orders for the company’s own
testing equipment for power semi-conductors were firm.
According to Tamagawa, there has been an increase in the volume of negotiations and contracts for telecoms andbroadcasting-related public works projects, and given that the order balance at end-March reached the amount needed toachieve its revised forecast, the segment is expected to attain the company’s revised forecast (sales: JPY2.1bn; operating
profit: JPY0mn).

Renewable Energy System Sales
Orders:JPY3.7bn (+143.4% YoY)

Sales:

JPY1.8bn (+509.0%)

Operating loss: JPY27mn (loss of JPY18mn in Q3 FY03/15)
In FY03/16, the company expects sales projects to be concentrated in 2H. For this reason, the segment is expected toachieve the revised forecast (sales: JPY4.7bn; operating profit: JPY206mn).

Solar Power Plant Operations
Sales:

JPY180mn (+202.7% YoY)

Operating profit:JPY56mn (+258.6% YoY)
Mega solar power plants in Shimonoseki, Tateyama, and Sodegaura sold electricity in line with forecasts.

www.sharedresearch.jp

33/61

R

Shared Research Report

Tamagawa Holdings | 6838 |Tamagawa Holdings ＞ Business

LAST UPDATE【2016/11/1】

Geothermal Power Plant Operations
The company is preparing to start operations of geothermal power plants, so no sales were recorded, and operating loss
was zero.

1H FY03/16 results (announced November 12, 2015)
Sales:

JPY1.1bn (-42.4% YoY)

Gross profit:

JPY353mn (-42.7% YoY)

SG&A expenses: JPY514mn (+27.1% YoY)
Operating loss: JPY161mn (operating profit of JPY212mn in 1H FY03/15)
Recurring loss: JPY190mn (recurring profit of JPY210mn in 1H FY03/15)
Net loss:

JPY249mn (net income of JPY120mn in 1H FY03/15)

SG&A expenses were up despite an increase in sales due to higher R&D expenses (JPY143mn; up by JPY38mn compared to
1H FY03/15), and higher sales promotion expenses in the Renewable Energy System Sales segment.

Electronics and Telecoms Equipment
Orders:JPY1.0bn (-43.5% YoY)

Sales:

JPY960mn (-44.9%)

Operating loss: JPY90mn (operating profit of JPY257 in 1H FY03/15)
Mobile telecom providers changed their construction plans for base stations and restrained investment, hurting segment
earnings.
The company sought to win new orders in the area of 3.9-generation mobile facilities, defense facilities, and public wirelessfacilities, as well as orders in new areas, focusing on new markets and customer acquisition. It also continued measures to
add value, expand and cultivate business areas, and joint development with partner companies, whileworking to strengthen proposals for its in-house products. As a result, the company saw an increase in orders from newcustomers and new markets, digital signal processing boards required for high-speed signal processing, including forfiber optic-related products for various wireless applications (excluding high-frequency analog products). However, in themobile phone infrastructure market, sales were lower year-on-year as restraint in corporate capex was greater than initial
estimates.

Sales by channel
Mobile telecoms: JPY208mn (-68.3%)
Defense: JPY305mn (-56.6%)
Other (government services, disaster prevention, analysis): JPY445mn (+16.5% YoY).
Segment sales were down due to lower sales to mobile telecoms companies, which lowered their spending on basestations. Defense related sales were down due to fizzling demand for facility renewal. In wireless transport (railways andairports), the company won orders for fiber optic-related products for use in airports. Orders for the company’s own testing
equipment for power semi-conductors were firm.

www.sharedresearch.jp

34/61

R

Shared Research Report

Tamagawa Holdings | 6838 |Tamagawa Holdings ＞ Business

LAST UPDATE【2016/11/1】

To cope with year-on-year declines in sales, Tamagawa worked to restrain fixed costs and R&D expenses from theJuly-September quarter onward. As a result, although the segment booked an operating loss for 1H due to lower sales, thecompany plans to break even for the full year. According to the company, acquisition has been steady during FY03/16 forcontracts of large-scale public works projects in mobile telecoms. As a result, although lower sales are forecast for FY03/16,
these are forecast to be covered by higher sales and profits and FY03/17 and beyond.
Tamagawa Electronics Vietnam Co., Ltd., the Vietnam-based manufacturing subsidiary owned by the company’s
consolidated subsidiary Tamagawa Electronics, began operation in October 2015. Following its launch, the company began
production of high-quality, high-frequency passive components for use in telecoms and broadcasting, as well as mobile
base stations, geared toward the Japanese market. Reduced costs are planned to lead to improvements in pricecompetitiveness, yielding an increase in orders. In later years the company aims to expand business into Southeast Asia andthe Middle East.

Renewable Energy System Sales
Orders:JPY1.3bn (+776.1% YoY)

Sales:

JPY27mn (-80.1%)

Operating loss: JPY109mn (loss of JPY5mn in 1H FY03/15)
In sales, the company reported gains on O&M (Operation and Management) for its power conversion and solar power
tracking frame systems, as well as the solar power plant equipment, which it sold last year. In addition to power plant
equipment, it is booking continuous O&M revenues following the sale.
In FY03/16, the company expects sales projects to be concentrated in 2H. During 1H, the company brought forward fixed
costs, with profits likely to be concentrated in the second half of the year. Fixed costs brought forward were primarily those
associated with capturing orders, including sales promotion expenses and expenses required to evaluate potential sites forsolar power generation plants.

Solar Power Plant Operations
Sales:

JPY135mn (+197.9% YoY)

Operating profit:JPY51mn (+JPY217.1% YoY)
Mega solar power plants in Shimonoseki, Tateyama, and Sodegaura sold electricity in line with forecasts.

Geothermal Power Plant Operations
The company is preparing to start operations of geothermal power plants, so no sales were recorded, and operating loss
was zero.
In January 2015, the company announced that it planned to build a total of seven geothermal power plants, and to this end
acquired a total of seven separate plots of land. The company moved forward on construction at two of the seven sites butchanged its plan in December 2015. The company sold the two plants currently under construction to a third party andsold back the sites acquired for the five other geothermal power plants to their original owners.

www.sharedresearch.jp

35/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Business

LAST UPDATE【2016/11/1】

At the geothermal power plant located in Beppu City, Oita Prefecture, a reexamination of data acquired after work had
begun showed that the company was unlikely to get the return on the project it originally envisioned. After a series of talks
with the outside party that originally proposed the project, Tamagawa reached an agreement to sell the two power plants
currently under construction to a company owned by the party that originally proposed the project at a price that would begreater than the total amount the company had invested in the two projects. The transaction and payment under thisagreement are be completed by the end of January 2016.
As for the remaining five sites at which construction of geothermal power plants has not yet begun, Tamagawa chose to
exercise its right under the original purchase contract to sell the land back to the original owner at the same price for which
it was purchased. Two of the five sites have already been sold back to their original owners and the sales of remaining threesites are expected to be completed by the end of December 2015.

FY03/15 results (announced May 13, 2015)
Sales:

JPY5.1bn (+22.1% YoY)

Operating profit:

JPY531mn (+11.3%)

Recurring profit:

JPY514mn (+7.5%)

Net income:

JPY427mn (-2.2%)

Electronics and Telecoms Equipment
Orders:JPY3.2bn (-7.8% YoY)

Sales:

JPY3.4bn (+5.3%)

Operating profit:

JPY467mn (-2.7%)

Mobile telecom providers increased their investments in wireless facilities at the beginning of 2H. However, they changed
construction plans during Q4.
The company sought to win new orders in the area of 3.9-generation mobile facilities, defense facilities, and public wirelessfacilities. As a new business area, the company began to sell testing equipment for power semiconductors in June 2014.
Since Tamagawa has secured orders in the new business, it expects to report sales in FY03/16. The company also installed a
new high-definition monitoring system essential for the safe and smooth management of its group solar-power plants. Salesof the company’s own products totaled JPY1.4bn (+22.5% YoY), accounting for 40.4% in the segment.
Operating profit declined due to spending on research and development worth JPY239mn (JPY124mn in the previousyear).
Segment profit after allocation of corporate costs and others was JPY420mn (-7.3% YoY), surpassing the initial target of
JPY370mn. The company attributed the more profit than planned to a rise in sales of its own products, efficient
procurement of materials due to the introduction of a core system, and disappearance of the cost to cope with defects.

Solar System Sales
Orders:JPY1.7bn (+102.8% YoY)

Sales:

JPY1.8bn (+101.8%)

www.sharedresearch.jp

36/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Business

Operating profit:

LAST UPDATE【2016/11/1】

JPY112mn (+118.6%)

The company streamlined its operations and expanded sales reach to all parts of the country.
The company started sales of solar power plant equipment. By selling 2.3MW equipment, it reported sales of JPY1.1bn.

