Alpha-Win Company Research Report
CUBE SYSTEM INC.
(2335 TSE First Section)● SummaryIssued: 2/2/2021

Alpha-Win Capital Inc. Research Department
http://www.awincap.com/◆Independent, mid-tier system integrator with long-term, stable growth・CUBE SYSTEM INC. (hereinafter, the “Company”) is an independent, mid-tier system integrator listed on theFirst Section of the TSE. Its main customers include Nomura Research Institute (“NRI”) and Fujitsu Group. It
develops systems and provides services mainly for the finance, distribution, and telecommunications industries.
Its strengths are its excellent customer base, extensive experience, high credibility, and the skill and expertise thatit has built up over the years. Founded in 1972, it has been in business for about 48 years.
・With the exception of one fiscal year, the Company has been continuously increasing sales YoY for the past 22
years. During this period, the annual sales growth rate (simple average of the rate of increase in sales) was +7.0%
and annual recurring profit growth rate (simple average) was +8.3%; it has been steadily expanding its businessand keeping its business in the black over many years. Recurring margin has stably been at around 7%, and theincrease in sales has been contributing directly to increases in profit, dividend, and market capitalization. Under
the new president, the Company’s plan starting this fiscal year is to focus further on the digital business.

◆Consolidated financial results for the first nine months (Q3 YTD) of FY 2021: despite
small sales growth, operating profit grew significantly by 28.2% YoY due to improved
gross margin and lower SG&A expenses
Consolidated Results for the First Nine Months (Q3 YTD)
・Consolidated financial results for first nine months of FY 2021 (April-December 2020: hereinafter, “Q3 YTD”;
note that the Company’s fiscal year is March-ending so that FY 2021 ends in March 2021) were as follows: salesof Y10,591 million (+0.5% YoY), operating profit of Y792 million (+28.2% YoY), recurring profit of Y922 million(+46.8% YoY), and net profit attributable to owners of the parent (hereinafter, “net profit”) of Y596 million(+51.8% YoY) (Figure 1 on page 2 and Figure A on page 6). Record highs for Q3 YTD were achieved for sales
and each profit (operating, recurring, and net).
・Sales decreased by 0.2% YoY in the first quarter (April-June 2020: hereinafter, “Q1”), increased by 0.5% in thesecond quarter (July-September 2020: hereinafter, “Q2”), and increased by 1.3% in the third quarter (OctoberDecember 2020: hereinafter, “Q3”), indicating that although sales have been mostly flat, the sales growth rate has
been gradually improving.
・Unlike the previous fiscal year, there has been no unprofitable projects during this fiscal year so far, and theCompany was also able to hold down the costs and improve operational efficiency during the COVID-19 crisis.
As a result, profit grew significantly. Gross margin rose from 17.1% in the previous Q3 YTD to 18.7% this Q3
YTD (numbers have generally been rounded to the first decimal place in this Report) and the SG&A expenses ratio
was maintained at 11.2%, resulting in a rise in operating margin by approx. 1.6 percentage points from 5.9% to7.5% (Figure 1 on page 2 and Figure 5 on page 4). As with the first half, sales seem to have been smaller than thevalue targeted in the Company's plan (not disclosed), while the profits had probably exceeded the plan. Although
the COVID-19 crisis had temporarily caused a stagnation of its sales activities, it has been incorporating online
tools and starting to see progress with customer interactions and negotiations. The amount of orders received andsales were partially affected, but the impact was limited and in fact nearly negligible as far as profit is concerned.
・In Q3 YTD, overall sales increased slightly by Y56 million YoY (+0.5%) and gross profit increased significantly
by Y180 million YoY (+10.0%) thanks to the improvement in the profit margin. The following are the results byservice category (three categories).
・Sales of its core business, or the System Integration Service (SIS), increased by Y68 million (+0.9% YoY). The
increase in system development projects for delivery service companies in the transportation industry and for
education business companies had offset the negative impact of the completion of system development projects forconstruction machinery manufacturers in the manufacturing industry as well as the decrease in co-op-related
Short Report
1/7This 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 thisReport 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 that the 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 fromthe use of or 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. Intellectual
property of this Report belongs to Alpha-Win 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: 2/2/2021

