COMPANY RESEARCH AND ANALYSIS REPORT

G-7 HOLDINGS INC.
7508
Tokyo Stock Exchange First Section

21-Jun.-2017
FISCO Ltd. Analyst

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

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

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

21-Jun.-2017
http://www.g-7holdings.com/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Posted all-time high consolidated results for a second straight fiscal year in FY3/17 led theBusiness

2. Aiming for higher sales and profits in all business segments in FY3/18. ......................................................

01
01

3. Accelerating business growth through aggressive M&A...............................................................................

01

Supermarket and AUTOBACS.....................................................................................................................

4. Medium-term business plan targets ¥170,000mn in net sales and ¥7,000mn in ordinary income in
FY3/21. . ................................................. ......................................................................................................

02■Business Overview--------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. AUTOBACS and car-related businesses. .....................................................................................................

03

2. Business Supermarket and quality food business........................................................................................

04

3. Other Business...................................... ......................................................................................................

04■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 05
1. Overview of FY3/17 results..........................................................................................................................

05

2. Performance trends by business segment. ..................................................................................................

06

3. Financial condition and key financial indicators. ..........................................................................................

10■Business outlook-------------------------------------------------------------------------------------------------------------------------------------------------------- 11
1. Company forecast for FY3/18......................................................................................................................

11

2. Segment outlook. . .................................. ......................................................................................................

11■Medium to long-term growth strategy-------------------------------------------------------------------------------------------------- 13■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 15

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

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

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

21-Jun.-2017
http://www.g-7holdings.com/██Summary
Aiming for all-time highs again in FY3/18 driven by BusinessSupermarket and AUTOBACS
G-7 HOLDINGS INC. <7508> (hereafter, “G-7” or “the Group”) is a holding company that owns subsidiaries operating
the largest franchises of AUTOBACS stores and Business Supermarket in Japan. It excels at store profitability
with emphasis on productivity per employee and other indicators. It is also promoting development of agricultural,
foodstuffs and restaurant businesses, as well as overseas businesses. The Group is also promoting growth strategies
using M&As.
1. Posted all-time high consolidated results for a second straight fiscal year in FY3/17 led by the BusinessSupermarket and quality food business
The Group reported FY3/17 consolidated results with all-time highs for a second year running, with ¥110,377mn in
net sales (+6.2% YoY) and ¥4,062mn in ordinary income (+26.1%). While sales slightly missed period-start target(¥115,000mn) due to sluggishness in the AUTOBACS and car-related business, earnings were roughly on trackwith the plan thanks to expansion of Business Supermarket and Quality food business profits and improved income
in other businesses.
2. Aiming for higher sales and profits in all business segments in FY3/18
The FY3/18 guidance calls for higher sales and profits with a 6.6% YoY rise in net sales to ¥117,700mn and 5.9%
increase in ordinary income to ¥4,300mn. It projects further sales and profit expansion in Business Supermarket
and Quality food business accompanying store additions and sales and profit gains in AUTOBACS and car-related
business thanks to focus on boosting sales of high value-added services. The Group also intends to expand thecoin laundry business started as a new initiative in FY3/17 and realize profits in domestic motorcycle business,
agricultural business, and other areas that had losses in FY3/17.
3. Accelerating business growth through aggressive M&A
The Group is continuing the M&A strategy. It acquired Kawase Shokuhin Co., Ltd., a food supermarket, and Crown
Trading Co., Ltd., which conducts export sales of used cars, as subsidiaries in May 2017. Kawase Shokuhin
operates four stores in Hyogo Prefecture and booked ¥1,819mn in annual sales in FY12/16. The Group plans toconvert these stores to Business Supermarket or Megumi no Sato business. Crown Trading posted ¥2,165mn insales in FY1/17. It mainly exports cars to Southeast Asia, and the Group intends to utilize this entity to strengthen
its overseas auto-related business. We think the earnings impact from these additions should be minor.

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

01 15

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

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

21-Jun.-2017
http://www.g-7holdings.com/

4. Medium-term business plan targets ¥170,000mn in net sales and ¥7,000mn in ordinary income in FY3/21
The Group has set goals of ¥170,000mn in net sales and ¥7bn in ordinary income in FY3/21, the final year of
the medium-term business plan. It hopes to expand net sales in the AUTOBACS and car-related business from
FY3/17’s ¥54,600mn to ¥65,000mn through provision of service businesses, such as car inspections, body repair,
and insurance and cultivation of new goods and services besides auto goods. It is also targeting an increase in
Business Supermarket and quality food net sales from FY3/17’s ¥70,200mn to ¥85,000mn led by store additions. In
overseas business, the Group aims to expand net sales from a few hundreds of million yen (FY3/17) to ¥10,000mn
by utilizing M&A in pursuit of auto-related businesses, food exports and imports, and restaurant business. While
overseas business is likely to continue posting losses for the time being due to the upfront investment period, theGroup wants to cultivate it as a future earnings source.
Key Points
Growing as a mega-franchisee of AUTOBACS and Business Supermarket
Booked higher sales and profits in all segments and reached all-time highs for a second straight fiscal year in
FY3/17• Focusing on improved profitability at stores and aims to increase sales and profits in all segments again••㻾㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟㻔¥㼙㼚㻕㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻔¥㼙㼚㻕㻻㼞㼐㼕㼚㼍㼞㼥㻌㼕㼚㼏㼛㼙㼑㻌㻔㼞㼕㼓㼔㼠㻕㻝㻠㻜㻘㻜㻜㻜
㻠㻘㻜㻢㻞

