Tokyu Construction / 1720

COVERAGE INITIATED ON: 2020.05.21 LAST UPDATE: 2021.07.12 Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is to provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will always present opinions from company management as such. Our views are ours where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at [email protected] or find us on Bloomberg.

Research Coverage Report by Shared Research Inc. Tokyu Construction / 1720 RCoverage LAST UPDATE: 2021.07.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

INDEX

How to read a Shared Research report: This report begins with the trends and outlook section, which discusses the company’s most recent earnings. First-time readers should start at the business section later in the report.

Executive summary ------3 Key financial data ------5 Recent updates ------6 Highlights ------6 Trends and outlook ------8 Quarterly trends and results ------8 Long-term management plan ------15 Vision 2030 and Long-term management plan “To zero, from zero” ------15 Long-term management plan “To zero, from zero” ------16 Business strategy ------19 Business ------26 Business description ------26 Segments ------29 Market and value chain------37 Construction market in Japan ------37 Main competitors ------42 Strengths and weaknesses ------51 Notable projects ------53 Historical performance and financial statements ------59 Income statement ------59 Balance sheet ------60 Cash flow statement ------61 Historical performance ------62 Other information ------69 History ------69 News and topics ------73 Corporate governance and top management ------74 Dividend policy ------76 Major shareholders ------76 Employees ------76 Profile ------77

02/78 Tokyu Construction / 1720 RCoverage LAST UPDATE: 2021.07.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Executive summary

Business overview

◤ Tokyu Construction is a second-tier general contractor (see paragraph below). A member of the Tokyu Group, Tokyu Construction is an equity-method affiliate of Tokyu Corporation (TSE1: 9005), which owns a 15.3% stake in the company (including indirect holdings). Most revenue comes from private-sector construction projects. In FY03/21, the Building Construction segment accounted for 66.2% of consolidated revenue. The Civil Engineering segment, which includes railway construction, accounted for 32.7%, and the Real Estate segment provided 1.1%. Nearly 20% of construction orders come from other companies in the Tokyu Group. Tokyu Construction focuses on areas along Tokyu train lines, from the southwestern part of Tokyo’s 23 wards to northern Yokohama.

◤ A general contractor is a construction company that accepts all-in contracts for building construction and civil engineering work. After receiving such contracts from companies or government/municipal bodies, general contractors subcontract work to specialized construction companies (subcontractors), managing the overall process. The scale of business is large; revenues from individual projects may run from billions to tens of billions of JPY. Construction periods on office building, railway, or roadway projects typically last from one to three years. Private-sector construction tends to be vulnerable to fluctuations in the operating environment. Public-sector projects tend to be more stable, with government entities continuing to place orders even in economically difficult times. The Japanese construction industry has been growing in recent years, benefiting from increased investment in construction, notably for business related to the Tokyo Olympics. Once this private-sector demand slows down, the company expects general contractors to prioritize relatively solid demand involving public-sector and overseas projects, and expansion of non-building construction business.

◤ The Building Construction segment accounted for 66.2% of consolidated revenue (FY03/21). In this segment, the company constructs buildings throughout Japan, including office buildings, government offices, and schools. Operating in a buoyant construction market, recently the company has constructed a number of major office buildings near Shibuya Station. Notable projects include Shibuya Hikarie (completed in 2012), Shibuya Scramble Square (completed in 2019), Shibuya Stream (completed in 2018), and other high-rise office buildings that are part of a Shibuya Station redevelopment project. The company has a sales team that concentrates specifically on the Shibuya area. This team has been instrumental in such projects as Qfront (1999), which is a landmark near Shibuya’s Hachiko crossing, and Shibuya 109 (1979). The company has also handled projects for educational institutions, such as Tokyu-affiliated Asia and Tokyo City universities, as well as Nippon Sport Science University.

◤ The Civil Engineering segment generated 32.7% of consolidated revenue (FY03/21). In this segment, the company focuses on businesses characterized by stable demand and good profitability, such as railway and road construction. Tokyu Construction says it has industry-leading technological expertise in these areas. Recent railway construction projects include continuous elevated railway work near Keikyu Kamata Station (completed in 2016) and subway construction on the Tokyu Toyoko Line between Shibuya and Daikanyama (2014). The company explains that its railway construction technologies allow it to build complex multilevel crossings, and that it has earned a strong reputation for sophisticated technologies that enable new routes to be built at night without interfering in the operation of existing routes. Road construction projects include the Atsugi Minami Interchange on the Shin-Tomei Expressway (2018) and the Ohashi Junction on the Shinjuku Line of the Metropolitan Expressway Central Circular Route (2010).

◤ Key overseas projects include the Jakarta Mass Rapid Transit Project (completed in 2019, Indonesia), the Bangkok MRT Purple Line (completed in 2014, Thailand), the Vo Nguyen Giap Road (2014, Vietnam), and the Causeway Point Shopping Center (2012, Singapore). Civil engineering work tends to be concentrated on ODA projects. In recent years, the company has focused on obtaining orders for high-rise buildings.

◤ In March 2021, the company formulated its corporate vision for 2030, “Vision 2030,” and in May 2021, it announced its 10- year long-term management plan, “To zero, from zero,” aimed at achieving Vision 2030. The company plans to invest JPY170bn in core and strategic businesses over the next ten years, aiming to achieve an operating profit of at least JPY22.0bn and ROE of 10% or higher in FY03/30. It also revised its shareholder returns policy. The company plans to pay dividends based on a dividend on equity (DOE) of at least 4.0%, which strikes a balance between the medium-term target

03/78 Tokyu Construction / 1720 RCoverage LAST UPDATE: 2021.07.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

of a minimum 10% ROE and consolidated dividend payout ratio of at least 40%. This is aimed at stabilizing the dividend amount and improving shareholder returns, taking into consideration capital efficiency. The company also plans to buy back shares flexibly, also taking into account capital efficiency.

Earnings trends

◤ In FY03/21, revenue was JPY231.5bn (-28.1% YoY), operating profit was JPY3.6bn (-82.5% YoY), recurring profit was JPY4.9bn (-77.7% YoY), and net income attributable to owners of the parent was JPY2.7bn (-82.2% YoY). While public- sector construction investment remained strong, private-sector construction investment declined as companies further scaled back or changed their business plans in the wake of the COVID-19 pandemic.

◤ The company’s FY03/22 forecast calls for revenue of JPY285.0bn (+23.1% YoY), operating profit of JPY7.0bn (+97.2% YoY), recurring profit of JPY7.3bn (+49.3% YoY), and net income of JPY4.8bn (+81.3% YoY). Based on its long-term management plan “To zero, from zero.” (announced on May 12, 2021), the company will position its domestic civil engineering, building construction, and building renovation businesses as its core businesses, and its international, real estate, and new businesses as its strategic businesses. Additionally, with human resources and digital technologies as sources of competitive advantage, the company will aim to sustainably improve both financial and nonfinancial corporate value by implementing five key strategies centered on delivering three values (decarbonization, zero waste, and disaster prevention and mitigation).

Strengths and weaknesses

Shared Research identifies three strengths at Tokyu Construction: 1) nearly 20% of revenue due to business opportunities via the Tokyu Group, 2) a strong track record of projects completed in Shibuya and along the Tokyu lines, and 3) abundant experience with railway construction, which helps ensure stable earnings during economic doldrums. We also see three weaknesses: 1) outdone by super general contractors in its record for high-value-added construction work (such as large sports facilities, art museums, and long bridges), 2) a low percentage of revenue from public-sector civil engineering projects, which tend to be more profitable than private-sector construction and feature stable demand, and 3) despite a maturing domestic market, slow to build overseas and real estate businesses.

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Key financial data

Income statement FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 FY03/22 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Est. Revenue 227,843 228,570 226,164 262,815 296,393 243,618 320,711 331,437 322,170 231,483 285,000 YoY -7.0% 0.3% -1.1% 16.2% 12.8% -17.8% 31.6% 3.3% -2.8% -28.1% 23.1% Construction (completed work) 222,149 226,784 223,969 260,454 294,063 237,749 318,707 329,548 320,083 229,016 Real Estate 5,694 1,786 2,195 2,360 2,329 5,869 2,003 1,888 2,086 2,467 Gross profit 12,271 12,002 13,241 16,968 31,088 30,344 35,720 36,073 36,173 18,170 YoY -36.0% -2.2% 10.3% 28.1% 83.2% -2.4% 17.7% 1.0% 0.3% -49.8% Gross profit margin 5.4% 5.3% 5.9% 6.5% 10.5% 12.5% 11.1% 10.9% 11.2% 7.8% Construction (completed work) 11,678 11,406 12,480 17,049 30,511 28,648 35,126 35,900 35,885 19,343 Real Estate 592 595 760 -80 577 1,695 593 172 288 -1,172 Operating profit 1,572 1,154 2,630 6,009 18,178 17,211 21,416 21,987 20,315 3,549 7,000 YoY -79.3% -26.6% 127.9% 128.5% 202.5% -5.3% 24.4% 2.7% -7.6% -82.5% 97.2% Operating profit 0.7% 0.5% 1.2% 2.3% 6.1% 7.1% 6.7% 6.6% 6.3% 1.5% 2.5% Recurring profit 1,884 2,301 3,559 8,024 19,768 18,839 22,128 22,932 21,969 4,891 7,300 YoY -75.9% 22.1% 54.7% 125.5% 146.4% -4.7% 17.5% 3.6% -4.2% -77.7% 49.3% Recurring profit 0.8% 1.0% 1.6% 3.1% 6.7% 7.7% 6.9% 6.9% 6.8% 2.1% 2.6% Ne t inc o me 1 , 79 9 -566 2,685 5,805 13,340 13,691 16,118 15,504 14,903 2,647 4,800 YoY -56.0% - - 116.2% 129.8% 2.6% 17.7% -3.8% -3.9% -82.2% 81.3% Net margin 0.8% - 1.2% 2.2% 4.5% 5.6% 5.0% 4.7% 4.6% 1.1% 1.7% Per share data (split-adjusted; JPY) Shares issued (year-end; '000) 106,761 106,761 106,761 106,761 106,761 106,761 106,761 106,761 106,761 106,761 EPS 16.9 -5.3 25.2 54.4 125.0 128.3 151.1 145.4 139.8 25.0 45.9 EPS (fully diluted) 12.2 ------Dividend per share 3.0 - 5.0 13.0 25.0 26.0 31.0 30.0 30.0 10.0 40.0 Book value per share 293 304 329 419 506 620 740 869 949 - Balance sheet (JPYmn) Cash and cash equivalents 17,881 23,097 18,215 18,318 50,674 22,582 28,865 49,145 29,549 34,173 Total current assets 120,738 118,854 131,556 146,079 171,041 155,983 197,473 204,971 171,125 158,454 Tangible fixed assets 14,180 14,174 17,145 18,228 17,756 19,204 21,634 26,163 32,033 34,342 Investments and other assets 19,196 20,849 20,670 27,558 25,311 28,933 29,790 33,017 31,760 32,568 Intangible assets 327 316 313 359 416 692 858 844 976 1,202 Total assets 154,442 154,195 169,685 192,226 214,526 204,813 249,756 264,996 235,897 226,568 Short-term debt 8,243 232 7,182 4,131 115 3,130 170 178 25,179 5,264 Total current liabilities 116,340 114,100 127,784 136,838 150,799 130,624 165,688 165,955 127,578 95,046 Long-term debt 2,686 2,513 2,068 4,937 4,843 1,859 1,879 1,752 1,590 21,654 Total fixed liabilities 6,711 7,607 6,643 10,526 9,488 7,808 4,893 6,059 6,614 28,012 Total liabilities 123,052 121,707 134,427 147,364 160,288 138,433 170,581 172,014 134,193 123,058 Shareholders' equity 31,326 32,410 35,153 44,673 54,003 66,152 78,950 92,634 101,215 102,964 Total net assets 31,390 32,487 35,258 44,861 54,238 66,380 79,175 92,981 101,703 103,509 Total interest-bearing debt 10,929 2,745 9,250 9,068 4,958 4,989 2,049 1,930 26,769 26,918 Cash flow statement (JPYmn) Cash flows from operating activities -11,486 14,264 -9,302 2,111 39,003 -23,545 16,226 29,694 -33,439 11,629 Cash flows from investing activities 20 -619 -2,072 -1,525 -334 -1,717 -3,383 -5,786 -7,488 -3,753 Cash flows from financing activities 4,704 -8,569 6,476 -675 -6,035 -2,788 -6,457 -3,575 21,604 -3,308 Financial ratios ROA (RP-based) 1.3% 1.5% 2.2% 4.4% 9.7% 9.0% 9.7% 8.9% 8.8% 2.1% ROE 5.8% -1.8% 7.9% 14.5% 27.0% 22.8% 22.2% 18.1% 15.4% 2.6% Equity ratio 20.3% 21.0% 20.7% 23.2% 25.2% 32.3% 31.6% 35.0% 42.9% 45.4% Total asset turnover 151.3% 148.1% 139.7% 145.2% 145.7% 116.2% 141.1% 128.8% 128.6% 100.1% Net margin 0.8% -0.2% 1.2% 2.2% 4.5% 5.6% 5.0% 4.7% 4.6% 1.1% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

05/78 Tokyu Construction / 1720 RCoverage LAST UPDATE: 2021.07.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Recent updates

Highlights

On July 12, 2021, Shared Research updated the report following interviews with Tokyu Construction Co., Ltd.

On June 24, 2021, the company announced a change in its lineup of representative directors.

Through a meeting of its Board of Directors that was held on the same day, the company has decided to adjust its lineup of representative directors. Accordingly, former Representative Director and Chairman Tsuneo Iizuka has assumed the position of chairman of the Board of Directors effective June 24, 2021. The company states that it made this change with the goal of achieving ongoing improvement in enterprise value under a new management structure.

On May 12, 2021, the company announced earnings results for full-year FY03/21; see the results section for details.

On the same day, the company announced its new long-term management plan, “To zero, from zero”.

Positioning: The company formulated its corporate vision for 2030, “Vision 2030”, in March 2021. The long-term management plan “To zero, from zero” is a 10-year strategy aimed at achieving Vision 2030.

Fundamental policy: The company positions its domestic civil engineering, building construction, and building renovation businesses as its core businesses, and its international, real estate, and new businesses as its strategic businesses. Through the practice of “deepening knowledge” and “searching for knowledge,” and with human resources and digital technologies as sources of competitive advantage, the company aims to sustainably improve both financial and nonfinancial corporate value by implementing five key strategies centered on delivering three values (decarbonization, zero waste, and disaster prevention and mitigation).

Five key strategies: 1. Promote and establish the Tokyu Construction brand: Visualize initiatives and achievements, and promote them internally and externally with a new brand message 2. Deepen core businesses: Strengthen capabilities by enhancing problem-solving skills, innovating construction production systems, and forming strategic alliances 3. Grow strategic businesses: Create new growth opportunities through initiatives and investments with a strong focus on producing synergies with core businesses. 4. Human resources and organization strategy: Achieve results and accelerate innovation through organizational and cultural reforms that are closely tied to the human resource strategy. 5. Financial and capital strategy: Shift from a focus on enhancing financial foundations to a focus on improving capital efficiency (pursuing an optimal capital structure)

Long-term management plan KPIs: The company plans to invest JPY170bn over 10 years to achieve Vision 2030.

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Management indicator FY03/21 Act. FY03/22 FY03/24 FY03/31 Operating profit (JPYmn) 3,500 7,000 13,000 or higher 22,000 or higher Profitability Operating profit margin 1.5% 2.4% 4.0% or higher 5.0％ or higher ROIC 3.2% 4.1% 6.0% or higher 7.0％ or higher Efficiency ROE 2.6% 4.8% 8.0% or higher 10.0% or higher Debt-to-equity ratio 0.26 0.5 or lower Soundness Equity ratio 45.4% Approx. 40–45% Approx. 45％ Employee engagement BBB BBB A AAA Non-financial GHG emission (reduction) 5.0% 7.5% 12.5% 30.0% Note: ROIC = (NOPAT+consolidated non-operating income) / (consolidated shareholders' equity [average of beginning and end of period]) Note: Employee engagement rating by Link and Motivation Inc.'s “Motivation Cloud.” The rating is for all group employees, including subsidiaries. There are 11 ratings, and the current BBB rating is the fourth highest, after AAA, AA, and A. GHG emission compared to FY03/18 levels.

Shareholder return policy: The company will target a dividend on equity ratio (DOE) of 4.0% or higher, while striking a balance between its medium- to long-term performance target of ROE of 10% or higher and dividend payout ratio of 40% or higher. Long-term plan "To zero, from zero." Up t o FY 03/ 21 (from FY03/22) Cons. Payout ratio 20% or higher DOE 4.0% or higher Shareholder return policy Flexible acquisition of treasury shares Note: Dividend on equity ratio (DOE) = consolidated dividend per share on common stock with record date in the current fiscal year / consolidated equity per share (average of beginning and end of period) x 100

Investment plan: Inv e st ment s Amount (JPYmn) Key investments 10-year total 170,000 Investments in domestic, civil engineering, construction, and construction RN businesses ■Invesments for technology development Core Business ■Investments in production systems innovation and DX ■M&A investments Business strategy Investments in international, real estate, and new businesses investment based on 160,000 ■M&A investments for international business expansion delivering three values ■Acquisition of real estate emphasizing synergy with core businesses Strategic Business ■Investments in new business incubation ■Investments in concessions/PPP business ■Investments in venture businesses and venture funds Investment in source of competitive advantage Investments in HR system reform and human resources cultivation 10,000 (human resources x DX) Environment construction and systems infrastructure pertaining to companywide DX

On the same day, the company announced a revision to its shareholder return policy and dividend forecast for FY03/22.

For previous releases and developments, please refer to the “News and topics” section.

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Trends and outlook Quarterly trends and results

Cumulative FY03/20 FY03/21 FY03/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4% of Est.FY Est. Revenue 78,722 183,415 248,190 322,170 42,684 95,423 154,667 231,483 100.6% 230,000 YoY 28.8% 18.6% 8.0% -2.8% -45.8% -48.0% -37.7% -28.1% -28.6% Gross profit 10,300 23,928 29,422 36,173 3,563 8,323 12,879 18,170 YoY 53.6% 36.2% 11.7% 0.3% -65.4% -65.2% -56.2% -49.8% Gross profit margin 13.1% 13.0% 11.9% 11.2% 8.3% 8.7% 8.3% 7.8% SG&A expenses 3,664 7,608 11,577 15,858 3,529 7,130 10,763 14,620 YoY 20.0% 14.0% 15.1% 12.6% -3.7% -6.3% -7.0% -7.8% SG&A ratio 4.7% 4.1% 4.7% 4.9% 8.3% 7.5% 7.0% 6.3% Operating profit 6,636 16,320 17,845 20,315 34 1,192 2,116 3,549 88.7% 4,000 YoY 81.7% 49.8% 9.7% -7.6% -99.5% -92.7% -88.1% -82.5% -80.3% Operating profit margin8.4%8.9%7.2%6.3%0.1%1.2%1.4%1.5% 1.7% Recurring profit 7,001 16,972 18,947 21,969 258 1,680 2,739 4,891 99.8% 4,900 YoY 80.7% 49.3% 11.5% -4.2% -96.3% -90.1% -85.5% -77.7% -77.7% Recurring profit margin 8.9% 9.3% 7.6% 6.8% 0.6% 1.8% 1.8% 2.1% 2.1% Net income 4,838 11,516 12,662 14,903 60 759 1,546 2,647 88.2% 3,000 YoY 94.3% 50.4% 9.9% -3.9% -98.8% -93.4% -87.8% -82.2% -79.9% Net margin 6.1% 6.3% 5.1% 4.6% 0.1% 0.8% 1.0% 1.1% 1.3% Quart erly FY03/20 FY03/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4 Revenue 78,722 104,693 64,775 73,980 42,684 52,739 59,244 76,816 YoY 28.8% 11.9% -13.8% -27.2% -45.8% -49.6% -8.5% 3.8% Gross profit 10,300 13,628 5,494 6,751 3,563 4,760 4,556 5,291 YoY 53.6% 25.5% -37.3% -30.7% -65.4% -65.1% -17.1% -21.6% Gross profit margin 13.1%13.0%8.5%9.1%8.3%9.0%7.7%6.9% SG&A expenses 3,664 3,944 3,969 4,281 3,529 3,601 3,633 3,857 YoY 20.0% 9.0% 17.2% 6.3% -3.7% -8.7% -8.5% -9.9% SG&A ratio 4.7% 3.8% 6.1% 5.8% 8.3% 6.8% 6.1% 5.0% Operating profit 6,636 9,684 1,525 2,470 34 1,158 924 1,433 YoY 81.7% 33.7% -71.6% -56.8% -99.5% -88.0% -39.4% -42.0% Operating profit margin8.4%9.2%2.4%3.3%0.1%2.2%1.6%1.9% Recurring profit 7,001 9,971 1,975 3,022 258 1,422 1,059 2,152 YoY 80.7% 33.1% -64.9% -49.1% -96.3% -85.7% -46.4% -28.8% Recurring profit margin 8.9% 9.5% 3.0% 4.1% 0.6% 2.7% 1.8% 2.8% Net income 4,838 6,678 1,146 2,241 60 699 787 1,101 YoY 94.3% 29.2% -70.3% -43.8% -98.8% -89.5% -31.3% -50.9% Net margin 6.1% 6.4% 1.8% 3.0% 0.1% 1.3% 1.3% 1.4% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

