Alpha-WinCompany Research Report
PCA(9629 TSE First Section)

Issued: 7/18/2018

Research Dept., Alpha-Win Capital Inc.
http://www.awincap.com/● SummaryBusiness Description
・PCA CORPORATION (the Company, hereinafter) is an independent software manufacturer specialized inpackaged software for core business operations. It is a major specialized player in the industry.
・The Company was founded in 1980 by a group of Certified Public Accountants. Since then, it has been
providing packaged or cloud-based software mainly to small- and medium-sized companies. With “customer
first” as its slogan, the Company declares its mission to be to contribute to the customers’ businesses throughenterprise system software.
Current Financial Results
・The Company is quickly recovering from a period of decreasing revenue, decreasing profit, and postings oflosses. In FY 2018 (full year), sales increased by 4.5% YOY and each profit also largely increased. Sales of thehighly profitable cloud business, the labor management system, and the solutions business grew. Thanks tothese increases in sales and serious efforts to reduce cost, the Company’s profit margins have improved.
・In FY 2019, the Company plans to increase sales by 7.2% YOY (Y10,486 mil), operating profit by 2.2%
YOY (Y825 mil), and net profit for the year by 33.5% YOY (Y588 mil). Businesses such as the cloud and thelabor management system are expected to continue to drive growth, leading to increased sales and profit for the
fourth consecutive year. However, operating profit growth rate should be small due to a strategic upfront
investment.
Competitiveness・The Company has a customer base of approximately 200,000 companies and is marked by its high brandrecognition and top-ranking market share in the fields of accounting and finance for small/medium-sizedcompanies. The Company’s cloud-based enterprise system software business in these fields is especially strong,ranking No. 1 in the industry as a pioneer of the business. The strengths of the Company are its ability todevelop products and services that meet various customer needs including those related to changes in tax andother regulations, its stable customer base, and its ability to provide high-quality products and services atreasonable prices.
Business Strategy
・Cloud & smart device, post-ERP, and industry specialization are the Company’s group business strategies.
Regarding the Key Performance Indicators (KPI), the Company has declared that it will achieve Y20 bil insales, 2.5% in DOE, and 80,000 companies as customers of the cloud service over the long term.
・ Meanwhile, issues remain with regards to the improvement of profitability and the development of
next-generation, growth-driving new products. More information should be revealed when the new president
announces the specific measures and goals to add to the concept of the new medium-to-long-term business planthat has been disclosed.
Forecast on Financial Results
・Alpha-Win’s Research Dept. expects FY 2019’s sales and profits to be at the same level as the Company’s
forecasts. Over the medium term, increased sales and profit margins can be expected for the cloud business,
which is in a stably expanding phase. Meanwhile, costs will rise from the upfront investment to expand
business and strengthen organization. Considering these factors, profit is expected to continue to increase at
5-6% per year.
Stock Price
・Comparing valuation indicators with the average of the 1st section of the TSE, the Company’s P/E is approx.
20, greater than the average of about 15. Its dividend yield is around average, at approx. 1.7%. Its P/B is approx.
1/32
This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate, or
fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this report must
make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may
be copied, photocopied, cited, or translated without our consent.

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

Issued: 7/18/2018

1.0, below the average of 1.3. Meanwhile, most indicators of the Company are relatively cheap compared to its
competitors.
Shareholder Return・To date, the Company has followed a stable dividend policy. When the Quo Card shareholder benefit plan istaken into account, the actual dividend yield is even higher. The Company plans to continue to enhanceshareholder return while paying dividend and improving the EPS.

【 9629 PCA
FY
2016
2017
2018
2019
2019
2020
2021

CE
E
E
E

Sector: Information & Communication 】
Sales

YOY

O.P.

YOY

R.P.

YOY

N.P.

YOY

EPS

BPS

Dividend(Y mil)（ %）(Y mil)（ %）(Y mil)（ %）(Y mil)

（ %）

(Y )

(Y )

（Y ）

8,440
9,360
9,785
10,486
10,40011,00011,680

3.3
10.9
4.5
7.2
6.3
5.8
6.2

40
432
807
825
850
900
950

957.9
86.8
2.2
5.3
5.9
5.6

66
463
834
842
875
925
975

593.6
79.9
0.9
4.9
5.7
5.4

-93
160
441
588
600
634
669

- -13.70 1,567.18- 23.49 1,568.59
174.1
64.37 1,644.39
33.5
85.95
―
35.9
87.50 1,701.09
5.8
92.60 1,762.95
97.60 1,829.80
5.5

31.0
31.0
31.0
31.0
31.0
31.0
31.0

(Note) CE = the Company’s estimate; E = estimate by Alpha-Win’s Research Dept. All fiscal years discussed in this document
are March-ending.

【 Stock Price and Valuation Indicators: 9629 PCA 】
Item

as of 6/29/2018

Item

P/E

P/B

Dividend Yield

Dividend Payout Ratio

Stock Price (Y)1789.0Last FY (actual)

27.8

1.1

1.7%

48.2%

Shares Outstanding (thou.)

7700.0This FY (est.)

20.4

1.0

1.7%

35.4%

Next FY (est.)

19.3

1.0

1.7%

33.5%

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

13,7750Equity Ratio at Last FY-End

65.0% Last FY’s ROE

3.9%(Note) Estimates were made by Alpha-Win’s Research Dept.

【Performance】
Period1 month
3 months
6 months
12 months

Return vs. TOPIX
2.6%
3.6%
3.5%
2.6%
-0.6%
4.4%
19.4%
11.2%

(Note) Stock price and index as of theend of June 2018

2/32
This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate, or
fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this report must
make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may
be copied, photocopied, cited, or translated without our consent.

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

Issued: 7/18/2018

Contents
1．Company Overview ........................................................................................................P4
Major Specialized Player in the Enterprise System Software Industry ................................P4
Business Philosophy ..........................................................................................................P5
2．Business Description and Business Model .....................................................................P6
Enterprise System Software Necessary for Efficient Business ............................................P6
Business Model with High Continuity and Marginal Profit Ratio .......................................P6
Expansion of Highly Stable and Profitable Subscription-Based Businesses ......................P7
Cloud Business as a Growth Driver....................................................................................P8
3．Shareholder Composition.............................................................................................P10
Change in Composition by Type of Shareholder .............................................................. P10
Major Shareholder Composition....................................................................................... P10
4．ESG ...............................................................................................................................P12
Environment .................................................................................................................... P12
Society............................................................................................................................. P12
Governance...................................................................................................................... P12
5．History of Growth.........................................................................................................P13
Company History............................................................................................................. P13
Transition in Past Financial Results ................................................................................ P13
6．Business Environment ..................................................................................................P16
Market Trend for Enterprise System Software.................................................................. P16
Comparison with Competitors.......................................................................................... P17
7．Last Fiscal Year’s Results and This Fiscal Year’s Forecast........................................P21
Full-Year Financial Results for FY 2018 (last fiscal year) ................................................ P21
PCA’s Financial Results Forecast for FY 2019 (this fiscal year)....................................... P23
Alpha-Win Research Dept.’s Financial Results Forecast for FY 2019 (this fiscal year) .... P24
8．Growth Strategy ...........................................................................................................P26
Management Indicator Goals and Areas of Focus............................................................. P26
New Medium-to-Long-Term Vision PCA Vision 2030..................................................... P26
Alpha-Win Research Dept.’s Financial Results Forecast for the Medium Term................ P27
9．Analyst’s Views.............................................................................................................P28
PCA’s Strengths and Challenges ...................................................................................... P28
Shareholder Return and Shareholder Benefit Program...................................................... P29
Factors that May Affect Stock Price................................................................................. P31

3/32
This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

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

Issued: 7/18/2018

1. Company Overview
 Major specialized player
in the industry with 38
years of practice,developing andproviding packaged
enterprise system
software forsmall/medium-sizedcompanies(1) Enterprise system: a partof a company’s information
system that deals withmatters directly affecting
business, such as financial
accounting, production
control, sales and inventory
control, purchases, HR, andpayroll. A general term forback-office applications. Also
called the mission-criticalsystem, it serves as animportant core system for
operations/services.

