Alpha-Win Company Research Report
PCA(9629 TSE First Section)● SummaryIssued: 12/18/2018

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

Business Description
・PCA CORPORATION (hereinafter “the Company”) is an independent software manufacturer specialized inpackaged enterprise system software. It is a major specialized player in the industry.
・The Company was founded in 1980. Since then, it has been providing on-premises or cloud-based software
mainly to small- and medium-sized companies. The Company’s mission is to contribute to society as a“management-supporting company” that supports the smooth management and operation of other companies
mainly through the provision of enterprise system software that realizes high-level automatization.
Current Financial Results
・The Company is sharply recovering from a period of decreasing revenue, decreasing profit, and postings oflosses. In H1 of FY 2019, sales increased by 9.9% YOY and operating profit decreased by 44.1% YOY. In
addition to the sales for the highly profitable cloud business, sales for the labor management system and thesolutions business also increased. Meanwhile, profit decreased due to upfront investment costs associated withnew product development. However, both sales and profit beat the Company’s unofficial H1 targets.
・The Company has kept its initial forecasts for FY 2019. It plans to increase sales by 7.2% YOY (Y10,486 mil)and operating profit by 2.2% YOY (Y825 mil). Businesses such as the cloud and the labor management systemare expected to continue to drive growth, leading to increased sales and profit for the fourth consecutive year.
However, operating profit growth rate is expected to be small due to strategic upfront investment cost.
Competitiveness・The Company has a customer base of approximately 200,000 companies and is marked by its high brandrecognition and top-ranking market share in the fields of accounting and finance for small/medium-sizedcompanies. The Company’s cloud-based enterprise system software business in these fields is especially strong,ranking No. 1 in the industry as a pioneer of the business. The strengths of the Company are its ability to develop
products and services that meet various customer needs including those related to changes in tax and otherregulations, its stable customer base, and its ability to provide high-quality products and services at reasonable
prices.
Business Strategy
・As the basic business strategy for its corporate group, the Company aims to create a strong earnings base for its
main businesses (reinforce and increase sales of PCA Cloud and strengthen the on-premises business), create
new business opportunities, and strengthen the management system to become a highly profitable company.
・In the medium-term business plan announced by the new president, numerical targets for the final FY, or FY
2022, were set out as follows: Y11.5 bil or greater for sales (of which the sales for the subscription-based
businesses are targeted to be Y6 bil), Y1.5 bil or greater for operating profit, and 10% or greater for operating
margin (all consolidated figures).
Forecast on Financial Results・Upon evaluating the H1 results and H2 situation, Alpha-Win Research Dept. has judged that the Company’s
FY 2019 forecasts for sales and profits are conservative and has made an upward revision. Over the medium tolong term, although there will be upfront costs for investments such as business expansion and the strengtheningof organizational structure, we believe that sales and profits will generally continue to increase, judging from
how the cloud business is in a phase of continuous growth, if the effects of event-driven high demand (bothbefore and after the event) are evened out.

1/35
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 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. Intellectual property of thisReport 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
PCA (9629 TSE First Section)

Issued: 12/18/2018

Stock Price
・Stock price is strong, with an annual high recorded in December. Comparing valuation indicators with theaverage of the First Section of the TSE, the Company’s P/E, dividend yield, and P/B are slightly on the high side.
However, compared to its competitors, it has an undervalued impression regarding most valuation indicators.
Shareholder Return・To date, the Company has followed a stable dividend policy. When the Quo Card shareholder benefit plan istaken into account, the actual dividend yield increases to 2.5%. The Company plans to continue to enhanceshareholder return and improve the EPS while making stable dividend payments at a dividend payout ratio of
about 30%.

【 9629 PCA

Sector: Information & Communication 】 Figure A

FY
2016
2017
2018
2019
2019
2020
2021
2018
2019

CE
E
E
E
Q2
Q2

Sales

YOY

O.P.

YOY

R.P.

YOY

N.P.

YOY

EPS

BPS

Dividend(Y mil)%

(Y mil)%

(Y mil)%

(Y mil)

%

(Y )

(Y )

Y 

8,440
9,360
9,785
10,486
10,60011,30010,500
4,473
4,917

3.3
10.9
4.5
7.2
8.3
6.6
-7.1
7.7
9.9

40
432
807
825
875
1,200
830
436
244

957.9
86.8
2.2
8.4
37.1
-30.8
222.4
-44.1

66
463
834
842
900
1,220
850
459
268

593.6
79.9
0.9
7.9
35.6
-30.3
190.2
-41.7

-93
160
441
588
620
836
582
107
196

- -13.70 1,567.18- 23.49 1,568.59
174.1
64.37 1,644.39
33.5
85.95
40.6
90.51 1,704.11
34.8 122.06 1,795.41-30.4
84.98 1,849.66-10.9
15.63 1,597.74
83.0
28.61 1,699.55

31.0
31.0
31.0
31.0
31.0
31.0
31.0
-

(Note) CE = the Company’s estimate; E = estimate by Alpha-Win Research Dept. Q2 = cumulative through the second quarter.
All fiscal years discussed in this document are March-ending.
【 Stock Price and Valuation Indicators: 9629 PCA 】 Figure B
as of 12/14/2018

Item

P/E

Item 

P/B

Dividend Yield

Dividend Payout Ratio

Stock Price (Y)2,079

Last FY (actual)

32.3

1.3

1.5%

48.2%

Shares Outstanding (thou.)

7,700This FY (est.)

23.0

1.2

1.5%

34.3%

16,008

Next FY (est.)

17.0

1.1

1.5%

25.4%

Market Capitalization (Y mil)Dilutive Shares (thou.)

65.0% Last FY’s ROE

Equity Ratio at Last FY-End

0

3.9%

(Note) Estimates were made by Alpha-Win Research Dept.

Stock Chart (end-of-week prices) : 9629 PCA

Figure C

(Y)

2,500
2,400
2,300
2,200
2,100
2,000
1,900
1,800
1,700
1,600
1,500
1,400
1,300
1,200
1,100
1,000
900

(Note) From the 4th week of August 2016 to the 2nd week of Dec. 2018

 Performance
PeriodReturn vs. TOPIX
1 month-6.1%-1.5%
3 months
11.1%
26.9%
6 months
16.2%
26.5%
12 months
15.5%
32.0%

M

/Y

Y

/1
8

)

(Note) Stock price and index values asof 12/14/2018. Prepared by Alpha-Win
Research Dept.

(M

/1
8

10

/1
8

08

/1
8

06

/1
8

04

/1
7

02

/1
7

12

/1
7

10

/1
7

08

/1
7

06

/1
7

04

/1
6

02

/1
6

12

/1
6

Price relative to TOPIX (right axis)

10

08

1.70
1.65
1.60
1.55
1.50
1.45
1.40
1.35
1.30
1.25
1.20
1.15
1.10
1.05
1.00
0.95
0.90

Stock price (left axis)

2/35This 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 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. Intellectual property of thisReport 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
PCA (9629 TSE First Section)

Issued: 12/18/2018

Contents
1．Company Overview ............................................................................................................ P4
Major Specialized Player in the Enterprise System Software Industry ................................. P4
Business Philosophy .............................................................................................................. P5
2．Business Description and Business Model ....................................................................... P6
Enterprise System Software Necessary for Efficient Business ............................................. P6
Business Model with High Continuity and Marginal Profit Ratio ........................................ P6
Expansion of Highly Stable and Profitable Subscription-Based Businesses ...................... P7
Cloud Business as a Growth Driver ...................................................................................... P8
3．Shareholder Composition ................................................................................................ P10
Major Shareholder Composition ......................................................................................... P10
4．History of Growth ............................................................................................................ P11
Company History................................................................................................................. P11
Transition in Past Financial Results .................................................................................. P11
5．Business Environment...................................................................................................... P14
Market Trend for Enterprise System Software .................................................................... P14
Comparison with Competitors ............................................................................................. P15
6．This Fiscal Year’s H1 Results and Full-Year Forecast ................................................. P18
FY 2019 Q2/H1 Financial Results....................................................................................... P18
PCA’s Financial Results Forecast for FY 2019 H2............................................................. P19
PCA’s Financial Results Forecast for FY 2019 Full-Year .................................................. P21
Alpha-Win Research Dept.’s Financial Results Forecast for FY 2019 Full-Year .............. P22
7．Growth Strategy ............................................................................................................... P24
Management Indicator Goals and Areas of Focus............................................................... P24
New Medium-to-Long-Term Vision
PCA Vision 2030: 1st Stage – Medium-Term Business Plan to 2021 ........................... P24
Alpha-Win Research Dept.’s Financial Results Forecast for the Medium Term ................ P27
8．Analyst’s View .................................................................................................................. P28
PCA’s Strengths and Challenges ......................................................................................... P28
Shareholder Return and Shareholder Benefit Program ....................................................... P29
Factors that May Affect Stock Price.................................................................................... P31
9. Interview with the President ............................................................................................. P33
Q&A .................................................................................................................................... P33(Note) Upon translating to English, when the page numbers differed from the original Japanese version, they were
adjusted to those of the English version of the Report.
3/35
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
PCA (9629 TSE First Section)

Issued: 12/18/2018

1. Company Overview
w Major specialized player
in the industry with 38
years of practice,developing andproviding packaged
enterprise system
software forsmall/medium-sizedcompanies(1) Enterprise system: a part ofa company’s information
system that deals with matters
directly affecting business, suchas financial accounting,production control, sales andinventory control, purchases,
HR, and payroll. A generalterm for back-officeapplications. Also called themission-critical system, it serves
as an important core system for
operations/services.
w The Group is comprisedof the Company and 3
subsidiaries.
Consolidated to parent
company sales ratio has
stayed around 1.1.
w The Company’s fiscal
year ends in March (e.g.
FY 2019 ends in March2019).

◆ Major Specialized Player in the Enterprise System
Software Industry
PCA CORPORATION (hereinafter “the Company”) is an independent, midtier, specialized company in the software industry. The Company is a
specialist in developing and selling packaged software (software prepared foruse in certain operations) for enterprise systems1, such as those for accounting
and tax. It is a major player as a specialist of such software for small/mediumsized companies. About 200,000 companies are active users of theCompany’s products, with sales for ordinary companies comprising greaterthan 90% of total sales. With regards to the size of the customer companies,
the Company is especially good at business toward small/medium-sizedcompanies with 50 to 100 staff. 80% of the Company’s sales are via dealers(the remaining 20% are direct sales). It has the largest transaction with thedealer RICOH (sells the Company’s software along with its own hardware
such as office appliances), which contributes to about 18% of the Company’s
total sales. The Company’s customers are diversified, with major companies
as its largest customers by monetary value. The Company ranks No. 1 in theindustry in software for public benefit corporations, having installed softwarein over 8,000 corporations.
The Company’s group is made of a total of four companies: the Company andthree consolidated subsidiaries. The consolidated subsidiaries are Xronos Inc.
(development/sales of labor management system and time recorders; 80% of
shares owned by the Company), KEC Corporation (installation guidance,
operation, maintenance, and other services for PCA products/services;
wholly owned by the Company), and MACS System Corporation(development/sales of computer software for medical office use such as
electronic medical records; 80% of shares owned by the Company). The ratioof consolidated to parent company sales has stably remained around 1.1,
indicating that a greater weight is placed on the parent company’s financial
results (Figure 1). Although the subsidiaries’ profits and losses are notdisclosed, during the past seven years, the ratios of consolidated to parent
company recurring profit were in the range of 1.0-1.6 for the fiscal years that
the Company was in the black (including this fiscal year’s forecast).
Additionally, the summed profit and loss of the three subsidiaries, calculated
by consolidated minus parent company recurring profit, indicate a surplus(Figure 2).

