COMPANY RESEARCH AND ANALYSIS REPORTMEIKO NETWORK JAPAN CO., LTD.
4668
Tokyo Stock Exchange First section

3-Dec.-2019
FISCO Ltd. Analyst

Yuzuru SatoFISCO Ltd.
http://www.fisco.co.jp

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

MEIKO NETWORK JAPAN CO., LTD.
4668 Tokyo Stock Exchange First section

3-Dec.-2019
http://www.meikonet.co.jp/ir-e/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Overview of FY8/19 results.................... ......................................................................................................

01

2. Priority strategies in FY8/20.........................................................................................................................

01

3. FY8/20 outlook...................................... ......................................................................................................

02

4. Shareholder return policy....................... ......................................................................................................

02■Business overview---------------------------------------------------------------------------------------------------------------------------------------------------- 03■Business performance------------------------------------------------------------------------------------------------------------------------------------------ 04
1. Overview of FY8/19 results.................... ......................................................................................................

04

2. Segment trends...........................................................................................................................................

05

3. Financial position and management indicators. ...........................................................................................

11■Business outlook-------------------------------------------------------------------------------------------------------------------------------------------------------- 12
1. Priority strategies in FY8/20.........................................................................................................................

12

2. FY8/20 outlook...................................... ......................................................................................................

14■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 15■Information security policy------------------------------------------------------------------------------------------------------------------------------- 16

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

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

MEIKO NETWORK JAPAN CO., LTD.
4668 Tokyo Stock Exchange First section

3-Dec.-2019
http://www.meikonet.co.jp/ir-e/██SummaryPreparatory school with multiple brands and focusing on English
education service and foreigner work and learning assistanceservices
MEIKO NETWORK JAPAN CO., LTD. <4668> (hereafter, also “the Company”) offers a variety of educational services
centered on the direct and franchise operations of the Meiko Gijuku private tutorial schools, but also after-schoolcare, medical-related preparatory schools, soccer schools, and Japanese language schools for overseas students.
Its strengths include its expertise in franchise operations and the Company is aiming to become a top company inhuman development while expanding business domains with M&A activities and business alliances.
1. Overview of FY8/19 results
The Company reported FY8/19 consolidated results with net sales rising 4.5% year-on-year (YoY) to ¥19,967mn
and operating income growing 23.1% to ¥1,775mn. While it slightly missed guidance (¥20,320mn in net sales and¥1,860mn in operating income) due to ongoing declines in the number of classrooms and students in mainstay
Meiko Gijuku business (including franchises) and weakness at some consolidated subsidiaries, both sales and profitsrose YoY for the first time in two years. Key factors contributing to the gains were conversion of the Meiko Gijuku
franchise operating company to a consolidated subsidiary (adding ¥1,126mn YoY) and decline in sales promotion
costs for the Meiko Gijuku business (providing a savings of ¥459mn) in profits. Although period-end levels dropped
to 1,937 classrooms (down 4.5% YoY) and 113,081 students (down 2.8%) in the Meiko Gijuku business, progressin classroom scrap & build activities lifted the average number of students per classroom by 1.8% to 58.4 people,
the first increase in four years.
2. Priority strategies in FY8/20
The Company has presented four priority strategies in FY8/20 of 1) strategic promotion of franchise business, 2)
restructuring of the Meiko Gijuku business, 3) expansion and reinforcement of existing businesses, and 4) creationof new businesses. In strategic promotion of franchise business, it plans to pursue franchise business for Jiritsu
Gakushu RED, a personalized preparatory school operated by peer SPRIX <7030>, and tyotto Juku, a private
tutoring school that specializes in university exams operated by tyotto Inc., through business alliances. This strategy
aims to accommodate a wide range of customer needs by promoting multiple preparatory school brands withdifferent characteristics using the Company’s franchise operational knowhow as a base. In Meiko Gijuku business,meanwhile, the Company has outlined a policy of continuing classroom scrap & build efforts again in FY8/20 and alsoraising class quality and service levels through use of ICT and other techniques and strengthening local marketingstrategies with a goal of improving profitability by halting decline in student volume and increasing sales per student.
In existing businesses, it plans to strengthen kids business and English learning business. In new businesses, it islaunching online learning services for the Japanese language, business manners, and other areas geared toward
companies hiring foreign workers.

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

01 16

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

MEIKO NETWORK JAPAN CO., LTD.
4668 Tokyo Stock Exchange First section

3-Dec.-2019
http://www.meikonet.co.jp/ir-e/

Summary

3. FY8/20 outlook
The forecasts for the FY8/20 consolidated earnings calls for higher sales but lower profits, anticipating net sales
to increase 5.2% to ¥21,000mn, and operating income to decrease 11.6% to ¥1,570mn. Breakdown of theplanned sales increase includes ¥540mn from a full-year contribution by KMG Corporation (below, KMG), which
the Company acquired as a subsidiary in 3Q FY8/19, ¥450mn in parent sales (Meiko Gijuku business at ¥200mn,
kids business at ¥120mn, Waseda Academy Kobetsu schools at ¥60mn, etc.), and other subsidiaries at ¥40mn.
In operating income, meanwhile, the Company expects a ¥200mn profit boost from higher sale, but setbacks of¥400mn in strategic investment costs (information and ICT content development costs in Meiko Gijuku business at¥150mn, investments in English business at ¥150mn, and business development costs in new preparatory schoolsat ¥100mn). Management wants to solidify the Company’s growth foundation through strategic investments andthen steadily deliver growth from FY8/21.
4. Shareholder return policy
There has been no change to the Company’s policy of actively returning profits to shareholders. The FY8/20 dividend
per share will be ¥30 (dividend payout ratio, 94.8%), maintained the same level YoY. Going forward, the Company
sets 80% as the target standard for the dividend payout ratio. There have also been no changes to the shareholder
benefit program, in which the Company gives QUO cards worth ¥1,000 to ¥5,000 to shareholders as of the end of
August, according to the number of shares they hold and the length of time that they have held them. The grossinvestment yield per share unit, including the shareholder benefit program, is at the 4-6% level at the current shareprice (¥947 as of October 25, 2019).
Key Points
Sales and profits rose in FY8/19 for the first time in 2 fiscal years from the effects of M&A and the reduction insales promotion cost
• Expanding the line-up of educational services through aggressive business alliances and building a growth
foundation• Plans to continue robust implementation of shareholder return•㻾 㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟（¥㼙㼚）㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕（¥㼙㼚）㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼕㼚㼏㼛㼙㼑㻌㻔㼞㼕㼓㼔㼠㻕㻞㻡㻘㻜㻜㻜

㻡㻘㻜㻜㻜㻞㻜㻘㻜㻜㻜

㻝㻤㻘㻣㻢㻤

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㻟㻘㻡㻡㻡㻝㻤㻘㻢㻣㻞

㻝㻥㻘㻟㻤㻟

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㻝㻘㻣㻣㻡

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㻝㻘㻠㻠㻝

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㻜

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㻜

㻲㼅㻤㻛㻝㻡

㻲㼅㻤㻛㻝㻢

㻲㼅㻤㻛㻝㻣

㻲㼅㻤㻛㻝㻤

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

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

02 16

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

MEIKO NETWORK JAPAN CO., LTD.