◆ Major Specialized Player in the Enterprise System
Software Industry
PCA CORPORATION (hereinafter “the Company”) is an independent,
mid-tier, specialized company in the software industry. The Company is a
specialist in developing and selling packaged software (software preparedfor use in certain operations) for enterprise systems1, such as those foraccounting and tax. It is a major player as a specialist of such software forsmall/medium-sized companies. About 200,000 companies are active usersof the Company’s products, with sales for ordinary companies comprising
greater than 90% of total sales. With regards to the size of the customer
companies, the Company is especially popular among small/medium-sizedcompanies with 50 to 100 staff. 80% of the Company’s sales are via dealers(the remaining 20% are direct sales). It has the largest transaction with thedealer RICOH (sells the Company’s software along with its own hardware
such as office appliances), which contributes to about 18% of theCompany’s total sales. The Company’s customers are diversified, withmajor companies as its largest customers by monetary value. The Company
ranks No. 1 in the industry in software for public benefit corporations,having installed software in over 8,000 corporations.

The Company’s group is made of a total of four companies: the Company
and three consolidated subsidiaries. The consolidated subsidiaries are
Xronos Inc. (development/sales of labor management system and time
recorders; 80% of shares owned by the Company), KEC Corporation(installation guidance, operation, maintenance, and other services for PCA
 The Group is comprised
products/services; wholly owned by the Company), and MACS Systemof the Company and 3
Corporation (development/sales of computer software for medical office use
subsidiaries.
such as electronic medical records; 80% of shares owned by the Company).
Consolidated to parent
The ratio of consolidated to parent company sales has remained around 1.1,
company sales ratio has
indicating that a greater weight is placed on the parent company’s financial
stayed around 1.1.
results (Figure 1). Although the subsidiaries’ profits and losses are notdisclosed, during the past seven years, the ratios of consolidated to parent
 The Company’s fiscal
company recurring profit were in the range of 1.0-1.6 for the fiscal years
year ends in March (e.g.
that the Company was in the black (including this fiscal year’s forecast).
FY 2018 ends in March
Additionally, the summed profit and loss of the three subsidiaries,
2018)
calculated by consolidated minus parent company recurring profit, indicate
a surplus (Figure 2).
[Figure 1] Ratio of Consolidated to Parent Company Sales (ratios shown on upper portion of graph)

4/32
This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

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

Issued: 7/18/2018[Figure 2] Ratio of Consolidated to Parent Company Recurring Profit (ratios shown on upper portion of graph)(Ref) Figures 1 and 2 were both prepared by Alpha-Win’s Research Dept. based on the securities report. Estimates (E) are from theCompany’s business plan.

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

The name of the Company comes from the five founders who were
Certified Public Accountants (CPA); the letters CPA were shuffled into themeaningful name P (Professional) C (Computer) A (Automation).
The Company’s finance is firm, rich in cash and debt-less. Considering thatits total asset is Y17.3 billion and market capitalization is approximately
Y13.8 billion, it has ample cash and deposits (Y7.3 billion). Its financial
ratios, such as its equity ratio of 65% and current ratio of 303%, are also
very sound (all values are as of the end of March 2018).

◆ Business Philosophy
 The Group’s basic
business policy is to“aim for a morerational businesswith clear vision”

 The mission
statement is to“contribute to society
by developing andproviding packaged
software that realizes
advanced automationof core business
operations”

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

5/32This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

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

Issued: 7/18/2018

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

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

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

 Provides about 14
types of originallydeveloped packaged
enterprise system
software About 70% of sales
come from original
products and services

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

◆ Business Model with High Continuity and Marginal
Profit Ratio
The Company’s business model is based on a mass production of a few
types of products, providing about 14 types of software. Due to the nature ofits business, its marginal profit ratio is high. Its original products andservices (products/maintenance/cloud) account for greater than 70% of total
sales, while the remaining 30% are from other companies’ products
6/32This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

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

Issued: 7/18/2018(purchased goods) included in the goods/other categories (Figure 3).
From developing to selling a new product, approximately two years andcorresponding amount of cost are necessary per product. Version upgrades(revision updates) are released usually in a one- to two-year cycle, although
this cycle is reconsidered as needed. In fact, in recent years, software
functions have become so enhanced that the customers’ purchasing in
response to this version upgrade cycle seems to be slowing down.
Since these types of software are related to operations that require highreliability, and since software replacements give rise to issues of cost, labor,
and data continuity, their users have little interest in actively or frequently
replacing their current software with an alternative of a different company.
Therefore, customer loyalty is high, and contracts have high repeat rates(50% to 90% or greater depending on the type of software). The barrier tomarket entry is high because trust and brand recognition are a must in thisindustry and its companies are currently mostly able to exist alongside one
another by taking strong positions in different niches.

◆ Expansion of Highly
Subscription-Based Businesses

StableandProfitable

Until FY 2016, sales and loss and profit were disclosed for the four businesssegments: “for ordinary companies,” “for non-profit organizations,”“medical,” and “cloud.” In FY 2017, all business segments became
consolidated. Sales are now disclosed for fives sales types (categories):“products,” “goods,” “maintenance service,” “cloud service,” and “otheroperating revenue” (also called “solutions”) (Figure 3). Profit and loss bysegment are no longer disclosed.
[Figure 3] Sales Classification by TypeSales Classification by Type
Productｓ
Goods
Maintenance Service
Cloud Service
Other Operating Revenue

FY 2018 (actual)% of Total Est. Gross
Sales (Y mil)
Sales
MarginDetailSales of original packaged software (accounting, sales management, purchasing and inventory
management, payroll, HR, etc.) (includes version upgrades)
Sales of other companies’ products such as business forms
By signing up to PSS membership, one can receive inquiry and support services from call centers
Subscription service for software provided via the cloud
Sales of other companies’ products such as software/hardware combined with its original products;
also called “solutions”

Total & Average

1,954

20.0 approx. 40%

988
3,109
1,854

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

1,87819.2 approx. 25%

9,785

54.5%

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

 Subscription-based
maintenance and cloudbusinesses account for
about 50% of the totalsales

During FY 2018, the maintenance service had the greatest sales (Figure 3
and Figure 4), serving as a stable source of profit. In recent years, sales of
the cloud service for packaged software have largely grown. The cloudservice is becoming a growth driver for the entire company with regards toboth sales and profits. Subscription-based revenue, which is the sum of themaintenance service and the cloud service, accounts for greater than 50% of
total sales, contributing to greater stability in management and profit. Boththe maintenance service and the cloud service have a high gross margin andcontinuity.
On a consolidated basis, sales breakdown by software operation type is not
7/32

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

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

Issued: 7/18/2018
disclosed. However, sales are known to be diversified, with sales for“accounting software” predicted to be the largest by composition (about
15% of total sales), followed by “sales management and purchase &inventory management,” and then by “payroll and HR” (“other including
cloud” comprises greater than 50% of total sales).

 Sales are the focus of
the internalmanagement offinancial performanceand goals

Currently, as the Company’s primary internal management target, goals areset for software sales (or the sold number of products) by operation type.
Profit and loss by software operation type are not targets of management,
but their values do not seem to be greatly different from one another. The
main accounting software business is generally assumed to be highly
profitable. Meanwhile, the business for medical software and related
products, which was started at a later stage, is thought to be less profitable
than other software due to upfront investment costs such as marketing anddevelopment costs (past disclosures indicate posting of a loss for thisbusiness, but currently no information is disclosed).
The percentage of new software sales or version upgrade sales in the total
sales changes every year, but the percentage of version upgrades is always
greater than 50%. As a side note, the Company’s on-premises tend to beinstalled and used by users on a single PC (stand-alone).

[Figure 4] Change in Sales and Sales Breakdown (unit: Y mil, %)(Ref) Excerpt from the Company’s financial results briefing and supplemental materials, reworked by Alpha -Win’s Research Dept.

◆ Cloud Business as a Growth Driver Shifting from packaged
to cloud-based software Drastic growth of thecloud: awakening of
the sleeping beast PCA

Until recently, the Company had focused its business on conventional
packaged software, also known as on-premises. However, as the Internet
became more sophisticated and more widely used, the Company expectedthat demands for the cloud would become greater due to its usability andcost performance. Therefore, since 2008, the Company has been providing
on the cloud the same software as the on-premises, ten years ahead of its
competitors. This cloud business, where customers pay fees continuously
for a certain period of time to use the software, is attractive as a stable,
8/32

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

Alpha-Win Company Research Report
PCA (9629 TSE First Section) The rapidly growing

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

(4) API (Application
Programming Interface):interface/network to
operate software;connects the software andthe program.
(5) Kintone: cloud service
for building business appon web database, provided
by Cybozu. Allows easy
system build-up andlinkage with othersystems.

