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

NEXT2120 Tokyo Stock ExchangeFirst Section

15-Jul.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Ikuo Shibata

伪伪Japan Largest Real Estate and Housing Information
Portal Site HOME'S Drives Earnings
NEXT Co., Ltd. (hereafter, "NEXT" or "the company") develops information services in various
lifestyle-related fields including a financial information site and a local community informationsite. Its primary focus is on managing the HOME'S real estate and housing information portal
site. The number of nationwide affiliated stores numbered 11,639 (as of March 31, 2014) andtotal listed properties numbered 4,250,000 (average for March 2014), the largest number oflistings in all of Japan. The unique feature of NEXT is its earnings model that charges affiliatedstores based on the number of user inquiries. Leveraging its position as No. 1 in total number oflisted properties, the company is raising its visibility and increasing the number of site visitors
by aggressively expanding its branding promotion. As a result, earnings growth has been solid.
During the fiscal year ended March 31, 2014 (FY3/14), both sales and profits increased torecord levels with sales of ¥14,690mn (up 22.8% y-o-y) and operating profit of ¥2,299mn(up 44.5%). In addition to growth in the total number of listed properties, aggressive branding
through record level ad spending, and increases in the number of site visitors and inquiries due
to search engine optimization (SEO) effects drove earnings.
In FY3/15, NEXT expects sales and profits to increase with sales of ¥17,240mn (up 17.4%
y-o-y) and operating profit of ¥2,328mn (up 1.2%). The sales growth rate is expected to slow
down slightly due to the impact of the consumption tax rate increase. Further, the cost raterose as a result of the opening of a home interior e-commerce service in April 2014, the profit
margin is expected to decline slightly due the reinforcement of digital marketing, the openingof new services in the real estate information domain, upfront investments in new developmentof affiliated stores, and the non-achievement of the previous fiscal year's target. NEXT has
positioned FY3/15 as a time for investment in long-term growth.
As a growth strategy, NEXT's earnings drivers over the near term are the establishment ofa dominant No. 1 position through reinvestment and the creation of a real estate industry
business platform by expanding and upgrading business support services for real estatecompanies. Further, as part of this strategy, NEXT will expand overseas and develop new
businesses.

伪伪Check Point
・HOME'S total number of listed properties is prominent, even among major real estate
information sites
・FY3/14 sales and profits were record highs
・Dividend payout ratio of about 20% is targeted, but will be even higher standard in the
futureWe encourage readers to review our complete legal statement on “Disclaimer” page.
1

Sales and Operating Profit Margin（¥mn）
16,000Sales

12,0002120 Tokyo Stock ExchangeFirst Section

10,000

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Ikuo Shibata

18.0%

15.7%
13.5%

13.3%

16.0%
14.0%
12.0%

9.2%

8,000
6,000

15-Jul.-14

20.0%
16.3%

14,000NEXT

Operating Profit Margin18.4%

17,24014,69010,77910,738

10,31910.0%
8.0%

11,962

6.0%

4,000

4.0%

2,000

2.0%

0

0.0%
FY3/10FY3/11

FY3/12

FY3/13

FY3/14

FY3/15E

伪伪Company Profile
HOME'S Real Estate and Housing Information Portal Site is No. 1
in Total Number of Listed Properties(1) Business Activities
NEXT develops information services in various lifestyle-related fields including a financial
information site and a local community information site. Its primary focus is on managing
the HOME'S real estate and housing information portal site. HOME'S provides a one-stophousing and property information service that includes "Rental and Real Estate Trade," "NewHouses," "New Condominiums," and "Custom-Built Houses and Renovations" nationwide.
The number of nationwide affiliated stores numbered 11,639 (as of March 31, 2014) and total
listed properties numbered 4,250,000 (average for March 2014), the largest number of listingsin all of Japan. The unique feature of NEXT is its earnings model that charges affiliated storesbased on the number of user inquiries. Leveraging its position as No. 1 in total number of listed
properties, the company is raising its visibility and increasing site visitors by aggressively
expanding its branding promotion. As a result, earnings growth has been solid.
The company's business is divided into two segments, the Real Estate Information Services
segment and the Other Businesses segment. The Real Estate Information Services segment
comprises 99.0% of total sales. Further, the Real Estate Information Services segment is divided
into "Rental & Real Estate Trade," "New Houses," "New Condominiums," "Custom-Built
Houses and Renovations," "Renter's Network (CRM services for the real estate industry),""Others (relocation estimates, elderly care service, overseas business, etc.). The Other
Businesses segment consists of the "MONEYMO" financial information site, the "Lococom"
local community information site, and other businesses.