[Figure 1] Ratio of Consolidated to Parent Company Sales (ratios shown on upper portion of graph)

4/35
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
PCA (9629 TSE First Section)

Issued: 12/18/2018[Figure 2] Ratio of Consolidated to Parent Company Recurring Profit (ratios shown on upper portion of graph)【 図表 2 】経常利益連単倍率（グラフ上部の数字が連単倍率、単位：倍）(Ref) Figures 1 and 2 were both prepared by Alpha-Win Research Dept. based on the securities report. Estimates (E) are from theCompany’s business plan.

w Founded by
Certified Public
Accountants in
1980
w Rich in cash anddebt-less

The name of the Company comes from the five founders who were Certified
Public Accountants (CPA); the letters CPA were shuffled into the meaningful
name P (Professional) C (Computer) A (Automation).
The Company’s finance is firm, rich in cash and debt-less. Considering thatits total asset is Y17.8 billion and market capitalization is approximately
Y14.4 billion, it has ample cash and deposits (Y6.9 billion). Its financial ratios,such as its equity ratio of 65% and current ratio of 278%, are also very sound(all values are as of the end of Sept. 2018).

◆ Business Philosophy
w The Group’s basic
business policy is to“aim for a morerational businesswith clear vision.”w The mission
statement is to“contribute to society
by developing andproviding packaged
enterprise system
software that realizes
advancedautomation.”

The Company’s business philosophy was announced as “customer-first”
when it made its first public offering in March 1994. Then, in 2010, theCompany laid out the three key ideas of the its business philosophy and 34
rules for the code of conduct and announced that the basic business policy for
its corporate group is to “aim for a more rational business with clear vision.”
The Company’s mission statement is to “contribute to society by developing
and providing packaged enterprise system software that realizes advanced
automation.” While its corporate culture is down-to-earth and homely, theCompany is also a pioneer in the conservative industry, conducting R&D andlaunching new products ahead of its competitors.
The following are the three key ideas of the Company’s business philosophy:
1) We will always make our best effort to be customer-first.
2) We will aspire to become a highly profitable company over the long termwith sound management.
3) We will treat our employees like family members and create a company
with a homely culture.

5/35
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
PCA (9629 TSE First Section)

Issued: 12/18/2018

2. Business Description and Business Modelw Enterprise systems
are mission-critical.
Stability andreliability are criticalelements since they
are used inside acompany.

◆ Enterprise System Software Necessary for Efficient
Business

The Company’s main business is enterprise systems that support internalbusiness operations. Unlike systems that simply work on personal computers,
an enterprise system is a computer system that supports a series of processes
throughout all business operation flows in a company. Since it is missioncritical for business operations, it is required to be reliable, efficient, stable,user-friendly, safe, and expandable.
The main ways for building an enterprise system are by package-based
system development and by original system development. Generally, themethod of taking packaged software that are already sold and combining
them into a system has advantages such as short development time, cheapness,and having relatively few bugs. On the other hand, as a disadvantage, it ishard to customize the system to a company’s business conditions, operations,management styles, and other specific needs.
For original software development and installment, outsourced development
and in-house development are the two options. In either case, the advantage
of an original system is that it is user-friendly since it can be customized to acompany’s needs and operations. However, development cost and time arelarger and longer, and it continues to need revisions, addition of functions,and maintenance after installment. Especially for micro-, small-, andmedium-sized companies, the development, installment, and operation oforiginal software are not easy due to financial, staff, and time constraints.

(2) Accounting software:
application software forrecording, processing, andmanaging accounting data
in an integrated way(3) HR and payroll
software: software forpayroll calculations andHR management

In response to these needs, the Company has been developing original
enterprise system software that especially meets the needs of individuals or
micro (SOHO)-, small-, and medium-sized companies in areas such asaccounting2, finance, HR and payroll3, sales management, purchasing andinventory management, tax, and medical and medical office work. The
enterprise system software is either packaged (on-premises: conventional
products operated in-house by a corporate customer) or cloud-based (aservice where the corporate customer can operate the enterprise system
software via the Internet easily and at a low cost without having to prepare its
own server). The enterprise system software is sold and distributed by direct
or indirect methods.
Additionally, the Company has not only been developing and sellingenterprise system software but has also been expanding its business byproviding consulting services based on solution proposals. With its
subsidiaries, the Company has also been providing various support services
such as maintenance service and installation/operation support. Goingforward, these businesses are to be further strengthened.

w Provides about 16
types of originallydeveloped packaged
enterprise system
softwarew About 70% of sales
come from original
products and services◆ Business Model with High Continuity and Marginal
Profit Ratio
The Company’s business model is based on a mass production of a few typesof products, providing about 16 types of software. Due to the nature of its
business, its marginal profit ratio is high. Its original products and services(products/maintenance/cloud) account for greater than 70% of total sales,
while the remaining 30% are from other companies’ products (purchased
goods) included in the goods/other categories (Figure 3).
From developing to selling a new product, approximately two years and
6/35

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
PCA (9629 TSE First Section)

Issued: 12/18/2018
corresponding amount of cost are necessary per product. Version upgrades(revision updates) are released usually in a one- to two-year cycle, although
this cycle is reconsidered as needed. In fact, in recent years, software
functions have become so enhanced that the customers’ purchasing in
response to this version upgrade cycle seems to be slowing down.
Since these types of software are related to operations that require highreliability, and since software replacements give rise to issues of cost, labor,
and data continuity, their users have little interest in actively or frequently
replacing their current software with an alternative of a different company.
Therefore, customer loyalty is high, and contracts have high repeat rates (50%
to 90% or greater depending on the type of software). The barrier to market
entry is high because trust and brand recognition are a must in this industry
and its companies are currently mostly able to exist alongside one another bytaking strong positions in different niches.

◆Expansion of Highly Stable and Profitable SubscriptionBased Businesses
Until FY 2016, sales and profit and loss were disclosed for the four businesssegments: “for ordinary companies,” “for non-profit organizations,”“medical,” and “cloud.” In FY 2017, all business segments became
consolidated. Sales are now disclosed for fives sales types (categories):“products,” “goods,” “maintenance service,” “cloud service,” and “otheroperating revenue” (also called “solutions”) (Figure 3). Profit and loss bysegment are no longer disclosed.
[Figure 3] Sales Classification by TypeSales Classification by Type

DetailSales of original packaged software (accounting, sales management, purchasing and inventory
management, payroll, HR, etc.) (includes version upgrades)
Goods
Sales of other companies’ products such as business forms
Maintenance Service By signing up to PSS membership, one can receive inquiry and support services from call centers
Cloud Service
Subscription service for software provided via the cloud
Sales of other companies’ products such as software/hardware combined with its original products;
Other Operating Revenue
also called “solutions”

Productｓ

Total & Average

FY 2018 (actual)% of Total Est. Gross
Sales (Y mil)
Sales
Margin1,954

20.0 approx. 40%

988
3,109
1,854

10.1 approx. 40%
31.8 80-90%
18.9 60-70%

1,87819.2 approx. 25%

9,785

54.5%

(Ref) Prepared by Alpha-Win Research Dept. based on the securities report and interviews. Includes estimated values.

w Subscription-based
maintenance and cloudbusinesses (“stockbusinesses”) accountfor about 50% of thetotal sales.

During FY 2018, the maintenance service had the greatest sales (Figure 3 andFigure 4), serving as a stable source of profit. In recent years, sales of thecloud service for packaged software have largely grown. The cloud service isbecoming a growth driver for the entire company with regards to both sales
and profits. Subscription-based revenue, which is the sum of the maintenanceservice and the cloud service, accounts for greater than 50% of total sales,
contributing to greater stability in management and profit. Both themaintenance service and the cloud service have a high gross margin andcontinuity.
On a consolidated basis, sales breakdown by software operation type is notdisclosed. However, sales seem to be diversified, with sales for “accounting
software” predicted to be the largest by composition (about 15% of total
sales), followed by “sales management and purchase & inventory
management,” and then by “payroll and HR” (“other including cloud”
comprises greater than 50% of total sales).
7/35

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
PCA (9629 TSE First Section)

w Shifting from salesbased to profit-based
internal managementof financial
performance and goals

Issued: 12/18/2018
Currently, as the Company’s primary internal management target, goals areset for software sales (or the sold number of products) by operation type.
Profit and loss by software operation type are not targets of management.
However, going forward, the Company will develop and establish aperformance management indicator for each internal organizational unit, etc.,
and make a transition from sales-based management to profit-based
management. The Company has commented that the profit/loss values foreach software operation type are not greatly different from one another, but
the main accounting software business is assumed to be generally highly
profitable. Meanwhile, the business for medical software and related products,
which was started at a later stage, is thought to be less profitable than othersoftware due to upfront investment costs such as marketing and development
expenses (past disclosures indicate posting of a loss for this business, butcurrently no information is disclosed). The percentage of new software sales
or version upgrade sales in the total sales changes every year, but thepercentage of version upgrades is always greater than 50%. As a side note,
the Company’s on-premises tend to be installed and used by users on a single
PC (stand-alone).

[Figure 4] Change in Sales and Sales Breakdown (unit: Y mil, %)Cloud
Solutions
Products

104.5%
9,360

8,440
2,069

8,000

1,767
854

6,000

1,639

955
1,740

4,000
3,026

YOY Change % of Total Sales

3,098

9,785
1,954
988

94.4%
103.5%

1,878

107.9%

3,109

100.4%

123.9%

49.3%

50.7%

2,000
1,152

1,496

1,854

FY 2016

FY 2017

FY 2018

0

One-Time-Fee-Based Subscription-Based
IncomeIncome10,000

MaintenanceGoods(Ref) Excerpt from the Company’s financial results briefing and supplemental materials, reworked by Alpha-Win Research Dept.

◆ Cloud Business as a Growth Driverw Shifting frompackaged to cloudbased software

w Drastic growth of thecloud: awakening of
the sleeping beast PCA

Until recently, the Company had focused its business on conventional
packaged software, also known as on-premises. However, as the Internet
became more sophisticated and more widely used, the Company expectedthat demands for the cloud would become greater due to its usability and cost
performance. Therefore, since 2008, the Company has been providing on thecloud the same software as the on-premises, more than ten years ahead of its
competitors. This cloud business, where customers pay fees continuously fora certain period of time to use the software, is attractive as a stable,
subscription-based business model, similar to the maintenance service. The
Company has lately been focusing its business on the cloud service, and thenumber of contracts as well as sales has been growing steadily (Figure 5). As
the cost of this cloud business is nearly fixed, with small variable costs suchas those related to manufacturing, selling, and logistics, this business has ahigh marginal profit ratio.
8/35

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
PCA (9629 TSE First Section)

Issued: 12/18/2018

w The rapidly growing

The Company leads the industry as No. 1 in cloud-based enterprise system
software for small/medium-sized companies. The following advantages makethe Company stand out from its competitors. Its competitors have also begun
their full-scale entry into the cloud market in recent years (2017-2018) as theirfirst year of cloud, but the Company is expected to stay advantageous for the
meantime.

cloud is based on a
subscription-based,stable business model.
Taking a lead in theindustry, the Company
has a competitive
advantage.