Issued: 7/18/2018
subscription-based business model, categorized together with themaintenance service. The Company has lately been focusing its business on
the cloud service, and the number of contracts as well as sales has been
growing steadily (Figure 5). As the cost of this cloud business is nearly
fixed, with small variable costs such as those related to manufacturing,
selling, and logistics, this business has a high marginal profit ratio.
The Company leads the industry as No. 1 in cloud-based enterprise system
software for small/medium-sized companies. The following advantages
make the Company stand out from its competitors. Its competitors have also
begun to enter the cloud market in recent years (2017-2018) as their firstyear of cloud, but the effect of the Company’s advantages is expected to lastfor the meantime.
・ Providing a wide variety of advanced software for business operations
・ Originally-developed open architecture, at a low cost・ Economies of scale are in effect, with more than 10,000 companies
already using cloud as customers, contributing to the Company’s profit
・ Consequently, it has a strong price advantage compared to its
competitors
・ Ten years’ worth of operation know-how
・ User-friendly, with WebAPI4 allowing linkage with other companies’
cloud (already linked with dozens of companies, including Kintone5 ofCybozu)[Figure 5] Transition in the Number of Companies with PCA Cloud and Sales of Cloud(Ref) Prepared by Alpha-Win’s Research Dept. using information including those from the Company’s financial results briefing materials andinterviews. (E) represents estimates made by Alpha -Win’s Research Dept.

9/32
This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

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

Issued: 7/18/2018

3． Shareholder Composition Shares were transferred

due to inheritance andother events, but there
was no substantialchange in major
shareholder
composition

Change in Composition by Type of Shareholder

Regarding shareholder composition by shareholder type as of the end of
March 2018 (Figure 6), the sum of “other corporate entities” and“individuals, etc.” accounts for approximately 85% of the total. “Overseas
corporate entities, etc.” and “financial institutions, etc.” account for only 7%
and 6%, respectively, and their ratios have not change much over the years.
Certain individually owned shares were transferred upon inheritance fromthe founder (Mr. Kawashima) and then transferred in FY 2017 to a generalincorporated association (the founder family’s asset management company,
categorized under “other corporate entities”). However, no substantialchange occurred in shareholder composition.

[Figure 6] Change in Shareholder Composition by Type of Shareholder (unit: %)(Ref) Prepared by Alpha-Win’s Research Dept. based on the securities report The largest shareholder

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

Major Shareholder Composition

Major shareholders are listed on Figure 7. The following are supplementary
information.
・ The largest shareholder Kawashima Co., Ltd.: the asset managementcompany of two directors of the Company (President Sato and Mr.
Kumamoto) and their relatives (descendants to the founder Mr.
Kawashima).
・ The second largest shareholder (excluding treasury stock; the same
applies to the rest of the ranking) State Street Trust and Banking Company
505001: most likely a fund but its investors are unknown. Also invests at
below 5% in several other Japanese small/mid-caps.
・ The third largest shareholder Obic Business Consultants Co., Ltd.
(OBC): a competitor with no transaction with the Company. Mr. Shigefumi
Wada, the fourth largest shareholder, is the current president of OBC. In
either case, their purposes are unknown, but may perhaps be to collectinformation or for future M&A or partnership.
・ The sixth largest shareholder Mizuho Bank, Ltd.: probably for the
purpose of cross-shareholding.
・ The seventh largest shareholder Logic Systems Co., Ltd., and the tenthlargest shareholder APPLIED SYTEM LABORATORY Inc.: unknown
purpose.
10/32

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

Alpha-Win Company Research Report
PCA (9629 TSE First Section)
 A new shareholder

joined ninth inranking. Probably an
investment fund. Its
actions are to beclosely watched.

Issued: 7/18/2018
・ The eight largest shareholder Nagoya PCA Co., Ltd.: the company towhich software development (SHOKON and other products of theCompany) is outsourced.
・ The ninth largest shareholder KBL EPB S.A. 107704: thought to be aEurope-based investment fund targeting Asian equity. Holds large amountsof several Japanese small/mid-caps for pure investment purposes. First
disclosed in FY 2018’s securities report as a major shareholder.

[Figure 7] Major Shareholders’ Status(at year-end)
FY2015

Kawashima Co., Ltd.
PCA CORPORATIONState Street Trust and Banking Company 505001
Obic Business Consultants Co., Ltd.
Shige fumi Wada (individual)
PCA Employee Stock Ownership Plan
Mizuho Bank, Ltd.
Logic Systems Co., Ltd.
Nagoya PCA Co., Ltd.
KBL EPB S.A. 107704
APPLIED SYSTEM LABORATORY Inc.
Reiko Sato (individual) Heir to the founder Mr. Kawashima
Tomoko Kumamoto (individual) Heir to the founder Mr.Kawashima
Hiroko Wada (individual)

―
848
244
254
181
110
121
114
―
―
―
1,467
1,467
358

FY2016

―
848
249
254
181
119
121
114
100
―
―
1,467
1,467
―

Unit: thou. shares
FY2017

2,935
848
266
254
181
127
121
114
100
―
86
―
―
―

FY2018

2,935
848
266
254
151
127
121
114
100
90
86
―
―
―

%

% of Total Shares

42.85
11.02
3.90
3.71
2.29
1.97
1.77
1.66
1.46
1.32
1.25

Ranking

1
―
2
3
4
5
6
7
8
9
10

(Ref) Prepared by Alpha-Win’s Research Dept. based on the securities report. Note: the official English name could not be verified for some.

There has been almost no change in the amount of treasury stock for several
years, accounting for about 11% of the outstanding shares.
 Restricted stock(granted after
requirements havebeen met) systemstarted for directors
and auditors. Uses apart of the treasury
stock, which is about
11% of the total.
(6) Restricted stock: A
type of stockcompensation plan that
directly grants acompany’s actual shares
to its directors, etc.

In June 2018, the Company terminated its retirement bonus plan for its
directors, and decided to instead use a part of its treasury stock to support
the newly created restricted stock6 (stock is granted after meeting
requirements). The restricted stock targets directors (excluding external
directors) and full-time auditors. Its system is as follows: “points” areaccumulated with an upper limit, where 30% of the base salary counts as a“point” – these points are then exchanged for the Company’s treasury stock
upon retirement. Promoting directors to possess more shares by granting theCompany’ treasury stock, this new compensation system was started in an
aim to share interests with shareholders over the long-term. In the past,
active management members only directly possessed small amounts of theCompany’s shares, with the exception of a few management members. The
implementation of this system should be effective in improving the
incentives of directors with regards to management and financial results.
Currently, the Company has not completely decided on how to furthermore
effectively use the remaining treasury stock in the future, but somepossibilities include cancellation of stock and stock-swap in a tie-up or an
M&A.

11/32
This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

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

Issued: 7/18/2018

4． ESG◆ Environment
Although the Company does not directly own any production facility andtherefore does not harm the environment, it still makes consideration forenergy/electricity conservation. Specifically, it follows the “cool biz”
standard by setting the default temperature for air conditioners insidebuildings to 28°C.

 Proactively supporting

the disabled and thediscovery and trainingof IT talents◆ Society
The Company declares to “contribute to society through the developing andproviding of packaged software that realizes advanced automation of corebusiness operations” in its mission statement. The idea is that bycontributing to improved user convenience and efficiency, it is fulfilling its
responsibility as a member of the society. In addition, the Company has
become a gold sponsor of the U22 Programing Contest backed by the
Ministry of Economy, Trade and Industry. In becoming a sponsor, it is
supporting the stimulation of Japan’s technologies and innovations and thediscovery and training of talented programmers who will shape the future.
Also, in order to support the reconstruction after the Great East Japan
Earthquake and help the people who suffered from it, the Company made adonation to the incorporated non-profit organization Médecins Sans
Frontières (MSF) Japan. Furthermore, it provided free replacements for theCompany’s products (CD-ROM, manuals, etc.) that were damaged or lost
due to the Earthquake.
The Company also operates a farm in Chiba Prefecture where it proactively
hires physically disabled staff. It also purchases packaged lunch andbakeries made by a company that hires physically disabled staff.

