COMPANY RESEARCH AND ANALYSIS REPORTProspect Co., Ltd.
3528
Tokyo Stock Exchange Second Section

27-Dec.-2019
FISCO Ltd. Analyst

Noboru Terashima

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

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

Prospect Co., Ltd.
3528 Tokyo Stock Exchange Second Section

27-Dec.-2019https://www.prospectjapan.co.jp/branch/index.html■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. FY3/20 1H consolidated results............. ......................................................................................................

01

2. FY3/20 forecast...........................................................................................................................................

02■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 03■Business overview---------------------------------------------------------------------------------------------------------------------------------------------------- 04
1. Main business activities...............................................................................................................................

04

2. Business features. . .......................................................................................................................................

05■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 05• FY3/20 1H results........................................................................................................................................

05■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 09
1. FY3/20 forecast...........................................................................................................................................

09

2. New business development:.................. ......................................................................................................

10■The medium- to long-term growth strategy------------------------------------------------------------------------------------- 10
1. Growth driver among the existing businesses..............................................................................................

10

2. M&A strategy......................................... ......................................................................................................

11■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 11

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

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

Prospect Co., Ltd.
3528 Tokyo Stock Exchange Second Section

27-Dec.-2019https://www.prospectjapan.co.jp/branch/index.html██Summary
A conglomerate that conducts a wide range of businesses witha focus on those related to real estate, including construction,
investment advisory, and renewable energy
The origins of Prospect Co., Ltd. <3528> (hereafter, also “the Company”) are found in Inami Kigyo Co., Ltd., which
conducted a textile business. But in 1994, the Company withdrew from the textile business and changed its main
business to a real estate business (primarily sales of condominiums). After that, the Company was temporarily amember of the DAIKYO <8840> Group, which is a major condominium developer. But it left the Group and started
independent management in 2007. Mr. Curtis Freeze*1, the owner and president of the former Prospect Co., Ltd.,
which had invested in the Company as a fund, was appointed as the representative director and president in2010. Since then, the Company has used M&A to expand its business to incorporate a public works construction
business*2 and custom-made homes business, and currently it is engaged in a wide range of businesses, including
a real estate development business (condominium sales, land and buildings), an asset management business, anda renewable energy business, including solar power generation.
*1	Mr. Curtis Freeze resigned from his post of representative director on December 13, 2018 to take responsibility for the
confusion caused by the delay in submitting the Company’s earnings report for the second quarter (the first half) of the
fiscal year ending March 31, 2019. Furthermore, he resigned from his post of director on June 27, 2019, in conjunction
with the Company’s transition to a company with an audit and supervisory committee from FY3/20.
*2	The construction business has not been included in the segments since FY3/20, because all the shares of a subsidiarywere sold in March 2019. Also, due to the resolution to liquidate a subsidiary in May 2019, the results of the asset
management business up to May 2019 will be reflected in the FY3/20 consolidated results, but not in subsequentconsolidated results. Both segments will be completely abolished by FY3/21.

1. FY3/20 1H consolidated results
In the FY3/20 1H consolidated results, net sales were ¥1,833mn (down 45.8% year-on-year (YoY), the operating loss
was ¥1,383mn (compared to a loss of ¥1,907mn in FY3/19 1H), the ordinary loss was ¥477mn (a loss of ¥1,483mn),
and the net loss attributable to owners of the parent was ¥536mn (a loss of ¥1,569mn). The most significant reason
for the operating loss was the recording of a large valuation loss by The Prospect Japan Fund Limited (hereafter“TPJF,” which on May 15, 2019, the Company passed a resolution to dissolve and liquidate), which was made asubsidiary in July 2017, due to decreases in the market values of the Fund’s holdings, which led to negative net
sales and an operating loss in the consolidated results. But apart from this, results trended steadily and basicallyas forecast in each business segment. Also, from the progress made in collecting loans, a reversal of the allowancefor doubtful accounts of ¥496mn was recorded in non-operating revenue, which meant that the ordinary loss was
smaller than the operating loss. The majority of the losses were ultimately from the valuation loss, not from losses
associated with an outflow of cash, so the impact on cash on hand was minimal.

