COMPANY RESEARCH AND ANALYSIS REPORTAPPLE INTERNATIONAL CO., LTD.
2788
Tokyo Stock Exchange Second Section

24-Apr.-2019
FISCO Ltd. Analyst

Ken Segawa

FISCO Ltd.
http://www.fisco.co.jp

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Acquired exclusive sales rights in Japan to a China-made EV . ...................................................................

01

2. The FY12/18 results and the FY12/19 forecasts . ........................................................................................

01

3. Developing auto auction business, used light commercial vehicles export business,and used vehicles purchase and sale business in Thailand. ........................................................................

01■Company and business profile--------------------------------------------------------------------------------------------------------------------- 02
1. Company profile .. .................................. ......................................................................................................

02

2. History .................................................. ......................................................................................................

03

3. Description of business . . ....................... ......................................................................................................

03

4. Business trends...........................................................................................................................................

06■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 07
1. Overview of FY12/18 results ................. ......................................................................................................

07

2. The financial condition and cash flow statement. ........................................................................................

08■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 09• FY12/19 earnings forecast..................... ......................................................................................................

09■Medium-to-long-term growth strategy------------------------------------------------------------------------------------------------- 10
1. Acquired exclusive sales rights in Japan for a China-made EV. ...................................................................

10

2. Domestic businesses............................. ......................................................................................................

14

3. Growth strategy for South East Asia...... ......................................................................................................

14■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 19

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/██SummaryDeveloping a new growth strategy to respond to changes in thebusiness environment
Currently, APPLE INTERNATIONAL CO., LTD. <2788> (hereafter, “Apple International,” also “the Company”) has
two main business pillars: Used vehicles export business, and the franchise chain headquarters for the used
vehicles purchase and sale business within Japan. It is developing a new growth strategy in Japan and overseas inanticipation of changes in the business environment.
1. Acquired exclusive sales rights in Japan to a China-made EV
In March 2019, the Company acquired exclusive sales rights in Japan from Nanjing Jiayuan Special Electric Vehicles
Manufacture Co., Ltd. (hereafter, JIAYUAN EV), a Chinese manufacturer of electric vehicles (EV). The Company was
highly evaluated for its expertise, such as on the Japanese legal system, and its knowledge about vehicles and won
the rights over general trading companies. It will first sell e-Apple, which is a single-seater minicar. In accordancewith Japan’s Road Traffic Act, it will be registered as a motorized two-wheeled vehicle. It will be introduced at theApple dealership owners’ meeting in April 2019, and the plan is to display it in dealerships based on feedback fromthe meeting. The second stage of sales for new EV vehicles will be EV trucks, which correspond to light trucks inJapan’s laws. The two-seater EV truck will have the same maximum load capacity as a light truck, of 350 kg. The
Spanish police have already introduced several thousand of them as patrol vehicles.
2. The FY12/18 results and the FY12/19 forecasts
In FY12/18, net sales increased 36.5% year-on-year (YoY) to ¥18,610mn, operating income rose 51.7% to ¥493mn,
and ordinary income grew 209.8% to ¥1,038mn. As a result of the completion of the liquidation procedure ofa consolidated subsidiary in Hong Kong and the conversion of foreign currency-denominated bonds, a foreignexchange gain of ¥728mn was recorded in non-operating income. The forecasts for FY12/19 are for net sales todecrease 6.5% to ¥17,406mn, operating income to decline 30.5% to ¥342mn, and ordinary income to fall 60.6%
to ¥409mn. In Thailand, which is the main destination for the used vehicles export business, following the generalelections in late March, the coronation and other national events for the new king will continue until early May, andin these two months, sales activities will slow down. In Japan also, there will be 10 consecutive days of holiday tomark the accession of the new emperor, and the forecasts for this fiscal period take into consideration the effectsof these factors.
3. Developing auto auction business, used light commercial vehicles export business, and used vehicles
purchase and sale business in Thailand
The subsidiary that was established in June 2018 in order to export used, light commercial vehicles (LCV) manufactured in Thailand, also expanded its business area to the used vehicles purchase and sale business. It has alreadyopened 5 Apple dealerships, and it will also increase the number of directly managed dealerships to 10 during thecurrent fiscal year. After that, the same as in Japan, it will recruit dealerships as the franchise chain headquarters,
and it is ultimately aiming to build a network of 100 dealerships. In the buying and selling business, it is benefitingfrom having the first-mover advantage, because there are no rival companies. Moreover, synergies are expectedwith the auto auction business, which the Company has been conducting in Thailand since 2008.

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

01 19

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/

Summary

Key Points
Awarded first place for the fifth consecutive year in a survey on customer satisfaction in the “Vehicle purchasing
companies” category• Acquired exclusive sales rights in Japan for a China-made EV• Developing Apple dealerships in Thailand, aiming for a network of 100 dealerships•

㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㼍㼚㼐㻌㼛㼜㼑㼞㼍㼠㼕㼚㼓㻌㼕㼚㼏㼛㼙㼑㻔¥㼙㼚㻕㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻡㻜㻘㻜㻜㻜

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

㻝㻘㻡㻜㻜

㻝㻘㻟㻞㻞
㻠㻜㻘㻣㻜㻣

㻠㻜㻘㻜㻜㻜

㻝㻘㻞㻜㻜㻟㻝㻘㻜㻞㻠

㻟㻜㻘㻜㻜㻜
㻞㻜㻘㻜㻜㻜

㻥㻜㻜㻞㻡㻘㻠㻢㻜
㻣㻠㻣㻝㻤㻘㻢㻝㻜

㻝㻠㻘㻤㻜㻤
㻠㻤㻥㻡㻤㻥㻝㻣㻘㻠㻜㻢

㻢㻜㻜㻝㻟㻘㻢㻟㻠
㻠㻥㻟㻝㻜㻘㻜㻜㻜

㻟㻜㻜
㻟㻠㻞

㻟㻞㻡
㻜

㻜

㻲㼅㻝㻞㻛㻝㻟

㻲㼅㻝㻞㻛㻝㻠

㻲㼅㻝㻞㻛㻝㻡

㻲㼅㻝㻞㻛㻝㻢

㻲㼅㻝㻞㻛㻝㻣

㻲㼅㻝㻞㻛㻝㻤 㻲㼅㻝㻞㻛㻝㻥㻌㻱

Source: Prepared by FISCO from the Company's financial results██Company and business profileHas two business pillars; the used vehicles export business and theused vehicles purchase and sale business1. Company profile
Apple International, as a pioneer in the export of used vehicles, launched used vehicles export business to Southeast
Asian countries in 1996. Since then, the Company has played an important part in the automobile distribution market,
not only in the used vehicles purchase and sale business, but also establishing auto auction businesses. Overseas,
the Company has continually developed new businesses based on the trust it has earned and the expanding
network of human connections it has established. The main business of the Company itself in the Company Groupis the export of used vehicles from Japan, while a subsidiary serves as the franchise chain headquarters in the used
vehicles purchase and sale business within Japan, and a Group company also directly manages franchise dealers.