 Promoting diversity
by improving gendermix

As a general employer action plan based on the Act on Promotion of
Women’s Participation and Advancement in the Workplace, the Company
has set goals to “continue to hire new female employees at greater than 40%
of total new hires, raise the percentage of female full-time employees fromthe current 25% to 30%, and create the foundation for raising the number of
future female managers by raising the percentage of women in the
Company.” The Company is promoting the workplace retention of womenand making efforts to promote greater female participation. Of theCompany’s directors, one is a female (external director).
◆ Governance
For internal control, the Company has set up an internal audit office,directly under control of the president, that cooperatively operates with two
external directors. It has also set up a risk-control committee with thepresident as the chairperson. These measures contribute to creating a risk
control system that can flexibly, quickly, and appropriately respond to risks.
As of June 2018, the Company does not have an executive officer system.
The management team is comprised of seven directors (including two
external directors) and four auditors (including three external auditors, one
tax accountant, one CPA, and one lawyer).

12/32This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

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

Issued: 7/18/2018

5． History of Growth◆ Company History
 Founded in recognitionof the importance andpromising future ofcomputer and enterprisesystem software
businesses in Japan With a pioneering spirit,
became the first to
begin cloud services in
the industry(7) SaaS (Software as aService): software where,
as a service, one can use thenecessary function in thenecessary amount whenneeded; or the method ofproviding such service.
Instead of the user
installing the software, thevendor operates thesoftware and provides thenecessary function to theuser via a network.

A group of five Certified Public Accountants with the late Mr. Kawashima
as its leader founded the Company in 1980 in recognition of the importanceand the promising future of computer and software businesses in Japan. At
first, they developed and sold business accounting software for small
business computers. In 1995, in anticipation of future transition from small
business computer users, the Company officially began the development
and marketing of packaged software for personal computers (PC). Then,with the emergence of the PC era, the Company grew thanks mainly to thefollowing four efforts: 1) greater variety of and version upgrades fordomestic packaged software, 2) expansion of the maintenance service, 3)
development of the cloud business, and 4) expansion of the solutions
business which includes the providing of other companies’ products.
Furthermore, the increased number of offices, cooperation with
manufacturers and dealers, and development of a nationwide sales/support
system helped rapidly expand its business. The Company is also seen as apioneer in the rather conservative industry, as it was the first in the industry
to begin providing cloud services (SaaS7) in 2008.
As for the three consolidated subsidiaries, KEC Corporation was founded in
1998, MACS System Corporation was made its subsidiary in 2008, andXronos Inc. was founded in 2001.
Regarding shares, the first public offering was made in 1994. The Company
was then listed on the second section of the TSE in 2000 and then the firstsection in 2014. Upon being listed on the first section of the TSE, theCompany changed its logo to the current one.

◆ Transition in Past Financial Results Changed its market
from the second to thefirst section of the TSE
in Dec. 2014

 Increased sales over thelong term. No
significant change in
profit.

Since foundation until now, the Company has been expanding its businessas a specialist in the development and marketing of enterprise system
software and related businesses, as described above. The transition in
financial results since its first public offering is described on Figure 8.
Supplemental information on the financial results is as follows, inchronological order:
・Aside from certain periods such as the post-Lehman economic downturnand the market recoil from the high demand stimulated by revisions in tax
and other regulations, the Company has generally kept increasing sales
since 1994. On the other hand, no significant improvement was made in
profit, failing to maintain or raise the level of profit that it had once
achieved.
・Consecutively decreasing sales and profit from FY 2001 to FY 2002
occurred due the economic downturn and the market recoil from the highdemand driven by the year 2000 problem.
・The four consecutive decreases in sales from FY 2007 to FY 2010, as wellas the seven consecutive decreases in profit from FY 2007 to FY 2013, werecaused by decreased demand (due to the post-Lehman economic downturn,etc.), increased HR/R&D/advertising costs, and decreased profitability
caused by intensified competition.
・In FY 2014, record-high sales (Y10,475 million) were achieved thanks to
13/32

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

Alpha-Win Company Research Report
PCA (9629 TSE First Section)
 Achieved record-highsales of Y10 billion in2014 thanks toevent-driven highdemandIssued: 7/18/2018
the high demand driven by two events: the termination of Windows XP
support (support ended in April 2014) and the change in consumption tax(from 5% to 8% in April 2014). The large growth of the cloud service also
contributed to the record-high sales.
・Decreased sales in FY 2015 is explained by the market recoil from thehigh demand driven by the two events as described above. Since FY 2016,
the Company has been increasing its sales again thanks to the continued
growth of the cloud, new products, strengthened sales force, and economic
recovery.

[Figure 8] Long-Term Transitions in Financial Results(Ref) Prepared by Alpha-Win’s Research Dept. based on the securities report. Estimate (E) for FY 2019 is from the Company’s business plan.

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

With regards to earnings, record-high net profit (Y937 million) was
achieved in FY 2000, having benefitted from the high demand driven by theyear 2000 problem. Additionally, in FY2006, record-highs were achievedfor operating profit and recurring profit (Y1,747 million and Y1,783 million,
respectively). Demand stimulated by the revised accounting regulation for
public benefit corporations and by the drastic changes caused by the new
Companies Act, as well as the Company’s ERP (integrated enterprisesystem) product “Dream 21,” contributed to these record-highs in 2006.
The Company’s gross margin and operating margin had been gradually
decreasing for a long time (Figure 9). Gross margin declined due toincreased price competition from intensified competition among packaged
software developers during the economic downturn, worsened product mix
from a rise in the percentage of other companies’ less-profitable products,
and higher costs, mainly in labor costs, production expenses (subcontractor
costs), and R&D costs.
14/32

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

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

Issued: 7/18/2018[Figure 9] Long-Term Transition in Gross Margin and Operating Margin(Ref) Prepared by Alpha-Win’s Research Dept. based on the securities report. FY 2019’s values are estimates (E) by the Company.

 A loss was recorded
for two consecutive
years in recoil frompast event-driven highdemand From FY 2016, began
to consecutively raisesales/profit, staying in
the black, thanks to
new products, growthof the cloud, and cost
reduction. Improved
operating margin.

Despite efforts to cut down on cost, losses were consecutively recorded forthe full-year results in FY 2015 and FY 2016 (net loss for the year: -Y207
million in FY 2015 and -Y93 million in FY 2016), affected by decreased
sales in response to the market recoil from the event-driven high demand as
described above and to the postponed revision of consumption tax to 10%.
However, in FY 2016, the Company started to increase sales again.
Although gross margin still continued to decrease, operating margin hadbottomed out and began to gradually increase thanks to the sales of the new
products and the cloud and cost reduction. Since FY 2017, the Company has
been able to continuously make and increase profit. The sales growth of thecloud and maintenance services and the cost reduction have been supporting
this growth/recovery of the Company’s financial results in recent years
despite its domestic sales being in a standstill below Y10 billion (Figure 9).

15/32This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
PCA (9629 TSE First Section)
 Decreasing number ofsmall/medium-sizedcompanies (potential
users) in Japan(8) Small-sized company:
diff. definition by eachindustry, but essentiallythe same as“small/medium-sizedcompanies” in staff sizeand sales

Issued: 7/18/2018

6． Business Environment◆Market Trend for Enterprise System Software
The number of companies in Japan is following a declining trend, falling
below four million companies (Figure 10). The number ofsmall/medium-sized companies is especially declining because ofsmall-sized companies8 closing their businesses. With the decreasing
population and aging society of Japan, the total number of small andmedium-sized companies – the Company’s customers – is not likely toexperience a large increase. As a side note, the total number of companies
as of June 2016 was approximately 3.87 million, slightly greater than theyear 2014 by 50,000 companies (+1.3%).