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

01 11

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

Prospect Co., Ltd.

27-Dec.-20193528 Tokyo Stock Exchange Second Section

https://www.prospectjapan.co.jp/branch/index.html

Summary

2. FY3/20 forecast
The Company noted that it is engaged in the biomass related business in Russia, and also that its Asset Management
and Overseas Real Estate Development Businesses are important segments that tend to be significantly affected bychanges in economic conditions and the market environment, both domestically and abroad, and that it is extremely
difficult to properly forecast ordinary business results. Based on this, the Company has adopted a policy of notdisclosing results forecasts. Accordingly, the Company has not disclosed consolidated results forecasts for FY3/20,
but it plans to resume a dividend in FY3/20. Under this plan, the Company will establish mandatory targets for thepayment of an annual dividend of ¥1 per share, and conducted measures to improve results as well as transferringfrom the capital surplus to retained earnings, along with other moves, in order to pay this dividend.
Key Points
A conglomerate that conducts a wide range of businesses with a focus on those related to real estate, including
construction, investment advisory, and renewable energy• It is actively conducting M&A while developing the renewable energy-related business as the growth driver•㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼚㼑㼠㻌㼟㼍㼘㼑㼟㻌㼍㼚㼐㻌㼛㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻛㼘㼛㼟㼟㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻛㼘㼛㼟㼟㻌㻔㼞㼕㼓㼔㼠㻕

㻔¥㼙㼚㻕

㻔¥㼙㼚㻕
㻝㻤㻘㻜㻜㻜

㻥㻡㻤㻌

㻟㻤㻢㻌

㻞㻘㻜㻜㻜
㻙㻠㻟㻌

㻝㻡㻘㻜㻜㻜

㻜㻙㻝㻘㻡㻠㻟㻌

㻝㻞㻘㻜㻜㻜
㻥㻘㻜㻜㻜㻙㻞㻘㻜㻜㻜

㻝㻢㻘㻢㻞㻝㻌

㻙㻠㻘㻜㻜㻜

㻝㻢㻘㻣㻞㻠㻌
㻝㻠㻘㻝㻠㻟㻌

㻢㻘㻜㻜㻜㻙㻢㻘㻜㻜㻜

㻝㻝㻘㻢㻤㻤㻌
㻙㻤㻘㻜㻠㻝㻌

㻟㻘㻜㻜㻜㻠㻘㻥㻟㻣㻌

㻜㻙㻤㻘㻜㻜㻜
㻙㻝㻜㻘㻜㻜㻜

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤

㻲㼅㻟㻛㻝㻥

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

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

02 11

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

Prospect Co., Ltd.

27-Dec.-20193528 Tokyo Stock Exchange Second Section

https://www.prospectjapan.co.jp/branch/index.html██Company profile
Although it was originally a textile company, today it has become aconglomerate conducting a wide range of businesses, mainly realestate-related
The Company has a long history and its predecessor, Inami Kigyo Co. Ltd., was founded in Toyama Prefecture
in 1937. It subsequently changed its corporate name to Carolina Co., Ltd., in 1961, and was listed on the Tokyo
Stock Exchange Second Section in 1962. Then on entering the 1990s, it withdrew from the textile business andshifted to its mainstay businesses of condominium sales, and at the same time it joined the DAIKYO Group, which
is a major condominium developer.
After that, in 2007 it left the DAIKYO Group and started independent management. In 2010, Mr. Curtis Freeze, who
was the owner and president of the former Prospect, which had invested in the Company as a fund, was appointed
as the representative director, president and fund manager. In 2013, it made a wholly owned subsidiary of former
Prospect through an exchange of shares. In 2014, it merged with this former company through an absorption merger,
and at the same time, it changed its corporate name to the current name of Prospect Co., Ltd. During this period,
it diversified its business through conducting M&As to make consolidated subsidiaries of Sasaki House Co., Ltd.,and Kidoh Construction Co., Ltd., and it then launched a solar business in 2015. It also made a subsidiary of TPJF
from an exchange of shares, in July 2017.
*	TPJF was dissolved and liquidated on July 27, 2019, and all of the shares in Kidoh Construction were sold in March 2019.