3-Dec.-2019

4668 Tokyo Stock Exchange First section

http://www.meikonet.co.jp/ir-e/██Business overview
Aiming to become a top company in human development throughthe mainstay Meiko Gijuku business and expanding into othereducational services
Based on its educational philosophy of human development through independent learning, the industry leader
in private tutorial schools primarily operates the Meiko Gijuku business (direct and franchise operations). The
Company is also actively expanding into other businesses related to educational services, aiming to become a top
company in human development. Specifically, it operates the Meiko Soccer Schools, soccer schools for children;
Waseda Academy Kobetsu schools, which provide tutorial instruction to junior high school and high school students
seeking entry into prestigious high schools and universities; and Meiko Kids Schools, which provide nursery care forpreschool children and after-school care for elementary school children. Additionally, its subsidiaries operate Tokyo
Ishin Gakuin, preparatory schools that specialize in the medical university field, and Waseda EDU Japanese language
schools and JCLI Japanese language schools as schools that cater to overseas students learning Japanese. Other
businesses include subsidiary Kotoh Jimusho Co., Ltd., which operates support businesses for university entrance
exam and pre-university education; subsidiary Youdec Co., Ltd., which publishes an exam information magazine,
produces mock exam questions, sells educational materials, and offers private instruction to students at theirschools; and Youdec’s subsidiary Koyo Shobo Co., Ltd., which is involved in the academic publishing business.
In overseas businesses, the mainstay Company operates a nursery school for Japanese residents in Singapore(non-consolidated subsidiary COCO-RO PTE, LTD.) and has invested in NEXCUBE Corporation, Inc. (equity-method
affiliate; 23.7% stake), which operates private tutorial schools in South Korea, and Taiwan-based Meiko Bunkyo (affiliatedcompany not accounted for by the equity method; 25.0% stake), which operates the Meiko Gijuku business in Taiwan.
The Company’s breakdown by business segments shows Meiko Gijuku business (including direct-operation schools
and franchise schools) as the main business at roughly 80% of sales and just over 90% of profits, including Meiko
Gijuku franchise business at just over 60% of overall profits.

㻱㼍㼞㼚㼕㼚㼓㼟㻌㼎㼞㼑㼍㼗㼐㼛㼣㼚㻌㼎㼥㻌㼎㼡 㼟㼕㼚㼑㼟㼟㻌㼟㼑㼓㼙㼑㼚㼠㼟㻿㼍 㼘 㼑㼟㻌㼎㼞㼑㼍㼗㼐㼛㼣㼚㻌㼎㼥㻌㼎㼡㼟㼕㼚㼑㼟㼟㻌㼟㼑㼓㼙㼑㼚㼠㼟㻹㼑㼕㼗㼛㻌㻳㼕㼖㼡㼗㼡㻌㼐㼕㼞㼑㼏㼠㻌㼛㼜㼑㼞㼍㼠㼕㼛㼚㼟㻌㼎㼡㼟㼕㼚㼑㼟㼟㻹㼑㼕㼗㼛㻌㻳㼕㼖㼡㼗㼡㻌㼒㼞㼍㼚㼏㼔㼕㼟㼑㻌㼛㼜㼑㼞㼍㼠㼕㼛㼚㼟㻌㼎㼡㼟㼕㼚㼑㼟㼟

㻝㻜㻜㻑

㻝㻜㻜㻑
㻞㻝㻚㻠㻑

㻞㻞㻚㻣㻑

㻠㻚㻤㻑

㻡㻚㻞㻑

㻢㻣㻚㻞㻑

㻢㻟㻚㻠㻑

㻢㻡㻚㻡㻑

㻞㻤㻚㻤㻑

㻟㻝㻚㻣㻑

㻞㻥㻚㻠㻑

㻲㼅㻤㻛㻝㻣

㻲㼅㻤㻛㻝㻤

㻲㼅㻤㻛㻝㻥

㻤㻜㻑
㻞㻤㻚㻤㻑

㻞㻣㻚㻠㻑

㻞㻡㻚㻞㻑

㻢㻜㻑

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㻠㻚㻜㻑

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㻼㼞㼑㼜㼍㼞㼍㼠㼛㼞㼥㻌㼟㼏㼔㼛㼛㼘㻌㼍㼚㼐㻌㼛㼠㼔㼑㼞㻌㼎㼡㼟㼕㼚㼑㼟㼟㼑㼟

㻠㻥㻚㻤㻑

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㻲㼅㻤㻛㻝㻣

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㻲㼅㻤㻛㻝㻥

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

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

03 16

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

MEIKO NETWORK JAPAN CO., LTD.

3-Dec.-2019

4668 Tokyo Stock Exchange First section

http://www.meikonet.co.jp/ir-e/██Business performance
Sales and profits rose in FY8/19 for the first time in 2 fiscal years
from the effects of M&A and the reduction in sales promotion cost
1. Overview of FY8/19 results
The Company posted FY8/19 consolidated results with ¥19,967mn in net sales (up 4.5% YoY), ¥1,775mn inoperating income (up 23.1%), ¥1,907mn in ordinary income (up 22.4%), and ¥958mn in net income attributable toowners of the parent (up 45.8%). The results are slightly below the Company’s forecasts but both sales and profits
increased for the first time in two fiscal years.
Consolidated FY8/19 results(¥mn)
FY8/18FY8/19Results% of sales

Forecast

Results% of sales

YoY

vs. forecast

Net sales

19,116-

20,32019,967

-

4.5%

-1.7%

Cost of sales

13,02068.1%

14,08013,744

68.8%

5.6%

-2.4%

SG&A expenses

4,654

24.3%

4,380

4,447

22.3%

-4.4%

1.5%

Operating income

1,441

7.5%

1,860

1,775

8.9%

23.1%

-4.6%

Ordinary income

1,558

8.2%

1,940

1,907

9.6%

22.4%

-1.7%

657

3.4%

1,020

958

4.8%

45.8%

-6.1%

Net income attributable to owners of theparentNumber of students enrolled at Meiko Gijuku schools, number of schools, total system-wide sales (direct and franchise operations)
Number of schools (end of August)

2,029

1,937

-4.5%

Number of students (end of August)

116,374

113,081

-2.8%

57.4

58.4

1.8%

41,63740,410-2.9%

Number of students per school (end of August)Total system-wide sales* Total system-wide sales = total sales of directly operated schools, including lesson fees, fees for educational materials, and test fees, total sales offranchise operations including lesson fees. Fees for educational materials, tests, etc., at franchise operations are not included.
Source: Prepared by FISCO from the Company's financial results

The Company received sales boosts from its consolidation of K.Line Co., Ltd., the Meiko Gijuku franchise operatingcompany, in 4Q FY8/18 and KMG in 3Q FY8/19 of ¥844mn and ¥414mn respectively, offsetting sales declines inparent business and at other consolidated subsidiaries. The unit cost ratio climbed by 0.7ppt YoY to 68.8% mainly
due to increases in personnel costs and rents related to acquisitions of K.Line and KMG as subsidiaries. The
SG&A expenses ratio, meanwhile, dropped 2.1ppt to 22.3%. Main changes were increases of ¥160mn (¥63mn
in advertising and promotional costs, ¥57mn in goodwill amortization costs, and ¥40mn in rents) accompanying
acquisition of K.Line and KMG as subsidiaries and ¥52mn in paid fees and a decline of ¥459mn in sales promotion
costs from ¥1,597mn in the previous year to ¥1,138mn. The Company spent more than usual on sales promotion
costs related to a branding renewal in FY8/18 and return to the level in a typical year in FY8/19 contributed to higher
operating income.

