BRIDGE REPORT (1433) March 26, 2021

https://www.bridge-salon.jp/

BESTERRA CO., LTD (1433)

President Akitatsu YoshinoCompany Information
MarketIndustry
President
HQ Address
Year-end
Homepage

TSE 1st Section
Construction business
Akitatsu Yoshino
Kiba Park Bldg, 3-2-6 Hirano, Koto-ku, Tokyo, JapanEnd of January
https://www.besterra.co.jp/

Stock Information
Share Price
Share Outstanding (End of the term)¥1,6438,355,600 shares
DPS (Est.)
Dividend Yield (Est.)
EPS (Est.)¥16.001.0%¥43.76

Market Cap.
¥13,728million
PER (Est.)
37.5x

ROE (Act.)
5.6%
BPS (Act.)¥315.08

Trading Unit
100 shares
PBR (Act.)
5.2x*The share price is the closing price on March 25. Each number are taken from the brief financial report of FY 1/21.

Consolidated Earnings
Fiscal Year
Jan. 2018 (Actual)Jan. 2019 (Actual)Jan. 2020 (Actual)Jan. 2021 (Actual)Jan. 2022 (Forecast)

Net Sales
Operating Income Ordinary Income
4,496
386
373
4,927
497
495
3,436
93
97
3,682
124
212
5,600
450
518

Net Income
263
621
59
142
360

EPS
31.69
75.25
7.29
17.33
43.76

DPS
15.00
15.00
16.00
16.00
16.00

*Forecast is from the Company’s financial report. unit: million yen, yen

This Bridge Report reviews on the outlook of BESTERRA CO., LTD’s earnings results for the fiscal year ended January 2021, its
forecast of the fiscal year ending January 2022 and medium-term management plan.

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BRIDGE REPORT (1433) March 26, 2021

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Table of Contents
Key Points
1. Company Overview
2. Fiscal Year ended January 2021 Earnings Results
3. Fiscal Year ending January 2022 Earnings Forecasts
4. Medium-term Management Plan 2025
5. Conclusions<Reference: Regarding Corporate Governance>

Key Points⚫

In the term ended January 2021, sales were 3,682 million yen, up 7.2% year on year. Thanks to the steady progress ofdemolition works, the company was able to make up for the delay until the second quarter due to the coronavirus pandemic,
and increased sales. Operating income rose 33.6% year on year to 124 million yen. In the second half of that term, thecompany made up for the delay in commencement of demolition works due to the pandemic in the first half. SG&A
decreased 1.2% year on year, as personnel expenses augmented, but advertisement and R&D costs declined. The impactof the novel coronavirus was not insignificant in the first half, but their on-site business operations were not suspended,and the company made efforts to diversify clients and expand its business scope. The company considers that such efforts
paid off and their results were almost in line with the forecast.

⚫

For the term ending January 2022, sales are projected to grow 52.1% year on year to 5.6 billion yen, and operating income
is forecast to rise 261.4% year on year to 450 million yen. As there is strong demand for plant dismantlement, significant
increases in sales and profit are expected. The company plans to pay an interim dividend of 6 yen/share and a term-end
dividend of 10 yen/share for a total of 16 yen/share per year, unchanged from the previous term. The expected payout ratio
is 36.6%.

⚫

The company announced the “mid-term management plan 2025.” Based on “Besterra ESG Management,” the company
will proceed with the five strategies: “technological patent strategy,” “sales strategy,” “strengthening of the dismantlement
management system,” “digital transformation (DX),” and “management strategy,” with the aim of achieving “sales of 10
billion yen, an operating income of 1 billion yen, and an ROE of 13.0%” in the term ending January 2026.

⚫

In the term ended January 2021, sales and profit slightly grew, exceeding the forecast. While maintaining the recovery
trend in the second half, the company aims to recover sales and profit considerably this term, based on the large orderbacklog at the end of the term. In the short term, we would like to monitor the variation in quarterly performance.

⚫

As the Japanese government stated a global commitment: “Carbon Neutrality by 2050,” the dismantlement andrenovation of power generation plants, petroleum/petrochemical plants, etc. will be accelerated further. It seems that theJapanese government expects that nuclear power plants, which do not emit greenhouse gases, will fulfill some roles, butseeing the recent news coverage, it is likely that old-fashioned nuclear power plants will be dismantled from the viewpointof safety. While taking advantage of such demand growth, the company will strengthen its human capital and promote DX,
and strive to achieve “sales of 10 billion yen and an operating income of 1 billion yen” in the term ending January 2026
and then “sales of 100 billion yen and an operating income of 10 billion yen.” We would like to keep an eye on their activities.