HistoryYear

Major event

1937

Inami Kigyo Co. Ltd., was established in Toyama Prefecture

1961

Changed corporate name to Carolina Co., Ltd.

1962

Listed on the Second Section of Tokyo Stock Exchange

1990

Changed how the name was written in Japanese

1991

Entered an alliance with the DAIKYO <8840> Group

1993

Began sales of the Morris condominium series (Series No.1 Morris Kawasaki)

1994

Withdrew from the textiles business

1994

Moved head office from Toyama Prefecture to Shibuya Ward, Tokyo

2000

Moved head office to its current location (1-30-8 Sendagaya, Shibuya Ward, Tokyo)

2001

Changed corporate name to Gro-Bels Co., Ltd.

2007

Left the DAIKYO Group and began independent management

2010

Mr. Curtis Freeze was appointed representative director and president

2012

Acquired all the shares and made a consolidated subsidiary of Sasaki House Co., Ltd.

2013

Acquired all the shares and made a consolidated subsidiary of (former) Prospect Co., Ltd.

2013Entered into the overseas real estate-related business2014

Acquired all the shares and made a consolidated subsidiary of Kidoh Construction Co., Ltd.

2014

Conducted an absorption merger with a subsidiary, former Prospect, and changed its corporate name to Prospect Co., Ltd.

2015

Launched the solar power generation business (the first project: Asago Tachiwaki Solar Power Plant)

2017

Acquired all the shares and made a subsidiary of The Prospect Japan Fund Ltd. though an exchange of shares

2018

Mr. Masato Tabata was appointed representative director and president

2019

Sold all shares of Kidoh Construction Co., Ltd.

Source: Prepared by FISCO from the Company’s website

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

03 11

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

Prospect Co., Ltd.
3528 Tokyo Stock Exchange Second Section

27-Dec.-2019https://www.prospectjapan.co.jp/branch/index.html██Business overview
The Company is developing a wide range of businesses centeredon real estate and including housing, construction, and renewableenergy-related businesses
1. Main business activities
The Company discloses information on the following business segments; real estate development business, asset
management business, public works construction business, renewable energy business, and others. The real estatedevelopment business is further broken down into condominium sales, land and buildings, and custom-made homes.
(1) Condominium sales (% of total net sales in FY3/19: 77.5%)
The same as general condominium developers, in this business the Company purchases land and constructs andsells condominium units. They are sold under the GRO-BEL brand, which is derived from the former company
name. Net sales and segment profit fluctuate depending on the status of site purchases and other factors. It sold(delivered) 96 units in FY3/19.
(2) Land and buildings
This business includes the sales of residential land, detached housing, and buildings, but it mainly involves thesales of land and buildings that accompany sales of condominiums. For the land and buildings (including unfinished buildings) that are intended to be sold for condominiums, it mainly sells those properties in which it expects
to achieve profits (profitability) above the target, and it does not purchase and sell land and buildings for whicha sale (profits) was expected from the beginning. Consequently, net sales for FY3/19 have not been recorded.
(3) Custom-made homes (% of total net sales in FY3/19: 42.5%)
The main business area is Yamagata Prefecture, primarily for the construction outsourcing work and renovation
work of detached housing carried out by Sasaki House, which it made a subsidiary through an M&A. Sasaki
House has a history of more than 50 years in the residential housing business, but because it did not have a
successor to take over its business, it sold all its shares to the Company and became its subsidiary. In FY3/19,
it delivered 58 buildings.
(4) Asset management business (% of total net sales in FY3/19: -147.3%)
This is an investment advisory business that conducts the fund management (mainly for Japanese equities) thatwas previously conducted by the former Prospect. However, in July 2017, the Company acquired 100% of thelisted shares in TPJF, which was one of the management funds, in a share-for-share transaction, so currently theinvestor in TPJF is the Company itself. Net sales and profit fluctuate depending on the end-of-period valuations ofstocks held, and in some cases negative values end up being posted. In FY3/19, net sales of negative ¥7,273mn
were recorded. In May 2019, the Company passed a resolution to dissolve and liquidate TPJF, and the sharesit held have all been recorded in investment securities. Therefore, this business’ results up to May 2019 will bereflected in the FY3/20 consolidated results, but there will be absolutely no changes after that, and this segment
will be abolished in FY3/21.
(5) Public works construction business (% of total net sales in FY3/19: 126.1%)
The business includes the microtunneling projects and the pre-stressed concrete (PC) construction works carriedout by subsidiary Kidoh Construction. Because the Company sold all of its shares of Kidoh Construction in March
2019, the public works construction business will be abolished as a segment from FY3/20.
We encourage readers to review our complete legal statement on “Disclaimer” page.