㻠㻘㻟㻜㻜

㻝㻞㻜㻘㻜㻜㻜
㻝㻜㻜㻘㻜㻜㻜

㻠㻘㻞㻜㻜
㻞㻘㻥㻟㻟

㻟㻘㻞㻞㻜

㻟㻘㻝㻟㻥

㻟㻘㻡㻜㻜

㻞㻘㻡㻝㻞

㻤㻜㻘㻜㻜㻜

㻞㻘㻤㻜㻜㻢㻜㻘㻜㻜㻜
㻠㻜㻘㻜㻜㻜

㻠㻘㻥㻜㻜㻤㻞㻘㻢㻞㻟

㻤㻤㻘㻝㻣㻤

㻤㻤㻘㻞㻢㻝

㻝㻜㻟㻘㻤㻥㻡

㻝㻝㻜㻘㻟㻣㻣

㻝㻝㻣㻘㻣㻜㻜

㻞㻘㻝㻜㻜
㻝㻘㻠㻜㻜

㻞㻜㻘㻜㻜㻜㻣㻜㻜㻜㻜㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤㻌㻱

Source: Prepared by FISCO from the Company materials

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

02 15

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

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

21-Jun.-2017
http://www.g-7holdings.com/██Business Overview
Growing as a mega-franchisee of AUTOBACS and BusinessSupermarket
The Group’s operations consist of three operating segments: AUTOBACS and car-related business, BusinessSupermarket and quality food business, and other businesses. Looking at the FY3/17 composition of net sales bybusiness segment, we see that AUTOBACS and car-related business represented 30.8% and Business Supermarket
and quality food business 63.6%, with these two business segments accounting for more than 90% of overall
operations.

㻿㼍㼘㼑㼟㻌㼎㼥㻌㼎㼡㼟㼕㼚㼑㼟㼟㻌㼟㼑㼓㼙㼑㼚㼠㼟㻌㻔㻲㼅㻟㻛㻝㻣㻕㻭㼁㼀㻻㻮㻭㻯㻿㻌㼍㼚㼐㻌㼏㼍㼞㻙㼞㼑㼘㼍㼠㼑㼐㻌㼎㼡㼟㼕㼚㼑㼟㼟㻮㼡㼟㼕㼚㼑㼟㼟㻌㻿㼡㼜㼑㼞㼙㼍㼞㼗㼑㼠㻌㼍㼚㼐㻌㻽㼡㼍㼘㼕㼠㼥㻌㻲㼛㼛㼐㻌㻮㼡㼟㼕㼚㼑㼟㼟㻻㼠㼔㼑㼞㻌㻮㼡㼟㼕㼚㼑㼟㼟
㻡㻚㻢㻑

㻟㻜㻚㻤㻑

㻢㻟㻚㻢㻑
Source: Prepared by FISCO from the Company materials

1. AUTOBACS and car-related businesses
The Group’s AUTOBACS franchise business mainly consists of activities including car product sales and maintenancehandled by G-7 AUTO SERVICE CO., LTD., motorcycle product sales and maintenance handled by G-7 BIKE
WORLD CO., LTD. and overseas car-related business.
AUTOBACS-related sales represent approximately 90% of segment sales, with 73 AUTOBACS-related stores inJapan (61 AUTOBACS stores, seven AUTOBACS Express stores, two Super AUTOBACS stores, two AUTOBACSSecohan Ichiba stores, and one AUTOBACS Cars) and two AUTOBACS stores in Malaysia as of the end of March
2017, giving it the largest scale within the 602 AUTOBACS Group stores. Stores are located predominantly in Hyogo,
Kyoto, Fukui, Okayama, Hiroshima, Chiba, and Ibaraki prefectures. Hyogo is particularly important with 40 stores,
or just under 60% of the Group’s entire network. Store management places strong emphasis on productivity per
employee and inventory turnover rates, and the franchise business is notable for maintaining the highest profitability
within the AUTOBACS Group. Other car-related businesses (the Group’s own initiatives) include eight CRYSTALSEVEN stores offering carwash and coating services, one TIRE SENMONKAN tire specialty store, six body repair
BP centers, and one Suzuki Cars Osaka store.