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1. Company Overview
As a specialist in plant dismantlement, BESTERRA manages the dismantlement of plants (metal structures) for iron-making, power
generation, gas, petroleum, etc. Its core competence is “the method and technology for dismantling plants,” and it has many patented
methods including international patents. The company concentrates its managerial resources on engineering (proposal, design, and work
planning) and management (supervision and work management), and outsources actual dismantlement work to its affiliates, and so it
does not own heavy machinery or construction teams (the risk of owning assets can be avoided), and it is unnecessary to procure materials,
etc. and make transactions for material production (the inventory risk can be avoided).
The Group also has two consolidated subsidiaries, Hiro Engineering, which provides human resource services for design work, etc. and
3D Visual KK, which handles 3D scan modeling and design work.
The corporate name “BESTERRA” was coined by combining the English word “Best (the superlative of ‘good’)” and the Latin word
“Terra (the earth),” and、infused with the ambition to “create the best earth.” By developing an integrated system for dismantling andrecycling, the company aims to actualize an advanced recycling society and contribute to the earth environment.
Corporate ethos and the code of conduct
Under the corporate ethos “We will contribute to the earth environment with our flexible way of thinking, creativity, and technologies
using these concepts,” the company enacted the following code of conduct.
Long-term vision (Ideal state of the company)
・ Plant Demolition Leader in Japan・ Proposing Plant Disassembly Technologies to the World
1-1 Characteristics of the business
The company has a single segment consisting of the plant demolition business. For others, it engages in the human resource service
business and the 3D scan, modeling, and design business. In the term ended January 2021, the plant dismantling business accounted for
92.7% of total sales.
Plant dismantlement businessIn the plant dismantlement business, the company works on all types of plants in the fields of ironmaking, electric power, gas, petroleum
and petrochemicals, etc. The company offers services on overall engineering processes including proposals, designing, work planning,
outsourcing/arrangement of equipment and materials, supervision, safety management, cost management, financial management, andhandling of governmental procedures. It focuses on designing its unique demolition technologies and supervising demolition works
based on demolition plans and uses specialized subcontractors for demolition works.
The clients for plant dismantlement are leading companies that own plants for ironmaking, electric power, gas, petroleum, etc. In mostcases, the equipment installation companies of the corporate groups of clients or leading general contractors are entrusted withdismantlement, and then BESTERRA serves as the primary or second-tier subcontractor.
Also, in the plant dismantlement business, BESTERRA receives valuable materials generated through dismantlement, such as scrap,
and sells them to scrap handlers. Accordingly, the company estimates the value of valuable materials while comprehensively considering
material, quantity, price (market price of each material, such as iron, stainless steel, and copper), etc. and negotiates with clients about
the fee for dismantlement work. In accounting, the gain from sale of valuable materials is included in revenue from dismantlement work,and posted as part of sales from completed dismantlement work. In some cases, contractors (clients) dispose of (sell) scrap, etc. bythemselves.

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https://www.bridge-salon.jp/*Two standards for posting revenue and seasonality of revenue posting of the company
The standards for posting revenue from contracts can be classified into the completed contract method, in which revenue is posted whenworks are completed, and the percentage-of-completion method, in which revenue is posted according to the progress of works. In thecase of plant dismantlement, where valuables, such as scrap, are collected, revenue cannot be confirmed until the sale of scrap. Therefore,
the company basically applies the percentage-of-completion method to large-scale projects whose contract amount exceeds 50 million
yen and whose period exceeds 3 months, from the term ended January 2018 (the completed contract method is applied to the projects
that are not applicable to the above criteria). The timing of posting revenue (the completion of demolition work) from works for which
the completed contract method is used is often affected by the capital investment plans of clients. In the case of BESTERRA, revenue
tends to be posted in the first quarter (February to April) and the fourth quarter (November to January) (the seasonality of revenue
posting). However, the variation in quarterly performance may mislead investors, so the company is expanding the scope of applicationof the percentage-of-completion method step by step, to equalize the timings of revenue posting.
OthersIn response to the chronic shortage of skilled construction workers, the company began providing human resource services in January
2013, and in March 2018, it made Hiro Engineering, which handles human resource services such as design work, a subsidiary. In
January 2015, the company began offering a 3D measurement service as well. It established 3D Visual KK in December 2019, and 3D
scan modeling and design business was transferred from INTER ACTION Corporation (securities code: 7725) in February 2020.