04 11

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

Prospect Co., Ltd.
3528 Tokyo Stock Exchange Second Section

27-Dec.-2019https://www.prospectjapan.co.jp/branch/index.html

Business overview(6) Renewable energy business (% of total net sales in FY3/19: 11.5%)
The business model entails developing solar power generation projects, and selling the power generated toelectric power companies. On the points of generating profits (cash flows) from acquiring rights and conducting
investment, or from selling equipment, it can be said that the approach in this business is the same as for a rentalbuilding business. As of the end of September 2019, it had nine operational plants (the ratio of power generated
according to the Company’s share, 29.1MW), and currently three plants are under development.
(7) Others (% of total net sales in FY3/19: 0.9%)This business mainly entails leasing the condominiums owned by the Company.
2. Business features(1) The “investment” approach
As mentioned previously, at first glance the Company seems to be developing its businesses in different fields. But
in fact, fundamentally they are all based on the same approach, of acquiring (purchasing) land, rights, projects,
and so on, and then investing (capital) in them, and collecting the profits at a later date. This point can be said tobe a feature of the Company’s business development.
(2) Business diversification (the portfolio approach)On the other hand, the Company conducts various businesses, such as for custom-made homes and construction, via the subsidiaries it has acquired through M&A. The reason why it conducted these M&A is that in thecustom-made homes and public works construction businesses, it can recover its investment in a relatively shortperiod of time compared to in its other businesses such as condominium sales, and they can be said to be suitablefor diversifying business risk and the time spans for recouping its financial investment. In other words, currently
the Company conducts its various businesses based on a portfolio approach, rather than simply diversifying on
a line extending from its existing businesses or into related fields. This can also be said to be one of its features.

██Results trends
Posted an operating loss in FY3/20 1H due to the recording of avaluation loss at a subsidiary, but the impact of this had ended by
May and the outflow of cash was minimal• FY3/20 1H results(1) Profit and loss conditions
The main reason for the operating loss was the recording of a valuation loss (comparison of the end of December
2018, to July 27, 2019) due to the decreases in the market values of the shares held by TPJF, which was madea subsidiary in July 2017, and this led to the recording of negative net sales, and moreover an operating loss, inthe consolidated results. Therefore, the majority of the losses were ultimately from the valuation loss (non-cash),not from losses associated with an outflow of cash, so the impact on cash on hand was minimal.

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

05 11

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

Prospect Co., Ltd.

