COMPANY RESEARCH AND ANALYSIS REPORTFJ NEXT CO., LTD.
8935
Tokyo Stock Exchange First Section

2-Aug.-2018
FISCO Ltd. Analyst

Ikuo Shibata

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

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

FJ NEXT CO., LTD.
8935 Tokyo Stock Exchange First Section

2-Aug.-2018https://www.fjnext.com/ir/index.html■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Company profile.. ................................... ......................................................................................................

01

2. Summary of the FY3/18 results....................................................................................................................

01

3. FY3/19 forecast...........................................................................................................................................

01

4. Growth strategy...........................................................................................................................................

02■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. Business overview................................. ......................................................................................................

03

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

04■Characteristics of the Company------------------------------------------------------------------------------------------------------------------ 04
1. Growth model........................................ ......................................................................................................

04

2. An overview of asset-management type condominiums and their future development potential. ................

05

3. The Company’s features (competitive advantages). .....................................................................................

05■Industry environment--------------------------------------------------------------------------------------------------------------------------------------------- 08
1. Sales environment.. ......................................................................................................................................

08

2. The purchase and development environment..............................................................................................

09

3. Competitive environment.............................................................................................................................

09■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 10
1. Trends in past results............................. ......................................................................................................

10

2. Summary of the FY3/18 results....................................................................................................................

11

3. FY3/19 forecast...........................................................................................................................................

14■Growth strategy----------------------------------------------------------------------------------------------------------------------------------------------------------- 15■CSR and information security measures--------------------------------------------------------------------------------------------- 16■Shareholder returns and share price valuation----------------------------------------------------------------------------- 16

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

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

FJ NEXT CO., LTD.
8935 Tokyo Stock Exchange First Section

2-Aug.-2018https://www.fjnext.com/ir/index.html██SummaryDeveloping asset-management type condominiums under the Gala
brand
Achieved record-high net sales for the third consecutive fiscal year
in FY3/18
Plans to greatly increase the dividend through growing profits andraising the dividend payout ratio
1. Company profile
FJ NEXT CO., LTD. <8935> (hereafter, also “the Company) conducts its mainstay business of the development
and sales of the Gala Condominium series, which are asset-management type condominiums located mainly inthe center of Tokyo, and the Gala Residence series, which are condominiums for families. It also conducts a realestate management business, primarily for the properties that it has sold. It secures high occupancy rates throughplanning and design that are based on the residents’ perspectives, such as for design features, safety, and comfort.
In this way, it has increased the value of the Gala brand and boasts the leading sales performance in the Tokyo
metropolitan area. The Company’s results are steadily expanding because demand is strong from individuals who
feel concerns about the future, such as about receiving a pension, and also who are facing new problems, like thesteps to take in response to inheritance tax.
2. Summary of the FY3/18 results
In the FY3/18 results, sales increased but income decreased, with net sales rising 9.1% year-on-year (YoY) to¥67,008mn, but operating income falling 9.7% to ¥7,238mn. However, both sales and income were above theinitial forecasts, and an evaluation that the Company continued to achieve positive results seems fair. In particular,
net sales achieved a new record high for the third consecutive fiscal period. Benefitting from the favorable external
environment, the real estate development business greatly expanded, including from the rise in the number ofcondominium units sold. On the other hand, the reason for the lower income was that the operating income margin
declined, including due to land purchase prices and construction costs remaining at high levels and the increase inadvertising costs. However, all of the cost factors were within the expected range, and therefore the Company wasable to secure higher-than-forecast income due to the increase in net sales above their forecast. Inventory assets,
which will affect the growth of results in the future, also steadily increased, up 17.7% on the end of the previous
fiscal year to ¥42,485mn, even while the Company continued to prioritize profitability for its land purchases
3. FY3/19 forecast
For the FY3/19 results, the Company is forecasting higher sales and income, with net sales to rise 13.4% YoY to¥76,000mn and operating income to increase 7.8% to ¥7,800mn. Continuing from before, the outlook is for the
expansion of the real estate development business to drive the growth in the results. In particular, it seems that theplan is to grow sales of family condominiums. The Company also intends to greatly increased the dividend by ¥12
YoY (based on the ordinary dividend) by growing profits and raising the dividend payout ratio.

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

01 17

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

FJ NEXT CO., LTD.
8935 Tokyo Stock Exchange First Section

2-Aug.-2018https://www.fjnext.com/ir/index.html

Summary

4. Growth strategy
The Company’s policy is to realize sustainable growth by playing a social significant role through its asset-management type condominiums business, including by providing high-quality housing in the city-center areas into
which the population is regressing, and providing opportunities for long-term asset management, mainly for generalsalaried workers. Recently, there has been a trend for major developers to enter the market for asset-management
type condominiums, and there are some who are expressing concerns about the intensification of competition,
including for land purchases. But from another viewpoint, this can be said to be evidence of the fact that thismarket is recognized to be attractive. If the industry acquires greater recognition and becomes more active fromthe entry of major developers, it is considered that for the Company, which has competitive advantages, including
having the expertise and information capabilities from having cultivated a top niche position, it is highly likely thatthe development of the industry as a whole will lead to opportunities for its own growth.
Key Points
In FY3/18, achieved record high net sales for the third consecutive fiscal period (although income declined,
mainly due to the rise in the cost ratio, it still exceeded the initial forecast).
• In addition to the expansion in rental demand in the Tokyo metropolitan area, the Company’s growth is being
supported by the improved recognition of its products as an asset-management method• Sales are expected to continue to increase in FY3/19, while the plan is to greatly increase the dividend throughgrowing profits and raising the dividend payout ratio• Is pursuing a niche top strategy, in which the development of the market as a whole leads to its own growth•㻾㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟(¥mn)

㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻔¥㼙㼚㻕㻻㼞㼐㼕㼚㼍㼞㼥㻌㼕㼚㼏㼛㼙㼑㻌㻔㼞㼕㼓㼔㼠㻕㻤㻜㻘㻜㻜㻜