projects for the distribution industry. With no unprofitable project recorded this fiscal year, gross profit increased
by Y121 million (+9.7% YoY) to Y1,377 million, mostly owing to the improvement in gross margin (17.0% lastQ3 ⇒ 18.4% this Q3).
・Due to the decrease in projects outsourced by the distribution industry, sales of the System Outsourcing Service(SOS) decreased by Y164 million (-9.2% YoY) to Y1,624 million. Its gross margin had stayed about the same, but
gross profit fell by Y29 million (-9.7% YoY) to Y277 million.
・In the Professional Service (ProS), there was an increase in system development projects for group banks of major
distribution companies, and steady progress was achieved with the consulting projects. As a result, its sales
increased by Y152 million (+11.4% YoY) to Y1,494 million, gross margin improved by 4.1 percentage points, andconsequently its gross profit increased by Y88 million (+37.5% YoY) to Y324 million.
・Sales by industry (four sectors) were mostly as already described above. Sales and profit growth of the businesswith the telecommunications and transportation industries contributed significantly to the overall results (+651
million yen in sales and +229 million yen in profit, YoY; Figure 1). This growth, in addition to the solid results of
the “other industries” category such as the consulting business and the education-related system development
business, offset the sales and profit decline of the business with the finance industry (system development projects
were scaled down) and the distribution industry (the completion of projects related to the consumption tax revision
had a large impact).
【Figure 1】Change in Quarterly Financial Results
Results
Unit: million yen

Total

Consolidated Sales

By Service Category

Sales

Gross Profit

System Integration: SIS
System Outsourcing: SOS
Professional: ProS
System Integration: SIS
System Outsourcing: SOS
Professional: ProS
System Integration: SIS
System Outsourcing: SOS
Professional: ProS

By Industry

Gross Margin (%)

Name of Service/Industry

Finance
Distribution
Telecommuications & Transportation
Manufacturing (other)Government (other)
Other (other)
Finance
Distribution
Telecommuications& Transportation
Gross Profit
Manufacturing (other)Government (other)
Other (other)
Finance
Distribution
Telecommuications & Transportation
Gross Margin (%)
Manufacturing (other)Government (other)
Other (other)

Total

Total Gross Profit

Sales

Gross Margin (%)
SG&A Expenses

SG&A Expenses Ratio (%)
Operating Profit

O.P. Margin (%)
Recurring Profit

R.P. Margin (%)
Net Profit

N.P. Margin (%)

Q1 FY 2020
Apr-June 2019

3,379
2,411
520
447
354
95
73
14.7
18.4
16.5
993
771
485
396
245
486
181
122
74
45
34
66
18.2
15.8
15.3
11.4
13.9
13.6
524
15.5
424
12.5
100
3.0
107
3.2
50
1.5

Q1 FY 2021 Change in Amount / Diff. % Change
Apr-June 2020
YoY: million yen / %YoY: %

3,373
2,311
506
555
437
82
123
18.9
16.3
22.2
989
675
592
329
182
603
191
123
141
56
24
105
19.3
18.2
23.8
17.0
13.2
17.4
643
19.1
401
11.9
242
7.2
248
7.4
166
4.9

-6
-100
-14
108
83
-13
50
4.2
-2.1
5.7
-4
-96
107
-67
-63
117
10
1
67
11
-10
39
1.1
2.4
8.6
5.7
-0.7
3.8
119
3.6
-23
-0.7
142
4.2
141
4.2
116
3.4

-0.2
-4.1
-2.7
24.2
23.4
-13.7
68.5

-0.4
-12.5
22.1
-16.9
-25.7
24.1
5.5
0.8
90.5
24.4
-29.4
59.1

22.7
-5.4
142.0
132.1
231.7

Q2 FY 2020
July-Sept 2019

3,692
2,532
691
469
470
130
84
18.6
18.8
17.9
1,125
916
432
417
209
593
228
165
66
62
34
127
20.3
18.0
15.3
14.9
16.3
21.4
683
18.5
391
10.6
292
7.9
290
7.9
191
5.2

Q2 FY 2021
Change in Amount / Diff. % Change
July-Sept 2020
YoY: million yen / %YoY: %

