Company Research and Analysis Report
FISCO Ltd.
http://www.fisco.co.jp

Nexyz.Group Corporation 伪伪Strong Advances in the Energy and Environment

4346 Tokyo Stock ExchangeFirst Section

Business, Brangista <6176> (Digital Magazines,
Smartphone Games) Sustaining Growth

16-Feb.-17

Nexyz.Group Corporation <4346> (hereafter, also “the Company”) has been leveraging strategicplanning and execution capabilities to broaden its business scope, including sales of mobile
phones, satellite broadcasts, and other digital products. The Company listed shares on the Osaka
Stock Exchange NASDAQ Japan market (now, JASDAQ) in 2002, and listed on the First Sectionof the Tokyo Stock Exchange in 2004. Nexys. Group’s current main businesses are the Energy
and Environment business, including LED lighting, launched in FY9/13, and the Electronic Mediabusiness handled by subsidiary, Brangista Inc. <6176>. The “Kami no Te” smartphone crane gamereleased in June 2016 is attracting interest with its various collaborations with general producer
Yasushi Akimoto, who is also the Company’s shareholder.

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hideo Kakuta

The Company’s primary business is rental service for LED lighting and other energy-saving products.
This business, which Nexyz.Group started with a slogan of “lowering electricity costs in Japan,”has grown to be the main business over the past four years and reached about ¥8bn in net sales
in FY9/16. The unique rental format, which sets initial costs at zero, is a good fit for the needsof restaurants, hotels, and other businesses, and Nexyz.Group has established a No.1 positionin the industry. The Company increased the number of products it handles during FY9/16 and isseeing robust demand for the Nexyz. Zero series comprised of water-saving equipment, commercial
refrigerators, commercial air conditioners and other products. Sales from products other than LED
lighting have expanded to about 15% of the business.
Nexyz.Group booked sharply higher consolidated sales and profits in FY9/16 with net sales up
32.1% year on year (YoY) to ¥14,062mn and operating income up 69.4% to ¥1,716mn. This was thefifth straight annual increase in operating income. The Energy and Environment business continued
to expand steadily and contributed to higher sales and profits through an increase in introductions,which account for about 40% of contracts, and diversification of the product line-up. Electronic Mediabusiness (mainly digital magazines) posted higher sales and profits too, and the Cultural Education
business (kimono wearing schools) also secured profits. Nexyz.Group is delivering strong results inall of its businesses.
The Company’s FY9/17 forecast calls for ¥16,500mn in net sales (+17.3% YoY) and ¥2,000mn inoperating income (+16.5%), with increased sales for a fourth straight year and profits for a sixth
consecutive year. We think this is a slightly conservative plan considering healthy growth trends inthe two core businesses and expect upward revisions during the fiscal year as in FY9/16. Nexyz.
Group forecasts lower profit growth in FY9/17 due to its plan for investing over ¥500mn in advertisingand promotions at Brangista Game Inc. as a special factor. However, the Company expects to bookrecord-high profit, even with this investment of over ¥500mn, due to strong performance of LED
lighting.
The “Kami no Te” smartphone crane game released in June 2016 has captured support from the“enthusiast” target segment users by providing premium prizes and various collaborative prizes
produced by Yasushi Akimoto. Premium prizes include original merchandise from AKB48, EXILE,
and other groups, and collaborative prizes made with idols participating in the Tokyo Idol Festival, theworld’s largest idol festival. Many prizes have sold out on the first day of going on sale. A partnershipproject with a late-night variety program that airs on Fuji Television started in November 2016,and has been raising publicity of the game. We expect further acceleration in light of the planned
investment of about ¥500mn toward advertising and promotions for “Kami no Te” in FY9/17.

