Business Overview 4. DX Regional Collaboration Project Signpost's DX and Regional Collaboration Project started in March 2022 with the establishment of the DX and Regional Collaboration Division. It aims to provide products and services that contribute to regional collaboration by collaborating with local financial institutions nationwide, utilizing its own DX technology and open innovation. In August 2022, it began working with Oita Made Co., Ltd., which was established with the investment of multiple companies in Oita Prefecture, including Oita Bank, to sell original products made in Oita Prefecture to both domestic and overseas markets and to match local companies and Signpost's products and services in order to promote the revitalization of Oita Prefecture's economy. In addition, in April 2024, it started offering DX support services for medium-sized and small businesses. As the first effort, it supports the creation of DX declaration by (The) Fourth Hokuriku Bank, Ltd. (Niigata City, Niigata Prefecture) to deploy DX declaration support services to the market. Furthermore, it will realize new solutions by commercializing its own technology and open innovation and promote regional collaboration through innovation.

4. Company's Strengths

Kyobashi Art Residence <5536> strengths are in their network, product strength, and business development capabilities. Their network also extends to strengths such as promotion, planning, supervision, and a comprehensive system. With such strengths, they are able to develop and sell niche real estate, 4-5 stories and 8-14 units, in high-demand areas within the 23 wards of Tokyo at an affordable price range of 0.3 billion to 0.5 billion yen, and achieve a high operating income ratio. These strengths have also become a source of improved recognition and credibility, supporting the company's growth.

Their network further creates a strong initiative to deploy their business in approximately two years from development to sales, including defect and resident countermeasures, enabling them to generate strong planning power around the construction planning department within the company, and further leading to strong supervision of their cooperative companies from land acquisition to design and construction, sales and rental. As their reputation and trust increased, their relationships with real estate agents, banks, securities firms, tax accountant offices, and accounting firms also developed. These companies and offices are the target of their affluent customers, not only introducing customers, but also generating financial, tax, operation, and asset disposal needs through transactions with the company, resulting in a complementary relationship. However, they continue to have an advantage in their network with wealthy customers as well as network and information exchange with competitors. In particular, competitors often fall into a general competitive position, but in the niche market of asset formation for rental apartment residences, collaboration and mutual prosperity is achieved through information exchange, such as customer and sales price information. Although the company's business type is similar to that of a newly-built investment condominium, Tasci, which was merged with the asset management-based Shin-Nihon Kenzobutsu in April 2024 to become a larger joint-stock holding company Tasci Holdings <166A>, it is considered that this is more advantageous in terms of enhancing information power than as a threat to the company. In order to further strengthen such network power, they have established an information development department in April 2024 for the purpose of strengthening relationships with trading partners such as joint ventures, business alliances, and capital alliances. Additionally, in June, they partnered with Akatsuki Honten Group, which operates securities-related businesses and real estate-related businesses, to jointly develop asset formation, revenue-generating rental apartments, and it is also expected to strengthen their network for wealthy customers.

However, networks like this cannot be utilized as strengths without product strength and business development capabilities. Therefore, the company is enhancing its product strength by developing products with high design, asset value, and stable supply, such as developing soundproof apartments for musicians, YouTubers, and gamers, with the support of companies such as Trunk Room and Car Share, and providing RASICLAS (RASICLAS) soundproof apartments. Additionally, the company is continuing to introduce DX in real estate development, such as partnering with real estate tech companies, to improve productivity and efficiency, and achieve a relatively high operating income ratio. They are also investing in start-ups, considering synergies with their own company, and investing in Effectual, which specializes in DX of location information management online, to strengthen their business development capabilities. Furthermore, in ESG-related businesses, their network with various industries that they have built up by continuously tackling environmental and social issues has become a strength.

Strengthening planning and development personnel to achieve growth.

5. Company challenges.

The biggest challenge to further leverage their strengths is believed to be securing and nurturing personnel. Going public has reinforced the management personnel side, and measures to enhance internal control, risk management system and compliance have been strengthened. There are plans to strengthen the personnel in development and planning in the future. In particular, the policy is to stabilize and increase the development and delivery of new condominiums, where there is very large development potential due to the small number of companies entering this niche market. In addition, the financial structure of having inventory of 5.6 billion yen and debt of 7.2 billion yen against total assets of 9.3 billion yen (as of 2nd quarter of November 2024) could also be considered a challenge. However, considering that inventory itself is tied to project financing and that our network with financial institutions has become stronger, it is believed that an increase in inventory and debt is not a problem with business expansion. However, financially, it is necessary to secure revenue from inventory (and ideally increase inventory turnover rate) and improve the self-capital ratio in the future. In addition, it may be a challenge to consider other procurement methods, such as equity finance, as debt tied to inventory increases with business expansion.

(Author: FISCO guest analyst Nobumitsu Miyata)