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

03 15

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

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

21-Jun.-2017
http://www.g-7holdings.com/

Additionally, BIKE WORLD, which engages in direct sales of motorcycle products, operates a total of 15 stores with12 stores in Japan, two stores in Malaysia, and one store in Thailand as of the end of March 2017.
2. Business Supermarket and quality food businessThis segment consists of Business Supermarket franchise operations developed by G-7 SUPER MART CO., LTD.,food product and restaurant operations developed by G7 JAPAN FOOD SERVICE CO., LTD., and G-7 MEATTERABAYASHI CO., LTD., a meat retailer, which was consolidated as a subsidiary in June 2015.
G-7 SUPER MART represents roughly 80% of segment sales, with its 127 supermarket outlets as of the end of March2017 giving it the largest scale among the 757 Business Supermarket Group stores. Store rollouts are predominantly
centered in the Kanto, Chubu, Kansai, Kyushu, and Hokkaido regions.
G7 JAPAN FOOD SERVICE, which accounts for just under 10% of sales, discovers local delicacies and unique local
products and handles wholesale supply to department stores and other retailers as quality foods. It also develops,
manufactures, and sells private-brand foods, handles export/import business, engages in online sales, and operates
restaurants and sweets business (booked in the Other Businesses segment) in Japan.
G-7 MEAT TERABAYASHI, which provides just over 10% of sales, had 95 retail butcher shops as of the end of March2017. Roughly 60% of these stores are set up as tenants at Business Supermarket and Megumi no Sato sites, andthe others are primarily located at department stores and shopping malls.
3. Other Business
The Group’s other businesses consist of G-7 AGRI JAPAN CO., LTD., which operates the Megumi no Sato farmers’market chain, G-7 RETAIL JAPAN CO., LTD., which manages real estate leasing, DAISO discount stores (100 yen
shops), recycling stores, fitness clubs and golf schools and G7 INTERNATIONAL PTE. LTD. (Singapore), whichhandles overseas operations (except for AUTOBACS and BIKE WORLD), a coin laundry service, and a sweets
business as new businesses.
For Megumi no Sato, there are 23 stores (14 in Hyogo, three in Osaka, four in Nara, one in Kyoto, and one in Chiba)
as of the end of March 2017. This business changed the sales format from consignment sales (booking about 20%of the sales price as fee income under sales) to purchase-based sales from June 2015.
G-7 is also steadily developing overseas business in Southeast Asia and Taiwan. The overseas agricultural businessinvolves cultivation of chrysanthemums in Vietnam for sales at Megumi no Sato stores and production of strawberries
in Myanmar for sale at City Mart stores operated by a major local distributor. In the restaurant business, the Grouphas one Ramen KOBE store each in Indonesia and Malaysia and operates a Kushikatsu Daruma store in Taiwan. It
is using a fundamental strategy of opening one direct-operation store in each country to establish the income modeland then proceeding to licensing contracts. The Group also opened one store each for Business Supermarket in
Singapore through a joint venture created with a local company (G-7 holds a 30% stake) in April 2016. It exports
all food items from Japan and book export sales of these items (under the Business Supermarket and quality foodbusiness). The Group has established overseas subsidiaries in Singapore, Malaysia, Vietnam, Indonesia, Myanmar,
Thailand, Cambodia, Taiwan, and Hong Kong.

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

04 15

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

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

21-Jun.-2017
http://www.g-7holdings.com/

As a new business, the Group started a coin laundry service as a franchisee of mammaciao large coin laundry shopswith over 200 sites nationwide under mammaciao Co., Ltd. It had two sites at its own AUTOBACS locations (oneeach in Kyoto and Hyogo prefectures) as of the end of March 2017. In the sweets business, the Group operates
three BAKE CHEESE TART cheese-tart shops as a franchisee (one in Kyoto and two in Osaka) as of the end of
March 2017. Additionally, the Group opened a Yamaya Honpo site, which makes Japanese fish-shaped cakes, inHyogo prefecture.
Major subsidiaries
Business segment

Company name

G-7 AUTO SERVICE CO., LTD.
AUTOBACS andcar-related business G-7 BIKE WORLD CO., LTD.
Business
Supermarket
and quality foodbusiness

Other Businesses

Capitalcontribution
ratio

Business description

100.0% Operator of AUTOBACS, etc.
100.0% Operator of BIKE WORLD, etc.

G-7 SUPER MART CO., LTD.

100.0% Operator of Business Supermarket, etc.

G7 JAPAN FOOD SERVICE CO., LTD.

100.0%

G-7 MEAT TERABAYASHI CO., LTD.

85.58% Retail sales of meats and processed livestock products

G-7 RETAIL JAPAN CO., LTD.

100.0%

G-7 AGRI JAPAN CO., LTD.

100.0% Operator of Megumi no Sato, etc.

G7 INTERNATIONAL PTE. LTD.

100.0% Holding company for overseas subsidiaries

Manufacturing, sales and import and export of food products andbeverages, operator of restaurants, etc.
Handles real estate development for the Group and operates recycling
shops, 100 yen shops, fitness clubs, and indoor golf schools

Source: Prepared by FISCO from the Company materials██Results trends
Booked higher sales and profits in all segments and reached all-timehighs for a second straight fiscal year in FY3/17
1. Overview of FY3/17 results
The Group reported FY3/17 consolidated results with all-time highs for a second straight fiscal year at ¥110,377mn
in net sales (+6.2% YoY), ¥3,897mn in operating income (+28.7%), ¥4,062mn in ordinary income (+26.1%), and¥2,080mn in net income attributable to owners of parent (+11.4%). While sales were somewhat sluggishness in the
AUTOBACS and car-related business, all segments achieved higher sales and profits earnings, including upbeat
momentum in the Business Supermarket and quality food business segment and reduction of stores with operating
losses and improvement of new-business income to a profit in Other Businesses.
The Group slightly exceeded operating and ordinary income targets, despite modest shortfall in net sales on
sluggishness in AUTOBACS and car-related business, thanks to curtailment of SG&A expenses and other earnings
improvement measures. Net income attributable to owners of parent was slightly under guidance because of booking¥529mn in extraordinary losses (mainly from ¥390mn in impairment losses), but the Group still raised profit by double
digits and earnings are steadily expanding.