We encourage readers to review our complete legal statement on “Disclaimer” page.
1

伪伪Check Point

Nexyz.Group Corporation• Strong advances in rental service for energy-saving products• Booked a fifth consecutive increase in operating income and steep sales gain in FY9/16• Strengthening promotions for the “Kami no Te” smartphone crane game in FY9/17• Improving shareholder returns with share buybacks and dividend hikes• Targeting ¥16,500mn in net sales and a record-high ¥2,000mn in operating income in FY9/17

4346 Tokyo Stock ExchangeFirst Section㼀㼞㼑㼚㼐㻌㼕㼚㻌㻲㼕㼟㼏㼍㼘㻌㼅㼑㼍㼞㻌㻾㼑㼟㼡㼘㼠㼟㻌(¥mn)

16-Feb.-17

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Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hideo Kakuta

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伪伪Company Overview
Corporate group led by “passionate venture capitalist” Takami
Kondo(1) History
The Company has its roots in door-to-door sales of touch-tone phones started in Osaka in 1987 by
Takami Kondo, Representative Director, President, and Group Representative. In 1990, the “Tell-me
system” for credit-based installment purchase of telephone line rights was a major hit, and the mobile
phone version of the system released later also had significant success. The Company subsequently
leveraged strategic planning and execution capabilities to broaden business scope, including salesof mobile phones, satellite broadcasts, and other digital products, received an investment fromSOFTBANK INVESTMENT CORPORATION (now, SBI Investment Co., Ltd.) in 2000, listed shareson the Osaka Stock Exchange NASDAQ Japan market (now, JASDAQ) in 2002 and advanced to
the First Section of the Tokyo Stock Exchange in 2004. The Company continued to expand businesscoverage by actively entering ISP services, financial products, video content, kimono schools andsales, and other areas through alliances and acquisitions. The Company’s current main businesses
are the Electronic Media business handled by Brangista and the Energy and Environment business,
including LED lighting, launched in 2012. Brangista started sales of the “Kami no Te” smartphonecrane game in June 2016 and continues to pursue new challenges.

We encourage readers to review our complete legal statement on “Disclaimer” page.
2

■■Company Overview

Nexyz.Group Corporation
4346 Tokyo Stock ExchangeFirst Section

16-Feb.-17

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hideo Kakuta

President Kondo is a lifelong venture entrepreneur who started his first business when he was 19
years old. He overcame various setbacks, including a decision to suspend a listing on the TSE
Mothers market due to the IT bubble collapse in 2000, and ultimately succeeded in listing on theFirst Section of the Tokyo Stock Exchange as the youngest founding executive at the time in 2004.
He received the Minister of Economy, Trade and Industry Award, the highest prize, in the Japan
Venture Award 2006’s entrepreneur division in 2006. He actively encourages future entrepreneurs
with his trademark passion through lectures (at Waseda University, University of Tokyo, and otheruniversities) and publications. He also serves as Representative Director for Passion Leaders (3,800
members nationwide), Japan’s largest business executive group.
Company History
Year
1987
1990

Main events
Started home telephone sales business in Tennoji Ward, Osaka
Established Nihon Telex Corporation (Suita City, Osaka) and announces the “Tell-me system,” arevolutionary service for setting up a telephone line for just ¥2,000 a month
1991 Began sales of mobile phones using the Tell-me system
1992 Started the Tell-me Credit service through an alliance with Orient Corporation
1994 Moved the headquarters to Shibuya Ward, Tokyo
1999 Opened branches in Hiroshima and Fukuoka and expanded the nationwide network
2000 Started handling WOWOW (BS broadcast) service
Received an investment from SOFTBANK INVESTMENT CORPORATION
Changed the company name to Nexyz. Corp.
2002 Listed shares on the Osaka Stock Exchange NASDAQ Japan market
Concluded a primary distributor contract with Softbank BB Corp.
Established TT Nexyz. Corporation to supply rental service for satellite broadcasts free of charge
2004 Began sales of “Otoku Line” low-cost fixed-line phone service using consignment booths
Listed shares on the First Section of the Tokyo Stock Exchange and First Section of the Osaka Stock
Exchange
2005 Established Nexyz.Trade Co., Ltd. as a joint venture with E*TRADE SECURITIES Co., Ltd. (currently
SBI SECURITIES Co., Ltd.) to provide financial product intermediary service
Established Nexyz. Entertainment Corporation. to provide video content distribution service
Nexyz.BB Corporation began ISP service
2006 Moved to a holding-company format with consolidated subsidiaries
Nexyz.BB and SoftBank Mobile Corp. formed a business alliance and began sales of mobile handsets
2007 Established Brangista Inc. as a joint venture with entertainment production firm LesPros Entertainment
Co., Ltd.
2008 Brangista and Rakuten Travel, Inc. formed a business alliance2009 Acquired Hakubi School (Hakubi Corporation) as a subsidiary2010 Started ASP service “EC Tencho” for EC malls
Started service for travel web magazine “Tabiiro”
2013 Rakuten, Inc. acquired a stake in Brangista
2015 Brangista, a group subsidiary, listed shares on the Tokyo Stock Exchange Mothers market
2016 Change of the company name from Nexyz. Corporation to Nexyz.Group Corporation
Downloads started for the “Kami no Te” god-like experience 3D crane game at Brangista
Source: Prepared by FISCO from the Company’s website