㻝㻜㻘㻡㻜㻜

㻣㻜㻘㻜㻜㻜

㻤㻘㻝㻜㻟㻢㻜㻘㻜㻜㻜
㻡㻜㻘㻜㻜㻜

㻣㻘㻤㻜㻜
㻣㻘㻞㻞㻢

㻥㻘㻜㻜㻜
㻣㻘㻡㻜㻜

㻢㻘㻢㻝㻠
㻡㻘㻥㻜㻞

㻢㻘㻜㻜㻜
㻠㻘㻢㻞㻡

㻠㻜㻘㻜㻜㻜
㻟㻜㻘㻜㻜㻜
㻞㻜㻘㻜㻜㻜

㻣㻢㻘㻜㻜㻜
㻢㻝㻘㻠㻝㻢

㻢㻣㻘㻜㻜㻤

㻡㻝㻘㻥㻡㻡

㻠㻜㻘㻡㻜㻜

㻠㻘㻡㻜㻜
㻟㻘㻜㻜㻜

㻠㻜㻘㻝㻡㻝

㻝㻘㻡㻜㻜㻝㻜㻘㻜㻜㻜

㻜㻜㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤

㻲㼅㻟㻛㻝㻥㻌㻱

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

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

02 17

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

FJ NEXT CO., LTD.
8935 Tokyo Stock Exchange First Section

2-Aug.-2018https://www.fjnext.com/ir/index.html██Company profile
Focuses on an asset-management type condominiums businessbased in central Tokyo
1. Business overview
The Company’s mainstay business is the development and sales of the Gala Condominium series, which areasset-management type condominiums located mainly in the center of Tokyo, and the Gala Residence series, which
are condominiums for families. It also conducts a real estate management business, primarily of the properties thatit has sold. It has four business segments; “the real estate development business,” “the real estate managementbusiness,” “the construction business,” and “the Japanese inn business.” The mainstay real estate development
business contributes 88.9% of net sales.
Business content by segments
Real estatedevelopment business

The Company plans, develops, and conducts sub-lot sales of the studio condominium Gala Condominium series, which aremainly for asset management, and the family condominium Gala Residence series. It also conducts sub-lot sales, sales, anda brokerage business for land and properties in the Izu region.
It is actively working to expand purchases and sales of previously-owned condominiums.

Real estate
management business

The Company mainly conducts a rental building management business of its sub-lot condominiums.
It is conducted by the Company’s consolidated subsidiary, FJ Community Co., Ltd.

Construction business

It mainly conducts the design, construction, inspection, and renovation of condominiums and other buildings.
It is conducted by the Company’s consolidated subsidiary Resitec Corporation.

Japanese inn business

It manages the Ito Yukitei and Ito Yukitei Kawana Bettei hot spring ryokans (Japanese inns) in Ito City, Shizuoka Prefecture,and the Gyokuhokan hot spring ryokan in Kawazu Town, Kamo District, Shizuoka Prefecture. The Company’s consolidated
subsidiary in this segment is FJ Resort Management Co., Ltd.

Source: Prepared by FISCO from the Company's materials㻿㼍㼘㼑㼟㻌㼞㼍㼠㼕㼛㼟㻌㼎㼥㻌㼟㼑㼓㼙㼑㼚㼠㻌㻔㻲㼅㻟㻛㻝㻤㻕㻯㼛㼚㼟㼠㼞㼡㼏㼠㼕㼛㼚㻌㼎㼡㼟㼕㼚㼑㼟㼟
㻢㻚㻟㻑㻶㼍㼜㼍㼚㼑㼟㼑㻌㼕㼚㼚㻌㼎㼡㼟㼕㼚㼑㼟㼟
㻝㻚㻟㻑㻾㼑㼍㼘㻌㼑㼟㼠㼍㼠㼑㻌㼙㼍㼚㼍㼓㼑㼙㼑㼚㼠㻌㼎㼡㼟㼕㼚㼑㼟㼟
㻟㻚㻡㻑㻾㼑㼍㼘㻌㼑㼟㼠㼍㼠㼑㻌㼐㼑㼢㼑㼘㼛㼜㼙㼑㼚㼠㼎㼡㼟㼕㼚㼑㼟㼟

㻾㼑㼍㼘㻌㼑㼟㼠㼍㼠㼑㻌㼙㼍㼚㼍㼓㼑㼙㼑㼚㼠㼎㼡㼟㼕㼚㼑㼟㼟
㻯㼛㼚㼟㼠㼞㼡㼏㼠㼕㼛㼚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㼎㼡㼟㼕㼚㼑㼟㼟
㻤㻤㻚㻥㻑㻶㼍㼜㼍㼚㼑㼟㼑㻌㼕㼚㼚㻌㼎㼡㼟㼕㼚㼑㼟㼟

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

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

03 17

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

FJ NEXT CO., LTD.
8935 Tokyo Stock Exchange First Section

2-Aug.-2018https://www.fjnext.com/ir/index.html

Company profile

2. History
Mr. Yukiharu Hida, the Company’s current President and CEO, has said that “We want to support customers’ asset
management and increase the value of their real estate by creating high-level living spaces that people will enjoy
living in, and by building a comprehensive asset management and management system in order to maintain asset
value over the long term,” while its management philosophy is “Contributing to the formation of an affluent society
through taking on the challenge of creating urban living spaces.” Based on these philosophies, the Company wasestablished in July 1980 as Fudo Juhan Co., Ltd.
In 1991, it changed its company name to FJ NEXT Co., Ltd. (with the “FJ” written in Japanese characters. In 2007,
it changed how “FJ” was written to using Western characters). In 1994, it launched sales of the Gala Condominium
series, which is its own brand, and its results have steadily expanded against the backdrop of the growth in rental
demand for asset-management type condominiums and also the demand for purchases. In particular, the Company’s
results have been supported by the improvement in the trust placed in and the awareness of the Gala brand, whichprioritizes profitability with an approach of returning income to investors.
After being listed on JASDAQ in 2004, its creditworthiness, financial strength and other attributes from being a
listed company further increased its advantages in the areas of sales, and purchases and development. This was inaddition to its track record of supplying properties up to that time, and they accelerated the Company’s growth. In
2005, it achieved first place for the first time in the ranking of the number of investment condominiums supplied in
the Tokyo metropolitan area (from research by the Real Estate Economic Institute Co., Ltd.). Its listing was changed
to the Tokyo Stock Exchange (TSE) 2nd Section in March 2007, and then it was designated onto the 1st Section
in October 2013.
For two consecutive years, in 2015 and 2016, and for the first half of 2017 (January-June) it was first in the ranking of
the number of investment condominiums supplied in the Tokyo metropolitan area (from research by the Real Estate
Economic Institute Co., Ltd.), and it has established an immovable, leading position in the industry.