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02 19

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/

Company and business profile

2. History
The Company was founded in Yokkaichi City, Mie Prefecture, in January 1996 for the purchase and sale of used
vehicles within Japan. Subsequently, in order to respond to the needs of overseas importers following the boom
in motorization in Southeast Asian countries, in December of the same year it launched a business to export used
vehicles to Thailand and Hong Kong. Currently, the Company itself operates the used vehicles export business fromJapan, mainly for Thailand, Malaysia, Singapore, and Indonesia.
The Company is expanding the scale and range of its operations through M&A. In November 2001, the Company
acquired shares of Car Consultant Maple Co., Ltd., which buys and sells cars, and in May 2004, it acquired sharesof franchise chain headquarters Apple Auto Network Co., Ltd. Both of these companies are now consolidated
subsidiaries.
The Company listed on the Tokyo Stock Exchange (TSE) Mothers market in December 2003, and then in May 2015,transferred to the TSE Second Section.
In November 2016, the Company established a dual-headquarters structure, setting up a second headquarters inTokyo’s Chuo Ward.
In May 2017, the Company entered-into a capital and business alliance with Isuzu Motors. It conducted a capitalincrease through a third-party allocation by newly issuing 1.38 million new shares (9.97% of the total shares issued) toIsuzu Motors. Both domestically and overseas, the two companies will collaborate for the purchase, distribution, andexports of the used commercial vehicles manufactured by Isuzu Motors. Overseas, it has established a subsidiary
to export light, commercial used vehicles from Thailand and to promote exports of Isuzu vehicles manufacturedin Thailand. The subsidiary also expanded its business scope into the used vehicles purchase and sale business,
3. Description of businessCurrently, its businesses are consolidated into the two business pillars of the used vehicles export business, whichis conducted by the Company itself, and the franchise chain headquarters business of buying and selling vehicles,
which is conducted by a consolidated subsidiary. Net sales by business in FY12/18 were ¥10,813mn from the used
vehicles export business and ¥7,797mn from the used vehicles purchase and sale business. The Company’s Groupconsists of the Company itself, two consolidated subsidiaries, and one equity-method affiliate. The equity-method
joint-venture company manages the used vehicles auction sites.
Affiliated companies
Name

Location

Capital/amountinvested

Ownership
ratio

Main business activities

Apple Auto Network Co., Ltd.

Yokkaichi City, Mie
Prefecture¥347mn74.3%

Consolidated

Used vehicle purchasing and overallmanagement of franchise chain network

Car Consultant Maple
Co., Ltd.

Nakakoma District,
Yamanashi Prefecture¥10mn

100.0%

Consolidated

Used vehicle purchasing and sales

Apple Auto Auction (Thailand)
Co. Ltd.

Kingdom of Thailand¥287mn34.4%

Equitymethod

Management of auto auction sites

APPLE INTERNATIONAL(THAILAND) Co., Ltd.

Kingdom of Thailand

2,000,000THB

49.0%

NonconsolidatedExports of used pickup trucks

APPLE HEV INTERNATIONAL
Pte. LtdSingapore

500,000 SGD

60.0%

Nonconsolidated

HV and EV repairs and maintenancebusiness

Source: Prepared by FISCO from Company materials

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03 19

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/

Company and business profile

In Thailand, subsidiary and joint venture with MBK Public Company Limited, Apple Auto Auction (Thailand) Co.
Ltd. manages auto auction sites. Owing to foreign ownership restrictions at the time of establishment, Company’sownership is only 34.4% and the company is therefore an equity-method affiliate. The management of auction sites
is a business involving the collection of exhibition fees, successful bid fees, and contract completion fees, so it is abusiness model in which high profits can be stably obtained if a certain level of auction volume is maintained. Thissubsidiary has the second highest market share in terms of dealing volumes of the auction market in Thailand. We
note, however, that motorcycle sales are not included in the company’s sales volume figures, although they areincluded in the sales volume figures of the company with the top market share.
(1) Used vehicles export businessIn this business, performance results fluctuate greatly as sales are affected by various factors, including the
economic conditions at the export destinations, revisions to the tax system and exhaust-emission regulations,exchange-rate fluctuations, and the timing of vehicle model changes. In Thailand, which is the main sales destination, in FY12/15 there occurred a rush in demand in anticipation of the increase in vehicle tax in January
2016, and then a decline in the following fiscal year as a reaction to this. In October 2016, the King of Thailand
Bhumibol Adulyadej, who was deeply loved by the Thai people and who had ruled for 70 years, passed away,
and subsequently consumers refrained from purchasing high-cost products from the mood of self-restraint that
had swept the country. In FY12/17, sales continued to decline as consumers held back from purchases before
the changes to new vehicle models. However, in FY12/18, demand in Thailand for a luxury recreational vehicle(RV) increased and sales were more than was initially forecast, so in the used vehicles export business, net sales
increased greatly, up 64.8% YoY. In FY12/19, general elections were held in Thailand in late March, while the
new king’s coronation ceremony and other national events celebrating will continue at the beginning of May and.
Therefore, it seems likely that sales activity will be sluggish during this period and sales will once again decline.

㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㼎㼥㻌㼎㼡㼟㼕㼚㼑㼟㼟㻔¥㼙㼚㻕㼁㼟㼑㼐㻌㼢㼑㼔㼕㼏㼘㼑㼟㻌㼑㼤㼜㼛㼞㼠㻌㼎㼡㼟㼕㼚㼑㼟㼟㼁㼟㼑㼐㻌㼢㼑㼔㼕㼏㼘㼑㼟㻌㼜㼡㼞㼏㼔㼍㼟㼑㻌㼍㼚㼐㻌㼟㼍㼘㼑㻌㼎㼡㼟㼕㼚㼑㼟㼟㻟㻜㻘㻜㻜㻜
㻞㻡㻘㻜㻜㻜

㻠㻘㻢㻠㻤㻌

㻞㻜㻘㻜㻜㻜
㻝㻡㻘㻜㻜㻜

㻟㻘㻥㻟㻣㻌

㻣㻘㻣㻥㻣㻌
㻡㻘㻣㻠㻝㻌
㻞㻝㻘㻤㻢㻠㻌

㻝㻜㻘㻜㻜㻜
㻡㻘㻜㻜㻜㻝㻞㻘㻞㻞㻝㻌

㻣㻘㻜㻣㻝㻌

㻥㻘㻜㻢㻢㻌

㻝㻜㻘㻤㻝㻟㻌
㻢㻘㻡㻢㻞㻌

㻜㻲㼅㻝㻞㻛㻝㻠

㻲㼅㻝㻞㻛㻝㻡

㻲㼅㻝㻞㻛㻝㻢

㻲㼅㻝㻞㻛㻝㻣

㻲㼅㻝㻞㻛㻝㻤

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

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

04 19

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/

Company and business profileAwarded first place for the fifth consecutive year in the “Vehicle
purchasing companies” category(2) Used vehicles purchase and sale businessIn the 2018 Oricon Japan customer satisfaction rankings, Apple was awarded first place for the fifth consecutive
year in the “Vehicle purchasing companies” category. At the end of December 2018, there were 239 member
dealers (including 12 directly managed dealers) in its “Apple” franchise chain of dealers. Apple Auto Network
member dealers are provided with information to help them determine appropriate price at the time of purchaseincluding used vehicles’ successful bid price information at auctions in Japan and inventory information. Throughsales promotions activities utilizing the Apple brand, Apple Auto Network provides its member dealers withintegrated management and in return collects royalties from them. In addition, the Company is also focusing
on its property and casualty insurance counter, online insurance, and car rental businesses, all offering speedy
contract completion.
In the used vehicles purchase and sale business, Apple Auto Network, the headquarters for developing the
franchise chain, is generating stable earnings.
Apple Auto Network’s main profit-loss information, etc.
(¥mn)
FY12/14