3,710
2,677
585
447
481
100
102
18.0
17.1
22.8
1,073
729
673
367
204
664
199
128
147
67
35
107
18.5
17.6
21.8
18.3
17.2
16.1
682
18.4
372
10.0
310
8.4
355
9.6
234
6.3

18
145
-106
-22
11
-30
18
-0.6
-1.7
4.9
-52
-187
241
-50
-5
71
-29
-37
81
5
1
-20
-1.7
-0.5
6.6
3.4
0.9
-5.3
-1
-0.1
-19
-0.6
18
0.4
65
1.7
43
1.1

0.5
5.7
-15.3
-4.7
2.3
-23.1
21.4

-4.6
-20.4
55.8
-12.0
-2.4
12.0
-12.7
-22.4
122.7
8.1
2.9
-15.7

-0.1
-4.9
6.2
22.3
22.6

Q3 FY 2020
Oct-Dec 2019

3,464
2,461
577
426
431
82
79
17.5
14.2
18.5
1,075
798
447
289
172
682
207
128
79
35
28
115
19.3
16.0
17.7
12.1
16.3
16.9
592
17.1
366
10.6
226
6.5
231
6.7
152
4.4

Q3 FY 2021
Oct-Dec 2020

3,508
2,484
533
492
459
95
99
18.5
17.8
20.1
904
680
751
308
230
636
170
127
160
50
38
108
18.8
18.7
21.3
16.2
16.5
17.0
654
18.6
414
11.8
240
6.8
319
9.1
196
5.6

Change in Amount / Diff.
YoY: million yen / %% Change
YoY: %

44
23
-44
66
28
13
20
1.0
3.6
1.6
-171
-118
304
19
58
-46
-37
-1
81
15
10
-7
-0.5
2.6
3.6
4.1
0.2
0.1
62
1.6
48
1.2
14
0.3
88
2.4
45
1.2

1.3
0.9
-7.6
15.5
6.5
15.9
25.3

-15.9
-14.8
68.0
6.6
33.7
-6.7
-17.9
-0.8
102.5
42.9
35.7
-6.1

Q3 YTD FY 2020
Apr-Dec 201910,535
7,404
1,788
1,342
1,255
307
236
17.0
17.2
17.6
3,193
2,485
1,364
1,102
626
1,761
616
415
219
142
96
308
19.3
16.7
16.1
12.9
15.4
17.5
1,799
17.1
1,181
11.2
618
5.9
628
6.0
393
3.7

Q3 YTD FY 2021
Apr-Dec 2020

10,591
7,472
1,624
1,494
1,377
277
324
18.4
17.1
21.7
2,966
2,084
2,016
1,004
616
1,903
560
378
448
173
97
320
18.9
18.1
22.3
17.2
15.8
16.9
1,979
18.7
1,187
11.2
792
7.5
922
8.7
596
5.6

Change in Amount / Diff.
YoY: million yen / %% Change
YoY: %

Change in Amount / Diff.
YoY: million yen / %% Change
YoY: %

56
68
-164
152
121
-29
88
1.5
-0.1
4.1
-227
-401
651
-98
-10
142
-56
-37
229
31
1
12
-0.4
1.4
6.2
4.3
0.4
-0.6
180
1.6
6.0
0.0
174
1.6
294
2.7
204
1.9

0.5
0.9
-9.2
11.4
9.7
-9.7
37.5

Q4 FY 2020
Jan-Mar 2020

4,173

Q4 FY 2021
Jan-Mar 2021

5,409

1,236

29.6

-7.1
-16.1
47.7
-8.9
-1.6
8.1
-9.1
-9.0
104.3
21.8
1.0
3.9

1,288
874
515

1,872
1,231
684

584
357
169

45.3
40.8
32.8

1,498

1,624

126

8.4

341
8.2
348
8.3
132
3.2

328
6.1
198
3.7
104
1.9

-13
-2.1
-150
-4.7
-29
-1.3

10.0

28.2
46.8
51.8

(Note) Figure 1 and Figures 3-5 were prepared by Alpha-Win Research Dept. based on the financial results summary and financial results supplemental
briefing materials. Due to processing of data during calculations, values for the same item may slightly differ in this Report, including its figures andtables. Note that values for Q1, Q2, and Q3 of FY 2021 are actual results and the values for Q4 and the full fiscal year (FY) are the Company’s forecasts.