・ Providing a wide variety of advanced software for business operations
・ Originally-developed open architecture and low cost・ Economies of scale are in effect, with more than 11,000 companies alreadyusing cloud as customers, contributing to the Company’s profit
・ Consequently, it has a strong price advantage compared to its competitors
・ Ten years’ worth of operation know-how
・ User-friendly, with WebAPI4 allowing linkage with other companies’
cloud (already linked with about 60 companies, including Kintone5 ofCybozu)(4) API (Application
Programming Interface):interface/network to
operate software; connects
the software and theprogram.
(5) Kintone: cloud service
for building business app on
web database, provided by
Cybozu. Allows easy systembuild-up and linkage withother systems.

[Figure 5] Transition in the Number of Companies that Implemented PCA Cloud andSales of PCA Cloud
14,0002,500

Sales of cloud service (right axis: Y mil)
12,000# of companies that implemented PCA Cloud(left axis: companies)

2,000

10,000

1,500

8,000

6,000

1,000

4,000
500
2,000

0

0

FY
2008

FY
2009

FY
2010

FY
2011

FY
2012

FY
2013

FY
2014

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019
(E)

(Note) Sales for FY 2008 to FY 2010 have not been disclosed.

(Ref) Prepared by Alpha-Win Research Dept. using information including those from the Company’s financial results briefing materials andinterviews. (E) represents estimates made by Alpha-Win Research Dept.

w 製品開発は、あたり約年の期間と億円の開発費を
要する。

9/35
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
PCA (9629 TSE First Section)

Issued: 12/18/2018

3． Shareholder Compositionuw No change in the top

shareholders. New
shareholders for theeighth and tenth place
under the name of trustbanks.

w The largest shareholder

is an asset managementcompany of thefounder’s family. OBC,
its rival, is also a major
shareholder.

Major Shareholder Composition

Major shareholders as of the end of September 2018 are shown on Figure 6.
Compared to the end of March 2018, the composition has not largely changed.
Two trust banks newly replaced KBL PB 7704 (assumed to be an European
investment fund) and APPLIED SYSTEM LABORATORY Inc. as theeighth and tenth largest shareholders.
・ The largest shareholder Kawashima Co., Ltd.: the asset managementcompany of two directors of the Company (president Sato and Mr.
Kumamoto) and their relatives (descendants to the founder Mr. Kawashima).
・ The second largest shareholder (excluding treasury stock; the same
applies to the rest of the ranking) State Street Trust and Banking Company
505001: most likely a fund but its investors are unknown. Also invests at
below 5% in several other Japanese small/mid-caps.
・ The third largest shareholder Obic Business Consultants Co., Ltd. (OBC):
a competitor with no transaction with the Company. Mr. Shigefumi Wada,
the fourth largest shareholder, is the current president of OBC. In either case,their purposes are unknown.
・ The sixth largest shareholder Mizuho Bank, Ltd.: probably for the purposeof cross-shareholding.
・ The seventh largest shareholder Logic Systems Co., Ltd.: unknown
purpose.
・ The ninth largest shareholder Nagoya PCA Co., Ltd.: the company towhich software development (SHOKON and other products of the Company)
is outsourced.

[Figure 6] Major Shareholders’ Status(Ref) Prepared by Alpha-Win Research Dept. based on the securities report.
Note: the official English name could not be verified for some.

Unit: thou. shares%

End of Mar.
2015

End of Mar.
2016

End of Mar.
2017

End of Mar.
2018

End of Sept.
2018% of Total Shares

―
848
244
254
110
181
121
114

―
848
249
254
119
181
121
114

2,935
848
266
254
127
181
121
114

2,935
848
266
254
127
151
121
114

2,935
848
266
254
145
125
121
114
108
100
98

42.86
11.01
3.89
3.70
2.11
1.82
1.76
1.66
1.58
1.45
1.43

Kawashima Co., Ltd.
PCA CORPORATIONState Street Trust and Banking Company 505001
Obic Business Consultants Co., Ltd.
PCA Employee Stock Ownership Plan
Shigefumi Wada (individual)
Mizuho Bank, Ltd.
Logic Systems Co., Ltd.
Trust & Custody Services Bank, Ltd. (investment trust account)Nagoya PCA Co., Ltd.
The Master Trust Bank of Japan, Ltd. (trust account)
KBL EPB S.A. 107704
APPLIED SYSTEM LABORATORY Inc.
Reiko Sato (individual) Heir to the founder Mr. Kawashima
Tomoko Kumamoto (individual) Heir to the founder Mr.Kawashima
Hiroko Wada (individual)(Treasury shares)

―

100

100

100

―
―
1,467
1,467
358
848

―
―
1,467
1,467
―

―
86
―
―
―
848

90
86
―
―
―
848

849

(% share of treasury shares)

11.02

11.1

11.1

11.0

Ranking

There has been almost no change in the amount of treasury shares for several
years, accounting for about 11% of the outstanding shares. The largest
shareholder Kawashima Co., Ltd. has stated that it intends to sell its shares(approx. 220,000 shares; 2.86% of the outstanding shares), which theCompany plans to acquire by a tender offer. By this acquisition, the Company
will possess a total of 13.9% of its own shares.
As of now, the Company has not decided on how to make use of thetreasury shares in the future, but some possibilities include using a portion
for director or employee remuneration, cancellation of stock, and stockswap in a tie-up or an M&A.
10/35
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.

1
―
2
3
4
5
6
7
8
9
10

Alpha-Win Company Research Report
PCA (9629 TSE First Section)

w Founded in recognitionof the importance andpromising future ofcomputer and enterprisesystem software
businesses in Japanw With a pioneering spirit,
became the first to
begin cloud services in
the industry(6) SaaS (Software as aService): software where, as aservice, one can use thenecessary function in thenecessary amount whenneeded; or the method ofproviding such service.
Instead of the user installingthe software, the vendor
operates the software andprovides the necessaryfunction to the user via a
network.
w Changed its market
from the Second to theFirst Section of the TSE
in Dec. 2014
w Increased sales over thelong term. No
significant change in
profit.

Issued: 12/18/2018

5． History of Growth◆ Company History
A group of five Certified Public Accountants with the late Mr. Kawashima as
its leader founded the Company in 1980 in recognition of the importance andthe promising future of computer and software businesses in Japan. At first,
they developed and sold business accounting software for small businesscomputers. In 1995, in anticipation of making transition from small businesscomputer users in the future, the Company officially began the development
and marketing of packaged software for personal computers (PC). Then, withthe emergence of the PC era, the Company grew thanks mainly to thefollowing four efforts: 1) greater variety of and version upgrades for domestic
packaged software, 2) expansion of the maintenance service, 3) developmentof the cloud business, and 4) expansion of the solutions business which
includes the providing of other companies’ products. Furthermore, theincreased number of offices, cooperation with manufacturers and dealers, anddevelopment of a nationwide sales/support system helped rapidly expand its
business. The Company is also seen as a pioneer in the rather conservative
industry, as it was the first in the industry to begin providing cloud services(SaaS6) in 2008.
As for the three consolidated subsidiaries, KEC Corporation was founded in
1998, MACS System Corporation was made its subsidiary in 2008, andXronos Inc. was founded in 2001.
Regarding shares, the first public offering was made in 1994. The Company
was then listed on the Second Section of the TSE in 2000 and then the First
Section in 2014. Upon being listed on the First Section of the TSE, theCompany changed its logo to the current one.

◆ Transition in Past Financial Results
Since foundation until now, the Company has been expanding its business asa specialist in the development and marketing of enterprise system softwareand related businesses, as described above. The transition in financial results
since its first public offering is described on Figure 7. Supplemental
information on the financial results is as follows, in chronological order:
・Aside from certain periods such as the post-Lehman economic downturnand the market recoil from the high demand stimulated by revisions in tax
and other regulations, the Company has generally kept increasing sales since
1994. On the other hand, no significant improvement was made in profit,
being unable to maintain or raise the level of profit that it had once achieved.

w Achieved record-highsales of Y10 billion in2014 thanks to eventdriven high demand.

・ Consecutively decreasing sales and profit from FY 2001 to FY 2002
occurred due the economic downturn and the market recoil from the highdemand driven by the year 2000 problem.
・The four consecutive decreases in sales from FY 2007 to FY 2010, as wellas the seven consecutive decreases in profit from FY 2007 to FY 2013, werecaused by decreased demand (due to the post-Lehman economic downturn,etc.), increased HR/R&D/advertising expenses, and decreased profitability
caused by intensified competition.
・In FY 2014, record-high sales (Y10,475 million) were achieved thanks to
the high demand driven by two events: the termination of Windows XP
support (support ended in April 2014) and the change in consumption tax(from 5% to 8% in April 2014). The large growth of the cloud service also
contributed to the record-high sales.
・Decreased sales in FY 2015 is explained by the market recoil from the high
11/35This 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
PCA (9629 TSE First Section)

Issued: 12/18/2018
demand driven by the two events as described above. Since FY 2016, theCompany has been increasing its sales again thanks to the continued growthof the cloud, new products, strengthened sales force, and economic recovery.

[Figure 7] Long-Term Transitions in Financial Results(Ref) Prepared by Alpha-Win Research Dept. based on the securities report. Estimate (E) for FY 2019 is from the Company’s business plan.

w Record-high operating
profit and recurring
profit in FY 2006

With regards to earnings, record-high net profit (Y937 million) was achieved
in FY 2000, having benefitted from the high demand driven by the year 2000
problem. Additionally, in FY 2006, record-highs were achieved for operating
profit and recurring profit (Y1,747 million and Y1,783 million, respectively).
Demand stimulated by the revised accounting regulation for public benefit
corporations and by the drastic changes caused by the new Companies Act,as well as the Company’s ERP (integrated enterprise system) product Dream21, contributed to these record-highs in 2006.
The Company’s gross margin and operating margin had been gradually
decreasing for a long time (Figure 8). Gross margin declined due to increased
price competition from intensified competition among packaged softwaredevelopers during the economic downturn, worsened product mix from a risein the percentage of other companies’ less-profitable products, and higher
costs, mainly in labor costs, production expenses (subcontractor costs), andR&D costs.

12/35
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
PCA (9629 TSE First Section)

Issued: 12/18/2018[Figure 8] Long-Term Transition in Gross Margin and Operating Margin(Ref) Prepared by Alpha-Win Research Dept. based on the securities report. FY 2019’s values are estimates (E) by the Company.

w Net loss recorded fortwo consecutive years
in recoil from past
event-driven highdemandw From FY 2016, began
to consecutively raisesales/profit and stay inthe black, thanks to
new products, growthof the cloud, and cost
reduction. Improved
operating margin.
w Experiencing positiveeffects from thestructural reform

Despite efforts to cut down on cost, losses were consecutively recorded forthe full-year results in FY 2015 and FY 2016 (net loss for the year: -Y207
million in FY 2015 and -Y93 million in FY 2016), affected by decreased sales
in response to the market recoil from the event-driven high demand as
described above and to the postponed revision of consumption tax to 10%.
However, since FY 2016, the Company has been increasing sales again. The
decline in gross margin is starting to stop, and operating margin has bottomedout and began to gradually increase thanks to increased sales for the new
products and the cloud and cost reduction. In recent years, the Company has
been pushing forward with a structural reform including the disposal ofexcessive assets with impairment risk (real estate and securities) andshortening of software amortization, and has started to see positive effects
from them. While domestic sales have been dwindling just below Y10 billion,
cost reduction and sales growth of the cloud and maintenance services have
led to the Company’s recent success in the growth and recovery of its
financial performance (Figure 8). Since FY 2017, the Company has been
continuously making and increasing profit. In FY 2018, it achieved recordhigh sales for the third fiscal year in a row and a significant increase in profit.

