COMPANY RESEARCH AND ANALYSIS REPORT

Ainavo Holdings
7539
TSE JASDAQ

14-Jul.-2017
FISCO Ltd. Analyst

Noboru Terashima

FISCO Ltd.
http://www.fisco.co.jp

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

Ainavo Holdings
7539 TSE JASDAQ

14-Jul.-2017
http://www.ainavo.co.jp/ir/irinfo.html■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Operating profit increased 26.3% YoY on higher sales and improved gross profit in 2Q FY9/17. ................

01

2. Full-year forecast unchanged from the period-start stance even with upbeat 1H results;
likely to raise targets....................................................................................................................................

01

3. Well within reach of the medium-term plan goal (¥1,900mn in FY9/19 operating profit)...............................

01■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 02
1. Company profile.. ................................... ......................................................................................................

02

2. History................................................... ......................................................................................................

03■Business overview---------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. Description of business.. ..............................................................................................................................

03

2. Review of segments and sub-segments. .....................................................................................................

05

3. Main procurement and sales counterparts. ..................................................................................................

05

4. Competition, features, and strengths...........................................................................................................

06■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 07
1. Results through 2Q FY9/17.................... ......................................................................................................

07

2. Financial condition................................. ......................................................................................................

09

3. Cash flow situation.. ............................... ......................................................................................................

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

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

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

Ainavo Holdings
7539 TSE JASDAQ

14-Jul.-2017
http://www.ainavo.co.jp/ir/irinfo.html██SummaryMid-sized home equipment and exterior installation company; wellwithin reach of the medium-term business plan goal (¥1,900mn in
FY9/19 operating profit)
Ainavo Holdings <7539> (hereafter, also “the Company”) is a pure holding company with three consolidated subsidiaries and one non-consolidated subsidiary. Its main businesses are installations of tile, siding, and other exteriormaterials, installations of kitchens and various water-related equipment, and sales of building materials and homeequipment. We think it is a unique company in offering a combination of installations and building materials andhome equipment wholesale businesses. While the Company primarily supplies these services to smaller generalcontractors and building firms, it also receives installation orders from major general contractors. Strict fund collection
management and project progress management have enabled the Company to accumulate abundant net cash
(cash/deposits – loans) totaling ¥8,605mn (as of end-2Q FY9/17) and cultivate a robust balance sheet.
1. Operating profit increased 26.3% YoY on higher sales and improved gross profit in 2Q FY9/17
The Company reported ¥32,491mn in net sales (+3.7% YoY), ¥1,468mn in operating profit (+26.3%), ¥1,567mn inrecurring profit (+19.5%), and ¥978mn in quarterly net profit attributable to parent owners (+3.0%) in 2Q FY9/17.
Operating profit climbed sharply on higher sales, a 0.3pp rise in gross profit, and a 0.7% decline in SG&A expenses.
However, net income only increased 3.0% due to higher corporate taxes and other costs.
2. Full-year forecast unchanged from the period-start stance even with upbeat 1H results; likely to raisetargets
The Company forecasts ¥63,700mn in net sales (+4.9%), ¥1,740mn in operating profit (+4.8%), ¥1,890mn inrecurring profit (-0.3%), and ¥1,130mn in net profit attributable to parent owned (-1.8%) in FY9/17. It retained
period-start levels because of the possibility of issues. However, we think it is likely to raise targets due to theabsence of major concerns thus far and upbeat 1H results. The standalone homes business, a key strength, should
fuel earnings momentum. By segment, standalone homes, where the Company is successful, is expected to be
the driving force for results.
3. Well within reach of the medium-term plan goal (¥1,900mn in FY9/19 operating profit)
The Company announced a new medium-term business plan that lasts through FY9/19 with a primary themeof maximizing group synergies and goals of ¥70,000mn in net sales, ¥1,900mn in operating profit, and a 2.7%
operating margin. We think it is well within reach of these goals and it might realize them ahead of time. While theCompany’s shareholder return policy targets a 30% dividend payout ratio, the FY9/17 ratio works out to 26.6%
using the current forecast. This suggests a possibility of a dividend hike depending on earnings.
Key Points
Main businesses are exterior and home equipment installations and building materials and home equipment
sales; possesses a sturdy financial base thanks to reinforced management• Likely to raise results and the dividend target in FY9/17• Well within reach of the medium-term business plan goal (¥1,900mn in FY9/19 operating profit)•