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Revenue and gross profit (parent) Revenue FY03/19 FY03/20 FY03/21 Cumulative (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Total revenue 59,168 147,806 216,282 309,946 74,382 170,452 230,015 296,426 39,542 87,677 144,004 216,245 YoY 9.9% 19.4% 5.0% -0.8% 25.7% 15.3% 6.3% -4.4% -46.8% -48.6% -37.4% -27.0% Construction 58,877 147,247 215,296 308,623 74,057 169,777 228,997 295,034 39,150 86,899 142,836 214,560 YoY 10.3% 19.8% 5.2% -0.7% 25.8% 15.3% 6.4% -4.4% -47.1% -48.8% -37.6% -27.3% Domestic public 10,769 22,029 35,239 52,498 14,025 36,775 51,509 72,393 10,483 25,596 40,532 57,430 Domestic private 45,678 120,537 174,785 248,416 55,928 126,738 168,292 210,798 26,055 56,334 95,142 148,373 General 30,851 85,230 126,019 178,722 41,499 92,389 124,815 159,227 21,606 46,771 78,167 118,874 Tokyu Group 14,826 35,307 48,765 69,693 14,428 34,349 43,476 51,571 4,448 9,562 16,974 29,499 Overseas 2,428 4,680 5,271 7,708 4,103 6,263 9,195 11,840 2,611 4,968 7,1628,757 Building Construction 45,833 119,141 171,067 238,241 56,587 126,551 167,577 206,956 26,010 56,360 91,391 138,991 YoY 19.1% 26.5% 8.9% 0.6% 23.5% 6.2% -2.0% -13.1% -54.0% -55.5% -45.5% -32.8% Domestic public 2,982 5,491 7,532 11,596 3,610 7,209 11,431 15,904 3,315 6,731 10,896 13,411 Domestic private 42,765 113,476 163,196 226,107 52,651 118,619 155,303 190,174 22,694 49,629 80,464 125,430 General 29,679 82,728 122,030 169,148 40,318 89,690 120,404 151,695 19,721 43,448 68,932 104,328 Tokyu Group 13,085 30,747 41,166 56,958 12,332 28,929 34,899 38,479 2,973 6,180 11,532 21,101 Overseas 85 173 337 537 325 722 842 876 - - 30 150 Civil Engineering 13,044 28,105 44,229 70,381 17,470 43,226 61,420 88,078 13,139 30,538 51,444 75,568 YoY -12.4% -2.2% -7.0% -4.7% 33.9% 53.8% 38.9% 25.1% -24.8% -29.4% -16.2% -14.2% Domestic public 7,787 16,537 27,706 40,901 10,415 29,565 40,078 56,489 7,167 18,864 29,635 44,019 Domestic private 2,913 7,060 11,588 22,309 3,277 8,118 12,989 20,624 3,360 6,704 14,677 22,943 General 1,172 2,501 3,989 9,574 1,181 2,699 4,411 7,532 1,885 3,323 9,235 14,545 Tokyu Group 1,741 4,559 7,599 12,735 2,096 5,419 8,577 13,092 1,475 3,381 5,441 8,397 Overseas 2,343 4,507 4,933 7,170 3,777 5,541 8,353 10,964 2,611 4,968 7,1318,606 Real Estate 290 558 986 1,323 324 674 1,017 1,391 392 777 1,167 1,684 YoY -39.2% -32.6% -19.0% -23.3% 11.7% 20.8% 3.1% 5.1% 21.0% 15.3% 14.7% 21.1%

Gross profit FY03/19 FY03/20 FY03/21 Cumulative (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Total gross profit 6,550 16,825 24,781 33,370 9,866 22,353 27,255 33,087 3,249 7,504 11,786 16,517 YoY 9.0% 16.3% -2.5% -5.5% 50.6% 32.9% 10.0% -0.8% -67.1% -66.4% -56.8% -50.1% Construction 6,412 16,609 24,380 33,316 9,681 21,976 27,056 32,935 3,031 7,086 11,380 17,854 Building Construction 5,239 13,062 18,820 23,423 8,168 17,862 21,293 24,717 2,079 4,482 7,245 11,822 Civil Engineering 1,172 3,546 5,560 9,892 1,513 4,113 5,763 8,218 951 2,604 4,135 6,031 Real Estate 138 216 400 54 184 377 198 151 217 418 405 -1,336

Revenue FY03/19 FY03/20 FY03/21 Quarterly (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4 Total revenue 59,168 88,638 68,476 93,664 74,382 96,070 59,563 66,411 39,542 48,135 56,327 72,241 YoY 9.9% 26.8% -16.7% -12.1% 25.7% 8.4% -13.0% -29.1% -46.8% -49.9% -5.4% 8.8% Construction 58,877 88,370 68,049 93,327 74,057 95,720 59,220 66,037 39,150 47,749 55,937 71,724 YoY 10.3% 27.1% -16.8% -12.0% 25.8% 8.3% -13.0% -29.2% -47.1% -50.1% -5.5% 8.6% Domestic public 10,769 11,260 13,210 17,259 14,025 22,750 14,734 20,884 10,483 15,113 14,936 16,898 Domestic private 45,678 74,859 54,248 73,631 55,928 70,810 41,554 42,506 26,055 30,279 38,808 53,231 General 30,851 54,379 40,789 52,703 41,499 50,890 32,426 34,412 21,606 25,165 31,396 40,707 Tokyu Group 14,826 20,481 13,458 20,928 14,428 19,921 9,127 8,095 4,448 5,114 7,412 12,525 Overseas 2,428 2,252 591 2,437 4,103 2,160 2,932 2,645 2,611 2,357 2,194 1,595 Building Construction 45,833 73,308 51,926 67,174 56,587 69,964 41,026 39,379 26,010 30,350 35,031 47,600 YoY 19.1% 31.6% -17.5% -15.8% 23.5% -4.6% -21.0% -41.4% -54.0% -56.6% -14.6% 20.9% Domestic public 2,982 2,509 2,041 4,064 3,610 3,599 4,222 4,473 3,315 3,416 4,165 2,515 Domestic private 42,765 70,711 49,720 62,911 52,651 65,968 36,684 34,871 22,694 26,935 30,835 44,966 General 29,679 53,049 39,302 47,118 40,318 49,372 30,714 31,291 19,721 23,727 25,484 35,396 Tokyu Group 13,085 17,662 10,419 15,792 12,332 16,597 5,970 3,580 2,973 3,207 5,352 9,569 Overseas 85 88 164 200 325 397 120 34 - - 30 120 Civil Engineering 13,044 15,061 16,124 26,152 17,470 25,756 18,194 26,658 13,139 17,399 20,906 24,124 YoY -12.4% 8.8% -14.4% -0.5% 33.9% 71.0% 12.8% 1.9% -24.8% -32.4% 14.9% -9.5% Domestic public 7,787 8,750 11,169 13,195 10,415 19,150 10,513 16,411 7,167 11,697 10,771 14,384 Domestic private 2,913 4,147 4,528 10,721 3,277 4,841 4,871 7,635 3,360 3,344 7,973 8,266 General 1,172 1,329 1,488 5,585 1,181 1,518 1,712 3,121 1,885 1,438 5,912 5,310 Tokyu Group 1,741 2,818 3,040 5,136 2,096 3,323 3,158 4,515 1,475 1,906 2,060 2,956 Overseas 2,343 2,164 426 2,237 3,777 1,764 2,812 2,611 2,611 2,357 2,163 1,475 Real Estate 290 268 428 337 324 350 343 374 392 385 390 517 YoY -39.2% -23.6% 9.7% -33.5% 11.7% 30.6% -19.9% 11.0% 21.0% 10.0% 13.7% 38.2%

Gross profit FY03/19 FY03/20 FY03/21 Quarterly (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4 Total gross profit 6,550 10,275 7,956 8,589 9,866 12,487 4,902 5,832 3,249 4,255 4,282 4,731 YoY 9.0% 21.4% -27.4% -13.0% 50.6% 21.5% -38.4% -32.1% -67.1% -65.9% -12.6%-18.9% Construction 6,412 10,197 7,771 8,936 9,681 12,295 5,080 5,879 3,031 4,055 4,294 6,474 Building Construction 5,239 7,823 5,758 4,603 8,168 9,694 3,431 3,424 2,079 2,403 2,763 4,577 Civil Engineering 1,172 2,374 2,014 4,332 1,513 2,600 1,650 2,455 951 1,653 1,531 1,896 Real Estate 138 78 184 -346 184 193 -179 -47 217 201 -13 -1,741 Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

09/78 Tokyu Construction / 1720 RCoverage LAST UPDATE: 2021.07.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Orders and construction carried forward (parent) FY 03/ 19 FY 03/ 20 FY 03/ 21 Cumulative (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Construction 44,270 96,834 149,231 263,053 26,679 71,738 115,295 193,315 27,741 122,357 186,066 306,633 YoY -45.3% -24.4% -23.4% -9.7% -39.7% -25.9% -22.7% -26.5% 4.0% 70.6% 61.4% 58.6% Domestic public 10,698 15,202 31,727 50,410 3,892 9,741 19,652 40,818 2,004 20,356 32,758 42,831 Domestic private 33,391 60,880 97,224 189,638 21,285 60,477 93,024 144,924 25,135 100,939 151,747 260,309 General private 28,176 46,865 74,801 155,028 15,228 48,030 76,304 120,968 18,236 88,717 131,599 230,389 Tokyu Group 5,214 14,015 22,423 34,609 6,056 12,447 16,720 23,956 6,899 12,222 20,147 29,920 Overseas 180 20,751 20,279 23,003 1,501 1,518 2,618 7,571 601 1,061 1,560 3,492 Building Construction 33,763 57,939 99,318 185,287 17,281 43,188 76,914 128,709 24,101 97,608 146,740 242,920 YoY -48.7% -45.6% -30.9% -13.6% -48.8% -25.5% -22.6% -30.5% 39.5% 126.0% 90.8% 88.7% Domestic public 4,791 7,054 18,624 22,225 373 4,203 8,968 9,994 1,065 3,203 5,320 5,731 Domestic private 28,975 50,854 80,690 163,046 16,928 39,013 67,972 113,772 22,338 93,968 140,797 235,125 General private 27,400 44,636 68,912 142,932 14,584 31,680 57,181 98,966 16,744 83,802 123,869 209,636 Tokyu Group 1,574 6,217 11,778 20,114 2,344 7,332 10,790 14,805 5,594 10,166 16,927 25,488 Overseas -3 31 3 15 -19 -28 -26 4,942 697 436 623 2,063 Civil Engineering 10,507 38,895 49,913 77,766 9,397 28,550 38,381 64,605 3,640 24,748 39,325 63,713 YoY -30.4% 79.8% -2.3% 1.3% -10.6% -26.6% -23.1% -16.9% -61.3% -13.3% 2.5% -1.4% Domestic public 5,907 8,148 13,103 28,185 3,518 5,538 10,683 30,824 938 17,153 27,438 37,099 Domestic private 4,416 10,026 16,533 26,592 4,357 21,464 25,052 31,151 2,797 6,970 10,949 25,184 General private 776 2,228 5,889 12,096 644 16,349 19,122 22,001 1,492 4,915 7,729 20,752 Tokyu Group 3,640 7,797 10,644 14,495 3,712 5,114 5,929 9,150 1,305 2,055 3,220 4,432 Overseas 183 20,720 20,276 22,988 1,521 1,546 2,645 2,629 -95 624 937 1,429

FY 03/ 19 FY 03/ 20 FY 03/ 21 Quarterly (JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4 Construction 44,270 52,564 52,397 113,822 26,679 45,059 43,557 78,020 27,741 94,616 63,709 120,567 YoY -45.3% 11.4% -21.4% 17.9% -39.7% -14.3% -16.9% -31.5% 4.0% 110.0% 46.3% 54.5% Domestic public 10,698 4,504 16,525 18,683 3,892 5,849 9,911 21,166 2,004 18,352 12,402 10,073 Domestic private 33,391 27,489 36,344 92,414 21,285 39,192 32,547 51,900 25,135 75,804 50,808 108,562 General private 28,176 18,689 27,936 80,227 15,228 32,802 28,274 44,664 18,236 70,481 42,882 98,790 Tokyu Group 5,214 8,801 8,408 12,186 6,056 6,391 4,273 7,236 6,899 5,323 7,925 9,773 Overseas 180 20,571 -472 2,724 1,501 17 1,100 4,953 601 460 499 1,932 Building Construction 33,763 24,176 41,379 85,969 17,281 25,907 33,726 51,795 24,101 73,507 49,132 96,180 YoY -48.7% -40.5% 11.0% 21.4% -48.8% 7.2% -18.5% -39.8% 39.5% 183.7% 45.7% 85.7% Domestic public 4,791 2,263 11,570 3,601 373 3,830 4,765 1,026 1,065 2,138 2,117 411 Domestic private 28,975 21,879 29,836 82,356 16,928 22,085 28,959 45,800 22,338 71,630 46,829 94,328 General private 27,400 17,236 24,276 74,020 14,584 17,096 25,501 41,785 16,744 67,058 40,067 85,767 Tokyu Group 1,574 4,643 5,561 8,336 2,344 4,988 3,458 4,015 5,594 4,572 6,761 8,561 Overseas -3 34 -28 12 -19 -9 2 4,968 697 -261 187 1,440 Civil Engineering 10,507 28,388 11,018 27,853 9,397 19,153 9,831 26,224 3,640 21,108 14,577 24,388 YoY -30.4% 334.3% -62.6% 8.3% -10.6% -32.5% -10.8% -5.8% -61.3% 10.2% 48.3% -7.0% Domestic public 5,907 2,241 4,955 15,082 3,518 2,020 5,145 20,141 938 16,215 10,285 9,661 Domestic private 4,416 5,610 6,507 10,059 4,357 17,107 3,588 6,099 2,797 4,173 3,979 14,235 General private 776 1,452 3,661 6,207 644 15,705 2,773 2,879 1,492 3,423 2,814 13,023 Tokyu Group 3,640 4,157 2,847 3,851 3,712 1,402 815 3,221 1,305 750 1,165 1,212 Overseas 183 20,537 -444 2,712 1,521 25 1,099 -16 -95 719 313 492

FY 03/ 19 FY 03/ 20 FY 03/ 21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4 Total carried forward 384,220 348,414 332,763 353,258 305,879 255,218 239,555 251,538 240,130 286997 294,768 343,611 YoY -13.8% -17.7% -18.5% -11.4% -20.4% -26.7% -28.0% -28.8% -21.5% 12.5% 23.0% 36.6% Building Construction 252,136 203,004 192,458 211,253 171,947 127,889 120,589 133,007 131,097 174,255 188,356 236,935 Civil Engineering 132,083 145,409 140,304 142,004 133,931 127,328 118,965 118,531 109,032 112,742 106,412 106,676 Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

10/78 Tokyu Construction / 1720 RCoverage LAST UPDATE: 2021.07.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Full-year FY03/21 results Summary

▷ Revenue: JPY231.5bn (-28.1% YoY; progress versus revised forecast announced November 9, 2020: 100.6%)

▷ Operating profit: JPY3.6bn (-82.5% YoY; 88.7%)

▷ Recurring profit: JPY4.9bn (-77.7% YoY; 99.8%)

▷ Net income: JPY2.6bn (-82.2% YoY; 88.2%)

* Net income attributable to owners of the parent

Key points

▷ In FY03/21, revenue fell JPY90.7bn to JPY231.5bn (-28.1% YoY) on lower revenue from completed construction as major projects such as the Shibuya redevelopment ran their course and new projects were delayed due to the pandemic. By segment, revenue fell JPY78.3bn in Building Construction and JPY12.8bn in Civil Engineering, but rose JPY381mn in Real Estate.

▷ Operating profit fell JPY16.8bn to JPY3.6bn (-82.5% YoY). By segment, operating profit was down JPY13.0bn in Building Construction and down JPY3.6bn Civil Engineering, but up JPY1.4bn in Real Estate. The profit fall was amplified due to lower margins amid stiffening competition and lower earnings on some projects and development properties. Recurring profit came in at JPY4.9bn (-77.7% YoY), boosted by an equity-method investment gain of JPY1.2bn.

Results by segment Building Construction segment Orders rose to JPY255.8bn (+70.2% YoY) despite a drop in domestic public work projects and overseas projects thanks to a rise in domestic private-sector projects. Revenue from completed construction fell to JPY153.3bn (-33.8% YoY), with revenue decreasing for domestic public work projects, domestic private-sector projects, and overseas projects. Segment profit fell 63.1% YoY to JPY7.6bn.

Completed construction in FY03/21

▷ University of Tokyo (West Tokyo) comprehensive research and experiment building and other works

▷ Ariake wide-area administrative affairs association fire department headquarters and Tamana fire station integrated building

▷ New building for Hokkaido Isuzu Motors

▷ Improvements at Ikegami Station and development of station building on Ikegami Line

▷ Shibuya ward office reconstruction project: residential building

Civil Engineering segment Orders rose to JPY65.2bn (+0.5% YoY) despite a decline in domestic private-sector projects owing to a rise in domestic public work projects and overseas projects. Revenue from completed construction dropped to JPY75.8bn (-14.4% YoY), with revenue increasing for domestic private-sector projects but decreasing for domestic public work projects and overseas projects. Segment profit fell 52.6% YoY to JPY3.3bn.

Completed construction in FY03/21

▷ Shibuya station area development plan: New temporary passageway at West Exit (Clients: Tokyu, JR East, Tokyo Metro)

Real Estate segment Real Estate revenue came to JPY2.5bn (+18.2% YoY). Segment loss came to JPY1.6bn (loss of JPY152mn in FY03/20) despite recording profits in the leasing business due to the booking of provision for loss on real estate business following the company’s revision of revenues and costs on large-scale development business.

11/78 Tokyu Construction / 1720 RCoverage LAST UPDATE: 2021.07.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Parent company Order backlog was JPY306.6bn (+58.6% YoY), which breaks down to shares of 20.8% for civil engineering and 79.2% for building construction. Public-sector projects accounted for 14.0%, and private-sector projects 84.8%.

Total sales were JPY216.2bn (-27.0% YoY), comprising JPY214.6bn (-27.3% YoY) in revenue from completed construction and JPY1.7bn in real estate revenue. Revenue from completed construction was 35.2% from civil engineering and 64.8% from building construction.

Operating profit was JPY2.5bn (-86.1% YoY), recurring profit JPY3.1bn (-83.2% YoY), and net income JPY1.3bn (-89.6% YoY).

For details on previous quarterly and annual results, please refer to the Historical financial statements section.

12/78 Tokyu Construction / 1720 RCoverage LAST UPDATE: 2021.07.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

FY03/22 full-year company forecast Numerical plan FY03/19 FY03/20 FY03/21 FY03/22 (JPYmn) 1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY Act. FY Est . Yo Y Revenue 154,697 176,740 331,437 183,415 138,755 322,170 95,423 136,060 231,483 285,000 23.1% Cost of revenue 137,129 158,234 295,363 159,487 126,509 285,996 87,099 126,214 213,313 Gross profit 17,568 18,505 36,073 23,928 12,245 36,173 8,323 9,847 18,170 Gross proift margin 11.4% 10.5% 10.9% 13.0% 8.8% 11.2% 8.7% 7.2% 7.8% SG&A expenses 6,671 7,415 14,086 7,608 8,250 15,858 7,130 7,490 14,620 SG&A ratio 4.3% 4.2% 4.2% 4.1% 5.9% 4.9% 7.5% 5.5% 6.3% Operating profit 10,897 11,090 21,987 16,320 3,995 20,315 1,192 2,357 3,549 7,000 97.2% Operating profit margin 7.0% 6.3% 6.6% 8.9% 2.9% 6.3% 1.2% 1.7% 1.5% 2.5% Recurring profit 11,369 11,563 22,932 16,972 4,997 21,969 1,680 3,211 4,891 7,300 49.3% Recurring profit margin 7.3% 6.5% 6.9% 9.3% 3.6% 6.8% 1.8% 2.4% 2.1% 2.6% Net income 7,659 7,845 15,504 11,516 3,387 14,903 759 1,888 2,647 4,800 81.3% Net margin 5.0% 4.4% 4.7% 6.3% 2.4% 4.6% 0.8% 1.4% 1.1% 1.7% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

The company’s FY03/22 forecast calls for revenue of JPY285.0bn (+23.1% YoY), operating profit of JPY7.0bn (+97.2% YoY), recurring profit of JPY7.3bn (+49.3% YoY), and net income of JPY4.8bn (+81.3% YoY).

The company expects earnings to turn around after bottoming in FY03/21. Orders have risen due to several factors since 2013, including Abenomics, the Tohoku earthquake, and Tokyo Olympics. These settled down, and FY03/21 was a kind of lean period for orders. Despite a solid recovery in orders, the company is aware that the OPM will not rebound to the levels of 6–7% that prevailed until FY03/20.

The company sees FY03/22 as the first year of structural reform under the long-term plan it announced on May 12, 2021, dubbed “To zero, from zero”(discussed later.) The company said that it would embark on structural reform as outlined below to deal with issues remaining following the previous medium-term plan.

Enhanced corporate governance Further improvement in separation of oversight and execution functions and effectiveness of board of directors

Personnel systems reform ▷ Progress on diversity, inclusion, and innovation ▷ Personnel mobility policy

Structural reform of organization Reform aimed at slimmer, flatter organization

Enhanced capabilities Comprehensive review of QCDSE and salesforce and restoration of earnings power

Capital efficiency inculcation Manage balance sheet with eye on profit down to the workplace level

Full-year earnings forecast

Outlook in revenue and gross profit from completed construction All construction at parent

▷ The company forecasts JPY265.3bn (+23.6% YoY) in revenue from completed construction.

13/78 Tokyu Construction / 1720 RCoverage LAST UPDATE: 2021.07.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

▷ It projects JPY20.8bn (+16.5% YoY) in gross profit from completed construction.

▷ It expects a 7.8% margin on construction (GPM), versus 8.3% in FY03/21.

The company had an ample initial order backlog of JPY343.6bn (+36.6% YoY) at the parent level.

Civil Engineering at parent

▷ The company forecasts JPY69.8bn (-7.6%, -JPY5.8bn YoY) in revenue from completed construction. This breaks down to domestic public works -JPY6.0bn YoY, general private-sector +JPY2.0bn YoY, Tokyu Group +JPY2.1bn YoY, and overseas - JPY3.8bn YoY. The company expects declines in revenue from completed construction for domestic public works and general private-sector, but growth from the Tokyu Group.