Solar Power Plant Operations
Sales:

JPY87mn (+70.7% YoY)

Operating profit:

JPY22mn (operating loss of JPY19mn a year earlier)

The Shimonoseki solar park, which operated for nine months in the previous year, was in full-year operation in FY03/15.
Plants in Tateyama (1.9MW) and Sodegaura (1.3MW), both in Chiba Prefecture, began operations in February and March,
respectively, of 2015.

Geothermal Power Plant Operations
This segment was created during FY03/15. The company is preparing to start operations of geothermal power plants during
FY03/16. No sales were recorded, and operating loss was zero.

FY03/14 results (announced May 13, 2014)
Results by segment:

Electronics and Telecoms Equipment
This segment saw mobile telecoms companies increase their capex spending on base stations and public expenditure
increase for defense facilities and public wireless facilities. Orders received totaled JPY3.5bn (+7.3% YoY) and sales were
JPY3.2bn (+2.5%). Specifically, sales in mobile telecoms were JPY1.4bn (-26.5%) due to a large-scale order that wascompleted in FY03/13 causing a relative decrease. Sales related to defense systems were JPY905mn (+79.6%).
According to the company, it is becoming increasingly adept at developing products in-house. As a result, sales of internallydeveloped products were JPY1.3bn (+36.6% YoY).
Operating profit for the segment was JPY480mn (+28.1% YoY). In addition to the effects of increased revenue, the sales
composition of internally developed products—which have relatively higher margins compared to other products in thesegment—went up from 30% in FY03/13 to 35% in FY03/14.

Solar system sales
Orders for solar power systems have been increasing since the Act on Special Measures Concerning Procurement ofRenewable Electric Energy by Operators of Electric Utilities (FIT Act—for feed-in tariffs) came into effect (August 2011). The
company also worked to make its sales operations more efficient. Thus, orders received were JPY845mn (+27.3% YoY), sales
were JPY890mn (+83.0%), and operating profit was JPY54mn (-5.5%).

Solar power plant operations
Sales of electricity began, following the completion of construction of the solar park in Shimonoseki, Yamaguchi Prefecture.
The company booked sales revenue from the project from July 2013. However, other solar power projects required startup
investment. In the end, sales were JPY52mn (there were no sales recorded for this segment the previous year), and thewww.sharedresearch.jp

37/61

R

Shared Research Report

Tamagawa Holdings ＞ BusinessTamagawa Holdings | 6838 |LAST UPDATE【2016/11/1】

company made an operating loss of JPY20mn (against an operating loss of JPY12mn the previous year).

FY03/13 results
Sales hit JPY3.7bn (+18.2% YoY). Operating profit was JPY373mn vis-à-vis a JPY29mn loss in FY03/12. Recurring profit was
JPY374mn contrasting with a JPY23mn loss in FY03/12. Net income was JPY339mn compared with a JPY37mn loss in
FY03/12. Segment results:

Electronics and telecommunications equipment
Owing to a recovery in mobile telecoms companies’ base station capex and a resumption of public investment in defense
and public wireless facilities, sales touched JPY3.2bn (+31.1% YoY) and operating profit nudged JPY374mn (+497.4% YoY).

Solar energy business
The introduction of FIT in July 2012 and better marketing boosted solar generating system orders. Sales rose to JPY486mn
from JPY19mn in FY03/12. Operating profit came in at JPY41mn vis-à-vis a JPY24mn loss in FY03/12.

Biomass energy business
Sales were JPY74mn (-89.0% YoY). Operating loss reached JPY30mn compared with a JPY47mn loss in FY03/12. The
company exited this business in the wake of consolidated subsidiary Bioenergy Resources Co Ltd filing for bankruptcy.

www.sharedresearch.jp

38/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Business

LAST UPDATE【2016/11/1】

Income statement
Income statement

FY03/07

FY03/08

FY03/09

FY03/10

FY03/11

FY03/12

FY03/13

FY03/14

FY03/15(JPYmn)Non-cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

FY03/16Cons.

Total sales

3,114

4,012

4,299

2,803

2,640

3,106

3,672

4,171

5,095

7,260

YoY

42.5%

22.1%

28.8%

7.1%

-34.8%

-5.8%

17.7%

18.2%

13.6%

22.1%

CoGS

2622

3274

3,348

2,412

2,314

2,516

2,623

2,973

3,616

5,710

Gross profit

526

738

951

392

326

590

1,049

1,198

1,479

1,550

GPM

16.9%

18.4%

22.1%

14.0%

12.3%

19.0%

28.6%

28.7%

29.0%

21.3%

457

620

1,020

619

612

619

675

721

947

1,270

14.7%

15.5%

23.7%

22.1%

23.2%

19.9%

18.4%

17.3%

18.6%

17.5%

SG&A expenses
SG&A-to-sales ratio

Operating profit

69

118

-68

-227

-286

-30

373

477

531

280

YoY

271.9%

71.0%

-

-

-

-

-

27.8%

11.3%

-47.4%

OPM

3.9%

2.2%

2.9%

-1.6%

-8.1%

-10.8%

-1.0%

10.2%

11.4%

10.4%

Non-operating income

42

49

45

16

18

14

19

9

8

16

Non-operating expenses

12

58

105

14

16

8

17

8

25

84

Recurring profit

99

109

-128

-224

-284

-24

375

478

514

211

YoY

226.7%

9.9%

-

-

-

-

-

27.6%

7.5%

-58.9%

RPM

3.2%

2.7%

-3.0%

-8.0%

-10.8%

-0.8%

10.2%

11.5%

10.1%

2.9%

Extraordinary gains

44

16

52

0

45

-

1

2

5

61

Extraordinary losses

3

492

341

346

109

7

0

0

0

3

Tax charges

2

39

-7

-1

3

6

36

44

92

104

Implied tax rate

2%

-11%

1.6%

0.1%

-0.8%

-20.9%

9.6%

9.1%

17.7%

38.6%

Net income

138

-408

-408

-570

-351

-37

340

436

427

165

-

-

-

-

-

-

-

28.5%

-2.2%

-61.3%

4.4%-10.2%-9.5%-20.3%-13.3%

-1.2%

9.3%

10.5%

8.4%

2.3%

YoY
Net margin

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Historical forecast accuracy
Initial CE vs. Results

FY03/07 FY03/08 FY03/09 FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15

FY03/16(JPYmn)Non-cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

2,650

3,000

3,870

3,389

3,110

2,980

3,378

4,504

4,534 5,600-7,300

Sales (Initial CE)
Sales (Results)

3,114

4,012

4,299

2,803

2,640

3,106

3,672

4,171

5,095

Initial CE vs. Results

17.5%

33.7%

11.1%

-17.3%-15.1%

4.2%

8.7%

-7.4%

12.4%

-

Operating profit (Initial CE)

-

40

129

139

191

22

69

493

506

590-850

Operating profit (Results)

69

118

-68

-227

-286

-30

373

477

531

280

-

195.2%----

441.1%

-3.2%

5.0%

-

101

52

71

133

179

18

65

488

489

520-790
211

Initial CE vs. Results
Recurring profit (Initial CE)
Recurring profit (Results)

7,260

99

109

-128

-224

-284

-24

375

478

514

-1.8%

109.5%----

476.5%

-2.0%

5.1%

-

92

50

63

133

179

13

60

449

450

400-570

Net income (Results)

138

-408

-408

-570

-351

-37

340

436

427

165

Initial CE vs. Results

50.3%

-

-

-

-

-

466.3%

-2.8%

-5.1%

-

Initial CE vs. Results
Net income (Initial CE)

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

From FY03/09 through FY03/12 the company initially forecast profits every year but delivered a series of losses. However, in
the absence of a solid profitability roadmap, results fell short of company forecasts.