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

■Company■
ProfilePie chart of sales breakdown for FY3/14
5.4% 0.9%
4.1%

Rental & Real Estate Trade

7.0%

New Houses

NEXT
2120 Tokyo Stock ExchangeFirst Section

New Condominiums
12.2%
53.6%

15-Jul.-14

Custom-Built Houses andRenovations
Renter’s Network
OthersOther Businesses

16.7%

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Ikuo Shibata

NEXT has six consolidated subsidiaries (one in Japan and five abroad). Its wholly owned
domestic subsidiary, Renters Co., provides customer relationship management (CRM) services
for real estate companies. Overseas, NEXT has one subsidiary in Indonesia 50.0% ownership
ratio), one in Thailand (99.9% ownership ratio), and three which used to do business in China(however, the three Chinese subsidiaries are now in the process of being liquidated).

Taking Advantage of Fee Structure Revision to Significantly
Raise the Total Number of Listed Properties(2) Company History
NEXT was founded in Yokohama City, Kanagawa Prefecture in March 1997 with the goal ofproviding services that enable free online access to real estate property information. When
President and CEO Takashi Inoue, the founder of NEXT, was employed at Recruit Cosmos
Co., Ltd. (now Cosmos Initia Co., Ltd.<8844>), a major real estate developer, he felt that
there was an asymmetry of information (unequal distribution of information) and still room for
greater management efficiency in real estate companies. Thus, he started the company withthe aim of creating an information infrastructure that would benefit both users and real estatecompanies by making information for the many home buyers and renters easily accessible andby broadening their options.
In April 1997, NEXT started the real estate and housing information portal site HOME'S service,its core business, but until it secured a certain total number of listed properties and pulled
in more site visitors, it was not a profitable line of business and management continued to
be dependent on website construction support business for real estate companies. However,spurred by its unceasing adherence to its founding principles and the growing number ofInternet users, the company established a business base while gradually raising the value ofits media. In January 2002, NEXT concluded a capital tie-up with Rakuten, Inc. (4755) aimed
at strengthening its content, increased its earnings while raising its media value, and listed on
Tokyo Stock Exchange Mothers in October 2006.

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

■Company■
ProfileNEXT
2120 Tokyo Stock ExchangeFirst Section

15-Jul.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Ikuo Shibata

In addition, NEXT started the local community information site "Lococom" in October 2006.
Renters Co., which provides business support CRM services for real estate companies, wasturned into a wholly owned subsidiary in April 2007. At the same time, NEXT expanded its
service domain by taking over the online homebuilding business run by ITOCHU Corporation(8001) and the home renovation business run by ITOCHU Electronics (now Itochu Interactive
Corporation), and listed on the first section of the Tokyo Stock Exchange in March 2010.
Further, it launched the "MONEYMO" site that provides lifestyle and financial information in
February 2011.
A major turning point for the company was the revision of its fee structure carried out inJanuary 2011. To achieve even greater growth and to eliminate the asymmetry of information,a founding concept, NEXT recognized that increasing user convenience by having a huge total
number of listed properties and differentiating itself from competitors are what really counts.
It therefore changed from its past billing system based on the total number of listed properties
to a new billing system based on the number of inquiries. The change in the billing system,
even though it temporarily caused earnings to decline, brought about a rapid increase in total
listed properties, and established NEXT as No. 1 in total number of listed properties, and iscontributing to the company's current growth.
Meanwhile, overseas, the company launched its real estate and home information site service
in Thailand in January 2012 and in Indonesia in August 2012.

Advantages: Unique Revenue Model and Strong Ability to Attract
Customers(3) Special Characteristics of NEXTThe greatest feature of HOME'S is its No. 1 position in total number of listed properties. The
fact that HOME'S is No. 1 in total number of listed properties attracts users and this createsa virtuous cycle whereby the number of affiliated stores and total listed properties increases
further and drives company earnings. What enabled NEXT to become No. 1 in total numberof listed properties was that it developed its business through the 4P Strategy, which it has
implemented for three years since 2011. The 4P Strategy consists of a price strategy (change
in billing method), a product strategy (website upgrades), a promotion strategy (branding
promotion), and a placement strategy (marketing strategy). Above all, 1) a unique revenue
model, and 2) strong ability to attract customers are what gives the company its advantage.