FY12/15

FY12/16

FY12/17

FY12/18

3,854

4,512

5,337

6,102

7,041

Ordinary income

185

288

253

234

185

Net profit

101

178

166

160

127

Net assets

-

1,050

1,184

1,310

1,397

Net sales

-

1,787

1,811

1,983

2,032

229

233

245

252

228

FY12/14

FY12/15

FY12/16

FY12/17

225

238

238

236

239

No. of assessments

147,800

159,700

154,487

157,516

161,271

No. of vehicles purchased

72,80077,20073,66574,22876,297

No. of vehicles sold (a+b)

75,40081,40078,87980,434

83,209Of which, no. of vehicles sold at auction

66,20071,40068,94569,86872,869Of which, no. of retail-sales vehicles

9,200

10,0009,934

10,566

10,340Total assets
Net sales per directly managed dealership(units: dealerships, assessments, vehicles)
No. of FC dealers

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

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05 19

FY12/18

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/

Company and business profile

Completed the business structural reforms and resumed dividend
payments
4. Business trends(1) Return of the founder, restructuring of Group companies
President Yoshinobu Kubo, founder of the Company and the largest shareholder went on sick leave from 2007
and withdrew from the frontline of the Group’s management. But his health recovered and in 2013 he returnedto the management frontline as the Chairman and President. After his return, concerns emerged regarding the
rapid expansion of operations in Asia, particularly in China, undertaken during his absence. Thereafter, he andmanagement worked to restructure the Group. The objective of this Group restructuring was to eliminate risk
factors and restore financial stability. The number of consolidated subsidiaries in FY12/09 was 28 companies andat the most, there were also 11 equity-method affiliates. This was reduced to two consolidated subsidiaries andone equity-method affiliate. The Hong Kong subsidiary and its three subsidiaries are currently inactive.
(2) Withdrawal from China businessBy withdrawing from the unprofitable. China business, currency risk, market risk, and country risk relating to
China have been eliminated. The Company has also improved its financial stability by ending the debt guarantee it
provided to a subsidiary. The Company sold its new vehicle dealer business subsidiary in China and withdrew fromthe market. In FY12/09, net sales from the China business reached ¥27,194mn, which accounted for more than
60% of total sales, but since FY12/15, sales from the China has no longer been included in consolidated net sales.
(3) Significant improvement in financial position
The Company posted net losses for five consecutive years (FY12/08-FY12/12) and interest-bearing debt rose to¥14,955mn in FY12/13. Of the Company’s ¥11,735mn in short-term borrowing as of end-FY12/14, China-related
borrowing accounted for ¥10,513mn, and in terms of financing, this business had become a factor hampering thedevelopment of other businesses. As China-related borrowing was eliminated by end-FY12/15, interest-bearing
debt declined greatly, from ¥11,957mn of end-FY12/14 to ¥2,587mn.

㻵㼚㼠㼑㼞㼑㼟㼠㻙㼎㼑㼍㼞㼕㼚㼓㻌㼐㼑㼎㼠㻌㼍㼚㼐㻌㻰㻛㻱㻌㼞㼍㼠㼕㼛㻵㼚㼠㼑㼞㼑㼟㼠㻙㼎㼑㼍㼞㼕㼚㼓㻌㼐㼑㼎㼠㻔㼘㼑㼒㼠㻕㻔¥㼙㼚㻕㻰㻛㻱㻌㼞㼍㼠㼕㼛㻔㼘㼕㼓㼔㼠㻕

㻔㼤㻕

㻞㻚㻤㻡

㻝㻡㻘㻜㻜㻜

㻟㻚㻜㻜

㻞㻚㻢㻡

㻞㻚㻢㻝

㻝㻞㻘㻡㻜㻜

㻞㻚㻡㻜㻝㻜㻘㻜㻜㻜

㻞㻚㻜㻜

㻣㻘㻡㻜㻜

㻝㻚㻡㻜

㻝㻚㻞㻟

㻡㻘㻜㻜㻜

㻝㻚㻜㻜
㻜㻚㻡㻠

㻜㻚㻠㻡

㻞㻘㻡㻜㻜

㻜㻚㻞㻠
㻢㻘㻜㻝㻞

㻝㻝㻘㻤㻢㻝

㻝㻠㻘㻥㻡㻡

㻝㻝㻘㻥㻡㻣

㻞㻘㻡㻤㻣

㻜

㻝㻘㻢㻡㻡

㻜㻚㻡㻜

㻜㻚㻞㻜
㻝㻘㻠㻣㻢

㻟㻘㻜㻡㻝

㻲㼅㻝㻞㻛㻝㻝 㻲㼅㻝㻞㻛㻝㻞 㻲㼅㻝㻞㻛㻝㻟 㻲㼅㻝㻞㻛㻝㻠 㻲㼅㻝㻞㻛㻝㻡 㻲㼅㻝㻞㻛㻝㻢 㻲㼅㻝㻞㻛㻝㻣 㻲㼅㻝㻞㻛㻝㻤

Source: Prepared by FISCO from Company materials

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

06 19

㻜㻚㻜㻜

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/

Company and business profile(4) Finalizing business restructuring measures and strengthening of financial base in order to resume
dividends
In FY12/16, consolidated retained earnings had improved from negative ¥292mn at the end of FY12/15 to positive¥1,209mn, erasing accumulated losses. However, parent retained earnings remained in deficit, which was an
obstacle to the resumption of dividends. Therefore, the Company decided to reduce capital reserves by ¥694mn
and appropriate this amount to write off negative retained earnings as the final step in its restructuring program.
As a result, the Company resumed dividends in FY12/17 for the first time in eight fiscal years.