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

04 16

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

MEIKO NETWORK JAPAN CO., LTD.

3-Dec.-2019

4668 Tokyo Stock Exchange First section

http://www.meikonet.co.jp/ir-e/

Business performance

Shortfalls versus guidance were lower numbers of classrooms and students in the Meiko Gijuku business and weaker
results at some subsidiaries, such as Youdec and Tokyo Ishin Gakuin. In Meiko Gijuku business, the number ofclassrooms (direct-operation and franchise) dropped by 4.5% YoY to 1,937 schools and the number of students
was down 2.8% to 113,081 students at period-end, the fourth straight year of declines. System-wide sales fell
2.9% to ¥40,410mn, the seventh straight annual decline. New openings, additions, and re-openings only totaled
10 classrooms (a decline of four classrooms YoY), while closures, suspensions, and terminations reached 102
classrooms (an increase of 43 classrooms). Progress in closures and other revisions of unprofitable classrooms
supported the first rise in average student volume per classroom at period-end in four years with an increase of 1.0
students. Even though middle school and high school student volumes continued to move lower, the number of
elementary school students increased in a second straight year.

Ongoing classroom and student decline in Meiko Gijuku business,but average number of students per classroom switched to anincrease at period-end
2. Segment trends(1) Meiko Gijuku direct operations business
Meiko Gijuku direct-operation business posted sales and profit gains for the first time in four years with an 11.6%
YoY rise in sales to ¥10,639mn and a 3.4% increase in segment profit to ¥894mn. By company, the Company’s
direct-operation sales fell 2.2% to ¥6,143mn while operating income climbed 10.3% to ¥795mn, and subsidiary
MAXIS Education Co. Ltd. (below, MAXIS) reported a slight decline in sales of 0.4% to ¥2,867mn and a 3.4%
increase in operating income to ¥246mn. K.Line, which was added as a consolidated subsidiary in 4Q FY8/18,
booked ¥1,214mn in sales and ¥73mn in operating profit, and KMG, which was added in 3Q FY8/19, provided¥414mn in sales and a ¥4mn operating loss. K.Line and KMG consolidation lifted sales. In profits, while goodwill
amortization costs rose by ¥58mn YoY, the Company benefited from a ¥62mn decline in sales promotion costs
and rise in sales per student in direct-operation business.

㻺 㼑㼠㻌㼟㼍㼘㼑㼟㻌㼕 㼚㻌㼠㼔㼑㻌㻹㼑㼕㼗㼛㻌㻳㼕㼖㼡㼗㼡㻌㼐㼕㼞㼑㼏㼠㻌㼛㼜㼑㼞㼍㼠㼕㼛㼚㼟㻌㼎㼡㼟㼕㼚㼑㼟㼟（¥㼙㼚）㻰㼕㼞㼑㼏㼠㼘㼥㻌㼛㼜㼑㼞㼍㼠㼑㼐㻌㼎㼥㻌㼠㼔㼑㻌㻯㼛㼙㼜㼍㼚㼥㻻㼜㼑㼞㼍㼠㼑㼐㻌㼎㼥㻌㻷㻚㻌㻸㼕㼚㼑㻝㻞㻘㻜㻜㻜

㻝㻜㻘㻜㻜㻜
㻤㻘㻜㻜㻜㻻㼜㼑㼞㼍㼠㼑㼐㻌㼎㼥㻌㻹㻭㼄㻵㻿㻻㼜㼑㼞㼍㼠㼑㼐㻌㼎㼥㻌㻷㻹㻳

㻥㻘㻡㻟㻜
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㻜

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

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

05 16

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

MEIKO NETWORK JAPAN CO., LTD.

3-Dec.-2019

4668 Tokyo Stock Exchange First section

http://www.meikonet.co.jp/ir-e/

Business performance㻿㼑㼓 㼙㼑㼚㼠㻌㼕㼚㼏㼛㼙㼑㻌㼕㼚㻌㻹㼑㼕㼗㼛㻌㻳㼕㼖㼡㼗㼡㻌㼐㼕㼞㼑㼏㼠㻌㼛㼜㼑㼞㼍㼠㼕㼛㼚㼟㻌㼎㼡㼟㼕㼚㼑㼟㼟
（¥㼙㼚）
㻝㻘㻠㻜㻜
㻝㻘㻞㻜㻜
㻝㻘㻜㻜㻜

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㻝㻘㻝㻟㻡
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㻢㻜㻜

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㼀㼛㼠㼍㼘

㻣㻟
㻤㻥㻠

㻤㻢㻡

㻞㻟㻤

㻞㻠㻢

㻣㻞㻝

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㻙㻝㻠㻟㻌

㻙㻝㻡㻤㻌

㻙㻠㻌
㻙㻞㻝㻢㻌

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㻲㼅㻤㻛㻝㻤

㻲㼅㻤㻛㻝㻥

㻝㻘㻜㻠㻟

㻠㻜㻜
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㻙㻞㻜㻜
Source: Prepared by FISCO from the Company's financial results

Number of directly operated schools and enrolled students
Directly operated by the Company

Number of schools (end of August)
Number of enrolled students(students)

Operated by MAXIS

Operated by KMG
FY8/19 3Q-4Q
ChangeFY8/18 4Q

Operated by K. Line

FY8/18FY8/19ChangeFY8/18FY8/19ChangeFY8/18FY8/19

233

221

-5.2%

93

92

-1.1%

42

41

-2.4%

43

15,974

15,281

-4.3%

6,438

6,482

0.7%

2,680

2,689

-

2,143

Average number of students per
school (students)

68.6

67.4

-1.7%

68.3

69.8

2.2%

63.8

64.5

-

49.8

Sales per student (¥1,000)