1-2 Strengths: an excellent client base, efficient dismantlement management based on plenty of experience, and intellectual
property, such as patented methods
The strengths of the company are excellent client assets, efficient dismantlement management based on plenty of experience, andintellectual property, such as patented methods. Because the clients are basically engineering subsidiary companies of leading companies
in ironmaking, electric, gas, coal oil fields, and major general contractors, which are easily trustable excellent clients, and it is predictedthat they will receive orders continuously. The clients of the leading companies highly evaluate its company’s total management (lowcost and high efficiency) of plant dismantlement that it cultivated experiences for over 40 years, and it elect a barrier to entry.
Furthermore, a variety of technologies and know-how the company possesses, which have been accumulated through environmental work,
etc. is also the strength of the company, including the recycling of waste materials which is a manifest and potential intellectual property.
Patented methods, etc.
“Apple peeling demolition method” and fusing robot “Ringo☆Star”
The “apple peeling demolition method” is a method of dismantling a large spherical tank, such as gas holders and oil tanks, by cutting itin spirals from the center of the ceiling of the enclosure part. The cut part spirals down to the ground gradually under the force of theearth’s gravity (natural energy). The method enjoys superiority in a work period, cost, and safety, and has considerable competitive
advantages, realizing “greater promptness, higher cost efficiency, and added safety.” Furthermore, the company offers a robot for thefusing process, “Ringo☆Star,” which automates the “apple peeling demolition method.” (The company is also working to expand therange of applications for “Ringo☆Star” by developing a new attachment).
Environment-related methods
The company has cultivated experiences and business results of a multitude of environment-related demolition works, using the “firelessmethods” which do not require the use of fire. For example, although polychlorinated biphenyls (PCBs) are considered as a toxic
substance and therefore totally abolished today, it had been used for many years in transformers and condensers because of its excellent
thermal stability and chemical stability (electric insulation characteristics). In many cases, transformers and condensers are disposed ofin conjunction with plant demolition works; however, because PCBs gasify when they are treated at the high temperature, posing a riskof inhaling the gas so generated, any firearms (such as gas cutting machines) cannot be used in demolition and withdrawal involving
PCBs. The company is skillful at fireless and quasi-fireless methods using saber saws (which cut off objects with their saw blades moving
in a reciprocating manner) that can cut off objects thicker than the thickness, which, in the industry, had been considered impossible tocut, through numerous devices, including measures against seizure of motors and recycling of blades. BESTERRA has applied for joint
patents with Hitachi Plant Construction, Ltd. for a transformer dismantling method, a transformer dismantling jig, and a cutting devicefor dismantling a transformer.
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Windmill demolition works
The number of power-generating wind turbines continues to increase by about 20% annually worldwide, but the demand for dismantlingis expected to increase in the future due to wear and tear and economic obsolescence. According to the material presented by the company,
the wind power generation volume worldwide is 486,790 MW (by about 340,000 onshore power generation plants and about 4,000
offshore ones) with an annual growth rate of about 20%. In Japan, the number of wind power generation plants stood at 2,225 as of theend of 2017, expanding by about 90 every year. Meanwhile, as the useful life is approximately 15 to 20 years, and the windmills for
power generation established in the early stage are reaching the application limit. Moreover, not a few plants need to be dismantled due
to damage or fatal failure caused by thunderbolts or typhoons.
How to knock down a power-generating wind turbine (international patent application)
As some windmills have been built in mountain districts and on the sea, demolition of them is highly difficult. The company has deviseda method for dismantling wind turbines that does not require scaffolds and has already acquired a domestic patent for “Method ofknocking down a power-generating wind turbine.” International patents are pending for “Method of knocking down towering structuresusing their bases” and “Method for dismantling tower-shaped equipment for wind power generation.” Safety of workers can be improved
dramatically, and the work period can be shortened by using these patent-based methods.
Pursuit of the value of the 3D business
Using services such as layout simulation, strain/bending/torsion measurement, comparison of structures before and after improvement,
and video walkthroughs, the company converts physical data taken when plants were established (more than 30 years ago) into the latest
3D data and uses that to provide detailed information about the dismantling process. They also provide unique 3D measurement services
for dismantling work using the latest measuring technology and simulation systems that are capable of drawing data as 2D diagrams,
handling BIM/CIM modeling, Perfect 3D, and 3D printing, etc.
“Visualize” the dismantling process
Layout simulation
The equipment models produced with 3D CAD are placed in 3D data, and the replacement ofequipment can be simulated. By moving the equipment models, it is possible to check how theyinterfere and collide with one another.
Strain, bending, and torsion It is possible to measure changes in shapes. This is useful for diagnosing frameworks tentatively, tomeasurements
check whether a building got distorted due to an earthquake, deterioration, etc.
Comparison of structures
The shapes of equipment that changes due to heat and vibration, such as pipes, conveyors, andbefore and after installation furnaces, at the time of installation and after operation are compared. With 3D data, it is possible tograsp overall changes intuitively.
Video walkthroughs
Walk-through videos are produced by using synthesized point cloud data. These videos can be utilized
for presentations and publicity videos regarding dismantlement plans and real estate information.
Unique 3D measurement service
Draws a two-dimensional
The 3D CAD models based on point cloud data are converted into drawings. It is also possible todiagramproduce drawings directly from point cloud data in a simple manner.
Handles BIM/CIM
Modeling is conducted with 3D CAD based on point cloud data. It is possible to produce models ofmodeling
the parts that require construction or renovation as BIM (building information modeling) data.
Perfect 3D
This is a large-scale 3D data measurement service combining automobile-based MMS (mobile
mapping system), airborne laser measurement, water area measurement, etc.
3D printing
After modeling with point cloud data, data are processed and deformed so that they can be shaped witha 3D printer. It can produce fine structures with a lamination pitch of 15 μm.

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1-3 ROE analysis
FY 18/1
ROE (%)Net Income to Sales Ratio (%)
Asset Turnover Ratio(Times）
Leverage（Times）

FY 19/1
11.7
5.87
1.11
1.80

FY 20/1

23.8
12.62
1.08
1.75

FY 21/1
2.3
1.75
0.72
1.85

5.6
3.87
0.67
2.14

ROE was low in the previous term and the term before that, but the company aims to achieve “an ROE of 13% in the term ending
January 2026” in its “mid-term management plan 2025” (which will be described later).

2. Fiscal Year ended January 2021 Earnings Results
2-1 Consolidated results
FY 1/20
Sales
Gross profit
SG&A expenses
Operating income
Ordinary income
Net Income

3,436
708
615
93
97
59

Ratio to sales

FY 1/21100.0%
20.6%
17.9%
2.7%
2.8%
1.7%

Ratio to sales

3,682
732
608
124
212
142

100.0%
19.9%
16.5%
3.4%
5.8%
3.9%

YoY
+7.2%
+3.4%
-1.2%
+33.6%+118.9%+137.8%Compared toforecasts
-3.1%
+3.8%
+6.4%
+9.7%

*unit: million yen
Sales and operating income increased, and profit exceeded the forecast.
Sales were 3,682 million yen, up 7.2% year on year. Thanks to the steady progress of demolition works, the company was able to makeup for the delay until the second quarter due to the coronavirus pandemic, and increased sales. Operating income rose 33.6% year on
year to 124 million yen. In the second half of that term, the company made up for the delay in commencement of demolition works dueto the pandemic in the first half. SG&A decreased 1.2% year on year, as personnel expenses augmented, but advertisement and R&D
costs declined. The impact of the novel coronavirus was not insignificant in the first half, but their on-site business operations were notsuspended, and the company made efforts to diversify clients and expand its business scope. The company considers that such efforts
paid off and their results were almost in line with the forecast.The large order backlog at the end of the term, too, will contribute to theperformance this term.
The number of completed works (rough estimates)
FY 1/20
Ratio to sales
Electric power
419
13%
Steelmaking
1,838
57%
Petroleum/petrochemical
548
17%
Gas
290
9%
3D
Other
129
4%
Total
3,224
100%

FY 1/21
615
1,263
1,161
68
102
205
3,414

Ratio to sales
18%
37%
34%
2%
3%
6%
100%

YoY
+47%
-31%
+112%
-76%
+59%
+6%

*unit: million yen

The composition is well-balanced, as the company received many orders as a main contractor in the chemical field.

