COMPANY RESEARCH AND ANALYSIS REPORT

G-7 HOLDINGS INC.
7508
Tokyo Stock Exchange First Section

24-Jan.-2018
FISCO Ltd. Analyst

Yuzuru SatoFISCO Ltd.
http://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

24-Jan.-2018
http://www.g-7holdings.com/investors/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Posted higher sales and profits in 1H FY3/18..............................................................................................

01

2. Likely to set all-time highs again in FY3/18. .................................................................................................

01

3. Rebooting overseas efforts other than AUTOBACS and car-related business andsome restaurant and food businesses... ......................................................................................................

01

4. Medium-term business plan targets ¥170bn in net sales and ¥7bn in ordinary income in FY3/21. ..............

01■Business overview---------------------------------------------------------------------------------------------------------------------------------------------------- 02
1. AUTOBACS and car-related business. . ........................................................................................................

03

2. Business Supermarket and quality food business........................................................................................

03

3. Other Businesses.........................................................................................................................................

04■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 05
1. Overview of 1H FY3/18 results. . ............. ......................................................................................................

05

2. Performance trends by business segment. ..................................................................................................

06

3. Financial condition and key financial indicators. ..........................................................................................

08■Business outlook-------------------------------------------------------------------------------------------------------------------------------------------------------- 09
1. Forecast for FY3/18.....................................................................................................................................

09

2. Segment outlook. . .................................. ......................................................................................................

10■Medium to long-term growth strategy-------------------------------------------------------------------------------------------------- 11■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 12

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
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G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

24-Jan.-2018
http://www.g-7holdings.com/investors/██SummaryLikely to continue expanding business performance led
by mainstay AUTOBACS and Business Supermarket operations
G-7 HOLDINGS INC. <7508> is a holding company that owns subsidiaries operating the largest franchises of
AUTOBACS and Business Supermarket stores in Japan. It excels at store profitability with emphasis on productivity
per employee and other indicators. It is also promoting development of the foodstuffs and restaurant businesses,
agricultural as well as the overseas businesses. The Company is also promoting growth strategies using M&As.
1. Posted higher sales and profits in 1H FY3/18
The Company reported 1H FY3/18 (Apr-Sep 2017) consolidated results with ¥57,160mn in net sales (+7.9% YoY)and ¥1,729mn in ordinary income (+8.7%), setting all-time highs on a half-year basis. Main drivers were sharp
earnings recovery in the mainstay AUTOBACS business on last-minute demand prior to tire price hikes and healthy
expansion of Business Supermarket earnings with a rise in same-store sales and additions from new openings.
2. Likely to set all-time highs again in FY3/18
The Company retained its FY3/18 initial forecast of ¥117,700mn in net sales (+6.6% YoY) and ¥4,300mn in ordinary
income (+5.9%). Progress through 1H was roughly on track with the plan, and earnings might even exceed targets
depending on snowfall conditions in the winter season. Furthermore, dashboard camera (dashcam) sales haveclimbed sharply since October and customers are waiting for product shipments. Continuation of this boom would
provide a tailwind.
3. Rebooting overseas efforts other than AUTOBACS and car-related business and some restaurant andfood businesses
In overseas initiatives, meanwhile, the Company intends to reboot activities by around March 2018, other than the
AUTOBACS and car-related business and some restaurant and food businesses. While it had been pursuing the
agricultural business and restaurant operations in Southeast Asian countries in recent years, management concluded
that it is likely to take a while until these efforts become profitable. The Company plans to sell or consign operations
to local companies. Nevertheless, it still views capitalizing on economic growth in Southeast Asia as an important
aspect of its earnings growth strategy over the long term and wants to reenter this region after making sufficient
preparations, such as cultivating human resources. There should not be much impact on FY3/18 results due to themodest scale of these operations. In earnings, meanwhile, the decision is likely to favorably affect FY3/19 thanks
to removal of losses.
4. Medium-term business plan targets ¥170bn in net sales and ¥7bn in ordinary income in FY3/21
Company goals for FY3/21, the final year of the medium-term business plan, are ¥170bn in net sales and ¥7bn inordinary income. For the AUTOBACS and car-related business, it hopes to expand sales from FY3/17’s ¥54.6bn to¥65bn by strengthening car inspection, body repair, insurance, and other service businesses and cultivating new
products and services besides car products. For the Business Supermarket and quality food business, it aims toincrease sales from FY3/17’s ¥70.2bn to ¥85bn mainly through expansion of the store network. While the overseas
business is headed for a temporary retreat, the Company is still seeking to attain targets through aggressive
promotion of M&A deals in Japan.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