██Characteristics of the Company
Leveraging its position in the industry, its strengths are
creditworthiness, financial strength, and information volume
1. Growth model
The Company’s growth model is comprised of two growth drivers; expanding the asset-management type condominiums market itself, and maintaining and improving its market share. In other words, to understand its growthpotential, it is important to ascertain two aspects; how will the asset-management type condominiums market in theTokyo metropolitan area (particularly the city center) develop, and within this development, how will the Company
be able to demonstrate its competitive advantages? In addition, a feature of the real estate management business,
which is ancillary to the main business, is that it supports profits as a stock business that accumulates income.

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

04 17

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

FJ NEXT CO., LTD.
8935 Tokyo Stock Exchange First Section

2-Aug.-2018https://www.fjnext.com/ir/index.html

Characteristics of the Company

Moreover, recently, the Company has been active in areas such as the development and sale of family condominiums
and the handling of previously-owned condominiums. Its main business is ultimately providing asset-management
type condominiums on the assumption that they will be held for the long term. But business development into
fields utilizing the management resources it has cultivated up to the present time (including its financial base andinformation capabilities) can be expected to improve results while also keeping-down risk, and thereby have theeffect of adding depth to the profit structure (management stability).
2. An overview of asset-management type condominiums and their future development potential
In order to judge the future development potential of asset-management type condominiums, it is necessary tounderstand their mechanism, product characteristics, and social significance.
(1) Mechanism
The objective for asset-management type condominiums is not for the purchaser (the owner) to live in them, but
to earn rental income by renting them to a third party. Therefore, the Company stably generates rental income,and thereby builds the trust of the owners, by securing high occupancy rates through the development ofcondominiums that ascertain the needs of residents, in addition to having good locations.
(2) Their aim and merits for the owners
Following the increased awareness of its products, many owners in recent years have been general salaried
workers, and in most cases they purchase with the aim of conducting asset management for the future. While
securing the funds for the purchase from a home loan, generally, the monthly repayments are within the range ofrental income and the owners’ plan is to complete the repayments by the time they retire. Therefore, in principle,
they can carry out asset management for the future from a long-term perspective without it affecting their daily
lives. Also, in addition to the fact that stable rental income plays the role of a private pension in old age, a featureof the products is that they has various other merits, including replacing life insurance from the purchase of ahome loan as a set with group credit life insurance, responding to inheritance tax measures (which has the effectof keeping down the inheritance tax valuation amount), and they also have the effect of diversifying investments.
In particular, in addition to the introduction of a negative interest rate policy and concerns about receiving apension in the future, the need for new measures to respond to inheritance tax means that asset-management
type condominiums are attracting attention.
(3) Social significanceThe main customer group for asset-management type condominiums is general salaried workers, and the businesshas the social significance of providing opportunities for long-term asset management, and at the same time, ofproviding high-quality rental properties in city center areas into which the population is regressing. In the future
also, it is forecast that the trends of an increase in the number of single-person households and the regressionof the population to city centers will continue. In particular, it is highly likely that these trends will be further
accelerated in the period up to the holding of the Tokyo Olympic Games, so it considered that the importance ofproviding infrastructure to support single persons living in city centers will increase more and more.
3. The Company’s features (competitive advantages)
The Company continues to boast the highest number of units sold in the Tokyo metropolitan area, and its competitive
advantages can be arranged as follows.

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

05 17

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

FJ NEXT CO., LTD.
8935 Tokyo Stock Exchange First Section

2-Aug.-2018https://www.fjnext.com/ir/index.html

Characteristics of the Company(1) Provides high-quality living environments based on a clear product concept
The Company is developing the asset-management type Gala Condominium series and the family-condominium
type Gala Residence series as its own brands. It conducts planning and development from the perspectiveof residents, which has increased the value of the Gala brand, and this is demonstrated by its track record of
supplying properties and high occupancy rates up to the present time. In particular, the features of its mainstay,asset-management type Gala Condominium series are entrances with a feeling of luxury, an external appearance
featuring excellent designs, safety, and facilities specifications that emphasize comfort. Gala Hills Shinjuku won the
National Association of Living Industries’*1 4th Excellent Project Award*2 in 2014, and Gala Precious Kawasaki won
the 7th award in 2017. In addition, based on the expertise that the Company has cultivated for asset-management
type condominiums, the features of the family-condominiums Gala Residence series are easy traffic access, asurrounding environment that is rich in amenities and convenience, and advanced design features with high basic
performance.
*1	This organization has 1,500 companies in all Japan in the real estate industry, mainly consisting of mid-sized companies
but also including listed companies.
*2	W ith the aim to promote quality housing provision and development of living environments, etc., this award is given to
an excellent project selected out of projects by members from the National Association of Living Industries, that excels
in creativity to form good living environments, with sociability, product planning, residential performance and designing,as well as harmony with the townscape and the surrounding environment, etc.

Gala Precious Kawasaki

Source: The Company's press releaseWe encourage readers to review our complete legal statement on “Disclaimer” page.

06 17

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

FJ NEXT CO., LTD.
8935 Tokyo Stock Exchange First Section

2-Aug.-2018https://www.fjnext.com/ir/index.html

Characteristics of the Company(2) Focuses on good locations and information capabilities
It goes without saying that the most important element in the evaluation of the asset value of rental housing isa good location. Therefore, whether a company is able to purchase land in good locations will greatly influence
its competiveness. On the other hand, there is a tendency for location information to gather in companies with atrack record of results and financial strength, so there is an industry structure in which the strong become evenstronger. In the case of the Company, it has industry-leading sales results, strong brand power, and a stablefinancial base. It also has a competitive advantage in terms of information capabilities, and it is considered that
this is producing a virtuous circle, as it further improves its sales results and brand power, which in turn increases
its information capabilities. The Company specializes in areas in which the need for housing is high, particularlyin central Tokyo, Yokohama, and Kawasaki. In addition, it carefully selects and provides locations; for example,
more than 98% of its properties are within 10 minutes of their nearest station.
Supply area of Gala condominiums series

Source: The Company's results briefing materials(3) High level rental management expertise and extensive after-sales support
The Company aims to maintain its occupancy rates through maintaining its assets by conducting real estate
management of the properties it sells, and through providing services that are useful for the residents’ lives(concierge services). In addition, it offers complete after-sales support, such as reviewing asset management plansand providing consultations on selling properties, which earns it the strong trust of owners. Looking at the results
for the number of managed rental units, this number has grown steadily year by year alongside the results for the
supply of its own-brand properties, and by the end of FY3/18, it had increased to 14,552 units. On the other hand,the occupancy rates have trended stably at extremely high levels, averaging approximately 99.1% at the end of
FY3/18, due to the Company’s strict selection of good locations and its accumulation of management expertise.
*	For your reference, the occupancy rate for properties included in J-REIT is an average of approximately 97.7% (from theInvestment Trusts Association), so the Company’s occupancy rate is above this average.