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The amount of completed demolition works is recovering.
Breakdown of SG&A
FY 1/20
Personnel Cost
R&D Cost
Commissions andRemunerations Paid
Recruitment Cost
Advertisement
Other
Total SG&A expenses

327

Ratio toFY 1/21
sales
9.5%
333

Ratio to
sales
9.0%

16
53

0.5%
1.5%

9
64

0.2%
1.7%

16
10
190
615

0.5%
0.3%
5.5%
17.9%

13
4
183
608

0.4%
0.1%
5.0%
16.5%

Increase/
Major change factors
Decrease+1.7% Increase in headcount of main
employee-45.9% Decreased development of robots+20.2%
Factory introduction fee-19.2% Advertising media, referral fee-56.7% Decrease of exhibition
-3.7%
-1.2%
-

*unit: million yen
Overall SG&A was unchanged from the previous year, although the SG&A expenses in respective categories fluctuated, as the company
reconsidered costs in the fiscal year amid the coronavirus pandemic.

For sustainable growth, the company needs to focus on receiving orders as a main contractor, and it is indispensable to increase
demolition supervisors. Accordingly, the company continuously engages in recruitment activities. The number of demolition supervisors
increased by 2 from the beginning of the term to 39.
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2-2 Orders received and the backlog of orders
FY 1/20
The backlog of orders at the beginning of the term
The amount of works received
The amount of completed works
The backlog of orders at the end of the term

FY 1/21
1,021
3,249
3,224
1,046

YoY
1,046
4,912
3,414
2,545

2.5%
51.2%
5.9%
143.1%*unit: million yen

Order backlog was large, as the company received large-scale orders thanks to the improvement in the order-receipt environment causedby the increase of excess facilities. Also, in the term ending January 2022, they are reportedly receiving a sufficient number of businessinquiries.
Orders received by sector (Amounts are approximate.)
FY 1/20
Ratio
FY 1/21
Ratio
YoY
Electric power
73
7%
814
32%
+1,012%
Steelmaking
565
54%
382
15%
-32%
Petroleum/petrochemical
397
38%
1,145
45%
+188%
Gas
76
3%
Other
10
1%
127
5%
+1,117%
Total Orders Received
1,046
100%
2,545
100%
+143%
*unit: million yen
Through active marketing as a main contractor, the company received orders for large-scale dismantlement projects in the electric powerand chemical fields. The market share in the iron-making field dropped, but it is expected to recover, as there will emerge demand forremoval or renovation of facilities due to business reorganization, deterioration of equipment, etc.
2-3 Financial condition and cash flow（CF）
Financial condition

Cash
Notes receivable, accounts receivable fromcompleted construction contracts and other
Current Assets
Investments, Others
Noncurrent Assets

January
2020
938
708
1,965
2,680
2,975

January2021
1,367 Payables
1,392 Borrowings and Bonds

January
2020
347
1,747

January
2021
558
2,519

2,400
2,540
4,941

3,435
2,595
6,030

2,948 Liabilities
2,765 Net Assets
3,082 Total Liabilities, Net Assets*unit: million yen
Total assets grew 1,089 million yen from the end of the previous term to 6,030 million yen, due to the increases in cash & deposits andaccounts receivable.
Total liabilities augmented 1,035 million yen to 3,435 million yen, because debts rose 772 million yen from the end of the previous term.
Nets assets were nearly unchanged.
Capital-to-asset ratio dropped 8.4 points from the end of the previous term to 43.0%.
Cash Flow（CF）
FY 1/20
Operating Cash Flow(A)Investing Cash Flow(B)Free Cash Flows (A + B)
Financing Cash Flow
Cash and Equivalents at Term End

FY 1/21-153-2,543-2,697
1,604
938

YoY
-108
-101
-209
638
1,367

+45
+2,442+2,487-966+428*unit: million yen
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The deficit of free CF shrank, as purchase of securities or investment securities decreased from the previous term.
The cash position improved.
2-4 Topics(1) Fund procurement for completing the mid-term management plan
In January 2021, the company announced that it would procure funds by issuing share acquisition rights to third parties for achieving
the mid-term management plan.
(Outline of the fund procurement scheme)＊To allocate share acquisition rights to the investment trust operated by the Hayate Group, which is an institutional investor thatcreates and operates investment trusts.
＊The investment trust to which share acquisition rights will be allocated is Japan’s first investment trust that was introduced as theone for directly offering funds to enterprises (true direct financing) when it was established. Besterra would become the first enterprise
to receive funds through this trust.
＊When share acquisition rights are exercised, 1.36 million new shares will be issued, diluting the shares by about 16%, but thecompany will procure funds according to the rise in share price by adopting “The issue program targeted at Kikan-Toshika
institutional investors (K-TIP)” developed by the Hayate Group.
＊Compared with capital increase through a public offering, it is possible to procure funds swiftly and efficiently. Compared withsimple moving strike warrants, it is possible to curtail dilution and maximize the procurement amount.
＊Through the 9th and 10th issuances of share acquisition rights, the company is estimated to procure a total of about 2.6 billion yen.
(Purposes of fund procurement)
The purposes are to secure funds for growth and strengthen the financial foundation for completing “the mid-term management plan
2025 (which will be described later)” announced on March 12.
1. To secure funds for growth(1) Field related to the removal of equipment for“Investment in M&A in the 4 fields where high synergetic effects decarbonization
with the plant dismantling technology can be expected”(2) Field related to the dismantlement of wind power
generation facilities(3) Digital field for pursuing 3D business value(4) Specialized dismantlement field for sophisticating thedismantling technology

2. To strengthen the financial foundation

The company will also allocate funds for the increase of
marketing and recruiting staff, the improvement of businessbases, etc. in parallel with the expansion of their businessscale.
In order to cope with the drop in financial flexibility throughthe decline in liquidity on hand, the augmentation ofborrowings, etc., the company will increase shareholders’equity and fortify its financial foundation for successful
business.