www.sharedresearch.jp

39/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Business

LAST UPDATE【2016/11/1】

Balance sheet
Balance sheet

FY03/07

FY03/08

FY03/09

FY03/10

FY03/11

FY03/12

FY03/13

FY03/14

FY03/15

FY03/16(JPYmn)Non-cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

1,074

706

820

665

493

56

390

1,764

1,524

2,737

256

-

-

-

-

-

-

-

-

1,343

2,046

1,033

915

663

864

1,345

1,112

1,377

985

Inventories

306

580

345

275

328

299

328

347

447

318

Other current assets

192

134

47

63

45

74

52

197

258

181

Total current assets

ASSETSCash and equivalents
Marketable securities
Accounts receivable

2,915

3,722

2,245

1,918

1,530

1,293

2,114

3,421

3,606

4,221

Buildings

186

174

162

132

94

80

87

114

130

157

Tools, furniture and fixtures

62

458

88

36

5

1

58

87

126

88

Machinery and equipment

3

20

2

1

1

0

22

430

1,458

1,407

198

198

198

126

106

52

52

52

540

652

Construction in progress

-

-

-

-

-

-

346

35

156

159

Accumulated depreciation

973

1,142

1,151

997

959

899

884

908

966

966

Total tangible fixed assets

453

855

451

295

205

133

564

718

2,410

2,464

Investment securities

630

90

251

69

23

8

14

19

23

17

Other

156

7

16

20

7

9

13

19

131

152
169

Land

786

97

267

89

30

18

27

38

154

Software

17

301

25

25

-

-

1

19

88

77

Other

25

22

22

14

-

-

-

12

106

232

Total other fixed assets

42

323

47

39

-

-

1

31

194

309

Total fixed assets

1,281

1,275

765

423

235

150

593

788

2,759

2,942

Total assets

4,195

4,997

3,010

2,341

1,766

1,445

2,709

4,210

6,376

7,164

Accounts payable

145

1,301

511

443

430

364

386

474

620

321

Short-term interest-bearing debt

615

404

507

433

203

30

40

323

300

1,395

Accounts payable

38

253

108

39

31

48

108

86

169

101

Other current liabilities

512

336

99

111

220

156

173

247

392

232

Total current liabilities

1,310

2,293

1,226

1,026

884

598

708

1,130

1,481

2,049

Total intangible assets

LIABILITIES

242

441

216

67

-

-

151

294

539

612

Lease obligations

-

-

-

-

-

-

-

-

947

925

Other fixed liabilities

84

208

101

86

83

85

100

148

247

283

Total fixed liabilities

327

649

318

153

83

85

251

442

1,733

1,820

Long-term interest-bearing debt

858

844

724

500

203

30

192

618

839

2,007

1,636

2,942

1,544

1,179

967

683

959

1,572

3,215

3,869

Capital stock

1,029

1,029

1,029

1,102

1,102

1,102

1,387

1,625

1,656

1,677

Capital surplus

1,196

1,196

1,024

1,096

1,096

1,096

1,381

1,620

1,077

1,057

322

-119

-619

-983

-1,335-1,372

-991

-555

445

611

Total shareholder equity (net assets)

4,195

2,055

1,466

1,162

799

761

1,751

2,638

3,161

3,295

Working capital

Total interest-bearing debt
Total Liabilities
SHAREHOLDER EQUITY (NET ASSETS)

Retained Earnings

1,504

1,325

867

747

562

800

1,287

986

1,204

982

Interest-bearing debt

858

844

724

500

203

30

192

618

839

2,007

Net debt

-216

138

-96

-165

-290

-26

-198

-1,146-685-730

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

AssetsDuring FY03/16, current assets accounted for 58.9% of total assets. The ratio of fixed assets has increased since FY03/13.
Primary factors of current assets were cash and equivalents (64.8% of current assets in FY03/16) and accounts receivable(23.3%). Operating cash flows stemming from improved profitability, stock issuances, and financing activity were factors incash and equivalents increasing from JPY390mn in FY03/13 to JPY2.7bn in FY03/16.
Tangible fixed assets shrank from JPY451mn in FY03/09 to JPY133mn in FY03/12 owing to a string of impairment losses amidslumping profits. In FY03/13 and onward, tangible fixed assets have been on an uptrend due to construction of solar parks
and capex in the Electronics and Telecoms Equipment business.

www.sharedresearch.jp

40/61

R

Shared Research Report

Tamagawa Holdings | 6838 |Tamagawa Holdings ＞ Business

LAST UPDATE【2016/11/1】

Liabilities
In FY03/16, a majority of liabilities is comprised of accounts payable, interest-bearing liabilities, and lease obligations.
Interest-bearing liabilities shrank from JPY844mn in FY03/08 to JPY30mn in FY03/12. Shared Research estimates thatborrowing was difficult due to the profit slump, so Tamagawa repaid short- and long-term borrowings, corporate bondredemptions continued, and there was no debt refinancing. In FY03/13 interest-bearing liabilities increased for the first timein five years and amounted to JPY192mn. In FY03/16 the figure increased to JPY2.0bn.
In FY03/16 net debt (interest-bearing liabilities minus cash and deposits) was positive, amounting to positive JPY730mn.
The company newly reported lease obligations in FY03/15 because it built the solar parks in Tateyama and Sodegaura, bothin Chiba Prefecture, on leases.

Net assets
Due to the extended profit slump and net losses, net assets declined from JPY4.2bn in FY03/07 to JPY761mn in FY03/12.
Retained earnings were minus JPY1.3bn in FY03/12.
In FY03/13 net income returned to the black, leading to an increase in retained earnings for the first time in five years.
Capital and additional paid-in capital increased due to the placement of 2.1mn shares in January 2013 and the issuance ofoptions (potential issuance: 4.8mn additional shares). We note that 1.8m additional shares were issued in FY03/13 on theexercising of options.
From FY03/14 onward, net assets increased by JPY477mn from the exercise of share subscription rights issued in January
2013 and by net income in each year.

www.sharedresearch.jp

41/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Business

LAST UPDATE【2016/11/1】

Cash flows
Cash flow statement

FY03/07

FY03/08

FY03/09

FY03/10

FY03/11

FY03/12

FY03/13

FY03/14

FY03/15

FY03/16(JPYmn)Non-cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cash flows from operating activities (1)

-305

-136

259

-1

68

-332

36

764

387

1,614

Cash flows from investing activities (2)

59

-111

-17

12

93

77

-454

-265

-865

-392

-246

-247

242

11

162

-255

-418

499

-478

1,222

Cash flows from financing activities

-43

-121

-194

-82

-299

-168

783

875

238

-2

Depreciation & amortization (A)

48

58

217

76

20

14

22

84

106

187

Free cash flow (1+2)

Capital expenditures (B)

-31

-134

-82

-22

-7

-12

-446

-254

-866

-662

Working capital changes (C)

381

-179

-459

-120

-186

238

488

-301

219

-222

-226

-305

186

-397

-152

-272

-572

568

-552

-87

Simple FCF (NI + A + B - C)

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Operating cash flow
Operating cash flow hinges on net income, depreciation, goodwill amortization and changes in working capital. The reason
that operating cash flow topped net losses plus depreciation and goodwill amortization from FY03/09 through FY03/11 was
impairment losses, valuation losses on investment securities and a drop in working capital. In FY03/12 operating cash flow
fell despite a narrower net loss due to an increase in accounts receivable. In FY03/13 and later operating cash flow stayed in
the black as the company continued to report annual net income.
Operating cash flow was significantly higher than net income during FY03/16 due to equipment sales in the Renewable
Energy Systems Sales business, which caused cash inflows from the increase and decrease in inventories.

Investment cash flow
Through FY03/12 Tamagawa was restrained in its investments with capex below JPY100mn, so cash flows from investing
activities were minus JPY17mn in FY03/09 but positive from FY03/10 through FY03/12. Tamagawa’s investment cash flow
remained in negative territory in FY03/13 and the subsequent years due to capital investments in the Electronics andTelecoms Equipment business and capex in the solar parks.

Financial cash flow
Interest-bearing debt declined from FY03/09 through FY03/12, so financing cash flows remained negative. In January 2013
Tamagawa made a placement of 2.1mn shares and issued options (if exercised would prompt the issuance of 4.8mn
additional shares) to fund solar park construction. There were 1.8m shares issued in FY03/13 on the exercising of options. In
FY03/13 Tamagawa saw JPY783mn in financing cash flows: JPY554mn from the issuance of shares; JPY47mn from option
issuance; JPY170mn from long-term borrowing; and JPY100mn from corporate bond issuance.
During FY03/14, inflows included JPY450mn from the issuance of shares, and inflows from borrowings, leading to JPY875mn
in financing cash flows.
In FY03/15, financing cash flows came to JPY238mn, due to JPY58mn in revenue from issuing new shares, JPY26mn inrevenue from issuing share purchase warrants, and borrowings.