We encourage readers to review our complete legal statement on “Disclaimer” page.
4

■Company■
Profile4P Strategy

NEXT
2120 Tokyo Stock ExchangeFirst Section

15-Jul.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Ikuo Shibata*	Network externality means thatthe more the number of members
increases, the more each member
benefits.

Source: Company

1) Unique Revenue Model of Billing based on Number of Inquiries
The increase in the total number of listed properties was caused by the revision of its fee
structure. To increase user convenience and differentiate itself from competitors by the total
number of listed properties, in "Rental & Real Estate Trade," its volume zone, the company
changed from a billing system based on the number of total listed properties, which is theindustry standard, to a billing system based on the number of user inquiries. This change has
led to a rapid increase in the total number of listed properties. From the affiliated stores'
perspective, paying only a fixed base rate whereby their cost won't increase no matter
how many properties they list motivates them to list more properties. Moreover, network
externality* is at work at HOME'S, which can increase site visitors as the total number of listed
properties increases, and is considered a factor in the successful matching of interests of boththe company and affiliated stores. The company's inquiry-based billing is calculated by applying
a certain rate to the rent of the subject property.
Unlimited Number of Listed Properties + Pay-As-You-Go Format Based on Number of Inquiries

Source: Company

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

■Company■
Profile2) Strong Ability to Attract Customers through Branding and SEO
NEXT has focused on strengthening its visibility and its ability to attract customers to its sitethrough aggressive branding promotion and highly precise SEO. With respect to advertisingcosts, the company continues its strategy of investing roughly 25% to 30% of sales in anticipatory
investments, which has contributed to its higher visibility.

NEXT
2120 Tokyo Stock ExchangeFirst Section

15-Jul.-14*	Major keywords refer to theselected words
rental, rental
Importantdisclosurescondominium,
condominium,
anddisclaimers appear
previously-owned
condominium,
apartment,
newthiscondominium,
atthe end of
document.
single family house and newhouse

FISCO Ltd. Analyst
Ikuo Shibata

In the area of SEO, based on the effects of information volume from being No. 1 in total numberof listed properties and website upgrades through integration and other measures, while atthe same time an in-house team of experts collaborates with outside partners, the company
continued to have the top average ranking of search results based on major keywords*. As
a result, the company boasts the No. 1 industry ranking in number of site visitors (based onaccess from home and office PCs according to Nielsen NetView, August 2012 – February2013). NEXT is also focused on increasing user convenience and was ranked No. 1 in userfriendliness according to the Gomez Real Estate Information (rental/buying and selling) siteranking (announced in December 2013).

Advertising costs (five years)（¥mn）

Advertising Costs

Sales Ratio

5,000
28.9%

4,500
22.9%

3,500

25.0%

17.9%

20.0%

2,500

4,496

2,000

15.0%

3,454

1,500
1,000

35.0%
30.0%

26.5%

4,000

3,000

30.6%

2,460

1,926

10.0%

2,735

5.0%

500
0

0.0%
FY3/10FY3/11

FY3/12

FY3/13

FY3/14

Photo of NEXT's Website and TV Commercial Featuring Comic Duo "Banana Man"

Source: Company

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

伪伪Industry Structure
HOME'S total number of listed properties is prominent, evenamong major real estate information sites