27-Dec.-20193528 Tokyo Stock Exchange Second Section

https://www.prospectjapan.co.jp/branch/index.html

Results trends

Also, in every business segment other than the asset management business, while they did not necessarily record
profits, their results trended basically as forecast in FY3/20 1H. Conversely, long-term loans receivable (¥554mn),
which in previous years had been classified into loans with the possibility of default and recorded as an allowancefor doubtful accounts, were completely collected, and alongside this, a reversal of the allowance for doubtful
accounts of ¥496mn was recorded in non-operating revenue, which kept down the ordinary loss to ¥477mn.
FY3/20 1H results(¥mn, %)
FY3/19 1H
AmountFY3/20 1H

Ratio to sales

AmountRatio to sales

YoY

Net sales

3,380

100.0

1,833

100.0

Gross profit

-609

-

-314

-

-

1,297

38.4

1,069

58.3

-17.6

Operating loss

-1,907--1,383--

Ordinary loss

-1,483

-

-477

-

-

Net profit (loss) attributable to owners of the parent-1,569

-

-536

-

-

SG&A expenses-45.8

Source: Prepared by FISCO from the Company's financial results(2) Conditions by segment
FY3/20 results by segment(¥mn, %)
FY3/19 1H
AmountFY3/20 1H
Change% change

3,380

100.0

1,833

100.0

-1,547-45.8

Condominium sales

1,472

43.6

1,643

87.3

171

11.6

Land and buildings

-

-

-

-

-

-

Custom-made homes

620

18.3

713

37.9

93

15.1

Asset management business-1,233-36.5-1,003

-53.3

230

-

Public works construction business

2,302

68.1

-

-

-2,302

-

321

9.5

470

25.0

149

46.6
-59.1

Net sales

Renewable energy business

Ratio to sales

AmountRatio to sales

19

0.6

7

0.4

-12

-1,907--1,383

-

524

-

53

-

66

-

13

25.9

Land and buildings

-

-

-

-

-

-

Custom-made homes

-28

-

-39

-

-11

-

-1,410--1,122-288-

Public works construction business

-45

-

-

-

45

-

Renewable energy business

77

-

144

-

67

87.4

3

-

2

-

-1

-9.6

-557

-

-434

-

123

-

OthersOperating loss
Condominium sales

Asset management business

Others(Company-wide expenses, etc.)

Source: Prepared by FISCO from the Company's financial briefing materialsa) Condominium sales
In FY3/20 1H, the Company executed new contracts for 26 units (62 units in FY3/19 1H) with a value of ¥1,190mn(¥2,527mn in FY3/19 1H), and delivered 34 units (37 units in FY3/19 1H). As a result, net sales were ¥1,643mn(up 11.6% YoY) and segment profit was ¥66mn (up 25.9% YoY).
b) Land and buildings
No contract results were recorded in FY3/20 1H.