▷ It projects JPY6.9bn (+14.4% YoY) in gross profit from completed construction.

▷ It expects a 9.9% margin on construction (GPM) versus 8.0% in FY03/21.

Building Construction at parent

▷ The company forecasts JPY195.0bn (+40.7%, +JPY56.5bn YoY) in revenue from completed construction. This breaks down to domestic public works -JPY5.4bn YoY, general private-sector +JPY38.7bn YoY, Tokyu Group +JPY22.7bn YoY, and overseas +JPY550mn YoY. The business overall had an ample initial order backlog of JPY236.9bn (78.1% YoY) at the parent level.

▷ It projects JPY13.9bn (+17.6% YoY) in gross profit from completed construction due.

▷ It expects a 7.1% margin on construction (GPM) versus 8.5% in FY03/21 amid stiffer competition and higher construction costs.

Order outlook at parent

Order forecast (parent)

Parent FY03/19 FY03/20 FY03/21 FY03/22 (JPYmn) 1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY Act. FY Est. Total orders 96,834 166,219 263,053 71,738 121,577 193,315 71,739 234,894 306,633 257,000 YoY -24.4% 1.8% -9.7% -25.9% -26.9% -26.5% 0.0% 93.2% 58.6% -16.2% Construction 57,939 127,348 185,287 43,188 85,521 128,709 43,189 199,731 242,920 200,000 YoY -45.6% 17.8% -13.6% -25.5% -32.8% -30.5% 0.0% 133.5% 88.7% -17.7% Civil Engineering 38,895 38,871 77,766 28,550 36,055 64,605 28,551 35,162 63,713 57,000 YoY 79.8% -29.5% 1.3% -26.6% -7.2% -16.9% 0.0% -2.5% -1.4% -10.5% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

▷ Civil engineering: The company forecasts 125.6% YoY growth in orders from the Tokyu Group, but falls of 13.7% YoY from the public sector and 37.4% YoY from the general private sector.

▷ Building construction: The company forecasts YoY growth in orders from the Tokyu Group and the public sector, but a drop- off from the general private sector following significant order growth in FY03/21.

Orders to be carried forward to FY03/23 The company also expects orders carried forward to FY03/23 of JPY335.3bn, in line with the previous year. It expects ample orders heading into FY03/23.

▷ Civil Engineering orders carried forward: JPY93.9bn (-12.0% YoY)

▷ Building Construction orders carried forward: JPY241.4bn (+1.9% YoY)

14/78 Tokyu Construction / 1720 RCoverage LAST UPDATE: 2021.07.12 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Long-term management plan

Review of medium-term plan: 2018‒2020 “Shinka 2020”

▷ The company made solid progress toward its FY03/21 targets through FY03/20, but earnings deteriorated suddenly in FY03/21 due to the coronavirus pandemic.

Difference between results and forecast in medium-term management plan FY03/19 FY03/20 FY03/21 (JPYmn) FY03/21 Targets Act. Act. Act. Init ial plan 312,000 Revenue 331,437 322,170 231,483 Revised plan 244,000 Operat ing profit Init ial plan 6.3% 6.6% 6.3% 1.5% margin Revised plan 2.7% Shareholders' Init ial plan 110,000 92,634 101,215 102,964 equity Revised plan 104,000 Init ial plan 13.0% ROE 18.1% 15.4% 2.6% Revised plan 5.0% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

Achievements

▷ The company completed large and difficult projects where it did not have previous experience in Japan and overseas, including redevelopment around Shibuya station

▷ The company built up shareholders' equity, improving balance sheet health, which had been an issue since the company’s restructuring and rehabilitation

Issues

▷ Changes to the order portfolio due to the tapering off of large projects such as the Shibuya redevelopment

▷ Significant decline in OPM

▷ Decline in ROE due to profit slump

▷ Insufficient earnings growth outside domestic building construction business

▷ Changes to employee attitudes and work styles due to COVID-19

▷ Fostering sense of crisis in response to changing conditions

Review The company said that the sudden downturn in earnings in FY03/21 engendered a strong sense of crisis, and it recognizes the need to embark on structural reform to restore earnings as an urgent priority. The company sees April 2021–March 2023 as a structural reform phase, and April 2023 onward as a transformation phase. It said that long-term strategy execution will enable steady progress on initiatives aimed at transformation.

Vision 2030 and Long-term management plan “To zero, from zero”

Formulation of Vision 2030

The company has formulated a vision every 10 years since 2000 with the aim of realizing its corporate philosophy. The company’s Vision 2020 of being “a general contractor that continues to embody ‘shinka’” (which translates roughly as “deepening and evolving in the pursuit of genuine value”) ended in FY03/21, so the company formulated “Vision 2030,” its new vision looking toward 2030.

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Tokyu Construction formulated Vision 2030 with a keen awareness of the company’s purpose, derived from its founding spirit, the shared values (corporate philosophy and principles of conduct) in the organization and its behavior, achievements and challenges of Vision 2020, and solving of social issues, which is the company’s identity. The company set forth the Vision 2030 theme as “To zero, from zero, The environment and the excitement of the future.”

“To zero” means striving for zero carbon and waste emissions, and “from zero” expresses the company’s ambition to enter new fields. “To zero” encompasses the concept of a safe and comfortable environment, and “from zero” expresses the company’s desire to offer excitement and contribute to a sustainable society and to continue to strive to improve corporate value.

Long-term management plan “To zero, from zero”

In May 2021, the company disclosed its long-term management plan “To zero, from zero” which it will use to achieve goals in its Vision 2030.

Fundamental policies

▷ The company positions its domestic civil engineering, building construction, and building renovation businesses as core businesses, and its international, real estate, and new businesses as strategic businesses.

▷ Through the practice of “deepening knowledge” and “searching for knowledge,” and with human resources and digital technologies as sources of competitive advantage, the company aims to implement five key strategies centered on delivering three values (decarbonization, zero waste, and disaster prevention and mitigation).

▷ The company aims to sustainably improve both financial and nonfinancial corporate value.

Five key strategies 1) Promote and establish the Tokyu Construction brand: Visualize initiatives and achievements, and promote them internally and externally with a new brand message. 2) Deepen core businesses: Strengthen capabilities by enhancing problem-solving skills, innovating construction production systems, and forming strategic alliances. 3) Grow strategic businesses: Create new growth opportunities through initiatives and investments with a strong focus on producing synergies with core businesses. 4) Human resources and organizational strategy: Achieve results and accelerate innovation through organizational and cultural reforms that are closely tied to the human resource strategy. 5) Financial and capital strategy: Shift from a focus on enhancing financial foundations to a focus on improving capital efficiency (pursuing an optimal capital structure).

Numerical targets

KPIs in long-term management plan Management indicator FY2020 Act. FY2021 FY2023 FY2030 Operating profit (JPYmn) 3,500 7,000 13,000 or higher 22,000 or higher Profitability Operating profit margin 1.5% 2.4% 4.0% or higher 5.0％ or higher ROIC 3.2% 4.1% 6.0% or higher 7.0％ or higher Efficiency ROE 2.6% 4.8% 8.0% or higher 10.0% or higher Debt-to-equity ratio 0.26 0.5 or lower Soundness Equity ratio 45.4% Approx. 40–45% Approx. 45％ Employee engagement BBB BBB A AAA Non-financial GHG emission (reduction) 5.0% 7.5% 12.5% 30.0% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods. Note: ROIC = (NOPAT + non-operating income) / (shareholders’ equity + interest-bearing liabilities) Note: Employee engagement rating by Link and Motivation Inc.'s “Motivation Cloud.” The rating is for all group employees, including subsidiaries. There are 11 ratings, and the current BBB rating is the fourth highest, after AAA, AA, and A. Shareholder return policy The company recognizes the importance of having ample retained earnings to invest with a view to improving corporate value and further improvements in its financial position so it can withstand medium- to long-term risks. Meanwhile, as an important

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measure to provide shareholders with stable, ongoing returns of profits, the company’s previous dividend policy targeted a consolidated dividend payout ratio of at least 20% and a flexible shareholder returns element including share buybacks that took into account earnings performance. However, the company said that dividends based on past earnings led to instability in the dividend amount which was influenced by individual fiscal year earnings.

In its long-term plan, the company revised its previous shareholder return policy and disclosed a new one. It will target a dividend on equity ratio (DOE) of at least 4.0%, while striking a balance between its medium- to long-term performance target of ROE of 10% or more and consolidated dividend payout ratio of at least 40%. This is aimed at stabilizing the dividend amount and improving shareholder returns, taking into consideration capital efficiency. The company also plans to buy back shares flexibly, also taking into account capital efficiency.

Shareholder return policy Long-term plan "To zero, from zero." Up to FY03/21 (from FY03/22) Cons. payout ratio 20% or higher DOE 4.0% or higher Shareholder return policy Flexible acquisition of treasury shares Source: Shared Research based on company data

Investment plans The company plans to spend JPY170bn over 10 years on VISION 2030.

Investment plans Inv e st ment s Amount (JPYmn) Key investments 10-year total 170,000 Investments in domestic, civil engineering, construction, and construction RN businesses ■Invesments for technology development Core Business ■Investments in production systems innovation and DX ■M&A investments Business strategy Investments in international, real estate, and new businesses investment based on 160,000 ■M&A investments for international business expansion delivering three values ■Acquisition of real estate emphasizing synergy with core businesses Strategic Business ■Investments in new business incubation ■Investments in concessions/PPP business ■Investments in venture businesses and venture funds Investment in source of competitive advantage Investments in HR system reform and human resources cultivation 10,000 (human resources x DX) Environment construction and systems infrastructure pertaining to companywide DX Source: Shared Research based on company data

Delivering three values With a primary focus on mitigating climate change risk, the company has set forth the delivery of three values: decarbonization, zero waste, and disaster prevention and mitigation, in the context of the UN’s SDGs as a starting point for solving social issues. The company aims to achieve decarbonization not just in the construction process itself but in the entire construction value chain and new business areas. It aims to contribute to a circular economy by curtailing CO2 emissions generated from waste incineration. The company also intends to contribute to the provision of infrastructure in addition to suppressing CO2 emissions which are a factor in major natural disasters.

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KPIs pertinent to delivering three values

Provision of values Key measures 2030 levels to be achieved

■Promotion of ZEB ■Switch to renewables for all electricity used in business activities Decarbonization ■Enter renewal energy businesses ■Use non-fossil fuels for heavy machinery and dump trucks ■Decarbonization of construction materials ■Develop timber construction business ■GHG reduction target: Scope 1, 2, and 3: 30% cut ■Development and operation of decarbonization technologies ■Shift to renewables for all electricity used in business (first for Zero waste ■Reduce final disposal volume of waste plastic, etc. Japanese general contractor) ■Promote use of recycled materials ■Financial impact: Aim to reduce risk and capture opportunities ■Develop and operate waste recycling technology worth JPY12–16bn ■Contribute to longer service life with infrastructure asset management Disaster prevention ■Extend building life using building health diagnosis technology and and mitigation torrential rain damage prediction technology ■Build disaster simulation tools based on digital twins Source: Shared Research based on company data

As part of its decarbonization efforts, the company has been working to reduce emissions generated from electricity use in order to meet the greenhouse gas emission reduction targets certified by the Science Based Targets initiative (SBTi). In March 2021, the company joined the RE100 initiative, and targets a switch to renewable energy sources for all of the electricity used in its business activities, including construction sites and offices, by 2030. Since April 2021, the company resolved to use 100% renewable energy derived electricity in all of its new construction projects in principle. It also plans to accelerate the switch to renewable energy in its existing projects. Two large logistics warehouses the company started building in March 2021 (ESR Higashi Ogishima Distribution Center and ESR Kawasaki Ukishima Distribution Center) received electricity from renewable energy resources in April 2021, and all of the electricity used in construction work and offices comes from clean, CO2 emissions free sources.

Science based targets (SBTs): SBTs are greenhouse gas emissions reductions targets for 5–15 years in the future set by companies. They are considered science-based if they are in line with what climate science deems necessary to meet the goals the Paris Agreement (to limit the global temperature rise to well below 2°C and targets limiting the rise to 1.5° C from pre-Industrial Revolution levels). The SBT governing bodies are the United Nations Global Compact, CDP, World Resources Institute (WRI) and Worldwide Fund for Nature (WWF). RE100: An initiative involving globally influential companies that have adopted a goal of using electricity derived 100% from renewable energy sources in their business activities. The Tokyu Construction group has set a target of shifting to 100% renewable energy sources in all of the electricity used in its business activities by 2030, and is accelerating its efforts to bring about a decarbonized society as soon as possible.

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Business strategy

Vision 2030, the company’s long-term management plan: What it may look like in practice

Tokyu Construction plans to review its earnings structure based on Vision 2030 and its long-term management plan. From FY03/22 onward it has positioned the domestic civil engineering, building construction, and building renovation businesses as core businesses, and its international, real estate, and new businesses as strategic businesses. The company wants to revamp its earnings structure from a core/strategic business split of 94:6 in FY03/20 to 75:25 in FY03/31.

In its core businesses, it plans to use building information modeling (BIM) and construction information modeling (CIM) as platforms and create a variety of added value through the value chain with personnel and digital technologies, and transform the building construction business model. It plans to transform its business portfolio through innovation in its international, real estate, and construction businesses and growth in new businesses that help solve social issues.

Deepening core businesses

The company said it aimed to strengthen its capabilities by strengthening problem-solving skills, construction and production system innovation, and strategic alliances. FY2021–FY2023 FY2024–FY2026 FY2027–FY2030 Proactive development of businesses that provide Shift to proposal-based sales based on provision of Spearhead new construction schemes (e.g. IPD* ) Core business three values and creation of success stories three values to distinguish company based on accumulated data and strategies Leverage BIM and CIM data to grow business in value results, and aim to break away from customer-led Maximize use of digital platforms based on BIM and CIM contracting industry chain and maximize synergies between businesses Source: Shared Research based on company data IPD (integrated product delivery): A project where various related parties including the client, designer, construction companies, and specialist construction companies work under a single contract.

Deepening domestic civil engineering business 1) Securing construction capacity and strengthening problem-solving skills 2) Strengthening overall evaluations, expansion in maintenance and repair, and participation in early contractor involvement (ECI): An ordering method that reflects the technical capabilities of constructors in design content from the design stage and aims to achieve cost reductions and shortening of the construction period 3) Strengthening sales to other railways, including private railways and subways in Tokyo metropolitan area 4) Environment-related initiatives and the commercialization of infrastructure asset management 5) Promotion of front-end loading based on CIM 6) Information sharing, visualization, and training of engineers 7) Cooperation with external parties to complement the company’s weaknesses

Deepening domestic building construction and building renovation businesses 1) Strengthening relationships with customers through proposal-based sales 2) Acquisition and strengthening of design proposal capabilities to meet customer needs 3) Productivity enhancement to cut costs and reduce construction periods 4) Promotion of front-end loading based on BIM 5) Acquisition of maintenance and management expertise and strengthening of renovation handling capabilities 6) Strengthening of ZEB and other environment-related equipment and technology 7) Strengthening of cooperation with Tokyu Group companies

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Cultivate the core area around Shibuya The company plans to further cultivate demand around Shibuya* and along the Tokyu lines**. Shibuya Station redevelopment work specifically includes Shibuya Scramble Square Central Tower and West Tower (scheduled for completion in FY03/28). Taken in the broader sense (the communities around Shibuya Station), the company expects redevelopment demand to persist over the medium to long term because the area has a large stock of aging small and medium-sized buildings. Major building redevelopments are opportunities to attract tenants, and the company thinks the Shibuya area has a growing need to add value to existing buildings. Tokyu Construction has created an extensive track record of building construction in the Shibuya area over the past 60 years. The company explains that this history, plus a dedicated sales team that communicates closely with people in this area, have enabled it to build solid relationships with town councils and commercial organizations in the area. By leveraging these strengths, the company is playing a central role in urban development in Shibuya in the broader sense. Further in the future, the company expects to extend its redevelopment business to areas around other major stations on the Tokyu lines, such as Sangenjaya and Mizonokuchi.

*Shibuya: Shibuya is one of Tokyo’s three major sub-centers, along with Shinjuku and Ikebukuro, and is one of the busiest areas in Tokyo. Shibuya Station is also one of the Tokyo’s largest railway stations, allowing passengers to transfer among Tokyu’s Den-en-toshi and Toyoko lines, Tokyo Metro’s Fukutoshin and Ginza lines, JR East’s Yamanote Line, and Keio railway lines. Average daily traffic through JR Shibuya Station is around 366,000 passengers (FY03/20: JR East survey). The Shibuya district is one of several popular areas for young people. Major shopping facilities include Tokyu Department Store, Shibuya 109, and Shibuya Parco. **Along the Tokyu lines: Tokyu Den-en-toshi Line (Shibuya, Ikejiri-Ohashi, Sangenjaya, Futako-Tamagawa, Mizonokuchi, Tama Plaza, Nagatsuta, Minami Machida Grandberry MallーChuorinkan) Tokyu Toyoko Line (Shibuya, Daikanyama, Nakameguro, Jiyugaoka, Tamagawa, Musashi Kosugi, Hiyoshi, Tsunashima, Yokohama) Tokyu Meguro Line (Meguro, Fudo-mae, Musashi-Koyama, Ookayama, Den-en-chofu) Tokyu Oimachi Line (Futako-Tamagawa, Jiyugaoka, Ookayama, Hatanodai, Oimachi) Tokyu Ikegami Line (Gotanda, Hatanodai, Kamata) Tokyu Tamagawa Line (Tamagawa, Musashi-Nitta, Kamata)

Shibuya Scramble Square Central and West Towers Many small, older buildings around and the former Shibuya Station Shibuya Station

Source: Tokyu website (“Shibuya redevelopment”) Source: Nippon.com website (photo courtesy of Tokyu Corporation) Growing demand for renovation The company expects demand for renovation to rise as the number of aging buildings grows. Seismic reinforcement and environmental considerations are driving demand for renovation. The company believes this trend will persist, centered on non- residential buildings. Tokyu Construction plans to cultivate this market through Tokyu Renewal Co., Ltd., a subsidiary that handles this business. Tokyu Construction intends to build a new customer base for commercial facilities and hotels by highlighting its construction technology capable of handling projects that are large in scale and difficult, as well as by leveraging its capabilities in interior construction planning and design. As it expects the construction market to shrink and demand for renovation to expand, the company considers it will need to make a functional change in the way it receives orders to accommodate more recurring-revenue business.

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Building maintenance and renovation work Percentage of infrastructure 50-plus years old

(JPYtn) Non-residential Residential Aging rate (over 50 years) March March March 14 2013 2023F 2033F 12 Road bridges 18％ 43％ 67％ 10 Tunnels 20％ 34％ 50％

8 River management facilities 25％ 43％ 64％

6 Sewer pipes 2％ 9％ 24％ Quay walls 8％ 32％ 58％ 4 Source: Company data 2

0

Source: Shared Research, based on MLIT’s “Statistics Survey on Execution of Construction Works”

Urban Solutions business In addition to enhancing cooperation with other companies in the Tokyu Group, the company says it plans to reinforce earnings by strengthening necessary solutions and building a comprehensive value chain through active personnel hiring, alliances, and M&A. In this area of business, the company collects information about the challenges and needs of local companies and landowners and proposes design, construction, and ways to utilize property, including leasing. Tokyu Construction works with partners on small-scale projects that are difficult for it to handle itself and forms alliances with top-tier general contractors in these areas. Tokyu Construction works with other companies in the Tokyu Group in such areas as tenant leasing and maintenance and management. By handling all aspects of the business, including renovation, the company aims to remain in contact with clients over the long term.

Infrastructure asset management In this business, the company supports the maintenance, management, and renewal of infrastructure such as railways and roads from a long-term perspective, promoting the social value of efficient maintenance and management technologies. The company uses iTOREL*, a system for inspecting and examining entire cross sections of tunnels using leading-edge robotics and AI technologies.

*iTOREL (a system for inspecting and examining full cross sections of tunnels): This new technology uses testing robots that straddle the roadway inside a tunnel to conduct tests without interfering with vehicle traffic. Autodetection units that check for cracks or bubbles in concrete linings, and hammer testing units can be used to check for quantitative changes over time. Testing results are examined using the company’s expert system. The company uses this information to suggest repair methods that are cost-optimized, taking the tunnel’s life cycle cost into account.

Net zero-energy building (ZEB) A net zero-energy building (ZEB) reduces energy consumption to nearly zero. The company carried out ZEB renovation on its Institute of Technology, which was completed 25 years ago, and whose energy efficiency was lower than for the most modern buildings. ZEB renovations carried out starting in 2016 were aimed at reducing building CO2 emissions during use. The company lowered the external heat load by employing a double-skin curtain wall, exterior thermal insulation, multilayered glass, and other measures. It also used energy sources other than fossil fuels (solar, geothermal, hydrogen) that it also used to generate power. In the process, Tokyu Construction became the first private-sector company in Japan to install a hydrogen production, storage, and power generation system. The company intends to push forward further to improve technologies, aiming for a truly net zero (100%) energy reduction. In FY03/20, it achieved 78% energy reduction, the highest level in Japan.

Reflecting growing calls to move to a carbon-free society, the company plans to market itself as a ZEB planner.

Tokyo City University Building A The company has designed a new building that will be one of the largest university buildings in Japan, with total floor area of more than 100,000sqm, using multiple elemental technologies it has developed. Construction began in June 2020.

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Seikitokyu Kogyo head office The company is working on a ZEB design for this urban office building, even though it is supposed a ZEB format will be difficult due to the limited space available. Construction is scheduled to begin in spring 2021.

iTOREL system for inspecting the full cross sections of tunnels Institute of Technology following ZEB renovations

Source: Company website

Application of environmentally friendly concrete (CELBIC) Tokyu Construction is one of 13 companies jointly developing environmentally friendly concrete. CELBIC stands for “Consideration for Environmental Load using Blast furnace slag In Concrete.” The low-carbon concrete uses powdered slag from steel manufacturers to reduce carbon dioxide emissions, and this is expected to reduce the amount of CO2 generated by concrete production by 40% in the case of the Ginza 5-chome Project (tentative name) where it will be used.