[Figure 10] Change in the Number of Domestic Companies(Ref) The “2016 Economic Census for Business Activity” by the Ministry of Internal Affairs and Communications and the Ministr y of
Economy, Trade and Industry and the “2017 White Paper on Small and Medium Enterprises in Japan” by the Small and Medium
Enterprise Agency

Meanwhile, facing necessities for manpower, operational efficiency, andimproved corporate financial results, companies and other corporate bodies
are starting to rebuild or reinforce their enterprise systems. Alpha-Win’s
Research Department forecasts that the size of the relevant market will
steadily increase along with increasing demand for software to streamline
business operations.
According to the “WHITE PAPER Information and Communications inJapan” by the Ministry of Internal Affairs and Communications, the size ofthe packaged software market (excluding game software, embedded
software, etc.) in 2015 was approximately Y1.1 trillion and its size has been
gradually increasing in recent years.
Our Research Department estimates Japan’s current market size forenterprise system software specifically related to the Company’s business to
be approximately Y500 billion and for ERP to be approximately Y100
billion. Annual growth rate is forecasted to be about 3% for the former and
16/32
This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
PCA (9629 TSE First Section)
 Stably growing
enterprise system
software market.
Transitioning fromon-premises to thecloud.
 Market potential for

cloud-based enterprisesystem software in
Japan continues to be
great

Issued: 7/18/2018
10% for the latter over the medium term. The cloud-based enterprise system
software market is expected to have an especially high annual growth rateof 20-30% over the long term, replacing a part of the packaged software(on-premises) market. In fact, compared to the U.S. where the cloud-based
enterprise system software market is several years ahead of Japan, thepenetration rate of such system in Japan is ½ to ⅓ of that of the U.S. (ref:“WHITE PAPER Information and Communications in Japan” by the
Ministry of Internal Affairs and Communications, etc.). Consequently, thegrowth potential of the market in Japan should be great (according to theyear 2017 version of the “WHITE PAPER,” the penetration rate of thecloud in Japan is approximately 26% in “payroll / financial accounting / HR”
and only 6-8% each in “production management / logistics management /store management,” “purchasing,” and “sales on orders”).

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

 OBC, MJS, Yayoi, and

OHKEN are its rivals

The Company has different rivals for each type of operation targeted by thesoftware. In general, including its key accounting software product, its
rivals among listed companies are thought to be Obic Business Consultants(OBC: 4733), directly, and Miroku Jyoho Service (MJS: 9928), indirectly.
OBC is the greatest competitor, since it has similar product lineup andbusiness model as the Company. Among unlisted companies, Yayoi(subsidiary of ORIX), OHKEN (independent), and OSK (subsidiary of
OTSUKA CORPORATION) are its direct competitors.
The accounting software market size is approximately Y200 billion. The
17/32

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

Alpha-Win Company Research Report
PCA (9629 TSE First Section)
 Its key product, theaccounting software, isthird in the industry

Issued: 7/18/2018
market is reaching maturity and its size should not largely change. The
Company is estimated to be third from the top in the market (about 10% of
total market shares). Similar market share and positions are also predicted to
be true for the Company’s payroll and HR software. Money Forward andfreee also join in as rivals in the cloud market.
A characteristic of the Company is that it provides high quality but
reasonably priced products and services to its customers.
A comparison of the long-term transition in gross margin and operating
margin of the three major listed companies (the Company, OBC, and MJS)
is shown on Figures 12 and 13. Compared to the Company, both OBC andMJS’s margins are stable, perhaps due to the merit of scale (the sales ofboth OBC and MJS are more than two times greater than the Company’s,
and their operating profits are about twelve times and fives times greater,
respectively), the difference in efficiency, and the difference in sales
composition. Both companies used to have a lower subscription rate tomaintenance support, but had been able to raise this rate, leading to greater
earning capacity. However, the Company’s profit margins have alsobottomed out in recent years, now aiming for greater earning capacity.
Similarly, looking at the transition in the Company’s ROA and ROE on
Figure 14 and the comparison of the three listed companies’ businessoverview and management indicators on Figure 15, the Company seems tohave room for improvement in earning capacity as well as asset efficiency.

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

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

18/32
This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

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

Issued: 7/18/2018[Figure 13] Long-Term Transition in the Operating Margin of Three Major Listed Companies(PCA, OBC, and MJS)

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

19/32
This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

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

Issued: 7/18/2018[Figure 15] Company Overview and Management Indicator Comparison for Three Major Listed Companies(PCA, OBC, and MJS)

Italics show each company’s estimates (CE) for FY 2019. Others are actual values for FY 2018.
(Ref) Prepared by Alpha-Win’s Research Dept. based on each company’s securities report, financial results briefing materials, HP, and interviews

20/32
This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

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

Issued: 7/18/2018

7．Last Fiscal Year’s Results and This Fiscal
Year’s Forecast

 Last fiscal year, salesrose for the 3rdconsecutive year andprofit increased
significantly◆ Full-Year Financial Results for FY 2018 (last fiscal
year)
Positive full-year consolidated financial results were reported for FY 2018
(hereinafter, “last fiscal year”): Y9,785 million in sales (+4.5% YOY),
Y807 million in operating profit (+86.8% YOY), Y834 million in recurring
profit (+79.9% YOY), and Y441 million in net profit for the year
attributable to owners of the parent (+174.1% YOY). Although sales were
below the value forecasted at the beginning of the year as well as therevised forecasts (Y9,876 million expected at the beginning of the year; theactual result was Y9,785 million), profit for the year exceeded all forecasts(Y425 million and Y441 million in net profit for the year in the same order
as above; Figure 16). However, last fiscal year’s sales were one of thehighest in the Company’s history, second only to the Y10,475 million
recorded in FY 2014 under the influence of high demand driven by twoevents (Windows XP support termination and consumption tax revision).

 Sales could not reach
forecasted value at the
beginning of the year,
but still the 2nd
highest in history
despite the lack ofevent-driven highdemand. Profit
exceeded expectation
at the beginning of theyear.

[Figure 16] FY2018 Actual Results and Change in Forecast (unit: Y mil, %)Forecast at% YOY
FY2018 Consolidated Beginning of
ChangeYear
Sales
Ope rating Profit(% of sales)

Recurring Profit(% of sales)

Net Profit for the Year(% of sales)

9,876
645
6.5
669
6.8
425
4.3

Revise d
Revise d
Diff. from
Forecast Initial Forecast Forecast(10/16/2017)(1/29/2018)

5.5
49.3
44.4
164.4

9,917
768
7.7
809
8.2
352
3.5

41
123
140
-73

9,842
766
7.8
797
8.1
429
4.4

Diff. from
InitialForecast

ActualResult

-34
121
128
4

9,785
807
8.2
834
8.5
441
4.5

Diff. from
Diff. from
Initial Forecast Final Forecast

-91
162

-57
41

% YOY
Change
4.5
86.8

0.5
165

37

79.9

0.4
16

12

174.1

0.1

(Ref) Prepared by Alpha -Win’s Research Dept. based on information including those from the financial results summary and news release The cloud was thegrowth driver for both
the Company’s sales
and profits(9) Labor management
system: also called theattendance management
system, it
manages/utilizes various
info on working hours.
Can automaticallyaggregate data on
working hours, etc., andprepare data to link withpayroll software.

Last fiscal year, sales increased by Y425 million compared to FY 2017.
This increase breaks down to Y358 million by the cloud business and Y138
million by the solutions business (other revenue) (Figure 17).
The flagship product PCA Cloud (the product name for the Company’s
cloud service; a system that allows business applications, etc., to be flexibly
used via the Internet) has begun to successfully penetrate into the market.
This success, in addition to the transition from the on-premises(conventional software), helped increase the number of users at a steadypace, and thus contributed largely to the rise in the Company’s sales as awhole. Since about 40% of new cloud contracts are with new customers, thecloud service serves as an important medium for finding new customers.
Also, the solutions business (other companies’ products) was supported by
the demand for the kinds of products that are not included in the Company’s
original product lineup (such as the POS system).
Meanwhile, sales of the maintenance service and products only increased
modestly. Also, for product sales, although the subsidiary Xronos’ labor
management system9 business grew in light of the correction of long
working hours as part of the Work-Style Reform, sales of version upgradesfor products such as the accounting software did not grow as expected,
resulting in a sales decrease by Y115 million.
21/32

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

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

Issued: 7/18/2018[Figure 17] Factors Contributing to Increased Sales in FY 2018 (last fiscal year) (unit: Y mil)(Ref) Excerpt from the Company’s FY 2018 financial results briefing materials, reworked by Alpha -Win’s Research Dept.

 Profit margins

bottomed out andbegan improving, withimproved grossmargin and cost
reduction

Large improvements were seen in income, mainly due to an increase insales and the improvement of gross margin by 3.5 points to 54.5%. Several
factors contributed to the improvement in gross margin, such as thedecrease in software amortization which is recorded as a cost (from Y893
million in FY 2017 to Y528 million in FY 2018, equivalent to a 3.7%
improvement in the cost-to-sales ratio) and the expansion of thesubscription-based maintenance and cloud businesses (from 49.1% of total
sales in FY 2017 to 50.2% in FY 2018) which helped improve sales
composition with their high continuity and profitability. Additionally,
SG&A expenses only increased by 4.3% YOY despite increased R&D and
HR expenses, as reduction and control of sales promotion and advertisingexpenses were successful. Since this increase was smaller than the sales
increase of 4.5% YOY and the gross margin increase of 11.8% YOY, theratio of SG&A expense to sales stayed about the same with 46.4% in FY
2017 and 46.3% in FY 2018. As a result, operating margin largely improved
from 4.6% to 8.2% for the same years, leading to a large increase in profit
by nearly 90% (Figure 18).