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

01 12

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

Ainavo Holdings
7539 TSE JASDAQ

14-Jul.-2017
http://www.ainavo.co.jp/ir/irinfo.html

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Source: Prepared by FISCO from the Company's financial results██Company profile
Pure holding company with four subsidiaries; main businesses are
exterior and home equipment installations and building materials
and home equipment sales
1. Company profile
Ainavo Holdings is a pure holding company with three consolidated subsidiaries and one non-consolidated subsidiary.
Its main businesses are installation of tile, siding, and other exterior materials, installation of kitchens, water-related
equipment, and other home equipment, and sales of building materials and home equipment. The Company is
unique in its combination of installations and wholesale supply of building materials and home equipment.

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

02 12

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

Ainavo Holdings
7539 TSE JASDAQ

14-Jul.-2017
http://www.ainavo.co.jp/ir/irinfo.html

Company profile

2. History
The company traces its roots to Abe Umekichi Shoten, which was founded in 1924 by Umekichi Abe, a bricklayer andgrandfather of current representative director and president Kazunari Abe. It shifted the business to tile installations
after the war as demand moved to tiles with a brick-feel amid steel-reinforced concrete becoming the mainstreambuilding technique. It ramped up wholesale business with the establishment of Sanwa Shokai in 1961 in response to
rapid growth in tile demand during Japan’s advanced growth phase. After the collapse of the bubble economy, thecompany expanded the presence of home equipment business amid contraction of tile demand owing to a decline
in home starts volume and changes in building techniques. Installations have risen as a ratio of overall businessrecently, and the company has been expanding installations of siding exterior and water-related home equipment
as well as wholesale business for various building materials and home equipment, in addition to tile installations.
It registered as an OTC stock with the Japan Securities Dealers Association in 1997 and is currently listed on the
JASDAQ market following the merger of the JASDAQ Securities Exchange and Osaka Securities Exchange. It
transitioned to a holding-company format and changed its name to Ainavo Holdings in 2013.
HistoryYear

Main company events

1924

Established Abe Umekichi Shoten

1961

Established Sanwa Shokai

1968

Renamed Sanwa Shokai as Sanwa Shoji

1987

Renamed Sanwa Shoji as Avelco

1997

Registered as an OTC stock with the Japan Securities Dealers Association

2010

Listed on the JASDAQ market following the merger of the JASDAQ Securities Exchange and Osaka Securities Exchange

2013

Transitioned to a holding-company format and renamed itself as Ainavo Holdings

2014

Opened a showroom in Shinsaibashi (Osaka)

Source: Prepared by FISCO from the Company website██Business overview
Mainly installs tile, siding, and other exterior materials and homeequipment; possesses a sturdy financial base thanks to reinforced
management
1. Description of business
Ainavo Holdings, a pure holding company, has three consolidated subsidiaries and one non-consolidated subsidiaryin its group as of the end of March 2017. The company’s business segments are standalone homes and large
properties, and segment results through 2Q FY9/17 were ¥29,215mn for standalone homes (89.9% of overall sales)and ¥3,275mn for large properties (10.1%) in sales and ¥1,517mn and ¥341mn respectively in operating profit.
However, the Company simply splits these segments by the relative size of customers (in terms of orders value) andactual content of business activities is the same. The former primarily covers installations for ordinary homes withorders obtained from smaller general contractors and ordinary building firms, while the latter mainly reflects orders
from large general contractors and other major customers.