・Figure 2 on page 3 describes the factors that increased or decreased operating profit during Q3 YTD. Sales had
stayed about the same, but R&D investment had increased (+17 million yen YoY) and other expenses also rose(+50 million YoY) mainly due to personnel expenses. Profit grew, though, largely owning to business expansion
and improved earning power of the existing businesses (+1,187 million yen YoY), optimization of human resources(+77 million yen YoY), and streamlining of operation through digital technology (+45 million yen YoY). Also,
although not mentioned in the initial forecast, in addition to the gain on investment in Limited Liability Fund (+92
million yen), gain on sale of investment securities (+23 million yen) was recorded, increasing non-operating profit
for this Q3 YTD from Y10 million in the previous Q3 YTD to Y130 million. As a result, both the amount and rateof growth in recurring profit as well as net profit were significantly greater than those of operating profit.
・In the Company's current business model, sales growth is generally directly correlated with the number of
employees. The total number of employees in Japan and overseas has been increasing from 739 in Dec. 2018 (atend of month) ⇒ 745 in Dec. 2019 (+6; +0.8%) ⇒ 786 in Dec. 2020 (+41; +5.5%). In recent years, sales per
employee in Japan have stayed about the same, but operating profit per employee in Japan has recently improved
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2/7This 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 thisReport 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 that the 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 fromthe use of or 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. Intellectual
property of this Report belongs to Alpha-Win and no part of this Report may be copied, photocopied, cited, or translated without our consent.

-3.8
-43.2
-21.7

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

Issued: 2/2/2021

significantly (in the same order as above, Q3 YTD operating profit per person has grown from 938 ⇒ 949 ⇒
1,136 thousand yen per person). While the upcoming impact of COVID-19 remains uncertain, system development
demand is still strong (non-face-to-face, DX businesses such as those related to remote work, EC, and AI). The
Company is somewhat short of staff, but it has been working on improving productivity and efficiency through the
optimization of the allocation of human resources and other measures.
・There has been no significant change in the balance sheet as of the end of Q3. Cash and deposits, which havebeen gradually accumulating, are now Y4.1 billion, indicating that the Company has ample liquidity on hand(essentially debtless). Its financial standing is also firm, with an equity ratio of 68.9%.
【Figure 2】Factors that Increased/Decreased Operating Profit in Q3 YTD (unit: million yen)
(Note) Financial results supplemental briefing materials, partially added and revised

Rise in profit from businessexpansion and improved
earning power of existing
businesses

Decrease in
expenses from
optimization of
resources

Worked on digitalizationof operation

Increase in
R&D expenses,
investment, etc.

Increase inotherexpenses

+45

+77

+118

792

-50

-17

618

Last FY’s Q3 YTD
4/2019 – 12/2019

YoY +174 million yen

This FY’s Q3 YTD
4/2020 – 12/2020

Consolidated Q3 Results (three-months period)・Results for Q3 (October to December 2020) were as follows: sales of Y3,508 million (+1.3% YoY), operating
profit of Y239 million (+6.2% YoY), recurring profit of Y318 million (+38.3% YoY), and net profit of Y196
million (+30.7% YoY) (Figure 1 on page 2, Figures 3-4, and Figure 5 on page 4). Profit grew consecutively from
Q1 and Q2 as well as on a YoY comparison. Gross margin also rose for the quarter (three-months period), from
17.1% in the previous Q3 to 18.6% this Q3. Consequently, although the SG&A expenses ratio had increased,
operating margin improved by 0.3 percentage points from 6.5% to 6.8%.
・However, the amount of YoY growth in profit per quarter has been becoming smaller, with Y142 million growthin Q1, Y19 million growth in Q2, and Y14 million growth in Q3.
・Due to seasonal variations, this Q3’s sales and operating profit were 5.4% and 22.9% smaller than in Q2,
respectively.
・Order backlog at the end of this Q3 was Y3,928 million, a slight increase from Y3,899 million at the end of theprevious Q3 and Y3,909 million at the end of this fiscal year’s Q2.
【Figure 3】Quarterly Change in Sales(unit: million yen)