[Figure 18] Factors Contributing to Increased Profit in FY 2018 (last fiscal year) (unit: Y mil)(Ref) Excerpt from the Company’s FY 2018 financial results briefing materials, reworked by Alpha -Win’s Research Dept.

22/32
This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

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

 Structural reform hascome into effectIssued: 7/18/2018
A large increase in net profit for the year was also achieved despite thenon-operating profit or loss, which stayed at about the same level as last
fiscal year at +Y28 million, and the extraordinary profit or loss, for which
the real estate revaluation continued from last year led to the posting of an
impairment loss of -Y244 million (-Y228 mil in FY 2017) as extraordinary
loss. In the several years before transitioning to a new system under the newpresident, the Company has been pushing forward with a structural reform,
reorganizing assets that have impairment risks (such as real estate andsecurities) and making software amortization period shorter.
Several factors caused sales to fall below the forecast at the beginning of theyear. First, the sales of version upgrades for the on-premises could not reach
the Company’s goal. Also, while the consolidated subsidiary MACS System
Corporation (in charge of development and sales of medical enterprisesystems) was able to complete the development of the next version ofelectronic medical records, the date of sale was delayed due tocircumstances such as the postponement of new orders. As a result, MACS
System Corporation posted a loss (value not disclosed), and the“consolidated minus parent company” recurring profit, as well as net profit
for the year, was revised downward.

 The Company expects

increased sales andprofit for the 4th
consecutive year due
to the sales of cloudand maintenance.
Record-high sales
planned to beachieved.

◆ PCA’s Financial Results Forecast for FY 2019 (this fiscal
year)
The Company expects the financial results for FY 2019 to be Y10,486
million in sales (+7.2% YOY), Y825 million in operating profit (+2.2%YOY), Y842 million in recurring profit (+0.9% YOY), and Y588 million in
net profit for the year (+33.5% YOY).
The Company aims to increase sales in all categories (by type), by +Y701
million in total. The breakdown of this sales increase in descending order is
as follows: Y380 million by “cloud services” (+20.5% YOY), Y161 million
by “products” (+8.2% YOY), and Y82 million by “maintenance service”(+2.6% YOY) (Figure 19). Continued growth of the cloud service(especially for accounting software) and the labor management software(categorized under “products”; the subsidiary Xronos is in charge), productswith early-bird campaigns prior to consumption tax revision, and new
products (next-generation product for ERP10, cloud-related products, etc.)
are expected to help increase sales. New orders for labor management
software have been increasing especially briskly due to the Work-Style
Reform, giving the Company reason to expect a double-digit sales growth.

(10) ERP (integrated
operation): stands forEnterprise Resource
Planning. Management
concept based on the
integration and real-timeprocessing of corebusiness information toefficiently optimize thewhole. Provided as IT
solutions software for [Figure 19] Forecasted Contributions to Sales Increase in FY 2019 (this fiscal
integrating enterprise year) (the Company’s business plan) (unit: Y mil)systems.

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

23/32
This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

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

 Because of upfront

investment, growth rateof operating profit andrecurring profit should
be small. However, in
the absence of
extraordinary loss, net
profit for the year
should increase by 30%.

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

Issued: 7/18/2018
Regarding profit and loss, the gross margin is expected to improve by 1.0
point from 54.5% to 55.5% owing to increased sales in the highly profitable
cloud business and cost reduction. Consequently, gross profit should also
increase by 9.1% YOY. On the other hand, SG&A expense is expected toincrease by 10.4% YOY due to the upfront investment for future growth(+Y146 million in R&D expense and +Y140 million in HR expense
planned) (Figure 20). As a result, the Company expects operating margin toslightly worsen from 8.2% last fiscal year to 7.9%, resulting in a minimal
increase in profit. No extraordinary loss is planned, and net profit for theyear is forecasted to increase greatly by 33.5% YOY.
The company’s financial forecast for the upper half is not disclosed, as theCompany states: “Since the final target for profit will be achieved bycontrolling the expenses, making a forecast for the upper half is difficult.”
For dividend, the Company plans to continue the annual payout of Y31.

[Figure 20] Forecasted Contributions to Profit Increase in FY 2019 (this fiscal year) (the Company’s business plan)(unit: Y mil)(Ref) Excerpt from the Company’s FY 2018 financial results briefing materials, reworked by Alpha -Win’s Research Dept.

◆ Alpha-Win Research Dept.’s Financial Results Forecast
for FY 2019 (this fiscal year)
Alpha-Win’s Research Department (our Research Dept.) has prepared aforecast for the financial results of the Company as shown on Figure 21(P25).

 Our Research Dept. has

made a conservative
estimate for this fiscal
year’s sales, but expects
the Company’s goals forprofit to be achievablethrough cost control

Regarding sales forecast for FY 2019 (this fiscal year), the effects of thecampaign before consumption tax revision and the new products are hard tojudge at this point. Sales may possibly slightly go below the Company’splan, especially for the products. On the other hand, the Company’s plan for
profit should be achievable since the cost control of advertsing and otherexpenses seems feasible, the profitable subscription-based business is likely
to post good results, and the general performance of Japanese companies
seems to be solid.
Our Research Dept. predicts Y10,400 million in sales (+6.3% YOY; theCompany estimates Y10,486 mil; -Y86 mil different from the Company’s
estimate), Y850 million in operating profit (in the same order as above:
24/32

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

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

Issued: 7/18/2018+5.3% YOY; CE Y825 mil; +Y25 mil diff.), Y875 million in recurring
profit (+4.9% YOY; CE Y842 mil; +Y33 mil diff.), and Y600 million in net
profit for the year (+35.9% YOY; CE Y588 mil; +Y12 mil diff.). Regarding
sales forecast by type, our Research Dept.’s prediction matches the forecast
disclosed by the Company in that the sales of the cloud business will be thegrowth driver for the entire sales as well as profit. The current situation of
new contracts for the cloud is also good.
While profit does in fact depend on sales, since the Company is determined
to control expense in order to achieve the full-year profit goal, large
revisions should not be needed for net profit at this point. Since theCompany holds a stable dividend policy, and the forecast for EPS does nothave many reasons for revision, our Research Dept. has judged that
dividend will stay the same as the Company’s forecast, at Y31.

[Figure 21] Financial Results Forecast by Alpha-Win Res. Dept. for This Fiscal Year and Over the Medium Term
(Unit: Y mil)Sale s
Products
Goods
Maintenance S ervice

Category

Cloud S ervice
Other Operating Revenue

Gross Margin
SG&A Expense(% of sal e s )Operating Profit(% of sal e s )Recurring Profit(% of sal e s )Net Profit for the Year(% of sal e s )Sale s (% YOY growth for all values)
Products
Goods

Category

Maintenance S ervice
Cloud S ervice
Other Operating Revenue

Gross Margin (% YOY diff.)
SG&A Expense (% growth)
Operating Profit (% growth)
Recurring Profit (% growth)
Net Profit for the Year (% growth)

FY2018 AR
9,785
1,954
988
3,109
1,854
1,878
54.5%
4,528
46.3%
807
8.2%
834
8.5%
441
4.5%

FY2019 CE
10,486
2,115
1,009
3,191
2,234
1,932
55.5%
4,997
47.7%
825
7.9%
842
8.0%
588
5.6%

FY2019 E
10,400
2,080
1,000
3,160
2,230
1,930
55.8%
4,950
47.6%
850
8.2%
875
8.4%
600
5.8%

FY2020 E
11,000
2,100
1,020
3,200
2,680
2,000
56.4%
5,300
48.2%
900
8.2%
925
8.4%
634
5.8%

FY2021 E
11,680
2,150
1,030
3,250
3,200
2,050
56.5%
5,650
48.4%
950
8.1%
975
8.3%
669
5.7%

4.5%
-5.6%
3.3%
0.4%
23.9%
7.9%
3.5%
4.3%
86.8%
79.9%
174.1%

7.2%
8.2%
2.1%
2.6%
20.5%
2.9%
1.0%
10.4%
2.2%
0.9%
33.5%

6.3%
6.4%
1.2%
1.6%
20.3%
2.8%
1.3%
9.3%
5.3%
4.9%
35.9%

5.8%
1.0%
2.0%
1.3%
20.2%
3.6%
0.6%
7.1%
5.9%
5.7%
5.8%

6.2%
2.4%
1.0%
1.6%
19.4%
2.5%
0.1%
6.6%
5.6%
5.4%
5.5%

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

25/32
This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

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

Issued: 7/18/2018

8． Growth Strategy◆ Management Indicator Goals and Areas of Focus
In 2012, the Company announced its group goal for management indicators
as Y20 billion in sales (actual result for FY 2018 was Y9.8 bil), 2.5% in
DOE (same as above, 1.9%), and 80,000 corporate customers of the cloud(10,000 as of the end of January 2018), and has been developing its businessin line with this goal. To achieve this goal, five areas of focus have been
decided: 1) become No. 1 in the cloud-based enterprise system software
market, 2) enhance solutions to provide more than simple functionality, 3)further advance the technology in PCA Cloud, 4) pursue new services, and5) actively pursue M&As.