13/35
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
PCA (9629 TSE First Section)w Decreasing number ofsmall/medium-sizedcompanies (potential
users) in Japan(7) Small-sized company:
diff. definition by eachindustry, but essentially thesame as “small/mediumsized companies” in staff
size and sales

Issued: 12/18/2018

6． Business Environment◆Market Trend for Enterprise System Software
The number of companies in Japan is on a downward trend, falling below
four million companies (Figure 9). The number of small/medium-sizedcompanies is especially declining because of small-sized companies7 closing
their businesses. With the decreasing population and aging society of Japan,
the total number of small and medium-sized companies – the Company’s
customers – is not likely to experience a large increase. As a side note, thetotal number of companies as of June 2016 was approximately 3.87 million,
slightly greater than the year 2014 by 50,000 companies (+1.3%).

[Figure 9] Change in the Number of Domestic Companies
Ten thou. companies

4.21 milcompanies

500-0.39 mil companies
3.82 milcomanies

400

300

423

410

378

366

367

53

54

200

334

Small-sized

325

100
Mid-sized

0

61
1999

59
2001

55
2004

2006

2009

56

51
2012

2014
(year)

Largesized

1.1(Ref) The “2016 Economic Census for Business Activity” by the Ministry of Internal Affairs and Communications and the Ministry of
Economy, Trade and Industry and the “2017 White Paper on Small and Medium Enterprises in Japan” by the Small and Medium
Enterprise Agency

Meanwhile, facing necessities for manpower, operational efficiency, andimproved corporate financial results, companies and other corporate bodies
are starting to rebuild or reinforce their enterprise systems. Alpha-Win
Research Department forecasts that the size of the relevant market will
steadily increase along with increasing demand for software to streamline
business operations.
According to the “WHITE PAPER Information and Communications inJapan” by the Ministry of Internal Affairs and Communications, the size ofthe packaged software market (excluding game software, embedded software,etc.) in 2015 was approximately Y1.1 trillion and its size has been gradually
increasing in recent years.

w Stably growing
enterprise system
software market.
Transitioning from onpremises to the cloud.

Alpha-Win Research Department estimates Japan’s current market size forenterprise system software specifically related to the Company’s business to
be approximately Y500 billion and for ERP to be approximately Y100 billion.
Annual growth rate is forecasted to be about 3% for the former and 10% for
the latter over the medium term. The cloud-based enterprise system software
market is expected to have an especially high annual growth rate of 20-30%
over the long term, replacing a part of the packaged software (on-premises)
market. In fact, compared to the U.S. where the cloud-based enterprise system
software market is several years ahead of Japan, the penetration rate of such
14/35

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
PCA (9629 TSE First Section)

w Market potential for

cloud-based enterprisesystem software in
Japan continues to begreat.

Issued: 12/18/2018
system in Japan is ½ to ⅓ of that of the U.S. (ref: “WHITE PAPER
Information and Communications in Japan” by the Ministry of Internal
Affairs and Communications, etc.). With regards to the software development
method in Japan and the U.S., outsourced development continues to be
popular in Japan. In fact, the share of packaged software in Japan is about
12%, which is about a quarter of the share in the U.S. (Figure 10).
Consequently, the growth potential of the packaged software market in Japan
seems great (according to the year 2017 version of the “WHITE PAPER,” thepenetration rate of the cloud in Japan is approximately 26% in “payroll /financial accounting / HR” and only 6-8% each in “production management/ logistics management / store management,” “purchasing,” and “sales onorders”).
Japan

USA

[Figure 10] Software Ratio in Japan and the USA(Ref) Ministry of Internal Affairs and Communications: “Reporton Current Status of Japan’s ICT”

Packaged
11.7%

Packaged46.2

Outsourced
development
68.3%

Outsourced
development
53.6%◆Comparison with Competitors
Figure 11 portrays an overview of the various positions and main players in
the industry, categorized by target customer. The players in the industry aremostly able exist alongside one another by taking strong positions in different
niches, segregated by the size of the company/organization that are their users
or by the operation targeted by the software.
[Figure 11] Customers and Main Players of the Enterprise System Software Market(Ref) The Company’s financial results briefing material
Note: the official English name could not be verified for some.

15/35
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
PCA (9629 TSE First Section)w Its key product, theaccounting software, isthird in the industry.

w OBC, MJS, Yayoi, and

OHKEN are its rivals.

Issued: 12/18/2018
The Company has different rivals for each type of operation targeted by thesoftware. In general, its rivals among listed companies regarding businessincluding its key accounting software are thought to be Obic Business
Consultants (OBC: 4733), directly, and Miroku Jyoho Service (MJS: 9928),
indirectly. OBC is the greatest competitor, since it has a similar productlineup and business model as the Company. Among unlisted companies,
Yayoi (subsidiary of ORIX), OHKEN (independent company), and OSK(subsidiary of OTSUKA CORPORATION) are its direct competitors.
The accounting software market size is approximately Y200 billion. The
market is reaching maturity and its size should not largely change. The
Company is estimated to be third from the top in the market (about 10% of
total market shares). The Company seems be at a similar level of market shareand position for its payroll and HR software. Money Forward and freee alsojoin in as rivals in the cloud market.
A characteristic of the Company is that it provides high quality but reasonably
priced products and services to its customers.

w Each of the profit
margins have bottomedout and began toincrease due toimproved gross marginand cost reduction,
while leaving room for
improvement in profit
margins and asset
efficiency.

A comparison of the long-term transition in gross margin and operating
margin of the three major listed companies (the Company, OBC, and MJS) is
shown on Figures 12 and 13. Compared to the Company, both OBC andMJS’s margins are stable, perhaps due to the merit of scale (the sales of both
OBC and MJS are more than two times greater than the Company’s, and theiroperating profits are about twelve times and five times greater, respectively),
the difference in efficiency, and the difference in sales composition. Bothcompanies used to have a lower proportion of users signing a contract for the
maintenance support service, but succeeded in raising this ratio, leading togreater earning capacity. However, the Company’s profit margins have alsobottomed out in recent years, now aiming for greater earning capacity.
Similarly, looking at the transition in the Company’s ROA and ROE on
Figure 14, the Company seems to have room for improvement in earning
capacity as well as asset efficiency.

[Figure 12] Long-Term Transition in the Gross
Margin of Three Major Listed Companies(PCA, OBC, and MJS)

(Ref) Figures 12-14 were prepared by Alpha-Win’s Research Dept. based on the securities
report, and their estimates (E) are from the Company’s business plan.

16/35
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
PCA (9629 TSE First Section)

Issued: 12/18/2018[Figure 13] Long-Term Transition in the Operating Margin of Three Major Listed Companies(PCA, OBC, and MJS)

[Figure 14] Transition in the Company’s ROA and ROE

17/35
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
PCA (9629 TSE First Section)

Issued: 12/18/2018

6 ． This Fiscal Year’s H1 Results and FullYear Forecast

w For the H1 results,
sales increased for thethird consecutive
fiscal year and hit arecord-high, but profit
decreased due todevelopment expense
for the new product.
However, profit did
exceed the Company’s
target (undisclosed).

◆ FY 2019 Q2/H1 Financial Results
Consolidated financial results for FY 2019 Q2 (hereinafter “H1”) were as
follows: Y4,917 million in sales (+9.9% YOY), Y244 million in operating
profit (-44.1% YOY), Y268 million in recurring profit (-41.7% YOY), andY196 million in net profit attributable to owners of the parent (+83.0% YOY;
hereinafter “net profit”) (Figure 15). Overall, sales increased and profit
decreased (Figure 15). The Company has not disclosed a financial result
forecast for H1, explaining that since “the final target for profit will beachieved by controlling the expenses, making a forecast for the upper half isdifficult.” However, it did make a comment that it has beaten its initial H1targets for both sales and profit.

w The cloud was thegrowth driver for both
the Company’s sales
and profits.

Thanks to the steady growth of the sales for the cloud and the solutions
businesses, H1 sales hit an all-time-high. The number of corporate users of
PCA Cloud increased by about 1,300 in nine months from 10,000 on Jan. 11,
2018, to 11,331 at the end of Sept. 2018 (net gain of about 153 companies permonth). This is a fast-paced increase, since it has generally taken the
Company 12 months to achieve the same increase in the past. As a result,sales for the cloud increased largely by 29.6% from Y871 million last H1 to
Y1,129 million this H1. The share of sales of the subscription-based
businesses (maintenance service + cloud), an important indicator for theCompany, was 54.6%, having risen 3.9 points from 50.7% at the end of
March 2018 (Figure 16).

(8) Labor management
system: also called theattendance management
system, it manages/utilizes
various info on working
hours. Can automaticallyaggregate data on working
hours, etc., and prepare
data to link with payroll
software. Provided as onpremises or by cloud.

Thanks in part to the Work-Style Reform, sales of the subsidiary Xronos’labor management system8 increased by about 20%, which also led to thegrowth of implementation coaching fees, etc., and resulted in a 20.7%
increase in sales for the solutions business. Sales for the other categories –
maintenance, goods, and products – stayed about the same (Figure 17).

[Figure 15] FY 2019 H1 Financial Results(unit: Y mil, %)Consolidated Results

SG&A Expenses
SG&A-to-Sales Ratio

Operating Profit
O.P. Margin

Recurring Profit
R.P. Margin

Net Profit
Attributable to Owners of the Parent

N.P. Margin
Net Profit Per Share

ActualActual

4,473
2,584

4,917
2,714

444
130

57.8%

55.2%



2,147

2,470

48.0%

50.2%

436

244

9.7%

5.0%

Diff.

323

(Y mil)

FY 2019

Progress
Rate
Full-Year%
Forecast
109.9%
10,48646.9%
105.0%
5,822
0.0%

55.5%

115.0%

4,997



+2.2

47.7%

(192)

-44.0%

825



-4.7%

7.9%

459

268

(191)

-41.6%

842

10.3%

5.5%



-4.8%

8.0%

107

196

89

183.0%

588

2.4%

4.0%



1.6%

5.6%

Y15.63

Y28.61

Y12.98183.0%

Y85.95

6,000

Cloud

Maintenance

Solutions

Goods

Products
5,000

4,000

49.4%

844



104.7

45.4%

54.6%

390

373

120.7

1,031
854

2,000

1,553
1,537

33.3%

812

693
361

31.8%

4,917

823

3,000

29.6%

% of Total Shares

109.9

4,473
4,153

46.6%

YOY Change

Subscription-Based
IncomeGross Margin

YOY Change

One-Time-Fee-Based
IncomeSales
Gross Profit

Apr - Sep Apr - Sep
2017
2018

[Figure 16] Change in H1 Sales(unit: Y mil, %)

100.2

1,550

1,000

716

871

Apr-Sep 2016

Apr-Sep 2017

1,129

129.6

0

Apr-Sep 2018

(Ref) Figures 15–18 were prepared by Alpha-Win Research Dept. based on excerpts from the FY 2019 Q2 financial results briefing materials.