As Besterra carries out original ESG management for realizing an advanced recycling-oriented society and attaining SDGs, it
recognizes “(1) the field related to the removal of equipment for decarbonization” as a priority investment target.
Through the removal of facilities for decarbonization, it is expected that technological innovation will be triggered in various sectors,
including transportation, industry, commercial/residential, and electric power, and business opportunities will increase. However, theremoval of facilities for decarbonization is only one example. Through M&A, the company will invest in (2) wind power generation,(3) 3D business, and (4) sophistication of the dismantling technology.
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3. Fiscal Year ending January 2022 Earnings Forecasts
3-1 Consolidated Earnings
Sales
Operating income
Ordinary income
Net income

FY 1/21
3,682
124
212
142

Ratio to sales
100.0%
3.4%
5.8%
3.9%

FY 1/22(forecast)
5,600
450
518
360

Ratio to sales
100.0%
8.0%
9.3%
6.4%

YoY
+52.1%+261.4%+143.4%+152.5%*unit: million yen

A significant recovery is expected. Sales are expected to reach a record high.
Sales are projected to grow 52.1% year on year to 5.6 billion yen, and operating income is forecast to rise 261.4% year on year to 450
million yen. As there is strong demand for plant dismantlement, significant increases in sales and profit are expected. The company plansto pay an interim dividend of 6 yen/share and a term-end dividend of 10 yen/share for a total of 16 yen/share per year, unchanged fromthe previous term. The expected payout ratio is 36.6%.

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4. Mid-term management plan 2025
In March 2021, the company announced the 5-year “mid-term management plan 2025 (FY 1/22 to FY 1/26),” which starts this term.
(1) External environment①Expansion of the dismantlement market
In Japan, the ratio of facilities that are over 50 years old will increase at an accelerating pace in the coming 30 years.
It is forecast that more plants will be dismantled or renovated, due to the rapid deterioration of facilities constructed in or after the rapid
growth period in the 1960s, economic obsolescence, corporate reorganization, international relocation, etc. The Japanese dismantlement
market is expected to keep growing at an accelerating pace.
The company estimates that the scale of the dismantlement market is about 1 trillion yen.
The Cabinet decided to adopt the “removal of facilities for decarbonization” based on the declaration of carbon neutrality by 2050 andthe “fifth basic plan for energy,” which is focused on the reduction of greenhouse gas emissions. Like this, the government, too, is
promoting the restructuring and reestablishment of the plant industry for improving efficiency, so it can be expected that there will be
more governmental measures for renovating or dismantling various facilities, including power plants.
②Trend of the plant industry
The company considers the trend of each industry and the market scale as follows.
Industry
Market scale
Trend, etc.
Electric power
About 13 As coal-fired power plants are decreasing and 24 nuclear power plants are to betrillion yen
decommissioned, it is necessary to comprehensively reconsider the system for actualizing
the appropriate combination of energy.
Iron-making
About
2 Due to business reorganization and deterioration, it is necessary to remove or renovate
trillion yen
redundant facilities.
Petroleum/petrochemical About
8 Most of industrial complexes were constructed during the rapid economic growth period,
trillion yen
so the sophistication, restructuring, etc. of equipment are progressing for boosting
international competitiveness.
Other manufacturing
About 20 Manufacturing industries are expected to see the renewal and dismantlement oftrillion yen + equipment due to the streamlining of business operations through the technologicalαevolution called the fourth industrial revolution and the changes in demand and supply inJapan.
(2) Mid-term management plan 2025
① Ideal state and long-term vision
Besterra aims to flourish in the global market as the “plant demolition leader in Japan” and the “enterprise that proposes the plantdismantling technology to the world” based on its technologies and know-how.
To attain this goal, the company pursues “Besterra ESG management.” In detail, it will implement the five strategies: the “technologicalpatent strategy,” “sales strategy,” “strengthening of the dismantlement management system,” “digital transformation (DX),” and“management strategy.”② Besterra ESG management and SDGs
◎ Besterra ESG management
Under the corporate ethos: “to contribute to the earth environment with flexible thinking and creativity and technological capacity basedon them,” the company aims to contribute to social sustainability and achieve beneficial growth. This is “Besterra ESG management,”
and its unique business model for gaining competitive advantages.
The company will concentrate on the following five items, with the measures or policies of “SDGs of Besterra,” “enhancement of nonfinancial strategies and initiatives,” and “establishment of a growth model from the long-term viewpoint.”
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BRIDGE REPORT (1433) March 26, 2021

Personnel
SafetyR&D
Recycling
Governancehttps://www.bridge-salon.jp/

Pursuit of worthwhile jobs and individual growth
Creation of a safety culture with its unique technologies
Development of innovative demolition methods friendly to the earth
Realization of advanced environmental cycling through thestrengthening of the venous industry
Thorough transparency and risk control

SDGs of Besterra
For contributing to the earth environment, the company set a total of 17 goals related to SDGs, and aims to attain them.
1