██Results trends
Sales increased 36.5% and profit increased 51.7% YoY in FY12/18
1. Overview of FY12/18 results(1) FY12/18 results
In FY12/18, net sales increased 36.5% YoY to ¥18,610mn, operating income rose 51.7% to ¥493mn, ordinary
income grew 209.8% to ¥1,038mn, and profit attributable to owners of parent increased 380.5% ¥981mn.
Compared to the initial forecasts, net sales were 12.0% above forecast, but operating income, ordinary income,and profit attributable to owners of parent were below forecast by 14.5%,19.6%, and 15.4% respectively. Share of
profit of entities accounted for using equity method relating to the Thai auto auction business increased 44.9% to¥87mn. The reason why ordinary income increased greatly compared to the increase in operating income was therecording of foreign exchange gain of ¥728mn in non-operating income. On the completion of the local liquidation
procedure for the consolidation subsidiary A.I. HOLDINGS (HONG KONG) LIMITED, foreign currency-denominatedbonds were converted. On the other hand, based on the situation of the accumulation of receivables in overseas
trading partners, the Company made a conservative judgment about the possibility of their recovery. As a result,in 4Q it additionally recorded an allowance for doubtful accounts of ¥202mn, and for the full fiscal year, provisionof allowance for doubtful accounts of ¥206mn was recorded in non-operating expenses.
Consolidated FY12/18 results(¥mn)
FY12/17

FY12/18

YoY

Results% of sales

Forecast

Results% of sales

Change% change

vs. forecast

13,634-

16,62018,610

-

4,976

36.5%

12.0%

Used vehicles export
business

6,562

48.1%

-

10,813

58.1%

4,251

64.8%

-

Used vehicles purchase andsale business

7,071

51.9%

-

7,797

41.9%

726

10.3%

-

Gross profit

1,866

13.7%

-

2,340

12.6%

474

25.4%

-

SG&A expenses

1,540

11.3%

-

1,847

9.9%

306

19.9%

-

Operating income

325

2.4%

577

493

2.6%

168

51.7%

-14.5%

Ordinary income

335

2.5%

1,293

1,038

5.6%

703

209.8%-19.6%

Profit attributable to ownersof parent

204

1.5%

1,160

981

5.3%

776

380.5%-15.4%Net sales

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

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

07 19

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/

Results trends

By business, net sales increased greatly in the used vehicles export business, rising 64.8% YoY to ¥10,813mn.
This was because demand in Thailand increased for the model-change vehicles and a luxury RV, so the numberof vehicles sold exceeded the initial forecast.
In the used vehicles purchase and sale business, net sales increased 10.3% YoY to ¥7,797mn. The number ofdealerships at the end of the period had increased by 3 on the end of the previous fiscal year to 239. The numberof vehicle assessments grew 2.4% to 161,271, while the number of vehicles purchased rose 2.8% to 76,297.
The number of vehicles sold increased 3.5% to 83,209, of which, the number of vehicles sold at auction grew
4.3% to 72,869. In contrast, the number of retail sales declined 2.1% to 10,340. So the main factors keeping
down profits were the increase in sales of vehicles sold at auction, which has a low level of profitability, and thedecrease in the number of retail sales, which has a high level of profitability. Also, in the market for dealerships
specializing in purchases, competition intensified, including with Gulliver (IDOM Inc. <7599>) and BIGMOTOR
Co., Ltd., so purchase prices were higher than before and profitability was reduced.
2. The financial condition and cash flow statement(1) Balance sheet
At the end of FY12/18, total assets were up ¥1,924mn on the end of the previous fiscal year to ¥10,154mn. The
main increase and decrease items were as follows. In current assets, cash and deposits decreased ¥1,565mn,
accounts receivable increased ¥2,115mn, and merchandise and finished goods rose ¥284mn. In current liabilities,
notes and accounts payable decreased ¥12mn, and the increase in accounts receivable was procured by ¥1,535
in short-term loans payable. The indicators of financial stability are 307.6% for current ratio and 56.0% for equity
ratio.
Balance sheet(¥mn)
FY12/14

FY12/15

FY12/16

FY12/17

FY12/18

ChangeCash and deposits

9,397

2,533

2,429

3,389

1,823

-1,565

Accounts receivable – trade

3,632

3,472

3,204

2,314

4,429

2,115

Merchandise

3,582

731

868

1,299

1,584

284

Accounts receivable – other

2,013

538

3

3

61

57

Other

1,457

638

507

603

907

304

-1,231

-59

-107

-147

-235

-88

18,853

7,856

6,905

7,463

8,570

1,107

Property, plant and equipment

753

215

237

274

878

604

Intangible assets

29

42

40

28

59

31

1,026

990

409

464

645

181

Non-current assets

1,809

1,248

687

766

1,583

817

Total assets

20,662

9,104

7,593

8,230

10,154

1,924

Current liabilities

16,629

4,872

1,118

1,302

2,786

1,484

209

282

1,254

1,161

1,314

153

16,838

5,154

2,373

2,463

4,100

1,637
1,574

Allowance for doubtful accounts
Current assets

Investments and other assets

Non-current liabilities
Total liabilities

11,957

2,587

1,655

1,476

3,051

Net assets

3,824

3,950

5,219

5,766

6,053

286

Total liabilities and net assets

20,662

9,104

7,593

8,230

10,154

1,924

Current ratio

113.4%

161.2%

617.2%

573.2%

307.6%-

Equity ratio

21.8%

63.5%

90.9%

89.4%

56.0%

-

(Interest-bearing debt)

Ratios of stability

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

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08 19

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/

Results trends(2) Cash flows
At the end of FY12/18, the balance of cash and cash equivalents was down ¥1,575mn on the end of the previous
fiscal year to ¥1,789mn. Net cash used in operating activities was ¥2,382mn, because although profit before
income taxes of ¥1,054mn was recorded, the Company posted increase in notes and accounts receivable of¥2,115mn, foreign exchange gain of ¥723mn, and increase in advance payments of ¥529mn. Net cash used ininvesting activities was ¥673mn, mainly due to purchase of property, plant and equipment of ¥565mn. Net cash
provided by financing activities was ¥1,500mn, primarily due to increase in short-term loans payable of ¥1,450mn.
Cash flow statement(¥mn)
FY12/15

FY12/15

FY12/15

FY12/15

Change-3,224

Cash flows from operating activities

-418

8

841

-2,382

Cash flows from investing activities

-73

356

-68

-673

-605

Cash flows from financing activities

1,137

-181

224

1,500

1,275

Cash and cash equivalents at end of period

2,178

2,367

3,365

1,789

-1,575

Source: Prepared by FISCO from the Company's financial results██Outlook
The forecasts are for lower sales and profits in FY12/19 inconsideration of the national events• FY12/19 earnings forecast
The forecasts for FY12/19 are for net sales to decrease 6.5% to ¥17,406mn, operating income to decline 30.5% to¥342mn, ordinary income to fall 60.6% to ¥409mn, and profit attributable to owners of parent to decrease 66.7%
to ¥324mn. The reason for the forecasts of larger declines for ordinary income and profit attributable to owners ofparent is the absence of the large foreign exchange gain recorded under non-operating income in FY12/18.
The outlook for the economic environment continues to be unclear, including due to the effects of the intensificationof the US-China trade friction, the rapid slow-down of the Chinese economy and the UK leaving the EU. In Thailand,
which is the main destination for the used vehicles export business, a general election was held on March 24th,and then after that, the coronation ceremony of the King of Thailand Maha Vajiralongkorn and other national events
will be held continuously from May 4th to 6th , and sales activities are expected to slow down during this roughly
two-month period. In Japan also, 10 consecutive days of holidays are scheduled to celebrate the ascension to
the throne of the new emperor. It will be difficult to arrange overland-freight deliveries before and after this time, so
operations are expected to be sluggish for around a two-week period. The results forecasts for this fiscal year weremade in consideration of these factors.