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

03 12

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

Ainavo Holdings
7539 TSE JASDAQ

14-Jul.-2017
http://www.ainavo.co.jp/ir/irinfo.html

Business overview

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㻝㻜㻚㻝㻑

㻝㻤㻚㻠㻑

㻤㻝㻚㻢㻑
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Note: Segment operating profit prior to companywide adjustments
Source: Prepared by FISCO from the Company's financial results

The standalone homes business breaks down further into sub-segments of exterior wall installations, home equipment installations, building materials and related products sales, and home equipment sales, and the large properties
business consists of tile installations and home equipment installations. Sub-segment shares of overall sales (through2Q FY9/17) as shown below are 23.5% for exterior wall installations, 40.6% for home equipment installations, 15.1%
for building materials sales, and 10.8% for home equipment sales under the large standalone homes business and3.6% for tile installations and 6.4% for home equipment installations under the large properties business.

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㻝㻜㻚㻤㻑

㻝㻡㻚㻝㻑

㻱㼤㼠㼑㼞㼚㼍㼘㻌㼣㼍㼘㼘㻌㼕㼚㼟㼠㼍㼘㼘㼍㼠㼕㼛㼚㼟㻔㼟㼠㼍㼚㼐㼍㼘㼛㼚㼑㻌㼔㼛㼙㼑㼟㻌㼎㼡㼟㼕㼚㼑㼟㼟㻕㻴㼛㼙㼑㻌㼑㼝㼡㼕㼜㼙㼑㼚㼠㻌㼕㼚㼟㼠㼍㼘㼘㼍㼠㼕㼛㼚㼟㻔㼟㼠㼍㼚㼐㼍㼘㼛㼚㼑㻌㼔㼛㼙㼑㼟㻌㼎㼡㼟㼕㼚㼑㼟㼟㻕㻮㼡㼕㼘㼐㼕㼚㼓㻌㼙㼍㼠㼑㼞㼕㼍㼘㼟㻌㼟㼍㼘㼑㼟㻔㼟㼠㼍㼚㼐㼍㼘㼛㼚㼑㻌㼔㼛㼙㼑㼟㻌㼎㼡㼟㼕㼚㼑㼟㼟㻕㻴㼛㼙㼑㻌㼑㼝㼡㼕㼜㼙㼑㼚㼠㻌㼟㼍㼘㼑㼟㻔㼟㼠㼍㼚㼐㼍㼘㼛㼚㼑㻌㼔㼛㼙㼑㼟㻌㼎㼡㼟㼕㼚㼑㼟㼟㻕㼀㼕㼘㼑㻌㼕㼚㼟㼠㼍㼘㼘㼍㼠㼕㼛㼚㼟㻌㻔㼘㼍㼞㼓㼑㼜㼞㼛㼜㼑㼞㼠㼕㼑㼟㻌㼎㼡㼟㼕㼚㼑㼟㼟㻕㻴㼛㼙㼑㻌㼑㼝㼡㼕㼜㼙㼑㼚㼠㻌㼕㼚㼟㼠㼍㼘㼘㼍㼠㼕㼛㼚㼟㻔㼘㼍㼞㼓㼑㻌㼜㼞㼛㼜㼑㼞㼠㼕㼑㼟㻌㼎㼡㼟㼕㼚㼑㼟㼟㻕㻠㻜㻚㻢㻑
Source: Prepared by FISCO from the Company's results briefing materials

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

04 12

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

Ainavo Holdings
7539 TSE JASDAQ

14-Jul.-2017
http://www.ainavo.co.jp/ir/irinfo.html

Business overview

2. Review of segments and sub-segments(1) Standalone homes business
These orders primarily come from local smaller general contractors and builders and home manufacturers andrelated builders.* The Company does not receive many orders directly from the party conducting the project.
*	Sales of tile materials and home equipment related to installation projects are booked under the respective installation
segments.