Digital shift Tokyu Construction aims to accelerate business reforms through a greater uptake of IT, responding to the ongoing digitization of markets and customer needs. To do so, the company is forging alliances with the Tokyu Group and other partner companies, investing in startups, and actively pursuing M&A. A concrete example is innovation of construction and production systems originating with building information modeling (BIM) and construction information modeling (CIM). To that end, the company made Singapore-based BIM equipment design company Indochine Engineering a wholly owned subsidiary in October 2020 and acquired shares in Kawamura Sekisan, an estimating company, and made it a subsidiary. The company established Iwase Precast, a joint venture, to manufacture and sell precast concrete, which improves construction efficiency, and is working on end-to-end digital transformation in construction. In order to promote the use of BIM in construction across the entire company, the company is deploying the BIM first model, a BIM version of design documents, to worksites in Japan before construction begins.

Use of BIM and CIM systems In January 2019, Tokyu Construction started developing the “BIM first model” and adopting BIM with the aim of innovation in construction and production systems. The BIM first model is data obtained by converting design documents into BIM, and can be used in day-to-day management starting with examination of a construction plan before work begins, evolving to construction plans actually used on-site. Initially, the system only handled structural BIM models, but from FY03/22 the company plans to roll out models for BIM data covering greater data volume, encompassing exteriors and some interiors, external structures, and facilities to all sites above a certain size. By deploying BIM throughout the entire value chain, the company plans to revamp its construction and production systems, and aims at improvements in construction productivity of 30% or more.

BIM: Building information modeling (BIM) is a solution for utilizing information in a building database produced by adding data regarding attributes, such as cost, finishing details, and management information, to a three-dimensional digital model of a building constructed on a computer during various types of construction processes, including design, construction, maintenance, and management. To front-load construction work and streamline on-site operations, Tokyu Construction has started distributing a structural model that supports BIM as a “first model” at the start of construction. The distributed model is utilized at the site as a construction BIM, and applied to an examination of the construction plan. Visualizing work procedures and sharing BIM information with employees and on-site skilled construction workers makes it possible to select the best procedures, and helps to improve the efficiency and safety of the operations. BIM can also help ensure consistency among multiple drawings, such as architectural design, structural, and equipment plans, and prevent losses due to operational rework. Furthermore, it is possible to check work in detail and build a consensus with the client and designers in three dimensions, improving the speed of decision-making. The company says it plans to utilize the information provided by BIM to reduce the burden of on-site quantitative calculations. (Source: Tokyu Corporation’s Integrated Report 2019)

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CIM: Construction information modeling (CIM) refers to applying the concept of BIM, which is taking hold in the construction field, in civil engineering.

Moving from individual VR to shared VR Using virtual reality (VR), the company is conducting a proof-of-concept experiment to speed up information sharing and consensus-building at construction sites by using a virtual space where several people can gather at the same time. This is facilitated by the Ricoh Virtual Workplace solution from Ricoh Co., Ltd. (TSE1: 7752), which uses a range of features to enable natural, free communication between people separated by physical distance. Tokyu Construction will verify the effectiveness of the solution for possible commercialization in the future.

Using MR in building confirmation The company is conducting simulated screening in a joint trial with a confirmation inspection institution using a mixed reality (MR) device from Microsoft and BIM. It aims to boost inspection efficiency and accuracy by centrally comparing and confirming the actual structure against blueprint data.

Wooden construction business The company is focusing on the business of building structures that give preference to the use of wood or that are of mixed wooden construction. In recent years, technologies mixing wooden and non-wooden methods (reinforced concrete and steel frame construction) have advanced, making the medium-sized wooden construction business more tenable. Amid regulatory reforms and increasing environmental demands, the company expects demand to increase for medium- to high-rise offices, residences, and commercial structures that mix reinforced concrete and wood. The company plans to pursue technological developments in this area from a medium- to long-term perspective, gradually addressing technical issues.

Daito Trust Construction Co., Ltd.’s (TSE1: 1878) “ROOFLAG Rental Housing Future Exhibition Hall” (in Tokyo’s Koto Ward) was completed in March 2020. This major wooden construction project features a lattice work roof with a span of up to 60 meters, one of the largest in Japan. The roof is made up of 128 pieces of cross laminated timber (CLT)* material and uses no stanchions, resulting in an unprecedentedly spacious interior. Digital technologies including building information modeling (BIM) are used for the construction.

*Cross laminated timber (CLT) is a type of wooden construction material. Whereas in standard laminated timber, the layers are laminated together with the grain running in the same direction, in CLT, each layer is oriented perpendicular to the adjacent layers, resulting in panels with superior structural strength.

Left: Rebuilding the roof over Togoshi Ginza Station on the Tokyu Ikegami Line (2016). Right: ROOFLAG Rental Housing Future Exhibition Hall (2020)

Source: Company website

Strategic business growth International business

▷ The company plans to step up its efforts in railway and transportation infrastructure and transit oriented development (TOD) under official development assistance (ODA) programs primarily in Southeast and South Asia, leveraging the strengths it has cultivated in Japan in railway construction and urban development along the Tokyu railway lines

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▷ In private-sector construction, it aims to establish a high-margin business model tailored to individual countries’ market environment through partnerships with local companies and local human resources

Overseas projects The company is pursuing the construction business overseas, in South and Southeast Asia (Thailand, Singapore, Indonesia, Myanmar, Vietnam, and Bangladesh). Overseas development assistance (ODA) projects and private-sector building construction projects are its focus. For ODA projects centering on railways and roads, the company has expanded its region of business concentration from Thailand, Indonesia, and Myanmar to other South Asian countries including Bangladesh. As for private-sector building construction projects, Tokyu Construction has participated in high-rise building projects of strong local developers and factory construction for Japanese companies operating overseas, as well as hotel construction projects. The company strives to enhance governance for the expansion of business, seeking to make the processes of business and risk management visible.

Jakarta Mass Rapid Transit Project (Indonesia, 2019) Takasago factory (Singapore, completed in 2013)

Source: Company website Source: Company website

Real estate business

▷ The company plans to grow the real estate business to exploit synergies with the construction business and ensure stable earnings

▷ Based on the three values it provides (decarbonization, zero waste, and disaster prevention and mitigation), the company aims to target eco-conscious customers and develop real estate development/value adding businesses by leveraging synergies with the construction business.

In this business, the company acquires real estate to ensure stable future earnings. Taking on a certain degree of exposure, Tokyu Construction is reinforcing the real estate leasing business. Specifically, the company is focusing its leasing investments on office buildings and stores. The Tokyu Group is extensive, including such companies as Tokyu Corporation and Tokyu Land Corporation. By leveraging this groupwide information network, the company plans to concentrate on buying income properties that offer synergies with its small and medium-sized building construction in central Tokyo and along the Tokyu lines. The company intends to add value to the properties it purchases, renovating them to boost investment yields. To expand this business, the company is setting new investment standards and monitoring processes in the interest of managing risk. It plans to hire outside personnel to build up processes in terms of expertise, as well as on the organizational front.

Public–private partnerships In the PPP/concession business, Tokyu Construction intends to concentrate on the water and sewerage business (an area of strength) and on developing the airport concession business. The company sees water and sewerage as a field with growth potential and one that has strong ties to the civil engineering business. It participates in the airport concession business through cooperation with other members of the Tokyu Group. In 2018, Tokyu Construction and four others set up a special-purpose company to operate a sewage treatment plant for the Seien area of Hamamatsu for the next 20 years. This project represents the first sewerage system privatization in Japan. The company plans to participate actively in new bidding projects, collaborating

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with the SPC and the project operating company (Hamamatsu Water Symphony K.K.), acquiring expertise, and training employees.

Seien sewage treatment plant

Source: City of Hamamatsu data

New businesses

▷ The company plans to establish a “new business continuity creation function” and aggressively develop a succession of new business in areas that can contribute to growth in the three values the company provides, including renewable energy, and areas that use digital technologies

▷ To that end, it plans to invest up to JPY5.0bn in venture businesses in Japan and overseas

▷ The company plans to step up its efforts (through group collaboration) on concession projects for sewerage systems, airports, etc., and PPP initiatives such as smart cities

In 2012, the company entered a new area of business: bell pepper cultivation. Plantaardig farm Co., Ltd., a subsidiary, grows the bell peppers at a greenhouse in Miho-mura, Inashiki, Ibaraki Prefecture (one of the largest bell pepper nutriculture facilities in Japan) and sells it. The company aims to expand this business. It also intends to concentrate on searching for and developing other new businesses.

Plantaardig farm’s Miho-mura plant (Miho-mura, Inashiki, Ibaraki Prefecture)

Source: Plantaardig Farm’s website

In May 2021, the company earmarked up to JPY5.0bn to invest in venture businesses in Japan and overseas with a view to creating growth opportunities. The company aims to develop new businesses that have synergies with the construction business, targeting areas that contribute to growth in the three values (decarbonization, zero waste, and disaster prevention and mitigation) and its sources of competitive advantage (human resources and digital technology).

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Business Business description General contractor in the Tokyu Group Tokyu Construction is a second-tier general contractor. It accepts entire orders for building construction and civil engineering work and then managing those construction projects. A member of the Tokyu Group, Tokyu Construction is an equity-method affiliate of Tokyu Corporation, which owns a 14.7% stake in the company (end-March 2021).

In FY03/21, the Building Construction segment accounted for 66.2% of consolidated revenue. The Civil Engineering segment, which includes railway construction, accounted for 32.7%, and the Real Estate segment provided 1.1%. Private-sector construction projects thus account for the majority of revenue. Nearly 20% of orders come from other companies in the Tokyu Group. Tokyu Construction focuses on areas along Tokyu train lines, from the southwestern part of Tokyo’s 23 wards to northern Yokohama.

On a parent-only basis, in FY03/21 private-sector construction projects accounted for 58.0% of revenue, private-sector civil engineering projects (including railway construction) for 10.6%, and public-sector projects (civil engineering and building construction) for 26.6%.

Definition of a general contractor A general contractor* is a main contractor that accepts orders to undertake entire building construction and civil engineering projects, according to a licensing system by the Ministry of Land, Infrastructure, Transport and Tourism. Other notable general contractors include Kajima, Taisei, and Obayashi.

General contractors accept entire orders from entities such as companies, governments, and municipal bodies, and then outsource specific types of work (interior construction, electrical contracting, equipment installation, reinforcement work) to specialized construction companies (subcontractors). General contractors manage the overall construction process to ensure that specified projects are completed within the allotted times. The scale of business they handle is large; revenue from individual projects may run from billions to tens of billions of JPY. Construction periods on office building, railway, or roadway projects typically last from one to three years. Private-sector construction tends to be vulnerable to economic fluctuations. Public- sector projects tend to be more stable, with government entities continuing to place orders even in economically difficult times. The Japanese construction industry has been growing in recent years, benefiting from increased investment in construction, notably for business related to the Tokyo Olympics. Once this private-sector demand has run its course, the company expects general contractors to prioritize relatively solid business involving public-sector and overseas projects, and expansion of non- building construction business.

*Licensing system in the construction business: Based on the Construction Business Act**, construction companies that perform work valued at JPY5mn or more must be licensed by the Minister of Land, Infrastructure and Transport according to their type of business. Main contractors (which engage in the construction of civil engineering structures and buildings by providing overall planning, direction, and coordination) perform “general civil engineering works” and “general building works.” General contractors, which perform integrated construction work, typically obtain both licenses. The role of a main contracting company is to ensure a building or other structure is delivered as and when requested by the party placing the order. To do so, the main contracting company handles the overall management of specialty contractors on processes, quality, costs, safety, and other factors. General contractors, which undertake whole projects from the parties placing the orders, and order subcontractors to conduct business totaling more than JPY40mn (JPY60mn for general building works) must obtain a “special construction business license.” **Construction Business Act: This act defines “construction business” as “a business that contracts to complete construction work, regardless of whether it is a main contractor, a subcontractor, or falls under any other designation.” “Contract” refers to one party entering into an agreement promising to complete a building, facility, roadway, or other structure in exchange for consideration paid by another party for this result.

Construction management Construction sites are fast-moving, with on-site people and materials changing on a daily basis as work progresses. On any given day, large construction sites may see more than 1,000 workers. Such sites require overarching management. The general contractor’s role is to use their construction and management skills to smoothly manage the overall construction process,

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assigning specialty contractors and arranging for the purchase and delivery of necessary materials. Smooth construction management requires a high level of expertise and experience. The key is to balance on-site construction activities smoothly while ensuring profits. General contractors typically have sales, design, construction, costing (estimates, procurement), equipment, and R&D departments that enable them to take on and manage construction work.

Flow of construction work In a typical flow, a landowner, real estate company, national government, or municipal body produces a design drawing itself or asks a design office to do so. The party placing the order then submits the design drawing to the general contractor and requests an estimate of construction costs. As well as handling construction, in some cases a general contractor may be asked to produce design drawings as well. Once the party placing the order decides who it wishes to handle the construction, it signs construction services agreement with the general contractor. After receiving this contract, the general contractor draws up more detailed construction plans, obtains estimates from subcontractors, and places work orders.

Construction planning requires a general contractor to conduct field surveys, geological surveys, surveys of neighboring buildings, and surveys for buried objects before producing a work schedule. The general contractor dispatches a site foreman to the construction site to oversee construction work. When erecting a building, construction may include such specialized processes as foundation work (soil improvement, form work); rebar or steel frame structures; pillars, floors, and walls; exterior work (outside walls, plastering, painting); interior work (piping, air conditioning, wiring); and landscaping.

Main contractors and subcontractors In general, the main contractor (direct recipient of a construction order) is a general contractor, and specialized construction companies are subcontractors. Projects are single-item, built-to order structures built to meet certain specifications, construction periods, and quality levels. Construction business tends to be cyclical, with busy periods and slack periods. Maintaining a full staff capable of handling work during busy periods would lead to excessive fixed costs (personnel). By outsourcing to subcontractors during busy periods, general contractors can stabilize their fixed costs throughout the year. Subcontractors may also outsource work to sub-subcontractors for the same reason, so the construction industry has numerous subcontractors.

Another aspect of subcontracting is the existence of specialized construction companies (subcontractors). General contractors (main contractors) outsource work to numerous companies that specialize in specific areas, leading to the prevalence of subcontractors. This arrangement leads to decentralization when construction demand falls off significantly, resulting in oversupply (as general contractors seek to lower costs by spreading out work to subcontractors). In times like the present, though, when Japan’s working-age population is shrinking, leading to a shortage of workers, general contractors are working to increase the level of centralization through closer affiliation with high-quality, specialized construction companies.

Specialty contractors have specialized expertise and are covered under 27 work categories. These include carpentry; plastering; scaffolding and excavation; dismantling; masonry; roofing; electrical contracting; plumbing; tiling, brick and block; steel structure contracting; steel reinforcement; paving; dredging; sheet metal; glazing; painting; waterproofing; interior finishing; machinery, equipment and facility; heat insulation; telecommunication engineering; landscaping; well drilling; cabinetmaking; water supply facilities; firefighting facilities; and sanitation facilities.

A main contractor that outsources more than JPY40mn to subcontractors (or more than JPY60mn for general building works) requires a “special construction business” license.

Impact of region and climate The construction business requires the movement of people, materials, equipment, and other resources. Even with the same type of building, construction parameters may differ depending on the type and quality of soil, climate, and other factors in each region. Climate could have a significant impact on construction period. In addition to making it difficult to accurately estimate costs ahead of time, construction companies bear the risk of low-profit projects.

Construction business expenses The main costs of construction work are net construction costs: materials, labor, outsourcing, and operating expenses. Materials expenses are the costs of consumables, such as steel, wood, and concrete. Labor expenses are the salaries paid to workers at specialized construction companies laboring on-site. Subcontractors’ materials and labor costs are included in outsourcing costs.

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Operating expenses include the cost of wear on tools, costs for the use of construction equipment*, costs of temporary materials and equipment**, as well as the costs of power, fuel, material transport and storage, transportation, insurance, and taxes and dues. Construction management expenses, which are not included in net construction costs, are defined as the expenses required to manage the overall construction process. Construction management expenses include the costs of managing technologies, processes, safety, labor, and administration.

*Construction equipment: Bulldozers, backhoes (power shovels), pile drivers, cranes, tower cranes, concrete pump trucks **Temporary materials and equipment: Scaffolding, forms, covering nets and sheeting, temporary enclosures, soundproofing panels, prefabricated houses, portable toilets

Capital expenditures Construction companies may make capital investments on construction equipment, but nowadays general construction equipment is typically leased or rented, so the amount of investment required for the actual building construction business is limited. Construction companies typically invest in leasing (office buildings and stores), development (commercial facilities, hotels, and resort facilities), and acquisitions.

Experience in receiving contracts Because construction contracts are signed before a building exists, from the customer standpoint is important to know that construction work has been performed to the required standard when a building passes into their hands. For customers, a construction company’s past performance is a key indicator of its ability to perform according to contract.

General contractors tend to have a more extensive project record than local small and medium-sized construction companies, so are in a better competitive position to receive orders. Albeit a second-tier general contractor, Tokyu Construction has experience in a wide range of areas. In addition to numerous ultra high-rise buildings, the company has extensive experience with office buildings, schools, government office buildings, condominiums, railways (notably tunnels and multilevel crossings), roadways, waterways and sewerages (notably tunnels and bridges). The five super general contractors, including Kajima, have more experience in large construction projects, including large general hospitals, sports facilities, art museums, long bridges, and dams.

Profitability of building construction and civil engineering Civil engineering work tends to be high-profit; an analysis of segment OPM at general contractors shows that building construction typically generates margins of 7–9%, whereas OPM on civil engineering work is around 10–12%. Shared Research understands this difference exists because preliminary screening for civil engineering work, which usually means public-sector projects, usually limits bidding to construction companies that possess sophisticated construction technology and highly stable management.

Public-sector projects also tend to be more stable and less susceptible to economic downturns than private-sector construction. Tokyu Construction expects the market for private-sector construction to mature over the medium to long term. For that reason, the company’s medium-term management plan highlights civil engineering work as a growth field.

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Segments

Segments FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 (JPYmn) Act.Act.Act.Act.Act.Act.Act.Act.Act.Act. Revenue 227,843 228,570 226,164 262,815 296,393 243,618 320,711 331,437 322,170 231,483 YoY -7.0% 0.3% -1.1% 16.2% 12.8% -17.8% 31.6% 3.3% -2.8% -28.1% Const ruct ion: Building 179,407 186,814 171,682 197,883 228,062 167,558 244,618 258,896 231,572 153,253 YoY -8.8% 4.1% -8.1% 15.3% 15.3% -26.5% 46.0% 5.8% -10.6% -33.8% % of total 78.7% 81.7% 75.9% 75.3% 76.9% 68.8% 76.3% 78.1% 71.9% 66.2% Construction: Civil Engineering 42,742 39,970 52,286 62,570 66,000 70,190 74,089 70,652 88,511 75,762 YoY -3.8% -6.5% 30.8% 19.7% 5.5% 6.3% 5.6% -4.6% 25.3% -14.4% % of total 18.8% 17.5% 23.1% 23.8% 22.3% 28.8% 23.1% 21.3% 27.5% 32.7% Real Estate 5,694 1,786 2,195 2,360 2,329 5,869 2,003 1,888 2,086 2,467 YoY 49.8% -68.6% 22.9% 7.5% -1.3% 152.0% -65.9% -5.7% 10.5% 18.3% % of total 2.5% 0.8% 1.0% 0.9% 0.8% 2.4% 0.6% 0.6% 0.6% 1.1% Other Operating profit 1,572 1,154 2,630 6,009 18,178 17,211 21,416 21,987 20,315 3,549 YoY -79.3% -26.6% 127.9% 128.5% 202.5% -5.3% 24.4% 2.7% -7.6% -82.5% Operating profit margin 0.7% 0.5% 1.2% 2.3% 6.1% 7.1% 6.7% 6.6% 6.3% 1.5% Const ruct ion: Building 1,795 2,210 2,880 6,965 19,576 16,630 22,130 20,200 20,511 7,561 YoY -76.1% 23.1% 30.3% 141.8% 181.1% -15.0% 33.1% -8.7% 1.5% -63.1% Operating profit margin 1.0% 1.2% 1.7% 3.5% 8.6% 9.9% 9.0% 7.8% 8.9% 4.9% % of total 36.7% 54.0% 48.7% 71.1% 82.9% 73.1% 80.2% 72.4% 75.2% 81.7% Construction: Civil Engineering 2,677 1,462 2,536 3,227 3,773 4,729 5,214 7,993 6,914 3,280 YoY -1.9% -45.4% 73.5% 27.2% 16.9% 25.3% 10.3% 53.3% -13.5% -52.6% Operating profit margin 6.3% 3.7% 4.9% 5.2% 5.7% 6.7% 7.0% 11.3% 7.8% 4.3% % of total 54.7% 35.7% 42.9% 32.9% 16.0% 20.8% 18.9% 28.7% 25.4% 35.4% Real Estate 420 419 499 -390 257 1,387 245 -304 -152 -1,585 YoY -47.9% -0.2% 19.1% - - 439.7% -82.3% - - - Operating profit margin 7.4% 23.5% 22.7% - 11.0% 23.6% 12.2% - - - % of total 8.6% 10.2% 8.4% -4.0% 1.1% 6.1% 0.9% -1.1% -0.6% -17.1% Adjustments -3,321 -2,938 -3,285 -3,792 -5,429 -5,535 -6,173 -5,901 -6,957 -5,706 Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