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09 19

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/

Outlook

FY12/19 earnings forecast(¥mn)
FY12/18

FY12/19 E

YoY

Results% of sales

Amount% of sales

Amount18,610-17,406--1,204-6.5%

Operating income

493

2.6%

342

2.0%

-151

-30.5%

Ordinary income

1,038

5.6%

409

2.3%

-629

-60.6%

981

5.3%

324

1.9%

-657

-66.7%Net sales

Profit attributable to owners of parent

Growth rate

Source: Prepared by FISCO from the Company's financial results██Medium-to-long-term growth strategy
Restructuring the business model from the paradigm shift brought
about by CASE
In Japan, where the trends of the falling birthrate, aging population and declining population are progressing, thecontraction of market scale is forecast to continue, and there are concerns that the rapid expansion of the conventional business model will create problems for the future. In the automotive industry, CASE (connected, autonomous
driving, sharing, motorization) is causing a paradigm shift for the transition to next-generation vehicles. In November
2017, Akio Toyoda, President & CEO of Toyota Motor Corporation <7203> stated that “The automotive industry hasentered an era of profound transformation, the likes of which come only once every 100 years. (Omission). A crucial
battle has begun–not one about winning or losing, but one about surviving or dying”.**	Q uoted from Toyota Motor Corporation’s announcement on November 28, 2017, “Toyota Announces Executive,
Organizational and Personnel Changes.”

The Company has started to build a new business model in anticipation of the changes that will take place in theindustry in 5- or 10-years’ time. In the used vehicles purchase and sale business in Japan, it understood that due
to the sharing economy, vehicle “ownership” is shifting to “use,” so it has entered-into the car sharing, car leasing,and car rental businesses. In car sharing, it is investigating handling EV, as described below. For car leasing, it hasestablished specialist stores, while it has launched the car rental business in Okinawa Prefecture and Oita Prefecture.
1. Acquired exclusive sales rights in Japan for a China-made EV
For EV, which are next-generation vehicles, in March 2019 the Company acquired the exclusive sales rights in Japanto the EV of JIAYUAN EV, a Chinese EV manufacturer. The Company was highly evaluated for its expertise, such as
on the Japanese legal system, and its knowledge about vehicles and won the rights over general trading companies.
It will first sell e-Apple, which is single-seater minicar. In accordance with Japan’s Road Traffic Act, it will be registeredas a motorized two-wheeled vehicle, and therefore it will not require a vehicle inspection, garage certification, weighttax, and acquisition tax. So its car tax and insurance costs are inexpensive, and its fuel consumption (expenses) arealso economical. The monthly amount for both taxes and insurance is only around ¥3,600. It can be charged from ahome electricity socket (100V) and can be fully charged in around 6 to 8 hours. It can travel around 150 kilometers
per charge, or about half that distance if on mountain roads. It is thought that it will be used for short trips, such as
for shopping. The vehicle price is expected to be ¥700,000. In China, Alibaba Group Holding Limited <BABA> isusing it as a delivery vehicle.

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10 19

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/

Medium-to-long-term growth strategy

The EV minicar e-Apple, (motorized two-wheeled vehicle)

Source: Company's results briefing materials

Overview of the electric minicar e-AppleClassification

Electric mini car (four-wheel vehicle with motor) manufactured by JIAYUAN EV of China

Size

Length 2,245mm / Width 1,290mm / Height 1,570mm

Wheelbase1,500mm

Motor

Rated output 0.59 kw (maximum output 3kw)
Rated power DC60V

Battery

Capacity 12V120Ah (5 parts)
Charge time, 6 to 8 hours / uses 100V
Charging power supply AC100V (home use 100V)

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

The monthly expenses of the electric minicar e-Apple
Details

Monthly expenses

Motorized two-wheeled vehicle tax¥308 (¥3,700 per year)

Additional voluntary premium

Personal, ¥1,970, personal loss ¥720 (in the case of Sony Assurance)

Liability insurance¥625 (¥7,500 a year)

Monthly maintenance costs Total¥3,623

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

e-Apple will be introduced at the Apple dealership owners’ meeting in April 2019, and the plan is to display it indealerships based on feedback from the meeting. As it is a new business, it has not been included in the results
forecasts for the current fiscal period. For the time being, the electric minicar will be sold only at dealerships, and it
is expected to have a customer-attraction effect. The Company has decided to exhibit it at the Tokyo Motor Show
to be held in October 2019.
The second stage of sales of new EV vehicles will be EV trucks, which correspond to light trucks in Japan’s laws.
The two-seater EV truck will have the same maximum load capacity as a light truck, of 350 kg. It has already cleared
the standards for crash tests conducted in Germany. The plan is to acquire approval from the Ministry of Land,
Infrastructure, Transport and Tourism, and to release it on the market this year. The Spanish police have alreadyintroduced several thousand of them as patrol vehicles.

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/

Medium-to-long-term growth strategy

EV truck (light truck)

Source: Company materials(1) EV trendsa) Market forecast
According to the International Energy Agency (IEA), global new vehicle sales of both the BEV (battery-powered
electric vehicle) and PHV (plug-in hybrid vehicle) in 2017 surpassed 1 million for the first time at 1,148,000, an
increase of 54.3% YoY. Of which, BEV increased 63.2% to 750,000, and PHV rose 40.1% to 398,000. The IEA
forecasts that the number of vehicles sold in 2030 will be 21.5 million, 18 times the number in 2017 (an annual
growth rate of 24%). It also presents a scenario exceeding this forecast, of 38 million vehicles, if the growth rateis accelerated by policy support in various countries. Assuming that the total number of vehicles sold in 2030 is
between 110 million and 120 million, the shares of BEV and PHV in the median-value scenario will be slightly lessthan 20%. The cumulative number of vehicles sold will increase from 3.7 million in 2017 to 130 million in 2030,
which is equivalent to approximately 10% of the number of vehicles owned at the current time.
Looking at the number of new BEV and PHV sold by country in 2017, China accounted for 579,000s, which isabout half of the total. Second was the United States, at 198,000, followed by Norway with 62,000 and Germany
with 54,000. Japan, which had been in first place until 2010, was fifth, with 54,000.
The number of new BEV and PHV sold by country(1,000 vehicles)
2012

2013

2014

2015

2016

2017

%
YoY

Change% change

China

9.90

15.34

73.17

27.38

336.00579.0050.4%

243.00

72.3%

USA

53.24

96.70

118.78113.87

159.62

198.35

17.3%

38.73

24.3%

Norway

4.51

8.52

19.77

33.73

44.89

62.26

5.4%

17.37

38.7%

Germany

3.37

6.93

12.74

23.19

24.61

54.56

4.7%

29.95

121.7%

Japan

24.44

28.88

32.29

24.65

24.85

54.10

4.7%

29.25

117.7%

UK

2.69

3.75

14.74

29.34

37.91

47.25

4.1%

9.34

24.6%

France

6.26

9.62

12.64

22.95

29.51

34.78

3.0%

5.27

17.9%

Sweden

0.93

1.55

4.67

8.59

13.42

2.35

1.8%

6.93

51.6%

Canada

2.02

3.12

5.07

6.96

11.58

16.68

1.5%

5.10

44.0%

Korea

0.51

0.06

1.31

3.19

5.26

14.71

1.3%

9.45

179.7%

9.97

27.79

27.52

66.87

56.57

66.66

5.8%

10.09

17.8%

117.8422.80

322.7054.72

744.22

1,148.70

100.0%

404.48

54.3%

BEV

57.89

111.32188.86321.00459.91

75.49

65.3%

290.58

63.2%

PHV

59.95

91.48

133.83219.73284.31398.2134.7%

113.90

40.1%

Other
Total (BEV+PHV)