24-Jan.-2018
http://www.g-7holdings.com/investors/

Summary

Key Points
Primarily generates earnings from AUTOBACS and car-related business and Business Supermarket and quality
food business• Likely to set all-time highs again in FY3/18• Aiming for ¥170bn in FY3/21 net sales including M&A additions•㻾㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟（¥㼙㼚）㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕（¥㼙㼚）㻻㼞㼐㼕㼚㼍㼞㼥㻌㼕㼚㼏㼛㼙㼑㻌㻔㼞㼕㼓㼔㼠㻕㻝㻠㻜㻘㻜㻜㻜

㻠㻘㻜㻢㻞

㻠㻘㻟㻜㻜

㻝㻞㻜㻘㻜㻜㻜

㻝㻜㻜㻘㻜㻜㻜

㻠㻘㻞㻜㻜
㻞㻘㻥㻟㻟

㻟㻘㻞㻞㻜

㻟㻘㻝㻟㻥

㻟㻘㻡㻜㻜

㻞㻘㻡㻝㻞

㻤㻜㻘㻜㻜㻜

㻞㻘㻤㻜㻜㻢㻜㻘㻜㻜㻜
㻠㻜㻘㻜㻜㻜

㻠㻘㻥㻜㻜㻤㻞㻘㻢㻞㻟

㻤㻤㻘㻝㻣㻤

㻤㻤㻘㻞㻢㻝

㻝㻜㻟㻘㻤㻥㻡

㻝㻝㻜㻘㻟㻣㻣

㻝㻝㻣㻘㻣㻜㻜

㻞㻘㻝㻜㻜
㻝㻘㻠㻜㻜

㻞㻜㻘㻜㻜㻜㻣㻜㻜㻜㻜㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤㻌㻱

Source: Prepared by FISCO from the Company’s financial results██Business overview
Primarily generates income from AUTOBACS and car-related
business and Business Supermarket and quality food business
The Company’s operations consist of three operating segments: AUTOBACS and car-related business, BusinessSupermarket and quality food business, and Other Businesses. Looking at the 1H FY3/18 composition of net sales
by business segment, we see that the AUTOBACS and car-related business represented 29.5% and the BusinessSupermarket and quality food business 64.8%, with these two business segments accounting for more than 90%
of overall operations.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

24-Jan.-2018
http://www.g-7holdings.com/investors/

Business overview

1. AUTOBACS and car-related businessThis segment mainly consists of AUTOBACS franchise activities including car product sales and maintenancehandled by G-7 AUTO SERVICE CO., LTD., motorcycle product sales and maintenance handled by G-7 BIKE
WORLD CO., LTD. and the overseas car-related business.
AUTOBACS-related sales represent approximately 90% of segment sales, with 73 AUTOBACS-related stores inJapan (62 AUTOBACS stores, seven AUTOBACS Express stores, two Super AUTOBACS stores, two AUTOBACSSecohan Ichiba stores, and one AUTOBACS Cars store) and two AUTOBACS stores in Malaysia as of the end of
September 2017, giving it the largest scale within the 601 AUTOBACS group stores. Stores are located predominantly in Hyogo, Kyoto, Fukui, Okayama, Hiroshima, Chiba, and Ibaraki prefectures. Hyogo is particularly importantwith 40 stores, or just under 60% of the Company’s entire network. Store management places strong emphasis
on productivity per employee and inventory turnover rates, and the franchise business is notable for maintaining
the highest profitability within the AUTOBACS group. Other car-related businesses (the Company’s own initiatives)
include seven CRYSTAL SEVEN stores offering carwash and coating services, one TIRE SENMONKAN tire specialty
store, seven body repair BP centers, and one Suzuki Cars Osaka store.
Additionally, BIKE WORLD, which engages in direct sales of motorcycle products, operates a total of 15 stores with12 stores in Japan, two stores in Malaysia, and one store in Thailand as of the end of September 2017.
2. Business Supermarket and quality food businessThis segment consists of Business Supermarket franchise operations developed by G-7 SUPER MART CO., LTD.,food product and restaurant operations developed by G7 JAPAN FOOD SERVICE CO., LTD., and G-7 MEATTERABAYASHI CO., LTD., a meat retailer, which was consolidated as a subsidiary in June 2015.
G-7 SUPER MART represents roughly 80% of segment sales, with its 134 supermarket outlets as of the end of
September 2017, giving it the largest scale among the 777 Business Supermarket group stores. Store rollouts are
predominantly centered in the Kanto, Chubu, Kansai, Kyushu, and Hokkaido regions.
G7 JAPAN FOOD SERVICE, which accounts for just under 10% of sales, discovers local delicacies and unique local
products and handles wholesale supply to department stores and other retailers as quality foods. It also develops,
manufactures, and sells private-brand foods, handles export/import business, engages in online sales, and operates
restaurants and sweets business (booked in the Other Businesses segment) in Japan.
G-7 MEAT TERABAYASHI, which provides just over 10% of sales, had 102 retail butcher shops as of the end of
September 2017. Roughly 60% of these stores are set up as tenants at Business Supermarket and Megumi no
Sato sites, and the others are primarily located at department stores and shopping malls.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
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G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