【Figure 4】Quarterly Change in Operating Profit (unit: million
yen)

450

6,000

400
5,000

350
300

4,000

250
3,000

200
150

2,000

100
1,000

50
0

0
FY 2014

FY 2015

FY 2016

FY 2017
Q1

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Q2

FY 2018
Q3Q4FY 2019

FY 2020

FY 2021

FY 2014

FY 2015

FY 2016

FY 2017Q1Q2

FY 2018
Q3

FY 2019

FY 2020

FY 2021Q4

3/7

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 thisReport 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 that the 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 fromthe use of or 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. Intellectual
property of this Report belongs to Alpha-Win 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)【Figure 5】Quarterly Change in O.P. Margin

Issued: 2/2/2021(unit: %)

12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
FY 2014

FY 2015Q1

FY 2016Q2

FY 2017

FY 2018

Q3

FY 2019
Q4

FY 2020

FY 2021FY◆ No change to the initial full-year forecast made at the beginning of the FY. Greater
likelihood of achieving record-high sales and profit.
・The Company has not made changes to its full-year forecast announced at the beginning of the fiscal year thatsales will be Y16,000 million (+8.8% YoY), operating profit will be Y1,120 million (+16.8% YoY), net profit willbe Y700 million (+33.3% YoY), and annual dividend will be Y18 per share (interim dividend was Y8). It has also
not changed its forecast for this full fiscal year’s sales by industry since its plan in Q2.
・The Company plans to achieve sales and profit growth again this fiscal year. In fact, it plans to achieve recordhigh sales for another consecutive year as well as record-high profits (past record highs: operating profit of Y964
million in FY 2015 and net profit of Y628 million in FY 2016). It will also aim again to achieve, for the first time,
operating profit and recurring profit that are each greater than Y1 billion (it had tried to achieve this goal last fiscal
year too but was unsuccessful). The likelihood of achieving this goal has become greater.
・Progress in Q3 YTD against the Company’s full-year forecast was 66.2% for sales (last Q3 YTD: 71.6%). Progresswith profit was solid, at 70.7% for operating profit (last Q3 YTD: 64.4%) and 85.2% for net profit (last Q3 YTD:
74.7%). Sales growth rate in Q3 YTD was much smaller than the Company’s plan for the full fiscal year (+8.8%
targeted in the full-year plan, but +0.5% in Q3 YTD), but the profit growth rate was significantly greater (for net
profit, it was +51.8% compared to the plan of +33.3%).
・When the Q3 YTD results are subtracted from the full-year forecast that the Company had announced, the expected
results for Q4 (January-March 2021) come out to be Y5,409 million for sales (+29.6% YoY), Y328 million for
operating profit (-3.8% YoY), and Y104 million for net profit (-21.8% YoY). The Company seems to be expecting
a large growth in sales and significant drop in profit in Q4. The expected operating margin in Q4 is 6.1%, which isa somewhat conservative assumption since it is worse than the operating margin of 8.2% in the previous Q4, 7.2%
during this Q1, 8.4% during this Q2, and 6.8% during this Q3.
・Taking into account the risks pertaining to COVID-19, Alpha-Win Research Department has made a somewhat
more cautious full-year forecast for sales than the Company. Indeed, due to the COVID-19 crisis, there has been astagnation in the Company’s sales activity, especially with new negotiations. Some of its corporate customers havealso been scaling down their IT investments due to worsened financial performance. However, because a part ofits customers with solid financial performance has been starting to actively conduct strategic IT investments, theCompany has been able to maintain its sales. The amount of orders received and the order backlog have also stayedabout the same YoY. In addition, its measures to improve operation, raise the earning power of the existing
businesses, optimize resources, and streamline operation through digital technologies have been more effective
than expected, contributing to a YoY improvement in profit margin.
・Considering the results up through Q3 and the Company’s forecast for Q4, we decided to keep our forecast thatfull-year sales for this fiscal year will be slightly below the Company's forecast. With regards to profit, theCompany’s assumptions for the costs and profit margins in Q4 seem somewhat conservative, and there have been
temporary but unexpected gains on investment and related items recorded under non-operating profit/loss. Partly
taking into account these factors, we decided to raise our profit forecast for the full fiscal year.
・Regarding the Company’s financial performance over the medium term (starting next fiscal year), we have notchanged our forecast for sales or profit at this point. However, since our forecast is based on the assumption thatthe economic environment will gradually normalize, if COVID-19 continues to impact business in the next fiscal
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4/7

