Alpha-Win Company Research Report
CUBE SYSTEM INC.
(2335 TSE First Section)● SummaryIssued: 6/7/2021

Alpha-Win Capital Inc. Research Department
http://www.awincap.com/

Business Description
・CUBE SYSTEM INC. (hereinafter, the “Company”) is an independent, mid-tier system integrator (SI) listed on
the First Section of the TSE. Its main customers include Nomura Research Institute and Fujitsu Group. It develops
systems and provides services mainly for the finance, distribution, and telecommunications industries. Founded
in 1972, it has 49 years of history.
Current Financial Performance・With the exception of one fiscal year, the Company has been continuously increasing sales YoY for the past 20
years (including the period during which its results were nonconsolidated). During this period, its annual sales
growth rate (simple average of the rate of increase in sales) was +6.0% and its annual recurring profit growth rate
(simple average) was +7.1%; the Company has been steadily expanding its business and keeping its business in theblack over many years. Thanks to its committed efforts in business development and management reform, therecurring margin has been stable at around 7% (7.2% on average) and the increase in sales has been contributing
directly to increases in profit, dividend, and market capitalization.
・Last fiscal year (FY 2021; note that the Company’s fiscal year is March-ending), sales were about 7.6% lower thanthe Company’s initial forecast but had grown by 0.5% YoY to Y14.79 billion. Operating profit was Y1.17 billion,
or 4.8% above the initial forecast, and had grown significantly by 22.5% YoY. Record-high sales were achieved
for the nineth consecutive year, and operating, recurring, and net profit also hit their record highs. Operating andrecurring profit each exceeded Y1 billion for the first time. Dividend was raised by Y2 to Y20 per share.
・This fiscal year (FY 2022), the Company plans to achieve sales of Y16 billion (+8.2% YoY), operating profit ofY1.23 billion (+4.7% YoY), and net profit of Y850 million (+0.7% YoY). It is planning to achieve consecutive
record highs for sales, operating profit, and net profit. It plans to keep dividend at Y20, the amount after the previous
dividend hike.
・Going forward, the impact of COVID-19 is expected to become smaller and the business environment is predicted
to turn toward recovery. Consequently, the Company expects sales to grow since IT investments will likely begin
increasing again and it will be able to win projects for strategic IT investments. In addition to sales growth, it plans
to maintain profit growth by working on its own digitalization and resource optimization to improve profitability
and productivity.
・Given the risks of COVID-19, Alpha-Win made a somewhat more cautious forecast than the Company for thisFY’s sales and profits. However, we believe that cost control will keep the downward deviation of profit limited.
Business Strategy
・Last fiscal year, which was the final year of the medium- to long-term management vision V2020, the Company
had planned to achieve sales of Y18.5 billion, operating margin of 9.6%, and ROE of 13%, but was only able toachieve the goal for ROE (the results were Y14.8 billion, 7.9%, and 14.0%, respectively). This was because its
new business development, recruitment, and orders received for large-scale projects had been below expectations.
・In the medium-term management plan (V2026) that started this fiscal year, the Company plans to actively work on
developing its proposal-based business (proposal of solutions to customers/industries based on the Company’s
technology and expertise in its customers’ industries, followed by the providing of the corresponding services) andcontract-based business (contract development of information systems according to customer request), as well as
strengthening the SI Business based on the Enhancement Business and strengthening the Digitalization Business.
・It has also been actively engaged in in-house development/enhancement of new technologies and services and joint
development with other companies. It has been building the foundation for such development through investments,
providing financing, and forming alliances.
・In the new medium-term plan, it announced the financial goals for each fiscal year, including those for sales,
1/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

operating profit, and ROE. In the final year or FY 2024, it hopes to achieve Y18.5 billion, Y1.48 billion, and 13%
or greater, respectively. It has also set nonfinancial goals for diversity promotion and work-style reform, which itplans to achieve through IT.
・Going forward, the key points will most likely be its collaboration with major system integrators, development ofproposal-based businesses targeting end users, improvement of project management skills, continued improvementof profit margins, monetization of businesses in new business areas, acquisition of new customers, acquisition andtraining of employees, M&As and alliance strategies, globalization, and incorporation of new technologies.

Forecast of Medium-Term Financial Results
・The Company’s business is affected by the financial performance and system investment trends of its domestic
corporate customers. However, the impact of COVID-19 is expected to gradually become smaller so that people’s
lives and economic activities will also start returning to normal.
・Over the medium to long term, IT investments by the Company’s corporate users are expected to continuously
expand. We believe that this trend will allow the Company to stably increase both sales and profit by about 6-10%
per year through the expansion of the Enhancement Business (the Company’s strong point), acquisition of new
customers, the new Digitalization Business, development of the SI Business, and productivity improvement.
Shareholder Return
・The Company has been proactively returning profit to shareholders through share buybacks, stock splits, andsequential dividend hikes. When benefits from the shareholder benefit program are added to the dividend, thedividend yield essentially comes out to be about 2.2% at maximum. The forecasted dividend payout ratio is 32%,
which is about average for its industry, but its DOE (based the most recent actual values) is high at 4.5%. Withsolid financial performance and ample cash, shareholder return measures such as share buybacks and dividend
hikes can be continued to be expected.
Stock Characteristics and Stock Price
・Over the past 12 years or so, its stock price has increased by about 4.3 times and has been largely outperforming
the TOPIX. Based on this fiscal year’s forecasted values, valuation does not seem cheap compared to the averageof all stocks listed on the TSE First Section or its competitors. However, with stock price corrections, theCompany’s stock price seems to have come close to the fair value.
・Since it is a domestic-demand-oriented, defensive stock and stable profit growth is expected to continue, it is most
likely seen as a potential medium/long-term investment target. In terms of stock price, we should not only watch
its progress with this fiscal year’s financial performance and the IT investment trends of companies, but also thecontribution of businesses in new digitalization-related technologies/areas to the financial results, alliances withother companies, M&As, and return of profit to shareholders.
【 2335 CUBE SYSTEM
FY

2019
2020
2021
2022
2022
2023
2023
2024
2024

Sector: Information & Communication 】 Figure A

Sales

YOY

O.P.

YOY

R.P.

YOY

N.P.

YOY

EPS

BPS

Dividend(million yen)（%）(million yen)（%）(million yen)（%）(million yen)

(%)

(Y)

(Y)

(Y)

14,325
14,70814,78816,00015,70017,20016,65018,50017,700

CE
E
CE
E
CE
E

5.6
2.7
0.5
8.2
6.2
7.5
6.1
7.6
6.3

921
959
1,174
1,230
1,200
1,340
1,290
1,480
1,400

7.8
4.1
22.5
4.7
2.2
8.9
7.5
10.4
8.5

959
976
1,295
1,250
1,220

7.5
1.7
32.7
-3.5
-5.8

596
525
844
850
830

5.1
-11.9
60.7
0.7
-1.7

43.25
38.69
62.11
62.55
61.07

393.29411.96476.52560.14

16.0
18.0
20.0
20.0
20.0

1,310

7.4

890

7.2

65.49

605.63

20.0

1,420

8.4

965

8.4

71.01

656.6420.0(Note) CE = the Company’s estimate/forecast. E = Alpha-Win Research Dept.’s estimate/forecast. The Company’s fiscal year is March-ending.
【 Stock Price and Valuation Indicators: 2335 CUBE SYSTEM 】 Figure B
Dividend Payout Ratio

Item

6/4/2021

Item

Stock Price (Y)1,017

Last FY (actual)

16.4

2.1

2.0%

32.2%

Shares Outstanding (thou.)

14,500This FY (est.)

16.7

1.8

2.0%

32.7%

Market Capitalizatoin (million yen)

14,747

Next FY (est.)

15.5

1.7

2.0%

30.5%

Equity Ratio at Last FY-End

68.6%

Last FY's ROE

14.0%

Dilutive Shares (thou.)

0

P/E

P/B

Dividend Yield(Note) Estimates were made by Alpha-Win Research Dept. Due to cancellation of a part of the treasury shares at the end of May
2021, the number of outstanding shares were revised accordingly.

2/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021【 Stock Chart (end-of-week prices): 2335 CUBE SYSTEM 】 Figure C
(Y)
1,600
1,500
1,400
1,300
1,200
1,100
1,000
900
800
700
600
500
400

Stock Price (left axis)

09
/1
6
12
/1
6
03
/1
7
06
/1
7
09
/1
7
12
/1
7
03
/1
8
06
/1
8
09
/1
8
12
/1
8
03
/1
9
06
/1
9
09
/1
9
12
/1
9
03
/2
0
06
/2
0
09
/2
0
12
/2
0
03
/2
1
(M
M
/Y
Y
)

Price Relative to TOPIX (right axis)

2.00
1.90
1.80
1.70
1.60
1.50
1.40
1.30
1.20
1.10
1.00
0.90
0.80
0.70
0.60

(Note) From the first week of September 2016 to the first week of June 2021

Period1 month
3 months
6 months
12 months【Performance】
Returnvs. TOPIX-11.1%-13.9%-6.6%-11.1%-29.7%-37.0%
31.7%
5.1%(Note) Reflects stock price and index
values up through the closing price on
6/4/2021. Return for the 1-month period
is the comparison of the closing price atthe end of April and on June 4. The
same applies to the other periods.
Prepared by Alpha-Win Research Dept.

(Note) Values calculated or shown in this Report have generally been rounded to the nearest unit. Therefore, the values may differ
from the Company’s official disclosed values.

＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊

Disclaimers
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital
Inc. (hereinafter “Alpha-Win”) on the request of the company presented in this Report.
This Report is not to be construed as a recommendation or solicitation of investment. Alpha-Win shall not beliable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use ofor reliance on this Report. Investors who read this report must make their own decisions on all investment
matters and take full responsibility regarding their investment.
This Report has been prepared with a focus on objectivity and neutrality based on the analysis of generally accessible
public information and supplemental information including interview(s) by the analyst. Alpha-Win, the writer,
and/or other persons involved in the publication of this Report may already hold, or buy and sell in the future, thestock of the company presented in this Report.
Contents of this Report are based on information current as of the issue date and are subject to change
without notice. For the latest (updated) report, please see our website (http://www.awincap.com/). We also do
not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate, or
fit for any purpose and do not accept any responsibility or liability.
Copyright of this Report belongs to Alpha-Win and no part of the publication may be copied, photocopied, cited, ortranslated without our consent.
For inquiries regarding this Report, please send us an e-mail to info@awincap.com. However, Alpha-Win and thewriter of this Report do not have any obligation to reply to inquiries.
PFV2021-0622-2100

3/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

Contents
1．Company Overview ........................................................................................................................ P5
Independent, Mid-Tier System Integrator ......................................................................................... P5
Business Philosophy and Basic Management Policy ........................................................................ P7
2．Business Description and Business Model .................................................................................... P8
Three Lines of System Service .......................................................................................................... P8
Labor-Intensive Business Model in which Human Resources Are Key ......................................... P10
Sales Composition Well-Balanced by Industry ............................................................................... P11
Stable Customer Base and Business with High Continuity ............................................................. P12
Future Areas of Growth and Foundation for Next-Generation Technologies ................................. P14
3．Shareholder Composition ............................................................................................................ P16
Change in Composition by Type of Shareholder ............................................................................ P16
Major Shareholder Composition ..................................................................................................... P16
4．ESG .................................................................................................................................................. P19
Environment, Society, and Governance .......................................................................................... P19
5．History of Growth ......................................................................................................................... P20
Company History ............................................................................................................................. P20
Past Transition in Financial Results ................................................................................................ P20
6．Business Environment .................................................................................................................. P23
Trends of Japan’s System Integration Market ................................................................................. P23
CUBE SYSTEM’s Position and Comparison with Competitors .................................................... P25
7．Last Fiscal Year’s Results and This Fiscal Year’s Company Forecast ................................... P27
Full-Year Financial Results for FY 2021 (last fiscal year) ............................................................... P27
CUBE SYSTEM’s Financial Forecast for FY 2022 (this fiscal year)............................................... P30
8．Growth Strategy ............................................................................................................................ P33
Review of Medium- to Long-Term Management Vision “VISION 2020” ...................................... P33
The First Medium-Term Management Plan of “VISION 2026”....................................................... P33
Alpha-Win Research Dept.’s Financial Forecast for FY 2022 (this fiscal year)............................... P36
Alpha-Win Research Dept.’s Forecast of Medium-Term Financial Results ................................... P37
9．Analyst’s Views ............................................................................................................................. P38
SWOT Analysis ............................................................................................................................... P38
Shareholder Return and Shareholder Benefit Program ................................................................... P39
Stock Characteristics/Price and Valuation Comparison .................................................................. P40
Note: 1) Upon translating to English, when the page numbers differed from the original Japanese version, they were
adjusted to those of the English version of this Report. 2) The Company’s fiscal year is March-ending; i.e. FY 2022
ends in March 2022.
4/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

1. Company Overview◆ Independent, Mid-Tier System Integrator
w An independent system
integrator with 49 years ofhistory in the industry.
Specialized and mid-tier.
Stable customer base withseveral blue-chip companies
as its customer.
(1) System integrator: a company
that conducts system integration.
Abbreviated as “SI” or “SIer.” A
general term for companies that
plan, design, develop, operate, andprovide other solutions for the IT
operation systems of customers
including companies and thegovernment.

w The Company’s group ismade of the Company andthree subsidiaries.

(2) Offshore development:
providing services that meetcustomer needs, from systemdevelopment to maintenance, at alow cost using overseas/offshore
sites

CUBE SYSTEM INC. (hereinafter, the “Company”) is an independent
system integrator1 (a.k.a. SI). It is listed on the First Section of the TSE andis a mid-tier player in the system integration industry. Often as a
subcontractor for major SIs, the Company mainly develops the systems oflarge companies in the finance, telecommunications, and distribution
industries, as well as for the government. Its customer base is firm, having
expanded its business with its main customers over many years. The
Company has technological expertise and has earned strong trust from its
customers, with the four corporate groups Nomura Research Institute, Fujitsu,
Aeon, and Mizuho as its main customers and receiving outsourced jobs fromthe Tokyo Stock Exchange as well.
Founded in 1972 at the outset of the software industry, the Company has 49
years of history. Osamu Sakiyama, who became Chairman and
Representative Director upon the appointment of a new president, is one of
the founding members. Masahiro Nakanishi became Representative Director,
President, and CDO (Chief Digital Officer) in June 2020. Nakanishi
previously worked as vice manager of Nomura Research Institute’s Chubu
Branch and then joined the Company in 2017. He also has experience
working for a consulting company. At the Company, he directly conducts
sales activities for DX and other businesses as the company representative.
The Company’s group consists of four companies: the Company and three
consolidated subsidiaries. The consolidated subsidiaries are as follows(Figure 1).
1. HOKKAIDO CUBE SYSTEM INC.
(Located in Sapporo, Hokkaido; founded with 90.9% of the shares owned;
for system development and sales reinforcement in the Tohoku and Hokkaido
regions)
2. CUBE SYSTEM VIETNAM CO., LTD.
(Ho Chi Minh City, Socialist Republic of Vietnam; founded by the Company
as a wholly-owned subsidiary)
3. CUBE SYSTEM SHANGHAI CO., LTD.
(Shanghai, China; the Company established a joint company and thenacquired all shares in 2017)
The Company established its overseas subsidiaries mainly for the purpose of
conducting offshore development2.
HOKKAIDO CUBE SYSTEM INC.
● Head office: Chuo-ku, Sapporo City
● Founded: December 1990

【Figure 1】Locations of CUBE SYSTEM
Group’s Subsidiaries and Offices

Sapporo

CUBE SYSTEM INC.

● Head office: Shinagawa-ku, Tokyo● Founded: July 1972
Tokyo
NagoyaOsaka

CUBE SYSTEM INC. Nagoya Office● Location: Naka Ward, Nagoya City

Shanghai

CUBE SYSTEM INC. West Japan Solutions
Headquarters● Location: Chuo-ku, Osaka City

CUBE SYSTEM SHANGHAI CO., LTD.
Ho Chi Minh

● Location: Tianzan Road, Shanghai, China● Founded: July 2009

CUBE SYSTEM VIETNAM CO., LTD(Ref) Notice of convocation of the ordinary
general meeting of shareholders● Location: Dist. 12, Ho Chi Minh City, Vietnam● Founded: March 2008

As of June 6, 2020

5/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

The consolidated-to-parent-company sales ratio has stayed around 1.08 forthe past 19 years, with a large weight placed on the parent company’s results(Figure 2). Although the individual subsidiary’s profit/loss is not disclosed,
the consolidated-to-parent-company recurring profit ratio has been around0.98-1.17 (simple average of 1.05) during the same period. The total
profit/loss of the three subsidiaries, calculated by subtracting the parent
company’s recurring profit from the consolidated recurring profit, has been asurplus excluding the two periods FY 2011 and FY 2012 (Figure 3). During
the three fiscal years from FY 2017 to FY 2019, sales and profit of thesubsidiaries (= consolidated minus parent company) had grown too. In FY
2020, due to the completion of the subsidiaries’ major system development
projects, their sales and profit declined. Most recently, in FY 2021, profit
increased again despite a sales drop.

w Consolidated sales andprofit have been on an
increasing trend.
Consolidated
subsidiaries have been
staying in the black.
Consolidated-to-parentcompany ratios havebeen a little greater than
1 for both sales andprofit.