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

06 11

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

Prospect Co., Ltd.
3528 Tokyo Stock Exchange Second Section

27-Dec.-2019https://www.prospectjapan.co.jp/branch/index.html

Results trendsc) Custom-made homes
In this business, the Company performs construction of detached homes, as well as related renovation work andother activities, in its main business area of Yamagata Prefecture. In FY3/20 1H, new contracts were made for 34
buildings worth ¥852mn (compared to 36 buildings worth ¥976mn in FY3/19 1H), and 20 buildings were delivered(compared to 13 in FY3/19 1H). The Company recorded net sales of ¥713mn (up 15.1% YoY) and segment lossof ¥39mn (a loss of ¥28mn in FY3/19 1H).
d) Asset management business
TPJF held shares as a fund business, but due to the resolution to dissolve and liquidate it on May 15, 2019, all
the shares it held were transferred to investment securities. Therefore, their valuations on this transfer date wererecorded in the FY3/20 1H results. As a result, net sales were negative ¥1,003mn and the segment loss was¥1,123mn (compared to net sales of negative ¥1,233mn and a segment loss of ¥1,386mn in FY3/19 1H). Dueto the resolution to dissolve the Fund, results in the future will not fluctuate greatly and the current values will berecorded as the full fiscal year results.
e) Public works construction business
All of the shares of Kidoh Construction, which conducts this business, were sold in March 2019. Therefore, thisbusiness segment was abolished, and it recorded no net sales or segment loss in FY3/20 1H.
f) Renewable energy businessIn this business, in which the Company sells the power generated by the solar power generation facilities it
manages to electric power companies, it recorded net sales of ¥470mn and segment profit of ¥144mn.
At the end of September 2019, the Company had nine projects in operation (Asago Project, Katori Project, Ushiku
Project, Kumamoto Yatsushiro Project, Rikuzentakata Project, Sendai Project, Utsunomiya Tokujiro Project, Higashi
Hiroshima Project, and Narita Kanzaki Project). The Company’s share of power generation at these projects is29.1 MW. It is also scheduled to acquire power from another three projects (total power generation,13.9 MW)that are being constructed up to July 2021.
g) Others
This business mainly involves the rental to general tenants of condominium and other properties owned by theCompany. The Company recorded net sales of ¥7mn (¥19mn in FY3/19 1H) and segment profit of ¥2mn (¥3mn
in FY3/19 1H).
(3) Financial position
Although a significant loss has been booked and the financial position is slightly worse off, it is not at a level ofconcern. At the end of FY3/20 1H, total assets were ¥32,784 million, up ¥1,029mn from the end of the previous
fiscal year. Current assets were ¥9,089mn, down ¥8,590mn. This was mainly due to declines of both ¥1,999mn
in cash and deposits and ¥7,740mn in securities. Meanwhile, non-current assets were ¥23,694mn, an increaseof ¥9,620mn. The main components of this change were increases in property, plant and equipment of ¥2,303mn
and in investments and other assets of ¥7,324mn (mainly from the transfer of the securities held for TPJF).
Total liabilities were ¥17,231mn, up ¥2,215mn from the end of the previous fiscal year. The main factors included
increases in accounts payable for construction contracts of ¥25mn, short-term loans payable, etc. of ¥1,603mn
and long-term loans payable of ¥262mn. Net assets were ¥15,552mn, down ¥1,185mn. This decrease wasmainly due to the transfer of capital surplus and retained earnings and the recording of a net loss attributable toowners of the parent.

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

07 11

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

Prospect Co., Ltd.
3528 Tokyo Stock Exchange Second Section

27-Dec.-2019https://www.prospectjapan.co.jp/branch/index.html

Results trends

Balance sheets(¥mn)
End of FY3/19

End of FY3/20 1H

Change

5,049

3,050

130

165

35

Securities

7,800

59

-7,740Real estate for sale

1,263

1,775

511

Real estate for sale in process

2,409

2,769

360

Real estate for development

442

40

-401

17,6809,089-8,5909,876

12,179

2,303

186

178

-7

4,011

11,335

7,324

Cash and deposits
Notes and accounts receivable - trade

Current assets
Property, plant and equipment
Intangible assets
Investments and other assets-1,999

230

6,411

6,180

Investments in capital

1,368

1,765

397

Long-term loans receivable

2,365

2,554

189

Non-current assets

14,074

23,694

9,620

Assets

31,75432,784

1,029

295

321

25

2,169

3,773

1,603
1,189

Securities

Accounts payable for construction contracts
Short-term loans payable, etc.

3,997

5,187

10,414

10,676262

Non-current liabilities

11,01912,044

1,025

Liabilities

15,016

17,231

2,215

Net assets

16,73815,552-1,185Current liabilities
Long-term loans payable, etc.

Source: Prepared by FISCO from the Company's financial results(4) Cash flow conditions
In FY3/20 1H, cash flow used in operating activities was ¥1,033mn. The main expenditures included the recordingof ¥418mn as a loss before income taxes, a decrease in the allowance for doubtful accounts of ¥496mn,
investment in silent partnerships of ¥110mn, investments in capital of ¥100mn, and an increase in inventoriesof ¥6.87mn. Conversely, the main income items included depreciation of ¥194mn and a decrease in investment
securities for sale of ¥1,011mn.
Cash flow used in investing activities was ¥2,823mn. The main expenditures included ¥2,314mn to purchaseproperty, plant and equipment and loan advances of ¥750mn, while the main income items included collectionof loans receivable of ¥555mn.
Cash flow from financing activities was ¥1,913mn, with the main income items including an increase in long-termborrowing of ¥1,898mn.
As a result, cash and cash equivalents during the period decreased ¥1,999mn, and cash and cash equivalents
at the end of FY3/20 1H were ¥3,050mn.