www.sharedresearch.jp

42/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Other information

LAST UPDATE【2016/11/1】

Other information
HistoryFounded in 1968, the company was a leader in analog high-frequency wireless technology. By the mid-2000s thebusiness was derailed by Korean competitors. After several missteps and ownership changes Tamagawa found itself withthe current leadership in 2012.
J Bridge Corp became a shareholder in 2007. In 2007 J Bridge Corp (now Asia Alliance Holdings Co Ltd; TSE2: 9318)
became a shareholder. J Bridge in turn installed an executive from a company in which it held an equity stake (J CapitalManagement Co Ltd, 14.7% stake) to Tamagawa’s board in 2007. The new board member was then made CEO andproceeded to make a number of failed acquisitions, speculative investments and unwise decisions, leading to further
deterioration.
Raised capital for biomass energy in 2010. After the J Bridge-appointed CEO stepped down in 2009, the company
liquidated some money-losing subsidiaries in a bid to regain profitability. But amid declining sales its core electronics andtelecommunications equipment business continued to lose money in FY03/09-FY03/11. In 2010 the company raised
JPY144mn in new capital to launch a biomass energy business. It was liquidated in March 2012 after posting operating
losses in FY03/11 through Q2 FY03/13.
Masanori Kobayashi joins core business in June 2011. In June 2011, Masanori Kobayashi, a veteran of the company,
was appointed a director of Tamagawa Electronics Co Ltd, a subsidiary that is the core business. Kobayashi wassubsequently appointed CEO of Tamagawa Electronics in April 2012 and he took charge of rebuilding the electronics andtelecommunications equipment business. The reform included exiting unprofitable projects, something Tamagawa wasroutinely doing while battling overseas rivals. The segment returned to operating profitability in FY03/12.
Focusing on profits. In April 2012, following a request from a major Tamagawa HD shareholder, Toru Masuzawa became
executive director of Tamagawa Holdings, and CEO in June 2012. In June 2014, Tamagawa shifted to a joint leadershipsystem of two representative directors to cope with difficult market conditions. In addition to the incumbent Representative
Director Toru Masuzawa, the company promoted Masanori Kobayashi to new representative director with the aim toestablish a fair and transparent management base by maintaining and improving its compliance system and ensuring strong
corporate governance. In the same month, Yasuhiko Noguchi assumed presidency of Tamagawa Solar Systems (currently
Tamagawa Energy).
The company’s main task is to ensure profitability. The focus is on Tamagawa Energy, headed by Mr. Noguchi, and solarpark management where FIT pricing is guaranteed by the government. Another priority is ensuring stable profitability at
Tamagawa Electronics under the command of Kobayashi.

News and topics
June 2016
On June 29, 2016, the company announced a new medium-term management plan, covering from FY03/17 to FY03/20.

www.sharedresearch.jp

43/61

R

Shared Research Report

Tamagawa Holdings ＞ Other information

Tamagawa Holdings | 6838 |LAST UPDATE【2016/11/1】

The new plan calls for FY03/20 sales of JPY10.1bn and operating profit of JPY1.1bn. Detailed targets for each segment are
outlined below:

Medium-term management plan: Segment sales and profit targets

Source: Shared Research based on company data
Note: Figures may differ from company documents due to differences in rounding methods.

▶

Electronics and Telecoms Equipment segment: Generate stronger earnings by capturing orders for power amplifiers(used in next generation mobile phones), increasing overseas market share, and M&A targeting related businesses.

▶

Renewable Energy System Sales segment: Expand sales of small-scale wind power generation equipment,commercialize geothermal power generation, biomass power generation and small-scale wind power generationequipment, and launch initiatives to win orders in the second-hand solar power plant market, expand the sales
network, and strengthen its organizational structure by expanding the sales network and hiring more personnel.

▶

Solar Power Plant/Geothermal Power Plant operations: Expand capacity at the company’s power stations from thepresent 5MW to 20MW, generate stronger earnings by acquiring customers for its upcoming geothermal power plant
operations and evaluate the possibility of setting up renewable energy plants in the overseas Asian market.

▶

New businesses: Undertake initiatives related to hydrogen power storage and business investment, and explore ways
to realize synergies with existing businesses and to directly/indirectly tap opportunities at related businesses.

On June 22, 2016, the company announced that it had obtained an equity interest in Etrion Energy 5 LLC (to become an
equity-method affiliate).
As it announced on March 30 and June 11, 2015, Tamagawa was in talks with Etrion Japan KK (“Etrion”) as to how toproceed on a joint solar power generation venture in Misawa City, Aomori Prefecture. At a board of directors meeting heldon June 22, 2016, a resolution was passed on obtaining an equity interest in Etrion Energy 5 LLC (“Etrion 5GK”). The
effective date of the equity purchase is June 22, at a price of JPY300,000, and this will give Tamagawa a 30% stake in Etrion
5GK, making it an equity-method affiliate.
With the equity interest Tamagawa is obtaining from Etrion in Etrion5GK, the operation will proceed as a joint venture, andconstruction will begin as early as possible so that the sale of electricity can begin in the near future. According to a termwww.sharedresearch.jp

44/61

R

Shared Research Report

Tamagawa Holdings ＞ Other information

Tamagawa Holdings | 6838 |LAST UPDATE【2016/11/1】

sheet agreed with Etrion, Tamagawa will hold a 30% stake in the special purpose company that will oversee the project,
and the equity purchase is based on this agreement.
Tamagawa will also make an additional investment of JPY53mn in Etrion 5GK effective the same date as the aforementioned
equity purchase (June 24, 2016). The other investors in the project will make additional investments in proportion to theirstakes, so that even after this additional round of investments, the equity interest ratio will remain unchanged. Furthermore,on the same date as the aforementioned equity purchase and in keeping with their respective stakes, the various investors
in Etrion 5GK will provide subordinated loans in accordance with subordinated loan agreements they have with Etrion 5GK.
Tamagawa’s planned loan is JPY106mn.
By conducting development operations jointly with a major corporation and a major EPC contractor, Tamagawa believes it
can effectively operate this large solar power generation facility. This will also be the first project to receive financing
through a project finance scheme with a major financial institution, so this is an important project in terms of the company’sbusiness strategy. Once Etrion 5GK receives the initial loan from the financial institution, Tamagawa plans to transfer land
for the project to Etrion 5GK at a price of JPY274mn (book value).
Power plant overview
Location: Misawa City, Aomori Prefecture
Operator: Etrion Energy 5 LLC
EPC: Hitachi High-Technologies Corporation
Capacity: approximately 9.5MW (total)
Feed-in tariff: JPY36/kWh (before tax; fixed for 20 years)
First-year output: 10,740,000kWh (estimate)
Construction to start: July 2016
Commercial operation to start: February 2017
Outline of Etrion Energy 5 LLC
Source: Company data
*EPC refers to businesses comprehensively undertaking construction projects across the fields of engineering, procurement,
and construction.
*O&M refers to businesses that undertake operation and maintenance of facilities after construction is complete.

March 2016
On March 28, 2016, the company announced successfully completed grid connections for its small-scale wind power
generation facility.
As announced on February 1, 2016, the company has decided to begin power sales from small-scale wind power
generation equipment. Following the construction of Small-scale Wind Power Generator Facility No. 1 (power output:
19.5kW) on grounds available at its Tateyama mega solar power plant (power output: approx. 2,000kW), connections with
Tokyo Electric Power Company’s grid were completed and sales of electrical power started on March 25, 2016.

On March 14, 2016, the company announced upward revisions to its FY03/16 earnings forecasts.

www.sharedresearch.jp

45/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Other information

LAST UPDATE【2016/11/1】

Revisions to full-year earnings forecast
Sales: JPY7.1bn (previous forecast JPY5.4bn)
Operating profit: JPY258mn (JPY159mn)
Recurring profit: JPY187mn (JPY105mn)
Net income: JPY176mn (JPY106mn)

Reasons for the revision
At the Renewable Energy Systems Sales segment, the company was able to win more new orders for its solar power plant
equipment than projected in its previous forecast (December 10, 2015), and based on these favorable sales expects bothsales and profits to outstrip the previous forecast.

On March 1, 2016, the company announced the development of optical transmission equipment for trains.
Subsidiary Tamagawa Electronics Co. Ltd. (Tamagawa Electronics) has increased efforts to win contracts for telecoms andbroadcasting-related public works projects to minimize the impact of restrained capex spending in the mobile-phone
infrastructure market. As a result, Tamagawa Electronics has won an order for optical transmission equipment for use intrains, and has decided to start developing these products.
According to the company’s press release, one benefit of Tamagawa Electronics’ analog optical transmission equipment is
the cost effectiveness due to system simplification. They enable wireless signals that are the same as radio waves to be
directly converted to optical signals and transmitted. Further, compared to coaxial cables, optical fiber is suitable fortransmitting wireless signals over long distances because of its high frequency characteristics, in addition to fewer signal
losses.
The company expects the development of these products to boost earnings from FY03/17–FY03/19, and plans to have aseparate release regarding the earnings impact of this product when announcing its FY03/17 earnings forecast.

February 2016
On February 22, 2016, the company announced the establishment of a new subsidiary.
The company plans to expand its renewable energy business overseas, starting with Vietnam. In order to carry out accurate
and precise assessments of the business environment, it has established a subsidiary to increase its understanding of thejoint crediting mechanism (JCM) and the local electric power system in Vietnam, as well as to facilitate joint research witheducational institutions as it seeks to develop businesses overseas in the future.
Subsidiary details
Name:

THD Research Institute Co., Ltd.