NEXT
2120 Tokyo Stock ExchangeFirst Section

15-Jul.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Ikuo Shibata

There are many websites similar to HOME'S that offer real estate information services inJapan, but other major sites are "SUUMO" run by Recruit Sumai Company Ltd., "YAHOO! Real
Estate," "CHINTAI," and "at home." According to a survey conducted by Fuji Sankei Businessi, HOME'S holds the No. 1 position in total number of listed properties by an overwhelming
margin.
NEXT estimates the number of vacant properties in the market as a whole at roughly 5 to 5.5
million. Its goal is to cover all properties in Japan, which is a founding concept. In NEXT's case,because it has a revenue model whereby earnings grow if user inquiries increase, the advantagethat it gains by increasing the number of site visitors by covering all properties is bigger, even
if the total number of listed properties reaches the saturation point. Moreover, since network
externality is at work wherein sites that have an advantage due to the total number of listed
properties and ability to attract customers are increasingly raising their value as media, it isconceivable that the industry could become over concentrated (an oligopoly) at the top level
and that room to grow would come by cannibalizing competitors' market share.
In addition, there are no industry peers of comparable size with billing based on the numberof inquiries (inquiry billing) as NEXT does. Not only is inquiry billing difficult to forecast, it isconsidered a system that could make business performance fluctuate greatly and therefore isdifficult for large companies with many fixed costs to adopt.
Number of listed properties ranking

HOME'SSUUMOYahoo! Real Estate
at homeCHINTAI

Total Number of
Listed Properties
4,091,700
2,243,300
1,859,900
1,420,500
550,000

Source: Fuji Sankei Business i (March 31, 2014)

伪伪Financial Results Trend
Total Properties Listed and Affiliated Stores Increase andEarnings Enter Growth Stage(1) Past Earnings
Looking back on past earnings, the "Rental & Real Estate Trade" segment has driven NEXT's
sales, and until FY3/10 earnings had grown favorably along with the number of affiliatedstores and the sales per affiliated store (the value per affiliated store). The effects of the fee
structure revision are what caused earnings to decline from FY3/11 through FY3/12. Because
the number of inquiries fell below the company's expectations and there was a temporary
defection of affiliated stores overwhelmed by the industries' first inquiry billing attempt, thenumber of affiliated stores and the value per affiliated store decreased. However, the total
number of listed properties is rapidly increasing and the company's visibility and ability to
attract customers have further increased through branding promotion and effective SEO basedon website redesign begun in FY3/13. At the same time, the number of affiliated stores has
begun to steadily increase and earnings appear to have entered a new growth stage.

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

■Financial■
Results Trend

Further, even though the operating profit margin decreased in FY3/12 due to lower earnings
caused by revision of billing method, higher costs owing to head office relocation, and aggressive
anticipatory investments in advertising, thanks to the impact of the above-mentioned 4P
Strategy, in FY3/13, these costs were absorbed through higher sales, and high profitability is
being restored.

NEXT
2120 Tokyo Stock ExchangeFirst Section

Past Earnings
（¥mn）

Sales

16,000
16.8%

16.3%

16.0%

13.3%

14.0%

11.2%

12.0%
9.2%

8,000

10.0%

14,6906,000

10,7794,000

FISCO Ltd. Analyst
Ikuo Shibata

18.0%

15.7%

12,00010,000

Important disclosuresand disclaimers appear
at the end of this document.

20.0%

18.4%
16.7%

14,00015-Jul.-14

Operating Profit Margin

10,738

8,927

7,433

10,3198.0%

11,962

6.0%
4.0%

4,459

2,000

2.0%

0

0.0%
FY3/07

FY3/08

FY3/09FY3/10FY3/11

FY3/12

FY3/13

FY3/14

HOME’S Rental and Real Estate Trade’s Number of Affiliated Stores
and Value per Affiliated Store（Stores）

Number of Affiliated Stores

68,38812,00055,61010,00055,56456,857（¥）

Value per Affiliated Store

14,00056,09557,64980,00070,00061,63860,00046,03050,0008,000

40,000
6,000
4,000

7,733

10,1208,761

11,413
9,563

9,926

10,437

11,63930,00020,0002,000

10,00000
FY3/07

FY3/08

FY3/09FY3/10FY3/11

FY3/12

FY3/13

FY3/14

Note: As of fiscal year-end

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

■Financial■
Results Trend

HOME’S Rental and Real Estate Trade’s Total Number of Listed Properties（Mn properties）
450

