Efforts towards enhancing shareholder returns and corporate value.

1. Initiatives for shareholder return.

Wave Lock Holdings ＜7940＞ aims for a dividend payout ratio of over 35% as a shareholder return policy while maintaining stable dividends that are not swayed by changes in annual performance. The company also considers shareholder returns that include Stock Splits and share buybacks depending on the circumstances. Based on this basic policy, the dividend per share for the fiscal year ending March 2025 is expected to remain the same as the previous year at 30.0 yen (dividend payout ratio of 57.5%, annual dividend yield of 4.9%*). If the performance from the fiscal year ending March 2026 onward aligns with the medium-term management plan (Net income of 800 million yen for the fiscal year ending March 2026, 1000 million yen for the fiscal year ending March 2027), the dividend payout ratio may likely fall below 35%, necessitating a review of dividend increases. If the number of shares issued remains unchanged, the Net income per share for the fiscal year ending March 2027 is projected to be 118.5 yen, resulting in a dividend of 41.5 yen per share if the payout ratio is set at 35%.

* Calculated based on the closing stock price of 614 yen on November 8.

Aiming for an ROE that exceeds the cost of capital by enhancing profitability and acquiring growth.

2. Efforts towards enhancing corporate value.

The company's PB has long been below 1 (the BPS at the end of the interim period for the fiscal year ending March 2025 is 1,941 yen, PB is in the 0.3 range), and improving this status by enhancing corporate value is considered one of the important management issues. The sustained level below PB of 1 is due to the fact that the level of ROE is at 2.9% for the fiscal year ending March 2024, significantly below the company's cost of equity (around 6%), coupled with the low growth and profitability of the Materials Solutions business, which is its main business, causing a poor transmission of future growth images to investors.

In this context, the company aims to enhance corporate value by: (1) steadily executing a new medium-term management plan, expanding existing businesses focused on growth areas, and creating new business expansion routes through M&A, thereby acquiring profitability and growth; (2) by basing investment judgments on exceeding the cost of capital, appropriately allocating management resources; (3) keeping capital costs low through the utilization of low-cost interest-bearing debt. The company strives to increase profitability while raising the ROE to 6.3%, a level comparable to the cost of capital, by the fiscal year ending March 2027. At the same time, in line with the dividend policy, a review of dividend increases in accordance with performance improvements will be pursued, and through investor relations activities, appropriate disclosures and dialogues with shareholders and investors aim to enhance recognition of the company's growth potential, targeting PB above 1. It is believed that the steady expansion and enhancement in profitability of Metal decorative films and parts molded products for Automobiles, which will be the medium-term growth drivers, will naturally elevate long-term growth expectations for the company's performance, which is a point of focus.

(Written by FISCO guest analyst, Jo Sato)