Mainly operates the Energy and Environment business (rental
service for energy-saving products) and Electronic Mediabusiness (digital magazines)(2) Business overview
The Energy and Environment business is Nexyz.Group’s primary segment and consists of the
Nexyz. Zero series, a fast-growing rental service for LEDs and other energy-saving products, ahealth consulting business based on DNA analysis, and a leasing business. This segment drives
overall income at 63.7% of net sales and 74.9% of operating income in FY9/16. It covers results from
Nexyz. Corp., Nexyz. Zero Inc., and DiNA Inc.
The Electronic Media business produces and handles consignment of digital magazines, sells
advertising, provides services that support E-commerce companies (such as website construction,
operation, logistics, and translation), and runs a game business. This segment accounted for
21.5% of net sales and 21.3% of operating income in FY9/16. It covers Brangista, Brangista Game(established in October 2015), and Nexyz.Trade Co., Inc.
The Cultural Education business operates kimono-wearing schools and sells kimonos and Japaneseaccessories. This segment provided 14.8% of net sales and 3.8% of operating income in FY9/16. It
covers Hakubi Corporation.

We encourage readers to review our complete legal statement on “Disclaimer” page.
3

■■Company Overview

FY9/16 Business content and results by segments
Business content
Energy andEnvironment
business

Nexyz.Group Corporation
4346 Tokyo Stock ExchangeFirst Section

Electronic Mediabusiness

Group companies

Provision of rental service for LED
Nexyz. Corp.
lighting and other equipment, customer
Nexyz. Zero Inc.
acquisition and sales, health consulting
DiNA Inc.
service based on DNA analysis, etc.
Consigned production of digital
magazines and advertising sales,
Brangista Inc.
EC company support services (sales
Brangista Game Inc.
promotions, logistics), translation, games, Nexyz.Trade Co., Ltd.
financial product broker service, etc.

Cultural Education
Operates a kimono-wearing school
Hakubi Corporation
business
Total
Source: Company’s financial statements and FISCO Inc. analysis

Net sales
FY9/16
Share
(¥mn)
(%)
8,957

63.7%

1,998

74.9%

3,067

21.5%

566

21.3%

102

3.8%

2,085

14.8%

14,062100.0%

16-Feb.-17

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hideo Kakuta

Segment profit
FY9/16
Share
(¥mn)
(%)