393.3

402.0

2.2%

447.2

442.4

-1.1%

138.0

451.6

-

193.4

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

As a result of scrap & build activities, the Company’s direct-operation schools fell by 12 classrooms YoY to 221
classrooms at period-end and average student volume declined 4.3% to 15,281 students and the average numberof students per classroom was down 1.7% to 67.4 students during the period. In contrast to continuing declines inthese levels, average revenue per student rose 2.2% to ¥402,000, the first increase in eight years. Main sources of
the higher average price were tuition revisions in spring 2019, increase in the number of students taking summer
courses due to a change in the program, and a rise in students in the English program utilizing ICT, such as Meiko
Mirai English for elementary students and Meiko Middle School Listening for middle school students. Additionally,
the number of students at period-end fell at a slower pace than previously of 2.3% YoY and the average numberof students per classroom climbed 3.0%, the first increase in four years. In quarterly results, 4Q FY8/19 (Jun-Aug)posted gains of 2.0% in sales and 16.1% in operating income.
MAXIS had 92 classrooms at period-end, a decline of one classroom YoY, and an average of 6,482 students(up 0.7%), 69.8 students as the average number of students per classroom (up 2.2%), and ¥442,400 in averagerevenue per student (down 1.1%) during the period. It also reported a 4.1% YoY increase in the number ofstudents and a 5.2% rise in the average number of students per classroom at period-end. Business indicators
are generally improving. MAXIS booked higher sales and profits in 4Q FY8/19 with gains of 3.1% YoY in sales
and 9.7% in operating income.

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06 16

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

MEIKO NETWORK JAPAN CO., LTD.

3-Dec.-2019

4668 Tokyo Stock Exchange First section

http://www.meikonet.co.jp/ir-e/

Business performance(2) Meiko Gijuku franchise operations business
Meiko Gijuku franchise business reported ¥5,035mn in sales (down3.9% YoY) and ¥1,993mn in segment profit(up15.3%). Due to conversion of KMG to a subsidiary (transfer to direct-operation business) and existing classroom
closures and suspensions, this business had declines at period-end of 121 classrooms to 1,540 classrooms,
down 9.4% in the average number of students during the period to 87,387 students, and down 3.4% in the
average number of students per classroom to 54.4 students. Even though sales dropped in an eighth straight
year, segment profit restored an increase for the first time in two years thanks to a ¥339mn decline in sales
promotion costs.

㻹㼑㼕㼗㼛㻌㻳㼕㼖㼡㼗㼡㻌㼒 㼞㼍㼚㼏㼔㼕㼟㼑㻌㼛㼜㼑㼞㼍㼠㼕㼛㼚㼟㻌㼎㼡㼟㼕㼚㼑㼟㼟㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕

㻔¥㼙㼚）
㻢㻘㻜㻜㻜

㻿㼑㼓㼙㼑㼚㼠㻌㼕㼚㼏㼛㼙㼑㻌㻔㼞㼕㼓㼔㼠㻕

（¥㼙㼚）

㻟㻘㻜㻜㻜

㻞㻘㻢㻠㻠

㻡㻘㻜㻜㻜

㻞㻘㻡㻜㻜
㻝㻘㻥㻥㻟

㻠㻘㻜㻜㻜
㻟㻘㻜㻜㻜

㻞㻘㻜㻜㻜

㻝㻘㻣㻞㻥
㻡㻘㻡㻤㻢

㻝㻘㻡㻜㻜
㻡㻘㻞㻠㻞

㻡㻘㻜㻟㻡

㻞㻘㻜㻜㻜

㻝㻘㻜㻜㻜

㻝㻘㻜㻜㻜

㻡㻜㻜

㻜

㻜
㻲㼅㻤㻛㻝㻣

㻲㼅㻤㻛㻝㻤

㻲㼅㻤㻛㻝㻥

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

Numbers of franchise schools and enrolled students
FY8/18FY8/19ChangeNumber of schools (end of August)

1,661

1,540

-7.3%

Average number of enrolled students (students)

96,45687,387-9.4%

Average number of students per school (students)

56.3

54.4

-3.4%

Royalty sales (¥mn)

3,317

3,069

-7.5%

1,935.6

1,911.5-1.2%

Royalty sales per school (¥1,000)

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

In the sales change breakdown, royalty revenue was down by ¥247mn due to decline in student volume, franchiseadvertising sales fell by ¥136mn, franchise educational material sales (mainly the English program and other
ICT-based learning services) climbed by ¥103mn, and contract value improved by ¥67mn on increase in franchisemember volume. Franchise member volume change largely reflected a shift to younger owners, including cases ofclassroom managers going independent and business succession from an existing franchise owner due to aging.

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07 16

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

MEIKO NETWORK JAPAN CO., LTD.

3-Dec.-2019

4668 Tokyo Stock Exchange First section

http://www.meikonet.co.jp/ir-e/

Business performance

While Meiko franchise business had been trapped in an adverse spiral as tougher competition in the private
tutoring school market led to steady decline in the average number of students per classroom and this trend
undercut the investment appetite of FC owners and thereby contributed to downturn in the numbers of classrooms
and students, it recovered to an increase in the average number of students per classroom at end-FY8/19 forthe first time in nine years with a gain of 0.7 students. We think the main improvement was progress in closing
unprofitable schools, though it also reflects positive effect from reinforcement of initiatives in various training andseminars for franchise owners, classroom managers, and teachers aimed at raising service quality. Additionally,
the Company rolled out MEIKO-Style Coaching, a tutoring method implemented at direct-operation classrooms
for the purpose of providing differentiation from rivals, at franchise classrooms in spring 2019. While the effect of
this rollout still needs time to materialize, the Company hopes to leverage concrete results in the form of improved
student academic performance through continued use of MEIKO-Style Coaching to increase new student volume
and curtail service suspension and departure rates.
*	MEIKO Style Coaching is a learning system that effectively improves students’ academic performance through combining“review lessons” and an e-portfolio system (Meiko e-Po). “Review lessons” are a learning guidance method that raises
students’ understanding capabilities during learning through the tutor giving them hints, and the students then solving
problems using their own capabilities and explaining what they have understood in their own words to the tutor, andrecording this in review notes. Meiko e-Po is a dedicated app in which students record information, such as learning
records and plans, and the parents and guardians can use their smartphones to check on their children’s learning status
and academic performance at any time.

(3) Preparatory school businessIn the preparatory school business, which is conducted by the consolidated subsidiary Tokyo Ishin Gakuin Co.,
Ltd., net sales decreased 16.2% YoY to ¥371mn and operating loss was ¥29mn (compared to operating lossof ¥21mn in the same period in the previous fiscal year). Competition to acquire students has been steadily
intensifying for medical preparatory schools, and decline in the number of new entrants to the boarding course(graduates) again in spring 2019 continued to weaken earnings. The number of students at period-end dropped
by 11.5% YoY to 69 students, or about half of the 153 students at the recent peak at end-FY8/15.