◆ New Medium-to-Long-Term Vision PCA Vision 2030
 Core concept of themedium-to-long-term
vision was disclosed.
In November, themedium-termbusiness plan will beannounced by the newpresident.

Fumiaki Sato, previously executive vice president, was promoted topresident in June 2018. From then on, a new system was started. As the firststep, the core concept “PCA4.0” (Figure 22) of the medium-to-long-term
vision PCA Vision 2030 was announced at the financial results briefing for
FY 2018. The Vision was created in line with the fact that the Company willreach a milestone in the year 2030 as its 50th anniversary.
As a side note, the Company has categorized the 50 years from 1980 to2030 into four phases of business development as follows: 1980 to 1998 as“PCA1.0,” the period of transition from small business computer to PC;
1998 to 2008 as “PCA2.0,” the period of flourishment of the internet andclient servers; 2008 to 2018 as “PCA3.0,” the period of transformation ofinternet into infrastructure and popularization of the cloud; and 2018 to2030 as “PCA4.0.”“PCA4.0” is sumarized below. However, specific strategies and new
numerical targets have not been disclosed yet. Having created a Corporate
Planning Division in January 2018, a specific business plan and growth planshould be determined and then disclosed in November of this year.

[Figure 22] Overview of the Core Concept “PCA4.0” of the Medium-to-Long-Term Vision

PCA4.0 [Be coming a Proble m-Solving Se rvice Provide r]
1. Se rvice-orie nte d cre ation of products
2. Sale s partne rship e nriche d by solution proposals
3. Stre ngthe ning digital dire ct marke ting
4. Enhancing custome r contact and re lationship
5. Imple me ntation of strate gic re cruitme nt, training, and e valuation programs
6. De ve lopme nt of fle xible organizational and ope rational syste ms(Ref) Prepared by Alpha -Win’s Research Dept. based on an excerpt from the Company’s FY 2018 financial results briefing
materials

Additionally, in the new medium-to-long-term management vision PCA
Vision 2030, the Company has declared that it will continue to be acontributing member of the society – a “management supporting company”
that supports the smooth management and operation of companies mainly
through the providing of software that helps realize advanced-levelautomation of core business operations. The specific vision for theupcoming three stages (short-term, medium-term, and long-term) was also
disclosed (Figure 23).
26/32
This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

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

Issued: 7/18/2018[Figure 23] The New Medium-to-Long-Term Vision PCA Vision 2030

(Ref) Excerpt from the Company’s FY 2018 financial results briefing material◆ Alpha-Win Research Dept.’s Financial Results Forecast
for the Medium Term
Our Research Dept. made a prediction of the financial results for the three
years leading to FY 2021 (described previously on page 25, Figure 21).
There are several uncertain factors, such as anticipated changes in
consumption tax and other laws, progress in new product development,changing balance in the competition with major competitors, and theprogress of the M&A strategy. However, since the subscription-based
businesses (the cloud and the maintenance services) should grow, for the
meantime, sales and profit are expected to continue to increase.
The annual sales growth rate for each category (by sales type) is assumed to
be about 20% for the cloud service, 1.5% for the maintenance service, and
2% for the remaining three categories (by sales type) for both FY 2020 and
FY 2021. The fraction of gross margin contributed by each sales type was
not largely altered, but instead we focused our analysis on the effect ofimproved product mix on the gross margin. General and administrative
expenses are predicted to increase annually by 6-7% mostly due toincreased R&D, advertising, and HR expenses since the Company is in an
investment phase, for instance, for business structure reinforcement in
preparation for future growth, new product development, and technology
research (virtualization technology, AI, Web API, and FinTech-linked
technology). No extraordinary profit or loss is expected.

 Our Res. Dept. expects
the subscription-based
businesses to be thegrowth driver and theannual profit growth rate
to be 5-6% over the
medium term

Overall, our Research Dept. expects that, over the medium term, sales
should grow annually by about 6% and profit for the year should similarly
grow by 5-6%. Since the Company’s business model gives it a highmarginal profit ratio, the profit growth rate is actually supposed to begreater than the sales growth rate, but we have predicted only a small
difference upon taking into account the upfront investment cost as describedabove.
We will revise the medium-term financial results forecast as needed whenthe medium-term business plan is announced as planned around the middleof November 2018.
27/32

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

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

Issued: 7/18/2018

9．Analyst’s Views◆ PCA’s Strengths and Challenges
The Company’s SWOT analysis results are listed on Figure 24.
[Figure 24] SWOT Analysis

Strength

Weakness

Opportunity

Threat・Brand recognition and trust built up over long years (major specialized player in theenterprise system s oftware market for small/medium-sized companies)
・Firm financial standing・Growth of a s ubscription-based business capable of generating stable revenue
・ Strong and diversified cus tomer bas e (200,000 companies total as active users)
・Taking a lead in the market with cloud services (No. 1 in enterprise sys tem software
for small/medium-sized companies)
・ High barrier to market entry
・Very experienced call center staff and engineers
・ Sales network (13 sales offices in Japan; 2,000 partnered companies)
・Low margins
・Business results s us ceptible to revisions related to accounting and tax laws, etc.
・Large improvements still needed in maintenance service with membership rate onlyaround 50%
・Highly competitive market
・Absence of a major, next-generation, growth-driving product/service
・Domestically oriented; overseas development difficult
・Increased demand from lack of manpower and need of efficient operation
・Potential for cloud services to increase users; development potential
・New products, new s ervices, and technology innovations
・Revisions related to accounting and tax laws, etc.
・Emergence of an alternative with the popularization of advanced AI technology, lagged
product development, defects in products, etc
・Termination ris k of contracts, etc.
・Information leakage
・Rise in HR and development cos ts(Ref) Prepared by Alpha -Win’s Research Dept.

Describing the strengths listed in the figure in more detail, the Company iswell known due to its long years of practice in the industry and the trust thatit has built up, and is especially strong in certain areas of business such asaccounting software for small/medium-sized companies and public benefit
corporations. Its customers also have high loyalty, as there is little incentive
to frequently change enterprise system software. Additionally, the Company
has been developing a subscription-based business model with highcontinuity and stability, providing maintenance support, the cloud, andversion upgrades to its customers.
On the other hand, looking at the weaknesses in more detail, the margins
have been gradually decreasing over the long term. Although operating
margin has begun to improve over the past few years, it was 8.2% last fiscal
year, still low compared to its major listed competitors. This may be
explained by how the subscription rate of the profitable maintenance service
is low for the Company compared to its competitors and by how the
Company has not been developing major, long-lasting new products (notbeing able to benefit from the advantage of scale).
However, if the Company could dig up hidden demand from its
28/32
This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

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

 Increased

subscription rateof the maintenanceservice will createa large potential
for improved
earnings capacity

Issued: 7/18/2018
growth-driving, cloud-related market with its price advantage, and if it
could improve the on-premises business by increasing the membership ofthe maintenance service through strategies such as direct contracts withcustomers, then there is potential for the Company to largely improve
profitability. For instance, even just by raising the maintenance service
subscription rate from the current 50% (approx.) to the same level as OBC,
at about 80%, or as MJS, at nearly 100%, the gross margin would
theoretically improve from 54.5% last fiscal year to about 59% and 62%,
respectively. This improvement would help largely increase sales and profit.
As for opportunity and threat, business volatility would generally become
greater in the case of high demand driven by events such as those related toconsumption tax revisions and Work-Style Reforms. Also, we should keep
note of the progress of major competitors in catching up with the Company
in the cloud-service market, in which the Company currently takes a lead,and in their development of new products and services.