【Figure 2】Ratio of Consolidated to Parent Company Sales (ratios shown on upper portion of graph)
Sales of parent company(million yen)

16,0001.08 1.08

1.08

1.07

1.11

1.10

1.10

Consolidated sales minus parent company's sales

1.08

1.06

1.06 1.08

1.08

1.08

14,000921
12,0001.09

857 1,084

1.09
1,151

1.13
1,601

8,000

439

6,000

478

534

504

784

751

777

506

679

Consolidated
to parent
company ratio

1.09 1.07
1,179 945

13,843785

10,000

4,000

1.07

13,52912,724678

12,409458
11,815
11,766
11,606

6,566
5,805 6,097

7,172 7,139 7,358 7,730

8,027

FY
2006

FY
2010

8,660

7,974 8,564

FY
2011

FY
2012

10,432

2,000
0
FY
2003

FY
2004

FY
2005

FY
2007

FY
2008

FY
2009

FY
2013

FY
2014

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019

FY
2020

FY
2021

【Figure 3】Ratio of Consolidated to Parent Company Recurring Profit (ratios shown on upper portion of graph)(million yen)

1,400

R.P. of parent company

1.06

1.07

1.07

1.06

1.07

1.03

1.03

1.03

Consolidated R.P. minus parent company's R.P.
0.99

0.98

1.01 1.03

1.05

1.02

1.04

1.06

1.17

1.07

Consolidated
to parent
company ratio

80

1,200

43

1,000

140

21
31

800
600

23

33

35

33

39

22

19

409

467

516

518

545

621

578

0

48

1,215

7
938

639

61

19

21

400
200

1.07

680

542

-8

-9

FY
2011

FY
2012

599

939
781

683

845

819

FY
2018

FY
2019

915

-200
FY
2003

FY
2004

FY
2005

FY
2006

FY
2007

FY
2008

FY
2009

FY
2010

FY
2013

FY
2014

FY
2015

FY
2016

FY
2017

FY
2020

FY
2021

(Ref) Both Figures 2 and 3 were prepared by Alpha-Win Research Dept. based on the securities report.
w 社名に込められた想い。
(Note) The estimates/forecasts are, unless otherwise noted, from the Company’s plan/forecast.

6/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

The Company’s finance is strong with essentially no debt. Its free cash flow(FCF) has also been stably positive, and cash and deposits have been
gradually accumulating (Figure 4). The Company has approximately Y4,470
million in cash and deposits (on B/S) in addition to more than Y1,170 million
in investment securities (high-liquidity stocks and bonds), totaling about
Y5,600 million in highly liquid assets (equivalent to 60% of the total assets
of 9,400 million and a little less than 40% of the sales of 14,800 million). In
comparison, its debt is Y280 million. Its financial ratios are also high andstable, with an equity ratio of 69% and current ratio of 308% (all are values
as of the end of March 2021).

w Essentially debt-less andrich in cash. Financiallysolid.

【Figure 4】Transition in Cash Flow (CF)
Unit: million yen
Operating CF ①
Investing CF ②
Financing CF
FCF ( ①+②)
Cash and Cash Equivalents

FY 2010
283
-1
-144
282
1,619

Issued: 6/7/2021

FY 2011
622
309
-173
931
2,376

FY 2012
101
54
-125
155
2,405

(Note: FCF stands for free cash flow. Unit = million yen)

FY 2013
451
-321
-151
130
2,383

FY 2014
317
-172
-188
145
2,339

FY 2015
503
-307
-439
196
2,099

FY 2016
534
25
-241
559
2,408

FY 2017
936
94
-610
1,030
2,822

FY 2018
388
28
-392
416
2,846

FY 2019
773
46
-531
819
3,131

FY 2020
747
25
-339
772
3,557

FY 2021
1,043
58
-215
1,101
4,448

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary(Note) “Cash and cash equivalents” are not “cash and deposits” of the B/S but are from the “Statements of Consolidated Cash Flows” in thefinancial results summary.

◆ Business Philosophy and Basic Management Policy
w The business philosophy/ goal is to “create aworld-class company.”

w The basic management
policies are “Customer
First,” “Focus,” and “AllEmployee Sales.”(3) All-employee sales system: asystem where there is no
dedicated department for sales
but instead each project ismanaged as a whole fromreceiving an order to delivering
the product and confirming
payment. The system engineer,
who is in charge of responding
to customers, will materialize
the systemization needs ofcustomers through dialogues
and carry out projects withresponsibility and authority
under a sales goal.

The Company’s business philosophy is as follows:
・A company flourishes with the people’s support. We must continue toexist to promise the well-being of people including our employees. Root ofcontinuity and development is profit, and profit is brought by customers.
Under this philosophy, we will “create a world-class company.”
The following are the Company’s three basic management policies:
・Customer First: All decisions are based on our customers’ values and it is
our standard to think from our customers’ perspectives.
・Focus: The four main elements of a company are people, assets, money, andtime. To maximally utilize these elements, we will focus our businessresources on the most important matters that have been decided based on ourcustomer-first policy.
・All-Employee Sales: To provide user-oriented services, each employee will
work toward the development of the Company’s business as independent
business persons. (⇒ has established a unique all-employee sales system3)
Targets for the entire company as well as for each department, such as thosefor sales, profits, and progress, are disclosed to all employees. Information is
being shared in an open management.

w Shares managementtargets/results with all
employees

7/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

2．Business Description and Business Model◆ Three Lines of System Service
w Business is classified into
three categories. The
System Integration
Service, which is mainly
system development,
accounts for 70% of thetotal sales. Profit marginsof the three categories areabout the same.
(4) System solution: solving issues
related to systems throughhardware, software, and services

As its business, the CUBE SYSTEM Group provides system solutions4.
Specifically, the Company provides a series of services from systemdevelopment through planning/proposal, design, and manufacture(programming), to testing, operating, and evaluating systems for othercompanies or the government. Since this is the Company’s single business,the business is further classified according to the informatization cycle ofcustomers into the following three categories (services lines).
1. System Integration Service (SIS)
2. System Outsourcing Service (SOS)
3. Professional Service (ProS)【Figure 5】Overview Diagram of the Processes of Each Service
System Solutions/Services
Planning/Proposal
Systematization
Plan

System Operation/Evaluation

System Development

Requirement
Definition

Basic
DesignSystemProgramming

Testing

1. System Integration Service

SystemOperation/Evaluation

Migration

2. System Outsourcing Service

Business System Design/Development Services

Business Application Management

System Migration / Downsizing

System Operation/Management

Offshore Development

Offshore Enhancement

3. Professional Service
System Migration
System Consulting

On-Site Consulting
Database Management

IT Infrastructure Development / Private Cloud Development(Ref) Prepared and reworked by Alpha-Win Research Dept. based on the securities report

w Projects are diversified.
(5) Requirement definition:
defining the scope and target ofsystemization(6) Basic design: also called
external design, a part of the
upstream process where thebasics of the functions necessary
for a system from the user’s
perspective are designed (screen,
method of operation, security,etc.). The workflow is as follows:
basic design → internal design→ detailed design!→
manufacture (also called
programming or
implementation).

1. System Integration Service (SIS)
・The Company’s main business. Develops business operation systems thatmeet the needs of end users such as companies and the government(hereinafter collectively referred to as “corporate users”). Includes
requirement definition5, basic design6, programming, and testing (Figure 5).
・While the time it takes from receiving an order to delivering the productcan range from a few months at the shortest to about three years, many of the
projects are completed in the order of a few months. Most orders are received
and delivered during the same fiscal year. The price can also range fromseveral million yen to several hundred million yen, but projects priced lessthan Y50 million are by far the most common.
・In general, engineers are stationed at the corporate user’s site and conduct
system development for each project in teams. However, to cut down on costand secure the necessary number of engineers, a part of the development is
outsourced to subsidiaries in Japan and overseas, or other companies in thesame business, under the supervision of the Company’s project manager.
・Since the system development business is, in general, based on contract
agreements, the SI (the Company), who is the contractor, bears responsibility
8/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)
w System Integration

Services are based oncontracts. Project
management isimportant in controlling
the risks and profit/loss.

(7) Standard development
framework F@CE: The
Company’s unique generalframework for standardizing andstreamlining application
development. A tool for carryingout projects efficiently by
preventing operation errors oromissions.

Issued: 6/7/2021

for the products (systems). Therefore, management of the risks and the
profit/loss of projects and products is important.
・Projects are often obtained through proposals or by bidding. Estimates are
generally calculated based on [number of staff] x [number of months]. After
receiving an order, in developing a system, the Company employs knowledge,know-how, and fundamental technologies pertaining to various industries,
companies, and businesses that it has accumulated over the years, as well as
its standard development framework F@CE7, to reduce the risk and improve
quality, profitability, and efficiency.
・Since unexpected changes in specifications, additional work exceeding theinitial estimate, etc., can negatively impact profitability and make a project
unprofitable, the Company has created a new, specialized department to workon improving its project management. The Company has also been actively
working on providing the Enhancement Service8, in which the Company
works closely with corporate users to make various proposals that will leadto new businesses (compact system development).

(8) Enhancement Service:
Providing not just system
maintenance, management, anddevelopment services but also
improving system performanceand quality to increase the valueof the system. Or proposing
ideas for new businesses.
Improves customer satisfaction
through these means. For theCompany, this service essentiallymeans continued business withthe customer.

2. System Outsourcing Service (SOS)・Services related to the operation and evaluation of systems. It provides two
solution services: System Operation & Management (development,
management, and evaluation of components of a system such as hardware,
basic software, database, network environment, etc.) and Business
Application Management (maintenance, management, and improvement ofbusiness applications and evaluation of management processes). The
Company has also established a seamlessly linked service structure where
new challenges found and proposed during system maintenance andoperation (SOS) can lead to a new Enhancement Service project (SIS).

(9) Business related to Oracle
Cloud: Cloud-related services
and proposals based on Oracle’s
database. The Company plans tocontinue to strengthen thisbusiness by increasing thenumber of certified employees.
Current annual sales are several
hundred million yen.

3. Professional Service (ProS)
・Services that utilize the Company’s technologies to solve everything related
to the informatization cycle from planning, designing, and developing
infrastructure to operating/monitoring systems,
including consulting,database improvement for greater efficiency, system monitoring,
management support, and informatization strategies. High performance isrealized through development tools and the skills of certified experts. The
Company is especially strong in database technologies, for which it has expert
engineers (business related to Oracle Cloud9).

【Figure 6】 Breakdown of Sales (outercircle) and Gross Profit (inner circle) by
Service Category in FY 2021
Professional
Service

SystemIntegration
Service

14.0%
15.7%

SystemOutsourcing
Service
14.7%

13.5%

Sales composition(outer circle)
Gross profit comp.
(inner circle)
70.7%
71.2%

(Ref) Prepared by Alpha-Win Research Dept.
based on the financial results summary

Breakdown of sales and gross profit by each of the three categories and theirtransition over the years are shown in Figures 6-8. Regarding sales
breakdown, SIS accounts for about 70% of the total, and SOS and ProS
almost equally share the remaining 30% (outer circle of Figure 6). Over the
past 19 years, total sales grew by 2.6x. Specifically, sales of SIS grew by 3.5x,
SOS grew by 2.1x, and ProS grew by 1.3x; SIS has been the main driver ofbusiness growth (Figure 7 on page 10).
Breakdown of gross profit is shown in Figure 6 (inner circle). The breakdown
is not largely different from that of sales. The change in gross margin is asshown in Figure 8 on page 10. Although some years were marked by a 5%
deviation at maximum, each category has generally stayed within the rangeof 15% to 21%. However, the gross margin of ProS, which has high added
value, has been increasing again and is 3-5 points higher than the other two
categories. The overall gross margin, though, depends on the gross margin of
SIS since SIS accounts for an extremely large percentage of the total sales.
9/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021【Figure 8】Change in Gross Margin of Each Service Category【Figure 7】Sales of Each Service Category(million yen)

25.0%

16,00014,00020.0%

12,00010,000
8,000

15.0%

6,000
4,000
2,000

10.0%

0

20
FY 02
20
FY 03
20
FY 04
20
FY 05
20
FY 06
20
FY 07
20
FY 08
20
FY 09
20
FY 10
20
FY 11
20
FY 12
20
FY 13
20
FY 14
20
FY 15
20
FY 16
20
FY 17
20
FY 18
20
FY 19
20
FY 20
20
21

SIS

SOS

ProS

Total

FY

5.0%

SIS (System Integration Service)
SOS (System Outsourcing Service)

0.0%

FY

20
FY 02
20
FY 03
20
FY 04
20
FY 05
20
FY 06
20
FY 07
20
FY 08
20
FY 09
20
FY 10
20
FY 11
20
FY 12
20
FY 13
20
FY 14
20
FY 15
20
FY 16
20
FY 17
20
FY 18
20
FY 19
20
FY 20
20
21

ProS (Professional Service)(Ref) Figures 7 and 8 were prepared by Alpha-Win Research Dept.
based on the financial results briefing materials.

◆ Labor-Intensive Business Model in which Human
Resources Are Key
Since most of the Company’s business is based on made-to-order, contractdevelopment of systems, its business is strongly characterized as a laborbased, single-product production model. Therefore, the acquisition andtraining of talented personnel are key factors since human resources are thesource of competitive advantage and growth potential. Since systems are
becoming more advanced and complex, talented employees for roles such as
project managers for overall project management and system engineers areespecially crucial in order to manage system quality, cost, deadlines, andprofit/loss. Currently though, due to recent years’ labor shortage, it has notbeen able to secure enough project managers to match its business expansion.
This shortage has been a bottleneck to further growth. The Company’s
challenge will be to increase new recruitment as well as improving theretention rate of its current employees.

w Labor-intensive business.
Securing and training
talented employees are key
to growth.

The change in the number of employees for the entire CUBE SYSTEM Groupis shown in Figure 9. In line with its business expansion, the Company has
been hiring about a few dozen new employees every year, mainly for systemengineer positions (for new areas such as DX), and plans to continue this pace.
【Figure 9】Change in the Number of Employees in the Group(persons)

Number of employees in Japan
Number of overseas employees

900
800
700
600
500

501
（+59）
28

(+19)

498
（-3）
32

(+4)

511
（+13）
38

(+6)

539
（+28）
58

(+20)

559
（+20）

588
（+29）
70

63

(+7)

496

518

(+6)

638
（+50）

656
（+18）

694
（+38）
82

720
（+26）
93

(+11)

737
（+17）
85

781
（+44）
92

( +7)

( -8)

84

(+1)

85

(-3)

554

571

(+41)

(+15)

(+25)

(+37)

FY 2018

FY 2019

FY 2020

FY 2021

(+14)

400
300
200

(+7)

481
(+8)

(+15)

(+22)

(+36)

(+17)

(-7)

473

(+40)

FY 2010

FY 2011

FY 2012FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

473

466

612

627

652

689

100
0

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing materials

10/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

With regards to cost structure, labor cost and subcontracting cost paid tobusiness partners (essentially, mostly personnel expense) account for about
90% of the cost of sales. Therefore, the Company’s skill in controlling those
two costs may impact its profitability, and resource optimization and project
management become crucial.

(10) Agile development: anapproach to project
development. Unlike theconventional waterfall
development, it divides a system
into short phases and conducts
repeated implementation(programming) and testing to cut
down on development time.
“Agile” means dexterous andquick.

w Sales breakdown byindustry: other > finance >distribution≒
telecommunications &transportation.
w Making progress withacquisition of new
customers anddiversification of industry【Figure 10】Sales Breakdown by
Industry in FY 2021
Finance
Distribution
Telecommunications & Transportation
Other

32.1%

28.5%

19.8%

19.7%

(Ref) Prepared by Alpha-Win Research Dept.
based on the financial results briefing materials

Generally, the nature of the system integration business makes it difficult torapidly expand business through unique products and services. Additionally,
although the sharing and leveraging of expertise are possible to some extent,
productivity improvement through those means is limited due to the current
reliance on manpower. The difficulty in improving profit margin is acharacteristic of the entire industry rather than just the Company. Faced bythese challenges, the Company’s plan is to improve its profit margin bycarrying out various measures that do not rely heavily on manpower, such as
the adoption of agile development10, use of a standard platform,
organizational strengthening of project management, utilization of overseas
subsidiaries (offshore development), and reviewing of contracts (negotiating
and proposing to change from payment based on the number of staff andmonths to payment in return for services).