a) Exterior wall installations
This business handles installations of interior and exterior tiles, floor tiles, and exteriors for ordinary homes, small
condominiums, and stores. It supports not only tiles, but also sidings and other materials.
b) Home equipment installations
This business covers renovation installations (including kitchens as well as bath, toilet, and other water-related
systems) and solar power generation system installations. While orders are fundamentally separate from exteriorwall installations, they are received jointly in some cases. The Company is one of the industry’s largest firms forbathroom installations with roughly 20,000 projects per year.
c) Building materials sales
This sub-segment handles wholesale transactions for various building materials used in ordinary homes, stores,
and smaller condominiums. Tile building material sales volume is relatively large. Its primary sales destinations
are tile installers and other specialty installation firms.
d) Home equipment sales
The Company sells home equipment to specialty installers, such as equipment suppliers and renovation firms.
(2) Large properties businessBusiness content is the same as the standalone homes business, but the Company books installations at large
properties (buildings, condominiums, and others) for major general contractors in this segment. It receives a
relatively large amount of orders from Obayashi <1802>, Konoike, and Haseko Corporation <1808>.
a) Tile installations
Interior and exterior tiles, floor tiles, stone material installationsb) Home equipment installations
Kitchens and other home equipment and air-conditioning equipment installations mainly for buildings and condominium buildings.
3. Main procurement and sales counterparts
The Company has roughly 7,000 customers, including major general contractors. Collection of accounts receivables
is a key point in business operations, as explained below, because these customers are not always active and value
per project varies significantly from a few million yen to over ¥100mn.
LIXIL Group <5938> is the primary procurement source for construction materials and home equipment, and theCompany also purchases extensively from TOTO <5332>, Rinnai <5947>, Cleanup <7955>, and Daiken <7905>.

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

05 12

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

Ainavo Holdings
7539 TSE JASDAQ

14-Jul.-2017
http://www.ainavo.co.jp/ir/irinfo.html

Business overview

While the Company has about 2,000 subcontractors (large and small) handling projects, roughly half of the subcontractors work exclusively with the Company and the two sides sustain longstanding trust relationships thanks
to support from the insurance framework described below.
4. Competition, features, and strengths
Many companies are involved in exterior wall installations or selling building materials and home equipment, and theCompany faces numerous rivals in its various areas of business. While it is not easy to find a clear rival as an overallbusiness, the most likely competitors are Koizumi and Watanabe Pipe. However, rivals are declining for exteriorwall installations due to the downward trend in the number of contractors in recent years. The Company promotes
differentiation with rivals in the current environment leveraging the following features.
One of the Company’s unique features is the comprehensive skills training center where it provides training inhighly specialized skills for its numerous subcontractors. The Company is capable of supporting a variety of projecttypes because it implements training. The skills center also inspects whether project work is taking place properly
at various sites once every half year and reduces discrepancies in completed work due to individual differences
through this process.
Another feature is the role of its own insurance program. The Company charges subcontractors 0.2% of transaction
value and pools the funds in a cooperative association for use to cover income for one week if a subcontractor(worker) is unable to work due to an accident. This program strengthens the trust relationship between the Company
and subcontractors and also boosts the retention rate for skilled workers and precision of finished work.
While it is normal for companies to implement sales management, cost management, and project process management, the Company also carefully conducts billing management, deposit management, and uncollected fundmanagement. Specifically, it manages procurement and sales for each project on an individual-line basis, evenwith small amounts, and applies the management (checks) to not only the income statement, but also the balance
sheet. The ability to assess this type of balance-sheet management while monitoring project progress is importantand not simple. There have been numerous cases in recent years of other firms in the business of selling building
materials entering the installations business, though many rivals later exit the installations portion due to the difficulty(inefficiency) of unpaid funds management. This aspect serves as a “hidden barrier to entry,” and the Company’s
ability to manage it is an important strength. These efforts have enabled the Company to accumulate abundant net
cash (cash/deposits – loans) totaling ¥8,605mn (26.2% of gross asset value; as of end-2Q FY9/17) and cultivate
robust finances.