404
361

400

NEXT
2120 Tokyo Stock ExchangeFirst Section

350
265

300
250
200
150

15-Jul.-14

425

104

100

FY3/07

FY3/08

121

136

100
50
0

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Ikuo Shibata

FY3/09FY3/10FY3/11

FY3/12

FY3/13

FY3/14

Note: Total number of listed properties is as of March 31 of each period

Record-Breaking Sales and Profits in FY3/14(2) Results Summary for FY3/14
In FY3/14, sales and profits increased dramatically, rising to record-breaking levels, with sales
up 22.8% to ¥14,690mn, operating profit surged 44.5% to ¥2,299mn, recurring profit climbed
48.6% to ¥2,302mn, and net profit rose 117.7% to ¥1,336mn. Compared to the company's initial
forecast, results came in well above target with sales at 112.6% and operating profit at 174.0%
above target.
In the company's core real estate information service, double-digit sales growth in all service
categories contributed to revenue growth. Along with an increase in the total number of listed
properties, branding promotion through record level ad spending and search engine optimization(SEO) effects resulting from website redesign increased the number of visitors and inquiries
and pushed earnings upward.
Although SG&A expenses rose due to record-breaking spending on advertising (up 30.2%
y-o-y) and personnel costs (up 15.5%) due to staff increases, as these costs were absorbed
by revenue growth, the operating profit margin jumped from 13.3% to 15.7% y-o-y. Further, thedelayed incurrence of expenses for planned new services, a decrease in losses from the local
community information site in the Other Businesses segment, and a return to profitability of
the financial information site helped push profits upward.

We encourage readers to review our complete legal statement on “Disclaimer” page.
9

■Financial■
Results Trend

Results Summary for FY3/14

NEXT
2120 Tokyo Stock ExchangeFirst Section

15-Jul.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Ikuo Shibata

Sales
Real Estate Information Services
Rental & Real Estate Trade
New Houses
New Condominiums
Custom-Built Houses and Renovations
Renter's Network
OthersOther Businesses
Sales cost
SG&A
Personnel costs
Advertising costs
Operating costs
Depreciation costs
OthersOperating profit
Real Estate Information Services
Other Businesses
Recurring profit
Net profit

FY3/13 (Results)% of total
11,962
11,851
99.1%
6,480
54.2%
1,900
15.9%
1,588
13.3%
810
6.8%
491
4.1%
580
4.9%
110
0.9%
376
3.1%
9,995
83.6%
3,275
27.4%
3,454
28.9%
355
3.0%
468
3.9%
2,441
20.4%
1,591
13.3%
1,902
15.9%
-311
1,549
13.0%
614
5.1%

FY3/14 (Results)% of total
14,69014,554
99.1%
7,877
53.6%
2,458
16.7%
1,793
12.2%
1,031
7.0%
596
4.1%
797
5.4%
135
0.9%
472
3.2%
11,918
81.1%
3,783
25.8%
4,496
30.6%
473
3.2%
438
3.0%
2,726
18.6%
2,299
15.7%
2,355
16.0%
-56
2,302
15.7%
1,336
9.1%

(Unit: \mn)
Change% change
2,727
22.8%
2,703
22.8%
1,397
21.6%
558
29.4%
204
12.9%
221
27.4%
104
21.3%
216
37.3%
24
22.2%
96
25.5%
1,922
19.2%
507
15.5%
1,042
30.2%
118
33.3%
-30
-6.5%
284
11.7%
708
44.5%
453
23.8%
255
753
48.6%
722
117.7%

Total number of listed properties
3,913
4,260
347
(thousands of properties; average for FY)
Number of affiliated stores
9,895
11,042
1,147(average for FY)
Value per affiliated store
54,54859,345
4,797(average for FY)
Note: Percent of segment total of operating profit shows the profit margin for each segment.

8.9%
11.6%
8.8%

Higher Sales and Profits Forecasted and Investment for LongTerm Growth in FY3/15(3) Earnings Forecast for FY3/15
The earnings forecast for FY3/15 is for sales and profits to increase with sales of \17,240mn,
up 17.4% y-o-y, operating profit of \2,328mn, up 1.2%, recurring profit of \2,322mn, up 0.9%, andnet income of \1,386mn, up 3.7%.
Beginning from FY3/15, NEXT reviewed its website integration and sales disclosure classificationaccording to the investment classification of its medium-term strategy (sales according toservice). When viewing sales by new service-based category, Real Estate Information Services
will likely remain strong, of which Rental & Real Estate Trade will be the primary contributors to
the sales increase, while the growth rate of Newly-constructed lots and Custom-Built Houses
and Renovations should slow down y-o-y due to the expected impact of the consumption tax
rate increase. The growth of the For Realtors segment depends on the expansion of sales of
CRM services for the rental business and business support services for real estate developers.
The rapid growth of HOME'S elderly care service is expected to contribute the growth of the
Others segment. The home interior e-commerce site HOME'S Style Market,
which started in April 2014, should contribute to higher sales in Other Businesses.
A slight decrease of the operating profit margin is expected as a result of a higher cost rate
due to home interior e-commerce service purchases, upfront investments to reinforce digitalmarketing, to start new services, and to develop new affiliated stores (utilizing third-party
marketing), as well as the delayed incurrence of expenses from the previous year. Moreover,NEXT plans to continue spending about 30% of sales on advertising. The company has positioned
FY3/15 as a year for investing in long-term growth and plans to gradually raise its operating
profit margin to 25%, its medium- to long-term goal, despite a temporary decline.