◆ Sales Composition Well-Balanced by Industry
Sales breakdown by industry is shown in Figure 10. Sales from the financeindustry, which must process a massive amount of data and must be secureand reliable, had been the largest by industry type in the past. However, while
the sales from finance had declined, sales from the “other industries”(industries other than the three industries of finance, distribution, andtelecommunications & transportation) had grown significantly, replacing
finance and rising to the top in the sales breakdown since FY 2019 (Figure
11 on page 12). After these two industry categories, the distribution and thetelecommunications & transportation industries follow, both similarly at 20%of the total sales.
HIMACS (TSE First Section: 4299) and Toho System Science (TSE First
Section: 4333), competitors whose business is especially similar to theCompany, specialize in business for the finance industry, with sales from thefinance industry constituting about 70% or 80% of the total, respectively. On
the contrary, sales from finance are about 30% of the total for the Company,
showing that the Company is diversifying its sales among industries by
expanding its business with the non-finance industries.
Concerning business for the finance industry, systems demand from mostly
megabanks had been the Company’s financial growth driver for many years.
However, this demand has leveled off due to weak earnings and thecompletion of consolidation and alliance phases in the finance industry. Thisdecline, though, has started to be offset by increased demand from companies
in the business of credit cards, cashless payment, insurance, and other relatedareas, helping the industry’s demand bottom out. Meanwhile, regarding thesales from telecommunications & transportation, business with delivery
companies in the transportation industry has been expanding, although withsome fluctuations due to the system investment cycle of telecom carriers, etc.
In recent years, regarding the “other industries” category, business with
manufacturers, the government, energy-related industries, and cloudconsulting-related industries had grown significantly thanks to the acquisitionof new customers and orders received for new projects. However, with the
11/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

completion of those projects, sales temporarily declined. As a result, theCompany appears to have become more balanced and diversified with regards
to industry type, leading to greater business stability.
The breakdown of gross margin by industry changes somewhat every year,
but we believe that this is because the differences in the profitability of eachindividual project, rather than the differences in the characteristics of eachindustry, are reflected in the gross margin. The gross margin is generally
improving for all industries, but in the most recent fiscal year, the grossmargin of the telecommunications & transportation industry had beensomewhat high due to the posting of profitable projects (Figure 12).
【Figure 11】Transition in Sales by Industry(million yen)

6,000
5,000
4,000
3,000
2,000
1,000
0
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
(CE)
Finance
Distribution
Telecommunications & Transportation
Other(Ref) Figures 11 and 12 were prepared by Alpha-Win Research Dept. based on the financial results briefing
materials and financial results briefing supplementary materials. CE: the Company’s plan.

【Figure 12】Transition in Gross Margin by Industry
Telecommunications& Transportation

24.0%

22.5%
22.0%
Finance

20.0%

19.2%
Distribution

19.1%

18.0%

Other 17.2%

16.0%
14.0%
12.0%
10.0%
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Financew A stable business, themajority of which consistsof continued transactions
with the existingcustomers.

Distribution

Telecommunications & Transportation

Other◆ Stable Customer Base and Business with HighContinuity
Since the Company’s customers and end users are Japan’s leading corporategroups, and its business deals with mission-critical operations, the Company
must provide proven, reliable, stable, user-friendly, secure, and sustainable
solutions. Moreover, for system development and operations, accumulation
12/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)
w Sales breakdown by
customer shows that
Nomura Research Instituteis the largest, followed by
Fujitsu, Aeon, andMizuho. These fourgroups account for a little
less than 80% of the total.

Issued: 6/7/2021

of business knowledge and know-how is necessary. Consequently, theCompany has high contract continuity with its existing customers. Its prime
ratio (percentage of direct contracts made with end users for systemdevelopment) is 20 to 30%, and many of its projects are outsourced indirectlyfrom major SIs.
【Figure 13】Sales Breakdown by Customer Group in FY 2021
NRI G

Fujitsu G

Aeon G

Mizuho G

Other

22.5%
4.5%
5.6%

48.5%
18.9%

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing materials.

As shown by the sales breakdown by customer group in FY 2021 (Figure 13),
Nomura Research Institute (hereinafter, “Nomura Res. Inst.” or “NRI”) is thelargest customer, followed by Fujitsu, Aeon, and Mizuho. These four
corporate groups account for a little less than 80% of the total. Thanks to thesuccess of the “account strategy” (a strategy where marketing activities are
conducted in a concentrated manner by the designated person in charge)
toward the four main customer groups, total sales of the four groups havebeen steadily increasing: by +2.8% YoY to Y10,351 million (+Y281 million)
in FY 2019, by +9.3% YoY to Y11,316 million (+Y965 million) in FY 2020,and by +1.3% YoY to Y11,463 million (+Y147 million) in FY 2021.
(11) e-e Partner: an especiallyclose partner among all partnersof NRI. Of the “e Partners”(approx. 150 companies) withhighly specialized businessknow-how and IT skills andhigh-level IT security, “e-ePartners” cooperate with NRI
not only in the operation of
specific projects but also in thecooperative promotion of
innovative activities in the
Enhancement Business; in thestrategic reinforcement of HR,
quality, and IT security; and in
the creation of a mutuallyprosperous business model thattakes advantage of each other’s
expertise. NRI has only
announced three companies (theCompany, HIMACS, and Toho
System Science) as its e-ePartners.

Over the past ten years, the sales growth rate for customers other than the fourmain groups had been high, and the percentage of sales of the four groups had
been gradually decreasing. However, in FY 2020 and FY 2021, the proportionof the four groups has been starting to increase again (Figure 14 on page 14).
Looking at long-term changes, we can see that the sales from Nomura Res.
Inst. Group had increased by approx. Y6,300 million from approx. Y900
million in FY 2002 to approx. Y7,200 million in FY 2021 thanks to the
expansion of business area from the initial focus on the distribution industry
to other industries such as finance. During this period, the Company’s overallsales grew by Y9.2 billion from Y5.6 billion to Y14.8 billion, with a majorityof this growth owing to the NRI Group (68%). Similarly, the Fujitsu Groupaccounted for Y1 billion of the total sales, or 11%, thanks to increasedtransactions related to telecommunications, electrical power infrastructure,and the government. Having increased sales over the long term with each of
the major corporate groups, the Company has earned excellent trust from its
customers and has high contract continuity.
In fact, the Company is one of the few companies that are partnered with
Nomura Res. Inst. (NRI) as an e-e Partner11. In this partnership, the Company
is closely partnered with NRI not only in business but also in making mutual
investments and exchanging employees. Looking at the Company’s
13/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

transactions with each company, we can see that NRI has also been the largest
by transaction size every year, and the second largest has been Fujitsu (actual
values are expected to be disclosed in the annual securities report).
In addition, in February 2019, the Company was awarded the Best Partner
Award by AEON IBS, with whom the Company has been in a business
relationship for 30 years. This is another proof that the Company’s customer
satisfaction level is high.
【Figure 14】Transition in Sales by Customer Group (G) and Share of the Top 4 Groups(Note: information on sales of Mizuho G before FY 2003 and of Aeon G before FY 2007 is not disclosed)(million yen)（％）

16,00082

14,00080

12,00078
76

10,000

74

8,000

72

6,000

(12) DX (Digital
Transformation): Thetransformation brought about by
the penetration of IT(information technology)
everywhere in the society. Not
only the businesses, but theindustrial structure and social
infrastructure are said to also
become affected. For companies,
the use of digital technologies
can bring reform to its businessmodel, operation, processes,organization, and culture.
(13) Cloud solution service: atype of service whereapplications are used as a“service” via web browsers, etc.
(14) Blockchain: distributed
network where information is
synchronized, recorded, andaccumulated among many
computers(15) AI: artificial intelligence(16) IoT: Internet of things. A
system that connects all devices
around us by the Internet.

2,000

66

0

64

20
FY 0 220
FY 0 320
FY 0 420
FY 0 520
FY 0 620
FY 0 720
FY 0 820
FY 0 920
FY 1 020
FY 1 1
20
FY 1 2
20
FY 1 320
FY 1 420
FY 1 520
FY 1 620
FY 1 720
FY 1 820
FY 1 920
FY 2 0
20
21

w Upfront investment ingrowth areas such as
cloud, blockchain, agile
development, AI, and IoT

68

FY

w Focused on DX projects

70

4,000

NRI G
Aeon G
Other

Fujitsu G
Mizuho G
TOP 4G share (right axis)（(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing materials
and financial results briefing supplemental materials◆ Future Areas of Growth and Foundation for NextGeneration Technologies
Alongside its own R&D, the Company has been forming alliances withcompanies that have advanced, new technologies. It has been awarded orcertified by major companies as their partners (see Figure 15 on page 15 forthe past year’s situation). It has been conducting investments and preparing
for the development of businesses that utilize next-generation technologies.
Since DX12-related IT investment of corporate users is expected to rapidly
increase, the Company has set the Digitalization Business as its area ofgrowth and plans to put company-wide efforts into actively making proposals
and responding to needs.
The Company has especially been focused on technology investments incloud solution services13 including Oracle-related services; participation insocial experiments of the Blockchain14 Collaborative Consortium; capital andbusiness alliances with companies with expertise in AI technology15, IoT
technology16, and blockchain; and alliances in agile development andmaintenance/operation services. These are aimed at acquiring and sharing
expertise and information on advanced technologies, developing humanresources, conducting joint development and proposals, and establishing new
businesses.
Furthermore, it created the Technology Strategy Office in its organization in
14/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

2016. The Office has dedicated members as well as members who
concurrently work for the sales department. The role of the Office is to catchup to leading-edge technologies and conduct R&D and business development
based on the newest core technologies.
Furthermore, through an investment partnership as well as direct investments
in private companies, the Company has been working on strategicallycollecting information on new technologies and searching for promising
companies. The results of these investments had contributed positively to last
fiscal year’s financial results as “gain on investment” or “gain on sales” under
nonoperating profit.

【Figure 15】Summary of Recent Alliances and Key Points (awards, exhibition of products with newtechnologies, acquisition of patent, etc.)
Date of Announcement

Announced Information

Details

April 2020

Created the DX Promotion Office andCenter for Future Human Resources
Development

DX Promotion Office established to accelerate progress with the digitalization business.
Center for Future Human Resources Development established for the enhancement of
future HR value.

November 2020

New partnership formed with Kinaxis
Japan Inc.

Formed a partnership with Kinaxis Japan Inc. (headquartered in Minato-ku, Tokyo, with
Toshiya Kaneko as president), the Japanese subsidiary of Kinaxis Inc. (TSX: KXS).
Through this partnership, Kinaxis's supply chain management (SCM) platform can beused to create efficient operation processes for solving frontline problems, as well as
providing fast and optimum system development support.

December 2020

CUBE SYSTEM's teams were awarded
the Company Award in the "CDLEHACKATHON 2020" sponsored by theJapan Deep Learning Association

In the "CDLE HACKATHON 2020" (an annual hackathon, or a large event for AI
technology) sponsored by the Japan Deep Learning Association ("JDLA"), projects
submitted by CUBE SYSTEM employees' teams were awarded in two divisions.
・ Idea Division: Received the Company Award for "NEO E-learning Using Deep
Learning"
・ Forecast Division: Awarded for weather forecasting based on graphics data

March 2021

Participated in an exhibition at Tokyo
Big Sight's "Second Blockchain EXPO
Spring"With the theme of "Smiles to all employees through digital technology," CUBE SYSTEM
participated in the exhibition with the following products that support the enhancementof non-contact communication and engagement between employees in this remote workera.
1. Smile Share Product・ Thanks Connect: Service that visualizes everyday feelings of "thanks" using online
communication tools
・ Cubecoin: engagement enhancement service using blockchain technology
・ Smile Cash Register: Non-contact and cashless payment settlement service using AI
image recognition technology; "non-contact" payment method based on face recognitionand "peace signs"
2. Be-SMART (sales support tool): joint development between DIGITAL BLOCKS Co.,
Ltd. and Cubecoin
3. AIZE (face-recognition AI): joint development between Tripleize Co., Ltd. and Smile
Cash Register

April 2021

Obtained patent for the touchless payment settlment service based on AI face recognition
Obtained patent for touchless payment that it provides in its DX Business. This patented technology is used in its original nonsettlement based on AI face recognition contact payment settlement service "Smile Cash Register" and will also be used in othernew products/services.

April 2021

Formed a certified partnership with ServiceNow (parent company is ServiceNow, Inc.,
based in California, USA, with Bill McDermott as president and CEO; the Japanesesubsidiary is ServiceNow Japan, headquartered in Minato-ku, Tokyo, with Masashi
Murase as executive officer and president) for the purpose of transforming theoperation/maintenance service to a new operation style. Through ServiceNow, it will
create a new working style for the new normal by transforming from an operation stylerelying on full-time operators and operation managers at data centers to an operationstyle based on remote operation and a single platform allowing the streamlining ofprocesses.

New certified partnership formed with
ServiceNow(Ref) Prepared by Alpha-Win Research Dept. based on the news release on the Company’s website

15/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

3． Shareholder Composition◆ Change in Composition by Type of Shareholder
With regards to shareholder composition by type of shareholder as of the endof March 2021 (Figure 16), “individuals, etc.” is by far the largest, owning
approx. 76% of the total. Second to this is “financial institutions, etc.,”
owning 18%. Together, these two types of shareholders are 94%, owning
most of the outstanding shares. “Overseas corporate entities, etc.” is small,
owning 1.2%. Since FY 2014, shares of “individuals, etc.” have somewhat
decreased and shares of “financial institutions, etc.” have been increasing.

w “Individuals, etc.” ownslightly less than 80% of
all shares.

【Figure 16】Change in Shareholder Composition by Type of Shareholder(unit: %) (as of the end of each period)
（％）

100
90
80
Individuals, etc.

70～

FY 2012FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

FY 2020

FY 2021

25
20

Financial institutions, etc.

15

Financial instrumentbusiness operators

10

Other corporate entities

5

Overseas corporate entities,
etc.

0
FY 2012FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

FY 2020

FY 2021(Ref) Prepared by Alpha-Win Research Dept. based on the notice of convocation of theordinary general meeting of shareholders and the securities reportuMajor Shareholder Composition

The Company’s major shareholder composition has been stable and has not
greatly changed. The major shareholders as of the end of March 2021 areshown in Figure 17 on page 17. The following is supplemental information.

w The employee stock
ownership plan andcurrent and former
directors are the mostprominent among the
major shareholders.
w Increase in investments
made under the name oftrust banks. Incorporated
in several investment
funds.

・Due to the decrease in the amount of shares owned by the Employee Stock
Ownership Plan, in March 2019, its ranking among major shareholders
became switched with Chairman Sakiyama (previously president), whobecame the largest shareholder instead. Possessing a little less than 12% of
all shares as of the end of March 2021, he owns just slightly more than the
Employee Stock Ownership Plan at second place. Also, President Nakanishi
owns 24.5 thousand shares (0.18% of all shares).
・The Master Trust Bank of Japan (trust account) is at third place, but thename of its final investors and its purpose are unknown (note that Mitsubishi
UFJ Trust and Banking Corporation have invested with a more than 40%
stake in this trust bank).
・The Company’s stock is incorporated in the Open-End Low-Price Equity
Fund managed by Nikko Asset Management (parent company: Sumitomo
Mitsui Trust Bank) and Japan equity index funds managed by Sumitomo
Mitsui Trust Asset Management, Mitsubishi UFJ Kokusai Asset Management,
16/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

Nomura Asset Management, Asset Management One, etc. A part of thesefunds is likely invested under the name of trust banks.
w Individuals in the major
shareholder list are
mostly those affiliatedwith the Company.

w Nomura ResearchInstitute, the Company’s
largest customer, is its
tenth largest shareholder.

・The fourth largest shareholder Akemi Onuki is one of the Company’s
previous presidents. The sixth largest shareholder Toshio Uchida is theCompany’s current director.
・The fifth largest shareholder, The Master Trust Bank of Japan, is the BIP
trust account for the Company’s director remuneration (stock-compensation
director incentive plan).
・The eighth largest shareholder Toshikuni Sato is the Company’s former
executive managing director.
・The ninth largest shareholder MUFJ Bank is the Company’s bank. The
tenth largest shareholder, Nomura Research Institute, is one of theCompany’s major customers.
・Of the top ten shareholders, the Employee Stock Ownership Plan, thedirectors/employees (including former members), and treasury shares add up
to about 40% of the total. The Company has been actively buying back its
shares, and its treasury shares including the BIP trust account were 1,332
thousand as of the end of FY 2021. This essentially places the Company atthird place in the shareholder ranking.

【Figure 17】Current Major Shareholders
Shareholder Name

(unit: thou. shares)

Osamu Sakiyama (indiv.): CUBE SYSTEM's chairman
CUBE SYSTEM Employee Stock Ownership Plan
The Master Trust Bank of Japan, Ltd. (trust account)
Akemi Onuki (indiv.): CS's former president
The Master Trust Bank of Japan(director renumeration BIP trust: 75,824 account)
Toshio Uchida (indiv.): current director
Masatsugu Sakurai (indiv.): general individual investor
Toshikuni Sato (indiv.): CS's former exec. managing director
MUFJ Bank, Ltd.
Nomura Research Institute, Ltd.
Japan Trustee Services Bank, Ltd. (trust account 5)
Mizuho Bank, Ltd.
CUBE SYSTEM INC.
Resona Bank, Limited

FY 2015
year-end

FY 2016
year-end

FY 2017year-end

FY 2018
year-end

FY 2019
year-end

FY 2020year-end

FY 2021year-end% of Total
SharesRanking

1,775
1,641
401

1,675
1,672
401

1,655
1,663
401

1,646
1,668
321
401

1,638
1,565
394
401

1,632
1,602
485
401

1,622
1,551
456
401

11.63
11.12
3.27
2.88

1
2
3
4

-

270

270

262

369

358

358

2.56

5

475
316
380
258
276
682
241

415
316
340
258
276
458
-

403
316
300
348
276
1,035
-

393
316
300
324
276
1,236
-

376
316
304
258
276
1,356
-

369
316
304
258
219
-

347
316
288
258
214

2.49
2.27
2.07
1.85
1.54

6
7
8
9
10

(Ref) Prepared by Alpha-Win Research Dept. based on the securities report.
(Note) “-” indicates that there were no data available on the major shareholder in the securities report, and does not necessarily mean zero.
Shareholding percentages were calculated excluding the treasury shares (including the BIP trust account for director remuneration).

w Used a portion of thetreasury shares as
incentives for the
directors

w The stock compensation
plan for directors wasrevised to further
reinforce consciousnessof financial results andstock price.