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

08 11

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

Prospect Co., Ltd.
3528 Tokyo Stock Exchange Second Section

27-Dec.-2019https://www.prospectjapan.co.jp/branch/index.html

Results trends

Cash flow statements(¥mn)
FY3/19 1H

FY3/20 1H

Cash flows from operating activities-3,249-1,033

Profit (loss) before income taxes-1,483-418

Depreciation

166

194

Increase (decrease) in allowance for doubtful accounts

34

-496

Increase (decrease) in provision for bonuses for directors

-725

-10

14

-110

Loss (gain) on investments in capital

-85

-100

Decrease (increase) in trade receivables

137

-68

Decrease (increase) in inventories

-212

-687

Loss (profit) on investment in silent partnership

Increase (decrease) in trade payables
Decrease (increase) in investment securities for sale
Cash flows from investing activities
Expenditure for the purchase of property, plant and equipment
Loan advances
Collection of loans receivable
Cash flows from financing activities
Net increase (decrease) in short-term borrowings

-329

13

-1,1191,011-2,877-2,823-2,059-2,314

-895

-750

7

555

1,105

1,913

2,304

1,898

546

-

-1,719-1

Net increase (decrease) in cash and cash equivalents-5,072-1,999Cash and cash equivalents at end of period

5,579

3,050

Proceeds from issuance of shares resulting from exercise of share acquisition rights
Dividends paid

Source: Prepared by FISCO from the Company's financial results██Outlook
Is aiming to be profitable for FY3/20 full year, even while results areunclear
1. FY3/20 forecast(1) Results outlook
The Company has not announced forecasts for the FY3/20 full fiscal year results, because it conducts a finance-related business (asset management) that tends to be greatly affected by factors such as economic conditions
and market conditions in Japan and overseas. The main reason it recorded a major operating loss in FY3/19 andFY3/20 1H was the recording of a valuation loss on the shares held (all Japanese shares) by a subsidiary, TPJF.
But it has already passed a resolution to dissolve and liquidate TPJF, so in the future, results will not change dueto this valuation loss. However, the impact of the negative net sales and the loss recorded in the FY3/20 1H willremain for the full fiscal year results. Therefore, the question for the FY3/20 full fiscal year results is how far can
the profits in the businesses other than the asset management business cover for the loss incurred in the 1H.
The Company has stated that it intends to “somehow become profitable and pay an annual dividend (scheduledas ¥1).”

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

09 11

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

Prospect Co., Ltd.
3528 Tokyo Stock Exchange Second Section

27-Dec.-2019https://www.prospectjapan.co.jp/branch/index.html

Outlook

When assessing the Company’s business results, as stated earlier, the Company’s businesses are widely dispersed
and there are some aspects where earnings can be recorded in a short time and other businesses where
retrieval takes time. Moreover, retrievals are not always booked as net sales, sometimes being recorded as
non-operating profit, or as an extraordinary gain, so the financial statements should probably be evaluated looking
at comprehensive profits, including extraordinary profit or loss, or cash flows and not just on operating profit andloss or ordinary profit and loss.
(2) Dividend forecast
As discussed above, the Company put off paying a fiscal year-end dividend because of the large loss posted in
FY3/19, thereby resulting in no dividend. However, the Company has stated that it wants to pay a dividend of atleast ¥1 in FY3/20, and the Company plans to pay this dividend by conducting transfer of capital (from capitalsurplus to retained earnings).
2. New business development:
Continuing on from its solar business within Japan, the Company has announced that it is entering into the biomass
fuel (wood pellets) manufacturing business in Russia as its renewable energy business. It has launched a joint-venturecompany with Russia’s RFP Group (Russia forest products group). Using as the raw material the sawdust andother such materials created within the wood processing plants owned by the RFP Group, it will construct a pellet
manufacturing plant at a site adjacent to these wood processing plants, and it intends to export the wood pellets
to biomass power generation plants in Japan. Customers are expected to mainly be biomass power generation
plants that use feed-in-tariffs (FIT).
For the progress made up to the present time, in May 2018 the Company started site preparation work for a pellet
manufacturing plant in Amursk in the Khabarovsk region of Russia. The plant was scheduled to begin operations in
the autumn of 2019, but due to the impact of bad weather and other factors, its scheduled completion has been
pushed back to February 2020.