㻼㼞㼑㼜㼍㼞㼍㼠㼛㼞㼥㻌㼟㼏㼔㼛㼛㼘㻌㼎㼡㼟㼕㼚㼑㼟㼟㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕

（¥㼙㼚）
㻢㻜㻜

㻿㼑㼓㼙㼑㼚㼠㻌㼕㼚㼏㼛㼙㼑㻌㻔㼞㼕㼓㼔㼠㻕

（¥㼙㼚）
㻤㻜

㻣㻝㻌

㻡㻜㻜

㻢㻜

㻠㻜㻜

㻠㻜

㻟㻜㻜

㻞㻜

㻞㻜㻜

㻜
㻙㻞㻝㻌

㻝㻜㻜
㻡㻣㻟

㻠㻠㻟

㻲㼅㻤㻛㻝㻣

㻲㼅㻤㻛㻝㻤

㻜

㻙㻞㻥㻌
㻟㻣㻝

㻙㻞㻜
㻙㻠㻜

㻲㼅㻤㻛㻝㻥

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

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

08 16

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

MEIKO NETWORK JAPAN CO., LTD.

3-Dec.-2019

4668 Tokyo Stock Exchange First section

http://www.meikonet.co.jp/ir-e/

Business performance(4) Other businesses
Other businesses reported ¥3,921mn in sales (up 0.5% YoY) and ¥186mn in segment profit (up 22.8%), continuing
expansion trends. With goodwill amortization costs for the Japanese school and Kotoh Jimusho at ¥243mn, profits
prior to deduction of goodwill amortization costs climbed 8.6% to ¥430mn.

㻻㼠㼔㼑㼞㻌㼎㼡㼟㼕㼚㼑㼟㼟㼑㼟（¥㼙㼚）㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻿㼑㼓㼙㼑㼚㼠㻌㼕㼚㼏㼛㼙㼑㻌㻔㼞㼕㼓㼔㼠㻕

㻡㻘㻜㻜㻜

（¥㼙㼚）

㻞㻡㻜
㻝㻤㻢㻌

㻠㻘㻜㻜㻜

㻞㻜㻜

㻝㻡㻝㻌
㻟㻘㻜㻜㻜

㻞㻘㻜㻜㻜

㻝㻡㻜
㻤㻟㻌

㻟㻘㻥㻞㻝

㻟㻘㻤㻥㻥

㻝㻜㻜

㻟㻘㻡㻣㻢
㻝㻘㻜㻜㻜

㻡㻜

㻜

㻜
㻲㼅㻤㻛㻝㻣

㻲㼅㻤㻛㻝㻤

㻲㼅㻤㻛㻝㻥

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

FY8/19 results breakdown in the other businesses segment(¥mn)
Net sales

YoY

OperatingincomeYoY

Note: Period-end figures, figures in parentheses are
YoY increases/decreases

Japanese language schools

1,361

3.3%

82

57.7% No. of students 1,782, (-35)

School-support and academic
publishing businesses

1,387

-7.7%

61

-67.6%

Waseda Academy Kobetsu
schools

532

5.9%

17

Kids schools

390

30.9%

23

666.7%

No. of schools and consignment operations 25 (+6),
No. of students 1,144 (+142)

Soccer schools

141

-0.2%

9

28.6%

No. of schools 14 (+1),
No. of students 870 (+27)

Other

108

-20.4%

-7

Total

3,921

0.5%

186

Sales and profits rose for Kotoh Jimusho as planned,
while declining at Youdec and Koyo Shobo Corporation

Restored No. of schools 35 (±0),
profitability No. of students 3,120 (+281)

Narrowed ESL club (English schools), overseas businesses,
losses study clubs, etc.
22.8%

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

Looking at trends in the main business, Waseda Academy Kobetsu schols booked ¥532mn in sales (up 5.9%
YoY) and ¥17mn in operating income (vs. an ¥11mn operating loss in the previous fiscal year). While the numberof schools at period-end was flat YoY at 35 schools (eight direct operation, five MAXIS direct operation, ninefranchise, and 13 Waseda Academy direct operation), the number of students expanded at a healthy 9.9% YoYpace to 3,120 students and both sales and profits increased.

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

09 16

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

MEIKO NETWORK JAPAN CO., LTD.
4668 Tokyo Stock Exchange First section

3-Dec.-2019
http://www.meikonet.co.jp/ir-e/

Business performance

Kids business performed well, thanks to increase in after-school childcare demand, with gains to ¥390mn in sales(up 30.9% YoY) and ¥23mn in operating income (up 666.7%). Main drivers of robust growth were higher student
volume at direct-operation schools and promotion of operating formats that facilitate quicker income, such as
franchise members, private operation of public sites, and consigned operation. This business had 25 schools at
period-end (seven direct operation, three children’s clubs, and 15 franchise and consigned operation), an increaseof six schools YoY (two children’s clubs and four franchise and consigned operation), and the number of students
rose by 14.2% to 1,144 students.
Soccer business posted ¥141mn in sales (down 0.2% YoY) and ¥9mn in operating income (up 28.6%). The
number of period-end schools rose by one school to 14 schools, and the number of students increased 3.2% to870 students, the first gain in four years. We think main factors driving student volume upward were revision of
the school format from FY8/18 to two types with Meiko Soccer Academy (provides full-fledged training with theaim of becoming a professional athlete in the future) and Meiko Soccer School (provides practical skills that boost
soccer capabilities and enjoyment of the game) and introduction of an overseas camp (Spain) as a summer eventto promote a rise in student membership.
The Company operates two brands for the foreigner Japanese language school business run by consolidated
subsidiaries – Waseda EDU Co., Ltd.’s Waseda EDU Japanese Language School and Kokusai Jinzai Kaihatsu
Co., Ltd.’s JCLI Japanese Language School. These two brands reported total sales of ¥1,361mn (up 3.3% YoY)and ¥82mn in operating income (up 57.7%). Operating income prior to goodwill amortization costs (¥169mn) rose
13.5% YoY to ¥252mn. This is a high-margin business with profitability at about 18%. The number of students
at period-end fell slightly by 1.9% to 1,782 students. While Waseda EDU Japanese Language School achieved
healthy growth with a 1.6% increase to 697 students, JCLI Japanese Language School’s 4.1% dip to 1,085
students weighed on overall student volume. Stricter immigration reviews for people coming from Myanmar and
Sri Lanka undercut the number of students joining the school in the July semester. JCLI Japanese Language
School hopes to revive student volume by broadening student recruitment efforts to China and other countries.
Capacity levels are 710 students at Waseda EDU Japanese Language School and 1,380 students at JCLIJapanese Language School.
The school assistance and publishing business consists of consolidated subsidiaries Kotoh Jimusho, Youdec,
and Koyo Shobo and booked ¥1,387mn in sales (down 7.7%) and ¥61mn in operating income (down 67.6%).
While Kotoh Jimusho fared well in its mainstay university entrance exam problem solutions business and salesrose 2.6% YoY to ¥531mn, as planned, weakness at Youdec with sales down 14.6% to ¥540mn due to decline
in university sample test services and Koyo Shobo with sales off 10.5% to ¥315mn because of a drop in new
publication issuance volume resulted in both sales and profit declines in this business.
Other businesses include ESL club (one school), a private-lesson English school, and Study Club (three schools),a private tutoring preparatory school that utilizes ICT, and overseas business.
*	ESL club is a private-lesson English school (up to two students per bilingual teacher) and provides high-level education
service to elementary students seeking to pass the Eiken Level 2 test. MAXIS transferred the operating company to Meiko
Network Japan.