18/35
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
PCA (9629 TSE First Section)

Issued: 12/18/2018
Gross profit increased by 5.0% YOY, but gross margin decreased by 2.6 pts
from 57.8% last H1 to 55.2% this H1 due to increased software amortization,
cost of goods purchased, cost of sales for the cloud, and maintenance cost for
the existing on-premises products. Increased sales for the cloud and solutions
contributed to profit, but due to the additional Y220 million in R&D expense
mainly for the new product Hyper (descried later), operating profit decreased
by Y192 million YOY to Y244 million (Figure 18). However, since theCompany sold its investment securities to improve asset efficiency, leading
to an extraordinary gain of Y63 million, net profit increased by Y89 million
YOY (83.0%) to Y196 million.

[Figure 17] Factors that Increased/Decreased Sales in FY
2019 H1(unit: Y mil, %)[Figure 18] Factors that Increased/Decreased Operating
Profit in FY 2019 H1(unit: Y mil)

(Y mil)(Y mil)

5,000

1000

Increase

177

Decrease

4,917

Increase

444

900

4,900

Software amortization
Cost of goods purchased
Cost of sales for the cloud
Manufacturing cost (maintenance)

800
4,800

257

700

4,700

-68
-73
-84
-82

600
Coaching fee,
etc.
+102
Other +75

4,600

4,500

Decrease

17

4,473

500

3

-314

436

-11

400
300

-10
4,400

PCA
Xronos

244

-220
-91

200

+194
+63

4,300

100
0

4,200
FY 2018 Q2

Products

Goods

Maintenance

Cloud

Solutions

FY 2019 Q2

FY 2018 Q2

Increased Sales

Increased Cost of
Purchases and Costof SalesIncreased HR
ExpenseIncreased R&D
ExpenseOther

FY 2019 Q2◆ PCA’s Financial Results Forecast for FY 2019 H2
In H2 (on a YOY comparison), the Company expects sales to increase by
Y257 million (+4.8%) to Y5,569 million, operating profit to increase by Y203
million (+54.7%) to Y573 million, and net profit to increase by Y54 million(+16.2%) to Y387 million (Figure 19).
The factors that are expected to increase sales are described on Figure 20. The
cloud is expected to continue to be the growth driver. The Company expects
sales of the products (on-premises) to increase by Y173 million, a somewhathigh estimate, in anticipation of events such as the campaign before theupward revision of consumption tax to 10%. Meanwhile, although H1 sales
exceeded the target, the full-year forecast for sales has not been changed. Thisis because the forecast for this fiscal year’s H2 sales for the solutions businesshas been held down at a conservative value – its sales are expected to decreaseby Y125 million YOY. As for the profit, in addition to the effect of increased
sales, the largest contributor is expected to be the improvement of gross profit
from 51.8% last H2 to 55.7% this H2 (+3.9 pts YOY). The Company expects
this improvement to occur since a little less than Y400 million’s worth ofsoftware was amortized at once during last fiscal year’s H2 mainly to improve
the financial soundness; in consequence, this expense will largely decrease
this H2. Also, the SG&A expenses are expected to increase by Y127 million
YOY (5.3%) mostly because of the Y158 million increase in the R&D
expense for next-generation products. The increase in sales will, however,offset this increase in expenses and maintain the SG&A-expenses-to-sales
ratio at just a slight increase (Figure 21).
During H2, the Company plans to hold a campaign for the on-premises before
19/35
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
PCA (9629 TSE First Section)

Issued: 12/18/2018
the increase in consumption tax, provide version upgrades, and launch thenew product Hyper Series9. In considering the launch date and the software
lineup (after Feb. 2019, each type of software will be sequentially launched,
starting with the accounting and fixed assets software), the actual contributionof the Hyper Series to financial results will probably start next fiscal year orlater.

(9) PCA Hyper: a newsoftware product for mediumsized companies as successor
to Dream21. Targets theapprox. 90,000 companies inJapan with sales of 1 to 10
billion yen, less than or equal
to 1,000 employees, and lessthan 10 subsidiaries in thecorporate group. A superiorversion of the DX Series. Its
unique features are how theuser can flexibly selectbetween the on-premises andthe cloud according to theirstage of growth, make flexible
linkage with other systems
using API, and streamline data
management for the entire
corporate group (consolidated
accounting).

[Figure 19] Financial Results Forecast for FY 2019 H2(unit: Y mil)Consolidated
Sales
Gross Profit
Gross Margin

SG&A Expenses
SG&A-to-Sales
Ratio

FY 2018
H2

FY 2019 H2

ActualForecast

51.8%

55.7%



3.9

2,380

2,507

127

105.3%

44.8%

45.0%



0.2

370

573

203

154.7%

7.0%

10.3%



3.3

374

566

192

151.3%

7.1%

10.2%



3.1

333

387

54

116.2%Net Profit
Attributable to Owners of the Parent

N.P. Margin

Net Profit per Share

%

5,569
3,100

Recurring Profit
R.P. Margin

Diff.

5,312
2,751

Operating Profit
O.P. Margin

YOY Change

257
349

104.8%
112.7%

6.3%

6.9%



0.6

Y48.7

Y56.5

Y7.8

116.2%(Ref) Figures 19-21 were prepared by Alpha-Win Research Dept. based on excerpts fromthe FY 2018 Q2 financial results briefing materials.

[Figure 20] Factors Expected to Increase/Decrease Sales
in FY 2019 H2(unit: Y mil)
(Y mil)

[Figure 21] Factors Expected to Increase/Decrease
Operating Profit in FY 2019 H2(unit: Y mil)
(Y mil)1000

5800
Increase

Decrease

124

900

5700

5,569

80

5600

173

5500

5

800
700

-125

Increase

Decrease

110

2

257

15

573

Other

FY 2019 H2Target

600

-158

500

5400

5,312

400

5300

370
Dec. software amortization
Inc. cost of sales of the cloudInc. manufacturing cost

300
5200

200

5100

300
-60
-110

100
0

5000
FY 2018 H2
Actual

Products

Goods

Maintenance

Cloud

Solutions

FY 2019 H2TargetFY 2018 H2
ActualIncreased
Sales

Decreased HR Expense Increased
Cost of Sales
R&D Expense

20/35
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
PCA (9629 TSE First Section)

Issued: 12/18/2018◆ PCA’s Financial Results Forecast for FY 2019 Full Yearw The Company keeps

the initial forecast forthis FY. It expects
increased sales andprofit for the 4th
consecutive year due
to the sales of thecloud andmaintenance. For
sales, a record-high is
also expected for thefull year.

w Due to upfront
investment, O.P. and
R.P. growth rates will
be small. However,with the extraordinary
gain, net profit isexpected to increaseby 30%.
(10) ERP (integrated
operation): stands forEnterprise Resource
Planning. Management
concept based on the
integration and real-timeprocessing of core businessinformation to efficiently
optimize the whole.
Provided as IT solutions
software for integrating
enterprise systems.

Although H1 results were great, the Company did not revise its initialfinancial results forecast for FY 2019 made at the beginning of the fiscal year
since it believes that in order to make a revision it would need a clearer viewof the Q4 results, which contributes to a large portion of the full-year results.
Indeed, the simple average for the share of Q4 (January through March) in
the full-year financial results for the past 13 years was 30.7% for sales and30.4% for operating profit. The initial forecast, which the Company keeps, isas follows: Y10,486 million in sales (+7.2% YOY), Y825 million in
operating profit (+2.2% YOY), Y842 million in recurring profit (+0.9%
YOY), and Y588 million in net profit for the year (+33.5% YOY).
The Company aims to increase sales in all categories (by type), by +Y701
million in total. The breakdown of this sales increase in descending order is
as follows: Y380 million by “cloud services” (+20.5% YOY), Y161 million
by “products” (+8.2% YOY), and Y82 million by “maintenance service”(+2.6% YOY) (Figure 22). The Company expects sales to increase due tocontinued growth of the cloud service (especially the accounting software)and the labor management software (categorized under “products” and “cloudservices”; managed by the subsidiary Xronos), high demand for the products
driven by early-bird campaigns planned to be held prior to the consumption
tax revision, and new products (will launch the Hyper Series, a cloud-based
product for medium-sized companies, etc., as the next-generation product for
the ERP10 software Dream21 which the Company has decided to eliminate
from its product lineup within five years). Especially since new orders forlabor management software have been increasing especially briskly due tothe Work-Style Reform, the Company expects to see a double-digit sales
growth.
[Figure 22] Factors Expected to Increase Sales in FY 2019 for the Full Year
(company plan)(unit: Y mil)
11,000
Increase

Decrease

10,80010,600380

54

10,486

Solutions

FY 2019
Target10,400
10,200161

10,00021

82

9,785
9,800(11) In the figure showing
the factors contributing to
YOY change in operating
profit, there are some parts
where the total of the actual
result for H1 (Figure 19) +the target for H2 (Figure21) does not match theinitial full-year forecast(Figure 23). Thisphenomenon is thought tobe caused by the differencein the date or the
categorization standard
used in the allocation of
expenses, etc.

9,600
9,400
9,200
9,000
FY 2018
Actual

Products

Goods

MaintenanceCloud(Ref) Excerpt from the Company’s FY 2018 financial results briefing materials, reworked
by Alpha-Win Research Dept.

Regarding profit and loss, the gross margin is expected to improve by 1.0
point from 54.5% last H2 to 55.5% this H2 owing to increased sales in thehighly profitable cloud business and cost reduction. Consequently, grossprofit should also increase by 9.1% YOY. On the other hand, SG&A expenses
are expected to increase by 10.4% YOY due to the upfront investment for
future growth (+Y146 million in R&D expense and +Y140 million in HR
21/35

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
PCA (9629 TSE First Section)

Issued: 12/18/2018
expense planned)11 (Figure 23). As a result, the Company expects operating
margin to slightly worsen from 8.2% last fiscal year to 7.9%, only minimallyincreasing profit. Extraordinary loss (impairment loss) was recorded last
fiscal year, but this fiscal year, extraordinary gain from the sales ofinvestment securities is expected, which is expected to largely improve net
profit by 33.5% YOY. For dividend, the Company plans to continue theannual payout of Y31.
[Figure 23] Factors that May Increase/Decrease Operating Profit in FY
2019 (this fiscal year) (company plan)(unit: Y mil)
(Y mil)
1,800

Increase

700

1,600
1,400

-214
-146
-140

1,200
1,000

Decrease

-182
825

807

800
600
400
200

SG&A Expenses

0
FY 2018
ActualIncreased Increased Increased Increased
Sales
Cost of Sales
R&D
HR Expense
ExpenseOther

FY 2019
Target(Ref) Excerpt from the Company’s FY 2018 financial results briefing materials, reworked
by Alpha-Win’s Research Dept.

w Alpha-Win Research

Dept. revised this FY’s
forecast for both thesales and profits
upward, having judgedthat they have thepotential to go beyond
the Company’s targets.