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

06 12

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

Ainavo Holdings
7539 TSE JASDAQ

14-Jul.-2017
http://www.ainavo.co.jp/ir/irinfo.html██Results trends
Operating profit increased sharply on higher sales and improved
gross profit in 1H FY9/17
1. Results through 2Q FY9/17(1) Status of profit and loss
The Company reported ¥32,491mn in net sales (+3.7% YoY), ¥1,468mn in operating profit (+26.3%), ¥1,567mn inrecurring profit (+19.5%), and ¥978mn in net profit attributable to parent owners (+3.0%) in 1H FY9/17. Operating
profit climbed sharply on higher sales led by growth in mainstay exterior and home equipment installations, a0.3pp rise in gross profit, and a 0.7% decline in SG&A expenses. However, net profit only increased 3.0% due tohigher corporate taxes and other costs.
The ¥305mn YoY increase in 2Q FY9/17 operating profit reflected boosts of ¥163mn from higher sales, ¥85mn
from non-recurrence of a provision to an installation losses allowance booked in the previous year, ¥35mn from
improvement in gross profit (0.3pp), and ¥23mn from lower SG&A expenses, according to the analysis of operating
profit change factors. Decline in personnel costs, which stemmed from not being able to sufficiently add personnel
to offset departures, was the primary source of lower SG&A expenses.
Overview of results through 2Q FY9/17(¥mn)
2Q FY9/16

2Q FY9/17

Value

Share of total
value

Results

Share of totalvalue

Net sales

31,337100.0%

32,491100.0%

Gross profit

4,402

14.1%

4,687

14.4%

6.5%

SG&A expenses

3,240

10.3%

3,218

9.9%

-0.7%

Operating profit

1,162

3.7%

1,468

4.5%

26.3%

Recurring profit

1,312

4.2%

1,567

4.8%

19.5%

950

3.0%

978

3.0%

3.0%

Quarterly net profit attributable to parent shareholders

YoY change
3.7%

Source: Prepared by FISCO from the Company's financial results and results briefing materials(2) Status by business segment
Below we review trends by segments and sub-segments.
a) Standalone homes businessStandalone homes business booked ¥29,215mn in sales (+4.6% YoY) and a ¥1,517mn segment profit (+14.3%).
By sub-segment, sales maintained upward trends in exterior installations to ¥7,635mn (+8.1%) and home equipment installations to ¥13,183mn (+6.9%), though weakened in building material sales to ¥4,890mn (-0.8%) andhome equipment sales to ¥3,505mn (-3.1%).
Mainstay exterior and home equipment installation businesses steadily expanded with support from recruitmentof new customers. While building material and home equipment sales fell, the declines were minor and are nota serious concern. In home equipment, we think sales should be assessed together with installations because
equipment sales are often included in the installation value. Combined revenue from home equipment installations
and sales increased 4.6% YoY in 1H. Segment profit strengthened on higher sales.

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

07 12

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

Ainavo Holdings
7539 TSE JASDAQ

14-Jul.-2017
http://www.ainavo.co.jp/ir/irinfo.html

Results trendsb) Large properties business
Large properties business recorded ¥3,275mn in sales (-3.5% YoY) and ¥341mn in segment profit (+67.8%).
Tile installations were down by 18.3% YoY to ¥1,183mn because of fewer completions for condominiums, themain market, and a lull in some projects. Home equipment, meanwhile, sustained sales growth with a 7.6% gain
to ¥2,091mn as building air-conditioner and renovation projects proceeded in line with the plan. Profit climbed
sharply on non-recurrence of ¥85mn in re-installation costs related to a defective project from the previous year.
Segment profit was also higher even without this factor.
Results by segment(¥mn)
2Q FY9/16

2Q FY9/17

Value

Share of total
value

Value

Share of totalvalue

Change invalue

Net sales

31,337100.0%

32,491

Change rate

100.0%

1,153

Standalone homes business

27,943

89.2%

3.7%

29,215

89.9%

1,272

Exterior wall installations

7,064

4.6%

22.5%

7,635

23.5%

571

Home equipment installations

8.1%

12,33039.3%

13,183

40.6%

853

6.9%

Building materials sales

4,929

15.7%

4,890

15.1%

-38

-0.8%

Home equipment sales

3,619

11.5%

3,505

10.8%

-113

-3.1%

Large properties business

3,394

10.8%

3,275

10.1%

-118

-3.5%

Tile installations

1,449

4.6%

1,183

3.6%

-265

-18.3%

Home equipment installations

1,944

6.2%

2,091

6.4%

147

7.6%

Operating profit

1,162

3.7%

1,468

4.5%

305

26.3%

Standalone homes business

1,327

-

1,517

-

189

14.3%

Large properties business

203

-

341

-

138

67.8%

(Adjustments)