24-Jan.-2018
http://www.g-7holdings.com/investors/

Business overview

3. Other Businesses
The Other Businesses consist of G-7 AGRI JAPAN CO., LTD., which operates the Megumi no Sato farmers’ market
chain, G-7 RETAIL JAPAN CO., LTD., which manages real estate, DAISO discount stores (100 yen shops), thrift
stores, fitness clubs and golf schools and G7 INTERNATIONAL PTE. LTD. (Singapore), which handles overseas
operations (except for AUTOBACS and BIKE WORLD), a coin laundry service, and a sweets business as new
businesses.
For Megumi no Sato, there are 26 stores (18 in Hyogo, two in Osaka, four in Nara, one in Kyoto, and one in Chiba)
as of the end of September 2017. This business changed the sales format from consignment sales (booking about
20% of the sales price as fee income under sales) to purchase-based sales from June 2015.
The Company has been steadily developing the overseas business in Southeast Asia and Taiwan. The agriculturalbusiness has started producing strawberries in Myanmar for sale at local stores. In the restaurant business, theCompany operates one Ramen KANBE store in Indonesia and a Kushikatsu Daruma store in Taiwan. The Company
also opened a Business Supermarket in Singapore through a joint venture created with a local company (G-7 holds
a 30% stake) in April 2016. It exports all food items from Japan and book export sales of these items (under theBusiness Supermarket and quality food business). The Company has established overseas subsidiaries in Singapore,
Malaysia, Vietnam, Indonesia, Myanmar, Thailand, Cambodia, Taiwan, and Hong Kong.
As a new business, the Company started a coin laundry service as a franchisee of mammaciao large coin laundry
shops with over 300 sites nationwide under mammaciao Co., Ltd. It had four sites at G-7 Malls with multiple Group
stores as of the end of September 2017. In the sweets business, the Company operates four BAKE CHEESE TART
cheese-tart shops as a franchisee (one in Kyoto, two in Osaka and one in Hyogo) as of the end of September 2017.
Additionally, the Company opened four Yamaya Honpo shops, which makes taiyaki (fish-shaped pancakes filledwith bean jam), in Hyogo.
Major consolidated subsidiaries
Business segment

Company name

G-7 AUTO SERVICE CO., LTD.
AUTOBACS andcar-related business G-7 BIKE WORLD CO., LTD.
Business
Supermarket
and quality foodbusiness

Other Businesses

Capitalcontribution
ratio

Business description

100.0% Operator of AUTOBACS, etc.
100.0% Operator of BIKE WORLD, etc.

G-7 SUPER MART CO., LTD.

100.0% Operator of Business Supermarket, etc.

G7 JAPAN FOOD SERVICE CO., LTD.

100.0%

G-7 MEAT TERABAYASHI CO., LTD.

85.58% Retail sales of meats and processed livestock products

G-7 RETAIL JAPAN CO., LTD.

100.0%

G-7 AGRI JAPAN CO., LTD.

100.0% Operator of Megumi no Sato, etc.

G7 INTERNATIONAL PTE. LTD.

100.0% Holding company for overseas subsidiaries

Food wholesale and retail sales, sweets business, restaurant
operations, etc.
Handles real estate development for the Group and operates recycling
shops, 100 yen shops, fitness clubs, and indoor golf schools

Source: Prepared by FISCO from Company materials

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

G-7 HOLDINGS INC.

24-Jan.-2018

7508 Tokyo Stock Exchange First Section

http://www.g-7holdings.com/investors/██Results trends
Likely to sustain sales and earnings growth led by healthy expansionof core AUTOBACS and Business Supermarket operations
1. Overview of 1H FY3/18 results
The Company reported 1H FY3/18 consolidated results with ¥57,160mn in net sales (+7.9% YoY), ¥1,624mn inoperating income (+12.7%), ¥1,729mn in ordinary income (+8.7%), and ¥1,074mn in net income attributable toowners of parent (+25.5%), continuing gains in sales and earnings and setting all-time highs for a half-year basis.
Main drivers were sharp recovery in earnings in the mainstay AUTOBACS business, which stalled in the previous
year, on last-minute demand prior to tire price hikes and healthy expansion of the Business Supermarket earnings
with additions from new openings and other positive trends. While the Company does not disclose its 1H forecast,
we think both sales and earnings were roughly on track with the plan.
By quarter, operating income was ¥852mn in 1Q and ¥772mn in 2Q, though the decline in 2Q mainly reflects
backlash from last-minute demand for tires in the AUTOBACS business in 1Q.
Consolidated results for 1H FY3/18(¥mn)
1H FY3/16
Results