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10 16

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

MEIKO NETWORK JAPAN CO., LTD.
4668 Tokyo Stock Exchange First section

3-Dec.-2019
http://www.meikonet.co.jp/ir-e/

Business performance

While the financial condition continues to be strong, recoveringprofitability is an issue
3. Financial position and management indicators
Looking at financial conditions at end-FY8/19, gross assets expanded by ¥1,081mn YoY to ¥19,765mn. Mainchanges were a ¥987mn increase in cash and deposits under current assets and a ¥204mn decline in goodwill versus increases of ¥350mn in investment securities, ¥80mn in software and the software provisional account, ¥86mn intangible fixed assets, and ¥40mn in deposits and guarantees. Goodwill outstanding value totaled ¥3,046mn (MAXISat ¥719mn, K.Line at ¥520mn, KMG at ¥242mn, Waseda EDU at ¥378mn, Kokusai Jinzai Kaihatsu at ¥834mn, and
KOTO & Company at ¥351mn).
Total liabilities increased by ¥1,003mn YoY to ¥5,350mn. This included increases of ¥408mn in unpaid corporate
taxes, ¥110mn in unpaid consumption tax, ¥191mn in unpaid costs, and ¥100mn in advance payments under current liabilities and ¥64mn in long-term loans under fixed liabilities. Net assets climbed by ¥77mn YoY to ¥14,414mn,
mainly due to a ¥92mn increase in other securities valuation income.
In business indicators, although the capital ratio dropped from 76.6% to 72.9% at period-end due to a rise inliabilities, it remains at a high level. The Company also operates at effectively no debt with a 1.4% interest-bearing
debt ratio and has a robust just over ¥7bn in net cash. We think it is sustaining healthy financial standing. Revitalizing
the Meiko Gijuku business, which has been steadily contracting, is an issue. Nevertheless, restoration of YoY
increase in the number of students per classroom at period-end and other bright signs have started emerging,thanks to cutbacks in unprofitable classrooms through scrap & build activities, rollout of MEIKO-Style Coaching at allclassrooms, and expanded use of ICT learning content describe above, and are raising expectations of a recovery.
Consolidated balance sheet and management indicators(¥mn)
FY8/15

FY8/16

FY8/17

FY8/18FY8/19Change

9,828

6,865

10,431

8,959

9,734

774

7,345

4,633

7,822

6,508

7,495

987

Non-current assets

8,852

10,105

8,883

9,723

10,030306

Total assets

18,68016,97019,314

18,683

19,765

1,081

Current liabilities

3,357

3,059

4,168

3,563

4,506

943

694

701

729

782

843

60

4,052

3,760

4,897

4,346

5,350

1,003

Current assets(Cash and deposits)

Non-current liabilities
Total liabilities

96

82

70

70

197

127

14,628

13,20914,416

14,336

14,41477

Equity ratio

78.0%

77.4%

74.5%

76.6%

72.9%

-3.7ptInterest-bearing debt ratio

0.7%

0.6%

0.5%

0.5%

1.4%

0.9pt

(Interest-bearing debt)
Net assets
Management indicators(Stability)(Profitability)
ROE

17.1%

6.8%

14.8%

4.6%

6.7%

2.1pt

Operating income margin

18.9%

11.7%

13.5%

7.5%

8.9%

1.4pt

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

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

11 16

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

MEIKO NETWORK JAPAN CO., LTD.
4668 Tokyo Stock Exchange First section

3-Dec.-2019
http://www.meikonet.co.jp/ir-e/██Business outlook
Expanding the educational service line-up through aggressive
arrangement of business alliances and building a growth foundation
1. Priority strategies in FY8/20
The Company has presented four priority strategies as its business policy in FY8/20 of 1) strategic promotion of
franchise business, 2) restructuring of Meiko Gijuku business, 3) expansion and reinforcement of existing businesses,
and 4) creation of new businesses. Management sees this as a period to solidify its base for building a growth
foundation.
(1) Strategic promotion of franchise businessThis strategy aims to accommodate a wide range of customer needs by concluding business alliances withpeers offering educational services with different characteristics and promoting franchise businesses in multiple
preparatory school brands by utilizing the Company’s strength of franchise operational knowhow as a base amid
continued intensification of competition in the preparatory school industry. In franchise business through allianceswith other firms, the Company already formed a capital and business alliance with Waseda Academy <4718>
in 2010 and rolled out Waseda Academy Kobetsu as a private tutoring preparatory school for elite schools andannounced, and this time it announced business alliances with SPRIX and tyotto (press release issued on October
10, 2019). Management intends to steadily promote franchise business.
a) Business alliance with SPRIXSPRIX operates Mori Juku, a private tutoring school, and Jiritsu Gakushu RED, a personalized preparatory schoolthat utilizes IT. The new business alliance calls for mutual promotion of Jiritsu Gakushu RED and development
and provision of educational materials and IT content. Jiritsu Gakushu RED is a preparatory school that utilizes IT
content and does not rely on teachers. It has developed a network of 83 classrooms nationwide through October
2019 since it launched franchise operations in 2014. This school’s main characteristic is low-cost provision ofservices that meet needs for periodic test preparation by fourth year elementary to third year middle school
students.
Provision of self-learning classes that utilize IT allows for schools in areas that could not support schools up to
now due to teacher shortages by keeping the number of teachers as low as possible.
b) Business alliance with tyotto
tyotto is a start-up company established in 2016 that operates the “tyotto Juku,” a private tutoring school thatprovides specialized coaching for university exams (one classroom in Kawasaki). This school aims to elicit appetite
to learn independently and boost academic capabilities through direct guidance with coaching and utilization of
the self-developed “tyotto folio” learning management app. It also periodically implements active-learning original
educational content, ProgressTime and fosters a stance of tackling problems without answers and thinking andcommunication capabilities.
The business alliance calls for integration of the Company’s private tutoring school operational knowhow andfranchise development knowhow and tyotto’s coaching knowhow, ICT content, and active learning content anddirect and franchise rollout of “tyotto Juku” by the Company and joint development and provision of ICT content.