Through several occasions, the Company had issued a portion of its treasury
shares to its directors as an incentive. In FY 2016, the Company terminatedits previous director retirement benefit plan and instead started the stockcompensation (BIP trust) director incentive plan in which the Company’streasury shares are issued and granted according to his or her position andachievement with respect to the medium-term management goals. The planis renewed every three fiscal years, or the span of a medium-term
management plan, and vesting occurs upon a director’s retirement.
Also, under this new plan, it issued a portion of the treasury shares to its
directors and executive officers as restricted stock compensation in
September 2018 and September 2019.
Furthermore, with the review of the medium-term management plan, it alsoplans to submit a proposal to the ordinary general meeting of shareholders to
be convened on June 23, 2021, to terminate the specified restricted stockcompensation plan which had been in place since FY 2017 and instead unify
17/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

the plans under the trust-type stock compensation plan which was started in
FY 2015.

w Conducted cancellation oftreasury shares equivalent
to 5.1% of all outstanding
shares. Currently owns
3.8% of all outstanding
shares.

Through this change, the Company aims to further link its directors’
remuneration with its stock price. By sharing not only the benefits of a risingstock price but also the risks of a falling stock price with the shareholders,the directors will be more conscious about making a greater contribution tocontinuously improving financial performance and raising company value
over the medium to long term. Since the new plan will help raise the directors’
incentives with regards to management and financial performance anddirectionally align them with the shareholders in terms of profit, the revisionand continuation of the plan will most likely be favorable to the shareholders.
On May 31, 2021, the Company conducted a stock cancellation of 779,840
treasury shares (cancellation of 5.1% of all outstanding shares) out of thetotal of 1,332,132 treasury shares that it had owned. This cancellation wasfor the purpose of returning more profit to shareholders and improving
capital efficiency. The total number of outstanding share after cancellation is14,500,000, of which 552,292 shares (3.8% of all outstanding shares) areowned as treasury stock.
The Company has not decided on how to use of the remaining treasury shares,
but some possibilities include using them for stock compensation as anotherdirector incentive, stock cancellation, or a stock-swap in a tie-up or an M&A.

18/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

4．ESG◆ Environment
w Working on continual
improvement ofenvironmental
performance (energy andresource conservation)

Although the Company’s business does not harm the environment, under thepolicy to “practice environment-friendly management through continual
improvement in environmental performance (energy/resource conservation),”the Company engages in environment-friendly activities (has obtained
ISO14001 certification). Specifically, the Company works on reducing
electricity and paper usage, reducing waste, implementing “cool biz” and“warm biz,” promoting green purchasing, and planting trees in Vietnam.

◆ SocietyAs a key industry necessary to the infrastructure supporting the economy andthe society, the CUBE SYSTEM Group believes its mission is to contributeto the further development of the IT society and the strengthening of its
customers’ competitiveness. It aims to create a more prosperous andconvenient society through the power of IT systems.
w Actively engaged in
activities that support theeducation of nextgeneration talents

It supports the education of next-generation talents in Japan and overseas. In
Vietnam, it started a scholarship for students enrolled in Vietnam’s universityof technology. It is also engaged in cleaning and beautification activities.

◆ Governance
As a company with auditors, the Company has set up the Nomination andCompensation Advisory Committee and the Integrated Risk Committee(which directly controls the Compliance Committee, the Internal Control
Committee, the Security Committee, the Working Style Reform Committee,
and other committees). The Company has also adopted the executive officer
system to strengthen corporate governance.
The Company has also set up an internal hotline system for compliancerelated matters. It has not adopted any anti-takeover measures.
w Of the 10 directors andauditors, 6 are fromoutside the Company.
w Also putting efforts into
mental health and SDGs
(17) SDGs (Sustainable
Development Goals):International goals for theperiod from 2016 to 2030
described in “The 2030 Agenda
for Sustainable Development”
that was adopted at the UN
Summit in September 2015.
Consists of 17 goals and 169
targets and pledges to “leave noone (on earth) behind.”

The management team consists of seven directors (of which three are outside
directors) and three auditors (all are outside auditors from Mitsubishi
Corporation and have overseas working experience). Two of the directors are
dedicated members, including the new chairman; three are from Nomura
Research Institute, including the president (additionally, one is an outside
director); and of the remaining two outside directors, one is a lawyer and one
is a doctor (female doctor) (all will be candidates for reappointment according
to the shareholders’ meeting proposal). Since the workstyle reform will be
one of its important challenges going forward, the Company has recruited an
occupational health physician as its director to help the Company create
specific measures through expertise in nursing care and mental health.
Also, under the health management policy, the Company is working on
improving and maintaining the mental and physical health of its employees
and creating a comfortable working environment (won a silver award as an
Outstanding Health Management Organization in May 2018).
In April 2019, it newly established the Sustainability Promotion Committee,
and in November 2020, it disclosed the “Sustainability Book.” It is working
on solving social issues to achieve the SDGs17, specifically by providing
high-added-value services, promoting diversity & inclusion, etc.
19/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

5． History of Growth◆ Company History

In 1972, the Company was founded as Customer Engineers Corporation by
its founding members, which included the current chairman, for the purposeof software development and system operation/management (its name waschanged to the current one in 1990). As computers became popular in theJapanese society, IT investments increased and the system development
market grew. Amidst this trend, the Company became specialized in thesystem integration business and built its trust and track record. It made more
and more contracts with leading Japanese companies, its current main
customer groups. As those companies increased their IT investment andoutsourcing of system development/operation, the Company has been able toexpand its areas of business as well as business in general at a steady pace.

w Founded with theprediction that theimportance and potentialof computer systems willgrow. Specialized in thesystem integration
business.
w Its main customers areleading blue-chipcompanies of Japan.

Regarding stock, the initial offering was made in the JASDAQ market in
2002. In 2006, the Company became listed on the Second Section of the TSE,
and then became listed on the First Section on March 2014.

w Changed its listing fromTSE Second Section to
the First Section in March2014◆ Past Transition in Financial Results
Since foundation until now, the Company has been improving its financial
performance as a specialist (SI) in the development and operation of systems
outsourced from companies and the government. Long-term transition in
financial performance is shown in Figure 18. The following are details of thefinancial results in chronological order.

【Figure 18】Long-Term Transition in Financial Results(million yen)(million yen)

18,000

1,295

Sales (left axis)
Recurring Profit (right axis)

16,000

1,400

1,250
1,200

Consolidated since FY 2001
14,000980 960959

12,000811
702

10,0008,000

445 432

6,000

4,000

2,000

893

499

550

550 583

643 597

660 672

4,220

4,387

4,806

14,78814,70814,3251,000

800

13,559606

12,899533

387

6,244 6,575

16,00012,623600

12,527
11,217302 309
5,598

976

7,100

7,767 7,923

8,706
8,109 8,507

9,166

9,241

400

8,431

0

200

0
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
(CE)(Ref) Prepared by Alpha-Win Research Dept. based on the securities report and financial results summary. CE: theCompany’s estimate/forecast.

20/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

・On a consolidated basis, with the exception of only a single fiscal year (FY2012), the Company has being achieving an year-on-year increase in sales
every fiscal year for the past 20 fiscal years. This stable growth trend is worth
noting.
・During the past 20 years, the annual sales growth rate (simple average ofthe annual rate of increase in sales) was +6.0%, and similarly the recurring
profit growth rate was +7.1%, showing how the Company has been steadily
improving its financial performance over the long term.
・Although recurring profit decreased in five out of the 20 fiscal years, thelargest annual drop stayed within the range of approx. -20%, and theCompany has been able to maintain a net profit during each year.

w Stable growth and sales
growth trend maintained
over many years. Profit
margins have stayed about
the same.
w Sales decreased only for 1
fiscal year during the past
20 years.
w Rate of change in financial
results has been stably
low.

・Analyzed statistically, the Company’s standard deviation for the rate ofchange in financial result and its variation coefficient (= standard deviation /average; shows relative dispersion; also called relative standard deviation)
are small, indicating that the volatility of the Company’s fundamentals is low(see Figure 19 for the comparison with similar-sized competitors during themost recent 17 fiscal years).
・Furthermore, because the Company’s operating margin has stably been ataround 7% (Figure 20 on page 22), sales growth has been directly
contributing to increases in profit, dividend, and market capitalization.

【Figure 19】Analysis of Performance Volatility over the Past 17 Years (% YoY change for sales and R.P.)
Note: non-consolidated for Toho System Science; actual values for FY 2005 - FY 2021
Target of Analysis
FY 2005 - FY 2021
Market: TSE 1st Sec.
n=17 fiscal years% Change in Sales (YoY %)Cube System
2335
CSStandard deviation
Average
Coefficient of variation

HIMACS
4299
HM
5.97
5.05
1.18

7.58
2.96
2.56

Toho System Science
4333
TS P
17.28
8.02
2.15

% Change in Recurring Profit (YoY %)Cube System
2335
CS
14.45
6.76
2.14

HIMACS
4299
HM
31.44
7.52
4.18

Toho System Science
4333
TS P
314.8488.85
3.54(Ref) Prepared by Alpha-Win Research Dept. based on the securities report and financial results summary

w Increased transactions
with the major 4 groups
have helped the Company
grow significantly.

w Even right after the
Lehman shock, sales
increased for 3 consecutive
fiscal years.

External environmental factors, such as increasing IT investments by
Japanese companies and the government, have not been insignificant to theCompany’s growth to date. However, much of the Company’s success seems
to have been brought by its efforts to gain more expertise, earn trust from its
customers, and build a strong customer base to consistently achieve positive
results. Although it is an independent company, it has strengthened its
relationship with the four major groups NRI, Fujitsu, Aeon, and Mizuho, as
described earlier. This strong relationship has enabled the Company tocontinue to increase the number of orders received from those groups, andhas been the major growth driver.
The financial performance for the most recent 12 years or so is as follows.
・ In FY 2009 when the Lehman shock occurred, the economy faced adownturn and customers became more cautious about IT investments.
However, the Company was able to continue to increase its sales owing tocontinued business with the existing customers, mainly for systems in thefinance and distribution industries, as well as due to the entry of companies
into the banking business leading to projects for operation expansion.
・The economic recession continued into FY 2010 and FY 2011. Systemdevelopment plans continued to be postponed, cancelled, or scaled down,
companies continued to hold off IT investments, and competition over priceand between companies became intense. However, thanks to the businesswith the existing customers and the expansion of business with life insurancecompanies, banks, and manufacturers, the Company continued to increase its
21/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)
w In FY 2012, due to theGreat East Japan
Earthquake, sales
decreased for the first timesince becoming listed.
Operating profit decreased
by 20%.

w Business environment
improved thanks to
Abenomics. Digitalization
investments also
increased. The Company
began to increase sales
again.

w Record highs achieved forboth operating profit andrecurring profit in FY 2015

w Sales have been hitting
record highs for 9 fiscal
years in a row. Profit
growth had been slow due
to increased cost, but hit arecord high in the previous
FY.

Issued: 6/7/2021

sales. With increasing sales, fluctuation in operating profit during the threefiscal years following the Lehman shock was limited to a small range.
･The Great East Japan Earthquake, though, had a large negative impact on
the Company in FY 2012. Amidst the difficult situation, sales decreased byapprox. 8%. Sales from finance stayed about the same, but sales from
distribution and telecommunications dropped largely. This was the single
instance, during the period from FY 2002 to the previous fiscal year, in whichsales had decreased. Operating profit also decreased by -20.9%, the largest
drop during the same period, but a net profit was maintained.
・Then, IT investments by companies and the government recovered fromtheir previous inclination to hold off or postpone thanks to factors such as the
economic recovery brought by Abenomics since December 2012, recoveryof corporate performance and employment, redevelopment of IT
infrastructure due to M&As, smartphone-related telecommunications
infrastructure, business related to the liberalization of electrical power retail,and increased investment in areas related to social securities. With thisrecovery, as well as the recent trend for full-scale investment in digitalization,
the Company’s sales growth trend has become more definite.
・ Regarding profit, in FY 2015, since sales increased due to businessexpansion from the development of businesses with existing customers andthe acquisition of new customers, and productivity improved due to thereinforcement of project management, etc., record-high operating profit andrecurring profit of Y964 million and Y980 million were posted, respectively(net profit for the year also hit a record high in the following year or FY 2016,
at Y629 million).
・Since then, the Company has been consecutively posting new record-highsales every fiscal year through FY 2021. However, due to the impact of
COVID-19, the sales growth rate has slowed down in the past two fiscal years.
・Meanwhile, due to increased cost and intensified price competition, theCompany’s gross margin and operating margin have been gradually
decreasing over the long term (Figure 20).
・The operating margin had decreased mainly due to the increased cost of
sales (subcontracting cost and labor cost), upfront investment cost, and
SG&A expenses (especially personnel expense; as a reference, the SG&A
expenses ratio changed from 7.9% in FY 2014 → 8.5% in FY 2015 → 9.5%
in FY 2016 → 9.3% in FY 2017 → 11.0% in FY 2018 → 10.6% in FY 2019
→ 10.5% in FY 2020 → 11.3% in FY 2021), but it began to improve in FY
2018. In the previous fiscal year (FY 2021), partially due to the improvementof gross margin, each of the profits hit their record highs for the first time infive or six fiscal years.
Gross Margin

Operating Margin

（％）

25.0

【Figure 20】Long-Term Transition in the
Company’s Gross Margin and Operating Margin

20.0
17.1

17.1

18.3
15.9

16.6

16.7

16.7

19.2
17.7

16.7

16.7

15.5

10.0

17.3

17.1

17.0

6.3

6.4

6.5

15.4

13.9

15.0

(Ref) Prepared by Alpha-Win Research Dept. based on
the financial results summary. CE: the Company’s
estimate/forecast.

16.2

15.5

17.0

8.7

8.2

7.5

7.9

7.1

7.4

8.0

7.7

7.3

7.2

6.2

6.5

7.7
5.9

7.9

7.5
6.1

7.7

5.0

0.0
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
(CE)

22/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

6．Business Environment◆ Trends of Japan’s System Integration Market
w As the outsourcing ofsystem development
became popular, SIs grewby taking those outsourced
system development jobs.

Survey of Selected Service Industries
Looking at “Sales by category of business for the information services
industry” of the “Survey of Selected Service Industries” prepared by the
Ministry of Economy, Trade, and Industry, we find that the sales of make-toorder software, as well as the sales of system integration which make up morethan half of make-to-order software sales, have been increasing with the
exception of the few years after the Lehman shock (Figures 21 and 22). In
Japan, outsourcing of system integration has become popular, and system
integrators (SIs) have steadily expanded their business as the contractor of
those outsourced projects.
According to the same data, from 2010 to 2019, sales of system integration
had increased by about 2.1% per year on a simple average. However, mostrecently in 2020, COVID-19 had caused a -2.7% negative growth, so that themarket size stayed at a little less than 5 trillion yen.

w COVID-19 caused anegative growth of Japan’s
SI market in 2020.
w SI sales growth was
negative for 13 months in arow (YoY), but the amountof decline has been
improving.

Monthly analysis of the same data (YoY change; Figure 23) shows thatgrowth has been negative for 13 months in a row from March 2020 to March
2021. However, the amount of decline has been improving compared to one
point in time. If the COVID-19 crisis settles down with the distribution of
vaccines, monthly sales may turn to positive YoY growth within this year.

【Figure 22】Change in the System Integration Market【Figure 22】Rate of Change in the SI Market(annual sales: unit = 100 million yen)(rate of change in sales: %)80,000（％）

25.0

70,00020.0

60,00050,00015.0

40,00010.0

30,000

5.0

20,0000.0

10,000-5.0

Make-to-order software

2020

-10.0
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

0

Of which is by system integrator

Make-to-order software

Of which is by system integrator(Ref) Figures 21-23 were prepared and reworked by Alpha-Win Research Dept. based on data from the “April 2021 Survey of Selected Service
Industry” by the Ministry of Economy, Trade, and Industry. Part of the original data used for market size (sales) in Figure 21 do not have continuity
with the rest due to changes in the survey target size. However, the rate of change in Figure 22 has been adjusted so that there is continuity.

【Figure 23】SI Market’s Monthly Sales on a YoY Comparison (unit: %)
(%)
15.0

10.0

5.0

0.0

-5.0

2015

2016

2017

Jan

Mar

Nov

July

2020

Sept

Jan

May

Nov

Mar

July

2019

Sept

May

Jan

Nov

Mar

July

2018

Sept

May

Mar

Jan

Nov

Sept

July

May

Mar

Jan

Nov

Sept

July

May

Jan

Mar

Nov

Sept

July

May

Mar

Jan

-10.0

2021

23/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)w Signs of recovery in thecurrent economic
environment
w Companies planning toincrease software investment
by 7.3% in 2021

Issued: 6/7/2021

Bank of Japan (BOJ) Tankan Survey
According to the BOJ Tankan Survey in March 2021, the amount of software
investment in FY 2021 (planned) by companies of all sizes and all industries
is expected to increase by +7.3% YoY, in contrast with -4.5% YoY in FY
2020.

w BOJ Tankan’s DI for large
companies turned positive.