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 thisReport 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 that the 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 fromthe use of or 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. Intellectual
property of this Report belongs to Alpha-Win 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: 2/2/2021

year and onwards, we may revise our forecast for profit over the medium term.
・With the Japanese government continuing to promote and accelerate digitalization, a part of the Company’s users(companies, organizations, etc.) has been further increasing their IT investment in order to adapt to the changes in
the world with and after COVID-19, as they develop new business models, strengthen their competitive advantage,
solve HR shortages, streamline and speed up operations, and make progress with DX. Therefore, the Company has
a large growth potential over the medium to long term. In fact, we believe that the Company will be able to continue
to stably increase sales and profit at a rate of about 8% per year (under normal conditions) through the expansionof the Enhancement business with its major customers, acquisition of new and promising projects (projects related
to utilization of technologies such as AI image recognition and blockchain, digitalization systems for thegovernment, etc.), new customer development, and improvement of productivity through various measures.

◆The Company’s recent activities (response to COVID-19, restructuring of organization,and industry trends)
Response to COVID-19
・Toward the post-COVID-19 era and the new normal, the Company has been encouraging a new working stylewhere each employee can work from their most suitable location in terms of the characteristic of their jobs as wellas their specific abilities. With digital technology and remote work (combination of decentralized/non-face-to-facesales activity with in-person sales), more than 50% of its employees currently work from home.
Restructuring of Organization
・For the achievement of the next management vision “VISION 2026,” which will be started under the new president
in April 2021, the Company plans to restructure its organization. Specifically, to focus its business on DX, it will
create new departments for business transformation and process transformation that will be effective across theentire company, as well as strengthening its sustainability and governance.
Industry Trends
・According to the Current Survey of Selected Service Industries (finalized report on November 2020), sales ofsystem integration for outsourced software decreased YoY for nine months in a row starting in March. During theeight months from April to November, sales decreased by 3.6% YoY on a simple average. Circumstances remaindifficult.
・Regarding the Company and its two competitors, since their rates of sales growth or decline (YoY) in Q3 YTD
include the rates for December, those rates cannot be simply compared with the data of the Current Survey on
Selected Service Industries. All three companies, though, seem to be making steady progress at rates that areslightly above the average of the industry, with the sales growth rates being +0.5% for the Company, +0.4% for
HIMACS, and 0.0% for Toho System. Similarly, their operating profit growth rates (Q3 YTD, YoY) were +28.2%,+58.9%, and +21.8%, respectively, all significantly greater than their sales growth rates. For all three companies,
although there were no significant changes in sales, the rise in operating margin due to improved gross margin andlower SG&A expenses has been responsible for their high profit growth rates.
・For this full fiscal year, the Company is expecting the highest growth rates for sales and profit (net profit) among
the three companies. Upon the announcement of Q3 financial results, HIMACS was the only company among thethree to revise its full-year forecast upward (sales forecast was not changed, but profit was revised upward by about
20%, and it also announced a gratis allotment of shares which will essentially lead to a 20% increase in dividend).