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

12 16

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

MEIKO NETWORK JAPAN CO., LTD.
4668 Tokyo Stock Exchange First section

3-Dec.-2019
http://www.meikonet.co.jp/ir-e/

Business outlook(2) Rebuilding the Meiko Gijuku business
As initiatives to revitalize the Meiko Gijuku business, the Company aims to improve student results throughcontinued improvement of class quality and service level, just as in FY8/19, and pursue unique value and boost
customer satisfaction with a consistent marketing strategy.
Key measures to enhance class quality and service level are promoting wider adoption of MEIKO-Style Coachingand development of ICT educational materials, pursuing improved and more efficient classroom operation bystrengthening and bolstering the unique learning and management assistance system, and developing highvalue-added services that utilize accumulated customer data, such as “Meiko epo.” The Company needs to look
more closely at support of franchise owners amid an overall trend of further advances in ICT usage.
As marketing strategy, meanwhile, the Company promotes Web advertising strategy that addresses local featuresand intends to strengthen contact center functions. The contact center seeks to increase new entrant students byquickly responding to inquiries submitted via the official web page and comparison sites and counseling set-up.
The Company has newly started a contact center for franchise classrooms too. This initiative aims to improve
service quality by lightening the work burden on classrooms and collecting inquiry content data and feeding itback to front-line classrooms.
(3) Expansion and reinforcement of existing businesses
In other existing businesses besides Meiko Gijuku, the Company hopes to expand kids business, which has
already been growing at a strong pace of at least 20% a year, even more. It reached a total of 25 schools underoperation through direct operation, franchise, consigned operation, and other formats as of October 2019. It isalso scheduled to begin consignment operation of after-class schools at a number of new schools as soon as
spring 2020 amid vibrant demand for after-school childcare and other after-class schools.
The Company also plans to roll out a new English education business with native and bilingual teachers for smallchildren (three-year olds to kindergarteners) and elementary students under a new brand. It intends to open two
direct-operation schools in Tokyo in April 2020 and subsequently develop franchise business after establishing theincome model. It is looking to develop franchise operations for ESL club, a private tutoring school for elementary
school students seeking to pass Eiken Level Two, in the English education business.
(4) Creation of new businesses
The Company is beginning a job and learning assistance business for foreigners as a new business. This initiative
targets the anticipated further rise in foreign workers following the government’s introduction of “Specified Skilled
Worker” as a new visa status covering 14 specialized industries, including care and construction, expected toconfront severe manpower shortages in April 2019. The government envisions acceptance of about 350,000
foreign workers under “Specified Skilled Worker” status over the next five years.
*	The new visa status for expanding acceptance of foreign workers has two types – Type 1 and Type 2. The stay period for a
Type 1 visa is a total of five years. Type 2, which requires a higher level of skill, allows for unlimited renewal of the stay period
and also permits joint entry with family members accepted for Type 1 and future application for permanent residence status.
The 14 industries are care, building cleaning, forged parts manufacturing, industrial machinery manufacturing, electricand electronic information, construction, shipbuilding and marine business, automotive repairs, airlines, accommodations,farming, fishing, food and beverage manufacturing, and restaurants. The only Type 2 industries out of this group areconstruction and shipbuilding and marine business. Visa acquisition requires passing a Japanese language test andindustry skill test. A person who completes a three-year skill-training course can transition to Type 1 without a test. The
government plans to define Type 2 tests in FY3/22.

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

13 16

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

MEIKO NETWORK JAPAN CO., LTD.
4668 Tokyo Stock Exchange First section

3-Dec.-2019
http://www.meikonet.co.jp/ir-e/

Business outlook㻺 㼡㼙㼎㼑㼞㻌㼛㼒㻌㼒 㼛㼞㼑㼕㼓㼚㼑㼞㻌㼣㼛㼞㼗㼑㼞㼟㻌㼕㼚㻌㻶㼍㼜㼍㼚（㼠㼔㼛㼡㼟㼍㼚㼐）
㻝㻘㻢㻜㻜

㻝㻘㻠㻢㻜

㻝㻘㻠㻜㻜

㻝㻘㻞㻣㻥

㻝㻘㻞㻜㻜

㻝㻘㻜㻤㻠
㻥㻜㻤

㻝㻘㻜㻜㻜
㻤㻜㻜

㻣㻝㻤

㻣㻤㻤

㻢㻜㻜
㻠㻜㻜
㻞㻜㻜
㻜
㻞㻜㻝㻟

㻞㻜㻝㻠

㻞㻜㻝㻡

㻞㻜㻝㻢

㻞㻜㻝㻣

㻞㻜㻝㻤

Source: Prepared by FISCO from the Ministry of Health, Labour and Welfare’s “Past Trends in the Number of Business Sites
Employing Foreigners and the Number of Foreign Workers”Limited understanding of the Japanese language and Japanese culture has led to numerous cases of trouble
amid increase in the number of foreigner workers in Japan. The Company started Japany service, an online
learning service for Japanese and business manners aimed at addressing these issues in October 2019. It jointly
developed this service with bond, Inc., which supplies online Japanese learning materials, and soeasy Co., Ltd.,
which provides training videos, and delivers it mainly to companies that employ foreigners and domestic andoverseas Japanese language schools and educational institutions.
Key features of the Japany service are online provision of learning aids for not only Japanese language requiredin daily life and business but also a wide range of contents, including Japanese certification test strategies
and specified skill test strategies, availability of learning management support, such as daily confirmation by aJapanese teacher of learning progress and online one-on-one services, and the ability for individual companies
to add original training videos along with learning videos for basic business manners, Japanese culture, and othertopics. Monthly charges begin at ¥1,500 per person. This is a low-cost way of efficiently educating employees
compared to school-style services. We think this business deserves attention as a growth area because ofsignificant latent demand.
By implementing these priority strategies, the Company aims to realize growth from FY8/21 as a group thatprovides a wide range of services from educating young children to job assistance for foreigners.

Positioning FY8/20 as an investment phase, expects profit decline
on higher sales
2. FY8/20 outlook
The forecasts for the FY8/20 consolidated earnings calls for higher sales but lower profits, anticipating net sales toincrease 5.2% to ¥21,000mn, operating income to decrease 11.6% to ¥1,570mn, ordinary income to fall 11.4% to¥1,690mn, and net income attributable to owners of the parent to decline 12.3% to ¥840mn.

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

14 16

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

MEIKO NETWORK JAPAN CO., LTD.