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

05 15

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

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

21-Jun.-2017
http://www.g-7holdings.com/

Consolidated results for FY3/17(Unit: ¥mn)
FY3/16
Results

FY3/17vs. Net sales

Initialforecast

Resultsvs. Net sales

YoY% of plan

Net sales

103,895-

115,000

110,377

-

6.2%

-4.0%

Cost of sales

77,23674.3%-

81,741

74.1%

5.8%

-

SG&A expenses

23,62922.7%-

24,739

22.4%

4.7%

-

Operating income

3,028

2.9%

3,700

3,897

3.5%

28.7%

5.3%

Ordinary income

3,220

3.1%

4,000

4,062

3.7%

26.1%

1.6%

Extraordinary gains/losses

95

0.1%

-

-529

-0.5%

-

-

Net income attributable toowners of parent

1,867

1.8%

2,100

2,080

1.9%

11.4%

-1.0%

Source: Prepared by FISCO from the Company materials

Upbeat trends in the Business Supermarket and quality foodbusiness and new coin laundry and sweets businesses
2. Performance trends by business segment(1) AUTOBACS and car-related business
The AUTOBACS and car-related business segment booked ¥34,010mn in sales (+0.4% YoY) and ¥1,206mn inoperating income (+17.9%). While sales were roughly flat at just a 0.1% gain YoY at G-7 AUTO SERVICE, whichmainly handles AUTOBACS business, operating income climbed 20%. Sales slowed because of flat store volume
versus the end of the previous fiscal year in the absence of new AUTOBACS openings, lackluster replacement
demand for winter tires in the first half of the fiscal year, and slumping sales of car audiovisual systems. In
earnings, meanwhile, positive trends were healthy momentum in the high value-added services business withcar inspection service, body repair and coating service, and other offerings and recovery in winter-tire demand
spurred by snowfalls from December 2016.
Category sales growth rates (YoY) were tires and wheels at -3.6%, car audiovisual equipment at -6.3%, batteries
at +3.3%, services (car inspections, body repair, coating, etc.) at -0.8%, insurance at +7.5%, and Cars (usedcar purchases and sales) at +2.8%. While car electronics product sales declined as a whole, ETC devices, driverrecorders, and some other items were upbeat. By region, western Japan had sluggish sales due to a large impact
from snowfall shortage. Kanto stores, on the other hand, posted higher sales and earnings. Existing store sales forthe entire AUTOBACS Group dropped 1.1% YoY in the subject period. G-7 Holdings hence continues to maintainrobust sales capabilities within the group.
G-7 BIKE WORLD, meanwhile, reported slightly higher sales, but an operating loss. This outcome can be attributed
to tougher competition with rivals amid an ongoing slump in the domestic motorcycle market. The Group opened
one new store and closed one store in FY3/17. It announced a business alliance with Bike O & Company Ltd.
<3377>, which purchases and sells used cars, in November 2016 aimed at strengthening profitability. The
business alliance mainly covers development of a mechanism for mutual customer introductions for their products
and services, expansion of adjacent BIKE WORLD and BIKE O stores, and promotion of people interactions andinformation sharing. The two companies also plan to consider collaboration in overseas initiatives. As part offorming the business alliance, the Group acquired a 0.98% stake (¥32mn) in Bike O & Company.

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

06 15

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

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

21-Jun.-2017
http://www.g-7holdings.com/

For overseas stores, the Group operates two AUTOBACS stores and two BIKE WORLD stores in Malaysia andone BIKE WORLD store in Thailand. This is the sixth year of operations in Malaysia, and sales continued to growat a double-digit pace with a 35% YoY increase. Profits are starting to pick up as well with BIKE WORLD reaching
profitability. The Thai store just opened in March 2016 and is still in the launch phase. While it needs more time,
we expect healthy income in upcoming years considering robust demand for motorcycle products.

㻭㼁㼀㻻㻮㻭㻯㻿㻌㼍㼚㼐㻌㼏㼍㼞㻙㼞㼑㼘㼍㼠㼑㼐㻌㼎㼡㼟㼕㼚㼑㼟㼟㻔¥㼙㼚㻕㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼕㼚㼏㼛㼙㼑㻌㻔㼞㼕㼓㼔㼠㻕㻠㻜㻘㻜㻜㻜
㻟㻞㻘㻜㻜㻜

㻝㻘㻡㻜㻜
㻝㻘㻞㻜㻢

㻝㻘㻝㻞㻠

㻝㻘㻞㻜㻜

㻝㻘㻜㻞㻟

㻞㻠㻘㻜㻜㻜
㻝㻢㻘㻜㻜㻜㻔¥㼙㼚㻕㻥㻜㻜㻟㻟㻘㻤㻥㻟

㻟㻟㻘㻜㻥㻡

㻟㻠㻘㻜㻝㻜

㻤㻘㻜㻜㻜

㻢㻜㻜
㻟㻜㻜

㻜

㻜

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

Source: Prepared by FISCO from the Company materials(2) Business Supermarket and quality food businessNet sales increased 9.3% YoY to ¥70,232mn and operating income rose 14.5% to ¥2,413mn, achieving double-digit gains in sales and profit. While results benefited from a full-year contribution by G-7 MEAT TERABAYASHI(vs. 10 months in FY3/16), sales and profit still improved even without the additions.
Sales at G-7 SUPER MART, which primarily operates Business Supermarket stores, increased 7.1% YoY. Existing
store sales grew by a healthy 1.9% YoY amid rising customer volume among restaurant operators faced withupswing in food material costs and general consumers spurred by deflationary sentiment. New store additions(store volume was up by seven sites from the end of the previous fiscal year to 127 stores at the end of March2017) contributed as well. The Group opened eight stores during the period (one in Tokyo, one in Hyogo, three
in Saitama, one in Chiba, one in Kanagawa, and one in Aichi).
G-7 MEAT TERABAYASHI opened eight stores, including joint openings with Business Supermarket, and steadily
increased store count to 95 stores at the end of March. Sales and profit expanded with support from full-year
contributions. G7 JAPAN FOOD SERVICE boosted sales and profits by recruiting new customers, mainly in EasternJapan, and reinforcing the product line-up in the quality foods business.

