AlbaLink Co., Ltd.

The Company's customer acquisition relies heavily on search engine traffic to its web media, and since algorithms are subject to change without notice, there is a risk that a sharp decline in search rankings could reduce the number of customers acquired. As countermeasures, the Company is diversifying its acquisition channels through listing advertisements and TV commercials, but if its response to such changes is delayed, this could materially affect its business results.

Securing sufficient personnel in both quality and quantity is essential for continued business expansion, and there is a risk that recruitment could become difficult due to a rising job openings-to-applicants ratio or a decline in the Company's competitiveness. In particular, licensed real estate transaction specialists (takken) are limited in the labor market, and if the required number cannot be secured, it may become difficult to open new branches as planned, which could also disrupt the operations of existing branches. The Company is responding through expanded new graduate and referral recruitment, enhanced training programs, and AI adoption, but the shortage of licensed personnel is assessed as having a likelihood of occurrence: medium and impact: high.

Representative Director Kenji Kawada plays an important role in management decision-making and business execution, and there is a risk that if he becomes unable to continue his duties, this could materially affect the Company's business results. He is also a major shareholder holding 53.8% of the total issued shares, and if he were to sell his shares, this could also affect the market price and liquidity of the Company's shares. The Company is proceeding with delegation of authority and the establishment of an organizational management structure in line with the expansion of its business scale, but the degree of dependence remains high.

Due to the design of the semi-annual progressive commission bonus system, property handovers tend to be concentrated in the final month of the second and fourth quarters, particularly December, resulting in a structure where revenue and profit at each stage are recognized in a concentrated manner. If, for any reason, handovers are not completed by the end of December, revenue and profit expected in the fourth quarter could be pushed into the following fiscal year, which could increase volatility in quarterly business results.

The Ministry of Land, Infrastructure, Transport and Tourism's "from flow to stock" policy and various government and municipal measures addressing the vacant house problem may encourage new entrants into the used housing market, leading to a risk of intensifying competition in procurement and sales. Intensifying competition could result in a decline in gross margin and stricter consumer requirements. The Company is responding through strengthened marketing capabilities, new branch openings, and productivity improvements through AI adoption, but if the expected results are not achieved, this could affect its business results.

The Company relies on borrowings from financial institutions for procurement funds, and its interest-bearing debt ratio remains relatively high at 58.0% at the end of FY2023 (ending December 2023), 44.3% at the end of FY2024 (ending December 2024), and 42.0% at the end of FY2025 (ending December 2025). There is a risk that fundraising could become difficult, or that interest burden could increase, due to a decline in creditworthiness or changes in the financial environment. The Company is responding through inventory minimization utilizing sanwi transactions and thorough cash flow management, but if inventory becomes concentrated and fixed for an extended period, this could worsen cash flow.

There is a risk that market deterioration or other factors could make it difficult to sell properties at the expected price, resulting in a prolonged inventory holding period. The Company seeks to minimize inventory holding periods by conducting procurement settlement and sales settlement on the same day through the promotion of sanwi transactions, and has established a system for identifying discrepancies between sales plans and actual results using its operational system. However, if the holding period becomes prolonged, this could affect business results through reduced sales prices or lower capital efficiency.

The Company handles a large volume of personal information through its business activities, and if information leakage occurs due to human error or unauthorized acts/cyberattacks from inside or outside the Company, there is a risk of reduced creditworthiness and significant liability for damages. The Company has implemented countermeasures through the establishment of internal regulations, regular guidance to officers and employees, access control management, and the introduction and updating of security systems, but complete prevention remains difficult.

The Company holds a license under the Building Lots and Buildings Transaction Business Act (Minister of Land, Infrastructure, Transport and Tourism License (1) No. 10112, valid from March 9, 2022 to March 8, 2027) as the foundation of its business, and if the license is revoked or related laws and regulations are newly enacted, amended, or abolished, this would cause significant disruption to business operations. In addition, there is a risk that new regulations could be established for sanwi transactions and paid removal transactions through amendments or abolition of related laws and regulations. The Company has established a system for timely monitoring through coordination with its legal counsel and information gathering via industry associations.

Due to the nature of handling many properties with complications, litigation such as claims for partition of co-owned property tends to occur frequently, and multiple disputed cases currently exist. In addition, buried objects, soil contamination, structural defects, and similar issues may not be discovered through normal surveys, and if liability for contractual non-conformity (repair, price reduction, damages, contract cancellation, etc.) arises after handover, the associated costs could exceed the transaction profit. The Company is responding through thorough detailed interviews, continuous improvement of contracts, and coordination with its legal counsel, but if such cases become numerous, this could affect its business results.