██The medium- to long-term growth strategy
Actively conducting M&A while developing the solar business as thegrowth driver
1. Growth driver among the existing businesses
As previously explained, the Company develops various businesses, and while businesses such as condominiumand custom-made home sales stably generate cash flow, these businesses are not expected to achieve dramatic
growth within Japan, and rather, they are cyclical businesses that are affected by economic fluctuations.
Conversely, the solar business using FIT and the biomass power generation business can be expected to generatecash flow over the long term. It is anticipated that the biomass power generation business will grow to replace thesolar business and become a major growth field in Japan in the future. Therefore, it would seem that by supplying
the pellets that are the fuel used in this field, the Company can be expected to achieve growth for this business thesame as or greater than that of its existing businesses.

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

10 11

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

Prospect Co., Ltd.
3528 Tokyo Stock Exchange Second Section

27-Dec.-2019https://www.prospectjapan.co.jp/branch/index.html

The medium- to long-term growth strategy

2. M&A strategy
The Company’s M&A strategy is one more aspect that is supporting its growth. Previously, it has conducted M&A
in the custom-made homes and construction fields. Going forward also, it plans to actively conduct them when it
finds a candidate that satisfies its investment standards. It intends to raise the funds for M&A using methods thatit deems to be optimal in each case, including from its own funds, borrowing, share exchanges, and issuing newshares. On the other hand, if the Company judges that there is no prospect for a business to contribute to profit
growth, its policy is to sell it without hesitation and to respond quickly as the situation demands, just as it did recently
with the construction business.

██Shareholder return policy
Dividend expected to resume in FY3/20
The Company pays dividends in order to return profits to shareholders, but it has not formulated a specific basic
policy for it. In FY3/18, the Company paid an annual dividend of ¥4 per share, but it did not pay a dividend in FY3/19.
However, the Company plans to resume dividend payments in FY3/20, albeit a small annual dividend of ¥1 per share.

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

11 11

Disclaimer
FISCO Ltd. (“FISCO”) offer stock price and index information for use under the approval of theTokyo Stock Exchange, the Osaka Stock Exchange and Nikkei Inc.
This report is provided solely for the purpose of offering information, and is not a solicitationof investment nor any other act or action.
FISCO prepared and published this report based on information which it considered reliable;
however, FISCO does not warrant the accuracy, completeness, fitness nor reliability of thecontents of this report or the said information.
The issuers’ securities, currencies, commodities, securities and other financial instruments
mentioned in this report may increase or decrease in value or lose their value due to influence
from corporate activities, economic policies, world affairs and other factors. This report does
not make any promises regarding any future outcomes. If you use this report or any information
mentioned herein, regardless of the purpose therefor, such use shall be made based on yourjudgment and responsibility, and FISCO shall not be liable for any damage incurred by you asa result of such use, irrespective of the reason.
This report has been prepared at the request of the company subject hereto based on theprovision of information by such company through telephone interviews and the like. However,
the hypotheses, conclusions and all other contents contained herein are based on analysis
by FISCO. The contents of this report are as of the time of the preparation hereof, and are
subject to change without notice. FISCO is not obligated to update this report.
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may currently or in the future trade or hold the financial instruments or the securities of issuersthat are mentioned in this report.
Please use the information in this report upon accepting the above points.

◾ For inquiry, please contact: ◾

FISCO Ltd.
5-11-9 Minami Aoyama, Minato-ku, Tokyo, Japan 107-0062
Phone: 03-5774-2443 (Financial information Dept.)
Email: support@fisco.co.jp