The business sentiment of all companies of all sizes and industries improved
from -15 in the December 2020 survey to -8 in March 2021 (“recent”), and“outlook” also improved from -18 to -10. The business sentiment of large
companies, which are the Company’s main customers, especially improved,
turning positive during the same period from -8 to +2 for “recent” and -7 to+2 for “outlook.” The market environment has been beginning to improve atleast over the short term.

w In the JISA-DI survey too,
the expected DI (outlook) for
make-to-order software sales
turned positive.

Data from Industry Association
According to the JISA-DI Survey (March 2021) by the Japan Information
Technology Services Industry Association, the expected DI (sales outlook)
for the sales of make-to-order software had used to be largely positive, butthen suddently fell to -43.8 in April-June 2020 in its largest drop ever.
The expected DI had stayed at a double-digit negative value for a while after
this, but was +8.2 in Jan-Mar 2021 and +11.8 in Apr-June 2021 and is starting
to recover. With regards to major customers of the surveyed companies, too,
the DI has been improving for most industries, especially for information &communication, manufacturing, government, finance, and insurance.
The employment situation index dropped from the most recent peak of 77.6
to 28.3 at one point in time, but then improved to 41.8 in April-June 2021,
indicating a strong sense of labor shortage. In particular, there is a shortageof IT engineers both in number and quality, and system development staff
continues to be difficult to secure.
These current data all indicate that the impact of COVID-19 seems to be
becoming gradually smaller.

w Strategic IT investments
are increasing.

w High demand related toDX

The Market’s Outlook
The structurally inherent lack of manpower, demands for improvement in
operation efficiency, and IT investments by companies and the government
will likely continue to steadily increase. In various industries and businessareas, companies have been actively investing in strategic areas anddeveloping technologies to raise their competitive advantage.
As systems become more advanced and the demand for DX increases, wepredict that the market size will grow at about 2-3% per year once economic
activities return to normal.

w 当部の中期の業績見通しを、
マクロ環境の変化やリスクフ
ァクターを考慮し改定。

w 中期的には、年率 6～10％の24/41
増収増益基調を予想。
This
Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021◆ CUBE SYSTEM’s Position and Comparison with
Competitors
In the system integration industry, there are about 220 companies defined bygeneral terms as a SI whose sales can be confirmed through disclosed
securities reports, etc. Among them, the Company is estimated to be ranked
at around 80th to 90th place from the top by sales volume. Its share in theJapanese market is estimated to be around 0.3%.

w Middle-ranking in theindustry by sales, at 80th to90th place from the top. Its
share of sales in the entire
system integration market
is estimated to be about
0.3%.

The Company’s competitors include HIMACS (TSE First Section: 4299) andToho System Science (TSE First Section: 4333), which the Company refers
to as its benchmark. They are both e-e Partners of Nomura Research Instituteand have about the same size as the Company as well as very similar market
positions. Several of the largest SI players in the market, such as Nomura
Research Institute and Fujitsu, are cooperators and partners rather than directcompetitors for the Company.

w Its benchmark companies
are HIMACS and Toho
System Science. Both are
Nomura ResearchInstitute’s e-e Partners andtheir market positions arevery similar.

Comparison of the long-term transition in the operating margin of the threemajor listed companies including the Company (hereinafter, the Company isabbreviated as CS in the graphs; similarly, HM for HIMACS and TS for Toho
System Science) is shown in Figure 24. Compared to the other two companies,
the Company’s operating margin is slightly low, but is relatively stable andis in no way significantly inferior.

w No significant differencein each profit margin
between the threecompanies. The
Company’s O.P. margin isslightly low, but its ROE
has significantly improved
and has been the highest
during the past four fiscal
years.

A similar comparison of the return on equity (ROE) (Figure 25) shows that
the Company’s ROE has been the highest of the three companies during thepast four years (same for ROA; although the profit margins are about thesame as the other two companies, its total asset turnover is high). Its ROE has
recovered greatly from one point in time, and since FY 2014, it has beenaround 9-14%. Its ROE goal over the medium term, including this fiscal year,
is 13% or greater.

【Figure 24】Comparison of Operating Margin between
Three Mid-Tier Listed Companies

（％）

（％）

12.0

CS

11.3

HM
10.1

10.0

9.2
8.0

8.0

7.3
7.7

6.0

5.9

7.3

7.7

7.6

7.7
7.6

6.5
5.5

4.0

8.4

7.7

24.0

TS

5.9

7.6

7.5

8.1

8.8
7.8
8.9

7.3

7.5
6.1

HM

TS

20.0

9.6
7.7

CS

22.0

6.9

6.2

7.2

4.9

6.3

6.6

6.6

6.4

6.5

9.3

18.0

7.8

16.0

16.4

17.2 16.8
15.4 15.5 15.3

7.7

7.9

12.0
10.0
8.0
6.0
4.0

0.1
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
(CE)

2.0

16.3
14.6

14.2

13.8

14.0

2.0
0.0

【Figure 25】Change in ROE of the Three Companies

11.3

11.1

10.9

10.0

12.4

8.6

6.7
5.2

8.6

8.7

8.8

8.5

9.2
6.2
5.4

8.4

12.1

7.1

13.5

8.0

14.1
11.6

9.1 11.9

4.4
4.3

13.2

10.7
9.0

11.4
11.4
9.8

9.8

9.6

9.8

14.0
9.6
10.2
9.1 11.2
8.8

5.3
4.3

3.8
0.2

3.0

0.0
FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

(Ref) Figures 24 and 25 were prepared by Alpha-Win Research Dept. based on the financial results summary and securities report

25/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021【Figure 26】Company Overview and Management Indicator Comparison for Three Mid-Tier Listed
Companies (the Company, HM, and TS)
Company Name

CUBE SYSTEM (CS)HIMACS (HM)Toho System Science (TS)

Code

2335

4299

4333

Characteristics

Independent. Mainly sys. dev. forfinance, distribution, telecom, and otherindustries (makers & gov. excluding theabove 3 industries). Sales for finance area little less than 30% of total sales.
"Other industries" category is thelargest, at a little over 30% of total sales.

Independent. 70% of sales comesfrom the finance industry. Sales for
insurance companies are espciallyhigh - a little less than 40% of total.

Began as Toho Mutual Life Insurance
Co.'s affiliate but is now indep.
Specialized in software dev. forfinance (insurance, securities, etc.) 80% of total sales. Also develops
software for the telecom industry.

FoundedJuly 1972

May 1976

June 1971

Listed Date (JASDAQ→TSE 2nd→TSE 1st)

10/2002→11/2006→03/2014

03/2001→03/2004→03/2015

06/2001→03/2007→03/2014

Sales Categories/Breakdown (FY 2021)

・System Integration 71.2%
・System Outsourcing 14.7%
・Professional 14.0%

・System Solution 40.0%
・System Maintenance 60.0%

・Software Development 97.8%
・IT System Service, etc. 2.2%

Director Composition (as of June 2020)

・Directors (7; 3 outside & 1 woman =14.3%)
・Auditors (3)・Executive officers (12; no woman)

・Directors (7; 3 outside)・Auditors (4; 2 outside)・Executive officers (11; no woman)

・Directors (5; 2 outside)・Auditors (4; 3 outside)・Executive officers (7; 1 woman =14.3%)

1. NRI (amount/% to be disclosed insecurities report)

1. NRI 5,392 (34.9％)

1. NRI 3,220 (27.0％)

2. Fujitsu (same as above)

IBM, Fujitsu, etc.

2. SCSK 1,243 (10.4％)

・Head office: Shinagawa-ku, Tokyo・West Japan Solutions Headquarters:
Osaka & Nagoya
・3 subsidiaries

・Head office: Yokohama, Kanagawa
・Minatomirai Office: Yokohama
・Head office: Bunkyo-ku, Tokyo・1 subsidiary

Major Clients/Customers (FY 2021)(sales = million yen; % of sales = %)Sites (including consolidated subsidiaries)

Medium term management plan
Medium term management plan,・FY 2022: sales Y16 bil, O.P. Y1.23 bil final FY: In FY 2023,(margin 7.7%)
・Sales Y17.75 bil
・FY 2023: sales Y17.2 bil, O.P. Y1.34 bil ・O.P. margin ≥6%(margin 7.9%)
・ROE ≥8%
・FY 2024: sales Y18.5 bil, O.P. Y1.48 bil(margin 8.0%)
・ROE: ≥13% for each year

Management Goals (indicators)

Management Policy/Strategy (summary)Sales (million yen) CE for FY 2022
Sales Growth Rate, YoY (%)

CE

Operating Profit (million yen) CE
O.P. Growth Rate, YoY (%) CE
EPS (CE) for FY 2022, YoY (%)
DOE (%) Actual
Past 12 Years’ Sales Growth Rate (FY 2021 result div. by
FY 2009 result: %)O.P. Growth Rate (same condition as above)
Equity Ratio (%) Actual# of Domestic/Overseas Employees, Actual
Est. Sales Per Employee (million yen / person)
Est. O.P. Per Employee (million yen / person)
ROE (%) Actual for FY 2021

A=B×C×D

N.P. Margin (N.P. for the year / sales : %)B

Total Asset Turnover Ratio (sales / ave. total asset)

C

Financial Leverage (ave. total asset / ave. owner's equity) D
ROA (R.P. / total asset : %)R.P. Margin (%) Actual

E=F×G
F

Medium-term management plan, final
FY: In FY 2023,
・Sales Y20 bil
・O.P. Y2 bil・O.P. margin ≥10%
・ROE ≥15%・Each employee will contribute to society
through business and aim for higher
corporate value
・Develop a stable and sustainablebusiness foundation based on proposal& contract-based businesses
・Work on sustainable management
・Development of digital solution service
・Develop area of strength in "Lift &Shift" of the SI Business・Create and implement new
Enhancement model・Develop management foundation bystrengthening HR development, group
governance, and internal control

・Contribute to the dev. of the IT
society by enhancing the customers'competitiveness as their best partner
・Actively work on receiving orders
for DX projects for thetransformation of existing businessmodels・Continue investment forstrengthening business structure
・Increase development staff
・Conduct M&As and create
capital/business alliances to solve
challenges of current plan・A company that works together withcustomers to create and realize values
needed by the customers
・Traditional IT business (expand
existing business & gain new
customers)
・Digital IT business (respond to DX
demand)・Create-IT business (dev. a serviceproviding business)・Strengthen business foundation (HR,work satisfaction, internal control)

16,0008.2

16,5006.9

13,200
8.3

1,230
4.7

1,280
-6.4

1,230
14.3

62.6
4.5

74.4
3.2

69.8
5.8

173.9%

169.4%

150.3%

180.3%
68.6
781
20.5
1.6
14.0
5.7
1.7

186.5%
76.8
869
19.0
1.5
11.2
6.1
1.4

117.2%
66.6
541
24.4
2.3
10.2
6.1
1.1

1.4

1.3

1.5

14.8
8.8
1.7

12.7
8.9
1.4

10.0
8.9
1.1

Total Asset Turnover Ratio (sales / ave. total asset) G
Italics show each company’s estimates/forecasts (CE) for FY 2022. Other values are actual results for FY 2021. Highest values among the three companies highlighted in yellow.

(Ref) Prepared by Alpha-Win Research Dept. based on each company’s securities report, financial results briefing materials, website, interviews, etc.

26/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

7．Last Fiscal Year’s Results and This Fiscal
Year’s Company Forecast◆ Full-Year Financial Results for FY 2021 (last fiscal year)
Overview
Consolidated results for FY 2021 (last fiscal year) were as follows: sales were
Y14,788 million (+0.5% YoY), operating profit was Y1,174 million (+22.5%
YoY), recurring profit was Y1,295 million (+32.7% YoY), and net profit
attributable to owners of the parent was Y844 million (+60.7% YoY;
hereinafter, “net profit”). Sales were 7.6% lower than the initial forecast, but
operating profit and all profits below this line exceeded their initial forecast(Figure 27).

w Last FY’s sales were
below the Company’s
initial forecast and ourforecast, but sales had
increased for the nineth
consecutive fiscal year
and also hit a new record
high.

Sales hit a record high for the nineth consecutive year starting in FY 2013.
For profit, a record-high was achieved for the first time in five or six fiscal
years. Several times in the past, the Company had tried but failed to achieve
Y1 billion or greater for both operating profit and recurring profit, but thisgoal was finally achieved. Annual dividend per share was raised from Y18 to
Y20.

w On the other hand, profit
was revised upward, andconsecutive growth andrecord highs wereachieved. Both operating
and recurring profit
reached the Y1 billion
goal for the first time.

In our previous report (February 2, 2021), we had forecasted sales of Y15,300
million for last fiscal year, which was a somewhat cautious forecast comparedto the Company’s (Y16,000 million). However, the actual results fell below
our forecast. For profits, we had forecasted an upward revision compared to
the Company’s forecast, but the results ended up being actually greater (inthe order of Alpha-Win’s forecast ⇒ actual results, operating profit was 1,150⇒ 1,174 million yen and net profit was 750 ⇒ 844 million yen).

w Increased annual
dividend by Y2/ share

w Could not achieve thegoal for sales since it
could not receive as manyorders as it had expected
for new projects andenhancement projects
due to the COVID-19
crisis.

Sales ended up being revised downward mostly because the Company could
not receive as many orders for new projects or enhancement projects as it had
expected due to COVID-19.
Operating profit was revised upward mainly because profit margins had
improved more than expected due to 1) increased gross margin from theposting of highly profitable projects and 2) cost reduction (transportation andmeeting costs) resulting from improved productivity and decentralized
operation. Also, last fiscal year, there were no unprofitable projects like in
FY 2020, and a total gain of Y94 million was posted under nonoperating
profit due to the gain on sale of investment securities and gain on investments
in investment partnership. As a result, net profit increased significantly by
60.7% YoY.

w Helped by improved
gross margin and cost
control. Also with theposting of nonoperating
profit, net profit
increased significantly.

【Figure 27】Comparison of Initial Forecast and Actual Result for FY 2021 (last FY)
Unit: million yen
Sales
Gross Profit
Gross Margin
SG&A Expenses

Company Plan at
Beginning of FY(Initial)

Alpha-Win's
Previous
Forecast

16,00015,300
2,720
17.8%
1,570
10.3%
1,150
7.5%
1,200
750
18

SG&A Exp. Ratio

Operating Profit
O.P. Margin
Recurring Profit
Net Profit
Dividend

1,120
7.0%
1,120
700
18

Result14,788
2,841
19.2%
1,666
11.3%
1,174
7.9%
1,295
844
20

% of Initial
Diff. from
Company Plan
Company Plan
Achieved-1,212

92.4%

54
0.9%
175
144
2

104.8%
115.7%
120.6%
111.1%(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary

27/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

Orders Received and Order Backlog
From the fiscal year before the previous → last fiscal year, the amount oforders received during the fiscal year slightly grew by Y320 million YoY(+2.2%) from Y14,741 million → Y15,062 million. The order backlog (at theend of each fiscal year) also grew by Y273 million YoY (+6.8%), fromY4,029 million → Y4,303 million.

w Slight increase in both theorders received and theorder backlog.

Sales and Profit by Service Category
The Company's overall increase in sales compared to FY 2020 was Y80
million. By service category, the two categories SIS (+Y96 million) and ProS(+Y204 million) grew, but SOS (-Y220 million) decreased (Figure 28).
Similarly, gross profit of SIS and ProS increased by Y275 million and Y81
million, respectively, but SOS’s gross profit decreased slightly by Y17
million (Figure 29).

w SIS and ProS’s sales andprofit grew, offsetting
decreased sales/profit ofSOS.

The gross margin improved for all service categories, but it improved themost for SIS, whose sales account for 70% of the total. SIS’s gross margin
improved from 16.6%→19.1% (+2.5 percentage points). Meanwhile, SOS’s
gross margin improved from 16.7%→17.6% (+0.9 percentage point) and
ProS’s also improved from 19.6%→21.6% (+2.0 percentage points). Of thetotal gross profit growth of Y337 million, SIS’s gross profit growth was Y275
million, or about 80% of the total.
【Figure 28】Contribution of Each Service
Category to Sales in FY 2021 (last fiscal year)【Figure 29】Contribution of Each Service Category to Gross
Profit in FY 2021 (last fiscal year)(million yen)

16,00014,70814,788(+ 80)

14,00012,00010,000(+ 96)

10,43910,535

2,398

2,178

(- 220)

1,870

2,074

(+ 204)2020/32021/3

8,000
6,000
4,000
2,000
0

ProS (Professional Service)
SOS (System Outsourcing Service)

Category
Total
Gross Profit
SIS(unit: million
SOS
yen)
ProS
Total
Gross Margin
SIS(unit: %)SOSProS

FY 2020
2,503
1,734
401
366
17.0%
16.6%
16.7%
19.6%

FY 2021
2,840
2,009
384
447
19.2%
19.1%
17.6%
21.6%

Diff.
337
275
-17
81
2.2%
2.5%
0.9%
2.0%

% Diff.
13.5%
15.9%
-4.2%
22.1%

(Ref) Figures 28 and 29 were prepared by Alpha-Win Research Dept. based on thefinancial results briefing supplemental materials

SIS (System Integration Service)w By industry, business fortelecommunications &transportation grew
sharply, contributing to
the sales/profit growth.