Date of establishment:

March 7, 2016 (planned)

Capital:

JPY1.0mn

Owner:

Tamagawa Holdings Co., Ltd. (100%)

Business:

Investigation, promotion of research, and the holding of seminars relating to thecompany’s overseas renewable energy business, starting with Vietnam

www.sharedresearch.jp

46/61

R

Shared Research Report

Tamagawa Holdings ＞ Other information

Tamagawa Holdings | 6838 |LAST UPDATE【2016/11/1】

On February 10, 2016, the company announced earnings results for Q3 FY03/16; see the results section for details.

On February 1, 2016, the company announced new products (small-scale wind power generation equipment) in its
Renewable Energy Systems Sales segment. The new product will be sold by Tamagawa Energy, a subsidiary of thecompany.

Summary of small-scale wind power generation equipment
Small-scale wind power generation refers to wind power generation equipment producing less than 20kW of electricity,with a purchase period of 20 years. Provided that wind speeds are sufficient, wind power generation can generate
electricity during the night, differentiating it from solar power generation. The company thinks that demand for such power
generation will increase in the future.
In order to demonstrate the reliability and functionality of this product, the company plans to construct and operate
Small-scale Wind Power Generator Facility No. 1 (power output: 19.5kW) on grounds available at its Tateyama plant (power
output: approx. 2,000kW). The wind turbines are to be supplied by C&F Green Energy, the manufacturer of models thecompany plans to sell. The Tateyama plant has already received approval from the Ministry of Economy, Trade and Industry,
and approval from Tokyo Electric Power (TSE: 9501) to provide power through its grid. Tamagawa aims to complete
construction and began sales of power in March 2016.

Summary of turbine manufacturer
C&F Green Energy—a C&F Group member company based in Ireland—is set to provide wind turbines to Tamagawa. C&F
Green Energy began development, production, and installation of small and medium scale wind power generation facilities
in 2006. It has installed over 1,000 wind turbines across Europe, including in Ireland, the United Kingdom, Italy, France, andSwitzerland. The C&F Group began design, manufacturing, and supply of metal and chrome parts for automotive
applications in 1989, and provides its products to companies across the globe.
The current wind turbine units—manufactured by C&F Green Energy—to be provided to Tamagawa have received ClassNK
approval from Nippon Kaiji Kyokai, a necessity for facilities to receive approval under the feed-in tariff system.

Sales plans
From an efficiency standpoint, the small-scale wind power generation equipment should ideally be placed in regions where
the wind speed is at least 5m/s. In FY03/16, Tamagawa plans to perform final checks on the functionality of wind power
generation equipment it owns, prior to beginning sales of the same models in FY03/17. By actively acquiring anddeveloping areas that meet the aforesaid standard, the company aims to sell about 100 units during FY03/17.

January 2016
On January 25, 2016, the company announced plans to install a solar power tracking system at its solar park in Sodegaura.
As announced on March 24, 2015, the company launched electricity sales at its solar park in Sodegaura, Chiba (hereafter,
Sodegaura solar park) last year. In order to explore new possibilities for its Solar Power Plant Operations business, it has
decided to establish a solar power plant at this park which makes use of an automatic tracking system—the company’s firstwww.sharedresearch.jp

47/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Other information

LAST UPDATE【2016/11/1】

usage of this technology.

About the tracking system
The tracking system the company plans to use is known as a universal-axis solar tracker. It automatically adjusts the solar
panel to the optimal angle in relation to the sun’s position, allowing it to gather more sunlight than a fixed panel and assuch make full use of the available solar energy. This in turn greatly increases its energy output. The company expects thatthe total amount of energy generated will be 20-30% more than that generated by the fixed solar panels it has been using
until now, and anticipates an increase in its power generating efficiency.

About the tracking system’s installation
Location: Sodagaura City, Chiba Prefecture
Capacity: Approx. 12Kw
Feed-in tariff: JPY32/kWh (excluding tax, fixed for 20 years)
Maker: TopperSun (Taiwan)

On January 12, 2016, Tamagawa Holdings Co., Ltd. announced an update on the status of its plans to construct a solarpark in Goto City, Nagasaki Prefecture.
As announced on November 18, 2014, the company is planning to construct and operate a solar park in Goto City,
Nagasaki Prefecture. Tamagawa has now selected a contractor to carry out the construction work for the solar park.
The solar park plans to utilize a 5.3MW extra high voltage system—the first of its type for Tamagawa. The company has been
preparing to start the sale of electricity there as soon as possible.
Nangoku Corporation, which is scheduled to perform construction work for the solar park, is a general trading company
based in Kagoshima that operates businesses such as construction materials, machinery and equipment,
telecommunications, and energy throughout the Kyushu region and has more than 40 subsidiaries and affiliates. Nangoku
plans to build 30 solar energy power plants on its own in Kyushu for a total generation capacity of around 200MW and hasconstructed more solar power facilities.

About the Goto City solar park
Location:

Yoshikugi-cho, Goto City, Nagasaki Prefecture

Operator:

GP Energy 2 Co., Ltd. (wholly owned subsidiary)Area:

10 hectares

Capacity:

Approx. 5.3MW

Feed-in tariff:

JPY36/kWh (fixed for 20 years)

Generation revenue:

JPY250mn/year (tentative)

First-year generation volume:

Approx. 6,790,566kWh

Start of the sale of electricity:

April 2017 (planned)

www.sharedresearch.jp

48/61

R

Shared Research Report

Tamagawa Holdings | 6838 |Tamagawa Holdings ＞ Other information

LAST UPDATE【2016/11/1】

On January 4, 2016, the company provided an update on the status of its plans to launch a power plant business in
Misawa, Aomori Prefecture.
As indicated in its December 26, 2014 announcement, the firm plans to construct and operate solar energy power plantfacilities with a total capacity of approximately ten megawatts in Misawa, Aomori Prefecture (hereafter “power plantbusiness”). It is in the process of performing the necessary procedures and hopes to start electricity sales at an early stage.
Tohoku Electric Power Co. has now officially approved a request for grid connections to Tamagawa’s power plant facilities(procedure for connecting to a power company’s grid, which is a precondition for selling power).
As the firm indicated on June 11, 2015, it reached a basic agreement with Etrion Japan KK (hereafter “Etrion”) to jointly
operate these power plant facilities. The official approval of the grid connection request should encourage quicker andmore concrete discussions with Etrion as the company looks to start operations.
Tamagawa Holdings expects this power plant business to begin selling power from FY03/17 and plans to promptly reportany concrete developments regarding this joint project with Etrion.

Power plant overview
Location:

Misawa, Aomori

Operator: GP Energy A, GP Energy B, GP Energy C, GP Energy D (wholly owned units)
Premises:

Approx. 153,000sqm

Capacity:

Approx. 10MW

Feed-in tariff:
Revenue:

JPY36/kWh (before tax; fixed for 20 years)

JPY390mn a year (estimate)First year output:

Approx. 10,852,814 kWh (estimate)

December 2015
On December 10, 2015, the company revised its sales and earnings forecast for FY3/16, and also provided an updated
status report on its Geothermal Power Plant Operations.

Revised FY 3/16 forecast
Sales: JPY5.41bn (previously JPY5.6–7.3bn)
Operating profit: JPY159mn (previously JPY590–850mn)
Recurring profit: JPY105mn (previously JPY520–790mn)
Net income: JPY106mn (previously JPY400–570mn)

Reasons for the revision
Moves by telecommunications carriers to restrain abrupt spending on mobile phone infrastructure and a lull (due toseasonality) in work on large government projects hurt sales at the Electronics and Telecoms Equipment segment. As thisleft 1H sales short of the company's initial forecast and put the Electronics and Telecoms Equipment segment below its
breakeven point, the company revised its full-year earnings forecast.