-368

-

-390

-

-

-

Source: Prepared by FISCO from the Company's financial results and results briefing materials(3) Update on progress with priority issues
Below we review progress in areas that the Company has earmarked as “priority issues.”
Progress with priority issues(¥mn)
SidingSiding pre-cut(buildings)

Lumber building
materials

Sashes(excluding Tokyo Sash) (including Tokyo Sash)

2Q FY9/16

1,241

-

736

451

2Q FY9/17

1,392

264

645

447

685
988

YoY

12.1%

-

-12.3%

-0.9%

44.3%

FY9/17 targets

3,150

720

1,840

1,300

2,840

Progress rate

44.2%

36.7%

35.1%

34.4%

34.8%

Source: Prepared by FISCO from the Company's results briefing materialsa) SidingSales value increased by a healthy 12.1% YoY pace to ¥1,392mn, but this appears to have missed the internalgoal (+20%). While the Company has many projects, installations have not been keeping up and it is importantto proceed efficiently.
b) Siding pre-cuts
This building method involves pre-cutting materials at a factory and just installing at the site. The Company has
been actively utilizing it since FY9/17. Progress toward the full-year target (building volume) is low, though this isjust an internal goal and should not have a major impact on earnings.

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

08 12

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

Ainavo Holdings
7539 TSE JASDAQ

14-Jul.-2017
http://www.ainavo.co.jp/ir/irinfo.html

Results trendsc) Lumber building materials
Sales dropped 12.3% YoY to ¥645mn. This business is slumping and trails the full-year target pace. Logisticbottlenecks appear to be interfering with business, rather than issues with sales capabilities. The Company needs
to make reforms that incorporate logistics.
d) Sashes
Sales including Tokyo Sash (which excels at larger sashes) rose by a robust 44.3% YoY to ¥988mn, but only
reached 34.8% of the full-year target. Furthermore, sales excluding Tokyo Sash eased 0.9% to ¥447mn and were
only at 34.4% of the full-year target. Reasons for weakness include tough competition in the industry due to thepresence of many specialty firms and inadequate support for detailed customer requests because the Company
does not have its own assembly plant.
Progress toward full-year goals in priority issue areas has been modestly lagging as explained above. However,these are just internal goals set by the Company and the shortfalls are unlikely to have an immediate major impact
on the full-year outlook.

Sturdy financial base with surplus net cash about ¥8,600mn
2. Financial condition
We review financial conditions as of end-2Q FY9/17. Current assets totaled ¥24,860mn (up ¥1,634mn from the endof FY9/16). Key item trends were cash and deposits up ¥825mn, notes receivable and unpaid funds on finishedprojects up ¥1,034mn, and unfinished project spending up ¥28mn. Fixed assets totaled ¥8,010mn (up ¥271mn),
including tangible fixed assets at ¥5,700mn (down ¥37mn), intangible fixed assets at ¥707mn (up ¥98mn), andinvestments and other assets at ¥1,602mn (down ¥210mn). Total assets hence climbed ¥1,906mn to ¥32,871mn.
Current liabilities totaled ¥13,579mn (up ¥1,021mn) with the main changes as increases of ¥528mn for notes
payables and unpaid project costs and ¥509mn for unpaid factoring. Fixed liabilities declined ¥3mn to ¥1,370mn.
As a result, total liabilities were ¥14,949mn (up ¥1,017mn. Net assets amounted to ¥17,921mn (up ¥889mn), mainly
on a ¥848mn gain in surplus profit from booking quarterly net profit attributable to parent shareholders.
The Company possesses a sturdy financial base with extensive surplus net cash (cash and deposits – loans) at¥8,605mn as of end-2Q FY9/17 with ¥9,349mn in cash and deposits versus ¥743mn in total loans (long-term +short-term loans).