Source: prepared by FISCO from the Global EV Outlook 2018 (IEA)

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12 19

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/

Medium-to-long-term growth strategy

Volkswagen (VW), of Germany, a world leading manufacturer in the automotive industry, is accelerating vehicle
electrification. In Germany, the government resolved in October 2018 that “the registration of gasoline anddiesel vehicles will not be permitted after 2030.” France and the United Kingdom will ban the sale of internal
combustion engine (ICE) vehicles by 2040. In its 2018 results, the number of EV sold by VW was only 40,000
vehicles. In March 2019, it upwardly revised its target for sales of EV by 2028 to 22 million vehicles, which isan increase of approximately 50% compared to the previous target. It intends to increase the pace of vehicles
sold per year to hundreds of thousands and to accelerate it to 3 million vehicles by around 2025. It has set thetarget of EV providing 40% of its global sales by 2030. It will increase the number of EV models to more than
50 by 2025 and more than 70 by 2028. Its investment plan up to 2023 sets out that it will increase the amountspent on next-generation vehicles, including EV, by nearly 30% compared to the previous plan, to 19 billion euro
(approximately ¥2.4 trillion).
b) Trends in the Chinese market
China, which has become the world’s largest vehicle market, enforced new regulations in January 2019 on
auto-manufacturers’ obligations for the minimum number of sales of new energy vehicles (BEV and PHV). It wasmade obligatory to acquire credits for new energy vehicles with a score of 10% in 2019 and 12% in 2020. Credit of
10% does not mean that new energy vehicles account for 10% of the total number of vehicles sold. EVs that can
travel long distances on a single charge can earn more credits than vehicles with poor performance. The regulation
targets manufacturers that produce or import more than 30,000 “traditional” vehicles (including hybrid vehicles(HV)) per year, and it is similar to the “cap-and-trade” regulatory approach for carbon emissions that has been
introduced around the world. Auto-manufacturers who cannot meet the minimum production requirement will beable to buy credits from other companies in the industry that have met it. Fines will be imposed on manufacturers
who cannot clear the regulation, and in the worst-case scenario, they will be forced to shut down their assemblylines. The Chinese leadership estimates that by 2025, the number of annual sales of new energy vehicles will beapproximately 20% of the total number, at 7 million vehicles.
The Chinese government will reduce total sales subsidies for EVs by about 30% in 2019. In 2018, the subsidy
per EV was reduced by 60% compared to in the previous year to 15,000 yuan (approximately ¥240,000) forlight-vehicle models with a travel distance of 150 kilometers. However, the subsidy for medium- to large-sizedmodels with a travel distance of 400 kilometers was increased by 10% to 50,000 yuan. The difference in amountby vehicle model reflects the policy. The subsidy system for EVs, which was introduced in 2010, will be reduced
gradually from 2017 and will be eliminated by 2020. The price difference between EVs and conventional vehicles isstill large, so the reduction of subsidies is likely to intensify competition among EV manufacturers to reduce costs.
c) The impact of EV
The number of parts per conventional ICE vehicle is about 100,000 parts, of which, 20,000 are engine parts. In
contrast, the number of parts per EV is around one tenth of this, at approximately 10,000 parts. Moreover, if limited
to the motor, it has less than 50 parts, or around 100 parts if related parts are included. On the other hand, thedriving battery is the main reason for its high cost. The transition from ICE vehicles to EV will eliminate the need forexisting major auto-manufacturers, some auto-parts companies, and refueling-related facilities. In the short-term,
the reduction of production facilities and personnel will damage local economies and cause employment problems.
In addition, EVs do not need regular oil changes, so the demand for maintenance will also decrease. As a result,companies that operate using conventional vehicles are concerned that the assets they possess will be negatively
capitalized, so they have the psychology of seeking to prolong the transition to EV.

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/

Medium-to-long-term growth strategy

Japan’s auto-manufacturers have already established new car sales networks, so there is only room for new
entries and the expansion of sales area through M&A of existing dealers. The Company seized the opportunity
arising from the transition from ICE vehicles to EV, and acquired exclusive imported EV sales rights in Japan.
Manufacturers in China, which has become the world’s largest auto-market and which is also rapidly expanding,are quickly responding to customer needs.
2. Domestic businesses
In the 2018 Oricon Japan customer satisfaction rankings, the Company subsidiary’s, Apple Auto Network, wasawarded first place for the fifth consecutive year in the “Vehicle purchasing companies” category. The Company
is aiming to diversify the sources of earnings not merely by pursuing a quantitative expansion, but also throughsynergies with existing Group functions. There are occurring changes in the consumption styles of young people,of “from objects to experiences” and from “ownership (exclusive) to sharing,” and we are seeing a trend of young
people not necessarily wanting to own a car and shifting from “ownership” to “use.”
The Company expanded into the car rental and car leasing business. In April 2017, the Company opened the firstApple Rental Car store in Naha City, Okinawa Prefecture, and it then opened Apple Rental Car Oita in Oita City,
Oita Prefecture. In January 2018, it held the grand opening of the Apple Lease Yokkaichi City Shinsho Store. The
Shinsho store in Yokkaichi City, Mie Prefecture, is the flagship store with an area of 4,531m2. It is a sales storesthat also provides maintenance services, and it is estimated to have 80 inventory vehicles. Its sales are from bothleases and loans, and it is also displaying EV.
3. Growth strategy for South East Asia
(1) Auto auction business in Thailand
Should the Japanese style of vehicle assessments also be adopted overseas, it would lead to the developmentof auto auctions and the expansion of used-vehicle distribution. The Company has been conducting an auction
business in Thailand since 2008, and it has 2 main sites in Bangkok and 14 other sites alongside major regionalroads. Since the auction system is cloud-based, if a site and office are secured, the Company is able to launch
an auction business in a short period of time not just in Thailand, but also in other South East Asian countries.
(2) Used vehicles purchase and sale business in Thailand
In June 2018, the Company established APPLE INTERNATIONAL (THAILAND) for the purpose of exporting used
LCV manufactured in Thailand. In addition to the used vehicles export business, this subsidiary has expanded
its business area to the used vehicles purchase and sale business that was previously cultivated in Japan.
In November 2018, it opened the very first Apple Dealership in Thailand. It currently has 5 directly managed
dealerships, which it plans to increase to 10 during the year, and then after that, to develop the franchise throughestablishing itself as the franchise chain headquarters. In the purchase and sales business, it is benefiting fromhaving the first-mover advantage, because there are no rival companies. This business will play a role for the stably
supply of the vehicles exhibited at auction sites in Thailand, and synergies with Group companies are expected.
Auction participants have indicated that they are strongly interested in joining the Apple dealership network.