Sales and Gross Profit by Industry
・By industry, of the total sales growth of Y80 million (compared to FY 2020),
finance decreased by Y270 million (-6.0%), distribution also decreased by
Y447 million (-13.3%), and the “other industries” too declined by Y245
million (-4.9%). However, these declines were offset by the significant sales
growth of telecommunications & transportation, which grew by Y1,043
million (+55.5%). In the finance industry, sales declined due to downscaled
system development projects for insurance companies. In the distribution
industry, the completion of consumption-tax related projects had caused thedecline, and in the “other industries,” completion of projects for construction
machinery manufacturers led to the decreased sales. On the other hand, salesof telecommunications & transportation increased mainly due to systemdevelopment projects for delivery companies (Figure 30 on page 29).
・Comparing the actual sales from each industry with their initial forecast, ofthe net downward revision in sales by Y1,214 million, telecommunications& transportation exceeded the target by Y958 million, while finance,
distribution, and “other industries” were Y628 million, Y404 million, and
28/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

Y1,140 million lower than their forecasted values, respectively. This was
because the Company did not gain as many orders as it had expected for new
projects or enhancement projects (Figure 31).
・Regarding gross profit, other than finance whose gross profit decreased by
Y38 million, the remaining three industries’ gross profit grew (Figure 32).
For telecommunications & transportation, the only industry for which sales
had grown, the gross profit increased by Y316 million (+92.7%), which was
94% of the total gross profit growth of Y337 million.
・Gross margin rose for each industry. Finance rose slightly by 0.3% YoY,
but telecommunications & transportation improved by 4.3 percentage points
from 18.1% to 22.5%. Lat fiscal year (FY 2021), telecommunications &transportation had contributed the most to both sales and gross profit.
【Figure 30】Contribution of Each Industry to Sales
in FY 2021 (last fiscal year)【Figure 31】Comparison between Initial Forecast andActual Results for Sales from Each Industry(million yen)

16,00014,70814,788(+ 80)FY 2021

14,00012,000(- 270)2,911(- 447)

1,879

2,923

(+ 1,043) tions &

4,987

4,742

FY 2020

FY 2021

10,000
8,000
6,000

3,359

Distribution

Diff: million yen
-628
-404
958
-1,140-1,214

Diff: %
-13.0%-12.2%
48.8%-19.4%-7.6%

Telecommunica
Transportation

4,000
2,000

Finance
Distribution
Telecommunications & Transportation
Other
Total

Finance

4,210

4,481

ResultInitial Forecast
4,210
4,838
2,911
3,315
2,923
1,965
4,742
5,882
14,786
16,000Other(- 245)0(Ref) Figures 30-32 were prepared by Alpha-Win
Research Dept. based on the financial results briefing
materials【Figure 32】Comparison of Gross Profit between Last FY andthe Year Before (FY 2020) for Each Industry
Gross Profit Comparison
Gross Profit(unit: million yen)

Gross Margin(unit: %)w Operating profit grew
due to sales growth, cost
reduction fromdigitalization, andresource optimization,
which had offset theincrease in expenses
such as personnel
expenses.
w Personnel expenses roseand the SG&A expenses
ratio worsened, but
operating margin
improved thanks toincreased gross margin.

Industry
Total
Finance
Distribution
Telecommunications & Transportation
Other
Total
Finance
Distribution
Telecommunications & Transportation
Other

FY 2020
2,503
848
549
341
764
17.0%
18.9%
16.3%
18.1%
15.3%

FY 2021
2,840
810
557
657
814
19.2%
19.2%
19.1%
22.5%
17.2%

Diff.
337
-38
8
316
50
2.2%
0.3%
2.8%
4.3%
1.8%

Analysis of Factors Contributing to Increase/Decrease in Operating
ProfitFigure 33 on page 30 shows an analysis of the factors that caused an increaseor decrease in the overall operating profit. Operating profit increased by Y471
million owing to the following factors: +174 million yen due to decreased
expenses achieved through the utilization of digital technologies, +142
million yen due to profit growth from business expansion and improved
profitability of the existing businesses, and +131 million yen due to expenses
reduced through resource optimization. On the other hand, operating profit
decreased by a total of Y256 million due to the following factors: -114 million
yen from increased expenses for adjusting to the new normal, -110 million
yen from increased personnel expenses to strengthen the governance system,and -32 million yen from increased R&D expenses. In sum, the Company’s
overall operating profit grew by Y215 million.
SG&A expenses increased by 7.9% YoY, which was significantly greaterthan the sales growth rate of 0.5%. The SG&A expenses ratio rose by 0.8
29/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

% Diff.
13.5%
-4.5%
1.5%
92.7%
6.5%

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

percentage point from 10.5% in the fiscal year before the previous to 11.3%
in the previous fiscal year. This was mainly because personnel expenses had
increased by a little greater than 14% YoY and the ratio of personnel expenses
to sales had risen from 4.7%→5.4%. However, since the gross margin had
improved by 2.2 percentage points from 17.0% to 19.2%, the operating
margin improved by 1.4 percentage points from 6.5% to 7.9%. As a result,despite a small sales growth, operating profit grew by 22.5%.
【Figure 33】Factors Contributing to Increased Operating Profit in FY 2021
(last fiscal year) (unit: million yen)
Increase(million yen)

Increased profit
due to businessexpansion andimproved
profitability ofexisting
businesses+131

Decrease in
expensesthrough
digitaltechnology

-110
-32

+142
959

Increased
personnel
expenses tostrengthen
governancesystem

FY 120202

Decrease

Decreased
cost due toresource
optimization

3

4

+174

+24

1,174

8

FY 92021-114

Increase in
R&D
investment

5

Decrease inotherexpenses

Increase in
expenses toadapt to the
new normal

6

YoY

7

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing materials◆ CUBE SYSTEM’s Financial Forecast for FY 2022 (thisfiscal year)
w This FY, planning forconsecutive sales/profit
growth and record-highsales/profit.

Overview
This fiscal year, the Company is expecting sales of Y16,000 million (+8.2%
YoY), operating profit of Y1,230 million (+4.7% YoY), recurring profit ofY1,250 million (-3.5% YoY), and net profit of Y850 million (+0.7% YoY).
It plans to achieve consecutive record highs for sales and profit (for operating
and net profit; excluding recurring profit) (Figure 34). It is not expecting asignificant nonoperating profit/loss or extraordinary profit/loss during thisfiscal year.

【Figure 34】The Company’s Financial Forecast for FY 2022 (this fiscal year) (unit: million yen)
Last FY's
Company Forecast
Plan forResults
for This FY
H1 FY 2021 H2 FY 2021
H1
(FY 2021)(FY 2022)
FY 2022
Sales
14,78916,000
7,084
7,705
7,505
Gross Profit
2,841
1,326
1,515
Gross Margin
19.2%
18.7%
19.7%
SG&A Expenses
1,666
773
893
SG&A Exp. Ratio
11.3%
10.9%
11.6%
Operating Profit
1,174
1,230
553
621
555
O.P. Margin
7.9%
7.7%
7.8%
8.1%
7.4%
Recurring Profit
1,295
1,250
604
691
560
Net Profit
844
850
400
444
370
Percent of full-year sales in H1 and H2
47.9%
52.1%
46.9%
Percent of full-year O.P. in H1 and H2
47.1%
52.9%
45.1%
Unit: million yen

Plan forH2
FY 2022
5.9%
8,495

% YoY
Change

0.4%
-7.2%
-7.6%

675
7.9%
690
480
53.1%
54.9%

% YoY
Change
10.2%

8.6%
-0.2%
8.2%

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing materials

30/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

w In H2, expecting
sales/profit growth close
to double-digit rates,
under the prediction thatthe economy will recover.

(18) Consulting collaboration
model: Business model where
new customers are developed incollaboration with consulting
companies or business isdeveloped by working with theconsulting division of major
system integrators(19) Smile Share Product: A
product which, under the themeof “Making employees smile
through digital technology,”
supports contactlesscommunication and engagement
among employees for the remote
work era (“Thanks Connect,”“Cubecoin,” and “Smile CashRegister”).
(20) Multicloud: A way ofutilizing the cloud in which
multiple cloud environments areused at a single point in time
(Oracle / AWS / Google/Azure, etc.). Multiple cloudservices are combined to realize
the optimum operation
environment.
(21) Microservices: Individuallydeveloped, small services are
combined and provided as asingle service (cloud-based
application software, etc.)

Issued: 6/7/2021

Impact of COVID-19 and Financial Forecast for H1 and H2
The Company has prepared its financial forecast based on the assumptionthat the COVID-19 crisis will begin to settle down and that social andeconomic activities will gradually recover. Unlike the previous fiscal year, it
has also announced the financial forecast for this fiscal year’s first half (H1)at the beginning of the fiscal year.
In H1, the Company plans to achieve sales of Y7,505 million (+5.9 YoY),
operating profit of Y555 million (+0.4% YoY), and net profit of Y370
million (-7.6% YoY). By subtracting H1 from the full fiscal year, theCompany’s forecast for the second half (H2) comes out to be Y8,495 million(+10.2% YoY), Y675 million (+8.6% YoY), and Y480 million (+8.2% YoY),
in the same order as above. In H2, the Company expects operating margin torise to 7.9% (compared to 7.4% in H1) due to sales growth from the recoveryof economic activities, improvement in productivity, and seasonal variations,and result in profit growth.
Estimates Used in Predicting Sales GrowthThis fiscal year, the Company is planning to achieve sales growth due to thefollowing measures and factors.
1. Strengthen sales efforts and securely receive orders from major accounts(clients) and in the existing business areas (Enhancement Business)
2. Based on the prediction that the economy will normalize and IT
investments will increase again, the Company plans to achieve sales
growth for all industries. Of the expected overall sales growth of Y1,211
million, sales of “other industries” are expected increase by Y675
million (53% of total sales growth; +13.9% YoY), and sales oftelecommunications & transportation are expected to increase by Y276
million (23% of total; +9.5% YoY) (Figure 35). The COVID-19 crisis
has clearly divided strongly performing industries from those who arestruggling, splitting customers into two ends of the spectrum.
Considering this situation, the Company plans to improve financial
performance by strengthening sales and allocating resources for areas
such as small-lot distribution and EC in which strategic IT investment
projects can be expected.
3. By business model (the Company’s new categorization criteria), salesof the Enhancement Business are expected to temporarily decline by
Y612 million (-5% YoY) (Figure 36 on page 32). On the other hand, it
expects the sales of the Digitalization Business to increase by Y254
million (+285% YoY) due to the development of the consulting
collaboration model18 and the Smile Share Product19. In addition, by
working on receiving more orders for multicloud20 and microservices21
projects, it plans to largely increase the sales of the SI Business by
Y1,569 million (+61% YoY).
+13.9% YoY(+675)(million yen)

【Figure 35】Predicted Contributions toSales in FY 2022 (this fiscal year) by
Industry (the Company’s plan)

6,000
5,000

+2.1% YoY
(+89)

5,400

4,300

4,210

+9.5% YoY(+276)+6.5% YoY(+188)

4,742

4,000

2,911

3,000

3,100

2,923

3,200

2,000
1,000
0
03/2021 (A)

03/2022 (P)Finance

03/2021 (A)

03/2022 (P)Distribution

03/2021 (A)

03/2022 (P)Telecommunications &Transportation

03/2021 (A)

03/2022 (P)Other(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing material. A = actual value. P = planned value.

31/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021【Figure 36】Sales Forecast by Business Model for FY 2022 (this FY) (the Company’s plan)
Unit: million yen, %Digitalization Business
SI Business
Enhancement Business

Total

FY 202166
2,561
12,162
14,789FY 2022CE

FY 2022 CE (YoY)
Diff.

320
4,130
11,55016,000

254
1,569
-612
1,211

FY 2021% Diff.
% of Total
384.8%
0.4%
61.3%
17.3%
-5.0%
82.2%
8.2%
100.0%FY 2022

FY 2027% of Total, CE
2.0%
25.8%
72.2%
100.0%% of Total, CE
10.0%
30.0%
60.0%
100.0%(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing material. CE: the Company’s forecast/estimate.

w Increased investments for
future growth are expected
to decrease operating
margin by 0.2 percentage
point, but operating profit
growth is predicted to beachieved through sales
growth.
w Planning to improve
profitability throughgreater cost control,
improved productivity, andshifting to high addedvalue businesses

Estimates Used in Predicting Operating Profit Growth
Gross margin is expected to improve again this fiscal year. However, since
the Company plans to resume active investments for future growth, which
would somewhat negatively impact the SG&A expenses ratio, the operating
margin is expected to decrease by 0.2 percentage point YoY to 7.7%. With
the sales growth, though, operating profit is expected to increase by 4.7%
YoY (reference: actual operating margin was 6.1% in FY 2017 → 6.3% in
FY 2018 → 6.4% in FY 2019 → 6.5% in FY 2020 → 7.9% in FY 2021). The
Company predicts that the following factors will contribute to the operating
profit growth.
1.
2.
3.
4.

Improved operational productivity from the digitalization of theCompany itself, and improved productivity from the sophistication of
the Enhancement Service.
Creation of a development system which would allow resource
optimization
Maintaining lean expenses, reduced through digitalization
Providing high added-value services (DX projects and proposal-based
business)

32/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

8． Growth Strategy◆ Review of the Medium- to Long-Term Management
Vision “VISION 2020”
The Company had previously created “VISION 2020,” a medium- to longterm management vision for 2012 to 2020. Last fiscal year was the final yearof the 3rd STEP (the three years from FY 2019 to FY 2021) of the vision.
The goal of the 3rd STEP was to “maximize customer value by contributing
to the growth of the customers’ businesses through the expansion of serviceproviding and SI businesses, creation of a new service lineup, anddevelopment of the service business,” and the Company had been developing
its business along this goal.
w Regarding the numericalmanagement goals of theprevious medium-term
plan, only the ROE wasachieved. Sales andoperating margin fell
below their goals.

The numerical goal for sales and operating margin could not be achievedsince the Company could not expand its new businesses or acquire humanresources as much as it had planed, and also because it could not win as manylarge-scale projects. On the other hand, the goal for ROE was achieved(Figure 37).
【Figure 37】Review of the Medium- to Long-Term Vision “VISION 2020”:
Numerical Goals Vs. Actual Results of the 3rd STEP
Stage
Sales
Operating Margin
ROE

A
B
C
1st STEP
3rd STEPFY 2021 Results
Y20 billion Y18.5 billion
Y14.7 biillion
10.0%
9.6%
7.9%
13.0%
14.0%

C-B
C/B
Diff. from Goal
% Achieved-3.8 billion yen
79%
-1.7%
82%
1.00%
108%

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing materials.

◆ The First Medium-Term Management Plan of “VISION
2026”
The following general direction of business has already been announced for“VISION 2026,” the new medium-term management vision for the six years
from FY 2022 to FY 2027 which succeeds the previous vision “VISION 2020”(Figure 38 on page 34). In addition, the Company has recently specificallydescribed the First Medium-Term Management Plan which targets the first
half, or the first three years including this fiscal year, of the VISION.

w In the new medium-termplan V2026, it plans toactively work on
developing the proposalbased business inaddition to its
conventional contractbased business.

Direction of BusinessWith the impact of COVID-19, themes and workstyles are expected to change
as the society makes a transition to the new normal. To proactively andflexibly respond to these changes, the Company has set the following two
guidelines.
・The employees themselves will have their own vision and business-oriented
mindset, and will think and act for themselves.
・Achieve business growth through the proposal-based business (a businessmodel in which solutions developed based on the Company’s technologies
and expertise in its customers’ industries are proposed to its
customers/industries and the corresponding services are provided) and thecontract-based business (a business model in which the Company conducts
contract development of information systems as requested by its customers).
The Company has indicated its plan to shift from the conventional contractbased business to the proposal & contract based business and actively makeproposals as well as starting new businesses. It also plans to develop a stable
33/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

and sustainable business foundation, and make investments especially in the
SI Business and the Digitalization Businesses with the Enhancement
Business as their basis.
The Company also created new categories based on three types of businessmodel: Enhancement, SI, and Digitalization. It is aiming to achieve growththrough the expansion of the SI Business (cloudification and alliance withmajor system integrators) and the Digitalization Business (solutions) basedon the Enhancement Business.

w In addition to
Enhancement, it plans toachieve growth bydeveloping its SI and
Digitalization businesses.

As shown in Figure 38, the proportion of each business model’s sales, in theorder of “Enhancement, SI, and Digitalization,” is planned to be changed
from the current “83%, 16%, and 1%” (FY 2021) to “60%, 30%, and 10%”in FY 2027, and to “40%, 40%, and 20%” over the long term (about 12 years
from now).