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Breakdown of parent-only revenue Parent revenue FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 (JPYmn) Act.Act.Act.Act.Act.Act.Act.Act.Act.Act. Building construction 174,460 179,514 166,128 190,082 221,870 160,890 236,898 238,241 206,956 138,991 % of parent revenue 78.3% 81.2% 75.5% 74.8% 76.9% 68.1% 75.8% 76.9% 69.8% 64.3% Domestic public 10,171 14,804 10,074 25,597 26,854 23,631 19,228 11,596 15,904 13,411 % of parent revenue 4.6% 6.7% 4.6% 10.1% 9.3% 10.0% 6.2% 3.7% 5.4% 6.2% Domestic private 123,127 126,987 129,794 144,194 173,008 112,351 152,126 169,148 151,695 104,328 % of parent revenue 55.3% 57.5% 59.0% 56.8% 60.0% 47.5% 48.7% 54.6% 51.2% 48.2% Tokyu Group 39,455 34,781 24,383 19,297 20,538 24,828 65,329 56,958 38,479 21,101 % of parent revenue 17.7% 15.7% 11.1% 7.6% 7.1% 10.5% 20.9% 18.4% 13.0% 9.8% Overseas 1,706 2,940 1,876 993 1,470 79 213 537 876 150 % of parent revenue 0.8%1.3%0.9%0.4%0.5%0.0%0.1%0.2%0.3%0.1% Civil engineering 42,597 39,737 51,932 61,864 64,626 69,845 73,863 70,381 88,078 75,568 % of parent revenue 19.1% 18.0% 23.6% 24.3% 22.4% 29.6% 23.6% 22.7% 29.7% 34.9% Domestic public 17,347 17,063 28,645 37,965 41,425 48,258 39,887 40,901 56,489 44,019 % of parent revenue 7.8% 7.7% 13.0% 14.9% 14.4% 20.4% 12.8% 13.2% 19.1% 20.4% Domestic private 7,974 6,789 8,017 11,480 11,344 8,887 11,145 9,574 7,532 14,545 % of parent revenue 3.6%3.1%3.6%4.5%3.9%3.8%3.6%3.1%2.5%6.7% Tokyu Group 12,171 11,597 9,507 9,848 7,991 9,302 12,436 12,735 13,092 8,397 % of parent revenue 5.5%5.2%4.3%3.9%2.8%3.9%4.0%4.1%4.4%3.9% Overseas 5,103 4,286 5,762 2,569 3,864 3,398 10,394 7,170 10,964 8,606 % of parent revenue 2.3%1.9%2.6%1.0%1.3%1.4%3.3%2.3%3.7%4.0% Total construction 217,057 219,251 218,061 251,946 286,496 230,736 310,761 308,623 295,034 214,560 % of parent revenue 97.5% 99.2% 99.1% 99.2% 99.3% 97.6% 99.4% 99.6% 99.5% 99.2% Domestic public 27,519 31,868 38,719 63,563 68,279 71,889 59,115 52,498 72,393 57,430 % of parent revenue 12.4% 14.4% 17.6% 25.0% 23.7% 30.4% 18.9% 16.9% 24.4% 26.6% Domestic private 131,101 133,776 137,811 155,674 184,352 121,238 163,271 178,722 159,227 118,874 % of parent revenue 58.9% 60.5% 62.6% 61.3% 63.9% 51.3% 52.2% 57.7% 53.7% 55.0% Tokyu Group 51,626 46,379 33,890 29,146 28,530 34,130 77,766 69,693 51,571 29,499 % of parent revenue 23.2% 21.0% 15.4% 11.5% 9.9% 14.4% 24.9% 22.5% 17.4% 13.6% Overseas 6,810 7,227 7,639 3,563 5,334 3,477 10,608 7,708 11,841 8,757 % of parent revenue 3.1%3.3%3.5%1.4%1.8%1.5%3.4%2.5%4.0%4.0% Real Estate 5,624 1,764 2,037 2,126 2,009 5,569 1,725 1,323 1,391 1,684 % of parent revenue 2.5% 0.8% 0.9% 0.8% 0.7% 2.4% 0.6% 0.4% 0.5% 0.8% Total parent revenue 222,682 221,015 220,098 254,073 288,505 236,305 312,487 309,946 296,426 216,245 Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

Building Construction The Building Construction segment accounts for 66.2% of consolidated revenue (FY03/21). In this business, the company builds office buildings, government offices, schools, hospitals, commercial facilities, logistics facilities, factories, and condominiums throughout Japan. Overseas, business centers on office buildings, factories, and commercial facilities in South and Southeast Asia.

Tokyu Construction’s emphasis is on work along Tokyu train lines, and in recent years construction business in Japan has been strong. For these reasons, recently the company has completed a number of office buildings near Shibuya Station. These include Shibuya Mark City (completed in 2000), Cerulean Tower (completed in 2001), Shibuya Hikarie (completed in 2012), Shibuya Stream (completed in 2018), Shibuya Scramble Square (completed in 2019), Ohashi Medical Center, Toho University (completed in 2018, Ikejiri-Ohashi), Futako-Tamagawa Rise (completed in 2011), and Nocty Plaza (completed in 1997, Mizonokuchi). The company has also built educational facilities for universities along Tokyu lines, such as Asia University and Tokyo City University, as well as Nippon Sport Science University and Teikyo University.

Mark City, the start of the Shibuya redevelopment project Shibuya Mark City, which was completed in 2000, required the building of a large structure (400m from east to west) in a tight space in a bustling shopping area directly above the Keio Inokashira Line. According to the company, the construction logistics, planning, and regional considerations it was required to handle on this project served as an important springboard that allowed it to obtain orders for further redevelopment projects.

A sales team with roots along the Tokyu lines, centered on Shibuya Tokyu Construction has a sales team dedicated to opportunities in the Shibuya area, which is the company’s base of operations. This team maintains close communications with members of this community, including shopping district promotional councils, landowners, building owners, and real estate companies, to gather information pertinent to construction orders. One aspect of

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these sales efforts is to support local festivals, such as the Shibuya Art Festival and an annual festival at the Miyamasumitake Shrine. These efforts have led to winning such redevelopment projects as Qfront, at the Shibuya Scramble pedestrian crossing (completed in 1999), Shibuya 109 (completed in 1979), and Sangenjaya Carrot Tower (completed in 1996).

Redevelopment work near Shibuya Station Since 2012, Tokyu Corporation and the East Japan Railway Company have been spearheading redevelopment work around Shibuya Station. Projects include Shibuya Hikarie (opened in 2012, built by Tokyu Construction), Shibuya Stream (opened in 2018, built by Tokyu Construction), Shibuya Scramble Square (opened in 2019, built by Tokyu Construction), Shibuya Cast (opened in 2017), Shibuya Fukuras (opened in 2019), and Shibuya Solasta (opened in 2019).

Redevelopment work near Shibuya Station (includes work performed by other companies)

Source: Shared Research, from the “Shibuya Redevelopment” section of Tokyu’s website Phase 1 of Shibuya Scramble Square (new construction work for the Shibuya Station District East Tower) This construction, which lasted from June 2014 to November 2019, took place above Shibuya Station—one of the busiest stations in Japan by passenger numbers. The construction environment was also subject to numerous limitations due to its nature as a traffic hub, where JR train lines, the Tokyo Metro Ginza Line, and Route 246 intersect. Underground are the Tokyo Metro Fukutoshin Line and the Tokyu Toyoko Line, as well as the Shibuya River. Construction had to take place in challenging circumstances, such as not interfering with operating train lines or the movement of people using Shibuya Station. The company was able to apply construction expertise it had gained at Shibuya Hikarie.

Materials and logistics had to be handled on a just-in-time basis. To do so, the company developed DandALL, a system for centrally managing in- and out-loading. This system enabled construction workers to share the status of in- and out-loading in real time using tablets and smartphones, substantially reducing waiting times for loading. The company notes that this use of ICT helped improve site productivity.

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Construction performed by the company as part of the Shibuya Station redevelopment

Source: Company briefing materials Noteworthy projects

Shibuya Stream (2018) Shibuya Scramble Square (2019) Qfront (1999)

Source: Company website Source: Company website Source: Company website

Ohashi Medical Center, Toho University (2018) New No. 6 Hall, Tokyo City University (2017)

Source: Company website Source: Company website Civil Engineering Railway, road, and water and sewerage construction Civil Engineering accounts for 32.7% of consolidated revenue (FY03/21). In this business, the company concentrates on railway and road construction, areas where it possesses some industry-leading technologies.

Railway construction Tokyu Construction has completed a number of highly difficult railway construction projects. The company explains that it has construction planning and technology skills, as well as better expertise than peers, enabling it to meet difficult requests from railway operators. Orders for difficult construction projects are typically awarded to super general contractors rather than

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second-tier general contractors. However, the experience Tokyu Construction has acquired has helped it build strong ties with construction companies specializing in railway construction and respond smoothly to client requests.

One area of particular expertise in railway construction is technologies that allow the company to build complex multilevel crossings at night, without interfering with the operation of existing routes. Recent projects in this category include upgrade construction at Shibuya Station on the Tokyo Metro Ginza Line* (scheduled for completion in 2022), continuous elevated railway work near Keikyu Kamata Station (completed in 2016), on underground construction between Shibuya and Daikanyama on the Tokyu Toyoko Line (completed in 2014), and construction of a multilevel crossing near Fudo-mae Station on the Tokyu Meguro (completed in 2008). As for overseas projects, the company took part in the Jakarta Mass Rapid Transit Project (Indonesia, completed in 2019).

Upgrade construction at Shibuya Station on the Tokyo Metro Ginza Line: From December 27, 2019 to the early hours of January 3, 2020, the Ginza line’s Shibuya station underwent track realignment and platform relocation for a third time. A total 5,000 workers, 1,000 from Tokyu Construction, the rest from subcontractors, worked efficiently, and with no obstruction to train schedules, the first train of the day on January 3 departed on schedule from the new station building. The company ensured quality and boosted productivity with the use of Building Information Modeling and Construction Information Modeling (“BIM/CIM”, management of construction production systems and facilities administration using 3D modeling from the survey and design stage).

For many projects, Tokyu Construction has used the STRUM method (“shifting track right upper/under method”) for putting in place a new track directly above or under existing tracks, which has helped on a number of projects involving continuous multilevel crossings. Although other second-tier general contractors also have experience with the construction of multilevel crossings, Tokyu Construction believes its standing as a general contractor affiliated with a railway group and its extensive experience give it an edge over peers. The company also handles routine maintenance and management of railway structures. This business gives Tokyu Construction access to a wealth of data and expertise in making proposals to railway operators. In April 2019, the company set up a new division to mark a full-fledged start in the infrastructure asset management business. With the new business, Tokyu Construction aims to provide clients with medium- to long-term infrastructure maintenance and management support on railway and roadway structures.

Road construction In the road construction category, the company specializes in the application of railway civil engineering technologies for tunnel excavation and building roadbeds and abutments. Noteworthy projects include the Atsugi Minami Interchange on the Shin- Tomei Expressway (completed in 2018), the Ohashi Junction on the Shinjuku Line of the Metropolitan Expressway Central Circular Route (completed in 2010), the Senpuku Tunnel on the Second Tomei Expressway (completed in 2008), road construction on the Miyako Kita-chiku Road on the National Route 45 (completed in 2018), and the Wakayama Misaki Line Hirai- Kita Area Road (completed in 2017). Overseas, the company built the Vo Nguyen Giap Road (Vietnam, completed in 2014).

Water and sewerage construction Water and sewerage construction makes use of tunnel excavation technology, an area of specialization for Tokyu Construction. Notable projects include the Sumida River Rain Water Trunk Line (completed in 2018), which was one of the largest projects in Japan to have been conducted using a freezing method, and the Toyokawa Irrigation Channel Tobu Line Waterway (completed in 2015).

Civil engineering: Demand typically stable and profitability high Civil engineering work tends to be high-profit; an analysis of segment OPM at general contractors shows that building construction typically generates margins of 7–9%, whereas OPM on civil engineering work is around 10–12%. Shared Research understands this difference exists because preliminary screening for civil engineering work, which usually means public-sector projects, usually limits bidding to construction companies that possess sophisticated construction technology and highly stable management. Public-sector projects also tend to be more stable and less susceptible to economic downturns than private-sector construction.

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Notable projects

Underground construction on the Tokyu Toyoko Wakayama Misaki Line Hirai-Kita Area Road (2017) Line (between Daikanyama and Shibuya, 2014)

Source: Company website Source: Company website Overseas projects Overseas projects are one pillar of Tokyu Construction’s strategy for diversifying sources of earnings. The area of specific focus is the construction business in South and Southeast Asia, with the primary focus on overseas development assistance (ODA) projects and private-sector building construction projects. For ODA projects centering on railways and roads, the company has expanded its region of business concentration from Thailand, Indonesia, and Myanmar to other South Asian countries including Bangladesh. As for private-sector building construction projects, Tokyu Construction has participated in high-rise building projects of prominent local developers and factory construction for Japanese companies operating overseas, as well as hotel construction projects. The company has set up offices in target countries (Thailand, Singapore, Indonesia, Myanmar, Vietnam, and Bangladesh). It has also established subsidiaries in Thailand, Indonesia, and Myanmar. In addition to the experience and expertise it has built up in these markets to date, the company plans to step up efforts to recruit talented local personnel, effectively leveraging the few Japanese staff assigned to these locations.

ODA projects and civil engineering work The company’s first ODA projects were in Dhaka, the capital of Bangladesh, where it built a depot for a mass rapid transit system (MRTS), as well as an MRTS in Indonesia. The company says it received high marks from the governments of both countries. The company has also received an order to construct a road on a newly built bridge and carry out large-scale upgrades on railways (between major cities Yangon and Mandalay) in Yangon, Myanmar, as well as for overhead expressway construction in Hanoi, Vietnam. In Thailand, Tokyu Construction completed the Bangkok MRT Purple Line (completed in 2014) and the southern section construction of the Bangkok subway (completed in 2002).

The Mass Rapid Transit System in Jakarta (source: Tokyu Corporation’s Integrated Report 2019): The capital of Indonesia, Jakarta, is densely populated. The increasing volume of road traffic to the city center has resulted in severe congestion and pollution and development of a railway network poses an important challenge for the government. With assistance from Japan, construction on Indonesia’s first mass rapid transit system began in November 2013 and took about five and a half years. Services started operating in March 2019.

In this project, Tokyu Construction was in charge of the CP101 elevated span and the CP102 span (a total of 5.9 km), including three stations and the railcars depot with an area of 8 ha. The company adopted a construction method that suited the conditions whereby there was no free space beneath bridges and without blocking existing roads. In the construction of an elevated prestressed concrete box-girder bridge, it was technically difficult to build a steeply curved bridge, in particular with a bending radius of 180 m based on the balanced cantilever method. As the construction took place above expressways and major roads in operation, it exercised a high-level of safety control, including measures for preventing falling objects, etc.

Further, the company explains that the project involved a total workforce of around 1,800 people, including 350 managers.

Building construction Key projects to date in this category are the Takasago Singapore factory (completed in 2013), Causeway Point Shopping Center (completed in 2012, Singapore), Malaysia Airlines A380 heavy maintenance hangar (completed in 2007), Suntec Singapore Convention & Exhibition Centre (completed in 2006), and Ninoy Aquino International Airport Terminal 2 Project (completed in 1998, Philippines). The company has enhanced its bidding support system, actively leveraging local staff and collaborating with local leading construction partners. To date, Japanese companies’ factories have been the main focus of its overseas building construction business. Now, it is enhancing its efforts to receive orders for high-rise buildings from local prominent developers,

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beyond Japanese companies. Tokyu Construction also supports other Japanese companies, including developers, who intend to expand their business overseas, earning trust from these companies when they expand business overseas, which leads to orders from them.

Real Estate In the Real Estate segment, the company holds real estate assets for lease. It also conducts non-asset businesses, such as redevelopment and equivalent exchange*. In the past, the company has concentrated on the non-asset business. Revenue and profit volatility in this business is high, as revenue is typically booked when projects are complete.

*Equivalent exchange: A development method in which a landowner provides the land and a developer bears the construction costs. Once the project is complete, the individual parties are assigned a portion of the project equivalent to their investments. Structures are shared by the parties involved and land is jointly owned. Developers can recoup project costs by selling the portion they own.

In FY03/21, this consolidated segment delivered revenue of JPY2.5bn (+18.3% YoY) and an operating loss of JPY1.6bn (segment operating loss of JPY152mn in FY03/20). The Real Estate segment delivered a temporary loss, due to booking of provision for loss on real estate business following the company’s revision of revenues and costs on large-scale development business.

The company positions real estate leasing as a strategic business for diversifying earnings. The company acquires income properties including office buildings and other commercial facilities to hold over the medium to long term. In FY03/19, the company worked to put in place a structure for this purpose, bringing in experts from the Tokyu Group and hiring other experienced personnel. Tokyu Construction also aims to boost profitability by taking advantage of the information networks it can access as the Tokyu Group’s general contractor and its focus on business in metro Tokyo and along the Tokyu lines. The company explains that these capabilities enable it to take on projects that would be difficult for other companies.

Prior to renting out properties, the company increases their value by performing seismic reinforcement, conducting renovations to make them legally compliant, and converting buildings into small offices. The medium-term management plan targets new investments of JPY10.0bn over a three-year period. In FY03/19, the company acquired five income properties for JPY4.4bn. Tokyu Construction has also set up the internal Real Estate Transaction Review Board* to monitor real estate acquisitions and enhance governance.

*Real Estate Transaction Review Board (source: Tokyu Corporation’s Integrated Report 2019): Tokyu Corporation reviews each property after inviting staff from specialized departments, including the Corporate Planning Department, the Legal Department, and the Finance & Accounting Department, and real estate experts from outside the company. Properties are risky assets that could affect the company’s business performance according to market conditions. As the company will expand its acquisitions, it reviews them every quarter to check the conditions of each one and the outcomes of the real estate business.

In the real estate business, the company mainly leases the properties outlined below.

Main office buildings leased

▷ Gotanda Brick Building (Shinagawa-ku, Tokyo), land: 642sqm, asset value: JPY2.5bn

▷ Higashi Kanda 1-chome Office (Chiyoda-ku, Tokyo), land: 317sqm, asset value: JPY1.5mn

▷ Shin Mizonokuchi Building (Takatsu-ku, Kawasaki), land: 1,686sqm, asset value: JPY1.3bn

▷ Chiyoda Dogenzaka Building (Shibuya-ku, Tokyo)

▷ MCC Kanda Iwamoto-cho Building (Chiyoda-ku, Tokyo)

▷ Ivy Works (Shibuya-ku, Tokyo)

Ivy Works The company acquired this office building and leveraged its strengths as a general contractor to conduct required seismic reinforcement in accordance with the Building Standards Act. Tokyu Construction then renovated the property into small offices, which it leases out over the medium to long term.

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Main shopping facilities leased

▷ Stores at 126 Udagawa-cho (Shibuya-ku, Tokyo), land: 778sqm, asset value: JPY1.6bn

▷ Provisional stores in the west of Udagawa (Shibuya-ku, Tokyo), land: 1,226sqm, asset value: JPY1.6bn

Main parcel of land leased

▷ Land in Nakahara-ku, Kawasaki, land: 7,893sqm, asset value: JPY2.3bn

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Market and value chain Construction market in Japan Investment in construction Private- and public-sector construction investments In the private sector, construction investment includes residences, office buildings, factories, and warehouses. Public-sector investment centers on civil engineering work, such as roadways and water and sewerage. Private-sector construction investment tends to expand in buoyant economic times and contract when the business climate turns downward. Public-sector investment tends to be stable, and governments have a tendency to increase public works projects to boost employment during economic recessions.

Industry structure Numerous small-scale operators The Japanese construction industry is characterized by numerous small operators. As of end-March 2021, 473,952 entities held construction business licenses. Of this number, 96.3% had capital of less than JPY50mn, with 61.9% having capital of less than JPY10mn.

Number of construction workers According to statistics by the Ministry of Internal Affairs and Communications, construction workers in Japan numbered 4.9mn in FY2020. This figure represents a 27.1% decline from the peak in 1997 (6.9mn). This number continued to increase through the mid-1990s, as the construction industry employed workers who had lost their jobs after the bursting of Japan’s economic bubble. Since 1998, construction industry employment gradually dropped off until the Great East Japan Earthquake in 2011. The earthquake prompted an uptick in construction investment, halting the decline in employment, and the figure has since been around 5.0mn. It fell from the previous year’s 5.0mn level in FY2020 amid the pandemic.

Domestic investment in construction High growth through the economic bubble period Nominal investment in construction (in both the private and public sectors) grew steadily during Japan’s era of high economic growth. However, in the early 1980s government spending on public works began to wane due to fiscal reform efforts, and private-sector building construction also began to slow. After that point, the nominal construction investment continued to expand during Japan’s economic bubble period. At its peak in FY03/93, investment in construction reached JPY84tn.

Sluggishness after the economic bubble burst, recovery following the Great East Japan Earthquake One area that was particularly affected by the bursting of Japan’s economic bubble was private-sector non-residential construction. Amid reforms to the fiscal structure, government investment in construction also fell off substantially, leading to approximately 20 years of sluggish domestic investment in construction spending. This structural decrease in construction investment prompted fierce competition in a construction industry that had until that point been divided up by corporate scale, type of construction, and region. To maintain business scale, main contractors took on low-profit projects. Subcontractors, which had to lower costs to retain business, also experienced lower profits.

Government investment in construction increased again in 2011, owing to demand for reconstruction and recovery in the aftermath of the Great East Japan Earthquake. Private-sector investment in non-residential construction also gradually increased following the 2008 global financial crisis. Benefiting from yen depreciation, corporate profits rebounded, and the economy entered a gradual recovery phase following the earthquake. After an extended period of low investment, nominal investment in non-residential construction and government investment in construction bottomed out at JPY27.2tn in FY03/13 and then began to rise.

In FY03/17, the figure was JPY34.1tn (+4.7% YoY), rising in FY03/18 to JPY35.6tn (+4.3% YoY) to exceed JPY35tn for the first time in 15 years.