1H FY3/17

vs. net sales

Results

vs. net sales

YoY

Net sales

52,964-

57,160-

7.9%

Cost of sales

39,504

74.6%

42,766

74.8%

8.3%

SG&A expenses

12,01722.7%

12,769

22.3%

6.3%

Operating income

1,441

2.7%

1,624

2.8%

12.7%

Ordinary income

8.7%

1,591

3.0%

1,729

3.0%

Extraordinary gains/losses

-39

-0.1%

-

-

-

Net income attributable to owners of parent

856

1.6%

1,074

1.9%

25.5%

Source: Prepared by FISCO from the Company’s financial results

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

24-Jan.-2018
http://www.g-7holdings.com/investors/

Results trends

Recovering in AUTOBACS business earnings andongoing stable growth in Business Supermarket operations
2. Performance trends by business segment(1) AUTOBACS and car-related business
The AUTOBACS and car-related business delivered ¥16,842mn in net sales (+8.4% YoY) and ¥349mn in operating
income (+135.3%) in 1H. G-7 AUTO SERVICE, which mainly handles the AUTOBACS business, recovered sharply
with a 2.5% YoY rise in sales and 220.4% increase in operating income. This entity provided a majority of thesegment’s profit addition. Domestic sites remained at 73 locations, but higher same-store activity lifted sales.
Upbeat tire sales, with relatively high profitability, contributed to the steep improvement in earnings.
Sales growth rates (YoY) by categories were tires and wheels at +10.2%, car batteries at +4.8%, oil at +3.1%, andservices (car inspections, body repair, coating, etc.) at +2.7%, reflecting healthy momentum in major businesses.
While car audiovisual equipment was the one weak spot at -7.5% because of the slump in car navigation systems,
we expect dashcams, which were flat in 1H, to provide a boost to sales from 2H given current conditions withcustomers waiting for shipments in reaction to media coverage in October.
Same-store sales for the entire AUTOBACS group increased 2.6% YoY in 1H, highlighting continuation of theCompany’s robust sales capabilities within the group.
G-7 BIKE WORLD returned to positive sales growth with a 3.5% YoY gain and reduced the operating loss by a
few ten million yen. This business stayed at 12 stores in Japan, but benefited from narrowing the product line-up
to strong-selling items and also achieved success in measures that addressed rival stores from 2Q. It only hasa modest operating loss at this point and is within range of recording a profit at the full-year level. The Company
started a business alliance with BIKE O & COMPANY Ltd. <3377>, which purchases and sells motorcycles, inNovember 2016. The alliance covers mutual customer introductions for their products and services, expansionof adjacent BIKE WORLD and BIKE O stores, and promotion of people interactions and information sharing. We
will be looking for positive contributions from the alliance.
For overseas stores, the Company operates two AUTOBACS stores and two BIKE WORLD stores in Malaysia
and one BIKE WORLD store in Thailand. This is the sixth year of operations in Malaysia, and sales continue togrow at a healthy pace. AUTOBACS customer traffic is growing, and this business is likely to achieve profitability.
(2) Business Supermarket and quality food business
The Business Supermarket and quality food business recorded ¥37,071mn in net sales (+7.5% YoY) and ¥1,231mn
in operating income (+0.7%) in 1H. Sales at G-7 SUPER MART, which operates mainstay Business Supermarket
stores, increased 7.7% YoY, and its operating income rose 0.1%. Same-store sales grew by a healthy 2.2% YoY
and new stores (addition of 11 stores from a year earlier to 134 stores at the end of September) boosted sales
too. The business opened seven new stores in 1H, compared to four in the previous year. While profit was only
slightly higher because of increased spending accompanying the store openings, it exceeded its forecast.
G-7 MEAT TERABAYASHI performed well with increases of 11.8% YoY in net sales and 4.1% in operating income.
It expanded store count by nine from a year earlier to 102 stores at the end of September, including joint openings
with Business Supermarket, lifting sales and profits. In 1H, this business opened eight new stores (vs. four a yearago) and had one closure.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

