■Outlook for Intellex <8940>

(3) Expansion of Advanced Investment Projects

As part of its medium-term growth strategy, the company aims to achieve sustainable growth by expanding market share through the introduction of innovative products such as the energy-efficient renovation 'Eco Cube' ahead of the industry in the fiercely competitive second-hand condo market, contributing to a comfortable living environment, saving electricity costs, and reducing CO2 emissions. Additionally, it aims to create a new revenue stream through the FLIE business to support digital transformation in the real estate circulation market. This will lay the foundation for long-term sustainable growth.

a) Towards the Expansion of 'Eco Cube'

The national regulations for energy-saving in housing are progressing for new homes, with guidelines for energy performance labeling under the revised Building Energy Efficiency Act published in September 2023. Energy performance labeling for new homes will start in April 2024, and from April 2025 onwards, compliance with energy-saving standards will be compulsory. This labeling system indicates the energy consumption, insulation performance, and approximate annual heating and lighting costs of a residence using specific labels.

Regarding existing homes, a study committee was convened, but the company had already independently calculated and made visible the energy efficiency of its product 'Eco Cube' before that. TEI Japan, a subsidiary of the company, conducted thermal calculations to visualize key performance indicators such as estimated heating and lighting costs and CO2 reduction. This allowed for comparison of energy efficiency values in residences. These efforts were recognized, and in December 2023, the company was selected as an operator for the Tokyo Housing Policy Headquarters' 'Tokyo Renovation Model House Project'.

Since the launch of 'Eco Cube' in January 2021, the product definition has evolved. Initially, products with insulation construction and high-efficiency ventilation systems were sold under the name 'Eco Cube.' However, starting from October 2023, in line with the new home guidelines, products with visible energy performance are now marketed as 'Eco Cubes' (even properties without insulation construction or high-efficiency ventilation systems achieve energy efficiency through measures like LED lighting or high-efficiency hot water systems, visualizing energy performance in an energy efficiency report). Furthermore, in the fiscal year ending May 2025, an upgraded version is planned by enhancing three performance aspects of energy-saving renovation (insulation performance, heat exchange ventilation performance, and energy consumption performance) through further technological developments, cost control, and shortened construction periods. This version will also consider achieving ZEH* levels. New construction methods for wall insulation and collaborative development with material manufacturers for floor insulation are underway, with patents pending. A new version of the heat exchange system will also be introduced through joint development with air conditioning equipment manufacturers by 2024.

* ZEH (Net Zero Energy House) is a type of housing that aims to achieve a net zero annual energy consumption balance through significantly improved insulation efficiency, high-efficiency equipment systems, the introduction of renewable energy, and maintaining indoor environmental quality. This involves reducing energy consumption while incorporating renewable energy sources, resulting in a net zero energy consumption balance over the year.

Moreover, the sales ratio of 'Eco Cube' was approximately 17% in the fiscal year ending May 2024, but 83% of the properties purchased after the third quarter of the fiscal year ending May 2024 were 'Eco Cubes', and it is expected that 'Eco Cubes' will account for the majority of sales after the fiscal year ending May 2025. In addition, the ratio of properties complying with the national energy-saving standards within 'Eco Cubes' is 10%, and the goal is to increase this ratio to 20% by the end of May 2025. Energy-saving compliant properties, in addition to benefits such as improving comfort and reducing utility costs, are also eligible for housing loan deductions, thus offsetting the high cost perception, leading to an expected increase in demand in the future.

* Properties eligible for housing loan deductions are those with a floor area of 50 square meters or more built after 1982 (new seismic standards).

b) FLIE Business

FLIE, a subsidiary of the company, operates a real estate buying and selling platform 'FLIE' where sellers (real estate companies) and buyers can conduct transactions directly with peace of mind. It also started offering the online-offline integrated real estate DX service 'FLIE ONE' from October 2023, which is expected to grow as a stable source of income in the future.

For 'FLIE', being a direct sales platform for sellers, the brokerage fee (approximately 3% of the transaction property price) is free, providing buyers with the advantage of acquiring homes at a lower cost than before. The number of listed pre-owned condominiums reached 2,000 in the Greater Tokyo area and a total of 3,000 nationwide by the end of May 2024, making it the largest scale in the industry (future openings planned only in the northern Kanto and Kai Shin areas). Sales through 'FLIE', including properties from other companies, have gradually increased to dozens of properties per month, contributing to an increase in fee income.

'FLIE ONE' integrates various services to support the operational efficiency of sellers and real estate brokerage companies. One of the key services, 'Furie de Botsaku', manages property information online, allowing 24-hour acceptance of property information verification and property viewing reservations, contributing to the efficiency of both sellers and brokerage companies, as well as reducing communication costs. Additionally, the self-viewing service 'Smaview' allows customers to make viewing reservations online anytime, completing all aspects from property search to on-site viewing on their smart phones (including unlocking rooms and auto-lock unlocking of shared areas). It has already been introduced by several major real estate brokerage companies.

Furthermore, it is expected that the utilization and expansion of 'Smaview' will advance. In May 2024, the company entered into a capital business alliance with CANDY HOUSE JAPAN, a company involved in the planning, manufacturing, and sales of smart locks, with plans to enhance 'Smaview' by providing a system for entry and exit management with logged records, enhancing security measures. It appears that the introduction to major monthly apartment operators has already been decided. In the case of monthly apartments, there was a need to replace keys every time a new tenant arrived, but by utilizing 'Smaview', the need for key replacement is eliminated, leading to cost savings and strengthened security measures, expected to contribute to future widespread adoption. It is also anticipated to have demand in industries other than the real estate industry, such as the logistics and construction industries. The company aims to monetize the 'FLIE' business in the fiscal year ending May 2025.

* The company underwrote a third-party allocation of shares for CANDY HOUSE JAPAN and invested 0.13 billion yen. CANDY HOUSE JAPAN, established in 2017, has shipped over 600,000 smart locks domestically and internationally.

(Written by FISCO guest analyst, Jo Sato)