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

07 15

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

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

21-Jun.-2017
http://www.g-7holdings.com/㻮㼡㼟㼕㼚㼑㼟㼟㻌㻿㼡㼜㼑㼞㼙㼍㼞㼗㼑㼠㻌㼍㼚㼐㻌㻽㼡㼍㼘㼕㼠㼥㻌㻲㼛㼛㼐㻌㻮㼡㼟㼕㼚㼑㼟㼟㻔¥㼙㼚㻕㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻔¥㼙㼚㻕㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼕㼚㼏㼛㼙㼑㻌㻔㼞㼕㼓㼔㼠㻕㻤㻜㻘㻜㻜㻜

㻞㻘㻝㻜㻣

㻞㻘㻠㻝㻟

㻢㻠㻘㻜㻜㻜

㻞㻘㻡㻜㻜

㻞㻘㻜㻜㻜
㻝㻘㻠㻠㻣

㻠㻤㻘㻜㻜㻜

㻝㻘㻡㻜㻜㻟㻞㻘㻜㻜㻜

㻢㻠㻘㻞㻢㻞

㻣㻜㻘㻞㻟㻞

㻝㻘㻜㻜㻜㻡㻞㻘㻠㻞㻜

㻝㻢㻘㻜㻜㻜㻡㻜㻜㻜㻜㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

Source: Prepared by FISCO from the Company materials(3) Other Business
Other Businesses sales climbed 6.9% YoY to ¥6,135mn and operating income recorded a ¥124mn profit (versus
FY3/16’s ¥39mn loss). Sales have been growing due to the switch from consignment sales to purchase-based
sales for farm produce at Megumi No Sato from June 2015 and the additions of coin laundry service andsweets business as new businesses. While sales scale remains small, these businesses are vibrant. The segment
reached a profit, even with losses in Megumi No Sato and overseas businesses, thanks to contributions from new
businesses, increase in real estate (rental income) business, and reduction of unprofitable stores.
Megumi No Sato opened two stores in Hyogo and one store in Chiba, putting store count at 23 stores at theend of March (up two stores from the end of the previous fiscal year). Sales increased on the switch to thepurchase-based format, but this business had an operating loss because of a larger increase in inventory disposal
losses than anticipated. Purchasing personnel must carefully manage purchases and purchasing prices in the
fresh produce business because sales results vary depending on daily weather conditions and other factors.
However, Megumi No Sato has not sufficiently trained human resources at its individual stores and is currently
in a trial-and-error phase of trying to optimize the purchasing system. Income temporarily weakened in thisenvironment.
The coin laundry service business, which the Group started in FY3/17, had one store on the grounds of an
AUTOBACS store and one store at a G-7 Mall at the end of March 2017. The shops attract many customers
because they have machines for washing and drying not only clothes, but also futons, carpets, and other items
that cannot be easily washed at home, and sales are healthy at both stores. The initial investment in washingmachines, dryers, and other facilities is roughly ¥20mn, but this is a profitable business model once depreciation
costs are recovered because of low cost of sales. Monthly sales total around ¥500-700,000, though prosperous
shops can reach ¥1mn. While the income contribution is minor, the Group plans to open co-location stores at
not only AUTOBACS sites, but also Business Supermarket and G-7 Malls with multiple group stores. Targets are
50 stores by 2020 and 100 stores in the future.

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

08 15

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

G-7 HOLDINGS INC.

21-Jun.-2017

7508 Tokyo Stock Exchange First Section

http://www.g-7holdings.com/

Mammaciao Kameoka Store

Source: Prepared by FISCO from the Company materials

For sweets, the BAKE CHEESE TART cheese-tart shop business has two stores (Osaka, Kyoto). This is a
popular take-out store with monthly sales of ¥20-30mn per site. It attracts lines of customers because of thereasonable pricing and delicious taste. Smaller stores quickly reach profitability because they are operated with
1-2 employees. This business contributes to sales and profit growth despite its small size.
In overseas business, agricultural businesses in Vietnam and Myanmar did not improve much during the year.
For restaurants, the Group directly operates one store each of Ramen KANBE in Malaysia and Indonesia andKushikatsu Daruma in Taiwan (FC contracts). Sales are particularly upbeat at the Kushikatsu Daruma store opened
in December 2015. The Group opened a Business Supermarket in Singapore as a joint venture with a local firmin April 2016, but this business has been struggling due to lack of recognition in the local market and difficulty indifferentiating itself.

㻻㼠㼔㼑㼞㻌㻮㼡㼟㼕㼚㼑㼟㼟㻔¥㼙㼚㻕㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼕㼚㼏㼛㼙㼑㻌㻔㼞㼕㼓㼔㼠㻕