24-Jan.-2018
http://www.g-7holdings.com/investors/

Results trends

G7 JAPAN FOOD SERVICE reported higher net sales at a 2.0% gain coupled with a 32.5% decline in operating
income. The quality food business continued healthy growth, but earnings slipped due to lower sales in the sweets
business (the Company books income from the sweets business in the Other Businesses segment).
(3) Other Businesses
In the Other Businesses, net sales climbed 9.8% YoY to ¥3,245mn and the operating loss was ¥73mn (versus a¥17mn loss in the previous year). G-7 AGRI JAPAN, which operates Megumi no Sato stores, realized double-digit
sales growth with an 11.6% YoY gain, but the operating loss slightly expanded due to increase in product inventory
disposal losses, an issue since the previous fiscal year. Megumi no Sato store count increased by two YoY to 25
stores at the end of September. The Company also converted supermarkets run by Kawase Shokuhin Co., Ltd.,
which it acquired as a subsidiary in May, to “Gekiyasu Supermarket Megumi no Sato” and put G-7 AGRI JAPANin charge of sales. This business has not reached profitability yet. Kawase Shokuhin posted about ¥1.8bn in net
sales in FY2016 and goodwill amounts to ¥90mn (slated for fixed-sum amortization over five years).
The coin laundry service business, which the Company started in FY3/17, is steadily growing. The shops havebeen well received because they have machines for washing and drying not only clothes, but also futons, carpets,
and other items that cannot be easily washed at home. This year’s rainy weather has also contributed to upbeat
customer traffic. Store count rose by two from the end of FY3/17 to four stores at the end of September. The
initial investment in washing machines, dryers, and other facilities is roughly ¥20mn, but because of low cost of
sales this is a profitable business model once depreciation costs are recovered. Monthly sales average around¥500,000-700,000, though flourishing shops can reach ¥1.2mn. While the income contribution is minor, theCompany plans to continue opening stores at G-7 Malls with AUTOBACS and other Group stores. Targets are
50 stores by 2020 and 100 stores in the future.
For sweets, the BAKE CHEESE TART cheese-tart shop business opened a new site in Hyogo and had four storesat the end of September. While monthly sales are low as a take-out store, the sites quickly reach profitability
because they are operated with 1-2 employees. However, same-store sales are dropping, including some settlingfrom the boom, and profit fell YoY in 1H. The Company opened two Z CROQUANTCHOU ZAKUZAKU stores,
which sell stick-type cream puffs, and one RINGO store, which specializes in freshly baked custard apple pies,
as well.
In overseas, the agricultural business in Myanmar did not advance much. For restaurants, the Company directly
operates one store each of Ramen KANBE in Indonesia and Kushikatsu Daruma in Taiwan (FC contracts), butboth struggled. Employee retention is low, and store operational challenges have not been resolved. The Company
plans to reverse course in the Ramen KANBE business by March 2018, either selling or consigning operations
to a local company.
At Crown Trading Co., Ltd. (the Company owns 51%), which handles export sales of used cars and was acquired
as a subsidiary in May 2017, while sales were solid, operating income incurred a modest loss. This company
generates about ¥2.1bn in annual sales and goodwill amounts to ¥111mn (fixed-sum amortization over five years).
The Company plans to make an additional investment to acquire Crown Trading as a wholly owned subsidiary inMarch 2018. The purchase cost totals about ¥250mn.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
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G-7 HOLDINGS INC.

24-Jan.-2018

7508 Tokyo Stock Exchange First Section

http://www.g-7holdings.com/investors/

Results trends

Further decline in the interest-bearing debt ratio improved
financial health
3. Financial condition and key financial indicators
Looking at the Company’s financial status at the end of September 2017, total assets were up ¥2,525mn from theend of FY3/17 to ¥40,144mn. This reflects increases of ¥798mn in cash and deposits, ¥726mn in merchandise andfinished goods in current assets and gains of ¥341mn in tangible fixed assets, ¥178mn in goodwill, and ¥279mn
in investments and other assets in fixed assets. New consolidated subsidiaries were the main source of additions
to these items.
Liabilities, meanwhile, rose by ¥1,774mn from the end of FY3/17 to ¥23,735mn, primarily because of a ¥1,788mn
increase in accounts payable. Interest-bearing debt climbed by ¥70mn. Net assets expanded by ¥750mn YoY to¥16,409mn with a ¥658mn increase in retained earnings as the main driver.
In management indicators for soundness, the equity ratio slightly eased from 40.8% at the end of FY3/17 to 40.1%,
though remains stable. The Company’s interest-bearing debt ratio, meanwhile, dropped 2.1ppt from the end of
FY3/17 to 52.8%, continuing the downward trend seen in recent years. Although the interest-bearing debt level itself
is flat, sustained growth in net assets is contributing to reduction of the interest-bearing debt ratio. The Company
intends to continue its aggressive pursuit of M&A strategy, though plans to mainly cover acquisition deals with surplus
cash. We expect further decline in the interest-bearing debt ratio absent a major M&A deal.
Consolidated balance sheet and key financial indicators(¥mn)
FY3/15

