■ Growth strategy 1. Business environment Considering the business environment surrounding the "AIAI Three Education Zones" developed by the AIAI group <6557>, AIAI NURSERY in the field of licensed nursery schools is expected to experience a large shift in nursery policies from 2024, as the organization responsible for child and family services was established in April 2023 with the aim of improving the quality of early childhood education and care, and as a response to the "unprecedented decline in the number of children" in Japan. However, despite the encouragement from the government, the saturated market feeling cannot be ignored due to the declining birth rate and the significant reduction in the number of newly opened nursery schools, taking into account factors such as the resolution of the waiting list problem in the industry. We also believe that the elimination of small-scale operating companies, considering the shortage of childcare workers, is a possibility to consider. On the other hand, the number of children with developmental disabilities is increasing even in the declining birth rate, and the demand for facilities for disabled children (child development support, medical child development support, after-school day services, visit support for nursery facilities, etc.) is rapidly increasing. Considering this situation, we believe that, not only is the business environment for AIAI PLUS and AIAI VISIT positive, the business environment for the "AIAI Three Education Zones", which provides integrated child care, therapeutic care, and education, is also favorable. 2. AIAI Group Mid-term Management Plan 2023-2025 The company formulated the AIAI Group Mid-term Management Plan 2023-2025 in May 2023, which incorporated a reconsideration of the position of the tech field, the construction of new business models such as nursery school visit support (AIAI VISIT) and early childhood education programs. The target figures are listed as sales of 12-13 billion yen and operating profit of 300-500 million yen in the final fiscal year ending March 2026, and cumulative investment of 680 million yen over three years. In the first term of the plan, ending in March 2024, sales and operating profit exceeded the final year target value, and the total number of children, the total number of visits to nursery facilities, and the total number of internal license holders all exceeded the plan. The growth strategy is progressing smoothly, and there is no major change in the basic strategy of maximizing group synergy through the "AIAI Three Education Zones". Regarding AIAI NURSERY, considering the situation in which the speed of opening licensed nursery schools is slowing down throughout the industry due to the resolution of the waiting list problem, the company will slow down the speed of opening new facilities with the maturity of the market in mind. However, in addition to continuing to expand into regions with high needs and high investment efficiency, the company will promote efforts to reorganize the industry. On the other hand, due to the growing demand for facilities for disabled children, AIAI PLUS will be developed as a pillar of growth after AIAI NURSERY, and the expansion of AIAI VISIT will be fully implemented in the Tokyo metropolitan area as a new business model. Regarding the expansion of AIAI VISIT, securing specialized visiting support personnel is an important point, so we will strengthen our approach from a variety of channels and promote the excavation of potential qualified persons. 7. Corporate-related initiatives In terms of financial and capital aspects, the company will continue to improve its self-capital and aim to support the stable growth of its business from a financial perspective. In terms of human capital, we will promote the creation of a work environment in which all employees at the facilities and offices can work comfortably and foster human resources. In AIAI NURSERY and AIAI PLUS, we will increase the options for work styles based on the preferences and stages of life of the employees working in the facilities, and establish a workplace environment where work and family can be balanced.

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At CREAL <2998>, the entire growth is led by "CREAL" and there will be no change in its role in the future. It will continue to pursue active marketing and IT investment. In addition, based on the situation where the partnership with SBI Holdings becomes more active, the mid-term goal is set for achieving an annual GMV of 80 billion yen and a total number of investors of 180,000 by the end of March 2027. In order to secure high-quality assets for investment, it has been decided to enter the hotel management business in May 2024.

The company's competitive advantage lies in having over 60,000 online users with a high repeat investment rate, or high loyalty. The key to growth is to make the most of those assets. Specifically, first, the "CREAL" user base of experienced investors, who are the source of growth, will be expanded through a partnership with SBI Securities. Next, in order to expand "CREAL" into a larger platform, it will focus on acquiring useful mass advertising to attract investment entry-level users. Large investors such as the wealthy and institutional investors will begin with the acquisition of licenses for the third and fourth businesses based on the special purpose companies law. With the acquisition of licenses, it becomes possible to organize cases using crowdfunding through SPC, and various fees such as off-balance properties and upfront fees can be immediately recorded as revenue. As a result, the company can achieve lightweight balance sheets and bankruptcy insulation. This is expected to improve the investment eligibility and expand the range and amount of investments, by encouraging the participation of not only individual investors but also financial institutions and institutional investors. In addition, the leverage effect of non-recourse loans can improve the yield of "CREAL" investors and the profitability of the company.