㻔¥㼙㼚㻕

㻝㻞㻠

㻞㻜㻜

㻣㻘㻜㻜㻜
㻢㻘㻜㻜㻜

㻝㻜㻜
㻙㻟㻥

㻡㻘㻜㻜㻜

㻜

㻠㻘㻜㻜㻜

㻟㻘㻜㻜㻜

㻙㻝㻜㻜

㻙㻞㻠㻥

㻡㻘㻣㻟㻥

㻢㻘㻝㻟㻡

㻞㻘㻜㻜㻜
㻝㻘㻜㻜㻜

㻙㻞㻜㻜
㻙㻟㻜㻜

㻞㻘㻣㻠㻢

㻙㻠㻜㻜

㻜

㻙㻡㻜㻜
㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

Source: Prepared by FISCO from the Company materials

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

09 15

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

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

21-Jun.-2017
http://www.g-7holdings.com/

Financial health improving with profit expansion
3. Financial condition and key financial indicators
Looking at the Group’s financial status at the end of March 2017, total assets were up ¥1,464mn from the end of
the previous fiscal year to ¥37,618mn, based on increases of ¥1,153mn in cash and deposits increases of ¥256mn
in products and merchandise in current assets. Liabilities dropped by ¥10mn from the end of the previous fiscal
year to ¥21,960mn, despite a rise of ¥84mn in interest-bearing debt, because of declines of ¥101mn in unpaid
corporate taxes and ¥99mn in bonus allowance. Net assets rose by ¥1,475mn YoY to ¥15,658mn, even with asetback of ¥604mn from dividend payments, primarily owing to a ¥2,080mn increase in net income attributable toowners of parent.
Looking at management indicators for soundness, the equity ratio rose from 38.1% at the end of the previous fiscal
year to 40.8% and the Group’s interest-bearing debt ratio improved from 60.5% to 54.9%. We think the Group ismaking progress in enhancement of financial standing with support from growing profits. In profitability, ROE wasunchanged YoY at 14.3%, but the Group realized steady gains with ROA up from 9.4% to 11.0% and OPM climbing
from 2.9% to 3.5%.
Consolidated Balance Sheet(Unit: ¥mn)
FY3/14

FY3/15

FY3/16

FY3/17

ChangeCurrent assets

15,08915,018

17,111

18,542

1,431(Cash and deposits)

7,183

6,952

8,242

9,395

1,153

(Merchandise and finished goods)

4,492

5,198

5,341

5,597

256

Fixed assets

16,96817,321

19,042

19,07634

Net assets

32,05732,33936,154

37,618

1,464

Total liabilities

20,45819,934

21,971

21,960-10(Interest-bearing debt)

8,700

8,458

8,342

8,426

84

Net assets

11,59912,404

14,183

15,6581,475

Equity ratio

36.2%

38.4%

38.1%

40.8%

Interest-bearing debt ratio

75.0%

68.2%

60.5%

54.9%

ROE (return on equity)

13.9%

10.6%

14.3%

14.3%

ROA (ratio of ordinary income to total assets)

10.1%

7.8%

9.4%

11.0%

Operating income margin

3.3%

2.6%

2.9%

3.5%

Management indicators(Financial strength)(Profitability)

Source: Prepared by FISCO from the Company materials

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

10 15

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

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

21-Jun.-2017
http://www.g-7holdings.com/██Business outlook
Two M&A deals in May 2017, adding just over ¥3,000mn to annual sales
1. Company forecast for FY3/18
The FY3/18 consolidated guidance calls for all-time high results with a 6.6% YoY rise in net sales to ¥117,700mn andincreases of 5.2% in operating income to ¥4,100mn, 5.9% in ordinary income to ¥4,300mn, and 5.8% in net income
attributable to owners of parent of ¥2,200mn. The Group envisions higher sales and profits in all business segments.
It projects further sales and profit expansion in Business Supermarket and quality food business accompanying store
additions. It also intends to lift margin and realize profits by enhancing productivity and controlling inventories andspending at stores run by G-7 BIKE WORLD, G-7 Agri Japan, and G-7 Retail Japan that had losses in FY3/17. The
Group will continue upfront invest in overseas business, but hopes to narrow losses on increased sales.
The Group acquired two new companies in May 2017. It purchased all shares in Kawase Shokuhin Co., Ltd., afood supermarket with four stores in Hyogo Prefecture (three stores in Akashi and one store in Kobe), and madethis company a wholly owned subsidiary. Kawase Shokuhin booked ¥1,819mn in annual sales in FY12/16 and has
30 employees. The Group plans to convert these stores to Business Supermarket or Megumi No Sato brands.
The other acquisition was a 51% stake in Crown Trading Co., Ltd., which conducts export sales of used cars. This
company posted ¥2,165mn in sales in FY1/17 and has 20 employees. It exports cars to 50 countries with emphasis
on Southeast Asia. The Group plans to expand its stake to 100% and expects this acquisition as a subsidiary toyield synergies with other overseas auto-related businesses. We expect the additions to provide just over ¥3,000mn
in FY3/18 sales, but think the earnings impact should be minor.

Focus on strengthening store profitability and aiming for higher
sales and profits in all segments
2. Segment outlook(1) AUTOBACS and car-related business
The Group is planning higher sales and profits in the AUTOBACS and car-related business in FY3/18. It projects
a roughly 5% YoY sales gain at mainstay G-7 AUTO SERVICE. Guidance envisions sales and profit gains, despite
the absence of plans to open new AUTOBACS stores at this point, by increasing sales of auto-related products
at existing stores, strengthening initiatives in the services division (car inspections, body repair, coating service,etc.), and holding events such as G-7 Mall Festival. This fiscal year had an upbeat start with April sales apparently
stronger than in FY3/17 and guidance mainly led by tire replacement demand (from winter to normal tires).
G-7 BIKE WORLD, meanwhile, will not open new stores and instead put a top priority on attaining an operating
income considering the ongoing slump in Japan’s motorcycle market. The Group expects synergies from activities
with Bike O & Company, its alliance partner since FY3/17. In overseas business, the Group forecasts continuing
growth by the motorcycle business in Malaysia and profitability in the AUTOBACS business by bolstering profit
margin at existing stores. It is not planning new openings at this stage.