2

3-1

3-2

To contribute to the earth ① To offer innovative dismantlingenvironment
byoffering technologies
fordeteriorated
innovative
dismantling infrastructuretechnologies② To offer reliable, safe dismantlingtechnologies for a low-carbon society
and contribute to the earth environment③ To offer advanced dismantlingtechnologies as a professional indismantlement by utilizing 3Dtechnologies
To develop a working ① To become a company in which
environmentinwhich every employee can feel that their job isemployees can feel that their worthwhile and be proud of the futurejobs are worthwhile② To respect diversity and enrich thefair environment③ To develop a fair educational
environment where it is possible to exert
abilities to the maximum
To realize an advanced ① To dispose harmful materials andrecycling-oriented society and pollutants appropriately and offer
contribute to the establishment technologies for making them harmlessof a sustainable society② To develop a recycling businesswith high added value and improve
productivity③ To coexist with local communities
and contribute to the improvement oflocal environments
To foster partnership for ① To foster future-oriented partnershipestablishing a sustainable with lofty goals beyond all kinds of(advanced recycling) society
boundaries② To promote fair and equitablepartnership between enterprises③ To offer new technologies,
knowledge, and findings to theadvanced recycling society, to attaingoals③ Strategies
The outline of the five strategies: “technological patent strategy,” “sales strategy,” “strengthening of the dismantlement management
system,” “digital transformation (DX),” and “management strategy” is as follows.
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BRIDGE REPORT (1433) March 26, 2021

https://www.bridge-salon.jp/③-1 Technological patent strategy
The company has obtained a lot of patents regarding tanks, boilers, chimneys, etc., and will keep acquiring competitive patents for
dismantlement methods in the fields of windmills, wind power generation, etc., where demand is expected to grow, and propose original
demolition methods and put them into practice.
While the global demand for windmills for power generation is growing at an annual growth rate of about 20%, the demand fordismantlement is projected to rise, due to the expiration for use and economic obsolescence.
In order to meet the growing demand for dismantlement of wind power generation equipment, the company has applied for a patent forthe dismantlement method “Matryoshka Method” ahead of competitors.
In addition to the 1 already obtained patent and 5 pending patents, the company is considering new multiple methods. The technologicaldevelopment division is in charge of development of dismantlement methods for obtaining patents and has a system for developing
methods based on ideas collected from on-site staff.

(Source: The company)

Since harmful substances are used at each plant equipment, soil pollution is an issue. Through the amendment into the Soil
Contamination Countermeasures Act, it became necessary to conduct a soil survey when developing land with an area of 900 m2 orlarger (before the amendment: 3,000 m2 or larger) in April 2019.
They will respond to the growth of such needs.
③-2 Sales strategy
In detail, the company will work on the “increase of orders received as a main contractor,” “enhancement of corporate branddevelopment,” “cementing of cooperation,” and “upgrade of business bases.”◎ Increase of orders received as a main contractor
The company aims to boost earnings ratio by increasing direct orders and the ratio of directly commissioned works and public works.
Since Besterra proposes plans based on each client’s plan, it possesses the knowledge of how directly commissioned works are carriedout, but in order to fortify the system, it will adopt the system for obtaining qualifications, including those for supervising engineers,
increase marketing support staff, and reform the personnel system.
◎ Enhancement of corporate brand development
In order to effectively enhance its brand power, the company will enrich advertising tools and distribute unified messages to stakeholders
via the media, etc.
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BRIDGE REPORT (1433) March 26, 2021

https://www.bridge-salon.jp/◎ Cementing of cooperation
The company will cement corporation in various ways.
* Cementing of cooperation with group companies
The company offers human resources services and 3D measurement services via subsidiaries. It will pursue business synergy bycementing cooperation among group companies and offering services through group marketing.
* Cementing of cooperation with alliance partners
The company will cement cooperation for decommissioning nuclear power plants.
Besterra will serve as a platform, and alliance partners, such as Hitachi Plant Construction, Ltd. (business alliance formed in July 2018),
Daiichi Cutter Kogyo K.K. (business alliance formed in September 2018), and Rever Holdings Corporation (business alliance formed
in September 2019), will conduct cooperative activities while utilizing each other’s strengths, to establish a system for decommissioning
business.
In Japan, there are 60 nuclear reactors at 19 locations, but 24 reactors out of them are to be decommissioned. The examination on thecompliance with the new standards will progress, and the decommissioning business is expected to grow. Actually, business inquiries
are reportedly increasing.
* Cementing of cooperation with Rever HD
The company will cement the cooperation with Rever Holdings Corporation, which is an equity-method affiliate.
While the core business of Besterra is the dismantlement of plants, which is positioned between the arterial industries including “electric
power, iron-making, and petroleum/petrochemical ones” and the venous industries including “scraps and industrial waste,” the corebusiness of the Rever Holdings Group is the intermediate processing in the venous industries including “scraps and industrial waste.”
While responding to the deterioration of infrastructure, whose market is expected to grow, the two companies will fulfill the role oflinking the arterial and venous industries and establish an indispensable position in the advanced recycling society.
◎ Upgrade of business bases
In order to increase orders for recurring-revenue projects (such as continuous orders from clients, works that require supervisors always
staying, the apple peeling dismantlement method, and PCB treatment works), the company will consider the establishment of new
business bases in Kyushu, where the amount of dismantlement projects is large, industrial complexes in Kashima, etc., Sendai, etc.
③-3 Strengthening of the dismantlement management system* Improvement of the procurement system
The company used to outsource works at each site for swift management, but seeing the expansion of the corporate scale, the newly
established procurement division of the headquarters has adopted a cost control system. It aims to optimize procurement costs byoutsourcing works all at once.
* Staffing plans
As the company specializes in dismantlement management, it needs to deploy a supervisor for all works. For sustainable growth, it isindispensable to increase dismantlement supervisors, so it will engage in company-wide recruitment activities.