2,667
100.0%* Prior tocompanywide profit
adjustments

Strong advances fueled by the revolutionary rental format of“zero” initial investment(3) Energy and Environment business: Rental service for energy-saving products
The Company’s rental service for LED lighting and other energy-saving products started with a slogan
of “lowering electricity costs in Japan” in FY9/13 and has grown to be the main business in the past
four years. It targets domestic firms that have not installed LED lighting yet (about 3mn companies)
and has established a No.1 position in the industry by using a unique rental format that eliminates
hefty upfront costs, which had been the main barrier for weak adoption. The Company has close ties
with restaurants and hotels through its various activities over the years, and restaurants account for
about 60% of overall installations. This business started with nine sales people and has expanded
to 11 sites around Japan and close to 300 sales people. Nexyz.Group is leveraging its strength ofsales capabilities on a nationwide scale. The Nexyz. Zero series of rental service for water-saving
equipment, commercial refrigerators, commercial air-conditioners, dishwashers, and other products
ramped up in FY9/16 has performed well, and sales from products other than LED lighting havegrown to about 15% of net sales. This business is currently at a stage of only offering other products
to existing customers for LED rental service, and we expect a further rise in customer volume once
the Company begins autonomous sales to firms other than the LED service. Installations (only LED
lighting) have been steadily rising, including an increase of 7,582 sites from 15,536 sites at the endof FY9/15 to 23,118 sites at FY9/16.

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4

■■Company Overview

Nexyz.Group Corporation
4346 Tokyo Stock ExchangeFirst Section

16-Feb.-17

Important disclosuresand disclaimers appear
at the end of this document.

The rental service uses a revolutionary approach that eliminates initial investments and uncertainty forcustomers. The biggest benefit for store operators (customers) is no initial charge for lights, installationand maintenance (five-year guarantee). It is more attractive than leases due to removing the need for
credit provision and thereby any impact on borrowing leeway. Customers pay rental fees from theirsavings in electricity costs for the first five years and receive the installed equipment at no charge fromthe sixth year and will no longer need to pay rental fees. This format significantly lowers costs. Roughly
40% of acquired customers come from introductions by the Company’s existing customers, attesting
to robust customer satisfaction. Besides economic benefits, the service has been well received
because of the appealing installations supported by selections from 3,000 types of LED lights by sales
staff, who have lighting consultant credentials. Many major firms have installed LED lighting using theCompany’s service, including Daitan Holdings Co., Ltd., which operates Nadai Fuji Soba, SoftBank
Corp., which runs mobile phone shops, car dealer TOKYO SUBARU INC., and restaurant operators
Gyu-kaku and Diamond Dining. Otani Sanso, a traditional inn located in Yamaguchi Prefecture that
hosted the recent Japan-Russia Summit Meeting, also installed LED lighting using the Company’s
service. We think this customer base reflects favorable assessment of service quality.

Issues digital magazines (19 magazines) that feature popular
actors on the front page(4) Electronic Media business (Brangista)

FISCO Ltd. Analyst
Hideo Kakuta

The Electronic Media business mainly consists of digital magazines, an area entered in 2007 by
subsidiary Brangista. Digital magazines come under cross media that combine the strengths ofmagazines and the Internet in enabling users to view information, watch videos, search, and makereservations and purchases just by “flipping pages and clicking.” This business currently publishes
19 digital magazines, including the “Tabiiro” travel magazine and “GOODA” men’s fashion magazine,
and every month 2mn users access the magazines for free. The Company is the No.1 domestic
publisher of digital magazines that has its own planning, production, and sales functions. It holds anadvantage from having a longstanding network with entertainment production firms that facilitatesaccess to popular actors for magazine covers.
The Company utilizes two different business models to obtain income. One is obtaining advertisement
fees mainly from restaurants and hotels, and the other is receiving production fees for delivering
prepared contents to customers. Digital magazines do not face a physical limit in the number ofads from the page count, a key difference with paper magazines. Ad volume has been steadilyrising each year and reached 5,063 ads in FY9/16, an increase of 526 from the previous year. The
income model mainly uses annual contracts for advertising fees (¥300,000-960,000 per year), andthe continuation rate is high at about 70%. This business thereby has repeat income attributes.