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

 Stable dividend of

Y31 per year.
Expects dividend
to keep increasingover the long term.

Ever since the first public offering of the Company’s stock was made,ordinary dividend has not been decreased, and has been gradually increasingover the long term with several years of no change in between (Figure 25).
Excluding commemorative dividends, ordinary dividend since FY 2011 has
been Y31 per share per year. Commemorative dividend was paid out only in
FY 2014 in celebration of the change in listing from the second to the firstsection of the TSE in December 2014, adding Y10 to the ordinary dividendof Y31 to an annual total of Y41 per share. Even in FY 2015 and FY 2016
when a net loss was recorded, the Y31/year dividend was maintained in linewith the Company’s stable dividend policy.
The dividend payout ratio was 48.2% in FY 2018 and is expected to be
36.1% in FY 2019 (based on the Company’s estimate; 35.4% based on our
Research Dept.’s). When calculated based on a stock price of Y1,789(closing price as of the end of June 2018), the dividend yield comes out tobe 1.7% (the average of the first section of the TSE is also about 1.7%). As
for DOE, one of the major KPIs (Key Performance Indicators), the actual
value for FY 2018 was 1.9% (the Company’s goal is 2.5%).
Taking into consideration the current dividend payout ratio, our Research
Dept. expects that the ordinary dividend of Y31 will be continued after FY
2018 for a while. Over the medium term, when the investment phase ends
and profitability increases considerably, dividend may increase.
A shareholder benefit program was started in 2013, and its partial revision
was annouced in July 2017 (Figure 26). Spcifically, a Quo Card is granted
to shareholders based on the number of shares held at the end of the Marchof every year. For instance, shareholders with equal to or greater than 100
shares and less than 300 shares are granted Y2,000 worth of Quo Card;
assuuming that the stock price is Y1,789, then the annual net yield for ashareholder with 100 shares is about 2.9% including the ordinary dividendof Y31 and the shareholder benefit (under the same condition, the annual
29/32This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

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

Issued: 7/18/2018
net yield for OBC is about 1.4%, and for MJS it is about 1.1% which is thesame as the dividend payout ratio since MJS has no shareholder benefit
program).

 Annual net yield

including theshareholder benefit
program is about 2.9%

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

[Figure 25] Transition in Dividend and Dividend Payout Ratio(Ref) Prepared by Alpha-Win’s Research Dept. based on the securities report. Estimates (E) are the Company and Alpha -Win’s estimates.

[Figure 26] Shareholder Benefit Program and Net Yield
Numbe r of Share s Owne d(greate r than or e qual to)(le ss than)
100
300
500

Shareholder Be ne fit(Quo Card: Y)

300
500

2,000
3,000
5,000

Dividend: Y
31
31
31

Net Yie ld: %
2.85
2.29
2.29

Net yield = (dividend + benefit value) / (stock price) was calculated for the minimal amount of stock owned in each range
Stock price assumed to be at: Y1,789(Ref) Prepared by Alpha-Win’s Research Dept. based on the Company’s data

30/32
This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

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

Issued: 7/18/2018◆ Factors that May Affect Stock Price Has been

outperforming TOPIX
for the past one year Cheaper valuation

than its competitors

The Company’s stock price and relative stock price compared to TOPIX forthe past two years are described in the summary section on page 2. Since
March 2017, the Company’s stock price, although with some swaying, has
generally been rising up along with the index. Stock price relative to
TOPIX has especially been rising up since around the July of 2017 until
now. The stock price may reflect the fact that, following the appreciation of
the yen and the implementation of trade protection, the Company has
become more recognized as a domestic stock with stable business results. It
may also reflect the Company’s good performance as it has started toconsecutively increase sales and profits again, and the fact that it is very
competitive and has high potential in the cloud-based enterprise system
software market in which it has pioneered.
Furthermore, a comparison of major valuation indicators was madebetween the Company, the market average, and its competitors (Figure 27).
In comparison with the average of first section of the TSE, the Company’s
P/E is approximately 20.8 (based on EPS estimated by the Company for FY
2019; 20.4 according to our Research Dept.’s prediction), exceeding thefirst section’s average of about 15.0. While the Company’s dividend yield,
at 1.7%, is around average (the simple average is 1.7%), the Company’s
P/B is only 1.1, below the first section’s average of 1.3. Meanwhile,
compared to its competitors (4733 Obic Business Consultants and 9928
Miroku Jyoho Service), the Company’s indicators are mostly low and givean undervalued impression (Figure 27).
Going forward, the following events or factors may have an impact on
stock price.

 Going forward, theannouncement ofspecific businessstrategies, numericaltargets, andcommitment
statements by the newpresident is the key
point of interest

First of all, the contents of the medium-term business plan that is to beannounced in November are of great interest. Since only the concept iscurrently disclosed, a disclosure of new numerical targets and specificstrategies and tactics for the medium to long term is anticipated. If, in theannouncement, the new president declares a strong commitment toward
numerical targets (KPI) and business goals, the stock price may be affected
positively. Similarly, stock price may rise if he reveals a growth strategy
that includes business domain expansion and M&A/tie-ups, a determination
to advance from a sales-oriented to a profit-oriented business, or atransition to management focused on asset efficiency.
Secondly, the progress of this fiscal year’s financial results including cost
control, the rate of increase in the number of contracts for the cloud service,
the improvement status of profit margins, the sales progress of new
products, the progress in increasing the membership of the maintenanceservice, and other factors may also affect stock price and should bewatched.

31/32
This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to Alpha-Win and no part of thisreport may be copied, photocopied, cited, or translated without our consent.

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

Issued: 7/18/2018[Figure 27] Comparison of Valuation Indicators with Competitors
Company Name

PCA (consolidated)

Obic Business Consultants(OBC: non-consolidated)

Miroku Jyoho Service(MJS: consolidated)

Code
Stock Price (at 6/29 closing)Market Cap (Y mil)P/E (price-to-earnings ratio)
P/B (price-to-book ratio)
Dividend Yield (%)
EV/EBITDA
P/S (price-to-sales ratio)

9629

4733

9928

1,789
13,775
20.8
1.1
1.7
4.2
1.3

7,870
317,570
34.6
2.8
1.0
22.9
12.7

2,790
97,109
29.4
5.4
1.1
18.5
3.2

Market cap = (shares outstanding) x (market share price [at 6/29 closing])
EV/EBITDA = (market cap + inte rest-bearing de bt -cash & deposits) / (O.P. + depreciation + intangible fixe d asset amortization)
P/S = marke t cap / sale s [the Company's estimate for FY 2019]
The Company's estimated EPS for FY 2019 use d in all P/E calculations(Ref) Pre pare d by Alpha-Win's Research Dept. based on information including those from the securities re port and the financial results summary(Ref) Prepared by Alpha-Win’s Research Dept. based on information including those from the securities report and the financial results summary＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊

Disclaimers
This Alpha-Win Company Research Report (this Report, hereinafter) has been prepared by
Alpha-Win-Capital Inc. (Alpha-Win, hereinafter) on the request of the company presented in thisReport.
This Report is not to be construed as a recommendation or solicitation of investment. Alpha-Win
shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must maketheir own decisions on all investment matters and take full responsibility regarding theirinvestment.
This Report has been prepared with a focus on objectivity and neutrality based on the analysis ofgenerally accessible public information and supplemental information including interview(s) by the
analyst. Alpha-Win, the writer, and/or other persons involved in the publication of this Report may
already hold, or buy and sell in the future, the stock of the company presented in this Report.
Contents of this Report are based on information current as of the issue date and are subject tochange without notice. We do not warrant or represent that the information in this Report isaccurate, reliable, complete, appropriate, or fit for any purpose and do not accept any
responsibility or liability.
Copyright of this Report belongs to Alpha-Win and no part of the publication may be copied,photocopied, cited, or translated without our consent.
For inquiries regarding this Report, please send us an e-mail to info@awincap.com. However,
Alpha-Win and the writer of this Report do not have any obligation to reply to inquiries. PFV20181029

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