◆ Alpha-Win Research Dept.’s Financial Results Forecast
for FY 2019 Full Year
Alpha-Win Research Department has updated the forecast for the financial
results of the Company as shown on Figure 24 (P23). We have revised boththe sales and the profits slightly upward, having judged that they may excel
beyond our previous forecast as well as the Company’s forecast.
Regarding the sales forecast for FY 2019 (this fiscal year), the effects of thecampaign before consumption tax revision and the new products are hard tojudge at this point. We had thought that sales may possibly end up beingslightly below the Company’s plan, especially for the products. However,sales grew more than expected in both Q1 and Q2; taking into account thisH1 situation and the fact that the H2 sales estimate for the solutions are on
the conservative side (its sales grew by Y177 million YOY in H1 but theCompany’s H2 forecast is based on a sales decrease of Y125 million YOY),
we have revised the full-year sales forecast upward.
Regarding profit, in the previous report, we had predicted that the Company’s
target for profit should be achievable and that the actual profit will come out
to be just slightly higher than the Company’s plan, since the cost control ofadvertsing and other expenses seemed feasible, the profitable subscriptionbased business was likely to continue to post good results, and the general
performance of Japanese companies seemed to be strong. In this report, alongwith the upward revision for sales, we again revised the profits upward,
although by a small amount.
22/35

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
PCA (9629 TSE First Section)

Issued: 12/18/2018
The revisions made by Alpha-Win Research Dept. to the financial results
forecast for FY 2019 are as follows (in the order of previous forecast→current
forecast): Y10,400 million→Y10,600 million for sales (+8.3% YOY; theCompany’s estimate is Y10,486 mil; difference of +Y114 mil compared to
the Company’s estimate), Y850 million→Y875 million for operating profit(in the same order as above: +8.4% YOY; CE Y825 mil; +Y50 mil diff.),
Y875 million→Y900 million for recurring profit (+6.9% YOY; CE Y842
mil; +Y58 mil diff.), and Y600 million→Y620 million for net profit for theyear (+40.6% YOY; CE Y588 mil; +Y32 mil diff.). Since the current situationof the new contracts for the cloud is still excellent, and the sales of the cloudis increasing at an accelerating speed, we predict that the cloud business willbe the growth driver for the entire sales as well as profit.

w Plans to control cost inorder to achieve the goal
for full-year profit

While profit does in fact depend on sales, since the Company is determined
to control the expenses while managing the profits, we have judged that large
revisions do not need to be made to net profit at this point. Since the Company
holds a stable dividend policy, and the forecast for EPS does not have muchroom for revision, we have judged that dividend will stay at Y31, the same as
the Company’s plan.

[Figure 24] Financial Results Forecast by Alpha-Win Res. Dept. for This Fiscal Year and Over the Medium Term
(unit: Y mil)Unit: Y mil, %FY 2018 AR

FY 2019 CE

FY 2020 E

FY 2020 New E

Goods

9,785
1,954
988

10,486
2,115
1,009

10,4002,080
1,000

10,6002,080
1,000

11,0002,100
1,020

11,3002,150
1,020

11,6802,150
1,030

10,5001,600
950

Maintenance Service

3,109

3,191

3,160

3,120

3,200

3,150

3,250

3,100

Cloud Service

1,854

2,234

2,230

2,300

2,680

2,800

3,200

3,000

Other Operating Revenue

1,878

1,932

1,930

2,100

2,000

2,180

2,050

1,900

Gross Margin

54.5%

55.5%

55.8%

55.5%

56.4%

57.0%

56.5%

55.5%

SG&A Expense

4,528

4,997

4,950

5,010

5,300

5,240

5,650

5,000

46.3%

47.7%

47.6%

47.3%

48.2%

46.4%

48.4%

47.6%

807

825

850

875

900

1,200

950

830

(% over sales)

8.2%

7.9%

8.2%

8.3%

8.2%

10.6%

8.1%

7.9%

834

842

875

900

925

1,220

975

850

(% over sales)

8.5%

8.0%

8.4%

8.5%

8.4%

10.8%

8.3%

8.1%

Sales
Products

Category(% over sales)

Operating Profit
Recurring Profit
Net Profit for the Year(% over sales)

Sales (% YOY growth for all values)
Products
Goods

Category

FY 2019 Old E FY 2019 New E

FY 2021 E

FY 2021 New E

441

588

600

620

634

836

669

582

4.5%

5.6%

5.8%

5.8%

5.8%

7.4%

5.7%

5.5%

4.5%
-5.6%
3.3%

7.2%
8.2%
2.1%

6.3%
6.4%
1.2%

8.3%
6.4%
1.2%

5.8%
1.0%
2.0%

6.6%
3.4%
2.0%

6.2%
2.4%
1.0%

-7.1%
-25.6%-6.9%-1.6%

Maintenance Service

0.4%

2.6%

1.6%

0.4%

1.3%

1.0%

1.6%

Cloud Service

23.9%

20.5%

20.3%

24.1%

20.2%

21.7%

19.4%

7.1%

Other Operating Revenue

7.9%

2.9%

2.8%

11.8%

3.6%

3.8%

2.5%

-12.8%

Gross Margin (% YOY diff.)

3.5%

1.0%

1.3%

1.0%

0.6%

1.5%

0.1%

-1.5%

SG&A Expense (% growth)

4.3%

10.4%

9.3%

10.6%

7.1%

4.6%

6.6%

-4.6%

Operating Profit (% growth)

86.8%

2.2%

5.3%

8.4%

5.9%

37.1%

5.6%

-30.8%

Recurring Profit (% growth)

79.9%

0.9%

4.9%

6.9%

5.7%

35.6%

5.4%

-30.3%Net Profit for the Year (% growth)174.1%

33.5%

35.9%

40.6%

5.8%

34.8%

5.5%

-30.3%(Ref) Prepared by Alpha-Win Research Dept. CE = the Company’s estimate. E = Alpha-Win Research Dept.’s estimate. AR = actual result.

23/35
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
PCA (9629 TSE First Section)

Issued: 12/18/2018

7． Growth Strategy◆ Management Indicator Goals and Areas of Focus

In 2012, the Company announced its group goal for management indicators
as Y20 billion in sales (actual result for FY 2018 was Y9.8 bil), 2.5% in DOE(same as above, 1.9%), and 80,000 corporate customers of the cloud (11,000
as of the end of Sept. 2018), and has been developing its business in line withthis goal. To achieve this goal, five areas of focus have been decided: 1)
become No. 1 in the cloud-based enterprise system software market, 2)enhance solutions to provide more than simple functionality, 3) further
advance the technology in PCA Cloud, 4) pursue new services, and 5)
actively pursue M&As.

w In November, the newpresident announced
the PCA Vision 2030:
1st Stage – MediumTerm Business Plan.

◆ New Medium-to-Long-Term Vision PCA Vision 2030: 1stStage – Medium-Term Business Plan to 2021
In June 2018, Fumiaki Sato, who was previously executive vice president,
was promoted to president and created a new operating framework for theCompany. The core concept “PCA4.0” of the medium-to-long-term vision
PCA Vision 2030 was announced in May 2018 and is summarized in Figures
25 and 26. The Vision was created in line with the fact that the Company willreach a milestone in the year 2030 as its 50th anniversary. Then, as the next
and further step, the Company announced in November the PCA Vision 2030:
1st Stage – Medium-Term Business Plan to 2021.
As a side note, the Company has categorized the 50 years from 1980 to 2030
into four phases of business development as follows: 1980 to 1998 as“PCA1.0,” the period of transition from small business computer to PC; 1998
to 2008 as “PCA2.0,” the period of flourishment of the internet and client
servers; 2008 to 2018 as “PCA3.0,” the period of transformation of internet
into infrastructure and popularization of the cloud; and 2018 to 2030 as“PCA4.0.”[Figure 25] The New Medium-to-Long-Term Vision PCA Vision 2030

w 当調査部では、中期の年間利益成長率を 5~8％予想。

(Ref) Excerpt from the Company’s FY 2019 Q2 financial results
briefing material

24/35This 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
PCA (9629 TSE First Section)

Issued: 12/18/2018[Figure 26] Overview of the Core Concept “PCA4.0” of the Medium-to-Long-Term Vision

PCA4.0 [Becoming a Problem-Solving Service Provider]
1. Service-oriented creation of products
2. Sales partnership enriched by solution proposals
3. Strengthening digital direct marketing
4. Enhancing customer contact and relationship
5. Implementation of strategic recruitment, training, and evaluation programs
6. Development of flexible organizational and operational systems(Ref) Prepared by Alpha-Win Research Dept. based on an excerpt from the Company’s FY 2019 Q2 financial results briefing materials

In the medium-term business plan, the Company described a medium-tolong-term vision that it will continue to be a company that contributes tosociety as a “management-supporting company” that supports the smoothmanagement and operation of other companies mainly by providing
enterprise system software that realizes high-level automatization.
In the recently annouced PCA Vision 2030: 1st Stage – Medium-TermBusiness Plan (FY 2020 – FY 2022), the Company stated that its basic policy
over the medium term is to “conduct structural reforms and develop businessplatforms so that business will continue to exist and develop stably over thelong term.” Aiming to become a solution-providing service providor, theCompany’s plan for the medium term is to focus on creating a firm earnings
base and management system for the realization of the medium-to-long-term
vision (Figure 27). We should look forward to future executions of specificmeasures and their effects.
[Figure 27] Basic Strategies and Their Summaries and Measures [PCA Vision 2030: 1st stage –Medium-Term Business Plan to 2021]
Basic Strategy

Summary and Measures
I. Build the earnings base for the main businesses

1. Stengthen and increase thesales of PCA Cloud

Will work on PCA Cloud, for which it has a rich product lineup and over ten years' worth ofbusiness know-how. Will secure a firm position in the market and build a strong earnings
base as one of its main businesses by focusing on improving brand power, finding new WebAPI partners, strengthening service functions, and strengthening cooperation withspecialists (professionals) in accouting offices, certified social insurance and labor consultant
offices, etc.

2. Strengthen the on-premises
businessEngage in strengthening the on-premises business (sales and maintenance of on-premises
products) by reviewing the products, service system, etc., based on the users' needs. Will
push forward with the transition of on-premises to a subscription-based model, as well as the
improvement of maintenance contract repeat rate and operation productivity.

1. Find the "seeds" of new
products and businesses

Aiming to create a new earnings base for the future. Will accelerate its progress withcreating new business opportunities by establishing a division (called "General Innovation
Office" for now; will be established in Jan. 2019) tasked with the role to find the seeds of
new products and businesses related to new technologies such as AI, big data, RPA, and
FinTech.

2. Renew efforts to develop the
medium-sized company market

With the new Hyper Series, renew efforts to develop the medium-sized company market,
which is an attractive market since it encompasses the upper zone of the Company's major
customers and has the capacity to bear large system investment costs.

II. Creation of new business opportunities

III. Strengthen the management system to become a highly profitable company
1. Strengthen the profit
management system to support
strategic decision-making

Strengthen the profit management system supporting strategic decision-making throughautonomous efforts by each internal organizational unit to improve profit, products andservices adapted to changes in the business environment, reassessment of the business asset
allocation, etc.
In addition to conventional management indicators, create and adopt a performance

2. Adpot performance evaluation
management indicator that would help improve profitability under the Company's businessindicators that reflectmodel as the Company tries to strengthen and make more transitions to the subscriptionprofitability improvement
based business model.