We encourage readers to review our complete legal statement on “Disclaimer” page.
10

■Financial■
Results Trend

Change of Disclosure Classification

NEXT
2120 Tokyo Stock ExchangeFirst Section

15-Jul.-14

Important disclosuresand disclaimers appear
at the end of this document.

Source: Company

Earnings Forecast for FY3/15

FISCO Ltd. Analyst
Ikuo Shibata

Sales
Real Estate Information Services
Rental & Real Estate Trade
Newly-Constructed Lots
Custom-Built Houses and Renovations
For Realtors
OthersOther Businesses
Sales cost
SG&A
Operating profit
Real Estate Information Services
Other Businesses
Recurring profit
Net profit

FY3/14 (Results)% of total
14,69014,554
99.1%
7,975
54.3%
4,324
29.4%
1,031
7.0%
638
4.3%
584
4.0%
135
0.9%
472
3.2%
11,918
81.1%
2,299
15.7%
2,355
16.2%
-56
2,302
15.7%
1,336
9.1%

FY3/15E% of total
17,24016,811
97.5%
9,602
55.7%
4,571
26.5%
929
5.4%
922
5.3%
785
4.6%
429
2.5%
738
4.3%
14,174
82.2%
2,328
13.5%
2,322
13.5%
1,386
8.0%

(Unit: \mn)
Change% change
2,550
17.4%
2,257
15.5%
1,626
20.4%
246
5.7%
-101
-9.9%
284
44.5%
201
34.4%
293
216.4%
265
56.2%
2,256
18.9%
28
1.2%
20
0.9%
50
3.7%

The company announced that it was changing from its previous conservative earnings forecast
to a neutral forecast. Considering the fact that the company's difficult-to-predict inquiry
billing is its earnings pillar, it had conservatively forecasted sales after taking into account all
estimated expenses, but has changed to a more rational sales forecast as the accuracy of its
forecasts have gradually increased.

伪伪Growth Strategy
With Real-Estate Business as Base, Generate Additional Profit
through Overseas Expansion and New Businesses
Over the medium to long term, the company seeks to evolve into a global company in the
Database and Communication Concierge Service (DB + CCS) domains. Leveraging various
information domains that revolve around people's lives, NEXT will offer services that provide
the most relevant information to each user. Its growth strategy for achieving this is to promote
four events (see diagram) by supporting overseas expansion and the development of new
businesses, with a focus placed on strengthening existing businesses.

We encourage readers to review our complete legal statement on “Disclaimer” page.
11

■Growth■
Strategy

The pillars of its strategy over the near-term are to establish the dominant No. 1 position
by reinvesting in HOME'S in Japan and to create a real estate industry business platform byexpanding business support services for real estate companies. While maintaining the realestate-related business as its base, it plans to generate additional profit through overseas
expansion and new businesses. Moreover, one of its targeted management benchmarks is anoperating profit margin of 25%.