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BRIDGE REPORT (1433) March 26, 2021

https://www.bridge-salon.jp/* Development of a personnel training system
In order to cope with the chronic shortage of manpower, the company will develop “a program for producing advanced dismantlement
engineers” to increase the number of employees who will drive business growth and make them useful early.
“Program for producing advanced dismantlement engineers”
The company will implement the “training program” for realizing the transfer of techniques from experienced engineers to inexperienced
ones.
In addition, it will “introduce a course for specialists in dismantlement and a course for managers” and “enrich the system for promoting
the acquisition of qualifications” for producing dismantlement supervisors, and formulate and operate a personnel system, which is
focused on the workstyles of individuals.
* Cementing of cooperation with subcontractors
Actual dismantlement works are conducted by subcontractors, and Besterra supervises and manages on-site work. Subcontractors aregroups of engineers who take central roles in dismantlement works. Accordingly, Besterra aims to improve the quality of works bycementing the cooperation with them.
Besterra makes transactions with a hundred and several tens of subcontractors per year. They are composed of a broad range ofcompanies, including dismantling firms, companies that lease or rent heavy machinery, equipment, etc., and companies that process
scraps and industrial waste. Among subcontractors around Japan, only about 30 companies possess the technology required for Besterra’s
works, so Besterra entrust them even if the site is distant.
With the dismantlement plan designed by Besterra, the dismantlement process is optimized, and a high profit margin is actualized.
Besterra pays to subcontractors within about 35 days after the closing date of a transaction, while clients pay within about 105 days after
the closing date of a transaction. This is a merit in cash management for subcontractors undertaking the works of Besterra.
* Acquisition of essential technologies through M&A, etc.
The company will encourage enterprises that possess essential technologies for the processes such as preliminary surveys, planning,dismantlement, disposal of waste, and ground leveling to join the Besterra Group through M&A or the like and acquire advanced
technologies.
③-4 Promotion of DX
By utilizing data and digital technologies, the company will upgrade products, services, and business models, and reform its business
operations, organizations, processes, corporate culture, and climate, to establish a competitive advantage.
* Crane rail inspection robots and revision to inspection methods
In order to efficiently conduct regular inspection of overhead cranes, which are installed at plants and factories to convey heavy objects
and parts, the company has developed a self-propelled inspection robot that runs on a crane rail in cooperation with iXs Co., Ltd.
A distortion of an overhead crane caused by deterioration due to aging would lead to a serious accident if it is not dealt with, so theregulations on safety of cranes, etc. in the Industrial Safety and Health Act stipulates that an enterprise that has installed a crane shallinspect it voluntarily once a month and once a year.
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BRIDGE REPORT (1433) March 26, 2021

https://www.bridge-salon.jp/

In the conventional manual inspection, workers had to go to the ceiling. Accordingly, there was a risk of an accident, visual inspection
led to inconsistency, and the loss of opportunities occurred due to the suspension of factory operation.
Meanwhile, inspection robots can reduce the risk of accidents among workers, always obtain accurate, meticulous data, and complete
inspection in a short period of time or in a spare time.
Besterra estimates that the market scale is about 30 billion yen.
* Reform of design and dismantlement processes
By converting paper data at the time of construction (over 30 years ago) into cutting-edge 3D data, the company will conductdismantlement whose processes are “visualized.”* Streamlining of on-site work based on the collaboration between people and robots
The company will use people and robots together at dismantlement sites while combining technologies for 3D measurement,
dismantlement, and robot control.
③-5 Management strategy*Environment
The company will contribute to the environment-oriented business administration of each client, by actualizing environment-oriented
business administration itself and providing dismantlement technologies for revamping plant equipment that would produce highenvironmental burdens.
* Reform of workstyles and development of a system for working without worry
The company has adopted various systems so that employees can work with peace in mind for a long period of time. It will make efforts
to increase the retention rate of employees and utilize the systems for recruitment.
(Concrete examples)
・Income insurance: The company will fully bear the insurance premiums. 50% of monthly pay will be covered until the age of retirement(60 years old). It is one of the best income insurances in Japan.
・ Retirement benefit system
・ Employee shareholding association: The company bears 15% of the reserve for members.
・ Retainable annual paid holidays: Paid holidays can be generally retained for 40 days as set forth in the Labor Standards Act, but in thecompany, it can be retained for up to 80 days in case an employees needs to recover from an injury or a disease.
*GovernanceIn order to actualize a system for achieving profitable growth and a sustainable society, the company will tighten its corporate governance.
As mentioned above, the company has procured funds by issuing share acquisition rights for the purposes of securing funds for growthand fortifying its financial foundation for completing the mid-term management plan.

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BRIDGE REPORT (1433) March 26, 2021

https://www.bridge-salon.jp/⑤ Numerical goals
The company set the following numerical goals.

3,682
124
212
142
3.4%

1st year
FY 22/1
5,600
450
518
360
7.9%

3rd year
FY 24/1
7,800
720
794
552
9.2%

5th year
FY 26/1
10,000
1,000
1,072
752
10.0%

5.6%
17

12.3%
43

12.5%
67

13.0%
91

FY21/1
Sales
Operating income
Ordinary income
Net income
Operating income
marginROEEPSCAGR (1)CAGR (2)+22.1%+51.8%+38.3%+39.6%-+15.6%+22.1%+19.9%+20.2%-+39.9%+20.6%*unit: million yen, yen.
*CAGR (1) is the average annual growth rate from FY01/21 to FY01/26, and CAGR (2) is the average annual growth rate from FY01/22 to FY01/26, calculated
by Investment Bridge Co., Ltd.

In the long term, the company aims to achieve “sales of 100 billion yen and an operating income of 10 billion yen” and “a 10% share in
the plant dismantlement market.”⑥ Distribution of profits and return to shareholders
With regard to the distribution of net income, the company set the policies: (1) “investment for future growth,” (2) “internal reserve forstrengthening the business base,” and (3) “return of profit to shareholders targeting a payout ratio of 40%.”
For growth, the company allocates funds rationally according to situations to the investment in human resources (recruitment andeducation), the investment in technological development (dismantlement methods and robots), the investment in systems (3D systems,
BIM and CIM), and the investment in strategic business (M&A).