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

07 17

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

FJ NEXT CO., LTD.
8935 Tokyo Stock Exchange First Section

2-Aug.-2018https://www.fjnext.com/ir/index.html

Characteristics of the Company

Trend in occupancy rate and number of managed rental units

Source: The Company's results briefing materials(4) Attributes of owners and residents
The owners are nearly all general salaried workers, with approximately 80% aged in their twenties through toforties. Also, even though the locations of the properties are in the Tokyo metropolitan area, the owners live
throughout the country, showing that their objective for their purchase is long-term asset management. On theother hand, the residents are often single company workers in their twenties and thirties, because the properties
have excellent locations, facilities, and specifications, so there is strong demand for them as company housing.
They are also very popular among women thanks to their high-level security and kitchen and bathroom facilities.

██Industry environment
Investment condominiums market in Tokyo metropolitan area istrending strongly due to firm demand
1. Sales environment
The number of investment condominiums supplied in the Tokyo metropolitan area steadily grew from the second
half of the 1990s to the first half of the 2000s. However, it subsequently trended downward due to the bankruptcies
and withdrawals of a succession of businesses because of the effects of soaring land prices and the economiccrisis triggered by the Lehman Brothers bankruptcy in 2008. But this decline bottomed-out in 2010, and in the last
few years, rental demand in the Tokyo metropolitan area has been growing against the backdrop of the increasein the number of single-person households and the regression of the population to the city center. Furthermore,in addition to the continuing low interest rates and concerns about receiving a pension in the future, a new needhas emerged for measures to respond to inheritance tax (which was increased by lower the basic deduction).
While the overall condominium industry is headed towards a consolidation phase due to a rise in lease prices thenumber has trended strongly, supported by the robust demand for purchases from individuals. The background to
this is considered to be that as an asset management method for the future, compared to other methods, such as
stocks, investment trusts, and bonds, purchasing an investment condominium can be expected to have tax-saving
effects and an insurance function, while it also offers a sense of security from providing a stable cash flow and as
an investment in a tangible asset.

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

08 17

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

FJ NEXT CO., LTD.

2-Aug.-2018

8935 Tokyo Stock Exchange First Section

https://www.fjnext.com/ir/index.html

Industry environment㼀㼞㼑㼚㼐㻌㼕㼚㻌㼠㼔㼑㻌㼚㼡㼙㼎㼑㼞㻌㼛㼒㻌㼕㼚㼢㼑㼟㼠㼙㼑㼚㼠㻌㼏㼛㼚㼐㼛㼙㼕㼚㼕㼡㼙㻌㼡㼚㼕㼠㼟㻌㼟㼡㼜㼜㼘㼕㼑㼐㻌㼕㼚㻌㼠㼔㼑㻌㼀㼛㼗㼥㼛㻌㼙㼑㼠㼞㼛㼜㼛㼘㼕㼠㼍㼚㻌㼍㼞㼑㼍㻌㻔㼁㼚㼕㼠㼟㻕
㻝㻜㻘㻜㻜㻜

㻤㻘㻥㻟㻥

㻥㻘㻜㻜㻜

㻤㻘㻥㻤㻟

㻥㻘㻞㻝㻜

㻤㻘㻢㻝㻢 㻤㻘㻡㻠㻤

㻤㻘㻟㻤㻣

㻤㻘㻜㻜㻜

㻣㻘㻜㻜㻢

㻢㻘㻜㻜㻜

㻣㻘㻜㻞㻤

㻢㻘㻥㻢㻢

㻣㻘㻜㻜㻜 㻢㻘㻞㻟㻞
㻡㻘㻝㻜㻝

㻡㻘㻜㻜㻜

㻡㻘㻞㻥㻤

㻢㻘㻞㻠㻜
㻡㻘㻣㻜㻟

㻢㻘㻜㻡㻢

㻠㻘㻡㻤㻟

㻠㻘㻜㻜㻜
㻟㻘㻜㻜㻜
㻞㻘㻜㻜㻜
㻝㻘㻜㻜㻜

㻜
㻞㻜㻜㻝 㻞㻜㻜㻞 㻞㻜㻜㻟 㻞㻜㻜㻠 㻞㻜㻜㻡 㻞㻜㻜㻢 㻞㻜㻜㻣 㻞㻜㻜㻤 㻞㻜㻜㻥 㻞㻜㻝㻜 㻞㻜㻝㻝 㻞㻜㻝㻞 㻞㻜㻝㻟 㻞㻜㻝㻠 㻞㻜㻝㻡 㻞㻜㻝㻢㻔㼅㼑㼍㼞㻕
Source: Prepared by FISCO from Real estate Economic Institute materials

2. The purchase and development environment
On the other hand, in terms of purchases and development, as land-purchase prices and construction costs remain
at high levels, it has become even more important to ascertain which sites will be profitable, and it is increasingly
likely that business results will be determined by the outcomes of land purchases. The Company utilizes its creditworthiness, financial strength, and abundant information capabilities, and its consistent policy since its establishment
has been to purchase sites while prioritizing profitability.
3. Competitive environment
Its industry peers are mostly specialists in investment condominiums, and the industry structure is that there
are many companies that are comparatively small scale. In this situation, the Company has constantly achieved
the leading sales results in the ranking of the number of investment condominium units supplied in the Tokyo
metropolitan area. Very recently, there has been a movement toward entry by major developers that have an eye
on the market’s expansion.