3-Dec.-2019

4668 Tokyo Stock Exchange First section

http://www.meikonet.co.jp/ir-e/

Business outlook

FY8/20 outlook (consolidated)(¥mn)
FY8/19FY8/20Results% of sales

Forecast% of sales

Net sales

19,967-21,000-

5.2%

Cost of sales

13,74468.8%

14,850

70.7%

8.0%

SG&A expenses

4,447

22.3%

4,580

21.8%

3.0%

Operating income

1,775

8.9%

1,570

7.5%

-11.6%

Ordinary income

1,907

9.6%

1,690

8.0%

-11.4%

958

4.8%

840

4.0%

-12.3%Net income attributable to owners of the parent

36.08

EPS (¥)

YoY

31.63

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

The breakdown of the ¥1.03bn YoY rise in sales includes ¥540mn from a full-year contribution by subsidiary KMG,
¥450mn in parent sales (Meiko Gijuku business at ¥200mn, kids business at ¥120mn, Waseda Academy Kobetsu
schools at ¥60mn, etc.), and other subsidiaries at ¥40mn. In Meiko Gijuku business, the Company has outlined apolicy of continuing classroom scrap & build efforts to improve profitability, despite ongoing declines in classroom
and student volumes, by increasing sales per student and raising the average number of students per classroom. In
kids business, the Company projects a 31% YoY rise in sales through increase in student volume at existing schools
and acquisition of new consignment deals. In Waseda Academy Kobetsu schools, it expects an 11% rise in sales
mainly on higher student volume at existing schools. Management thinks double-digit growth is possible in bothareas. In other subsidiaries, Japanese language school business and Kotoh Jimusho are slated to deliver healthy
growth. Despite the prospect of continued difficult conditions for the preparatory school business, which has beensteadily slumping, in 1H FY8/20 due to decline in student volume, the Company aims to revitalize business activity
by updating service content from spring 2020.
In operating income, meanwhile, the Company expects a ¥200mn profit boost from higher sale, but setbacks of¥400mn in strategic investment costs for priority areas described above. Investments consists of information and
ICT content development costs in Meiko Gijuku business at ¥150mn, investments in English-related business(English schools for preschool and younger children, ESL club) at ¥150mn, and business development costs in
new preparatory schools at ¥100mn.

██Shareholder return policy
Intends to continue robust shareholder return
The Company presented a policy of continuing robust shareholder return. In FY8/19, it lowered the dividend for the
first time since listing its shares in 1997 due to a determination that continuing to pay a dividend exceeding period
profit was not a good choice for shareholders due to importance of investing in future growth. In FY8/20, however,it intends to pay a flat dividend (YoY) of ¥30.0 (putting the dividend payout ratio at 94.8%). Management has set
a target of 80% as the payout ratio and we see potential for a dividend hike if it seems that the payout ratio mightdrop below this level.

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

15 16

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

MEIKO NETWORK JAPAN CO., LTD.
4668 Tokyo Stock Exchange First section

3-Dec.-2019
http://www.meikonet.co.jp/ir-e/

Shareholder return policy

Under the shareholder benefit program, the Company continues to give QUO cards worth ¥1,000-5,000 to shareholders as of the end of August, according to the number of shares they hold and the length of time that they
have held them. Those holding 100 shares for less than three years will receive a ¥1,000 QUO card, while thoseholding the same number of shares continuously for three years will receive cards with a value of ¥3,000. The grossinvestment yield per share unit, including the shareholder benefit program, is at the 4-6% level at the current shareprice (¥947 as of October 25, 2019). The Company’s capital policy is unchanged to strengthen its equity and toflexibly consider acquiring treasury stock when possible, taking into account the share price and financial position.

㻰 㼕 㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㼍 㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㻔㼘㼑㼒㼠㻕（¥）

㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻌㻔㼞㼕㼓㼔㼠㻕㻡㻜㻚㻜㻞㻜㻜㻚㻜㻑
㻝㻢㻥㻚㻤㻑

㻠㻜㻚㻜㻝㻢㻜㻚㻜㻑
㻝㻜㻣㻚㻤㻑

㻟㻜㻚㻜㻝㻞㻜㻚㻜㻑

㻤㻟㻚㻝㻑

㻥㻠㻚㻤㻑

㻡㻞㻚㻜㻑

㻞㻜㻚㻜

㻤㻜㻚㻜㻑

㻟㻥㻚㻢㻑
㻝㻜㻚㻜

㻠㻜㻚㻜㻑
㻟㻠㻚㻜

㻟㻤㻚㻜

㻠㻜㻚㻜

㻠㻞㻚㻜

㻟㻜㻚㻜

㻟㻜㻚㻜

㻲㼅㻤㻛㻝㻡

㻲㼅㻤㻛㻝㻢

㻲㼅㻤㻛㻝㻣

㻲㼅㻤㻛㻝㻤

㻲㼅㻤㻛㻝㻥

㻲㼅㻤㻛㻞㻜㻌㻱

㻜㻚㻜

㻜㻚㻜㻑

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

Shareholder benefit program
QUO card distribution (once annually, for shareholders as of August 31)
Value of gift cards for holding
stock for less than three years

Value of gift cards for holding
stock for three years or more

100–499 shares

Equivalent to ¥1,000

Equivalent to ¥3,000

500–999 shares

Equivalent to ¥2,000

Equivalent to ¥4,000

1,000 or more shares

Equivalent to ¥3,000

Equivalent to ¥5,000

Number of shares held

Note: Shareholders became eligible for the program from August 31, 2016.
Source: Prepared by FISCO from Company materials██Information security policy
The Company manages tutorial schools and also concludes contracts with member companies based on its own
franchise system, and it provides continuous school management guidance. In the school management process, itobtains personal information on students, parents and guardians, and tutors. It manages this personal informationin accordance with its Regulations on the Protection of Personal Information. It also examines measures to preventthe leakage of information through the Risk Management Committee and verifies the operational status of measures
to protect personal information.

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

16 16

Disclaimer
FISCO Ltd. (“FISCO”) offer stock price and index information for use under the approval of theTokyo Stock Exchange, the Osaka Stock Exchange and Nikkei Inc.
This report is provided solely for the purpose of offering information, and is not a solicitationof investment nor any other act or action.
FISCO prepared and published this report based on information which it considered reliable;
however, FISCO does not warrant the accuracy, completeness, fitness nor reliability of thecontents of this report or the said information.
The issuers’ securities, currencies, commodities, securities and other financial instruments
mentioned in this report may increase or decrease in value or lose their value due to influence
from corporate activities, economic policies, world affairs and other factors. This report does
not make any promises regarding any future outcomes. If you use this report or any information
mentioned herein, regardless of the purpose therefor, such use shall be made based on yourjudgment and responsibility, and FISCO shall not be liable for any damage incurred by you asa result of such use, irrespective of the reason.
This report has been prepared at the request of the company subject hereto based on theprovision of information by such company through telephone interviews and the like. However,
the hypotheses, conclusions and all other contents contained herein are based on analysis
by FISCO. The contents of this report are as of the time of the preparation hereof, and are
subject to change without notice. FISCO is not obligated to update this report.
The intellectual property rights, including the copyrights to the main text hereof, the data
and the like, belong to FISCO, and any revision, reprocessing, reproduction, transmission,
distribution or the like of this report and any duplicate hereof without the permission of FISCO
is strictly prohibited.
FISCO and its affiliated companies, as well as the directors, officers and employees thereof,
may currently or in the future trade or hold the financial instruments or the securities of issuersthat are mentioned in this report.
Please use the information in this report upon accepting the above points.

◾ For inquiry, please contact: ◾

FISCO Ltd.
5-11-9 Minami Aoyama, Minato-ku, Tokyo, Japan 107-0062
Phone: 03-5774-2443 (Financial information Dept.)
Email: support@fisco.co.jp