◆Stock price and characteristics: domestic-demand-related, stable growth stock that has
been significantly outperforming the TOPIX over the long term・Over the past approximately 11 years and nine months, the Company’s stock price has increased by about fivetimes and has been outperforming the TOPIX by about 392% thanks to its solid financial performance. However,it should be noted that over the past three months, economically sensitive stocks and companies that have madeupward revisions to their full-year financial forecasts have tended to bought more. In contrast, the Company is adefensive stock and has not changed its full-year forecast. Consequently, it has been underperforming the TOPIX
and HIMACS, which has announced an upward revision, over the short term.
・Evaluated as a stable growth stock with solid financial performance, the Company’s valuation seems be somewhat
at a premium compared to its competitors (Figure 6 on page 6). On the other hand, its valuation is low comparedto the average of TSE First Section (current averages of TSE First Section: forecasted P/E of 27.3 and weighted
dividend yield of 1.9% for this fiscal year and actual P/B of 1.3 in the previous fiscal year).
・Over the short term, its stock price will likely be affected by the situation regarding when and how the COVIDShort Report

5/7This 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 thisReport 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 that the 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 fromthe use of or 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. Intellectual
property of this Report belongs to Alpha-Win 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: 2/2/2021

19 crisis will settle down, this fiscal year’s overall financial results, next fiscal year’s financial forecast, and thequarterly trends in the amount of orders received and financial performance. Over the medium term, the following
should be watched as factors that may affect stock price: development of new customers, development of newtechnologies and areas such as DX and their contribution to financial performance; overall sales growth rate;changes in operating margin and operating profit growth rate; return to shareholders (dividend hike, share buyback,and stock split); and the financial performance and IT investment trends of Japanese companies (specifically, theCompany’s current and potential end users).
・Despite the COVID-19 crisis, the likelihood of the Company achieving record-high profit and double-digit profit
growth has increased. We continue to believe that if it can maintain a stable, double-digit annual growth rate for
profit (EPS), it will be able keep its current level of valuation and realize a stock return that matches the growth in
EPS.
【Figure 6】Comparison of Valuation with Competitors
Company Name

CUBE SYSTEM(CS: consolidated)

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

2335

4299

4333

Code
Stock Price (at 1/29 closing)Market Cap (million yen)
P/E (price-to-earnings ratio)
P/B (price-to-book ratio)
Forecasted Dividend Yield for FY 2021 (%)
EV/EBITDA
P/S (price-to-sales ratio)
Company Forecast for FY 2021 Sales (million yen)YoY Sales Growth Rate (%)
Company Forecast for FY 2021 Operating Profit (million yen)
YoY O.P. Growth Rate (%)
Company Forecast for FY 2021 O.P. Margin (%)
Forecasted Dividend Payout Ratio

1,166
17,816
22.6
2.6
1.5
13.6
1.1
16,000
8.8
1,120
16.8
7.0
34.9

1,266
15,715
13.9
1.5
2.2
9.4
1.0
15,100
-1.6
1,300
28.5
8.6
30.2

938
13,006
18.0
1.5
2.7
5.6
1.1
11,700
0.1
920
0.5
7.9
47.9

Market cap= (shares outstanding) x (market share price [at 1/29/2020 closing])
The companies' planned EPS and dividend values for FY 2021 were used in all P/E and dividend yield calculations.
Actual BPS values of Q3 FY 2021 were used in P/B calculations.
EV/EBITDA=(market cap + interest bearing debt - cash&deposits)/(O.P. + depreciation + intangible fixed asset amortization)
Values for interest-bearing debt and cash & deposits are actual values as of Q3 FY 2021.
P/S=market cap / sales [the companies' forecasts for FY 2021]*Values for HIMACS reflect upward profit revision, stock split, gratis allotment of shares, and essential rise in dividend(Note) Prepared by Alpha-Win Research Dept. based on each company’s financial results summary【 2335 CUBE SYSTEM
FY

2018
2019
2020
2021
2021
2021
2022
2023
2019
2020
2019
2020
2019
2020
2020
2021
2020
2021

CE
Old E
New E
E
E
Q1
Q1
Q2
Q2
Q3
Q3
Q3 YTD
Q3 YTDQ4Q4 CE

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)

13,55914,325
14,70816,00015,30015,30016,00017,000
3,379
3,373
3,692
3,710
3,464
3,508
10,535
10,591
4,173
5,409

5.1
5.6
2.7
8.8
4.0
4.0
4.6
6.3
9.6
-0.2
-2.1
0.5
-2.5
1.3
1.3
0.5
6.5
29.6

2.9
5.1
-11.9
33.3
33.3
42.9
-2.0
8.8
-34.2
229.3
30.7
23.0
30.7
29.8
2.3
51.8
-37.3
-21.8