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

09 17

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

FJ NEXT CO., LTD.
8935 Tokyo Stock Exchange First Section

2-Aug.-2018https://www.fjnext.com/ir/index.html██Results trends
Results are steadily expanding, benefiting from the favorable
external environment Secures a stable and high-level financial base
1. Trends in past results
On looking back on past results, we see that as a whole they have trended steadily, supported by the growth inrental demand and the demand for purchases of asset-management type condominiums in the Tokyo metropolitan
area. The results hit bottom in FY3/09 due to the effects of the economic recession following the Lehman Shock.
But based on its policy of not simply pursuing a balance of purchases and instead continuing to purchase land thatmatched its profitability standard, by steadily advancing property development, the Company was able to ride-out therecession with a comparatively small decline compared to the real estate industry as a whole, which suffered greatly.
Subsequently, its results expanded steadily alongside the economic recovery. In FY3/15, there was a temporary
levelling-off of results due to the timing of construction completion, but since FY3/16, its sales and income havecontinued to increase significantly, and net sales achieved record highs for three consecutive periods. This showsthat even though the Company is now quite experienced as a company, it is still in a growth process.
Financially, the interest bearing debt balance has increased alongside the growth in the results, while the equity
ratio is also being maintained at a high level due to the accumulation of internal reserves, and there are no concerns
about the stability of its financial base.
The reasons why the Company was able to ride-out the severe market environment that followed the economic crisis
triggered by the Lehman Brothers bankruptcy comparatively smoothly can be said to be as follows; the high asset
value of the Gala brand that prioritizes profitability from an approach of returning income to investors, including by
the strict selection of good locations, and the stability of its financial base.

㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼚㼑㼠㻌㼟㼍㼘㼑㼟㻌㼍㼚㼐㻌㼛㼞㼐㼕㼚㼍㼞㼥㻌㼕㼚㼏㼛㼙㼑㻔¥㼙㼚㻕㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻔¥㼙㼚㻕㻻㼞㼐㼕㼚㼍㼞㼥㻌㼕㼚㼏㼛㼙㼑㻌㻔㼞㼕㼓㼔㼠㻕㻤㻘㻝㻜㻟㻤㻜㻘㻜㻜㻜

㻥㻘㻜㻜㻜
㻣㻘㻞㻞㻢

㻢㻘㻢㻝㻠

㻡㻘㻥㻜㻞
㻢㻜㻘㻜㻜㻜

㻠㻜㻘㻜㻜㻜

㻢㻘㻜㻜㻜

㻠㻘㻢㻞㻡

㻠㻘㻜㻢㻥 㻟㻘㻤㻞㻝

㻠㻘㻜㻝㻟

㻟㻘㻜㻜㻜

㻝㻘㻠㻞㻢
㻢㻝㻘㻠㻝㻢

㻝㻢㻤㻡㻝㻘㻥㻡㻡
㻙㻥㻤㻣㻞㻜㻘㻜㻜㻜
㻞㻥㻘㻥㻥㻡

㻞㻞㻘㻠㻣㻣

㻢㻣㻘㻜㻜㻤

㻞㻠㻘㻣㻞㻜

㻞㻟㻘㻡㻝㻟

㻟㻜㻘㻡㻠㻡 㻟㻝㻘㻝㻡㻟㻠㻜㻘㻡㻜㻜 㻠㻜㻘㻝㻡㻝㻜㻜㻙㻟㻘㻜㻜㻜
㻲㼅㻟㻛㻜㻤㻲㼅㻟㻛㻜㻥㻲㼅㻟㻛㻝㻜㻲㼅㻟㻛㻝㻝㻲㼅㻟㻛㻝㻞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

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

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

10 17

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

FJ NEXT CO., LTD.

2-Aug.-2018

8935 Tokyo Stock Exchange First Section

https://www.fjnext.com/ir/index.html

Results trends㼀㼞㼑㼚㼐㻌㼕㼚㻌㼏㼛㼚㼐㼛㼙㼕㼚㼕㼡㼙㻌㼟㼍㼘㼑㼟㻔㼡㼚㼕㼠㼟㻕

㻿㼠㼡㼐㼕㼛㻙㼠㼥㼜㼑㻌㼏㼛㼚㼐㼛㼙㼕㼚㼕㼡㼙㼟㻲㼍㼙㼕㼘㼥㻙㼠㼥㼜㼑㻌㼏㼛㼚㼐㼛㼙㼕㼚㼕㼡㼙㼟㻞㻘㻡㻜㻜㻞㻘㻞㻜㻟㻌
㻞㻘㻜㻝㻢

㻞㻘㻜㻜㻜
㻝㻘㻡㻜㻥
㻝㻘㻡㻜㻜
㻝㻘㻜㻝㻥
㻝㻘㻜㻜㻜

㻝㻞㻜

㻥㻞㻞

㻤㻝㻠

㻝㻝㻡

㻣㻢
㻡㻜㻜

㻤㻥㻥

㻥㻢㻝

㻝㻘㻝㻥㻠

㻝㻘㻝㻣㻠

㻝㻠㻟

㻝㻝㻜

㻝㻞㻥

㻤㻜㻣

㻝㻥㻟

㻝㻜㻝

㻠㻢

㻝㻘㻤㻣㻟
㻝㻘㻟㻤㻜

㻣㻟㻤

㻝㻘㻠㻝㻟

㻥㻝㻡

㻝㻘㻜㻢㻠

㻝㻘㻜㻡㻝

㻞㻝㻤㻌

㻝㻠㻟

㻝㻘㻢㻡㻢

㻝㻘㻟㻝㻞

㻝㻘㻥㻤㻡㻌

㻝㻘㻠㻢㻟㻜㻲㼅㻟㻛㻜㻤 㻲㼅㻟㻛㻜㻥 㻲㼅㻟㻛㻝㻜 㻲㼅㻟㻛㻝㻝 㻲㼅㻟㻛㻝㻞 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

Source: Prepared by FISCO from the Company's financial results㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼕㼚㼠㼑㼞㼑㼟㼠㻙㼎㼑㼍㼞㼕㼚㼓㻌㼐㼑㼎㼠㻌㼍㼚㼐㻌㼠㼔㼑㻌㼑㼝㼡㼕㼠㼥㻌㼞㼍㼠㼕㼛㻿㼔㼛㼞㼠㻙㼠㼑㼞㼙㻌㼘㼛㼍㼚㼟㻌㼜㼍㼥㼍㼎㼘㼑㻌㻔㼘㼑㼒㼠㻕㻱㼝㼡㼕㼠㼥㻌㼞㼍㼠㼕㼛㻌㻔㼞㼕㼓㼔㼠㻕㻔¥㼙㼚㻕㻝㻤㻘㻜㻜㻜

