■ 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.

1. Growth Strategy

At CREAL <2998>, overall growth is driven by "CREAL", which leads to a policy of continuing active marketing and IT investment. Considering the significant impact of the partnership with SBI Holdings on performance expansion, a mid-term target of achieving an annual GMV of 80 billion yen and a cumulative number of investors of 0.18 million by the fiscal year ending March 2027 has been set. To secure excellent Asset Management revenue towards this goal, the decision to enter the hotel operation business in May 2024 has been made, along with advancing business partnerships with leading companies.

The company's competitive advantage lies in having over 0.08 million loyal users who maintain a high repeat investment rate online, and maximizing these assets will be key to growth. Specifically, the number of "CREAL" users from the investment experience layer that serves as the source of growth will be expanded through partnerships with SBI Securities. Next, to grow "CREAL" into a larger platform, efforts will focus on acquiring users from the inexperienced investment layer (investment entry layer) through effective mass advertising. The engagement of large investors such as affluent individuals and Institutions will begin with obtaining licenses for Type 3 and Type 4 business operators under the Special Investor Protection Act. By acquiring these licenses, project formation for crowdfunding using SPCs will be possible, allowing for immediate revenue recognition of various fees such as off-balance property and upfront fees, facilitating the Lightweight of the company's balance sheet and bankruptcy isolation. This is expected to enhance the eligibility of investment targets and promote participation from individual investors as well as financial institutions and Institutions, significantly expanding the breadth and amount of investment. Additionally, the yield for "CREAL" investors is expected to improve due to the leverage effect of non-recourse loans, which will also enhance the company's profitability. The company prioritizes obtaining this license.

On the other hand, there is also a focus on face-to-face initiatives. This involves bulk selling the properties that are the targets of the funds formed by "CREAL" to Institutions, with the company continuing to act as an Asset Manager to sustain revenue opportunities and increase the sales of "CREAL PRO". For online investors, long-term asset formation products will be proposed (cross-sold) to "CREAL" customers, contributing to the growth of "CREAL PB" revenue. The service is attracting attention as a corporate investment target due to the partnership with SBI Holdings, leading to an emphasis on responding to corporate clients.

In this way, by maximizing the platform characteristics of "CREAL," the company aims to increase revenue and profits for each service. In the future, it plans to efficiently meet the investment needs of all customer segments, including inexperienced investors, experienced investors, asset-building segments, affluent individuals, and Institutions through a DX platform, providing a wide range of alternative assets centered around real estate to meet asset management needs.

In addition to expanding the member base, strengthening property discovery and operational capabilities, the company is also actively considering M&A with an eye toward overseas business development. It is believed that these initiatives will strongly promote the expansion of the management foundation.

2. The hotel operation business "CREAL HOTELS" has begun.

The company announced its entry into the hotel operation business "CREAL HOTELS" on May 14, 2024, and established CREAL HOTELS on July 19 of the same year. The continuous growth of the company is essential for the increase in GMV, which requires high-quality assets. In addition to the rapid expansion of inbound demand leading to a surge in hotel needs, the Japanese government's target of 60 million foreign visitors to Japan and 15 trillion yen in consumption by 2030 further supports the anticipated increase in hotel demand. As there are few hotels accurately capturing inbound needs, the company entered the hotel operation business, which could become its fourth pillar. Targeting "limited/self-service × mid to high price range," the company plans to leverage its strengths in DX to offer innovative and flexible customer experience values through the development of high-grade apartment hotels, serviced apartments, and tourist-type villas, etc.

On November 13, 2024, as the first step, the company announced the operation of two properties under the new brand "LACER" in the high-demand inbound area of Okinawa and Naha. The two facilities, "LACER OKINAWA NAHA MIEBASHI" and "LACER OKINAWA NAHA TOMARIPORT," are scheduled to open simultaneously in late January 2025. Both have been acquired from existing hotels and rebranded to "LACER," with enhancements made to accommodate the growing demand for group stays preferred by inbound foreign guests, such as increasing the number of beds per room. The company is also advancing eight other projects, and based on these operational achievements, it is considering the future expansion of higher-priced hotel brands.

In the hotel operation business, two sourcing patterns are handled to pursue synergies with existing services. The first is to purchase existing hotels and implement renovations such as expanding rooms for inbound guests. In this case, a fund will be formed by "CREAL" to expand GMV, continuing the hotel operation business even after generating revenue through an exit while acquiring regular fees. The second is to procure land and construct hotels. Here, a fund will be organized under "CREAL PRO" for professional investors, with joint operations with investors planned while looking for exit opportunities. Future contracts for hotel operations are also anticipated. As inbound demand continues to increase year by year, it is expected that the number of professional investors, such as institutions interested in hotel property investment schemes, will increase, and alongside the company's growing recognition, demand for services is expected to rise.

3. Business partnership with TAT.

On November 14, 2024, it was announced that a business partnership with TAT would be established, and TAT would become an equity-method affiliate of the company in December of the same year. TAT is primarily engaged in hotel operation business as well as real estate development, planning, and design, and particularly has numerous development and operational achievements in long-stay apartment hotels targeted at inbound guests that the company aims for. With innovative concepts and brand strategies that respond to the next generation, TAT has strengths in the integrated development of planning, design, and operation considering economic rationality and customer growth strategies, thus expected to be a strong partner in the company’s hotel operation business.

The company is expecting significant synergy with existing businesses from this partnership. Effective support from TAT is anticipated in sourcing both existing hotels operated by TAT and new hotels in fund formation, which is expected to improve profitability. Particularly in "CREAL PRO," partnering with prominent institutions could lead to an increase in the number and scale of funds co-organized with TAT, as well as strong backup from TAT in hotel operation business during fund management and post-exit. In "CREAL HOTELS," there are expectations for cooperation in forming funds, enhancing and expanding hotels targeting inbound guests, developing hotel operational capabilities, and mutual support for potential operation candidates. By enhancing hotel operation know-how through the partnership with TAT and actively pursuing synergies with existing businesses, the goal is to expand the revenue base and achieve further growth.

(Writer: FISCO analyst Tomoichi Murase)