【Figure 38】Direction of the New MediumTerm Plan (V2026)

Model
l

ActionActionBusiness Model

Expand share through two approaches
Expand share throughtwo approaches
and strengths
and strengths
Large-scale ▶ Cooperate with SIer▶
Large-scale
Cooperate
with
SIer
Small/Mid-scale ▶ Solution
proposals
Small/Mid-scale ▶ Solution proposals

SI Business(Lift & Shift*)sformation theme
mationthemeof legacysystemsgacy
es andsystems
platformsnd
delplatforms

nt Businessusiness

Survive in a shrinking market

Enhancement
Survive in a shrinking market
In-depth pursuit of highproductivity
and high
Business
In-depth
pursuit
ofadded-value
highnformation systems
pport
derivative
mationandsystems, and effficient resource

effficient resource

Business Portfolio 2026
Business Portfolio 2026

6 ： 3 ： 1 Model
6 ： 3 ： 1 Modelas much as possible)
as much as possible)

ift & Shift)& Shift)(high
productivity
andprofitability)
high added-value(high profitability)

V2026: Second Medium-Term Management Plan (to 2026)

Concept for Sales Breakdown by Business Model
Business Portfolio
事業ポートフォリオ
Business Portfolio

Proposal-based approach
Digitalization
Proposal-based
approach
Alliances
Alliances
Investment(raise capital efficiency
Business
Investment (raise capital efficiency

ormation theme
theme
gtion
digitaltechnologies
tal technologies
al-basedbusiness
ed businessSIerst and derivative

General Plan Concept
for Salesby Business
forBreakdown
Sales Breakdown
by BusinessModel
Model

Take on challenges with a completely
Take on new
challenges
withthana completely
approach
beforenew approach than before

n Businessusiness【Figure 39】Priority Measures of the New Medium-Term Plan (V2026)

10%
10%
10%
1%
1%
1%
1%
16%
16％
16%
83%
83%
83%

30%
30%
30%
Per
PerPerson
PersonPer
PersonY30
mil 60%Y

30 mil 60%60%

Y30 mil

FY 2021

FY 2026

44 ︓
2 Model
モデル
： 4
： 2
4︓
4 ： 4 ： 2 Model

Digitalization Business
Develop digitalization solution
services

20%

40%

40%
40%

Digitalization Business
Digitalization Business
SI Business
SI Business
Enhancement
Enhancement

SI Business
Develop areas of strengthin “Lift & Shift”

40%

40%
40%

Long-Term Goal

2019

2026

Long-Term Target

2026

Long-Term Target(Ref) Excerpt from the financial results briefing materials(Note) *Lift & Shift: Providing SI services in which the current system
environment is moved to the cloud environment (“Lift”) and the cloudbased system is rebuilt (“Shift”)

w Five financial indicators:
ROE, sales per person,
sales breakdown (theproportions of sales),sales CAGR, andoperating margin

Transformation to a new business model and developmentof the management/business foundation

20%
20%

2019

w Financial and nonfinancial indicators
defined as its KPI

V2026: First Medium-Term Management Plan (to 2023)

Further future

Produce results from transformation andaccelerate growth

Enhancement Business
Develop and implement a newenhancement model・Develop original products (including social solutions)・Consulting collaboration business for major SIs /development of proposal-based SI business targeting end
users
・Provide systems mainly based on the cloud andmicroservices and make a transformation to a new operation
model
・Technology development and acquisition of new customers
through cooperation with major SIs
・Resource optimization through a groupwide collaboration
model and by consolidating its business partners together
・Business scaling and profitability improvement throughoriginal development and development/implementation ofoperation environment

・Recruit talents to support the management foundation; HR
Management Foundation
development strategy, workstyle reform, and vitalization
Strengthen HR development /・Increase engagement with investors; responding to thegroup governance / internal control
Prime Market

Priority Measures
The three business models and their priority measures in terms ofmanagement foundation have been set out (Figure 39). The Company has
defined the current period as the period for “Transformation to a new businessmodel and development of the management/business foundation.” In the next
Second Medium-Term Management Plan (FY 2025 – FY 2027), it plans to“Produce results from transformation and accelerate growth.”
Key Performance Indicator (KPI)The Company has disclosed financial and non-financial indicators as ameasure of its direction in the First Medium-Term Plan as well as over the
medium to long term.
For financial indicators, it has defined five items: three items related to sales,
and its usual indicators ROE (13% or greater) and operating margin (8%)(Figure 40 on page 35). Key points to note are the addition of sales breakdown
as an indicator of business model transformation and the addition of sales
growth rate (CAGR or compound annual growth rate; aiming for about 8%).
For non-financial indicators, the Company has not announced specificnumerical goals, but it has defined the following three items which it plans toachieve through IT: diversity promotion, workstyle reform, and vitalization
through communication. It also plans to work on sustainable management.
34/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

Financial Goals of the Medium-Term Management Plan
In addition to the KPIs., the Company has recently announced its sales,
operating profit, and ROE goals for each of the three fiscal years starting thisfiscal year (Figure 41; CE = the Company’s plan). In FY 2024 or the final
year, it plans to achieve sales of Y18.5 billion (+2.5 billion yen compared tothis fiscal year’s company forecast), operating profit of Y1,480 million (+250
million yen), and ROE of 13% or greater (same as this fiscal year’s forecast).

w Aiming for sales of Y18.5
billion and operating
profit of Y1.48 billion in
FY 2024

From FY 2022 → FY 2023 → FY 2024, YoY sales growth of +8.2% →+7.5% → +7.6% is planned, and operaing profit is expected to grow YoY at
increasingly faster rates, from +4.8% → +8.9% → +10.4%, due to a gradualimprovement of the operating margin.
By business model, the Company expects the sales of Enhancement totemporarily decline this fiscal year, but will start to recover next fiscal year.
The Digitalization and SI businesses are predicted to maintain growth. In sum,
the Company predicts that overall sales will grow at a rate of +7.8% in termsof CAGR (three fiscal years).
【Figure 40】KPIs of the First Medium-Term Management Plan of V2026
Key Performance Indicator
(KPI)
ROE

Capital Efficiency

NonFinancial

Through IT

Financial

Goals of theFirst Medium-Term Management Plan

Maintain(FY 2020: 14.0%)

Sales per Person

23 million yen

Medium/Long-Term Direction

13.0% or greater
30 million yen

Productivity(FY 2020: Y21 million)

Business Model Transformation

Sales Breakdown

Growth Potential

Sales CAGR

Profit Indicator

Operating Margin(FY 2020: 7.9%)%
Approx.
%
Implement measures to continuously improve profitability/productivity

Diversity Promotion

Diversity Indicator“Promotion of women’s participation,” “supporting employment of persons withdisabilities,” and “supporting child rearing and elderly care”

Workstyle Reform

Job Satisfaction Indicator

Setting indicators for job satisfaction, mental and physical health, workplace
liveliness, etc., and working on their improvement

Vitalization throughCommunication

Communication Indicator“Thank you and Like” indicator based on CUBE SYSTEM’s original product“Smile Share”

2.5 billion yen (vs. FY 2020) Digitalization Business +2 billion yen

SI Business +(vs. FY 2023)

Ratio of 6:3:1 for Enhancement:SI:Digitalization

Approx.

8%

Approx.

89%10(Ref) Excerpt from the financial results briefing materials【Figure 41】Forecasts of Medium-Term Financial Results (the Company’s plan and Alpha-Win’s forecast)
Unit: million yen, %Sales
Digitalization
SI
Enhancement
Gross Profit
Gross Margin
SG&A Expenses(% over sales)

Operating Profit(% over sales)

Recurring Profit(% over sales)

Net Profit(% over sales)

Sales (% YOY growth)Gross Margin (% YOY diff.)
SG&A Expense (% YoY growth)

Operating Profit (% YoY growth)
Recurring Profit (% YoY growth)
Net Profit (% YoY growth)

FY 2021 A
14,78966
2,561
12,161
2,841
19.2%
1,666
11.3%
1,175
7.9%
1,295
8.8%
844
5.7%

FY 2022 CE
16,000320
4,130
11,550

0.5%
2.2%
7.9%
22.5%
32.7%
60.7%

8.2%

1,230
7.7%
1,250
7.8%
850
5.3%

4.7%
-3.5%
0.7%

FY 2022 New E
FY 2022 Old E
15,70016,000

3,300
21.0%
2,100
13.4%
1,200
7.6%
1,220
7.8%
830
5.3%

FY 2023 CE
17,200400
4,500
12,300

2,850
17.8%
1,670
10.4%
1,180
7.4%
1,180
7.4%
735
4.6%

6.2%
1.8% Ommited since it
26.1%
is the2.1% comparison with
-5.8% FY 2021 Old E
-1.7%

1,340
7.8%

7.5%

8.9%

FY 2023 New E
16,650FY 2023 Old E
17,000

3,500
21.0%
2,210
13.3%
1,290
7.7%
1,310
7.9%
890
5.3%

3,050
17.9%
1,770
10.4%
1,280
7.5%
1,280
7.5%
800
4.7%

6.1%
0.0%
5.2%
7.5%
7.4%
7.2%

6.3%
0.1%
6.0%
8.5%
8.5%
8.8%

FY 2024 CE
18,500500
5,000
13,000FY 2024 E
17,700

1,480
8.0%

7.6%

10.4%

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing materials

35/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

3,720
21.0%
2,320
13.1%
1,400
7.9%
1,420
8.0%
965
5.5%
6.3%
0.0%
5.0%
8.5%
8.4%
8.4%

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021◆ Alpha-Win Research Dept.’s Financial Forecast for FY

2022 (this fiscal year)
w We reviewed our previous
forecast for this FY andrevised sales downward
and profit upward.

Revision to the Financial Forecast
We reviewed our financial forecast for this fiscal year and revised sales fromthe previous Y16,000 million to Y15,700 million (-300 million yen comparedto the Company’s forecast of Y16,000 million for this fiscal year) (Figure 41
on page 35).

w Compared to theCompany’s sales/profit
forecast, we made asomewhat more cautious
forecast since the impact of
COVID-19 is uncertain.
However, we expect a highlevel to be maintainedwith regards to the amountof profit.

Our rationale for this somewhat more cautious forecast is that, despite thegradual recovery of the business environment, there are concerns regarding
the prolongation of the COVID-19 crisis causing a stagnation of negotiations
and sales activities, the risks related to the customers’ IT investment trends,
and the Company’s ambitious plan for sales growth rate (+8.2% forecasted
for this fiscal year; a simple average of +6.0% per year over the past 20 years).

w We expect the gross margin
to improve, but the SG&A
expenses ratio to rise too.
Operating margin ispredicted to stay about thesame.

However, since we made a more cautious forecast of this fiscal year’s sales
compared to the Company’s plan, we consequently also slightly revised down
our forecast for operating profit and other subsequent profit items (-30 million
yen compared to the Company’s forecasted operating profit of Y1,230
million). As the Company resumes active investments for future growth,various costs such as personnel expenses and subcontracting costs are
expected to increase. As a result, although the gross margin will likely
improve, the SG&A expenses ratio is expected to rise as well. Our operating
margin estimate of 7.6% for this fiscal year, though, is nearly the same as theCompany’s estimate of 7.7%.

w There has been a generally
small deviation on average
between the initial forecast
and the actual results overthe long term, but theCompany has tended toannounce somewhat
ambitious forecasts.

【Figure 42】Chronological Comparisonof Initial Consolidated Forecast (theCompany’s) vs. Actual Results(Ref) Prepared by Alpha-Win
Research Dept. based on the financial
results summary. CE: the Company’s
forecast.

We also reviewed our previous forecast for profit and changed our forecast
for this fiscal year’s operating profit from the previous Y1,180 million toY1,200 million. Since the improvement in margin during the previous fiscal
year had been greater than expected, with the goal being mostly achieved one
year in advance (last fiscal year’s operating profit: Y1,175 million), we
revised the forecasted margin upward. Productivity improvement and cost
reduction will likely be achieved during this fiscal year too due todigitalization and resource optimization.

Financial Forecast and Track Record of Financial Results
Figure 42 shows an analysis of the past deviation between the Company's
initial forecast and actual results over the long term. During this period, on asimple average, actual sales were 1.8% lower than the initial forecast, and theactual operating profit, recurring profit, and net profit were 6.0%, 3.4%, and5.5% lower, respectively. However, neither operating nor recurring profit has
ever been more than 30% lower than the initial forecast in any fiscal year.
The Company has generally tended to announce targets that are ambitious but
within a realistically achievable range.
Sales

Consolidated
Unit: million yen
FY 2001
FY 2002
FY 2003
FY 2004
FY 2005
FY 2006
FY 2007
FY 2008
FY 2009
FY 2010
FY 2011
FY 2012FY 2013
FY 2014
FY 2015
FY 2016
FY 2017
FY 2018
FY 2019
FY 2020
FY 2021
FY 2022 CE

InitialForecast

ActualOperating Profit
InitialForecast

ActualRecurring Profit
InitialForecast

ActualNet Profit Attributable to
Owners of the Parent (N.P.)

InitialForecast

Actual

4,806
387
5,598
485
445
246
6,244
510
432
235
6,900
6,575
491
522
500
284
280
7,000
7,100
558
532
551
287
315
7,800
7,767
549
600
551
340
312
8,300
7,923
590
570
584
330
324
8,300
8,109
605
645
610
643
336
342
8,500
8,507
680
652
685
597
350
308
8,800
8,706
660
637
670
660
350
349
9,200
9,166
675
662
680
672
263
208
9,300
8,431
665
524
675
533
350
118
9,000
9,242
620
601
630
606
350
338
10,00011,217
700
665
700
702
380
387
12,00012,527
840
964
840
981
480
594
13,00012,623
1,000
949
1,020
960
600
629
14,00012,899
920
781
940
811
450
551
14,30013,559
1,060
855
1,080
893
650
567
14,70014,325
1,010
922
1,010
960
640
597
15,50014,708
1,090
959
1,090
976
684
525
16,00014,788
1,120
1,174
1,120
1,295
700
844
16,000
1,230
1,250
850
Simple average of diff. (unit: %), calc. for longest period with data on both sales and profits→

Green highlight:
record-high value

Yellow: 2nd
highestNumber of times revised up:down from initial forecast →

Sales

O.P.

R.P.

N.P.

% Diff. from Initial Forecast

Sales

O.P.

R.P.

N.P.

% YoY Change for Actual Result

-4.7%
1.4%
-0.4%
-4.5%
-2.3%
0.1%
-1.1%
-0.4%
-9.3%
2.7%
12.2%
4.4%
-2.9%
-7.9%
-5.2%
-2.5%
-5.1%
-7.6%

6.6%
-4.1%
-3.5%
-1.9%
-21.2%
-3.1%
-5.0%
14.8%
-5.1%
-15.1%-19.3%-8.8%-12.0%
4.8%

-4.3%
3.5%
-8.2%
2.4%
5.4%
-12.8%-1.5%-1.2%-21.0%
-3.8%
0.3%
16.7%
-5.9%
-13.7%-17.3%-5.0%-10.5%
15.6%

-1.5%
9.7%
-8.3%
-1.8%
1.9%
-12.1%-0.3%-20.9%-66.4%
-3.5%
1.7%
23.8%
4.8%
22.4%
-12.8%-6.8%-23.2%
20.6%

-1.8%

-6.0%

-3.4%

-5.5%

5 ： 13

3 ： 11

6 ： 12

7 ： 11

16.5%
15.0%
11.5%
5.2%
-2.9%
-4.4%
5.3%
-3.7%
15.7%
18.9%
8.0%
13.6%
10.2%
12.5%
9.4%
-1.6%
0.0%
-1.0%
2.0%
7.4%
5.9%
3.9%
2.3%
9.4%
10.2%
5.7%
4.9%
1.1%
-7.1%
-10.1%
2.3%
-2.3%
10.6%
13.4%
5.3%
4.0%
1.8%
-40.4%-8.0%-20.9%-20.7%-43.4%
9.6%
14.8%
13.7% 186.7%
21.4%
10.6%
15.8%
14.5%
11.7%
45.0%
39.7%
53.7%
0.8%
-1.6%
-2.1%
5.9%
2.2%
-17.7%-15.5%-12.4%
5.1%
9.5%
10.1%
2.9%
5.7%
7.8%
7.5%
5.2%
2.7%
4.1%
1.7%
-12.0%
0.5%
22.4%
32.7%
60.8%
8.2%
4.8%
-3.5%
0.7%
6.0%
5.6%
7.1%
13.7%
↑ Simple average for each FY(excl. FY 2022 CE)

36/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)
w We revised our forecast forthe medium term. Recordhigh sales/profit may also
be achieved in the next
fiscal year onwards.

Issued: 6/7/2021◆ Alpha-Win Research Dept.’s Forecast of Medium-Term
Financial Results
We revised our previous medium-term forecast and prepared a forecast for
the three fiscal years starting this fiscal year, with the forecast for FY 2024
newly added (Figure 41 shown previously on page 35).
For medium-term results, we made a somewhat more cautious forecast thanthe Company for both sales and profit, upon taking the following risk factors
into account. We predict, though, that the Company may potentially achieve
record-high sales and profit in the next fiscal year onwards too.

w The risk factors are themacroeconomic
environment and the risein costs.

w We expect Japanesecompanies to increase their
IT investment, enabling
the Company to achieve anannual profit growth rateof 6-10% over the medium
term.