㻢㻞㻚㻜㻑㻝㻢㻘㻜㻜㻜
㻝㻠㻘㻜㻜㻜

㻡㻜㻚㻞㻑

㻡㻟㻚㻢㻑

㻡㻢㻚㻢㻑

㻡㻟㻚㻢㻑

㻸㼛㼚㼓㻙㼠㼑㼞㼙㻌㼘㼛㼍㼚㼟㻌㼜㼍㼥㼍㼎㼘㼑㻌㻔㼘㼑㼒㼠㻕
㻢㻠㻚㻝㻑

㻢㻞㻚㻡㻑

㻢㻝㻚㻝㻑

㻢㻝㻚㻝㻑

㻢㻞㻚㻜㻑

㻡㻣㻚㻜㻑

㻣㻜㻚㻜㻑
㻢㻜㻚㻜㻑

㻡㻜㻚㻜㻑

㻝㻞㻘㻜㻜㻜

㻝㻜㻘㻜㻜㻜

㻠㻜㻚㻜㻑

㻤㻘㻜㻜㻜

㻟㻜㻚㻜㻑

㻢㻘㻜㻜㻜

㻞㻜㻚㻜㻑

㻠㻘㻜㻜㻜
㻝㻜㻚㻜㻑

㻞㻘㻜㻜㻜

㻜

㻜㻚㻜㻑
㻲㼅㻟㻛㻜㻤 㻲㼅㻟㻛㻜㻥 㻲㼅㻟㻛㻝㻜 㻲㼅㻟㻛㻝㻝 㻲㼅㻟㻛㻝㻞 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

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

2. Summary of the FY3/18 results
In the FY3/18 results, sales increased but income decreased, with net sales rising 9.1% YoY to ¥67,008mn, operating
income declining 9.7% to ¥7,238mn, ordinary income falling 10.8% to ¥7,226mn, and net income attributable toshareholders of parent company decreasing 14.3% to ¥4,689mn. However, both sales and income were above theirinitial forecasts, and an evaluation that the Company continued to achieve positive results seems fair. In particular,
net sales achieved a new record high for the third consecutive fiscal period.

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

11 17

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

FJ NEXT CO., LTD.
8935 Tokyo Stock Exchange First Section

2-Aug.-2018https://www.fjnext.com/ir/index.html

Results trends

Benefitting from the favorable external environment, the real estate development business greatly expanded fromthe rise in the number of condominium units sold and the increase in sales prices. In particular, the number ofcondominium units sold rose greatly to 2,203 units (+187 YoY, +132 compared to the forecast)*, and it is consideredthat the addition from sales of previously-owned condominiums was the main factor behind the result exceeding theforecast. In other businesses also, the real estate management business realized steady growth from the increasein the number of units managed (up +250 YoY), while results in the Japanese inn business also trended strongly.
Conversely, the YoY decline in results in the construction business was due to the reaction of the recording ofwholesales of condominiums in the previous fiscal period, and it seems to have been within the expected range.
*	W ithin the 2,203 condominium units sold, 1,985 were studios (+112 YoY), and 218 were family condominiums (+75).

On the other hand, the reason for the decline in income was that the operating income margin fell to 10.8% (13.1% in
the previous fiscal year) due to land purchase prices and construction costs remaining at high levels and an increasein advertising costs*, and also because of the increase in the percentage of total sales from previously-owned
condominiums that have a relatively low profit margin. However, all of the cost factors were within the expected
range, and therefore the Company was able to secure higher-than-forecast income due to the increase in net sales
above their forecast.
*	Includes advertising costs relating to family condominiums scheduled to be sold in this fiscal period (upfront costs)

The balance of inventory assets (the pipeline), which will affect results in the future, is also accumulating greatly
for both real estate for sale (completed condominiums) and real estate for sale in process (for inventory assets
as a whole, up 17.7% on the end of the previous fiscal year to ¥42,485mn). In particular, real estate for sale rosesignificantly, up 26.1% on the end of the previous fiscal year to ¥19,687mn, which was largely due to the previously-owned condominiums that are being held for strategic reasons, as well as from the effects of the completionof new buildings at the end of the fiscal period (a temporary factor). In addition, real estate for sale in process wassteadily accumulated, up 11.4% to ¥22,798mn, even while the Company continues to prioritize profitability for its
land purchases. Going forward, the plan for the previously-owned condominiums is to sequentially conduct sales
while aiming to coordinate this with the completion schedule for newly built properties. These condominiums also
have the aspect of being a stock business, with rental income being obtained during the period in which they are
held. At FISCO, we are focusing on the point that these efforts for previously-owned condominiums are securing
opportunities for income, which means that the Company is not reliant only on newly constructed properties.
Moreover, for the owners, the activation (the depth of the liquidity) of the previously-owned condominiums market
can be evaluated as having significant merits, for as and when they are needed.
*	W ithin the real estate for sale of 1,045 properties, previously-owned condominiums account for 720 properties.

Financially, total assets increased to ¥63,432mn (up 8.2% on the end of the previous fiscal period) due to therise in inventory assets, while shareholders’ equity grew to ¥39,343mn (up 9.9%) because of the accumulation ofinternal reserves. As a result, the equity ratio was 62.0% (61.1% at the end of the previous fiscal year), maintaining
its previous high level. Interest-bearing debt rose to ¥15,536mn (up 14.6% on the end of the previous fiscal period)
alongside the accumulation of inventory assets, but the current ratio remained high at 648.0% (560.3% at the endof the previous fiscal year), with no concerns regarding its financial stability. On the other hand, ROE, which shows
capital efficiency, maintained a double-digit level at 12.5% (16.3% in previous fiscal year) and it can be said that its
finances are well balanced.

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

12 17

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

FJ NEXT CO., LTD.