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https://www.bridge-salon.jp/

5. Conclusions
In the term ended January 2021, sales and profit slightly grew, exceeding the forecast. While maintaining the recovery trend in the second
half, the company aims to recover sales and profit considerably this term, based on the large order backlog at the end of the term. In the
short term, we would like to monitor the variation in quarterly performance.
As the Japanese government stated a global commitment: “Carbon Neutrality by 2050,” the dismantlement and renovation of power
generation plants, petroleum/petrochemical plants, etc. will be accelerated further. It seems that the Japanese government expects that
nuclear power plants, which do not emit greenhouse gases, will fulfill some roles, but seeing the recent news coverage, it is likely that
old-fashioned nuclear power plants will be dismantled from the viewpoint of safety. While taking advantage of such demand growth,
the company will strengthen its human capital and promote DX, and strive to achieve “sales of 10 billion yen and an operating incomeof 1 billion yen” in the term ending January 2026 and then “sales of 100 billion yen and an operating income of 10 billion yen.” Wewould like to keep an eye on their activities.

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BRIDGE REPORT (1433) March 26, 2021

https://www.bridge-salon.jp/<Reference: Regarding Corporate Governance>◎ Organization type and the composition of directors and auditors
Organization typeCompany with a board of company auditors
Directors
9 directors, including 2 outside ones
Auditors
3 auditors, including 3 outside ones
◎ Corporate Governance Report Update date: April 24, 2020
Basic policy
In order to promote sound business administration and win social trust sufficiently, our company recognizes corporate governance as themost important issue, puts importance on the improvement of the soundness, transparency, and fairness of business administration, andcomplies with laws and regulations thoroughly, and all executives operate business while keeping in mind that “the violation of laws or
regulations would lead to management responsibility.” In detail, our company disseminates and executes business pursuant to laws,
regulations, and in-company rules thoroughly, by developing appropriate systems for making decisions about business administration,
fulfilling duties, supervising work, conducting internal control, etc.
It is also important to reform management systems for “achieving appropriate share price” and “increasing share price sustainably” toemphasize shareholders and strengthen the function to check business administration, to establish global-level corporate governance.
The results of such efforts would win the trust of society, increase corporate value, and satisfy shareholders.
<Reasons for Non-compliance with the Principles of the Corporate Governance Code (Excerpts)>【Supplementary principle 4-3-3】
Our company has not established a clear procedure ensuring objectivity, timeliness and transparency for dismissal of the president orCEO, but we strive to realize a mutual assessment by involving outside directors in the process of evaluation of nomination andremuneration of the Board of Directors, in order to carry out the assessment of effectiveness of the Board of Directors appropriately.
【Principle 4-11】
The Board of Directors consists of directors and others with thorough knowledge of each of our business lines, and outside directors
who are company managers. While we consider the size of the board appropriate, we cannot say the same with regard to gender andethnic diversity. As such, we will strive to place importance on diversity when appointing directors going forward. In addition, the Boardof Directors, joined by outside directors, shall periodically meet to discuss the structure and management of the board in order to improveits capabilities and effectiveness. Our Board of Auditors comprises three independent auditors, including tax accounts and persons withexperience in corporate management, with expert knowledge and experience in management, finance, accounting, sales, auditing, etc.
<Disclosure Based on the Principles of the Corporate Governance Code (Excerpts)>【Principle 1-4 Strategically held shares】
From the viewpoint of business expansion based on maintaining and strengthening long-term, stable partnerships with business partners,
etc., we will acquire and hold the shares of business partners, etc., if we judge that this will contribute to the improvement of our mid/longterm corporate value. For equity investments premised on forming business alliances, the management meets with and receives
explanations of the operating environment, business strategy, and purposes of the capital alliance from representatives of the other party.
Based on this, the Board of Directors comprehensively evaluates the appropriateness of the stock valuation report and judges whether
the deal should take place. For strategically held shares, the Board of Directors constantly checks whether the holding of such shares willcontribute to the improvement of our corporate value and confirms the purpose and rationality of said holding based on that check. Our
company will appropriately buy/sell shares and exercise voting rights in accordance with relevant regulations, based on a comprehensive
evaluation from the viewpoint of improving our corporate value.

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https://www.bridge-salon.jp/【Principle 5-1 Policy on constructive dialogue with shareholders】
Regarding requests from shareholders for dialogue (interviews), our company believes that we should express a positive attitude withina reasonable scope in order to contribute to sustainable growth and medium- and long-term improvement of the corporate value of ourcompany. Aiming to promote constructive dialogue with shareholders, with the planning department designated as a department incharge of IR activities, our company holds financial results briefings targeted at financial institutions and investors semiannually anddiscloses corporate information as needed on our website and through the system of optional disclosure offered by Tokyo Stock
Exchange.

This report is intended solely for information purposes, and is not intended as a solicitation for investment. The information and opinions
contained within this report are made by our company based on data made publicly available, and the information within this report comesfrom sources that we judge to be reliable. However, we cannot wholly guarantee the accuracy or completeness of the data. This report is nota guarantee of the accuracy, completeness or validity of said information and opinions, nor do we bear any responsibility for the same. All
rights pertaining to this report belong to Investment Bridge Co., Ltd., which may change the contents thereof at any time without prior notice.
All investment decisions are the responsibility of the individual and should be made only after proper consideration.
Copyright(C) 2021 Investment Bridge Co., Ltd. All Rights Reserved.

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