(Ref) Prepared by Alpha-Win’s Research Dept. based on excerpts from the Company’s FY 2019 Q2 financial results briefing materials

25/35
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
PCA (9629 TSE First Section)

Issued: 12/18/2018
Also, in the annoucement, the Company described the new numerical targets
for FY 2022, the final fiscal year of the medium-term plan (the fiscal year
ended March 31, 2022), as shown below (targets for each year have not been
disclosed; please refer to Figures 28, 29, and 30).
[Figure 28] Targets of the Medium-Term Business Plan
Target Items of the Medium-Term Plan
Consolidated Sales

FY 2022 Target≥Y11.5 bil

Of which are sales from subscription-based businesses(maintenance/cloud)Achieve Y6 bil

Consolidated Operating Profit≥Y1.5 bilConsolidated Operating Margin≥10%(Ref) Figures 28–30 were prepared by Alpha-Win Research Dept. based on excerpts from the Company’s FY 2019 Q2 financial results
briefing materials[Figure 29] Financial Results Forecast in the Medium-Term Business Plan (consolidated)
Sales (left axis)(Y mil)

O.P. (left axis)

Margin (right axis)

13,50018.0%

12,00016.0%

10,500

14.0%

9,000

12.0%

7,500

10.0%

6,000

8.0%

4,500

6.0%

3,000

4.0%

1,500

2.0%
0.0%

0
FY 2019 E

FY 2020 E

FY 2021 E

FY 2022 E[Figure 30] Sales Forecast for the Subscription-Based Businesses
Total subscription-based sales(Y mil)

Maintenance fee (on-premises)

7,000

Cloud
6,000

5,000

4,000

3,000

2,000

1,000

0
FY 2019 E

FY 2020 E

FY 2021 E

FY 2022 E

26/35
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
PCA (9629 TSE First Section)

Issued: 12/18/2018◆ Alpha-Win Research Dept.’s Financial Results Forecast
for the Medium Termw Alpha-Win Res. Dept.
expects the subscriptionbased businesses to be
the growth driver and theannual profit growth rate
to be 5-6% over the
medium term when the
figures are evened out.
However, for FY 2020(next FY), both sales andprofit were largely
revised up in expectationof event-driven highdemand. On the contrary,
in expectation of a recoil
from that demand, theforecast for FY 2021 (theFY after the next) was
revised to expect
decreased sales andprofit.

Alpha-Win Research Dept. reviewed the financial results forecast for thethree years leading to FY 2021 (described previously on page 23, Figure 24).
There are several uncertain factors in the future, such as the change in
consumption tax, change in the name of the era, high demand caused by thetermination of the Windows 7 support and the recoil that will follow, new tax
laws or changes to the tax system, progress in new product development,changing balance in the competition with major competitors, and the progresswith the M&A strategy. However, since the subscription-based businesses(the cloud and the maintenance services) should grow, for the meantime, sales
and profit are expected to continuously increase when looking at figures thatare evened out excluding the effect of the event-driven high demand.
In FY 2014, there was high demand driven by two events (termination of
Windows XP support and consumption tax revision from 5% to 8%), leading
to a siginificant increase in sales and profit. In making the forecast, weestimated the upcoming event-driven high demand to raise FY 2020’s sales
by 500 to 600 million yen and, on the contrary, reduce FY 2021’s sales by
600 to 800 million yen in recoil (anticipated frontloaded demand during thecurrent fiscal year was also taken into consideration). We used these estimatesas the basis for our forecast. Furthermore, for the estimated annual sales
growth rate for each category (by sales type) for FY 2020 and FY 2021, wechanged the estimate for the maintenance service from about 1.5% in theprevious forecast to 0.5%, but kept it the same at about 20% for the cloudservice and about 2% for each of the remaining three categories (by salestype) (evened-out figures excluding the effect of the event-driven highdemand). The fraction of gross margin contributed by each sales type was notlargely altered, but instead we focused our analysis on the effect of improved
product mix, such as the cloud, on the gross margin. General andadministrative expenses are predicted to increase annually by 6-7% (when the
figures are evened out) mostly due to increased R&D, advertising, and HR
expenses since the Company is in an investment phase, including businessstructure reinforcement in preparation for future growth, new productdevelopment, and technology research (virtualization technology, AI, Web
API, and FinTech-linked technology). No extraordinary gain or loss is
expected.
As a result, we revised the FY 2020 financial results forecast significantly
upward; we expect increased sales, increased profit, and consecutive recordhigh for sales. Oppositely, we revised down the FY 2021 forecast, expecting
decreased sales and profit. However, after FY 2022 when the effect of therecoil from the event-driven high demand would have withered away, we
believe that the Company will begin to continuously increase sales and profit,
supported by its subscription-based businesses.
Over the medium to long term, we expect that both sales and profit will growannually by about 6%, when looking at evened-out figures excluding theeffect of the event-driven high demand. Since the Company’s business model
is characterized by a high marginal profit ratio, the profit growth rate is
actually supposed to be greater than the sales growth rate, but we predict thatthe growth will be stable due to the upfront investment cost described above.

27/35
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
PCA (9629 TSE First Section)

Issued: 12/18/2018

9．Analyst’s View
◆ PCA’s Strengths and Challenges
The Company’s SWOT analysis results are listed on Figure 31.
[Figure 31] SWOT Analysis
Brand recognition and trust built up over long years (major specialized player in theenterprise system software market for small/medium-sized companies)Firm financial standing (debtless management)Growth of a subscription-based business capable of generating stable revenue
 Strong and diversified customer base (200,000 companies total as active users)
Strength

Taking a lead in the market with cloud services (No. 1 in enterprise systems forsmall/medium-sized companies); experience (number of customers / number of years)
 High barrier to market entry
Very experienced call center staff and engineers
Rich product lineup; provides products as on-premises and by cloud Sales network (13 sales offices in Japan; 2,000 partnered companies)
Low margins

Weakness

Business results susceptible to revisions related to accounting and tax laws, etc.
(consumption tax, change in the name of the era, etc.)
Large improvements still needed in maintenance service with only around 50% ofusers subscribing to the service
Highly competitive market
Absence of a major, next-generation, growth-driving product/service
Domestically oriented; overseas development difficult

Opportunity

Increased demand from lack of manpower and need of efficient operation; Work-Style
ReformPotential for cloud services to increase users; development potential (esp. for mediumto small-sized companies)
New products, new services, and technology innovations
Revisions related to accounting and tax laws, etc.

ThreatEmergence of an alternative with the popularization of advanced AI technology, lagged
product development, defects in products, etc.
Termination risk of contracts, etc.
Information leakage
Rise in HR and development costs(Ref) Prepared by Alpha-Win Research Dept.

Describing the strengths listed in Figure 31 in more detail, the Company iswell known due to its long years of practice in the industry and the trust thatit has built up, and is especially strong in certain areas of business such asaccounting software for small/medium-sized companies and public benefit
corporations. Its customers also have high loyalty, as there is little incentive
to frequently change enterprise system software. Additionally, the Company
has been developing a subscription-based business model with highcontinuity and stability, providing maintenance support, the cloud, andversion upgrades to its customers.

w Increase in the

proportion of users
signing a contract
for themaintenanceservice will createa large potential
for improved
earnings capacity.

On the other hand, looking at the weaknesses in more detail, the margins havebeen gradually decreasing over the long term. Although operating margin has
begun to improve over the past few years, it was 8.2% last fiscal year, still
low compared to its major listed competitors. This may be explained by how
the proportion of users signing a contract for the profitable maintenanceservice is low for the Company compared to its competitors and by how the
Company has not been developing major, long-lasting new products (notbeing able to benefit from the advantage of scale).
However, if the Company could dig up hidden demand from its growthdriving, cloud-related market with its price advantage, and if it could improve
the on-premises business by increasing the proportion of users who subscribe
28/35This 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
PCA (9629 TSE First Section)

Issued: 12/18/2018
to the maintenance service through strategies such as direct contracts withcustomers, then there is a potential for the Company to largely improve
profitability. For instance, even just by raising the proportion of users who
sign a contract for the maintenance service from the current 50% (approx.) to
the same level as OBC, at about 80%, or as MJS, at nearly 100%, the grossmargin would theoretically improve from 54.5% last fiscal year to about 59%
and 62%, respectively. This improvement would help largely increase sales
and profit.
As for opportunity and threat, business volatility would generally become
greater in the case of high demand driven by events such as those related toconsumption tax revisions and Work-Style Reforms. Also, we should keep
note of the progress of major competitors in catching up with the Company
in the cloud-service market, in which the Company currently takes a lead, andin their development of new products and services.

◆ Shareholder Return and Shareholder Benefit Program
The Company’s basic policy is to stably, constantly pay out dividend while
improving the ratio of net profit for the year to shareholders’ equity (ROE)
under effective management. In returning profit to its shareholders, its policy
is to determine the level of dividend to be paid based on a comprehensive
analysis of elements such as its financial results and dividend payout ratio.
w The Company’s

goal for dividend
payout ratio is 30%
and its goal for
DOE is 2.5%. It
provides a stabledividend of Y31
per year. Dividend
is expected to keepincreasing over thelong term.

Ever since the first public offering of the Company’s stock was made,ordinary dividend has not been decreased, and has been gradually increasingover the long term with several years of no change in between (Figure 32).
Excluding commemorative dividends, ordinary dividend since FY 2011 has
been Y31 per share per year. Commemorative dividend was paid out only in
FY 2014 in celebration of the change in listing from the Second to the First
Section of the TSE in December 2014, adding Y10 to the ordinary dividendof Y31 to an annual total of Y41 per share. Even in FY 2015 and FY 2016
when a net loss was recorded, the Y31/year dividend was maintained in linewith the Company’s stable dividend policy.
While the Company believes that the ideal level for the dividend payout ratio
is around 30%, the actual dividend payout ratio was 48.2% in FY 2018 andis expected to be 36.1% in FY 2019 (based on the Company’s estimate;
35.4% based on Alpha-Win Research Dept.’s). When calculated based on astock price of Y2,163 (closing price as of the end of December 14, 2018), thedividend yield comes out to be 1.48%. As for DOE, one of the major KPIs
(Key Performance Indicators) for the Company, the actual value for FY 2018
was 1.9% (the Company’s goal is 2.5%).
Taking into consideration the current dividend payout ratio, Alpha-Win
Research Dept. expects that the ordinary dividend of Y31 will be continued
after FY 2018 for a while. Over the medium term, when the investment phaseends and profitability increases considerably, dividend may increase.

w Annual net yield

including theshareholder benefit
program is about
2.5%.

A shareholder benefit program was started in 2013, and its partial revision
was annouced in July 2017 (Figure 33). Spcifically, a Quo Card is granted toshareholders based on the number of shares held at the end of the March of
every year. For instance, shareholders with equal to or greater than 100 sharesand less than 300 shares are granted Y2,000 worth of Quo Card; assumingthat the stock price is Y2,079, then the annual net yield for a shareholder with
100 shares is about 2.5% including the ordinary dividend of Y31 and theshareholder benefit (under the same condition, the annual net yield for OBC
is about 1.1%, and for MJS it is about 1.2% which is the same as the dividend
payout ratio since MJS has no shareholder benefit program).
29/35

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
PCA (9629 TSE First Section)

Issued: 12/18/2018
The Company’s financial standing is also great with essentially no debt. We
should keep an eye out for stock splits as well as additional share
repurchasing in terms of total return ratio. Stock splits have not been
conducted since the 1-to-1.3 stock split in May 2000.

[Figure 32] Transition in Dividend and Dividend Payout Ratio(Ref) Prepared by Alpha-Win Research Dept. based on the securities report. Estimates (E) are the Company and Alpha-Win’s estimates.