2-Aug.-2018

8935 Tokyo Stock Exchange First Section

https://www.fjnext.com/ir/index.html

Results trends

Overview of FY3/18 results(¥mn)
FY3/17
Results

FY3/18% of net
sales

61,416

Results

Change% of netsales%
changeForecast% of netsales

vs.
forecast

5,592

9.1%

64,000Real estate development

53,40987.0%

59,570

88.9%

6,161

11.5%

-

-

-

Real estate

2,156

3.5%

2,336

3.5%

180

8.3%

-

-

-

Construction

5,011

8.1%

4,251

6.3%

-760

-15.2%---

Japanese inn

839

1.4%

850

1.3%

11

1.3%

-

-

-

Cost of sales

45,642

74.3%

51,114

76.3%

5,472

12.0%

-

-

-

Gross profit

15,77425.7%

15,894

23.7%

120

0.8%

-

-

-

SG&A expenses

7,759

12.6%

8,656

12.9%

897

11.6%

-

-

-

Operating income

8,015

13.1%

7,238

10.8%

-777

-9.7%

6,000

9.4%

120.6%Net sales

67,008

FY3/18104.7%

6,584

12.3%

5,915

9.9%

-669

-10.2%---

Real estate

783

36.3%

858

36.7%

75

9.6%

-

-

-

Construction

557

11.1%

386

9.1%

-171

-30.7%---

Japanese inn

62

7.4%

51

6.0%

-11

-17.7%---

Adjustment

27

-

26

-

-1

-

-

-

-

Ordinary income

8,103

13.2%

7,226

10.8%

-877

-10.8%

6,000

9.4%

120.4%Net income attributable toshareholders of parent company

5,474

8.9%

4,689

7.0%

-785

-14.3%

3,900

6.1%

120.2%

Condominium sales

2,016

2,203

187

9.3%

2,071

106.4%

Studio-type

1,873

1,985

112

6.0%

-

-

Family-type

143

218

75

52.4%

-

-

Balance of inventory assets

36,08942,485

6,396

17.7%

Real estate for sale

15,615

19,687

4,072

26.1%

Real estate for sale in process

20,474

22,798

2,324

11.4%

Total assets

58,631

63,432

4,801

8.2%

Shareholders’ equity

35,804

39,343

3,539

9.9%

Equity ratio

61.1%

62.0%

0.9pt

-

Interest-bearing debt ratio

13,553

15,536

1,983

14.6%

ROE

16.3%

12.5%

-3.8pt-Real estate development

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

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

13 17

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

FJ NEXT CO., LTD.
8935 Tokyo Stock Exchange First Section

2-Aug.-2018https://www.fjnext.com/ir/index.html

Results trends

Increase in sales expected to continue in FY3/19
3. FY3/19 forecast
For FY3/19, the Company forecasts that net sales will increase 13.4% YoY to ¥76,000mn, operating income will
increase 7.8% to ¥7,800mn, ordinary income will rise 7.9% to ¥7,800mn, and net income attributable to shareholdersof parent company will rise 6.6% to ¥5,000m. So the forecasts are for the increase in sales and profits.
As all of the businesses are continuing to perform well, expansion of the real estate development business is
expected to drive performance growth. While the number of condominium units sold will be around the same level as
the previous fiscal year, of 2,200 units for the year, the Company plans for the growth in sales of newly constructedfamily condominiums to contribute greatly to the higher sales. It will also work to actively engage in the buying andselling of previously-owned condominiums. In the other businesses also, the real estate management business willrealize stable growth from the increase in the number of units managed, while the outlook is for the construction
business to expand greatly from the significant growth from implementing projects for orders in progress. The aim
is also to improve the profit margin of the Japanese inn business by further increasing the number of customers
and reducing the various costs.
Conversely, for income, the Company’s estimates are conservative, such as that land purchase prices will rise andthat construction costs will remain at a high level. So it considers that the operating income margin will decline
slightly to 10.3% (10.8% in the previous fiscal period), but it is still expecting to secure higher income from theincrease in sales.
At FISCO, we think that, despite the intensifying competition for land purchases, it is fully possible that the Company
will achieve the net sales forecast, as the external environment (rental demand and purchase demand) will continue
to trend stably, and it had steadily accumulated inventory assets by the end of the previous fiscal year. Rather,
it is necessary to be aware of the potential for an increase in the number of units sold from previously-owned
condominiums, the same as in the previous fiscal year. Also, in order to judge results from the next fiscal period
onwards, we shall be paying attention to the land-purchase conditions.
Forecast for FY3/19(¥mn)
FY3/18Results

FY3/19% of net sales

Forecast

Net sales

67,008Operating income

7,238

10.8%

7,800

Ordinary income

7,226

10.8%

Net income attributable toshareholders of parent company

4,689

7.0%

Change% of net sales

76,000% change
8,992

13.4%

10.3%

562

7.8%

7,800

10.3%

574

7.9%

5,000

6.6%

311

6.6%

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

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

14 17

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

FJ NEXT CO., LTD.
8935 Tokyo Stock Exchange First Section

2-Aug.-2018https://www.fjnext.com/ir/index.html██Growth strategy
A niche top strategy, of the expansion of the market as a wholeleading to growth for the Company
The Company’s growth strategy would seem to be to further improve management efficiency and its competitive
advantages by specializing in asset-management type condominiums in the Tokyo metropolitan area (particularly inthe city center), and also a top niche strategy, of the expansion of the market as a whole leading to its own growth.
Looking at this from the opposite direction, we can see there is a growth bottleneck (constraint), in which growth isdetermined by market trends. Therefore, a key point for the Company itself, which leads its industry, would seemto be how it will promote the sound development of the asset-management type condominiums market. Including
through partnerships with other companies, it is creating a database of prospective customers who have expressed
an interest in its products (potential owners) and it is focusing its efforts into expanding the market base from a longterm perspective by aiming to increase awareness and understanding of asset-management type condominiums
through various measures, including by regularly providing potential and actual customers with information by email
and other means, and these CRM operations are conducted through Gala Navi*. In April 2016, it newly established
its own seminar room, and every month it holds seminars on themes in accordance with the various needs ofcustomers, from beginner investors through to owners, including in a seminar format and as individual consultation
sessions. We will also be paying attention to the results of other activities, like organizing seminars in collaboration
with financial institutions. Moreover, the Company is progressing measures to respond to new needs, including theestablishment of a local subsidiary in Taiwan (October 2014), whose role is to quickly and accurately ascertain theneeds of Taiwanese investors.
*	A site for disseminating information on asset-management type condominiums (regularly provides information on thewebsite and also via an email magazine), with more than 130,000 members (currently, member numbers are rapidly risingalongside the increase in interest).