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/

Medium-to-long-term growth strategy

Apple dealerships in Thailand

Bang Na Dealership

Sinagarindra Dealership

Source: Company's results briefing materials

The EV manufactured by JIAYUAN EV have acquired sales rights for Thailand. The Company is considering salesof new EV at the Apple dealerships being developed in Thailand.
The Free Trade Agreement (FTA) between China and the Association of Southeast Asian Nations (ASEAN) eliminated tariffs on imported finished vehicles from January 2018, and the Thai government warned that EVs would
be imported in large quantities. However, the actual number of EV sold has remained at a level of only a few
hundred vehicles, and the government has not made any specific announcements, such as on non-tariff barriers.
Thailand is aiming to develop EV-related industries domestically, and under the government’s EV Action Plan
launched in 2016, it intends to increase the number of EV and PHV to 1.2 million by 2035, and to have establisheda network of at least 690 charging stations. It has also announced a reduction in commodity tax and preferential
treatment for EV-related investment, and for manufacturers with annual vehicle production of 100,000 or more,each of HV, PHV, and BEV are eligible for preferential eco-car treatment. The Thai government announced that,as a time-limited measure up until 2025, the commodity tax will be reduced from the previous range of from 10%
to 30% to from 5% to 15% for HV and PHV, and from 10% to 2% for BEV.
(3) Export of used vehicles manufactured in Thailand
Thailand is a global production base for LCV. In the ranking of vehicle production in the major right-hand drive
countries in 2017, Japan was overwhelming the highest with 9,694,000 vehicles, followed by India with 4,783,000
vehicles, and then Thailand in third place with 1,989,000 vehicles. In particular, when limited to LCV, Thailand
produced 1,148,000 vehicles, which was the largest number, exceeding the 818,000 vehicles that were produced
in Japan. Toyota Motor has ended sales within Japan of its Hilux pickup truck, which is its strategic vehicle for
emerging countries. But in 2017, it re-launched sales for the first time in 13 years by importing Thai-manufactured
vehicles. Thailand is extremely important for right-hand-drive commercial vehicles.
In terms of the number of vehicles registered and sold by right hand drive country in 2017, Japan was top with
5,239,000 vehicles, then India with 4,018,000 vehicles, the United Kingdom with 2,955,000 vehicles, Australia
with 1,189,000 vehicles, Indonesia with 1,061,000 vehicles, and Malaysia with 591,000 vehicles. The Company
intends to activate exports of Thai-manufactured used vehicles to ASEAN countries by spreading the use ofJapanese-style vehicle assessments and expanding its auto auctions in Thailand.

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/

Medium-to-long-term growth strategy

No. of vehicles registered and sold in the main right-hand-drive countries (2017)
No. of vehicles registered and sold (1,000)
Passenger
vehiclesCommercial vehicles

%

Total

LCV

Passenger
vehiclesCommercial vehicles
LCV

Total

Main right-hand-drive
countries
Japan

8,347

1,342

818

9,690

86.1

13.9

8.4

100.0

India

3,952

830

504

4,782

82.6

17.4

10.5

100.0

818

1,170

1,148

1,988

41.2

58.8

57.7

100.0

1,671

78

60

1,749

95.5

4.5

3.4

100.0

Indonesia

982

234

145

1,216

80.7

19.3

11.9

100.0

South Africa

321

268

242

589

54.5

45.5

41.1

100.0

Malaysia

424

35

34

460

92.3

7.7

7.4

100.0

16,518

3,959

2,952

20,478

80.7

19.3

14.4

100.0

73,456

23,842

19,38897,299

75.5

24.5

19.9

100.0

Thailand
United Kingdom

Total
World

Source: Prepared by FISCO from OICA (the Organisation Internationale des Constructeurs d’Automobiles) statistics
Note: LCV (Light Commercial Vehicle)

The ASEAN Free Trade Area (AFTA) was advanced in December 2015 to become the ASEAN Economic
Community (AEC), and from 2016, tariffs between the member countries were eliminated. It made exports easierto the right-hand-drive countries, including Malaysia, Indonesia, and Brunei.
(4) The capital and business alliance with Isuzu Motors
The Company entered into a capital and business alliance with Isuzu Motors in April 2017, and in May of the same
year, it conducted a capital increase from a third-party allocation to Isuzu Motors.
Through the capital and business alliance with Isuzu Motors, the Company will accelerate the exports of Thaimanufactured used vehicles to ASEAN countries. For auto manufacturers, if the export of used vehicles expands,
used vehicles within Thailand will become in shorter supply and prices in the used vehicles market will stabilize.
They will be able to set higher trade-in prices, which will promote sales of new vehicles. For the Company, it will
be able to stably secure merchandise.
Thailand is a right-hand drive country and its market is dominated by Japanese manufacturers. In the percentagesof vehicle sales by manufacturer and brand in 2018, the top was Toyota Motor with 30.2%, followed by Isuzu
Motors with 17.1%%, and third was Honda Motor <7267> with 12.3%. Below them were Mitsubishi Motors<7211> with 8.1%, Nissan Motor <7201> with 6.9%, Mazda Motor <7261> with 6.8%, Ford (USA; Ford Motor
Company <F>) with 6.3%, Suzuki <7269> with 2.7%, MG Motor with 2.3%, Chevrolet (USA; General Motors
Company <GM>) with 1.9%, and others with 5.4%. This meant that Japanese manufacturers accounted for
84.1% of the total.
In 2018, the number of vehicles sold in Thailand increased 19.2% YoY to 1,039,000 vehicles, of which 399,000(up 15.4%) were passenger vehicles and 642,000 (up 22.2%) were commercial vehicles. The one-ton pickup
truck, which is a light commercial vehicle, accounted for 511,000 vehicles (up 20.6%), which accounted for
49.2% of the total.
In 2018, Isuzu Motors sold 162,000 one-ton pickup trucks in Thailand, an increase of 10.9% YoY. As it does notsell passenger vehicles, this vehicle’s share of Isuzu Motors’ total number of vehicles sold is extremely high, at
91.2%. The dependence of Toyota Motors, which has the top share in passenger vehicles, on the one-ton pickup
truck is 56.3%. For the number of one-ton pickup trucks sold, Toyota Motors had the top share with 34.6%,
followed by Isuzu Motors with 31.7%, and they are the two major powers in this market.