www.sharedresearch.jp

49/61

R

Shared Research Report

Tamagawa Holdings | 6838 |Tamagawa Holdings ＞ Other information

LAST UPDATE【2016/11/1】

Tamagawa Holdings had previously given its full-year forecast as a range estimate, owing to its Renewable Energy Systems
Sales segment, where sales and earnings vary depending on changes in the operating environment caused by external
factors. As indicated in the Geothermal Power Plant Operations status report released the same day, the upper end of theforecast range was based on the assumption that upon the completion of construction of the two geothermal power plantsthat are currently under construction, the company would sell electrical power from the geothermal power plant and thegeothermal power plants themselves, and would also sell the sites previously acquired for two other geothermal power
plants where construction has not yet begun. However, the company has sold the two plants that were under construction
to a third party, resold the land acquired to build the two other geothermal power plants, and halted the sale of geothermal
power plants. In addition to lowering the expected sales amount at the Electronics and Telecoms Equipment segment,these moves caused the company to revise down earnings figures at both the upper and lower end of the expected range.
The sharp drop in expected profits relative to the company’s full-year revised sales forecast is due to the fact that the
decline in sales was at the high-margin Electronics and Telecoms Equipment segment.
Given the current operating environment, company plans for restoring orders and sales at the Electronics and Telecoms
Equipment segment call for focusing on expanding sales to the defense market and the public sector disaster
preparedness-related market, and also on acquiring new customers. These efforts have brought in new large scale orders
and improved the segment's order flow but, since most of the deliveries under these orders will not be until April 2016 orlater, the contributions to earnings from will not appear until next fiscal year.
Current status of previously planned geothermal power plants
On January 29, 2015, the company announced that it planned to build a total of seven geothermal power plants, and to thisend acquired a total of seven separate plots of land. The company moved forward on construction at two of the seven sites
but changed its plan. Under the new plan, the company will sell the two plants currently under construction to a third-party
and sell back the sites acquired for the five other geothermal power plants to their original owners.
At the geothermal power plant located in Beppu City, Oita Prefecture, a reexamination of data acquired after work had
begun showed that Tamagawa Holdings was unlikely to get the return on the project it originally envisioned. After a seriesof talks with the outside party that originally proposed the project, Tamagawa Holdings reached an agreement to sell thetwo power plants currently under construction to a company owned by the party that originally proposed the project at a
price that would be greater than the total amount Tamagawa Holdings had invested in the two projects. The transaction
and payment under this agreement are be completed by the end of January 2016.
As for the remaining five sites at which construction of geothermal power plants has not yet begun, Tamagawa Holdings
chose to exercise its right under the original purchase contract to sell the land back to the original owner at the same pricefor which it was purchased. Two of the five sites have already been sold back to their original owners and the sales ofremaining three sites are expected to be completed by the end of December 2015.
The company had expected to use some of the capital that was raised by a warrant issue for its geothermal power plant
operations. However, after only 10 of the warrants issued were exercised, adverse changes in the operating environment
and the stock market pushed the company's share price down to a level where it made sense for the company to buy backand cancel all of the remaining 9,990 warrants and finance construction at the first geothermal power plant site with cashon hand.

www.sharedresearch.jp

50/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Other information

LAST UPDATE【2016/11/1】

October 2015
On October 1, 2015, the company announced the current status of its Geothermal Power Plant Operations (in planning).
As announced on December 26, 2014, the company has been carrying out administrative procedures and construction
work for its new Geothermal Power Plant Operations in order to initiate electric power sales at an early stage. The company
officially received a notice on September 30, 2015 from Kyushu Electric Power Co. regarding the approval and timing for
grid connections of Tamagawa’s two geothermal power plants.

Overview of the Geothermal Power Generation segment◤◤

Connection date:Around April 2016

Business:

Geothermal power generation is not affected by the weather, seasons, or day/night

fluctuations like solar power. As a result, one 125Kw geothermal power plant generates electricity roughly equivalent
to a 1MW solar power plant. Geothermal power plants can be built on small plots of land, which makes efficient
power procurement possible. The feed-in tariff of electricity produced by geothermal power plants is JPY40 per
kilowatt (consumption tax not included for 15,000kW or less).

Overview of the geothermal power plant◤◤

Location:

Beppu, Oita Prefecture

Output capacity:

About 250kW(equivalent to a 1MW solar power plant; two plants equivalent to a 2MW solar plant)

◤
◤
◤
◤

Feed-in tariff:

JPY40/kWh (fixed for 15 years)

Feed-in revenue:

About JPY80mn/year (estimate)

Generation capacity:

About 2.2mn kWh/year (estimate)

Sales start date: Around April 2016

The company projects that this geothermal power plant will begin operations in FY03/17. Although it expects the effect on
FY03/16 earnings to be negligible, it will swiftly announce any updates as soon as it is possible to calculate earnings
forecasts.

September 2015
On September 18, 2015, the company announced the acquisition and cancellation of No. 6 stock warrants (with an
option to adjust the exercise price).
At a board of directors meeting on the same day, the company resolved to acquire and cancel all No. 6 stock warrants
issued to Macquarie Bank Limited on January 16, 2015.

Details of the acquisition and cancellation of warrants
Name: No. 6 stock warrant (with an option to adjust the exercise price)
Allottee: Macquarie Bank Limited
Number of warrants: 10,000 (1,000 shares per warrant)
Allocation date: January 16, 2015

www.sharedresearch.jp

51/61

R

Shared Research Report

Tamagawa Holdings | 6838 |Tamagawa Holdings ＞ Other information

LAST UPDATE【2016/11/1】

Payment amount: JPY1,960 per share
Exercise price: JPY218 per warrant
Exercise period: January 19, 2015 to January 18, 2017
Number outstanding: 9,990 warrants
Acquisition and cancellation date: October 16, 2015

Reasons for the acquisition and cancellation of No. 6 stock warrants
The company issued No. 6 stock warrants on January 16, 2015 to the allottee, Macquarie Bank Limited, in order to procure
funds for the development of its solar and geothermal power plants. However, Tamagawa Holdings’ stock price hasremained at a low level following the issuance of the warrants, owing to the company’s operating environment and thestock market, and so the company believes the allottee is unlikely to voluntarily exercise the warrants. It is also possible forthe company to meet the abovementioned funding needs using cash on hand and indirect financing. Further, the company
has determined that it is necessary to alleviate market concerns of possible dilution owing to the continued existence of
unexercised warrants that the company believes are unlikely to be exercised.
Tamagawa Holdings believes that the acquisition and cancellation of the warrants will have a negligible impact on its
FY03/16 investment plans.

July 2015
On July 24, 2015, the company released the update on its geothermal power plant operations.
On December 26, 2014, the company had announced that it was planning to kick off selling electricity of its geothermal
power plant in August 2015. However, it now states that this may be pushed back, because of a surge in applications forgrid connections to its geothermal power plant in Beppu, Oita Prefecture, where it is driving geothermal business while
engaging in grid-connection talks with Kyushu Electric Power Co. This has created a potential need to procure voltage
regulators (SVCs, or Static Voltage Controllers) in the grid-connection project with Kyushu Electric to begin selling power.
Tamagawa has already completed the negotiation stage for grid connection with Kyushu Electric and has received
confirmation that it can proceed with the connection. Going forward, the company will crystallize timelines for thecompletion date and the selling start date based on the detailed blueprint for grid connection by Kyushu Electric.

June 2015
On June 11, 2015, the company announced the progress of a business alliance with Etrion Japan KK.
The company has concluded a Memorandum of Understanding regarding the business alliance with Etrion Japan, and thetwo companies have discussed the process for establishing a solar power business in Misawa, Aomori. Both parties have
now agreed upon a Term Sheet setting forth the specific process for this business and each company’s stake. The company
is analyzing the effect of this alliance on earnings for FY03/16 and plans to make an announcement as soon as possible.

Key points
The two companies will establish a special-purpose company (SPC) for this joint business.
Tamagawa may hold a stake of up to 30% in the SPC.

www.sharedresearch.jp

52/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Other information

LAST UPDATE【2016/11/1】

The two companies aim to complete all procedures necessary to begin construction by December 2015.
The two companies will jointly decide the method of funding and appoint engineering, procurement, andconstruction agents.

Overview of the power plant
Location:

Misawa, Aomori

Operator:

GP Energy A, GP Energy B, GP Energy C, GP Energy D (wholly owned units)

Premises:

153,000sqm

Capacity:

10MW

Feed-in tariff:

JPY36/kWh (before tax; fixed for 20 years)

Revenue:

JPY390mn a year (estimate)First year output:

10,852,814 kWh (estimate)

May 2015
On May 12, 2015, the company announced a reduction in capital reserves and the distribution of a surplus.
At a meeting of the board of directors held on the same day, the company resolved to reduce capital reserves by JPY200mn
and transfer the entire amount to the capital surplus account. It plans to use JPY41mn of the increase in capital surplus to
pay a dividend of JPY1 per share. The aim of the above is to secure shareholder return, and ensure a flexible capital policy infuture.
The planned record date for this distribution is March 31, 2015, provided the proposal to reduce capital reserves isapproved at the general meeting of shareholders on June 26, 2015, and the necessary procedures to protect creditors arecompleted.

April 2015
On March 30, 2015, the company announced a business alliance with Etrion Japan KK.

On the day of announcement, the two companies signed a Memorandum of Understanding to make a joint investment in asolar power plant in Misawa, Aomori Prefecture.

Etrion Japan KK is part of the Etrion Group under parent company Etrion Corporation, which constructs, owns, and operates
full-scale solar power plants. It is an independent power producer (IPP) with solar power plants totaling 130MW in output
in Italy and Chile, and is listed on the Toronto and Stockholm stock exchanges. Headquartered in Canada, this international
renewable energy provider also has branches in Geneva, Miami, Rome, Santiago, and Tokyo.