In addition, while focusing on asset-management type condominiums, the Company is aiming to further expand thescope of its business and acquire earning opportunities, while its policy for its family condominiums business is tosteadily accumulate a track record of results.
At FISCO, we think that it is highly likely that the Company will achieve sustainable growth. This judgment is because,
despite the concerns about the effects of rising land-purchase prices and construction costs, the demand fromresidents and owners for asset-management type condominiums in the Tokyo metropolitan area is strong and there
remains sufficient room for growth in the future. It is also because the Company is deploying a comparatively robust
business model (such as a conservative purchasing policy and financial strength, and a focus on high-quality rental
housing) and a stock business (for example, rental management operations and asset management operations,
including for the properties of other companies).
Recently, there has been a trend for major developers to enter-into the asset-management type condominiums
market, and there are some who are expressing concerns about the intensification of competition, including for landpurchases. But from another viewpoint, this can be said to be evidence of the fact that this market is recognized
to be attractive. If the industry acquires greater recognition and becomes more active from the entry of major
developers, it is considered that for the Company, which has competitive advantages, such as having the expertiseand information capabilities from having cultivated a top niche position, it is highly likely that the development of theindustry as a whole will lead to opportunities for its own growth.

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

15 17

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

FJ NEXT CO., LTD.
8935 Tokyo Stock Exchange First Section

2-Aug.-2018https://www.fjnext.com/ir/index.html██CSR and information security measures
Actively practicing CSR as the leading company
As the leading company representing its industry, the Company is actively conducting corporate social responsibility(CSR) activities and environmental measures. Specifically, it is adopting various environmentally friendly equipment,
including LED lighting and environmentally friendly plywood (including sustainable timber supplied from forests withpermission for afforestation from the government of the producing country), new material hybrid wallpaper (which
reduces CO2 emissions by 56% in the production process compared to the usual vinyl cloth, and which also does
not use the substances that cause sick building syndrome), air conditioners that are compliant with energy-saving
standards (installed as standard), and water-saving toilets. It is also advancing the greening of the roofs of itscondominiums as part of its measures to respond to the heat island effect.
Moreover, the Company is participating in the “Fun to Share” activities to prevent global warming that are being
promoted by the Ministry of the Environment, and it is conducting various in-Company eco-activities, including
implementing Cool Biz and Warm Biz, converting office lighting to LED, effectively using vinyl umbrellas (the shared
used within the Company of umbrellas that are not being used), and establishing an in-Company library (recycling of
unwanted books and magazines as an in-Company library). In addition, it supports the environmental conservation
activities being conducted in Akagi Nature Park (Shibukawa City, Gunma Prefecture), and it is planting trees indeveloping countries (in Africa and Asia).
On the other hand, the Company is implementing measures to strengthen information security, including the management of personal information, which is its greatest corporate social responsibility. In November 2006, it acquired
the ISO/IEC 27001 certification, which is the international standard for information security management systems.
In addition, it is working to build a strict management system through rotating the PDCA cycle.

██Shareholder returns and share pricevaluation

Plans to greatly increase the dividend by growing profits and raising
the dividend payout ratio
The Company’s basic policy for returning income to shareholders is to “Stably and continuously pay dividends
according to income after comprehensively considering various factors, including internal reserves for active businessdevelopment and maintaining a financial balance.” It revised the initial dividend forecast upwards for FY3/18 and paid
an annual dividend of ¥22 (including a special dividend of ¥2), which was an increase of ¥2 YoY (dividend payout
ratio, 15.4%). For FY3/19, due to growing profits and raising the dividend payout ratio, it plans to pay a dividend of¥32 (dividend payout ratio, 20.9%), which will be an increase of ¥12 on an ordinary-dividend basis. Going forward,
we can expect continuous dividends alongside the Company’s income growth, based on the relatively stability ofits business and its high level of income.

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

16 17

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

FJ NEXT CO., LTD.
8935 Tokyo Stock Exchange First Section

2-Aug.-2018https://www.fjnext.com/ir/index.html

Shareholder returns and share price valuation

Trends in dividend per share and dividend payout ratio

Source: The Company's results briefing materials

The Company actively acquires its own shares, and it acquired approximately 830,000 shares in FY3/17 (totalacquisition price, around ¥500mn) and 450,000 shares in FY3/18 (total acquisition price, around ¥400mn).
Also, as a measure for individual shareholders and to promote greater understanding of its Business, the Company
has introduced a shareholder benefits program in which they can select an item from a department store gift catalog
with a value of ¥1,500, and for long-term shareholders, with a value of ¥5,000. It also provides shareholders withvouchers that can be used at the Company Group’s hot spring Japanese inns.
The current share price (closing price on July 11, ¥986) is at the levels of PER (forecast) of 6.45 times, PBR (actual)of 0.82 times, and a dividend yield (forecast) of 3.25%. It is not possible to conduct a simple comparative analysis,as there are no similar listed companies with the same growth model. But starting with the fact that the TSE First
Section average PER (forecast) is 14.68 times and the PBR (actual) is 1.29 times, and also in consideration ofvarious factors, such as the strong demand for asset-management type condominiums in the Tokyo metropolitanarea, future development potential, the Company’s comparatively robust business model, and its recent results,
there is the sense that its current share price level is still undervalued. Therefore, as its industry’s leading company,
it is considered that there is plenty of room for its share price to rise from asset-management type condominiums
becoming further recognized as a long-term investment product. Also, in August 2017, it was newly selected as aconstituent issue in the JPX-Nikkei Mid and Small Cap Index*.
*	A stock price index compiled by Tokyo Stock Exchange, Inc., and NIKKEI Inc. This index applies the concept of the
JPX-Nikkei Index 400, which is an index comprised of highly attractive listed companies, to mid and small cap equities
by selecting companies that focus on capital efficiency and investor-oriented management, and aim to foster greaterawareness of such issues among corporate executives. It is comprised of 200 issues selected from the main markets of
the TSE 1st Section, 2nd Section, Mothers, and JASDAQ.

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

17 17

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
properties of the Tokyo Stock Exchange, and therefore all rights to them belong to the Tokyo
Stock Exchange.
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.
All intellectual property rights to this report, including copyrights to its text and data, areheld exclusively by FISCO. Any alteration or processing of the report or duplications of thereport, without the express written consent of FISCO, is strictly prohibited. Any transmission,
reproduction, distribution or transfer of the report or its duplications is also strictly prohibited.
The final selection of investments and determination of appropriate prices for investment
transactions are decisions for the recipients of this report.
FISCO Ltd.