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16 19

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/

Medium-to-long-term growth strategy㻺㼡㼙㼎㼑㼞㻌㼛㼒㻌㼛㼚㼑㻙㼠㼛㼚㻌㼜㼕㼏㼗㼡㼜㻌㼠㼞㼡㼏㼗㻌㼟㼛㼘㼐㻌㼜㼑㼞㻌㼙㼍㼚㼡㼒㼍㼏㼠㼡㼞㼑㼞㻌㼍㼚㼐㻌㼜㼑㼞㼏㼑㼚㼠㼍㼓㼑㻌㼛㼒㻌㼠㼛㼠㼍㼘㻌㼢㼑㼔㼕㼏㼘㼑㻌㼟㼍㼘㼑㼟㻌㻔㻞㻜㻝㻤㻕
number of vehicles (left)
㻥㻤㻚㻢㻑
㻥㻝㻚㻞㻑

㻔㼁㼚㼕㼠㼟㻕
㻞㻜㻜㻘㻜㻜㻜

% (right)㻥㻥㻚㻟㻑㻝㻜㻜㻚㻜㻑

㻝㻢㻜㻘㻜㻜㻜

㻤㻜㻚㻜㻑㻝㻞㻜㻘㻜㻜㻜

㻢㻜㻚㻜㻑
㻢㻞㻚㻢㻑
㻡㻢㻚㻟㻑

㻤㻜㻘㻜㻜㻜

㻠㻜㻚㻜㻑
㻟㻢㻚㻟㻑

㻠㻜㻘㻜㻜㻜

㻞㻜㻚㻜㻑㻝㻣㻣㻘㻜㻠㻣㻌

㻝㻢㻞㻘㻝㻟㻞㻌

㻢㻡㻘㻝㻠㻡㻌

㻡㻞㻘㻥㻢㻢㻌

㻞㻢㻘㻞㻠㻠㻌

㻞㻜㻘㻝㻣㻣㻌

㻝㻜㻚㻢㻑㻣㻘㻠㻥㻤㻌

㼀㼛㼥㼛㼠㼍

㻵㼟㼡㼦㼡

㻲㼛㼞㼐

㻹㼕㼠㼟㼡㼎㼕㼟㼔㼕㻺㼕㼟㼟㼍㼚

㻯㼔㼑㼢㼞㼛㼘㼑㼠

㻹㼍㼦㼐㼍

㻜

㻜㻚㻜㻑

Source: Prepared by FISCO from Thai Industries data

(5) Impact of autonomous driving
The transition to autonomous driving will raise vehicle prices. On the other hand, the speed of technologicalinnovation is fast, and there are concerns that it may lead to rapid obsolescence and a sharp drop in used-vehicle prices. Although the fuel efficiency of conventional vehicles has been increased and their safety has been
improved, such as from the automatic braking system, there have been no significant changes to their basic
performance. If the cost of the autonomous driving system to be installed in the future is from ¥1,000,000 to ¥2,000,000, the vehicle price may rise by 1.5 times to 2 times.
The Autonomous Driving Business Advisory Committee was established in February 2015 as an advisory committee of the Ministry of Economy, Trade and Industry and the Ministry of Land, Infrastructure, Transport andTourism, and according to a report released in March 2017, autonomous driving levels were divided into 5 levels
in accordance with the definitions of SAE International of the United States. SAE level 0 has no autonomous
driving, level 1 has driving support, and level 2 has partial autonomous driving, and up to this level, the driver
remains responsible for monitoring and responding for safe driving. On progressing to level 3, driving becomesconditionally autonomous, as while the driver responds during fallback, basically the driving is performed by thesystem. Level 4 is advanced autonomous driving, and at the highest level, level 5, the driving is fully autonomousand the system performs all of the driving tasks, and the user is not expected to respond even during thepreliminary-response stage.

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/

Medium-to-long-term growth strategy

Definitions of the autonomous driving levels (in accordance with SAE J3016TMSEP2016)
Level

Overview

Who/what monitors andresponds for safe driving

Level 0No autonomous driving• The driver performs all of the driving tasks

DriverLevel 1
Driving support• The system performs subtasks of the driving tasks relating to the control of either the front andrear or the left and right of the vehicle

The driver

Level 2
Partial autonomous driving• The system performs subtasks of the driving tasks relating to the control of both the front and rearand the left and right of the vehicle

The driver

The autonomous driving system performs all of the driving tasks
Level 3
Conditional autonomous
driving• The system performs all of the driving tasks (the area* is limited)• The user is expected to respond appropriately to the system's requests for intervention, etc.,
during the preliminary-response stage

The system(The driver during fallback)

Level 4
• The system performs all of the driving tasks (the area* is limited)
Advanced autonomous driving • The user is not expected to respond even during the preliminary-response stage

System• The system performs all of the driving tasks (the area* is not limited)• The user is not expected to respond even during the preliminary-response stage

SystemLevel 5
Fully autonomous driving

Note: * “area” here is not necessarily limited to a geographical area, but also includes the environment, traffic conditions, speed, time conditions, etc.
Source: prepared by FISCO from materials of the Autonomous Driving Business Advisory Committee

The schedule for autonomous driving by general (private-use) vehicles is to achieve level 2 for acceleration andlane changes by 2020, based on the premises that the driver will monitor safe driving on expressways and canperform driving operations at any time. By 2025, level 3 will be allowed for traffic separation and merging, which
will not only reduce the burden on drivers when driving, but also enable some second tasks. The transition to level
4 will be from 2025 onwards. From 2020 on the national highways and the main trunk roads and main roads thatserve as the major regional roads, it will be possible to use the level 2 system to recognize white lines and signs,
to drive while maintaining the vehicle’s line, to recognize and follow surrounding vehicles, and to change lanes. By
2025, it will be possible to recognize traffic lights, and go straight ahead and turn left or right at an intersection.
Also, although it will not be possible to raise the safe driving level to 3 and turn left or right, it is assumed that theburden on the driver will be reduced during times of congestion and that it will possible to perform some second
tasks. On the other hand, for commercial use, level 4 mobile services and unmanned deliveries are expected tobe realized in some regions from 2020 to 2025.
The installation of the AEBS (Advanced Emergency Brake System) in new vehicles will be made obligatory in 40
countries around the world from the beginning of 2020. Autonomous driving is a developing technology and it
has not been made obligatory, so its use will not spread immediately. However, going forward, the transition toautonomous driving is an irreversible change, so the Company will advance the transformation of its businessmodel. If the autonomous driving system developed for Japan does not function overseas, the value of exported
used cars will decline, and it will be difficult to maintain price competitiveness. In the used vehicles export
business, the factors causing results to fluctuate include the economic conditions at the export-destination
country, exchange rates, and changes in policy, such as on tariffs. Therefore, as its medium- to long-term anddiverse growth strategy, the Company will develop the auto auction business, the network of dealerships for theused vehicles purchase and sale business in Thailand and operate the franchise chain headquarters, and theused vehicles export business of Thai-made LCV, including from Isuzu Motors, while mitigating risk. In this way,
it intends to leverage the Group’s strengths and achieve growth in growth areas where it can demonstrate its
competitive advantages. It also plans to develop the success case studies in Thailand in neighboring countries.

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18 19

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

APPLE INTERNATIONAL CO., LTD.

24-Apr.-20192788 Tokyo Stock Exchange Second Section

http://www.apple-international.com/ir/██Shareholder return policy
Will keep the dividend per share at ¥5
In FY12/17, the Company paid a dividend per share of ¥5, the first payment in eight fiscal periods, for a consolidated
dividend payout ratio of 32.5%. For FY12/18, it kept the dividend per share at ¥5, but due to a temporary factor, of
foreign exchange gain related to the liquidation of an overseas subsidiary, the payout ratio decreased to 7.1%. In
FY12/19 also, it plans to maintain a dividend of ¥5 for a forecast dividend payout ratio of 21.3%.

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19 19

Disclaimer
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