Medium-to-long-term growth strategy and topics.

1. Announced a 3-year management plan to expand business areas beyond the guarantee area.

Jaylease (7187) announced a 3-year management plan, with the first fiscal year in 2025 and the last fiscal year in 2027. The new medium-term vision aims to be a "company that connects people with credit" beyond the guarantee area. While aiming for further expansion in the core businesses of residential and business rental guarantee, it shifts towards establishing multiple pillars including nurturing businesses (real estate brokerage business: subsidiary Asmirai, medical cost guarantee, child-rearing cost guarantee), and new businesses (IT and system business: business development centered on subsidiary EAVIS, etc.), while assuming further expansion.

2. Numerical targets for the 3-year management plan: Revenue exceeding 20 billion yen in the fiscal year ending March 2027, operating profit exceeding 3.4 billion yen.

The 3-year management plan aims for aggressive growth and has set high numerical targets. Aim for 21170 million yen in revenue (average annual growth rate of 17.0%) and 3465 million yen in operating income (same 10.0%) in the fiscal year ending March 2027. In terms of revenue and operating profit margins, it is expected to decline slightly from 16.4% in the fiscal year ending March 2024 (19.7%). This is because it takes into account the risk of the guarantee business assuming that the special factors of the corona disaster (generous subsidies, etc.) will disappear. Along with profit growth, we also plan to achieve a self-capital ratio of 50% or more at the end of the fiscal year ending March 2027. At the same time, we aim for a certain level of capital efficiency. We plan to achieve an ROE of approximately 20-35%. Against the backdrop of profit growth, we plan to enhance shareholder returns and aim for continuous increases while maintaining a dividend payout ratio of around 40%.

3. M&A: Acquiring EAVIS as a subsidiary and entering the IT system industry.

On April 30, 2024, the company acquired 100% of EAVIS's outstanding shares. As the new medium-term vision shows, this is the first expansion outside the guarantee area. EAVIS is a system company founded in Oita City, Oita Prefecture in 1997, and the two companies have been doing business through system development. Although it develops various software, it is the industry leader in developing and selling package software for environmental inspection agencies, as well as maintaining operations, and has a transaction base all over the country. In addition, the "Monitoring System" for hospitals and nursing homes/home care has received high evaluations worldwide and has established international sales channels in Thailand, Malaysia, Vietnam, and other countries. Both companies are expected to have synergistic effects. For the company, it can advance guarantee business DX more than ever before and create an advantage. Furthermore, in the future, it can utilize EAVIS's foundation in overseas expansion. For EAVIS, business opportunities will expand by utilizing the customer base such as the real estate industry. The biggest asset of EAVIS is human capital, with 68 employees, mainly system engineers. As for the future business structure (officers) and business strategy, the company intends to follow the existing policy and emphasize autonomy. Actual sales for the recent period were 170 million yen. This is due to the special demand during the corona disaster, and we expect sales of 118 million yen in the fiscal year ending March 2025. In the 3-year management plan, we aim for sales of 172 million yen in the fiscal year ending March 2027.

4. Plan for core businesses and existing businesses in the 3-year management plan.

(1) Residential rental guarantee

For the main residential rental guarantee business, we will further strengthen our industry-leading store network, connect all parts of Japan and implement an even more detailed regional strategy. In terms of resource allocation, we will focus on metropolitan areas with high expansion potential and allocate personnel to improve market share. The number of stores will increase by 11 to 47 (currently 36 in 33 prefectures) in the fiscal year ending March 2027, bringing us closer to full coverage of all 47 prefectures. The market growth rate for the residential rental guarantee industry is about 3% per year (estimated by the company), but we aim to grow at an annual rate of 12.5% and aim for a sales scale of 1,110 million yen in the fiscal year ending March 2027.

(2) Business rental guarantee

In the field of rental-property guarantees, there is an expanding need amid the continuing unstable economic environment. The company aims to be the industry leader through its 'No.1 store network,' 'specialized credit screening, sales, and receivables management for rental-properties,' 'development of large-scale and investment-grade properties,' and 'cultivation and strategic placement of human resources.' While the company has previously targeted small and medium-sized shops and offices, there is considerable room for growth by expanding into large offices and commercial facilities. The market growth rate for the rental-property guarantees industry is roughly 14% annually (as estimated by the company); however, the company aims to grow at a rate of 17.3% annually and achieve a sales target of 520 million yen by March 2027.

(3) Promotion and cultivation businesses: medical expense guarantees.

While the medical expense guarantees market is still in its infancy, its potential is significant, with a potential market size of around 100 billion yen. The drivers of market growth are believed to be the 2020 revision of the Civil Code and the shortage of medical professionals. A promising product is a 'guarantee service for outstanding hospitalization fees and other medical bills,' which the company has independently developed specifically for medical institutions. The company aims to grow this business at a rate of 30.1% annually and achieve a sales target of 2.2 billion yen by March 2027.

(4) Promotion and cultivation businesses: real estate-related businesses (Asmira).

In the real estate-related businesses, the subsidiary Asmira plans to grow through foreigner-focused real estate brokerage and renovation resales. Asmira's strengths include foreign staff, monthly apartment management, synergy with the parent company, and more. The company aims to grow this business at a rate of 7.2% annually and achieve a sales target of 55 million yen by March 2027.

(Written by FISCO Guest Analyst, Hideo Kakuta)