FY3/16

FY3/17

1H FY3/18

ChangeCurrent assets

15,018

17,111

18,542

20,258

1,716(Cash and deposits)

6,952

8,242

9,395

10,193798(Merchandise and finished goods)

5,198

5,341

5,597

6,323

726

Fixed assets

17,321

19,042

19,076

19,886810

Total assets

32,33936,154

37,61840,144

2,525

Total liabilities

19,934

21,971

21,96023,735

1,774(Interest-bearing debt)

8,458

8,342

8,426

8,496

70

Net assets

12,404

14,183

15,65816,409750

Equity ratio

38.4%

38.1%

40.8%

40.1%

Interest-bearing debt ratio

68.2%

60.5%

54.9%

52.8%

Key financial indicators(Financial strength)

Source: Prepared by FISCO from the Company’s financial results

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

24-Jan.-2018
http://www.g-7holdings.com/investors/██Business outlook
Likely to set all-time highs again in FY3/18
1. Forecast for FY3/18
The Company retained its FY3/18 initial forecast of ¥117,700mn in net sales (+6.6% YoY), ¥4,100mn in operating
income (+5.2%), ¥4,300mn in ordinary income (+5.9%), and ¥2,200mn in net income attributable to owners ofparent (+5.8%). It expects consecutive all-time highs. Fulfillment rates versus full-year targets through 1H are 48.5%
in net sales and 39.6% in operating income, outpacing average progress in the past five years (47.7% and 36.6%
respectively). The overseas business is somewhat sluggish, but AUTOBACS, Business Supermarket, and other main
domestic businesses are healthy, and we think the Company is capable of attaining its targets unless the market
environment changes significantly. In particular, the AUTOBACS business is exhibiting an upbeat start with wintertire inquiries in some regions and is likely to post higher dashcam sales. We also see a possibility of earnings beating
its forecast depending the extent of snowfall in the winter season.
Kawase Shokuhin and Crown Trading, the two companies acquired as subsidiaries in May 2017, add just over ¥3bn
in combined sales, but have a negative impact on earnings, including amortization of goodwill (about ¥30mn for
the two companies). The Company aims to realize profitability fairly soon for Kawase Shokuhin through utilization of
store operational knowhow and Crown Trading by leveraging synergies with the overseas auto-related business. It
also intends to actively pursue M&A deals in areas related to the two main businesses.
Consolidated forecast for FY3/18(¥mn)
FY3/17
Results

FY3/18

vs. net sales

Forecast

vs. net sales

YoY

1H progress
rate

110,377-

117,700

-

6.6%

48.5%

Operating income

3,897

3.5%

4,100

3.5%

5.2%

39.6%

Ordinary income

4,062

3.7%

4,300

3.7%

5.9%

40.2%

Net income attributable to ownersof parent

2,080

1.9%

2,200

1.9%

5.8%

48.8%

Earnings per share

171.76

Net sales

181.66

Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

09 13

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

24-Jan.-2018
http://www.g-7holdings.com/investors/

Business outlook

Aiming for higher sales and profits in all segments
2. Segment outlook(1) AUTOBACS and car-related business
The Company is planning higher sales and profits in the AUTOBACS and car-related business in FY3/18. It projects
a roughly 5% YoY sales gain at mainstay G-7 AUTO SERVICE. While the Company does not plan to open new
AUTOBACS stores, it announced the transfer of two AUTOBACS stores (Hyogo and Kyoto) from Autoplus Co.,
Ltd. in November 2017, lifting total store count to 75 locations. By category, it intends to continue strengthening
tires, service, and car sales initiatives and expand dashcam sales. Dashcam sales doubled YoY in October 2017
in response to media coverage, and customers are currently waiting for product shipments. We expect increase in
the installation rate for security reasons and think this business could serve as a major catalyst for car audiovisualequipment that has been slumping.
G-7 BIKE WORLD, meanwhile, is not opening new stores and instead putting top priority on attaining an operating
income in FY3/18. Sales of wear that gives protection from cold weather has been upbeat amid low temperaturesin the fall season. Additionally, the Company expects synergies from its alliance with BIKE O & COMPANY. In
overseas business, the Company forecasts continuing growth by the motorcycle business in Malaysia and early
profitability in the AUTOBACS business by promoting initiatives that improve customer draw.
(2) Business Supermarket and quality food business
The Company projects continuation of sales and earnings growth in the Business Supermarket and quality foods
business. It plans to open about 10 new stores in the mainstay Business Supermarket business and increase
sales by 6% YoY. It already opened seven stores through 1H and added one store in Fukuoka in October andplanning one store in the Kanto area in November. G-7 MEAT TERABAYASHI, which operates butcher shops, will
be opening new stores at a similar pace with a goal of surpassing ¥10bn in sales.
G7 JAPAN FOOD SERVICE will continue to discover local delicacies and develop private-brand products andalso recruit sales sites in Japan. It also plans to bolster exports to Southeast Asia and Hong Kong, Taiwan, andother Asian countries, mainly selling meats, fruits, seasonings, and other Japanese products to local restaurant
operators, hotels, and wholesalers.
(3) Other Businesses
The Company expects to generate higher sales and profits in the Other Businesses. For the Megumi no Sato
operations, it is temporarily halting store openings and taking steps to bolster profitability at existing stores. Thisbusiness needs to reduce inventory disposal losses after the shift to an operating approach of outright purchases
and sales. The Company seeks to promptly realize profitability by cultivating human resources and improving
systems to manage procurement and sales prices.