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

11 15

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

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

21-Jun.-2017
http://www.g-7holdings.com/(2) Business Supermarket and quality food business
The Group projects continuation of sales and earnings growth in Business Supermarket and quality foods. It plansto open about 10 new stores in the mainstay Business Supermarket business and increase sales by 6% YoY. It
already opened three stores in April (one each in Tokyo, Fukuoka, and Hokkaido), and these stores are exhibiting
robust starts. G-7 MEAT TERABAYASHI, which operates butcher shops, will be opening about 15 new stores. It
intends to open these stores at not only Business Supermarkets, but also other retail facilities and is aiming for¥10,000mn in sales.
G7 JAPAN FOOD SERVICE will continue to discover local delicacies and develop private-brand products andalso recruit sales sites. It plans to bolster exports to Southeast Asia and Hong Kong, Taiwan, and other Asian
countries, mainly selling meats, fruits, seasonings, and other Japanese products to local restaurant operators,
hotels, and wholesale firms.
(3) Other Businesses
The Group expects to generate higher sales and profits in Other Businesses. In the Megumi No Sato business, itwill reduce inventory disposal losses and develop the procurement network to enhance the product line-up. There
are no plans to open new stores, and priority will be given to revitalizing income at existing stores.
In the coin laundry business, the Group aims to open 11 new stores in FY3/18, generating an extra few tens of
million yen in sales. In the sweets business, it is reviewing expansion of cheese tart shops with robust sales, but
faces a challenge from the difficulty of finding store locations that meet its criteria because of the need for primesites next to train stations with strong customer draws. The Group has room in the licensing contract to open
a total of up to 11 stores in Keihanshin, Nagoya, Okayama, Hiroshima, and Fukuoka. It plans to open stores assuitable locations are discovered. In reuse business, the Group had operated three reuse shops in Okayama andChiba, but it opened a fourth shop in Nagoya in April 2017. While this business is still incurring losses, the Groupwants to improve earnings by raising handling volume with store additions.
In overseas business, the Group wants to reduce losses with benefits from increased sales. In the restaurant
business, Kushikatsu Daruma is doing well and the Group will open stores in Malaysia and Vietnam this fiscal
year if it finds tenant location that meet criteria. It is directly operating the first store and will promote multi-store
deployment by concluding sub-licensing contracts with local firms from the second store. The Group has received
multiple inquiries about sublicense contracts in Taiwan and might conclude a contract during FY3/18.

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

12 15

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

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

21-Jun.-2017
http://www.g-7holdings.com/██Medium to long-term growth strategy
Set goals of ¥170,000mn in sales and ¥7,000mn in ordinary income
for the final fiscal year in the medium-term plan
The Group’s medium-term business plan that lasts through FY3/21 presents final-year goals of ¥170,000mn in
net sales and ¥7,000mn in ordinary income. These goals represent a roughly 1.5 times in net sales and almost
1.7 times in ordinary income compared to FY3/17 results, and the Group intends to expand all businesses. For
AUTOBACS business (G-7 AUTO SERVICE), it expects a sharp gain with sales roughly doubling from the FY3/17
level to ¥60,000mn. This goal works out to a 18% average annual growth rate. The Group believes it can attainthe goal through expansion of domestic store network, including M&A, and efforts to broaden new products andservices, such as the aforementioned coin laundry service.
For the Business Supermarket business (G-7 SUPER MART), it targets a 27% increase in sales from the FY3/17
level to ¥65,000mn. The goal corresponds to a 4% increase pace as an annual average, and the Group should be
able to reach its target by expanding store network at a pace of 5-10 stores per year. The Group also intends toachieve goals for BIKE WORLD, meat, and agricultural businesses by steadily increasing the number of stores. For
G7 JAPAN FOOD SERVICE, it aims for a 30% increase from the FY3/17 level to ¥8,500mn, led by expansion ofquality food business and food exports as well as gains in development and sales of private-brand products throughcollaboration with Megumi no Sato.
The Group envisions rapid growth in overseas business from sales of a few hundreds of million yen in FY3/17
to ¥10,000mn in FY3/21. The ¥10,000mn includes about 50% from overseas AUTOBACS and BIKE WORLDbusinesses and roughly 50% from restaurant, food, and agricultural businesses. The Group intends to aggressively
make acquisitions even in Southeast Asian countries in order to realize the goal. One example is the purchase of
Crown Trading as a subsidiary. Management does not factor in profit contributions for the time being because of
upfront investment costs. However, it expects support for profit growth as a core business in future years once itsolidifies the income model because of high potential economic growth rates in Southeast Asia.
The Group is taking steps to improve human resource training internally aimed at supporting future growth. Three
years ago it started the Next Cabinet (NC) Club, a study group that consists of about 10 next-generation executive
candidates, and the NC Training School, a study group that brings together about 15 executive candidates. These
activities reflect the pressing need to cultivate human resources in promoting an aggressive business expansion
strategy that utilizes M&A and other methods. We expect better visibility for the Group’s attainment of medium-termbusiness goals if it strengthens management capabilities at group firms through cultivation of human resources.