NEXT
2120 Tokyo Stock ExchangeFirst Section

15-Jul.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Ikuo Shibata

To strengthen its existing businesses, NEXT aims to expand its user share and the number ofaffiliated stores. As for the expansion of user share, in addition to measures taken thus far toincrease site visitors, the company is broadening its engagement with customers by expanding
its services into new fields such as renovation and trunk rooms for storage, which it began in
the previous fiscal year, adopting marketing methods for retaining first-time visitors so they
become repeat customers (attracting customers by providing the most relevant content, andemail marketing. Further, NEXT is creating services that retain users as members by providing
communication tools they can use after they change residence. So that people can live optimal
lives, the company seeks to make suggestions on people's lifestyle and create an environment
in which people can more easily (and more frequently) change their residence. This will enable
the company's scope for growth to continue to expand.
NEXT is also taking steps to expand the number of affiliated stores. Beginning from FY3/15,
its policy is to accelerate the pace of new store development through the use of sales agentsand other means.
In addition, the real estate industry business platform provides essential solutions for realestate company business. Specifically, in addition to the function of attracting site visitors
through existing sites, the platform provides customer relationship management (CRM), which
covers pursuing customers, preliminary inspection/property visit, and sale closing, as well
as CRM support for real estate owners — an industry first. With a focus on its dominance inattracting customers, the company can expect to create value by expanding solution domains
to those upstream and downstream business processes and this will differentiate itself fromcompetitors.
A solution the company provides for attracting and pursuing new customers is its CRM service
for the rental business "Renter's Net," which has grown and is now adopted by more than 1,213
stores (up 37.4% y-o-y) as of March 31, 2014.
In the previous fiscal year, the company began offering new services such as "Preview Pro,"an iPad app for customer sales support for real estate companies, as well as a CRM service
that manages the business between realtors and real estate owners, and the HOME'S Pro SNS
service for realtors. Next seeks to increase the number of customers and sales per customer
by expanding further its service domain.
In April 2014, NEXT started a new business, HOME'S Style Market, a home interior e-commercesite that offers furniture that matches the needs of existing businesses. Although this is thefirst e-commerce site run by NEXT, it expands the aftermarket for housing search with asystem that limits inventory risk (prepares the product after order is received) as much as
possible.

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12

■Growth■
StrategyNEXT
2120 Tokyo Stock ExchangeFirst Section

As for overseas expansion, at some point the domestic market will reach the saturation point,
so it is working from a long-term span of five to 10 years in anticipation of further market
shrinkage. Taking into account the Internet diffusion rate, the real estate market, and otherfactors, based on SEO technology in its current state of development, the company hastargeted countries where the Google search engine is firmly established and that have large
populations per language. Because its strategy is to develop the website at low cost in regions
where it can leverage its strengths without having local bases, its plan is develop throughrepeated trial and error while keeping investment risk under control.
Growth Strategy – Four Events (chart)

15-Jul.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Ikuo Shibata

Source: Company

伪伪Shareholder Returns
Dividend payout ratio of about 20% is targeted, but will bestandard in the future
The company's basic policy concerning profit sharing is to flexibly distribute profits based oneach period's earnings, taking into account the medium- to long-term business plan and otherfactors. Currently, the company targets a payout ratio of about 20% for ordinary dividends, but
it is considering a possible future increase in its dividend payout ratio while taking into accountits forecast for net assets and investments, the growth rate, and other factors. In FY3/14,
NEXT has decided to pay a dividend of \4.74 per share (a payout ratio of 20%).In FY3/15, thecompany plans to increase its dividend to \4.92 per share (a payout ratio of 20%). As a resultof profit growth, the potential for a dividend increase is considered quite high over the medium
term. The company implemented a 3 for 1 stock split effective January 1, 2014.

We encourage readers to review our complete legal statement on “Disclaimer” page.
13

■Shareholder■
Returns

Dividend Record
Dividend per Share（¥）

Dividend Payout Ratio
25.0%

6.00
19.9%

5.00

NEXT

4.00

2120 Tokyo Stock ExchangeFirst Section

3.00

20.0%
20.0%

14.9%
10.2%

11.3%

15.0%
10.0%
4.74

2.00

15-Jul.-14

20.0%

2.17

1.00

4.92

5.0%

2.17

1.97
1.23

0.70

0.0%

0.00
FY3/09

Important disclosuresand disclaimers appear
at the end of this document.

10.0%

FY3/10FY3/11

FY3/12

FY3/13

FY3/14

FY3/15E

Note:Carried out 100 to 1 stock split in Oct. 2011 and 3 to 1 stock split in Jan.
2014; per share figures are the amount for which stock split is taken into account

FISCO Ltd. Analyst
Ikuo Shibata

We encourage readers to review our complete legal statement on “Disclaimer” page.
14

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