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

09 12

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

Ainavo Holdings
7539 TSE JASDAQ

14-Jul.-2017
http://www.ainavo.co.jp/ir/irinfo.html

Results trends

Balance sheet(¥mn)
End-FY9/16

End-2Q FY9/17

Change invalue

Cash and deposits

8,523

9,349

825

Notes receivables and finished project unpaid funds

11,77812,813

1,034

1,546

1,575

28

23,22624,8601,634

Tangible fixed assets

5,737

5,700

-37

Intangible fixed assets

608

707

98

408

385

-22
210

Unfinished project spending
Current assets (total)

Goodwill

1,392

1,602

Fixed assets (total)

7,738

8,010

271

Assets (total)

30,96432,871

1,906

Notes payables and unpaid amounts

6,454

6,983

528

Unpaid factoring

3,323

3,833

509

Current liabilities (total)

12,557

13,5791,021-8Investments and other assets

Long-term loans

238

230

Fixed liabilities (total)

1,374

1,370

-3

Liabilities (total)

13,931

14,9491,017

Net assets

17,032

17,921889

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

3. Cash flow situation
We review the cash flow situation as of end-2Q FY9/17. Cash flow from operating activities totaled a net surplusof ¥913mn (vs. a net surplus of ¥362mn a year ago). Main income sources were ¥1,561mn in quarterly net profit
prior to taxes and other adjustments and ¥1,076mn from a rise in procurement liabilities, while main outflows
were ¥1,345mn from a rise in sales credits. Cash flow from investing activities totaled a net deficit of ¥65mn (vs. a
net deficit of ¥572mn). Main outflows were ¥300mn in income from fixed-term deposit returns and ¥186mn fromacquisition of investment securities (net). Cash flow from financing activities totaled a net surplus of ¥135mn (vs. a
net deficit of ¥472mn), mainly due to outflows of ¥300mn from a net increase in short-term loans and ¥150mn from
dividend payments. These trends resulted in an increase of ¥983mn in cash and cash equivalents during the period
to an end-quarter balance of ¥9,349mn.
Cash flow statement(¥mn)
2Q FY9/16

2Q FY9/17

362

913

Quarterly net profit prior to taxes and other adjustments

1,295

1,561

Change in sales credits (- is an increase)-1,591-1,345

Change in inventories (- is an increase)

-581

110

Change in procurement liabilities (- is a decline)

1,626

1,076

Cash flow from operating activities

Cash flow from investing activities
Income from fixed-term deposit returns

-572

-65

-

300

Outflow from deposits to fixed-term deposits

-300

-

Acquisition of investment securities (net)

-150

-186

-472

135

Cash flow from financing activities
Net change in short-term loans (- is a decline)

-284

300

Dividend payments

-173

-150

Change in cash and cash equivalents (- is a decline)

-683

983

Quarter-end cash and cash equivalents balance

7,088

9,349

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

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

10 12

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

Ainavo Holdings
7539 TSE JASDAQ

14-Jul.-2017
http://www.ainavo.co.jp/ir/irinfo.html██Business outlook
Full-year forecast unchanged from the period-start stance; likely toraise targets
The Company expect ¥63,700mn in net sales (+4.9%), ¥1,740mn in operating profit (+4.8%), ¥1,890mn in recurring
profit (-0.3%), and ¥1,130mn in net profit attributable to parent owned (-1.8%) in FY9/17. It retained period-startlevels.
We think the Company is likely to exceed this earnings forecast and would not be surprised by an upward revisionof full-year targets because it already posted ¥1,468mn in operating profit in 1H. While the Company explained thatit “retained existing forecast because of uncertainty in the housing market and tough outlooks presented by many
major home builders,” we believe it is likely to raise targets due to the absence of major concerns thus far.
Overview of the FY9/17 forecast(¥mn)
FY9/16