We encourage readers to review our complete legal statement on “Disclaimer” page.
5

伪伪Business Performance
Booked a fifth consecutive increase in operating income andsteep sales gain in FY9/16

Nexyz.Group Corporation
4346 Tokyo Stock ExchangeFirst Section

16-Feb.-17

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hideo Kakuta(1) Review of FY9/16 results
Nexyz.Group booked ¥14,062mn in net sales (+32.1% YoY), ¥1,716mn in operating income (+69.4%),¥1,717mn in ordinary income (+66.5%), and ¥1,215mn in net income attributable to owners of parent(+44.4%) in FY9/16. Net sales rose sharply, and operating income reached a fifth straight annual
high. Rental service for energy-saving products, which has been making significant advances,
steadily expanded and contributed to higher sales and profits thanks to the rise in introduced deals
and diversification of the product line-up. Earnings growth strengthened on a substantial lift froma 3.6 percentage points drop in the SG&A expenses ratio, despite increasing the number of sales
people for the rental service that handles energy-saving products, because of the efficiency of its
sales activities led by introductions.
Business Results in FY9/16
FY9/15Results
Ratio to sales
(¥mn)
(%)
10,647100.0%
6,266
58.5%
4,381
41.1%
3,368
31.6%
1,013
9.5%
1,031
9.6%

Results(¥mn)
14,062
8,412
5,650
3,934
1,716
1,717

FY9/16
Ratio to sales(%)
100.0%
59.8%
40.1%
27.9%
12.2%
12.2%

YoY change
(%)
32.1%
34.2%
28.9%
16.8%
69.4%
66.5%

1,215

8.6%

44.4%

Net sales
Cost of sales
Gross profit
SG&A expenses
Operating income
Ordinary income
Net income attributable to841
7.9%
owners of parent
Source: Prepared by FISCO from the Company’s financial statements

Plans advertising investments for the “Kami no Te” game in
FY9/17, though still forecasts for all-time high earnings(2) FY9/17 outlook
Nexyz.Group forecasts for ¥16,500mn in net sales (+17.3% YoY), ¥2,000mn in operating income(+16.5%), ¥2,000mn in ordinary income (+16.4%), and ¥1,250mn in net income attributable to ownersof parent (+2.8%) in FY9/17. It expects a fourth straight rise in net sales and a sixth consecutive yearof profit gains. Targeted earnings are the highest levels ever for the Company as it marks the 28th
fiscal year. We think this is a slightly conservative plan considering healthy growth trends in the core
Energy and Environment and Electronic Media businesses and expect upward revisions during the
fiscal year as in FY9/16. Nexyz.Group forecasts lower earnings growth in FY9/17 due to its plan forinvesting over ¥500mn in advertising and promotional costs at Brangista Game from this winter asa special factor.
Business Results Outlook for FY9/17
FY9/16
Results
Ratio to sales
(¥mn)
(%)
14,062100.0%
1,716
12.2%
1,717
12.2%

Forecast(¥mn)
16,5002,000
2,000

FY9/17
Ratio to sales(%)
100.0%
12.1%
12.1%

YoY change
(%)
17.3%
16.5%
16.4%

1,250

7.6%

2.8%

Net sales
Operating income
Ordinary income
Net income attributable to
1,215
8.6%
owners of parent
Source: Prepared by FISCO from the Company’s financial statements

We encourage readers to review our complete legal statement on “Disclaimer” page.
6

■■Business Performance

Financial stability not a concern(3) Financial conditions

Nexyz.Group Corporation
4346 Tokyo Stock ExchangeFirst Section

Neyxz.Group was in healthy financial shape at the end of FY9/16. Total assets rose ¥1,165mn fromthe end of FY9/15 to ¥12,071mn. The main increase was ¥1,175mn in notes and accounts receivable- trade, reflecting strong momentum in rental business for energy-saving products. Liabilities climbed¥2,069mn to ¥4,718mn due mainly to a ¥1,368mn increase in non-current liabilities and a ¥1,335mn
rise in long-term loans payable.
Short-term and longer-term stability stands out in management indicators with the liquidity ratio at
272.4% and capital ratio at 40.5%.