[Figure 33] Shareholder Benefit Program and Net Yield
Number of Shares Owned(greater than or equal to)
100
300
500

300

Shareholder Benefit(Quo Card: Y)
2,000

31

2.45

500

3,000

31

1.97

5,000

31

1.97

(less than)

Dividend: Y

Net Yield: %Net yield = (dividend + benefit value) / (stock price) was calculated for the minimal amount of stock owned in each range
Stock price assumed to be at: Y2,079(Ref) Prepared by Alpha-Win Research Dept. based on the Company’s data

30/35
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
PCA (9629 TSE First Section)

Issued: 12/18/2018◆ Factors that May Affect Stock Pricew Has been

outperforming TOPIX
for the past one year.
Defensive and stable
growth stock.

w Cheaper stock value

than its competitors

The Company’s stock price and relative stock price compared to TOPIX forthe past two years are described in the summary section (page 2, Figure C).
Since March 2017, the Company’s stock price, although with some swaying,has generally been rising along with the index. Stock price relative to TOPIX
has been rising since around July of 2017 until now. Stock price has
especially been increasing since the announcement of the interim financial
results, reaching an annual-high on December 3rd. We hypothesize that stock
price increased because of the anticipated greater-than-expected results forthis fiscal year, as well as expectations for large increases in sales and profit
during next fiscal year due to the event-driven high demand, and because the
newly announced medium-to-long-term business plan and the direction of
the Company’s business reform may have given good impressions. The stock
price may also reflect the fact that, following the appreciation of the yen andthe implementation of trade protection, the Company has become more
recognized as a domestic stock with stable business results. Another factor
may be that the market is beginning to reevaluate the Company’scompetitiveness and high potential as seen from how it was the first to
provide packaged enterprise system software on the cloud.
A comparison of major valuation indicators was made between the Company,
the market average, and its competitors (Figure 34). In comparison with theaverage of First Section of the TSE, the Company’s P/E is approximately
24.2 (based on EPS estimated by the Company for FY 2019; according toAlpha-Win Research Dept.’s prediction, 23.0 for this fiscal year and 17.0 for
next fiscal year), exceeding the First Section’s average of about 13.4. While
the Company’s dividend yield, at 1.5%, is slightly below average (the simple
average is 1.9%; the weighted average is 2.3%), the Company’s P/B is 1.2,
which is about same as the First Section’s average of 1.17 (closing price asof December 14). Meanwhile, compared to its competitors (4733 ObicBusiness Consultants and 9928 Miroku Jyoho Service), the numbers for theCompany are low regarding most indicators, giving it an undervalued
impression (Figure 34). The Company’s EV/EBITDA value is especiallyrelatively low since it has no debt, has large amounts of cash and deposits,
and has actively amortized its assets last fiscal year.

w Going forward, thekey points of interest
are this FY’s
performance,development ofspecific measures as apart of the basic
strategies of themedium-termbusiness plan, theexecution of suchmeasures, and theireffects.

Going forward, the following events or factors may have an impact on stock
price.
The first and short-term points of interest are the contents of the Q3 financial
results that are scheduled to be announced around February of 2019 andwhether revisions will be made to this fiscal year’s financial results forecast(possible upward revision). This announcement is especially important since
it will be made at the time of year when we can make a prediction for Q4(January through March), during which a large proportion of the annual sales
and profits is recorded.
Over the medium term, the Company plans to execute growth strategies
including the expansion of business domains, M&A, and alliance, improve
its management system from sales-based to profit-based management, andmake a transition to a management system focused on asset efficiency. If
progress is made for these activities, they may positively affect the stock
price. We should keep an eye out for the future execution, progress, andeffects of the specific measures for the three basic strategies of the mediumto-long-term vision.
Additionally, other factors that may affect stock price include the rate ofincrease in the number of contracts for the cloud service, the share of salesof the subscription-based businesses, the improvement status of profit
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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
PCA (9629 TSE First Section)

Issued: 12/18/2018
margins, the sales progress of new products, the progress in increasing the
proportion of users who subscribe to the maintenance service, dividend
increase, stock-splits, and progress in the transition of the on-premises to thesubscription-based business model (a monthly-subscription-based business).
We should continue to watch out for these factors.

[Figure 34] Comparison of Valuation Indicators with Competitors
Company Name

PCA (consolidated)

Code
Stock Price (at 12/14 closing)Market Cap (Y mil)P/E (price-to-earnings ratio)
P/B (price-to-book ratio)
Dividend Yield (%)
EV/EBITDA
P/S (price-to-sales ratio)

9629

Obic Business Consultants(OBC: non-consolidated)[Figure 27] Comparison of Valuation Indicators with Competitors
4733
2,079
16,008
24.2
1.3
1.5
5.7
1.5

Miroku Jyoho Service(MJS: consolidated)
9928

9,730
392,625
39.6
3.5
0.8
30.4
14.3

2,489
86,633
23.6
4.8
1.2
16.4
2.8

Market cap = shares outstanding x market stock price [at 12/14 closing]
EV/EBITDA = (market cap + interest-bearing debt - cash & deposits) / (O.P. + depreciation + intangible fixed asset amortization, etc.)
P/S = market cap / sales [the Company's estimate for FY 2019]
The Company's estimated EPS for FY 2019 used in all P/E calculations(Ref) Prepared by Alpha-Win Research Dept. based on information including those from the securities report and the financial results summary

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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
PCA (9629 TSE First Section)

Issued: 12/18/2018

9．Interview with the President◆ Q&A
On December 7, 2018, we interviewed the Company’s new president FumiakiSato.
1. Please tell us your history before joining the Company.
Ø I was born in Tokyo in 1963, and I am currently 55 years old. Although I sometimes moved to other places
because of my parent’s transfer at work, I spent the most time in Tokyo. After graduating from the Faculty of
Law at Chuo University, I joined Kinki Nippon Tourist.
2. Please tell us why you joined the Company and your experiences after joining.
Ø Since my father-in-law was the founder of the Company, I became acquainted with it and joined it in 2003. I
did not have any experience at an IT company or as a programmer and was placed in the management
department. There, I experienced jobs such as human resources, general affairs, accounting, and management(served as general manager and head of division for each; took position as director, senior vice president, andHead of Management Department in 2011; became vice president in 2017; and became president in June 2018).
Four years ago, when the founder passed away, he asked me to look after the Company for him. Since theprevious president Mr. Mizutani had long intended to leave his job at age 60, I took position as president afterhim.
3. Are there any projects or jobs at PCA that left a strong impression on you?
Ø For jobs, I remember well about how I dealt with the revised Company Act when I was the general managerof the General Affairs Division. I also remember how my experiences at my previous workplace helped meplan and carry out the company trip.
4. Do you have a personal creed or motto? Please tell us.
Ø Just as there are “eight million spirits” in Japan (Shintoism: how everything has a spirit), I believe thateverything and everyone should be respected and we should put ourselves in someone else’s shoes (regarding
people) when doing anything. I receive stimuli from all people that I meet, and I appreciate and respect all
people whom I meet.
5. What do you do for your hobby on weekends or on weekdays outside of working hours?
Ø I like playing the piano or looking at the ocean and enjoying the feeling of “nothingness.”
6.

Please tell us your ambitions for the future as the Company’s president.

ØThis fiscal year (FY 2019) was our company’s 39th anniversary. Until now, we had steadily conducted businessunder the business model of developing and selling IT packaged software that fit the business conditions backthen. However, in recent years, the IT business environment has changed, so the conventional business model
no longer fits the trend, and it is becoming harder to predict the future. Because we have had success, it can be
hard to change, but in response to the changes, I believe that it is my role to change the Company’s structure
and mission and adopt a new model that allows for continuous growth. It has been half a year since I becamepresident, but I have had many discussions inside the Company, and I think I have had success in creating theawareness for the topic.
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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
PCA (9629 TSE First Section)
ØIssued: 12/18/2018

I’m not sure if the packaged enterprise system software business will continue to exist, but even if our products
change, we will continue to support the corporate management of our customers, and aspire to become the“management-supporting company” as declared in the new medium-to-long-term vision, or VISION 2030.

7. How do you evaluate PCA’s strengths (appeals) and challenges (areas needing improvement)?
Ø Our strength is that we have been in this business for 38 years during which we have gained trust from ourusers and business partners. We owe this success to the efforts of our front-line staff, so our front-line skills
are a great strength of ours. However, our front-line skills had been much dependent on the individual (person),so we believe that we need to improve our front-line skills more as a company in the future.
8. How do you think of your company’s rivals or about your company’s advantages over them?
Ø Our biggest rival is Obic Business Consultants (OBC; No. 1 share in the industry). Until the network version(Windows) became popular, we were greater in size than OBC, but because of the difference in the sales
strategy, we ended up losing our number-one position. Currently, we are focused on being customer-first, as
in gaining trust from our current and new customers, rather than gaining back market shares. We believe that
if we continue to build up trust and experience by improving our sales power, product power, service power,
and after-sales services (call center, etc.), the results will come along. We always keep in mind that we should
not lose track of what is truly important, which is our customer-first policy, (by chasing after market shares toomuch).
Ø About our company’s competitive advantage, we are hoping to emphasize our uniqueness and our new products
and services such as the cloud service which we have started providing 11 years ahead of other companies.
9.

Please tell us the current performance and situation and the prospect for achieving this fiscal year’s financial
targets.
Ø This fiscal year (FY 2019) and next fiscal year (FY 2020), we are expecting an especially high demand due tothe increase in consumption tax (from 8% to 10%), the termination of Windows 7 support, and the change in
the name of the era. These should become positive factors for us (especially next fiscal year). However, lasttime that there were two events creating especially high demand, which were the increase in consumption tax(from 5% to 8%) and the termination of Windows XP support, after the effect of those event-driven highdemand died down, there was a recoil, causing decreased sales and a net loss. We believe that there will again
be a recoil after the upcoming event-driven high demand, and how we will deal with this recoil is one of ourcurrent challenges. We believe that one strategy is to make our business more subscription-based. The current
share of subscription-based businesses in the sales ([sales of cloud + sales of maintenance service] / [total
sales]) is a little greater than 50% (actual ratio for H1 is 54.6%), but we hope to raise this ratio to 60% in three
years.

10. What are your thoughts on the shareholder return policy for the future?
Ø Currently, our dividend is 31 yen per share per year, so the dividend payout ratio is greater than our goal of
30%. We believe that the ideal level for dividend is one-third of net profit. We hope to increase our profit andcontinue to increase dividend in the future.
Ø We may use our treasury shares for the (existing) director remuneration plan or a new employee share
remuneration plan, as some possibilities.
11. Please tell us your thoughts on business strategies (M&As, alliances, etc.).
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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
PCA (9629 TSE First Section)
ØIssued: 12/18/2018

We have been looking at M&A as one way to develop our business, so although we currently do not have any
debt, we may borrow money in the future. Also, for example, looking at new businesses, we are thinking aboutsomething that is like a business consultant, which doesn’t mean that we will actually do consulting, but itmeans we will start a supporting business that includes providing human resources support and is directly
linked to management. From “things” (functions and ancillary services), we would like to provide “deeds”(values and results).

12. If you have any messages for the investors and shareholders, please tell us.
Ø We would like to keep up with the trust (from our customers) that we have gained over the 38 years since thefoundation of our company and aim for an even stronger relationship. We will continue to conduct business insuch a way that we can gain trust from not just our shareholders but also investors whom we ask to buy ourcompany’s shares.
End of Interview＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊

Disclaimers
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-WinCapital 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 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 report must make theirown 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. AlphaWin, the writer, and/or other persons involved in the publication of this Report may already hold, or buy
and sell in the future, the stock of the company presented in this Report.
Contents of this Report are based on information current as of the issue date and are subject tochange without notice. We do not warrant or represent that the information in this Report isaccurate, 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, or translated 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.
PFV2018-122022

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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.