We encourage readers to review our complete legal statement on “Disclaimer” page.

10 13

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

24-Jan.-2018
http://www.g-7holdings.com/investors/

Business outlook

In the coin laundry business, the Company plans to open five new stores in 2H and reach a total of nine locations
at the end of FY3/18. While this business should add an extra few tens of million yen to sales, the impact onearnings is likely to be minor because of depreciation costs for equipment. Expansion of the location network,
however, should contribute to profit over time. In the sweets business, sales momentum slowed at BAKE CHEESETART shops and the Company is taking a cautious stance toward new openings. The Company has opened four
Yamaya Honpo shops, which sell taiyaki Japanese fish-shaped cakes, since the end of FY3/17. It will assess
activity over about half a year and proceed with a multi-store rollout if the shops are profitable. In the reusebusiness, the Company had operated three reuse shops in Okayama (two shops) and Chiba (one shop) andopened another two shops (Aichi and Hyogo) by the end of September 2017. While this business is still incurring
losses, the Company aims to improve earnings by raising overall handling volume with store additions.

██Medium to long-term growth strategy
Aiming for ¥170bn in FY3/21 net sales including M&A additions
The Company’s medium-term business plan that lasts through FY3/21 presents final-year goals of ¥170bn in net
sales and ¥7bn in ordinary income. These goals represent a roughly 1.5 times in net sales and almost 1.7 times
in ordinary income compared to FY3/17 results, and the Company intends to expand all businesses. For the
AUTOBACS business (G-7 AUTO SERVICE), it expects a sharp gain with sales roughly doubling from the FY3/17
level to ¥60bn. This goal works out to a 18% average annual growth rate. The Company believes it can attain the goal
through expansion of domestic store network, including M&A, and efforts to broaden new products and services,such as the aforementioned coin laundry service.
For the Business Supermarket business (G-7 SUPER MART), it targets a 27% increase in net sales from the FY3/17
level to ¥65bn. The goal corresponds to a 4% increase pace as an annual average, and the Company should be
able to reach its target by expanding store network at a pace of 5-10 stores per year. The Company also intends
to achieve goals for BIKE WORLD, meat, and agricultural businesses by steadily increasing the number of stores.
For G7 JAPAN FOOD SERVICE, it aims for a 30% increase from the FY3/17 level to ¥8.5bn, led by expansion of
the quality food business and food exports as well as gains in development and sales of private-brand products
through collaboration with Megumi no Sato.
In the overseas business, meanwhile, the Company intends to reboot activities other than the AUTOBACS andcar-related business and some restaurant and food businesses and might revise the current goal of ¥10bn in
FY3/21 (sales were a few hundred million yen in FY3/17). Sales should expand in the AUTOBACS and car-related
business with the addition of Crown Trading, which exports used cars. However, other businesses face challenges
in cultivation of human resources and the Company is putting efforts into training people as a priority strategy
for the medium-term business plan. Three years ago it started the Next Cabinet (NC) Club, a study group thatconsists of about 10 next-generation executive candidates, and the NC Training School, a study group that brings
together about 15 executive candidates and periodically holds meeting. We expect better visibility for the Company’s
attainment of medium-term business goals if it strengthens management capabilities at Group companies throughthis type of cultivation of human resources.
Additionally, the Company is likely to actively pursue M&A opportunities in order to realize medium-term targets. It
has outlined a stance of assessing companies and businesses related to the two core businesses and investing indeals that offer synergy potential within the scope of cash flow.
We encourage readers to review our complete legal statement on “Disclaimer” page.