As announced on December 26, 2014, the company has acquired the land for a solar power plant in Misawa, and is making
preparations to begin selling electricity as soon as possible. Per this Memorandum of Understanding, Tamagawa and Etrion
will raise funds for this project once both companies have completed their due diligence. The company thus expects towww.sharedresearch.jp

53/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Other information

LAST UPDATE【2016/11/1】

complete the construction soon and with no major issues. The company has yet to decide on the method of raising funds,
and how the plant will be operated.

Overview of the power plant
Location:

5-chome, Mukawame, Misawa City, Aomori Prefecture

Operator:

GP Energy A, GP Energy B, GP Energy C, GP Energy D (wholly owned units)

Premises:

153,000sqm

Capacity:

10MW

Feed-in tariff:

JPY36/kWh (before tax; fixed for 20 years)

Revenue:

JPY390mn a year (estimate)First year output:

10,852,814 kWh (estimate)

On March 24, 2015, the company announced the start of electricity sales at its solar park in Sodegaura (Chiba Prefecture).

The company launched electricity sales on March 24, 2015, after connecting to the Tokyo Electric Power (TEPCO) grid. The
company does not expect this to have any material impact on earnings results for FY03/15.

Overview of the Sodegaura solar park
Name:

Sodegaura Hayashi Power Plant

Footprint:

Approx. 15,000sqm

kW output:

Approx. 1,300kW

Feed-in tariff:

JPY36/kWh (pre-tax; fixed for 20 years)

Expected revenue:

Approx. JPY60mn per year from the sale of electricity(cumulative total for 20 years: JPY1.2bn).

March 2015
On March 30, 2015, the company announced a business alliance with Etrion Japan KK.
On the day of announcement, the two companies signed a Memorandum of Understanding to make a joint investment in asolar power plant in Misawa, Aomori Prefecture.
Etrion Japan KK is part of the Etrion Group under parent company Etrion Corporation, which constructs, owns, and operates
full-scale solar power plants. It is an independent power producer (IPP) with solar power plants totaling 130MW in output
in Italy and Chile, and is listed on the Toronto and Stockholm stock exchanges. Headquartered in Canada, this international
renewable energy provider also has branches in Geneva, Miami, Rome, Santiago, and Tokyo.

www.sharedresearch.jp

54/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Other information

LAST UPDATE【2016/11/1】

As announced on December 26, 2014, the company has acquired the land for a solar power plant in Misawa, and is making
preparations to begin selling electricity as soon as possible. Per this Memorandum of Understanding, Tamagawa and Etrion
will raise funds for this project once both companies have completed their due diligence. The company thus expects tocomplete the construction soon and with no major issues. The company has yet to decide on the method of raising funds,
and how the plant will be operated.
Overview of the power plant
Location:

5-chome, Mukawame, Misawa City, Aomori Prefecture

Operator:

GP Energy A, GP Energy B, GP Energy C, GP Energy D (wholly owned units)

Premises:

153,000sqm

Capacity:

10MW

Feed-in tariff:

JPY36/kWh (before tax; fixed for 20 years)

Revenue:

JPY390mn a year (estimate)First year output:

10,852,814 kWh (estimate)

On March 24, 2015, the company announced the start of electricity sales at its solar park in Sodegaura (Chiba Prefecture).
The company launched electricity sales on March 24, 2015, after connecting to the Tokyo Electric Power (TEPCO) grid. The
company does not expect this to have any material impact on earnings results for FY03/15.
Overview of the Sodegaura solar park
Name:

Sodegaura Hayashi Power Plant

Footprint:

Approx. 15,000sqm

kW output:

Approx. 1,300kW

Feed-in tariff:

JPY36/kWh (pre-tax; fixed for 20 years)

Expected revenue:

Approx. JPY60mn per year from the sale of electricity(cumulative total for 20 years: JPY1.2bn).

On March 5, 2015, the company announced revisions to its full-year earnings forecasts.

Full-year FY03/15 forecast revisions (previous forecasts in parentheses)
Sales:

JPY5.0bn (JPY4.5bn)

Operating profit:

JPY517mn (JPY506mn)

Recurring profit:

JPY507mn (JPY489mn)

Net income:

JPY455mn (JPY450mn)

Reasons for the revisions
The company expects sales and profits to outperform previous forecasts, due to it being able to secure land to facilitate
sales of solar power plant equipment, as well as robust sales conditions.

February 2015
On February 23, 2015, the company announced that its mega solar power plant in Tateyama City, Chiba Prefecturewww.sharedresearch.jp

55/61

R

Shared Research Report

Tamagawa Holdings | 6838 |Tamagawa Holdings ＞ Other information

LAST UPDATE【2016/11/1】

commenced operations.
According to the company, connections from its mega solar power plant in Tateyama City to the Tokyo Electric Power(TEPCO) grid have been completed, and sales of power began on February 23, 2015. The company does not expect this tohave a material impact on its FY03/15 earnings results.

Summary of Tateyama City mega solar power plant
Plant name: Tateyama Power Plant
Land area: approx. 35,386sqm
Generation capacity: 1,999kW
Feed-in tariff (fixed rate for 20 years): JPY40/kWh (tax exclusive)
Estimated feed-in revenue: JPY95mn/year, JPY1.9bn cumulative total for 20 years

On February 6, 2015, the company announced that it will borrow long-term operating funds.
Funds will be loaned to the company from the Chiba Bank in the amount of JPY100mn, with a due date of January 31, 2018.

On February 3, 2015, the company announced that a subsidiary will secure a site for to facilitate the sale of solar power
plant equipment.
Subsidiary Tamagawa Solar Systems Co., Ltd. decided at a meeting of the board of directors that it will secure land to
facilitate the sale of power plant equipment. According to the company, after acquiring the rights to a feed-in tariff of JPY36
set by the Ministry of Economy, Trade and Industry (METI), it will be able to divide ownership of the low-voltage power
plant into 13 lots, to sell to outside buyers. This is expected to boost group earnings.

Details of the equipment sales
Location: Kanoya City, Kagoshima Prefecture
Total area: about 11,070sqm (for all 13 lots)
Output capacity: about 650Kw (for all 13 lots)
Feed-in tariff: JPY36/kWh (fixed for 20 years)
Acquisition date: February 3, 2015

January 2015
On January 29, 2015, the company announced that it would acquire additional land for its geothermal power
operations.

PurposeTamagawa Holdings, which plans to launch a geothermal power generation business, has already acquired land in Beppu
City, Oita Prefecture, to build a 125kW plant. The construction is currently underway to providing electricity as early as
possible. The company has decided to acquire six additional plots to build plants with a total capacity of 750kW. As a result,www.sharedresearch.jp

56/61

R

Shared Research Report

Tamagawa Holdings ＞ Other information

Tamagawa Holdings | 6838 |LAST UPDATE【2016/11/1】

the group will have seven plots for a total capacity of 875kW. A 125kW geothermal plant generates electricity equivalent to
a 1MW solar power plant. Thus, the company will have power plants with a combined generation capacity of a 7MW solar
power plant.

The choice of Beppu City
The company will build binary cycle power plants that use underground steam to rotate turbines. Binary power plants
generate electricity through a medium that has a lower boiling point than water. There is no need for the company to seeka new energy source because it will use a power source already being used for a hot spring nearby. Thus, the company will
be able to start operations within a short period of time at a relatively low cost. In addition, the company has determinedthat the location is suitable for geothermal power generation because another binary cycle power plant is operating nearby
and there is an ample supply of hot water.

Overview of the land
Location: Beppu City, Oita Prefecture
Size: 2,100sqm
Output: 750kW (One plot accommodates a 125kW geothermal plant, equivalent to a 1MW solar plant. Thus, six plotsof land would allow for power generation equivalent toa 6MW solar plant.)
Electricity price: JPY40/kWh (fixed for 15 years)
Expected annual revenue: JPY250mn
Expected initial year output: 6,800,000kWh
Transfer date: January 30, 2015

On January 16, 2015, the company announced the completion of payments related to the issuance of warrants (with an
option to adjust the exercise price).
The payments related to warrants announced on December 26, 2014.

November 2014
On November 25, 2014, the company announced the establishment of a second-tier overseas subsidiary.
Tamagawa Electronics Co., Ltd., a wholly owned subsidiary of the company, will form a subsidiary in Vietnam on March 31,
2015.

Purpose of establishment
Tamagawa Electronics is engaged primarily in the design, manufacture, and sales of mobile high frequency
telecommunications base stations, and other high frequency devices used in television transmission and public wirelessinfrastructure. Tamagawa Electronics has been a manufacturer and supplier to major domestic telecommunications
manufacturers. In recent years, price competition has caused a greater portion of manufacturing and procurement to occur
overseas, and in order to meet this demand and further reduce manufacturing costs for high frequency devices, thewww.sharedresearch.jp

57/61

R

Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Other information

LAST UPDATE【2016/11/1】

company has decided to establish a subsidiary in Vietnam with the intent of expanding its sales overseas and providing
higher quality products.