40.59
43.25
38.69
51.56
51.56
55.19
54.08
58.87
3.70
12.17
14.10
17.30
11.11
14.42
28.94
43.89
9.80
7.67

372.23393.29411.96454.15490.24529.10379.63418.69397.59440.07403.77449.26403.77449.26411.96
-

855
921
959
1,120
1,120
1,150
1,180
1,280
100
242
292
310
226
240
618
792
341
328

9.5
7.8
4.1
16.8
16.8
19.9
2.6
8.5
-8.8
141.3
17.3
6.2
-8.1
6.2
2.1
28.2
7.9
-3.8

892
959
976
1,120
1,120
1,200
1,180
1,280
107
248
290
355
231
319
628
922
348
198

10.0
7.5
1.7
14.7
14.7
23.0
-1.7
8.5
-19.0
130.8
18.9
22.4
-9.4
38.1
-0.6
46.8
6.4
-43.1

567
596
525
700
700
750
735
800
50
165
191
235
151
196
392
596
133
104

16.0
16.0
18.0
18.0
18.0
18.0
20.0
20.0
0.0
0.0
8.0
8.0
8.0
8.0
8.0
8.0
10.0
10.0

(Note) CE: the Company’s forecast. E: Alpha-Win Research Dept.’s forecast. Q1: Apr-June. Q2: July-Sept. Q3: Oct-Dec. Q4: Jan-Mar.
Q3 YTD: Apr-Dec.

Short Report

6/7This 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 thisReport 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 that the 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 fromthe use of or 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. Intellectual
property of this Report belongs to Alpha-Win 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: 2/2/2021【 Stock Price and Valuation Indicators: 2335 CUBE SYSTEM 】 Figure B
1/29/2021

Item

Item

P/E

P/B

Dividend Yield

Dividend Payout Ratio

Stock Price (Y)1,166

Last FY (actual)

30.1

2.8

1.5%

46.5%

Shares Outstanding (thou.)

15,280This FY (est.)

21.1

2.6

1.5%

32.6%

Market Capitalization (million yen)

17,816

Next FY (est.)

21.6

2.4

1.7%

37.0%

Equity Ratio at End of This Q3

68.9%

Last FY's ROE

9.6%

Dilutive Shares (thou.)0(Note) Estimates had been made by Alpha-Win Research Dept.
【 Stock Chart (end-of-week prices): 2335 CUBE SYSTEM 】 Figure C
(Y)
1,500
1,400
1,300

2.00

Stock price (left axis)
Price relative to TOPIX (right axis)

1,200
1,100
1,000
900

1.90
1.80
1.70
1.60
1.50
1.40
1.30
1.20
1.10

800

1.00

700

0.90

09
/1
6
11
/1
6
01
/1
03 7
/1
7
05
/1
7
07
/1
7
09
/1
7
11
/1
7
01
/1
03 8
/1
8
05
/1
8
07
/1
8
09
/1
8
11
/1
8
01
/1
03 9
/1
9
05
/1
9
07
/1
9
09
/1
9
11
/1
9
01
/2
03 0
/2
0
05
/2
0
07
/2
0
09
/2
0
11
/2
0
01
/2
1

500

0.80
0.70
0.60
(M
M
/Y
Y)

600

(Note) From the first week of September 2016 to the fifth week of January 2021 (reflects prices through the closing price on 1/29)

Period1 month
3 months
6 months
12 months

Performance
Return vs. TOPIX
-6.0%
-6.2%
-11.1%-22.3%
23.6%
2.3%
52.4%
41.9%

(Note) Reflects stock and index prices
through the closing price on 1/29/2021.
Performance for each period is thecomparison between the price on
1/29/2021 and the month-end price ofeach corresponding period. E.g.,
performance for the 1-month period isthe comparison of the closing price on
the last day of the previous month orDecember with the closing price on
1/29.

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 the writer of this Report do not have any obligation to reply to inquiries.
SV20210206-2100

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7/7This 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 thisReport 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 that the 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 fromthe use of or 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. Intellectual
property of this Report belongs to Alpha-Win and no part of this Report may be copied, photocopied, cited, or translated without our consent.