11 13

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

24-Jan.-2018
http://www.g-7holdings.com/investors/

Medium to long-term growth strategy㻿㼍㼘㼑㼟㻌㼠㼍㼞㼓㼑㼠㼟㻌㼎㼥㻌㼎㼡㼟㼕㼚㼑㼟㼟㼑㼟(¥100mn)㻭㼁㼀㻻㻮㻭㻯㻿㻌㼎㼡㼟㼕㼚㼑㼟㼟㻮㼡㼟㼕㼚㼑㼟㼟㻌㻿㼡㼜㼑㼞㼙㼍㼞㼗㼑㼠㻌㼎㼡㼟㼕㼚㼑㼟㼟㻲㼛㼛㼐㼟㻛㼞㼑㼟㼠㼍㼡㼞㼍㼚㼠㻌㼎㼡㼟㼕㼚㼑㼟㼟㻾㼑㼍㼘㻌㼑㼟㼠㼍㼠㼑㻌㼐㼑㼢㼑㼘㼛㼜㼙㼑㼚㼠㻌㼍㼚㼐㻌㼚㼑㼣㻌㼎㼡㼟㼕㼚㼑㼟㼟㻮㻵㻷㻱㻌㼃㻻㻾㻸㻰㻌㼎㼡㼟㼕㼚㼑㼟㼟㻹㼑㼍㼠㻌㼎㼡㼟㼕㼚㼑㼟㼟㻭㼓㼞㼕㻌㼎㼡㼟㼕㼚㼑㼟㼟㻻㼢㼑㼞㼟㼑㼍㼟㻌㼎㼡㼟㼕㼚㼑㼟㼟

㻝㻘㻤㻜㻜
㻝㻜㻜
㻤㻜
㻤㻡
㻝㻝㻡

㻝㻘㻢㻜㻜
㻝㻘㻠㻜㻜
㻝㻘㻞㻜㻜
㻝㻘㻜㻜㻜
㻤㻜㻜

㻢㻜㻜
㻠㻜㻜
㻞㻜㻜

㻟
㻢㻜
㻤㻜

㻝㻜
㻠㻜

㻞㻜

㻢㻡㻜

㻡㻞㻜

㻡㻜

㻞㻥

㻢㻜㻜

㻟㻝㻜

㻜
㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻞㻝

Source: Prepared by FISCO from Company materials██Shareholder return policy
Possibility of sustaining dividend hikes with a 30% payout ratio goal
The Company’s dividend policy is to return profits to shareholders in accordance with business performance,
premised on maintaining stable dividends, making a comprehensive determination, while taking into consideration
factors including capital required for future business expansion and its financial condition. Dividend results over the
past few years indicate that the Company is aiming for a dividend payout ratio of about 30%. This level appears to
be a target.
The Company plans to pay a dividend of ¥50.0 per share, which yields a 27.5% dividend payout ratio, in FY3/18.
It paid a ¥53.0 dividend (30.9% payout ratio), which consisted of a ¥40.0 ordinary dividend and a ¥13.0 special
dividend at period-end, in FY3/17. If earnings meet its forecast, we think the Company might pay a special dividendat the period end for FY3/18, just as last year, targeting a 30% payout ratio.

We encourage readers to review our complete legal statement on “Disclaimer” page.

12 13

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

G-7 HOLDINGS INC.

24-Jan.-2018

7508 Tokyo Stock Exchange First Section

http://www.g-7holdings.com/investors/

Shareholder return policy㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㼍㼚㼐㻌㼐㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛
(¥)
㻢㻜㻚㻜

㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㻔㼘㼑㼒㼠㻕
㻟㻜㻚㻤

㻡㻜㻚㻜

㻞㻤㻚㻣

㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻌㻔㼞㼕㼓㼔㼠㻕

㻟㻜㻚㻡

㻟㻢㻚㻜

㻟㻜㻚㻥
㻞㻣㻚㻡

㻠㻜㻚㻜

㻟㻜㻚㻜
㻞㻠㻚㻜

㻟㻜㻚㻜
㻞㻜㻚㻜

（㻑）

㻝㻤㻚㻜
㻠㻣㻚㻜

㻡㻟㻚㻜

㻡㻜㻚㻜
㻝㻞㻚㻜

㻟㻥㻚㻜
㻟㻜㻚㻜

㻝㻜㻚㻜

㻢㻚㻜

㻜㻚㻜

㻜㻚㻜
㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤㻌㻱

Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

13 13

Disclaimer
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This report is based on information that we believe to be reliable, but we do not confirm or
guarantee its accuracy, timeliness,or completeness, or the value of the securities issued bycompanies cited in this report. Regardless of purpose,investors should decide how to use
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This report was prepared at the request of its subject company using information provided
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this report are subject to change without prior notice.
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The final selection of investments and determination of appropriate prices for investment
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FISCO Ltd.