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

13 15

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

G-7 HOLDINGS INC.
7508 Tokyo Stock Exchange First Section

21-Jun.-2017
http://www.g-7holdings.com/

㻿㼍㼘㼑㼟㻌㼠㼍㼞㼓㼑㼠㼟㻌㼎㼥㻌㼎㼡㼟㼕㼚㼑㼟㼟㼑㼟(¥100mn)㻭㼁㼀㻻㻮㻭㻯㻿㻌㼎㼡㼟㼕㼚㼑㼟㼟㻮㼡㼟㼕㼚㼑㼟㼟㻌㻿㼡㼜㼑㼞㼙㼍㼞㼗㼑㼠㻌㼎㼡㼟㼕㼚㼑㼟㼟㻲㼛㼛㼐㼟㻛㼞㼑㼟㼠㼍㼡㼞㼍㼚㼠㻌㼎㼡㼟㼕㼚㼑㼟㼟㻾㼑㼍㼘㻌㼑㼟㼠㼍㼠㼑㻌㼐㼑㼢㼑㼘㼛㼜㼙㼑㼚㼠㻌㼍㼚㼐㻌㼚㼑㼣㻌㼎㼡㼟㼕㼚㼑㼟㼟㻮㻵㻷㻱㻌㼃㻻㻾㻸㻰㻌㼎㼡㼟㼕㼚㼑㼟㼟㻹㼑㼍㼠㻌㼎㼡㼟㼕㼚㼑㼟㼟㻭㼓㼞㼕㻌㼎㼡㼟㼕㼚㼑㼟㼟㻻㼢㼑㼞㼟㼑㼍㼟㻌㼎㼡㼟㼕㼚㼑㼟㼟

㻝㻘㻤㻜㻜
㻝㻜㻜
㻤㻜
㻤㻡
㻝㻝㻡

㻝㻘㻢㻜㻜
㻝㻘㻠㻜㻜
㻝㻘㻞㻜㻜
㻝㻘㻜㻜㻜
㻤㻜㻜

㻢㻜㻜
㻠㻜㻜
㻞㻜㻜

㻟
㻢㻜
㻤㻜

㻝㻜
㻠㻜

㻞㻜

㻢㻡㻜

㻡㻞㻜

㻡㻜

㻞㻥

㻢㻜㻜

㻟㻝㻜

㻜
㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻞㻝

Source: Prepared by FISCO from the Company materials

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

14 15

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

G-7 HOLDINGS INC.

21-Jun.-2017

7508 Tokyo Stock Exchange First Section

http://www.g-7holdings.com/██Shareholder return policy
Pays dividends with a 30% dividend payout ratio target
G-7 is paying out dividends as a measure for returning profits to shareholders. The Group’s underlying policy is toreturn profits to shareholders in accordance with business performance, premised on maintaining stable dividends,
making a comprehensive determination, while taking into consideration factors including capital required for futurebusiness expansion and its financial condition. It generally aims to maintain a dividend payout ratio of around 30%.
The Group paid a ¥53.0 dividend (30.9% payout ratio) in FY3/17 that included a ¥13 special dividend. For FY3/18,
the dividend has been set at ¥50.0 per share yielding a 27.5% dividend payout ratio. We think the Group might raisethe dividend if earnings meet guidance because this payout ratio (27.5%) is less than the targeted 30%.

㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㼍㼚㼐㻌㼐㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛
(¥)
㻢㻜㻚㻜

㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㻔㼘㼑㼒㼠㻕
㻟㻜㻚㻤

㻡㻜㻚㻜

㻞㻤㻚㻣

㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻌㻔㼞㼕㼓㼔㼠㻕

㻟㻜㻚㻡

㻟㻢㻚㻜

㻟㻜㻚㻥
㻞㻣㻚㻡

㻠㻜㻚㻜

㻟㻜㻚㻜
㻞㻠㻚㻜

㻟㻜㻚㻜
㻞㻜㻚㻜

（㻑）

㻝㻤㻚㻜
㻠㻣㻚㻜

㻡㻟㻚㻜

㻡㻜㻚㻜
㻝㻞㻚㻜

㻟㻥㻚㻜
㻟㻜㻚㻜

㻝㻜㻚㻜

㻢㻚㻜

㻜㻚㻜

㻜㻚㻜
㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤㻌㻱

Source: Prepared by FISCO from the Company materials

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

15 15

Disclaimer
FISCO Ltd. (the terms “FISCO”, “we”, mean FISCO Ltd.) has legal agreements with theTokyo Stock Exchange, the Osaka Exchange,and Nikkei Inc. as to the usage of stock priceand index information. The trademark and value of the “JASDAQ INDEX” are the intellectual
properties of the Tokyo Stock Exchange, and therefore all rights to them belong to the Tokyo
Stock Exchange.
This report is based on information that we believe to be reliable, but we do not confirm or
guarantee its accuracy, timeliness,or completeness, or the value of the securities issued bycompanies cited in this report. Regardless of purpose,investors should decide how to use
this report and take full responsibility for such use. We shall not be liable for any result of its
use. We provide this report solely for the purpose of information, not to induce investment or
any other action.
This report was prepared at the request of its subject company using information provided
by the company in interviews, but the entire content of the report, including suppositions andconclusions, is the result of our analysis. The content of this report is based on informationthat was current at the time the report was produced, but this information and the content of
this report are subject to change without prior notice.
All intellectual property rights to this report, including copyrights to its text and data, areheld exclusively by FISCO. Any alteration or processing of the report or duplications of thereport, without the express written consent of FISCO, is strictly prohibited. Any transmission,
reproduction, distribution or transfer of the report or its duplications is also strictly prohibited.
The final selection of investments and determination of appropriate prices for investment
transactions are decisions for the recipients of this report.
FISCO Ltd.