16-Feb.-17

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hideo Kakuta

Consolidated Balance Sheet and Management Indicators
The end of FY9/15
7,991
3,720
3,327
2,915
10,906
2,595
53
2,649
8,257
10,906

Current assets(Cash and deposits)(notes and accounts receivable - trade)Non-current assets
Total assets
Current liabilities
Non-current liabilities
Liabilities (total)
Net assets (total)
Liabilities and net assets (total)
Stability
Current ratio (current assets ÷ current liabilities)
307.9%
Equity ratio (Equity ÷ total assets)
40.1%
Source: Prepared by FISCO from the Company’s financial statements

The end of FY9/16
8,980
3,631
4,502
3,091
12,071
3,297
1,421
4,718
7,353
12,071(Unit: ¥mn)
Change
989
-89
1,175
176
1,165
701
1,368
2,069
-904
1,165

272.4%
40.5%

-

伪伪ROE
Realizing high-efficiency operations at 26.2% ROE
Nexyz.Group has dramatically improved ROE since it began rental service for LED lighting and otherenergy-saving products. ROE rose from 7.0% in FY9/14 to 26.2% in FY9/16. This improvement
confirms enhanced business efficiency. We expect the Company to maintain earnings level while
increasing its investments in games business amid an ongoing growth phase for its core rental
service for energy-saving products.

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We encourage readers to review our complete legal statement on “Disclaimer” page.
7

伪伪Policy on shareholder returns
Total return ratio increased to 50.3% in FY9/16 with a ¥15
annual dividend (up ¥5) and 15.4% dividend payout ratio

Nexyz.Group Corporation
4346 Tokyo Stock ExchangeFirst Section

Nexyz.Group aims to effectively balance investments in growth and suitable profit return toshareholders. It paid a ¥15 annual dividend (up ¥5 YoY) for a 15.4% dividend payout ratio in FY9/16.
It also aggressively purchased its own shares as part of shareholder returns with acquisitions of
228,600 shares through May 2016 and 200,000 shares through October 2016. These moves lifted
total return ratio to 50.3%. Nexyz.Group forecasts for a ¥20 annual dividend (up ¥5 YoY) in FY9/17
including interim dividend of ¥10 and year-end dividend of ¥10. Just as in FY9/16, it plans to bolster
shareholder returns in FY9/17 with share buybacks and increased dividend.

16-Feb.-17

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hideo Kakuta

We encourage readers to review our complete legal statement on “Disclaimer” page.
8

伪伪Growth Strategy
Investing in the “Kami no Te” smartphone crane game
○ Smartphone online games

Nexyz.Group Corporation
4346 Tokyo Stock ExchangeFirst Section

16-Feb.-17

Nexyz.Group released the “Kami no Te” smartphone crane game in June 2016. This is an online
game played through a smartphone, and prizes are sent to the person’s home. The app is simple
and expresses the feel in 3D of crane games that have been played for 86 years at game centers.
Prize appeal is an important point. Premium gifts and collaborative efforts with amine and movies,
which Yasushi Akimoto serves as the general producer, appeal to the target “mania” segment. The
income model consists of fees and advertising. In the fee model, users can play at a game at ¥100
per play. This game offers a new type of experience of playing in the virtual world and receiving realworld prizes.
Game Income Model

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hideo Kakuta

Source: From the Company’s results briefing materials

The first round of prizes contained original items from the AKB48 general election, and the game hascontinued to utilize collaborative projects with AKB and other idol events, dramas and theater shows
and released through the 17th round (as of December 16). Many items sold out on the first day,including collaborative prizes with idols participating in the Tokyo Idol Festival, the world’s largest idol
event, and a joint project with a movie that features EXILE and Third-Generation JSB.
The “#Hi Poul” variety program airing from 1:25am on Friday mornings on Fuji TV since November
2016 includes a regular feature on “Kami no Te” hosted by Haruna Kojima (AKB48) and Daisuke
Muramoto (Woman Rush Hour). The hosts receive proposals for “Kami no Te” prizes from the generalpublic via the official site and SNS and goddess Haruna Kojima and servant Daisuke Muramoto
make selections from the various proposals.
The Company did not invest heavily on advertising and promotions in the first six months due togiving priority to app revisions and prize loyalty. It plans to invest about ¥500mn in “Kami no Te”
advertising and promotions from March 2017, and we expect these initiatives to further accelerate
momentum.

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