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Medium- to long-term decline as the population dwindles Large reconstruction projects are forecast for the Tokyo metro area, but the broad consensus sees domestic investment in construction declining over the medium term once this construction boom has passed. The Research Institute of Construction and Industry estimates domestic investment in construction at around JPY62tn in FY03/22, but Tokyu Construction expects it to fall to around JPY51tn by FY03/26.

Japanese construction spending (non-residential construction and civil Company forecast of Japanese construction spending (FY03/26) engineering)

(JPYbn) Civil engineering (public) Non-residential (public) (JPYtn) 70,000 Civil engineering (private) Non-residential (private) 60

60,000 50

50,000 40 40,000

30 30,000

20 20,000

10,000 10

0 0

Source: Shared Research based on MLIT’s “Construction Investment Statistics” Source: Shared Research based on company briefing materials Robust demand for offices (three major metro areas) and public works According to Mizuho Industry Focus, demand for office space will remain solid over the medium term in Japan’s three major metropolitan areas. Although large projects are slated to begin opening in 2020, demand for office concentration and relocation will keep vacancies and leasing rates at firm levels. The Japanese government’s Plan for National Resilience, formulated in FY03/15, calls for the reinforcement and seismic enhancement of disaster preparedness centers, construction related to maintenance and renovation, and various other infrastructure-building projects. Tokyu Construction believes demand for public- sector projects will remain firm over the medium to long term. Construction has begun on the Chuo Shinkansen, a maglev line under construction between Shinagawa (Tokyo) and Nagoya that is scheduled to begin operating in 2027. With projects such as this, the company expects demand for private-sector civil engineering projects to remain solid as well.

Public works and the bidding system The Act on Promoting Quality Assurance in Public Works, which went into force in 2005, ranks construction companies undertaking public works according to total points, based on management criteria and a technology assessment. Points are based on assessments of construction experience, status of construction, and number and experience of engineers scheduled for deployment. The framework is designed to leverage companies’ technological capabilities. The Act on Promoting Quality Assurance in Public Works, revised in 2014, calls for competitive bids that 1) set expected prices at levels that ensure appropriate margins to contractors, allowing them to secure and train human resources, 2) reduce the burden of competitive bidding by introducing stepwise selection rather than requiring detailed technology proposals from all participants, and 3) the leveling off of timing for ordering and construction periods.

Plan for National Resilience Enhancing national resilience (disaster prevention and mitigation efforts) is a policy position formulated by the Japanese government (Cabinet Secretariat), aimed at increasing Japan’s risk management and resilience. The policy calls for more resilient national infrastructure in the face of extensive loss of human life due to frequent flooding and earthquakes, as well as damage to important infrastructure functions. The government policy, based on the Basic Act for National Resilience, was formulated into the 2014 Fundamental Plan for National Resilience, which was revised in 2018. The gist of the plan is to realize an independent,

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decentralized, and cooperative national land structure; reflect past disasters and knowledge of climate change; take appropriate measures combining tangible and intangible approaches; and utilize private funds through PPP/PFI.

Key measures

▷ Perform seismic reinforcement on designated evacuation shelters and other disaster prevention bases, residences, schools, and cultural assets.

▷ Encourage regional dispersion and expansion of corporate headquarters functions to ameliorate the trend toward centralization in Tokyo.

▷ Enhance the resilience of the power grid, and otherwise build an energy supply system that is robust in the face of disaster.

▷ Increase the disaster resistance of airports, ports, Shinkansen, emergency routes, and other transport and logistics facilities; build road networks to provide alternative access; build snow removal systems; put in place riverside and coastal embankments to protect regions from large tsunamis.

▷ Establish a foundation for agricultural, forestry, and fishery production.

▷ Prepare and seismically reinforce government buildings and public facilities to serve as disaster prevention bases.

▷ Enact flood control measures to provide alternative river routes in the face of climate change.

▷ Increase the resilience of disaster waste treatment systems.

▷ Disseminate risk by alleviating population concentration in locations at high risk of disaster.

▷ Promote the formulation of plans to extend the life of infrastructure, including electrical facilities, water and sewerage, highway bridges, and other lifelines, as well as disaster prevention bases, schools, healthcare institutions, and agricultural irrigation facilities, and create maintenance cycles.

▷ Promote R&D and the adoption and social implementation of measures to prevent and mitigate disaster and address the deterioration of infrastructure.

Urgent measures (2018–2020) The measures include expenditures of around JPY7tn (including around JPY0.6tn in business leveraging the Fiscal Investment and Loan Program, with national expenditure expected to provide around JPY3.5tn).

Matters relating to the building construction business

▷ Prevent or minimize disaster due to large-scale flooding, landslides, earthquakes, and tsunamis (Approx. JPY2.8tn)

▷ Ensure disaster response, including rescue and emergency and medical activity (Approx. JPY0.5tn)

▷ Ensure supplies of electric power and other energy (Approx. JPY0.3tn)

▷ Secure food supplies, lifelines, and supply chains (Approx. JPY1.1tn)

▷ Secure land, sea, and air transport networks (Approx. JPY2.0tn)

The Plan for National Resilience comprises policies for promoting the national government’s medium- to long-term measures based on the Basic Act for National Resilience. Policies concerning a certain scale of budgetary measures are to be decided in or after FY03/22.

Structural changes in the construction industry Increasingly serious labor shortages The construction business is facing labor shortages, due to the aging of the population and as the baby boomer generation exits the work force in large numbers.

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▷ Shortage of skilled workers: Even with enhanced productivity, the need for skilled workers is expected to reach 2.9–3.2mn people by 2025, according to the Ministry of Land, Infrastructure, Transport and Tourism. However, around 1.3mn baby boomers are expected to exit the workforce, resulting in a shortfall of 770,000–990,000 skilled workers.

▷ Aging of the population: The construction business is likely to be affected more severely by population aging than industry as a whole. Currently, more than 30% of workers in the construction industry are 55 or older, with around 10% aged 29 or younger.

▷ Construction companies are striving to offset labor shortages and an aging population by stepping up hiring of foreign nationals and younger workers. Tokyu Construction thinks companies may engage in corporate restructuring efforts in an effort to retain personnel.

Growing demand for renovation

▷ Although the construction business is slated to gradually shrink over the medium to long term, Tokyu Construction believes the growth in demand for renovation and maintenance will accelerate, buoyed by seismic reconstruction and environmental response measures. The company explains that the percentage of infrastructure built during Japan’s period of rapid economic growth that is now deteriorating is rising quickly. Accordingly, it expects demand for maintenance and upgrades to expand further.

▷ Tokyu Construction believes this situation warrants a move toward more recurring-revenue business and more flexible methods for accepting orders.

Percentage of infrastructure built 50 or more years ago Aging rate (over 50 years) March March March 2013 2023F 2033F Road bridges 18％ 43％ 67％ Tunnels 20％ 34％ 50％ River management facilities 25％ 43％ 64％ Sewer pipes 2％ 9％ 24％

Quay walls 8％ 32％ 58％ Source: Company materials

Growing need for productivity enhancement

▷ Use of BIM and CIM systems: Centralizing three-dimensional information on building shapes and attributes facilitates consensus- building between construction-related players, helping to improve the efficiency of design and construction work.

Building information modeling (BIM) is a solution for utilizing information in a building database produced by adding data regarding attributes, such as cost, finishing details, and management information, to a three-dimensional digital model of a building constructed on a computer during various types of construction processes, including design, construction, maintenance, and management.

To front-load construction work and streamline on-site operations, Tokyu Construction has started distributing a structural model that supports BIM as a “first model” at the start of construction. The distributed model is utilized at the site as a construction BIM, and applied to an examination of the construction plan. Visualizing work procedures and sharing BIM information with employees and on-site skilled construction workers makes it possible to select the best procedures, and helps to improve the efficiency and safety of the operations. BIM can also help ensure consistency among multiple drawings, such as architectural design, structural, and equipment plans, and prevent losses due to operational rework. Furthermore, it is possible to check work in detail and build a consensus with the client and designers in three dimensions, improving the speed of decision-making. The company says it plans to utilize the information provided by BIM to reduce the burden of on-site quantitative calculations, to streamlining business operations further. (Source: Tokyu Corporation’s Integrated Report 2019)

▷ i-Construction: MLIT encourages the utilization of ICT in construction production processes ranging from surveying and measurements to design, construction, and inspections. The company aims to improve productivity on construction sites by leveraging drones for measurements and ICT for construction.

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Tokyu Construction uses ICT and BIM/CIM in Shibuya redevelopment work. Conventional methods, which employ only two-dimensional drawings to share construction plans and related information, are inadequate for the complex project of redeveloping Shibuya, in which the civil engineering division and building construction division must simultaneously engage in their respective construction operations in close proximity, while maintaining city functions in the area. Accordingly, since 2013, Tokyu Corporation has been working to integrate BIM from the building construction business and CIM from the civil engineering business. The company has rendered the entire city of Shibuya in three-dimensions based on the concept of urban information modeling/management (UiM), and has been using the framework to study the redevelopment of Shibuya. Especially in the projects involving the Tokyo Metro Ginza Line at the East Exit of Shibuya Station and Shibuya Stream, construction planning in 3D space and using the 4D-CIM model, in which a time axis is also added to the 3D model, has contributed to swifter consensus building with the parties involved. The company is preparing for a project at the West Exit of Shibuya Station, with the proactive use of UiM in mind. The company says it intends to steadily and reliably propel the project forward, maintaining the project schedule, by ascertaining potential construction risks as expeditiously as possible in cyberspace, reproducing real-world conditions and applying the identified risks to the real world. The company notes it has been involved in construction in the Shibuya area for many years and explains that the “digital twin” the UiM provides will help it pass on its experience to employees working 50 or 100 years in the future. (Source: Tokyu Corporation’s Integrated Report 2019)

▷ Precast concrete construction method: This modular construction method involves the production of reinforced concrete construction parts in factories. The various parts are joined together at construction sites. This approach reduces the number of personnel required on-site, lowers costs, and facilitates a stable supply of high-quality concrete building parts.

▷ By introducing such methods, the company expects consolidation within the construction business. It believes the industry will see more mergers and acquisitions, as companies strive to scale up their profits.

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Main competitors Revenue of general contractors Tokyu Construction a second-tier general contractor The figure below shows a revenue of the top 20 general contractors in Japan, by revenue in FY03/21. The top five “super general contractors” (Obayashi, Kajima, Shimizu, Taisei, and Takenaka) have revenue of more than JPY1tn each. Companies below that level are referred to as “second-tier general contractor.”

Super general contractors tend to earn orders for large construction projects based on their high level of technological expertise and extensive track records. While construction sales tend to be central, these companies also have a wide range of construction technology capabilities, with in-house design, engineering, and R&D departments.

Revenue of top-20 general contractors (FY03/21)

(JPYbn) 0 500 1,000 1,500 2,000 2,500 Obayashi Kajima Shimizu Taisei Takenaka Penta-Ocean Construction Toda Maeda Sumitomo Mitsui Construction Kumagai Gumi Hazama Ando Nishimatsu Construction Tokyu Construction Takamatsu Okumura Tekken Daiho Tobishima Totetsu Zenidaka

Note: Figures for Takenaka are for FY12/20 Source: Shared Research based on individual companies’ materials Revenue composition of individual general contractors High percentage of private-sector construction projects Shared Research conducted a comparison of 13 general contractors, including Tokyu Construction. In FY03/21, building construction accounted for 66.2% of revenue at Tokyu Construction and the civil engineering business for 32.7%. Compared with others in the industry, building construction made up a high percentage of revenue. This ratio reflects proactive efforts to obtain orders for construction work within the Tokyu Group and aggressive efforts to obtain orders for building construction in the Shibuya area and throughout Japan, for office buildings, warehouses and factories, schools, and government buildings.

Other general contractors with a high proportion of revenue from building construction include the super general contractors and Toda Corporation. Meanwhile, Tekken Corporation, Okumura Corporation, Hazama Ando, Maeda Corporation, and Kumagai Gumi are general contractors focused on civil engineering work.

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General contractors’ revenue compositions (consolidated basis, FY03/21)

Construction Civil engineering Development, other

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Tokyu Construction Toda Shimizu Obayashi Taisei Kajima Nishimatsu Construction Sumitomo Mitsui Construction Kumagai Gumi Maeda Hazama Ando Okumura Tekken

Source: Shared Research based on individual companies’ materials Note: Shimizu figures are for parent company Financial analysis of individual general contractors The recurring profit margin (five-year average) for the top five “super general contractors” (Obayashi, Kajima, Shimizu, Taisei, and Takenaka) is 8.2%. In addition to benefiting from economies of scale on materials costs, we understand that these margins reflect a higher percentage of revenue from high-value-added construction, based on their extensive project track records.

The recurring profit margin (five-year average) for Tokyu Construction is 6.1%, in line with the 6.1% average for the 13 second- tier general contractors excluding the super general contractors. In FY03/20 the recurring profit margin (five-year average) for Tokyu Construction was 7.0%, above the 6.1% average for the 13 second-tier general contractors, but in FY03/21 the recurring profit margin dropped to 2.1% as it was a lean period.

In FY03/21, Maeda Corporation, Okumura Corporation, and Nishimatsu Construction had a total asset turnover period of 15 months and a large scale of assets. General contractors with large-scale assets typically have large-scale real estate business assets and financial assets. Tokyu Construction had a total asset turnover period of 11.7 months, up from 8.8 months the previous year, but below the 13.6 months average for the 18 main general contractors. This smaller scale of assets vis-à-vis revenue points to a more efficient financial balance.

In FY03/21, adjusted ROE, which indicates return on equity, was 12.3%, down 2.2pp from 14.5% the previous year. It dropped YoY in FY03/21 as it was a lean period, but exceeded the average of 10.2% for the 18 main general contractors.

*Adjusted ROE: Recurring profit x (1-30%**) / shareholders’ equity. **30% is a general figure used for the effective tax rate. Indicates ROE excluding the impact of temporary extraordinary gains or losses and tax expenses. ROE for Tokyu Construction was 15.4% in FY03/20.

Distinguishing features of various general contractors Tokyu Construction (TSE: 1720)

▷ Tokyu Corporation established Tokyu Construction Industry Co., Ltd. in 1946 amid the rapid reconstruction of postwar Japan. The Tama Garden City development and construction of the Izu Kyuko railway line were among its first projects. In civil engineering, the company has focused on railway (Tokyu lines) and roadway (expressway) projects. Private-sector construction projects have centered on the Shibuya area.

▷ Tokyu Construction is a second-tier general contractor. In FY03/21, consolidated revenue was JPY231.5bn, and recurring profit was JPY4.9bn. Breaking down consolidated revenue by segment, Building Construction accounted for 66.2%, Civil Engineering for 32.7%, and Real Estate for 1.1%.

▷ Of parent-only revenue, public-sector projects accounted for 26.6%, private-sector construction projects for 58.0%, private- sector civil engineering projects for 10.6%, and overseas projects for 4.0%. Work for the Tokyu Group made up 13.6% of revenue.

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Obayashi Corporation (TSE: 1802)

▷ The predecessor of Obayashi was established in 1892 by Yoshigoro Obayashi to construct the Abe Paper Mill. In 1911, the company won a bid to handle the overall construction of Tokyo Station. In 1912, Obayashi received an order to construct an imperial mausoleum.

▷ In FY03/21, consolidated revenue was JPY1.8tn, and recurring profit was JPY128.8bn. The building construction business accounted for 95.3% of revenue, and real estate for 2.4%. By consolidated segment, domestic building construction accounted for 54.6% of revenue, domestic civil engineering for 19.4%, overseas construction for 17.2%, overseas civil engineering for 4.1%, real estate for 2.4%, and other business for 2.3%.

▷ Breaking down consolidated operating profit by segment, domestic building construction accounted for 48.7%, domestic civil engineering for 36.9%, overseas construction for 2.8%, overseas civil engineering for -0.2%, real estate for 9.7%, and other business for 2.1%. Consolidated segment OPM was 6.2% for domestic building construction, 13.3% for domestic civil engineering, 1.1% for overseas construction, -0.3% for overseas civil engineering, and 28.1% for real estate.

▷ Parent-only revenue totaled JPY1.2tn, of which domestic projects accounted for JPY1.2tn. Of this amount, public-sector projects accounted for 18.1%, private-sector construction projects for 69.5%, and private-sector civil engineering projects for 8.5%. Overseas projects accounted for 2.2%. Compared with peers, public-sector projects account for a low percentage of Obayashi’s revenue and private-sector projects for a high proportion.

Kajima Corporation (TSE: 1812)

▷ Iwakichi Kajima established a carpentry business in Edo (present-day Tokyo). In 1860, the company pioneered its first Western- style building, Ei-Ichiban Kan (English House No. 1) and A-Ichiban Kan (Asian House No.1) in Yokohama. The company began railway construction in 1880. The company began undertaking overseas projects in Taiwan, Korea, and Manchuria. In 1904, it began construction on a railway linking Seoul and Busan. The company began building dams and power generation facilities in 1909, beginning construction on the Shizugawa Power Station for Ujigawa Electric. In 1918, Kajima began working on the Tanna Tunnel, a difficult project.

▷ In FY03/21, consolidated revenue was JPY1.9tn, and recurring profit was JPY139.7bn, making it one of the largest companies in the construction industry. On a consolidated basis, civil engineering accounted for 17.6% of revenue, construction for 41.0%, real estate development for 3.6%, domestic affiliates for 12.3%, and overseas affiliates for 25.6%.

▷ Of consolidated segment operating profit, civil engineering accounted for 23.1%, construction for 44.8%, development for 13.5%, domestic affiliates for 13.3%, and overseas affiliates for 5.3%. Consolidated segment OPM for civil engineering was 8.9%, construction 7.4%, development 25.3%, domestic affiliates 7.3%, and overseas affiliates 1.4%.

▷ Kajima undertakes a relatively high proportion of development work, compared with others in the industry. Kajima (parent) owns an office building; Kajima Yaesu Kaihatsu Co., Ltd., a subsidiary, owns Gran Tokyo South Tower (an office building); and Kajima Overseas Asia owns office buildings and commercial facilities in Indonesia and other parts of Southeast Asia.

▷ Of parent-only revenue, public-sector projects accounted for 18.9%, private-sector construction projects for 60.5%, private- sector civil engineering projects for 14.4%, overseas projects for 3.9%, and real estate development for 6.1%.

Shimizu Corporation (TSE: 1803)

▷ Kisuke Shimizu founded the company in the Kanda Kajicho district of Edo (now Tokyo). The company began operations in Yokohama in 1859, before Japan opened its doors to the rest of the world. In 1868, the company completed construction and operated Japan’s first Western-style hotel (Tsukiji Hotel). In 1887, Shimizu took on Eiichi Shibusawa as an advisor. On his advice, Shimizu began concentrating on private-sector construction.

▷ In FY03/21, consolidated revenue amounted to JPY1.5tn, and recurring profit was JPY135.9bn.

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▷ By segment, operating profit in the building construction business accounted for 34.1%, the real estate development business for 4.7%, and other adjustments for 4.7%. Consolidated segment OPM was 9.3% in the building construction business and 33.0% in the real estate development business.

▷ Of parent-only revenue of JPY1.2tn, building construction accounted for 73.4% and civil engineering for 20.8%. Parent-only GPM was 8.7% for building construction, and 24.6% for civil engineering. Of parent-only revenue, public-sector projects made up 19.1%, private-sector construction projects 64.0%, private-sector civil engineering projects 7.1%, and overseas projects 3.9%.

Taisei Corporation (TSE 1801)

▷ The company was founded as the construction division of Okura Gumi Shokai. In 1887, the company was established as Nippon Doboku Co., Ltd., with investment by Eiichi Shibusawa, Kihachiro Okura, and Denzaburo Fujita. In 1893, the company reorganized and was established as Okura Doboku Gumi. In 1946, the company’s name changed to Taisei Corporation as part of the postwar break up of Japan’s zaibatsu conglomerates.

▷ In FY03/21, consolidated revenue was JPY1.5tn, and recurring profit was JPY136.0bn, making it one of Japan’s largest construction companies. Of revenue, building construction accounts for 62.3%, civil engineering for 28.4%, real estate development for 8.6%, and other business for 0.7%. Of consolidated operating profit, building construction accounted for 48.8%, civil engineering for 42.9%, and real estate development for 7.4%. Consolidated OPM was 6.9% for building construction, 13.3% for civil engineering, and 7.6% for real estate development.

▷ Compared with peers, civil engineering accounts for a relatively high proportion of business, and its real estate development is relatively extensive. Taisei-Yuraku Real Estate Co., Ltd., a consolidated subsidiary, contributes around JPY7.0bn per year to operating profit in the real estate development segment.

▷ Of parent-only revenue, public-sector projects accounted for 20.0%, private-sector construction projects for 62.7%, private- sector civil engineering projects for 11.7%, and overseas projects for 2.9%. Compared with others in the industry, Taisei’s percentage of business from public-sector projects is high, and the percentage from overseas projects is low.

Takenaka Corporation (unlisted)

▷ Tobei-Masataka Takenaka established the business in 1610 in Nagoya to engage in shrine and temple construction. As Japan entered the Meiji era (1868–1912), Takenaka began concentrating on Western-style construction, completing the Nagoya Garrison barracks in 1874.

▷ In FY12/20, Takenaka had consolidated revenue of JPY1.2tn and recurring profit of JPY47.0bn. Shared Research understands that building construction accounts for a relatively high percentage of business. In FY12/20 group company Takenaka Civil Engineering & Construction Co., Ltd. generated revenue of JPY95.0bn and recurring profit of JPY3.7bn.

▷ By segment, the building construction business accounted for 92.6% of revenue, while real estate development accounted for 2.9%. Overseas business accounted for 9.7% of revenue, which is relatively high compared with peers.

Penta-Ocean Construction Co., Ltd. (TSE: 1893)

▷ The company was established as Mizuho-Gumi in the city of Kure, Hiroshima Prefecture in 1896. The company focused on marine construction, particularly civil engineering in harbors and bays. The company earned a reputation for marine civil engineering work through numerous projects in the Yokosuka and Sasebo areas. In 1937, the company build a dredger and entered the business of dredging and land reclamation.