Meanwhile, the company is also focusing on face-to-face initiatives. This involves selling in bulk to institutional investors the target properties of funds assembled by "CREAL," while the company continues to be involved as an asset manager, thus continuing to generate revenue opportunities and increasing the sales of "CREAL PRO." In addition, it will propose (cross-sell) products as long-term asset formation for online investors and contribute to increasing the sales of "CREAL PB." By maximizing the use of the platform for "CREAL," which is the company's strength, it aims to increase revenue and profitability for each business. In the future, it aims to operate through a DX platform as an asset management company that responds to the investment needs of all customer segments, such as investment entry-level users, experienced investors, asset formation seekers, the wealthy, and institutional investors, and provide alternative assets centered on real estate to meet the needs of asset management.

In the future lineup of real estate-related products, in addition to the current special law 1st and 2nd type products, we plan to prepare special law 3rd and 4th type products. After that, we will continue to apply for licenses and approvals in order to handle target property change products and open-end type products. With target property change products, products that can change the target assets, such as adding or selling real estate, can be handled in the fund, and while the fund was repaid in the past by selling the acquired real estate, with this product, investment can continue without making reinvestment after redemption. Open-end type products allow investors to start and redeem investments at any time. Compared to the current situation, it will be a long-term investment and a product feature suitable for depositing, and the company believes that it can serve as a receptacle for deposits of up to ¥1000 trillion. In addition, we are considering products that fall under special law 3 and 4 for optional combination type products for the wealthy, and plan to expand them as products with tax benefits that can achieve the same effects as investing in physical real estate. Furthermore, we are considering products that directly lend to companies and funds as private credit types, especially for overseas cases where demand is expected. This will be a product that can be provided to individual investors regardless of the Japanese market situation.

As for the future product lineup related to real estate, we plan to prepare not only special law 1st and 2nd type products currently handled but also special law 3rd and 4th type products. Then, we will continue to apply for licenses and approvals to handle target property change type products and open-end type products. For target property change type products, we will handle products that can change the target assets, such as adding or selling real estate in the fund. While funds were previously repaid by selling the acquired real estate, these products will allow investors to continue investing without making reinvestment after redemption. For open-end type products, investors can start and redeem investments at any time. Compared to the present situation, they will be investment products suitable for long-term investment and depositing, and we believe that they can play a role as receptacles for deposits of up to ¥1000 trillion. In addition, we are considering developing products that fall under special law 3 and 4, optional combination-type products for the wealthy, and expanding them as products that offer tax benefits that can achieve the same effects as investing in physical real estate. Furthermore, we are considering developing products that directly lend to companies and funds as private credit types, especially for overseas cases where demand is expected. These products can be offered to individual investors regardless of the Japanese market situation.

In addition, the company is actively considering M&A as a means to expand its business operations overseas, in addition to expanding its membership base, excavating properties, and strengthening operational capabilities. We believe that such initiatives can strongly promote the expansion of the management foundation.

2. Entry into hotel operation business "CREAL HOTELS"

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For the company, the supply of high-quality hotels not only contributes to the growth of the hotel operation business but also leads to an increase in GMV. We expect to expand business opportunities through synergy with existing businesses such as "CREAL" and "CREAL PRO", and to earn revenue through the sale of small amounts to individual investors, the sale as a fund to institutional investors through "CREAL PRO", and continuous asset management. In particular, there is considered to be ample room to develop institutional and corporate investors. Therefore, we have obtained permission as a third and fourth operator based on the Notifiable Offering Regulations, and if crowdfunding using SPC isolated from bankruptcy becomes possible, it could lead to large-scale investment and increase profitability.

There are two sourcing patterns in the hotel operation business. One is to purchase an existing hotel and renovate it, such as by expanding rooms for inbound use. The other is to procure land and build a hotel. In any case, funding is necessary to acquire the hotel, and the company can raise funds through its main business of crowdfunding. This enables the company to overcome financial issues until stable operation is achieved, further expand its GMV, and perform hotel operation stably. Therefore, the company plans to handle hotels worth approximately 2-3 billion yen that can be supplied through crowdfunding and quickly put its business on track. The company aims to operate 20 hotels in three years.

(Writer: FISCO analyst Tomoichi Murase)