Subsidiary details
Name:

Tamagawa Electronics Vietnam Co., Ltd.

Location:

Socialist Republic of Vietnam

Capital:

JPY50.0mn

Owner:

Tamagawa Electronics Co., Ltd. (100%)

Business:

Manufacture and sales of telecommunications equipment

On November 18, 2014, the company announced progress regarding construction of the solar park in Goto City,
Nagasaki Prefecture.
As disclosed on May 29, 2013, the company has acquired land in Goto City for the construction of a solar park, and iscontinuing preparations to begin operations. Tamagawa has now received approval from Nagasaki Prefecture to develop in
a forested area.
As the company continues preparations to begin construction, it has been applying to relevant authorities for permits
required to begin work. Approval from Nagasaki Prefecture to develop in a forested area was one such requirement tobegin construction of the solar park. The solar park is planned to utilize a 5.5MW extra high voltage system—the first of its
type for Tamagawa.

About the Goto City solar park
Location:

Yoshikugi-cho, Goto City, Nagasaki Prefecture

Operator:

GP Energy 2 Co., Ltd. (wholly owned subsidiary)Area:

10 hectares

Capacity:

Approx. 5.5MW

Feed-in tariff:

JPY36/kWh (fixed for 20 years)

Generation revenue:

JPY250mn/year (tentative)

First-year generation volume:

Approx. 6,790,566kWh

The company has modified its capacity estimates for this facility from 6.0MW to 5.5MW.

Other
The company has been subject to harmful internet rumors, and is taking steps to improve its reputation, including filing
civil and criminal actions, to bring the perpetrators to account.

www.sharedresearch.jp

58/61

R

Shared Research Report

Tamagawa Holdings | 6838 |Tamagawa Holdings ＞ Other information

LAST UPDATE【2016/11/1】

Major shareholders
Top Shareholders

Amount Held

Tang Marilyn Hweeti
Bank Julius Bär & Co., Ltd. (Singapore) ClientsJapan Securities Finance Co., Ltd.
Hiromasa Shimanuki
Toru Masuzawa
EFG Bank AG (Hong Kong) Account Client
Sada Kubota

10.4%
10.1%
7.2%
4.6%
3.2%
2.8%
2.4%

Tamagawa (treasury stock）

1.4%

Yuichi Sunaga
Hiroyuki Ohtake

1.3%
1.2%

Source: Shared Research based on company data
As of March 31, 2016www.sharedresearch.jp

59/61

R

Shared Research Report

Tamagawa Holdings | 6838 |Tamagawa Holdings ＞ Other information

LAST UPDATE【2016/11/1】

Company profile
Company

Head officeTamagawa Holdings Co., Ltd

1-6-15, Hamamatsu-cho, Minato-ku

VORT Hamamatsu-cho I,
Tokyo, Japan 105-0013
Phone

Listed on+81-3-6435-6933

JASDAQ

EstablishedExchange listing

May 7, 1970

August 31, 1999

WebsiteFiscal year-end

http://www.tmex.co.jp/english/index.html

March

IR Webhttp://www.tmex.co.jp/english/ir-info.html

www.sharedresearch.jp

60/61

R

Shared Research Report

About Shared Research Inc.
We offer corporate clients comprehensive report coverage, a service that allows them to better inform investors and other stakeholders by
presenting a continuously updated third-party view of business fundamentals, independent of investment biases. Shared Research can be found on
the web at http://www.sharedresearch.jp.

Current Client Coverage of Shared Research Inc.
Accretive Co., Ltd.
Accordia Golf Trust
Adastria Co., Ltd.
AEON DELIGHT Co.
Ai Holdings Corp.
Aiming Inc.
AnGes MG Inc.
Anicom Holdings, Inc.
Anritsu Corporation
Apamanshop Holdings Co., Ltd.
ArtSpark Holdings Inc.
AS ONE Corporation
Aucfan Co.,Ltd.
Axell Corporation
Azbil Corporation
Bell-Park Co., Ltd.
Benefit One Inc.
Canon Marketing Japan Inc.
Carna Biosciences, Inc.
Chiyoda Co., Ltd.
Chugoku Marine Paints, Ltd.
Cocokara Fine, Inc.
Comsys Holdings Corporation
CRE, Inc.
Creek & River Co., Ltd.
Daiseki Corp.
DIC Corporation
Digital Arts Inc.
Digital Garage Inc.
Don Quijote Holdings Co., Ltd.
Dream Incubator Inc.
Earth Chemical Co., Ltd.
Elecom Co.
EMERGENCY ASSISTANCE JAPAN Co.
en-Japan Inc.
FerroTec Corp.
Fields Corp.

Financial Products Group Co., Ltd.
FreeBit Co., Ltd.
FUJITA KANKO INC.
Gamecard-Joyco Holdings, Inc.
GCA Corporation
Grandy House Corp.
Hakuto Co., Ltd.
Happinet Corporation
Harmonic Drive Systems Inc.
Hearts United Group Co., Ltd.
Heiwa Real Estate Co., Ltd.
IDOM Inc.
IID, Inc.
Infomart Corp.
Intelligent Wave Inc.
istyle Inc.
Itochu Enex Co., Ltd.
ITO EN, Ltd.
J Trust Co., Ltd
Japan Best Rescue System Co., Ltd.
JIN Co., Ltd.
Kameda Seika Co., Ltd.
Kenedix, Inc.
KFC Holdings Japan, Ltd.
LAC Co., Ltd.
Lasertec Corp.
MAC-HOUSE Co.
Matsui Securities Co., Ltd.
Medinet Co., Ltd.
MEGANESUPER CO., LTD.
Milbon. Co., Ltd.
MIRAIT Holdings Corp.
MONEY SQUARE HOLDINGS, INC.
NAGASE & CO., LTD
NAIGAI TRANS LINE LTD.
NanoCarrier Ltd.
Nichi-Iko Pharmaceutical Co., Ltd.

Nippon Parking Development Co., Ltd.
Nisshinbo Holdings Inc.
Ono Sokki Co., Ltd.
Onward Holdings Co., Inc.
Paris Miki Holdings Inc.
NS Tool Co.
NTT Urban Development Corporation
Pigeon Corp.
Resorttrust, Inc.
Round One Corp.
Ryohin Keikaku Co., Ltd.
SanBio Company Limited
Sanix Incorporated
Sanrio Co., Ltd.
SATO Holdings Corp.
SBS Holdings, Inc.
Ship Healthcare Holdings Inc.
SMS Co., Ltd.
SOURCENEXT Corporation
Star Mica Co., Ltd.
SymBio Pharmaceuticals Limited
Takashimaya Co., Ltd.
Takihyo Co., Ltd.
Tamagawa Holdings Co., Ltd
TEAR Corporation
3-D Matrix, Ltd.
TKC Corporation
TOKAI Holdings Corp.
WirelessGate, Inc.
Yellow Hat Ltd.
Yumeshin Holdings
Yushiro Chemical Industry Co., Ltd.
V-cube, Inc.
Vision Inc.
VOYAGE GROUP, Inc.
ZAPPALLAS, INC.

Attention: If you would like to see companies you invest in on this list, ask them to become our client, or sponsor a report yourself.

Disclaimer
This document is provided for informational purposes only. No investment opinion or advice is provided, intended, or solicited. Shared Research
Inc. offers no warranty, either expressed or implied, regarding the veracity of data or interpretations of data included in this report. Shared Research
Inc. shall not be held responsible for any damage caused by the use of this report.
The copyright of this report and the rights regarding the creation and exploitation of the derivative work of this and other Shared Research Reports
belong to Shared Research Inc. This report may be reproduced or modified for personal use; distribution, transfer, or other uses of this report arestrictly prohibited and a violation of the copyright of this report. SR Inc. officers and employees may currently, or in the future, have a position insecurities of the companies mentioned in this report, which may affect this report’s objectivity.

Japanese Financial Instruments and Exchange Law (FIEL) Disclaimer
The report has been prepared by Shared Research Inc. (“SR”) under a contract with the company described in this report (“the Company”).
Opinions and views presented are SR’s where so stated. Such opinions and views attributed to the Company are interpretations made by SR. SR
represents that if this report is deemed to include an opinion by SR that could influence investment decisions in the Company, such opinion may bein exchange for consideration or promise of consideration from the Company to SR.

Contact Details
Shared Research Inc.
3-31-12 Sendagi Bunkyo-ku Tokyo, Japan
http://www.sharedresearch.jp
Phone: +81 (0)3 5834-8787
Email: info@sharedresearch.jp

www.sharedresearch.jp