▷ In FY03/21, consolidated revenue was JPY471.1bn, and recurring profit was JPY30.5bn. Of consolidated sales, domestic civil engineering accounted for 42.2%, domestic building construction for 30.7%, and overseas building construction for 25.9%.

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▷ Of consolidated operating profit, domestic civil engineering accounted for 75.0%, domestic building construction for 13.3%, and overseas building construction for 9.4%. Compared with peers, domestic civil engineering and overseas building construction business account for a relatively high proportion of business.

▷ Of parent-only revenue, public-sector projects accounted for 35.2%, private-sector construction projects for 27.6%, private- sector civil engineering projects for 10.8%, and overseas projects for 26.3%. Public-sector and overseas projects account for a relatively high percentage of business.

Toda Corporation (TSE: 1860)

▷ The company was established in 1881 in Tokyo’s Akasaka district by Rihei Toda, a carpenter specializing in the construction of temples and shrines. Toda built a number of modern-era buildings, including a library to commemorate Keio University’s 50th anniversary of establishment, the Okuma Auditorium at Waseda University, and the Yokohama Customs Building. It also engaged in construction for the London International Exhibition on Industry and Art.

▷ In FY03/21, consolidated revenue was JPY507.1bn, and recurring profit was JPY30.4bn. Domestic building construction accounted for 63.7% of consolidated revenue, domestic civil engineering for 26.2%, real estate development for 2.4%, group companies in Japan for 7.3%, and new fields for 0.4%.

▷ Of consolidated operating profit, domestic building construction accounted for 31.9%, domestic civil engineering for 49.1%, real estate development for 14.7%, group companies in Japan for 7.9%, and new fields for -3.6% (loss). Consolidated OPM was 2.8% for domestic building construction, 10.6% for domestic civil engineering, 34.6% for real estate development, and 6.2% for group companies in Japan.

▷ Of parent-only revenue, public-sector projects accounted for 28.7%, private-sector construction projects for 59.4%, private- sector civil engineering projects for 8.5%, and overseas projects for 0.5%.

Maeda Corporation (TSE: 1824)

▷ The company was established 1919 as Maeda Jimusho as part of Tobishima Gumi by Matabee Maeda.

▷ In FY03/21, consolidated revenue was JPY678.1bn, and recurring profit was JPY45.7bn. Of consolidated revenue, building construction accounted for 36.2%, civil engineering for 22.0%, paving for 34.3%, manufacturing for 5.1%, and infrastructure operation for 2.3%.

▷ Of consolidated operating profit, building construction accounted for 18.2%, civil engineering for 45.2%, paving for 25.2%, manufacturing for 3.2%, and infrastructure operation for 7.1%. Consolidated OPM was 3.4% in building construction, 14.1% in civil engineering, 5.0% in paving, 4.3% in manufacturing, and 7.1% in infrastructure operation.

▷ Of parent-only revenue, public-sector projects accounted for 32.8% (a relatively high proportion), private-sector construction projects for 49.4%, private-sector civil engineering projects for 16.6%, and overseas projects for 0.4%.

Sumitomo Mitsui Construction Co., Ltd. (TSE: 1821)

▷ The company originated with the establishment of a civil engineering and construction division at the Sumitomo Besshi Copper Mine in 1876. In 1968, the company completed the Mitsui Kasumigaseki Building, Japan’s first ultra high-rise.

▷ In FY03/21, consolidated revenue was JPY421.6bn, and recurring profit was JPY13.1bn. Of consolidated gross profit, the civil engineering business accounted for 55.6% and the building construction business for 43.5%.

▷ Of parent-only revenue, public-sector projects accounted for 28.7%, private-sector construction projects for 52.7%, private- sector civil engineering projects for 6.7%, and overseas business for 12.0%. This overseas figure is relatively high, compared with peers.

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Kumagai Gumi Co., Ltd. (TSE: 1861)

▷ Kumagai Gumi got its start in 1898, when Santaro Kumagai, a stonemason from Fukui, received an order to construct the waterway for the Shukununo Power Plant, which would be Japan’s third power plant. In 1937, the company completed construction on the Sanshin Railway (currently the JR Iida Line). As part of the construction of the Kurobegawa No. 4 Power Plant for Kansai Electric Power, Kumagai Gumi built the Omachi Tunnel (which involved difficult construction work and is important in Japan’s civil engineering history).

▷ In FY03/21, consolidated revenue was JPY450.2bn, and recurring profit was JPY28.4bn. The civil engineering business accounted for 27.0% of revenue, the building construction business for 53.0%, and subsidiaries for 20.0%.

▷ Of consolidated operating profit, the civil engineering business accounted for 27.6%, the building construction business for 52.6%, and subsidiaries for 19.9%. The consolidated OMP was 6.4% for civil engineering, 6.2% for building construction, and 6.2% for subsidiaries.

▷ Of parent-only revenue, public-sector projects accounted for 25.0%, private-sector construction projects for 56.8%, private- sector civil engineering projects for 17.7%, and overseas business for 0.5%. Public-sector projects and civil engineering work thus account for a relatively high percentage of performance.

Hazama Ando Corporation (TSE: 1719)

▷ In 1873, Shotaro Ando founded Ando-Kata in Tokyo’s Kanda Ward. The company engaged in brick construction in the Ginza and Asakusa areas of Tokyo.

▷ In FY03/21, consolidated revenue was JPY352.0bn, and recurring profit was JPY25.9bn. Of consolidated operating profit, civil engineering accounted for 53.4%, building construction for 39.6%, and intra-group business for 5.0%. Consolidated OPM was 13.0% for civil engineering, 6.8% for building construction, and 8.6% for intra-group business.

▷ Of parent-only revenue, public-sector projects accounted for 31.1%, private-sector construction for 49.3%, private-sector civil engineering for 13.1%, and overseas business for 5.0%. Public-sector projects and civil engineering thus account for a high percentage of business, as do overseas projects.

Nishimatsu Construction Co., Ltd. (TSE: 1820)

▷ Keisuke Nishimatsu established the company in 1874 to handle civil engineering and building construction work. In the early Showa era (1926–1989), the company was undertaking construction in Gyeongseong (Seoul), Changchun (capital of Manchukuo), and Beijing and Taipei, and was involved in railroads, highways, rivers and harbors, and hydroelectric projects.

▷ In FY03/21, consolidated revenue was JPY336.2bn, and recurring profit was JPY21.6bn. Of consolidated revenue, civil engineering accounted for 37.9%, building construction for 58.5%, and real estate and development for 3.6%.

▷ Of consolidated operating profit, civil engineering accounted for 40.1%, building construction for 43.9%, and real estate and development for 16.0%. Consolidated OPM was 6.6% for civil engineering, 4.7% for building construction, and 27.9% for real estate and development.

▷ Of parent-only revenue, public-sector projects accounted for 30.5%, private-sector construction projects for 56.9%, private- sector civil engineering projects for 8.8%, and overseas projects for 3.7%. Public-sector and overseas projects thus account for a high proportion of business.

Takamatsu Construction Group Co., Ltd. (TSE: 1762)

▷ The company was founded in 1917 in Yodogawa-ku, Osaka. In 2002, Aoki Construction Co., Ltd., joined the Takamatsu Construction Group. In 2004, Asunaro Construction Co., Ltd. merged with Aoki Construction, and Kongo-Gumi Co., Ltd. joined the group in 2006.

▷ In FY03/21, consolidated revenue was JPY283.1bn, and recurring profit was JPY12.1bn. Of consolidated segment revenue, building construction accounted for 49.6%, civil engineering 39.5%, and real estate 10.9%.

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▷ Of consolidated segment operating profit, building construction accounted for 37.5%, civil engineering 50.8%, and real estate 11.7%. Consolidated segment operating profit margins were 4.3% for building construction, 7.3% for civil engineering, and 6.1% for real estate.

▷ Public-sector and civil engineering projects (particularly marine civil engineering), residential building construction, and the real estate businesses account for a relatively high percentage of revenue.

Okumura Corporation (TSE: 1833)

▷ The company was established in 1907 by Taihei Okumura. In 1955, the company handled the second construction of Tsutenkaku Tower (an Osaka landmark). In 1978, Okumura received a subway construction order from Hong Kong. In 1984, the company received an order to build the Washuzan Tunnel (Kodama–Sakaide route), connecting the islands of Honshu and Shikoku.

▷ In FY03/21, consolidated revenue was JPY220.7bn, and recurring profit was JPY14.8bn. Of consolidated operating profit, civil engineering accounted for 72.1%, building construction for 8.2%, and real estate investment and development for 16.2%. Consolidated segment operating profit margins were 8.8% for civil engineering, 1.0% for building construction, and 40.8% for real estate investment and development.

▷ Of parent-only revenue, public-sector projects accounted for 41.8%, private-sector construction projects for 37.7%, private- sector civil engineering projects for 16.9%, and overseas business for 0.8%. Public-sector projects make up a higher percentage of business than the industry average.

Tekken Corporation (TSE: 1815)

▷ Tekken was established in 1944 by the Japanese government to facilitate ground transportation during WWII. Seiichi Kajima was appointed the company’s first president. The company’s first project was to build a tunnel for the Third-Stage Works of the Shinanogawa Hydroelectric Power Plant for Japan’s national railway.

▷ In FY03/21, consolidated revenue was JPY182.0bn, and recurring profit was JPY6.5bn. Of consolidated operating profit, civil engineering accounted for 69.0%, building construction for 22.3%, real estate for 4.2%, and ancillary business for 2.0%.

▷ Of parent revenue, public-sector projects accounted for 28.3%, private-sector construction projects for 41.5%, private-sector civil engineering projects for 26.5%, and overseas business for 3.5%. Compared with the industry average, private-sector building construction accounts for a relatively low share of business, while public-sector projects, private-sector civil engineering projects (including railway construction), and overseas projects account for a high proportion.

Daiho Corporation (TSE: 1822)

▷ Established in 1949, the company has registered patents for the Daiho Caisson Method (1952), the Daiho Dolphin Dock Method (1971), the Earth-Pressure Shield Method (1984), the Eccentric Multi-Axis Shield Method (1992), and the Anchor Caisson Method (2010).

▷ In FY03/21, consolidated revenue was JPY161.7bn, and recurring profit was JPY9.4bn. Of consolidated operating profit, civil engineering accounted for 55.8%, building construction for 40.5%, and other business for 3.7%.

▷ Of parent-only revenue, public-sector projects accounted for 56.4% and private-sector construction for 43.6%. Relative to other companies in the industry, public-sector projects and private-sector civil engineering projects (including railway construction) account for a high proportion of business.

Tobishima Corporation (TSE: 1805)

▷ In 1883, Bunjiro Tobishima founded Tobishima-gumi, which was contracted to demolish Fukui Castle. In 1905, the company was contracted to build Kyoto Electric’s Nakao power plant. In 1913, the company received a contract to build an electric railway between Fukui and Ono. In 1915, Tobishima received an order to undertake the Kinu River Improvement Project.

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▷ In FY03/21, Tobishima had consolidated revenue of JPY117.3bn and recurring profit of JPY3.7bn. As a percentage of consolidated segment operating profit, the civil engineering and construction business accounted for 92.5%, the architecture business for 7.6%, and the real estate development business for -0.1% (loss).

▷ Of parent-only revenue, public-sector projects accounted for 48.5%, private-sector construction projects for 32.9%, private- sector civil engineering projects for 15.2%, overseas projects for 2.5%, and development projects for 0.9%. Public-sector civil engineering projects account for a relatively high percentage of business.

Totetsu Kogyo Co., Ltd. (TSE: 1835)

▷ Totetsu Kogyo was established in 1943 as the national Tokyo Tetsudo Kogyo Co., Ltd. at the request of Japan’s Ministry of Railways as a trust business for construction companies in the Kanto region. The company takes part in a broad range of railway- related construction, such as building tracks, performing renovations and repairs, and conducting track maintenance.

▷ In FY03/21, consolidated revenue was JPY132.0bn, and recurring profit was JPY14.3bn. Of consolidated operating profit, civil engineering accounted for 62.8% and building construction for 29.8%.

▷ Of parent-only revenue, public-sector projects accounted for 8.9%, while private-sector civil engineering projects made up 89.1%. The company performs most of its private-sector civil engineering work for railway companies, particularly those in the JR group.

Peer company analysis

Comparison of profitability among peer companies Total asset Ticker FY 5-year GP SG&A Recurring profit ROA (RP- Adjusted turnover margin based) ROE CAGR margin ratio (month) Revenue RP 5yr avg. 5yr avg. FY2020 5yr avg. FY2020 FY2020 FY2020 (end) Tokyu Construction 1720 Mar -4.8% -24.4% 10.4% 5.0% 2.1% 6.1% 11.7 2.2% 12.3% Obayashi 1802 Mar -0.1% 3.0% 12.4% 5.1% 7.3% 7.6% 15.4 5.7% 10.7% Kajima 1812 Mar 1.8% 4.3% 12.5% 5.3% 7.3% 8.3% 13.6 6.5% 12.5% Shimizu 1803 Mar -2.6% 2.0% 12.9% 5.5% 7.2% 8.0% 15.7 5.5% 10.8% Taisei 1801 Mar -0.9% 2.9% 15.2% 5.5% 9.2% 10.0% 15.2 7.3% 13.2% Takenaka Unlisted Dec 1.6% -7.3% 12.3% 6.0% 3.8% 6.9% 14.0 3.3% 8.2% Penta-Ocean Construction 1893 Mar -0.8% 9.5% 25.7% 3.5% 6.5% 5.3% 11.5 6.8% 12.3% Toda 1860 Mar 0.6% 5.1% 13.2% 6.8% 6.0% 7.0% 17.4 4.1% 7.5% Maeda 1824 Mar 8.9% 14.7% 12.3% 6.2% 6.7% 7.3% 16.4 4.9% 7.0% Sumitomo Mitsui Construc 1821 Mar 0.3% -9.7% 10.3% 4.7% 3.1% 5.6% 10.7 3.5% 15.3% Kumagai Gumi 1861 Mar 5.6% 2.0% 11.0% 4.5% 6.3% 6.5% 10.1 7.5% 11.0% Hazama Ando 1719 Mar -1.5% 2.1% 13.7% 5.8% 7.4% 7.6% 11.6 7.6% 13.7% Nishimatsu 1820 Mar 1.7% 5.8% 12.0% 5.3% 6.4% 7.4% 16.9 4.6% 8.3% Takamatsu Construction 1762 Mar 6.3% 3.0% 13.9% 8.7% 4.3% 5.2% 9.4 5.5% 7.9% Okumura 1833 Mar 1.5% 9.8% 13.9% 7.9% 6.7% 6.7% 17.9 4.5% 6.2% Tekken 1815 Mar 1.2% 19.8% 8.7% 5.1% 3.6% 3.7% 12.2 3.5% 7.2% Daiho 1822 Mar 1.9% 0.5% 9.9% 3.6% 5.8% 6.4% 12.7 5.5% 9.2% Tobishima 1805 Mar -0.6% -9.5% 10.9% 5.8% 3.1% 4.9% 12.4 3.0% 10.4% Source: Shared Research based on annual securities reports and quarterly earnings announcements Note: Figures may differ from company materials due to differences in rounding methods.

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Parent-only revenue

Parent revenue Obayashi Kajima Shimizu Taisei Penta-Ocean Toda Maeda Sumitomo Mitsui Kumagai Gumi (JPYmn) FY03/21 FY03/21 FY03/21 FY03/21 FY03/21 FY03/21 FY03/21 FY03/21 FY03/21 Building construction 926,711 782,253 917,145 831,908 170,117 314,126 214,393 193,904 238,794 % of total revenue 75.3% 65.8% 73.4% 72.7% 38.2% 68.1% 58.6% 60.2% 66.3% Domestic public 65,480 62,459 86,291 90,107 19,094 39,753 33,092 16,612 32,389 % of total revenue 5.3% 5.3% 6.9% 7.9% 4.3% 8.6% 9.0% 5.2% 9.0% Domestic private 854,899 719,793 800,451 718,411 123,007 273,964 180,773 169,579 204,555 % of total revenue 69.5% 60.5% 64.0% 62.7% 27.6% 59.4% 49.4% 52.7% 56.8% Overseas 6,331 - 30,401 23,389 28,015 408 527 7,713 1,849 % of total revenue 0.5% - 2.4% 2.0% 6.3% - 0.1% 2.4% 0.5% Civil engineering 282,878 334,791 259,980 283,276 274,719 134,003 148,644 128,097 121,446 % of total revenue 23.0% 28.1% 20.8% 24.7% 61.7% 29.0% 40.6% 39.8% 33.7% Domestic public 157,568 162,763 152,539 139,112 137,608 92,872 86,876 75,684 57,847 % of total revenue 12.8% 13.7% 12.2% 12.2% 30.9% 20.1% 23.7% 23.5% 16.1% Domestic private 105,117 171,254 88,568 134,369 47,894 39,131 60,844 21,606 63,598 % of total revenue 8.5% 14.4% 7.1% 11.7% 10.8% 8.5% 16.6% 6.7% 17.7% Overseas 20,192 773 18,873 9,794 89,216 1,999 923 30,806 - % of total revenue 1.6% 0.1% 1.5% 0.9% 20.0% - 0.3% 9.6% - Total construction 1,209,589 1,117,045 1,177,125 1,115,185 444,837 448,130 363,038 322,002 360,240 % of total revenue 98.3% 93.9% 94.2% 97.4% 99.9% 97.1% 99.2% 100.0% 100.0% Domestic public 223,049 225,222 238,831 229,220 156,703 132,626 119,968 92,296 90,237 % of total revenue 18.1% 18.9% 19.1% 20.0% 35.2% 28.7% 32.8% 28.7% 25.0% Domestic private 960,016 891,048 889,019 852,780 170,901 313,096 241,618 191,186 268,153 % of total revenue 78.0% 74.9% 71.1% 74.5% 38.4% 67.9% 66.0% 59.4% 74.4% Overseas 26,523 773 49,274 33,184 117,232 2,407 1,451 38,519 1,849 % of total revenue 2.2% 0.1% 3.9% 2.9% 26.3% 0.5% 0.4% 12.0% 0.5% Development, other - 72,516 72,860 29,755 304 13,249 3,047 - - % of total revenue - 6.1% 5.8% 2.6% 0.1% 2.9% 0.8% - - Total parent revenue 1,230,418 1,189,562 1,249,985 1,144,940 445,142 461,380 366,086 322,002 360,240 Parent revenue Hazama Ando Nishimatsu Okumura Tekken Daiho Tobishima Totetsu Tokyu Construction (JPYmn) FY03/21 FY03/21 FY03/21 FY03/21 FY03/21 FY03/21 FY03/21 FY03/21 Building construction 192,110 189,343 105,106 82,355 57,175 43,775 31,880 138,991 % of total revenue 57.7% 60.2% 48.7% 46.2% 46.8% 40.7% 25.7% 64.3% Domestic public 18,591 8,383 23,712 8,306 - 6,276 - 13,411 % of total revenue 5.6% 2.7% 11.0% 4.7% - 5.8% - 6.2% Domestic private 164,052 179,198 81,394 74,049 - 35,429 - 125,430 % of total revenue 49.3% 56.9% 37.7% 41.5% - 32.9% - 58.0% Overseas 9,467 1,760 - - - 2,069 - 150 % of total revenue 2.8% 0.6% - - - 1.9% - 0.1% Civil engineering 135,931 125,377 104,698 95,506 65,109 62,945 89,602 75,568 % of total revenue 40.8% 39.8% 48.5% 53.6% 53.2% 58.5% 72.3% 34.9% Domestic public 85,019 87,756 66,404 42,045 - 45,931 - 44,019 % of total revenue 25.5% 27.9% 30.8% 23.6% - 42.7% - 20.4% Domestic private 43,638 27,742 36,501 47,225 - 16,384 - 22,943 % of total revenue 13.1% 8.8% 16.9% 26.5% - 15.2% - 10.6% Overseas 7,274 9,877 1,792 6,235 - 629 - 8,606 % of total revenue 2.2% 3.1% 0.8% 3.5% - 0.6% - 4.0% Total construction 328,044 314,720 209,805 177,862 122,284 106,720 121,482 214,560 % of total revenue 98.5% 100.0% 97.2% 99.8% 100.0% 99.1% 98.0% 99.2% Domestic public 103,611 96,140 90,116 50,352 68,974 52,207 11,035 57,430 % of total revenue 31.1% 30.5% 41.8% 28.3% 56.4% 48.5% 8.9% 26.6% Domestic private 207,690 206,941 117,895 121,275 53,310 51,814 110,447 148,373 % of total revenue 62.4% 65.8% 54.6% 68.0% 43.6% 48.1% 89.1% 68.6% Overseas 16,742 11,638 1,792 6,235 - 2,698 - 8,757 % of total revenue 5.0% 3.7% 0.8% 3.5% - 2.5% - 4.0% Development, other 4,878 - 5,977 - - 955 2,438 1,684 % of total revenue 1.5% - 2.8% - - 0.9% 2.0% 0.8% Total parent revenue 332,922 314,720 215,782 178,228 122,284 107,675 123,921 216,245 Source: Shared Research based on individual companies’ materials Note: Figures may differ from company materials due to differences in rounding methods.

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Strengths and weaknesses

Strengths

◤ Nearly 20% of revenue due to business opportunities via the Tokyu Group: As an equity-method affiliate of Tokyu Corporation, Tokyu Construction is a member of the Tokyu Group. As such, it benefits from numerous business opportunities. These include station building redevelopment projects along the Tokyu lines (such as at Shibuya and Futako- Tamagawa stations), as well as railway construction projects. Tokyu Corporation derives nearly 20% of revenue from Tokyu Group companies. This business goes back to Tama Garden City development, an extensive project in the 1960s. More recent examples include ultra high-rise buildings such as Shibuya Stream (completed in 2018), Shibuya Scramble Square (completed in 2019), and other large-scale Shibuya Station redevelopment work. In recent years, the company has taken part in numerous complex projects on the Tokyu lines, and these are becoming larger in scale. In addition, Tokyu Construction constructs buildings for Tokyu-affiliated universities: Asia University and Tokyo City University.