Risk Factors
・ Regarding the macroeconomic environment, the US-China trade war,
tapering and increase in interest rate to control inflation, the subsequent
increase in global economic uncertainties, the economic downturn after the
Tokyo Olympics, and these factors’ impact on the financial performance ofJapanese companies are the points of concern.
・Factors such as the Company’s main final users’ industry trends and IT
investment trends, the Company’s upfront investment costs for new businessarea development including M&As, the increase in cost, and the recruitment
situation in the future are hard to predict.
However, due to the following factors and estimates, we predict that sales andprofit will continue to increase annually by about 6-10% over the medium tolong term.
Factors and Estimates for Predicting Increased Sales
・As the impact of COVID-19 becomes gradually smaller, the financial
performance of companies are expected to recover and lead to increased IT
investment projects. Consequently, an annual sales growth of 5-7% is
expected over the medium term.
・The business with its major customers, the Digitalization Business, and the
SI Business are expected to be expanded through the technological expertiseand trust that it has built up over the years.
・Positive impact of the acquisition of new customers on the results・Development of new businesses and new business areas – specifically, sales
growth of business related to DX, energy, consulting, and new solutions(Smile Share Product, cloud, AI, blockchain, etc.)
・However, sales increase from large-scale M&As, etc., are not expected.
Factors and Estimates for Predicting Increased Profit
・The gross margin is expected to rise this fiscal year due to various measures(improved productivity, reviewing subcontracting cost, etc.), and then stayflat at a high level afterwards.
・Profit growth of the new businesses is not expected to largely contribute to
the results for the time being.
・Next fiscal year onwards, the SG&A expenses are expected to increase atabout the same rate as the sales growth rate – by about 5-6% per year (Y110
million per year). This is because the Company is expected to strengthen its
business foundation for future growth (expansion of HR, organization, andoffice sites), have increased personnel expense and subcontracting cost, andconduct upfront investments in new technology/business research.
・Consequently, the operating margin is estimated to improve by about 0.10.2 point per year starting next fiscal year.
・No significant nonoperating or extraordinary profit/loss is expected
37/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

9． Analyst’s Views◆ SWOT Analysis
The Company’s SWOT analysis result is shown in Figure 43. There are no
significant changes (changes are shown in red).
【Figure 43】SWOT Analysis(Ref) Prepared by Alpha-Win Research Dept.

・ Long history in the industry and extensive experience (inc. proven record in terms of past strong results, stock
return, returning profit to shareholders, etc.)

Strength

・ Stable and excellent customer base・ Technological expertise / unique know-how / staff with expertise / organization (business type / project
management ）・ Entry barrier essentially high; business with high continuity
・ Firm financial standing
・ Management with eager attitude toward business expansion
・ Consulting-based sales through direct sales activity; Enhancement Business・ Low-cost development system using overseas subsidiaries
・ Relies heavily on certain customers
・ Needs to secure and acquire more talented personnel

Weakness・ Industry structure in which profit margin is hard to improve
・ Takes a long time for next-generation, growth-strategy products and services to gain momentum
・ Project management (risk of occurrence of unprofitable projects)
・ Specialized in domestic demands; overseas development difficult
・ Continous growth of the market for IT systems due to HR deficit and the need to streamline operation
・ DX, new products, new services, and technology innovations leading to increased strategic demand for systems

Opportunity

・ Shfiting to upstream processes, niche areas, large-scale dev. projects, direct-contract projects; reinforce
Enhancement Business・ Business expansion following the global entry of customers
・ M&As and strengthening alliances
・ Lost business chance due to COVID-19 prolongation
・ Reduced IT investment, less demand for updates, and intensified price competition during recession

Threat・ Emergence of alternatives (popularization of AI or packaged business software), delayed product development,
and product defects
・ Information management and leakage risks
・ Increased personnel expense and subcontracting cost

w Many years’ worth oftrust, track record, andtechnological expertiseare its strengths. Growthpotential is large since
Japanese companies are
expected to increase IT
investments.
w Acquisition of talented
employees is thebottleneck to further
growth.
w Challenges: improving
margins, strengthening
project management,
developing new businessareas, and acquiring newcustomers among major
companies.

Describing the strengths listed in Figure 43 in more detail, the Company has
an excellent customer base owing to its long years of business during which
it had earned trust and built technological expertise. Its business ischaracterized by high business continuity, stability, and ambitiousness.
Moreover, the Company’s strength lies in its close position to the end users,
which means that it can propose related or derivative systems to its customers
and obtain new development and service projects (Enhancement). Since its
users, or Japanese companies, are expected to continue to strategicallyincrease IT and DX investments to improve business efficiency andprofitability, the Company’s growth potential is large.
On the other hand, looking at its weaknesses in more detail, the Company’s
industry in general is characterized by a tendency to have flat profit margins
over the long term, so that profit does not generally increase without sales
growth. New business area development and new customer acquisition are
crucial to increasing sales, but the shortage of human resources and especiallyproject managers have been the bottleneck to further growth.
The Company as well as the entire SI industry has been strengthening
preventive measures and project management over many years, but someprojects such as development in new areas still sometimes become
unprofitable and cause a temporary decline in profit. Although the Company
has been working on further improving its quality control, this should be
noted as a risk factor.
38/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021◆ Shareholder Return and Shareholder Benefit Program
The Company’s policy is to raise shareholder asset value by improving its
financial results in order to conduct stable dividend payments and increase
market capitalization. So far, it has been taking a proactive stance withregards to improving shareholder return, having conducted incremental
dividend hikes, share buyback, stock splits, enhancement of shareholder
benefit program, etc.

w Proactive stance withregards to returning profit
to shareholders

w Actual annual (maximum)
yield including theshareholder benefit
program is about 2.5%.

The Company’s consolidated dividend payout ratio was 39.4% in FY 2018,37.0% in FY 2019, 46.5% in FY 2020, 32.2% in FY 2021, and predicted to
be 32.0% in FY 2022 (the Company’s forecast), which have been close to theCompany’s target of 35%. The Company raised its dividend from Y14 to Y16
per share in FY 2018, and raised it by Y2 in both FY 2020 and FY 2021
consecutively to Y18 and Y20. In FY 2022, it plans to keep dividend the sameat Y20 (Figure 44). Since profit growth is expected over the medium term,
we believe that incremental rises in the dividend at an interval of a few years
are possible next fiscal year onwards.

w Has been sequentially
increasing dividend at aninterval of several years

Dividend yield is 2.0% when calculated based on a stock price of Y1,017(closing price as of the end of June 4, 2021). The Company conducts IR
activities toward individual investors, one of its major types of shareholders.
It has a shareholder benefit program where JCB Gift Cards are given to
shareholders based on the number of shares they own (Figure 45 on page 40).
When this benefit program is taken into account, the actual dividend yield
increases to approx. 2.5% at maximum (for the optimum number of shares
owned). The Company plans to continue to maintain its stable dividend
payment and raise the EPS to enhance shareholder return.
The actual annual yields of its competitors including their shareholder benefit
programs are approx. 3.7% for HIMACS and approx. 3.2% for Toho System
Science. Dividend on equity ratio (= total dividend / shareholder’s equity) in
FY 2021 was 4.5% for the Company, 3.2% for HIMACS, and 5.8% for Toho
System Science. The Company’s DOE is in the middle range, but is highcompared to the general average of 2%.
Since becoming listed on the market, the Company has performed a total ofsix stock-splits, including a 1-to-2 split in April 2010, a 1-to-1.5 split in April
2011, and a 1-to-2 split in October 2014. It has also conducted six sharebuybacks, including the approx. 350,000 shares (Y300 million) bought backin February of last year. As a result, the Company acquired a total of approx.
Y650 million’s worth of shares (acquisition price at the time of acquisition).
Since the Company has a great financial standing and is rich in cash,
depending on the level of the stock price, additional share buybacks are
possible.
【Figure 44】Change in Dividend and Dividend Payout Ratiow Has also been actively
conducting stock splits
and share buybacks

（％）

(Y)

60.0

30.0
51.2

50.0

48.9
42.7

41.2

40.0

36.3

35.2
30.1

30.0

25.0

46.5

20.0

32.4

32.2

32.0

30.5

15.0

20.0
10.0

Dividend
Commemorative dividend (right axis)
Dividend payout ratio
39.4
37.0
35.8

2.5

2.5

8.3

8.3

8.3

8.5

8.5

8.5

FY 2009

FY 2010

FY 2011

FY 2012FY 2013

FY 2014

14.0

14.0

14.0

FY 2015

FY 2016

FY 2017

16.0

16.0

18.0

20.0

20.0

20.0

10.0
5.0

0.0

0.0
FY 2018

FY 2019

FY 2020

FY 2021

FY 2022 E

FY 2023 E

w Has been proactive in(Ref)
Prepared by Alpha-Win Research Dept. Estimate/forecast (E) were also made by Alpha-Win.
conducting stock
splitsand share buybacks

39/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021【Figure 45】Shareholder Benefit Program and Actual Net Yield (shareholder benefit vesting date: end of Sept)
Number of Shares
Shareholder Benefit (JCB
Actual Net
Owned (greater(less than)
Dividend: Y
Gift Card: Y)
Yield: %than or equal to)
200
400
1,000
20
2.5
400
1,000
2,000
20
2.5
1,000
3,000
20
2.3
Actual net yield* = (dividend + benefit value) / (stock price)*Calculated for the min. (optimum) number of stock owned in each range
Based on stock price of Y1,017 (closing price on June 4, 2021)(Ref) Prepared by Alpha-Win Research Dept. based on the Company’s website◆ Stock Characteristics/Price and Valuation Comparison

w A defensive, domesticdemand-oriented growthstock. Stock priceincreased by approx. 4.3x
over the past approx. 12
years, largely
outperforming the
TOPIX.

Over the past approximately 12 years, the Company’s stock price rose by
about 4.3 times, largely outperforming the TOPIX by 297% (calculated withstock splits taken into account; based on closing price on June 4, 2021; Figure46). This growth seems to reflect the Company’s strong fundamentals andfirm financial growth over the long term.
With the general increase in strategic IT and DX investments by Japanesecompanies, the Company is expected to continue to increase profit at a
relatively stable pace. Since the stock also has a defensive characteristic, theCompany will likely be seen as a candidate for medium- to long-term
investment.

w Seems to still be an
attractive investment
target over the medium tolong term【Figure 46】Long-Term Return on the Company’s Stock (CS) and TOPIX(change in monthly stock price over the past approx. 12 years)
700%
600%

CS％

Past Approx. 12 Years' Growth Rate (%)
CS
TPX
Relative Return
430.6
133.9
296.7

TPX%

500%

6/4/2021
CS
1,017
TPX
1,959.19

400%
300%
200%
100%

End of Apr. 2009
CS*
192
TPX
837.79!Stock-split adjusted
retroactively

0%
-100%
04/2009

04/201004/201104/201204/201304/201404/2015

04/2016

04/2017

04/2018

04/2019

04/2020

04/2021

Note: CS stock price and TOPIX at the end of April 2009 set to 0% as the start point(Ref) Prepared by Alpha-Win Research Dept.

w Underperforming the
TOPIX over the past
approx. 6 months
w Valuation is about
average and stock price is
at fair value.
w Going forward, points ofinterest are this FY andnext FY’s financial
performance,
contribution of new
businesses to results, andenhancement ofshareholder return.

However, this year, the Company has been underperforming the TOPIX.
This is most likely in reaction to the previous significant outperformanceover TOPIX in March 2020 and later, when it had been evaluated as adomestic-demand-oriented growth stock with firm financial results despite
the concerning situation that the financial performance of companies may
worsen due to COVID-19 and the trade war. This also seems to have been
because the market favored buying large-cap, economically sensitive stocks
that fit with the new normal created by COVID-19.
The Company’s valuation was compared in terms of the major valuation
indicators with all stocks listed on the TSE First Section as well as its
competitors (HIMACS and Toho System Science). Based on this fiscal
year’s forecasted results, the Company’s valuation is about averagecompared to the former, and slightly high but not expensive compared to thelatter two companies. Its valuation seems to be at a premium compared to its
two competitors, perhaps because its stable growth potential and highliquidity are being reflected (see “average approximate trading volume perday” in Figure 47).
40/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 6/7/2021

Despite its solid financial performance, the Company’s stock price has been
largely underperforming over the past approximately six months, and seems
to have come close to the fair value. When defensive, small-cap, anddomestic-demand-oriented growth stocks become evaluated highly in themarket again, the Company’s stock price is expected to start outperforming
again. Compared with its two competitors, it has the highest liquidity.
【Figure 47】Comparison of Valuation Indicators and Liquidity of Three Competing Companies
Company Name
Code
Stock Price (at 6/4 closing)Market Cap (million yen)
P/E (price-to-earnings ratio)
P/B (price-to-book ratio)
Dividend Yield (%)
EV/EBITDA
P/S (price-to-sales ratio)

CUBE SYSTEM(CS: consolidated)

HIMACS(HM: consolidated)Toho System Science(TS: non-consolidated)

2335

4299

4333

Ave. Daily Trading Volume over the Past Approx. 6 Months (million yen)

1,017
14,747
16.3
2.1
2.0
8.5
0.9
103

1,070
13,282
14.4
1.4
2.8
4.9
0.8
32

928
12,868
13.3
1.5
2.7
4.4
1.0
4

Market cap= (shares outstanding) x (market share price [at 6/4/2021 closing])
The companies' planned EPS and dividend values for FY 2022 were used in all P/E and dividend yield calculations.
Actual BPS values of FY 2021 were used in P/B calculations.
EV/EBITDA=(market cap + interest bearing debt - cash&deposits)/(O.P. + depreciation + intangible fixed asset amortization)
P/S=market cap / sales [the companies' forecasts for FY 2022](Ref) Figures 47 and 48 were prepared by Alpha-Win Research Dept. based on the securities reports, financial results summaries, and stock data.

Relative to a universe of the leading 22 SI companies listed on the First
Section of the TSE (including the Company and the two companies
mentioned above; the total market cap of the 22 companies is Y11.6 trillion
and their total sales are about Y7 trillion), the Company’s valuation seems
slightly cheap in the SI sector (Figures 48). Going forward, we believe that
if the Company’s operating margin continuously improves and its sales grow,in addition to the rise in EPS, its valuation (P/E, etc.) may increase sharply
and its market capitalization may also rise.
【Figure 48】Comparison of Major Stocks in the SI Sector
CodeCompany Name
Market Cap. Stock Price
Sales
O.P.
O.P. Margin
Actual ROE (%) Est. P/E Actual P/B Est. Dividend Yield
Est. Dividend Est. EPS Actual BPS
9613
NTT DATA
2,417,910
1,724
2,360,000 180,000
7.6%
7.6
22.8
2.3
1.1%
19.00
75.58
764.994307 Nomura Research Institute2,092,300
3,430
590,000
96,000
16.3%
21.8
31.4
5.9
1.1%
38.00
109.37585.124684
OBIC
1,980,048
19,88090,00052,000
57.8%
15.1
44.2
6.6
0.9%
185.00449.692,990.72
4768
Otsuka Corporation
1,109,612
5,840
865,000
58,100
6.7%
14.6
28.0
4.1
2.1%
120.00208.601,415.40
4739
Itochu Techno-Solutions
792,000
3,300
520,000
48,500
9.3%
12.5
23.1
3.0
2.1%
70.00
142.83
1,102.79
3626
TIS
722,9432,745
470,000
48,500
10.3%
10.8
21.3
2.5
1.5%
40.00
128.781,078.60
9719
SCSK
644,885
6,190
420,000
48,000
11.4%
15.7
18.9
2.8
2.3%
140.00326.692,180.31
8056
Nihon Unisys
342,150
3,120
320,000
26,000
8.1%
13.4
17.9
2.3
2.2%
70.00
174.35
1,341.04
2327
NS Solutions
298,293
3,260
265,000
25,500
9.6%
10.3
17.4
1.7
1.7%
56.00
186.88
1,965.32
1973 NEC Networks & System Int.
260,566
1,745
320,000
26,000
8.1%
13.5
16.2
2.1
2.2%
38.00
107.43830.474812
ISID
247,368
3,795
110,000
12,500
11.4%
12.9
29.8
4.1
1.4%
52.00
127.37931.009759
NSD
163,726
1,773
70,00010,000
14.3%
13.7
20.6
2.9
2.5%
45.00
86.26
613.71
9682
DTS
132,720
2,631
95,00011,000
11.6%
13.3
15.6
2.0
2.5%
65.00
168.201,293.61
9749
Fujisoft
181,980
5,400
249,000
16,300
6.5%
7.4
19.0
1.4
0.9%
50.00
284.403,900.56
9692
CEC
53,7301,429
50,000
5,200
10.4%
12.4
14.1
1.5
2.8%
40.00
101.45977.554674
CRESCO
37,812
1,644
42,400
3,850
9.1%
14.8
12.1
1.8
2.4%
40.00
135.58926.969739 NIPPON SYSTEMWARE
33,9872,281
42,000
4,300
10.2%
12.3
11.5
1.4
1.8%
40.00
197.991,585.164725
CAC Holdings
29,764
1,449
51,000
2,600
5.1%
6.6
14.4
0.9
4.1%
60.00
100.81
1,622.01
9600
I-NET
23,1291,424
32,500
2,330
7.2%
9.5
14.2
1.4
3.3%
47.00
100.15
1,014.82
2335
Cube System
14,7471,017
16,000
1,230
7.7%
14.0
16.3
2.1
2.0%
20.00
62.55
476.524299
HIMACS
13,282
1,070
16,500
1,280
7.8%
11.2
14.4
1.4
2.8%
30.00
74.40
745.354333
Toho System Science
12,868928
13,200
1,230
9.3%
10.2
13.3
1.5
2.7%
25.00
69.76
627.90
Simple Average
527,537
11.6%
12.4
19.8
2.5
2.1%
Simple Average (excl. OBIC)
458,370
9.4%
12.3
18.7
2.3
2.2%
Note: Units for market cap., sales, and O.P.: million yen
Sales and O.P. are generally the companies' most recent forecast values
Units for stock price, dividend, est. EPS, and actual BPS: Y Units for P/E, P/B, and P/S: none
Stock prices are closing prices on June 4, 2021
Only valid data included in the averages

41/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

P/S
1.0
3.5
22.0
1.3
1.5
1.5
1.5
1.1
1.1
0.8
2.2
2.3
1.4
0.7
1.1
0.9
0.8
0.6
0.7
0.9
0.8
1.0
2.2
1.3