FY9/17 (E)Value

Share of total
value

Value

Share of totalvalue

Net sales

60,723100.0%

63,700100.0%

Standalone homes business

54,223

89.3%

57,250

89.9%

5.6%

Large properties business

6,499

10.7%

6,450

10.1%

-0.8%

Operating profit

1,659

2.7%

1,740

2.7%

4.8%

Recurring profit

1,895

3.1%

1,890

3.0%

-0.3%

Net profit attributable to parent shareholders

1,151

1.9%

1,130

1.8%

-1.8%

YoY change
4.9%

Source: Prepared by FISCO from the Company's financial results and results briefing materials

The Company’s segment sales targets are ¥57,250mn for the standalone homes business (+5.6% YoY) and¥6,450mn for the large properties business (-0.8%). It expect ¥1,420mn in operating profit (vs. ¥1,233mn in theprevious year) at core subsidiary Avelco Co., Ltd. While it forecasts declines in operating profit to ¥120mn at
INTELGROW Corporation (vs. ¥135mn) and ¥70mn at OnchoGiken Co. Ltd. (vs. ¥134mn), these trends are nottied to particular problems or concerns and simply reflect a conservative stance after relatively upbeat results in theprevious fiscal year.
Targets for priority issues (products) are siding at ¥3,150mn (+32.5%), lumber building materials at ¥1,840mn(+28.4%), and sashes (including Tokyo Sash) at ¥2,840mn (+77.3%).

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

11 12

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

Ainavo Holdings
7539 TSE JASDAQ

14-Jul.-2017
http://www.ainavo.co.jp/ir/irinfo.html██Medium- to long-term growth strategy
Well within reach of the medium-term business plan goal (¥1,900mn
in FY9/19 operating profit)
The Company announced a new medium-term business plan that lasts through FY9/19, following fulfillment of theprevious medium-term plan in FY9/16, with numerical goals of ¥70,000mn in sales, ¥1,900mn in operating profit,
and a 2.7% operating margin. We expect fulfillment of the medium-term plan goal because the Company is alreadytargeting ¥1,700mn in FY9/17 operating profit and is likely to raise this outlook.
The Company maintains the existing plan (from the initial announcement) to pursue the following five priority issues
in order to realize this goal.
(1) Build new business pillars to deal with changes in the market environment
Promote ZEH (solar panels, exterior, and sashes) responses at group companies(2) Quickly realize group synergies
Regional expansion strategy to address shrinkage of the domestic market(3) Conduct strategic decision-making in group management
Reorganization, efficient investments, and dealing with common group issues(4) Enhance support capabilities for group companies
Improved responsiveness to national policies and better business efficiency (develop a new core system andleverage Avelco Vietnam)(5) Strategically utilize human resources
Recruit and train human resources and promote horizontal interactions██Shareholder return policy
Targets 30% dividend payout, strong likelihood of a dividend hike in
FY9/17 depending on earnings
The Company fundamentally aims for a 30% dividend payout ratio as its shareholder return policy. The FY9/17
ratio, meanwhile, works out to 26.6% using current earnings forecast and the ¥26 target. If earnings overshoot as
explained above, the payout ratio would drop further and thereby increase the possibility of a dividend hike.

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

12 12

Disclaimer
FISCO Ltd. (the terms “FISCO”, “we”, mean FISCO Ltd.) has legal agreements with theTokyo Stock Exchange, the Osaka Exchange,and Nikkei Inc. as to the usage of stock priceand index information. The trademark and value of the “JASDAQ INDEX” are the intellectual
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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
this report and take full responsibility for such use. We shall not be liable for any result of its
use. We provide this report solely for the purpose of information, not to induce investment or
any other action.
This report was prepared at the request of its subject company using information provided
by the company in interviews, but the entire content of the report, including suppositions andconclusions, is the result of our analysis. The content of this report is based on informationthat was current at the time the report was produced, but this information and the content of
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
transactions are decisions for the recipients of this report.
FISCO Ltd.