◤ A strong track record of projects completed in Shibuya and along the Tokyu lines: Tokyu Construction has a sales team dedicated to opportunities in the Shibuya area, which is the company’s base of operations. This team maintains close communications with members of this community, including shopping district promotional councils, landowners, building owners, and real estate companies, to gather information pertinent to construction orders. One aspect of these sales efforts is to support local festivals, such as the Shibuya Art Festival and an annual festival at the Miyamasumitake Shrine. This sort of communication has led to participation in redevelopment projects involving numerous landowners and leaseholders, such as Qfront, at the Shibuya Scramble pedestrian crossing (completed in 1999), Shibuya 109 (completed in 1979), and Sangenjaya Carrot Tower (completed in 1996).

◤ Abundant experience with railway construction, which helps ensure stable earnings during economic doldrums: Demand for railway construction (civil engineering work), which makes up nearly 10% of revenue, is stable even in downbeat economic times. Such construction requires specialized expertise, and profitability tends to be high. Over the years, the company has accumulated leading-edge construction technology in this category, starting with the Izu Kyuko railway line (between Ito and Izukyu Shimoda), which was completed in 1961. In 1964, the company handled roadbed construction near the Chofu Minemachi area around the Tokaido Shinkansen, and in 1966, the company completed construction on an extension of the Tokyu Den-en-toshi Line (Mizonokuchi to Nagatsuta). One area of particular expertise is technology that allows it to build complex multilevel crossings at night, without interfering with the operation of existing routes. The company has used this technology on continuous elevated railway work near Keikyu Kamata Station (completed in 2016) to connect directly to the Keikyu Airport Line and on underground construction between Shibuya and Daikanyama on the Tokyu Toyoko Line (completed in 2014), allowing trains to pass directly to the Tokyo Metro Fukutoshin Line.

Weaknesses

◤ Outdone by super general contractors in its record for high-value-added construction work: Tokyu Construction has built up a record of broad-ranging construction projects, including civil engineering work on railways, roads, and shield tunneling, which require sophisticated technical expertise. Still, the company lags behind such super general contractors as Kajima, Taisei, and Takenaka, which have completed numerous high-value-added construction projects, including large sports facilities, art museums, religious facilities, dams, long bridges, and marine civil engineering work. This situation is unlikely to change anytime soon as entities that place new orders tend to carefully scrutinize construction companies’ records of past performance.

◤ Low percentage of revenue from public-sector civil engineering projects, which tend to be more profitable than private-sector construction and feature stable demand: To date, Tokyu Construction has energetically expanded its business in private-sector construction, a market that is slated to mature. The company’s medium-term management plan highlights civil engineering work as a growth field for that reason. Civil engineering work tends to be high-profit; an analysis of OPM at general contractors shows that building construction typically generates margins of 7–9%, whereas OPM on civil engineering work is around 10–12%. This difference exists because preliminary screening for civil engineering work, which usually means public-sector projects, usually limits bidding to construction companies that possess

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sophisticated construction technology and highly stable management. Also, price competition is fiercer on private-sector construction. Public-sector civil engineering projects account for 20.4% of parent-company revenue at Tokyu Construction (FY03/21), lower than the 26.5% average for 10 second-tier general contractors. The company needs to increase orders for such projects, which it sees as being a growth area and providing stable demand.

◤ Despite a maturing domestic market, slow to build overseas and real estate businesses: Tokyu Construction went through a management crisis in 1998. Key reasons included numerous unprofitable overseas and real estate projects. As part of management restructuring efforts the following year, the company underwent a split, paring away unprofitable projects and going through corporate rehabilitation. As aftereffects, Tokyu Construction currently holds less business real estate and its overseas business is smaller in scale than its peers. With domestic demand expected to mature as private- sector demand declines, the company is working to diversify its business portfolio. However, the real estate business and overseas projects do entail a certain amount of business risk, so the company is unlikely to expand these businesses rapidly.

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Notable projects

Building Construction Office buildings (Shibuya)

Cerulean Tower (2001) Shibuya Hikarie (2012) Shibuya Stream (2018) Shibuya Scramble Square (2019)

Source: Company website Office buildings and commercial facilities

PMO Hanzomon (2017) Nagaileben’s head office building (2014) Futako-Tamagawa Rise (2011)

Source: Company website

Qfront (1999) Carrot Tower (1996) Shibuya 109 (1979) Shibuya Mark City (2000)

Source: Company website

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Logistics facilities GLP Nagareyama (2017) Tokyo Rail Gate West (2020)

Source: Company website

Educational facilities

New No. 1 Hall, Asia University (2018) New No. 6 Hall, Tokyo City University (2017)

Source: Company website Source: Company website Hospitals

Ohashi Medical Center, Toho University (2018) Saitama Medical Center, Jichi Medical University (2008)

Source: Company website Government buildings

Amagasaki Magistrates Court of the Kobe District Court (2017) New No. 2 City Government Building, Ichikawa (2017)

Source: Company website

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Civil Engineering Railway construction (private-sector civil engineering projects)

Subway construction on the Tokyu Toyoko Line (between Daikanyama and Shibuya, 2014)

Source: Company website

Continuous elevated railway work near Keikyu Kamata Overhead reconstruction at Togoshi Ginza Station on the Station (Section 2, 2016) Tokyu Ikegami Line (2016)

Source: Company website Road construction (public-sector projects)

Pedestrian bridge, Shibuya Station East Exit, National Route 246 (2019) Atsugi-Minami Interchange, Shin-Tomei Expressway (2018)

Toyomane Tunnel (2017) Wakayama Misaki Line Hirai-Kita Area Road (2017)

Source: Company website

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Water and sewerage and revetment work (public-sector projects)

Yumenoshima Park West Area Embankment (2018) Sumida River construction (rainwater trunk line, 2012)

Source: Company website

Overseas projects

Left: Bangkok MRT Purple Line (Thailand, 2014), Center: Vo Nguyen Giap Road (Vietnam, 2014), Right: Jakarta MRT (Indonesia, 2019)

Source: Company website

Causeway Point Shopping Center (Singapore, 2012) Rehabilitation of Bridges for the Java North Line (Indonesia, 2011)

Source: Company website

Suntec Singapore Convention & Exhibition Centre (Singapore, 2006) A380 Maintenance Hangar for Malaysia Airlines (Malaysia, 2007)

Source: Company website

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Overview of completed projects

Major projects completed (2017) Project Location Customer Public civil eng. National Route 45 Toyomane Tunnel Iwate Ministry of Land, Infrastructure, Transport and Tourism Public civil eng. Wakayama Misaki Line Hirai-Kita Area Road Wakayama Ministry of Land, Infrastructure, Transport and Tourism Public civil eng. Asaka-Kamiigusa Road No.2, Vertical Shaft No. 1 Saitama Tokyo Metropolitan Government Railway constr. Renovation work at Yutenji Station, Tokyu Toyoko Tokyo Tokyu Railways Line Gov't facility Amagasaki Magistrates Court of the Kobe District Kobe, Hyogo Osaka High Court Court Gov't facility Tokyo Metropolitan Vocational Skills Development Tokyo Ministry of Land, Infrastructure, Transport and Tourism Center Gov't facility Wakayama Regional Common Building for Wakayama Ministry of Land, Infrastructure, Transport and Tourism Government Offices Gov't facility Rocker NCO Club, 621 Building, Kadena Okinawa Japan Engineer District, the U.S. Army Corps of Engineers Gov't facility Ofuna Disaster Preparedness and Cultural Center Iwate Urban Renaissance Agency Gov't facility Nihonbashi Tax Office Tokyo Ministry of Land, Infrastructure, Transport and Tourism Municipality New No. 2 Government Building, Ichikawa Ichikawa, Chiba City of Ichikawa Municipality Government Building, Koka Shiga City of Koka Municipality Funabashi Sports Park Pool Chiba City of Funabashi School Hoyu-Gakuin High School Tokyo Nakanobu-Gakuen (now Hoyu-Gakuin) High School School New No. 6 Hall, Tokyo City University Tokyo Gotoh Educational Corporation School New No. 8 Hall, Yokohama Kenshidai Campus, Kanagawa Nippon Sport Science University Nippon Sport Science University School Teikyo University Institute of Sports Science & Tokyo Teikyo University Medicine School Nippon Sport Science University Hokkaido Nippon Sport Science University Hospital Urayasu Central Hospital Chiba Urayasu Central Hospital Office building PMO Shibuya Tokyo Nomura Real Estate Development Office building PMO Hanzomon Tokyo Tokyo Metro, Nomura Real Estate Development (customer representative) Office building Kitami Kantec Building Kitami, Hokkaido Kantec Hotel TRUNK (HOTEL) Tokyo Take and Give Needs Hotel Gora Hot Spring Setsugetsuka Bettei Suiun Kanagawa Kyoritsu Estate Hotel Center Beach House Okinawa Unimat Precious Hotel Candeo Hotels Tokyo Roppongi Tokyo Tokyo Tatemono Commercial facility OKKA634 Kanagawa Taisei Kogyo, Musashi Bowl Commercial facility Kamome Terrace Iwate Saito Seika Logistics facility Kyushu Logistics Center Saga Mitsubishi Electric Logistics Logistics facility GLP Nagareyama Chia Nagareyama 1 SPC Condominium Dresser Meguro Ohashi Previ Tokyo Tokyu Construction Condominium Proud Roppongi Tokyo HKRJ Roppongi SPC, Nomura Real Estate Development Condominium The Parkhouse Chiyoda Kojimachi Tokyo Mitsubishi Estate Residence Elderly care facility Tsubame no Sato Tokyo Shibuya-ku Residence Grand Forum Setagaya Karasuyama Tokyo Cosmos Initia Residence The Parkhouse Stage Azamino Kanagawa Mitsubishi Estate Residence Production facility Carabao-1 New Factory (Thailand) Thailand CARABAO TAWANDANG

Source: Shared Research based on company data

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Major projects completed (2018) Project Location Customer Public civil eng. Atsugi Minami Interchange, Shin-Tomei Kanagawa Central Nippon Expressway Expressway Public civil eng. Yumenoshima Park West Area Embankment Tokyo Tokyo Metropolitan Government Public civil eng. Narihirabashi Pump Station Tokyo Tokyo Metropolitan Government Railway constr. Kuyama Tunnel, Kyushu Shinkansen Nagasaki Japan Railway Construction, Transport and Technology Agency Gov't facility Miho Sub-Camp Building, Japan Ground Self- Tottori Ministry of Defense Defense Force Gov't facility Karatsu Bay Common Building for Government Nagasaki Ministry of Land, Infrastructure, Transport and Tourism Offices Gov't facility Flight of Dreams Aichi Central Japan International Airport Municipality Shibuya Ward Office Tokyo Mitsui Fudosan Residential School New No. 1 Hall, Asia University Tokyo Asia University School Benesse Itabashi 3-chome Nursery Tokyo Japan Post, Benesse Style Care Hospital Ohashi Medical Center, Toho University Tokyo Toho University Office buiding Building C, WOWO Tatsumi Broadcast Center Tokyo WOWOW Office buiding Shimbashi M-Square Bright Tokyo Zao Properties SPC Hotel Hotel Intergate Tokyo Kyobashi Tokyo The Sankei Building Hotel Richmond Hotel Himeji Hyogo Ushio Sport facility Aso Tokyu Golf Club Kumamoto TLC Golf Resort Sport facility Teine Olympia Center House Hokkaido Kamori Kanko Commercial facility Saegusa Building, Shibuya Tokyo Saegusa Trading, Tokyu Railways Commercial facility Olinas Kinshicho Tokyo Capitaland Mall Japan Production facility Sano Plant, Tokyu Linen Supply Tochigi Tokyu Linen Supply Production facility Headquarters and head office factory, Tokyo Katsuragawa Seira Katsuragawa Seiri Production facility Isesaki Plant, Nippon Cookery Gunma Nippon Cookery Condominium Park Homes Chiyoda Awajicho Tokyo Mitsui Fudosan Condominium Dresser Wise Tama Plaza Kanagawa Tokyu Railway, Mitsubishi Corp., Mitsubishi Estate Residence, other Elderly facility Center Minami Shinkan Kanagawa Platesia Residence Proud Season Inagi Minamiyama Tokyo Nomura Real Estate Development Overseas Railyard, No. 6 Depot, Dhaka Mass Rapid Transit Bangladesh Dhaka Mass Transit Company Limited System No. 6 Overseas Dawbon Bridge, Yangon Myanmar Ministry of Construction, Union of Myanmar

Source: Shared Research based on company data

Major projects completed (2019)

Project Location Customer Public civil eng. Pedestrian overpass, Shibuya Station East Exit, Tokyo Ministry of Land, Infrastructure, Transport and Tourism National Route 246 Public civil eng. Ibii Shiokaze T unnel, Nat ional Rout e 220 Miyazaki Ministry of Land, Infrastructure, Transport and Tourism Public civil eng. Miyako Kita-ku Road, Sanriku Expressway Iwate Ministry of Land, Infrastructure, Transport and Tourism Public civil eng. Sumida River Rain Water Trunk Line No. 3 Tokyo Tokyo Metropolitan Government Railw ay const r. Kanazaw a-Hakkei St at ion, Seaside Line Kanagaw a Y okohama Seaside Line School International students’ dormitory, Tokyo City Tokyo Tokyo City University University School Kyoto Municipal Mukajima Shuren Junior High School Kyoto City of Kyoto School Shinkan, Daisho Gakuen High School Osaka Daisho Gakuen High School Hot el Vessel Inn Chiba-Ekimae Chiba NT T East Propert ies Hotel Shigira Turtle Bay Okinawa Unimat Precious Logistics facility Kanto Logistics Center, Prima Meat Packers Ibaraki Prima Meat Packers Production facility Kosai Plant, Tadano Kagawa Tadano Production facility Tanmi New Plant, Prima Meat Packers Ibaraki Prima Meat Packers Overseas Jakarta Mass Rapid Transit Project Indonesia Jakarta Mass Rapid Transit

Source: Shared Research based on company data

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Historical performance and financial statements Income statement

Income statement FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 (JPYmn) Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons. Revenue 227,843 228,570 226,164 262,815 296,393 243,618 320,711 331,437 322,170 231,483 YoY -7.0% 0.3% -1.1% 16.2% 12.8% -17.8% 31.6% 3.3% -2.8% -28.1% Completed construction 222,149 226,784 223,969 260,454 294,063 237,749 318,707 329,548 320,083 229,016 Real estate business 5,694 1,786 2,195 2,360 2,329 5,869 2,003 1,888 2,086 2,467 Cost of revenue 215,572 216,568 212,923 245,847 265,304 213,274 284,991 295,363 285,996 213,313 Completed construction 210,470 215,377 211,488 243,405 263,552 209,100 283,581 293,648 284,198 209,673 Real estate business 5,101 1,190 1,435 2,441 1,752 4,173 1,409 1,715 1,797 3,639 Gross profit 12,271 12,002 13,241 16,968 31,088 30,344 35,720 36,073 36,173 18,170 Gross profit margin 5.4% 5.3% 5.9% 6.5% 10.5% 12.5% 11.1% 10.9% 11.2% 7.8% Completed construction 11,678 11,406 12,480 17,049 30,511 28,648 35,126 35,900 35,885 19,343 Real estate business 592 595 760 -80 577 1,695 593 172 288 -1,172 SG&A expenses 10,698 10,848 10,611 10,958 12,910 13,133 14,303 14,086 15,858 14,620 SG&A ratio 4.7% 4.7% 4.7% 4.2% 4.4% 5.4% 4.5% 4.2% 4.9% 6.3% Operating profit 1,572 1,154 2, 630 6,009 18,178 17,211 21,416 21,987 20,315 3, 549 YoY -79.3% -26.6% 127.9% 128.5% 202.5% -5.3% 24.4% 2.7% -7.6% -82.5% Operating profit margin 0.7% 0.5% 1.2% 2.3% 6.1% 7.1% 6.7% 6.6% 6.3% 1.5% Non-operating income 669 1,533 1,372 2,278 1,946 1,870 987 1,180 1,935 1,691 Non-operating expenses 357 386 443 263 355 241 274 235 282 349 Recurring profit 1,884 2,301 3,559 8,024 19,768 18,839 22,128 22,932 21,969 4,891 YoY -75.9% 22.1% 54.7% 125.5% 146.4% -4.7% 17.5% 3.6% -4.2% -77.7% Recurring profit margin 0.8% 1.0% 1.6% 3.1% 6.7% 7.7% 6.9% 6.9% 6.8% 2.1% Extraordinary gains 464 56 360 100 19 187 337 - - 35 Extraordinary losses 2,617 24 19 542 97 111 - 138 256 Income taxes 543 291 1,201 2,269 5,860 5,233 6,231 7,294 6,793 1,984 Implied tax rate 23.1% -111.9% 30.8% 28.0% 30.4% 27.6% 27.9% 31.8% 31.1% 42.5% Net income attributable to non-controlling interests 5 15 7 30 45 4 4 134 134 39 Net income attributable to owners of the parent 1,799 -566 2,685 5,805 13,340 13,691 16,118 15,504 14,903 2,647 YoY -56.0% - - 116.2% 129.8% 2.6% 17.7% -3.8% -3.9% -82.2% Net margin 0.8% - 1.2% 2.2% 4.5% 5.6% 5.0% 4.7% 4.6% 1.1% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

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Balance sheet

Balance sheet FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 (JPYmn) Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons. ASSETS Cash and deposits 17,881 23,097 18,215 18,318 50,674 22,582 28,865 49,145 29,549 34,173 Notes and accounts receivable 79,044 73,319 88,147 100,707 87,640 96,995 130,651 115,174 114,136 94,089 Costs on uncompleted construction contracts 12,113 13,745 18,157 13,120 19,130 22,144 18,933 24,137 20,802 17,986 Costs on real estate business 734 380 210 320 1,052 138 8 1 - - Real estate for sales 526 577 564 624 291 21 163 21 21 21 Materials and supplies 95 84 82 57 59 67 40 20 39 61 Advances paid 13,650 13,906 Deferred tax assets 882 938 938 927 2,686 2,720 Other 9,693 6,804 5,280 12,036 9,557 11,370 5,325 2,695 6,715 12,169 Allowance for doubtful assets -233 -94 -38 -32 -50 -57 -164 -131 -139 -47 Total current assets 120,738 118,854 131,556 146,079 171,041 155,983 197,473 204,971 171,125 158,454 Buildings and structures 4,039 4,115 5,041 5,888 6,098 6,621 7,626 9,691 12,201 13,475 Machinery, equipment, and vehicles 1,955 2,124 1,967 2,092 2,451 2,789 3,127 3,588 3,864 4,025 Land 11,053 10,834 13,098 13,634 13,001 13,829 15,302 17,914 21,541 23,718 Lease assets 449 420 417 254 162 206 356 407 422 456 Construction in progress 349 0 39 42 83 416 1 Accumulated depreciation -3,317 -3,669 -3,379 -3,641 -3,956 -4,282 -4,820 -5,521 -6,413 -7,334 Tot al tangible fixed assets 14,180 14,174 17,145 18,228 17,756 19,204 21,634 26,163 32,033 34,342 Tot al intangible assets 327 316 313 359 416 692 858 844 976 1,202 Investment securities 13,536 16,537 16,805 24,207 22,150 24,473 25,016 28,411 27,496 29,816 Long-term loans receivable 280 279 267 67 67 60 52 51 36 30 Retirement benefit asset 176 1,155 1,453 1,423 - Deferred tax assets 1,887 972 344 63 68 70 289 196 1,449 115 Other 3,678 3,222 3,417 3,344 2,849 3,173 2,978 2,934 2,781 2,604 Allowance for doubtful assets -186 -162 -164 -124 -0 -0 -0 -0 -4 - Investments and other assets 19,196 20,849 20,670 27,558 25,311 28,933 29,790 33,017 31,760 32,568 Total fixed assets 33,704 35,340 38,128 46,147 43,484 48,829 52,283 60,025 64,771 68,113 Total assets 154,442 154,195 169,685 192,226 214,526 204,813 249,756 264,996 235,897 226,568

LIA BILITIES Accounts and notes payable 83,067 82,679 83,778 97,154 84,751 53,583 75,687 74,233 39,987 39,349 Electronically recorded liabilities 23,242 29,602 49,392 50,486 14,719 12,240 Short-term debt 8,243 232 7,182 4,131 115 3,130 170 178 25,179 5,264 Corporate taxes payable 208 215 660 2,038 5,593 1,319 4,777 3,909 4,295 3 Advances received on uncompleted construction contracts 11,776 16,676 19,081 17,903 16,789 20,179 14,540 14,623 13,713 13,331 Advances received on real estate business 15 0 0 0 300 12 0 1 5 1 Provision for warranties for completed construction 1,064 1,254 1,160 1,891 2,857 2,027 2,335 2,821 4,921 4,749 Provision for loss on construction contracts 4,139 3,130 3,982 1,691 987 1,050 628 2,095 985 1,804 Provision for bonuses 1,330 1,273 1,411 2,172 3,198 3,486 4,268 3,405 2,850 1,801 Provision for loss on litigations 384 130 Deposits received 4,993 6,949 7,838 7,685 8,899 9,172 9,755 11,425 12,866 14,860 Other 1,116 1,557 2,686 2,169 4,061 7,057 4,130 2,772 8,052 1,638 Total current liabilities 116,340 114,100 127,784 136,838 150,799 130,624 165,688 165,955 127,578 95,046 Long-term debt 2,686 2,513 2,068 4,937 4,843 1,859 1,879 1,752 1,590 21,654 Deferred tax liabilities 18 1,214 1,440 2,893 12 791 8 201 Provision for share-based remuneration for directors 0 16 38 49 Provision for loss on real estate business 1,470 1,470 2,150 2,150 1,978 1,878 2,266 2,491 4,200 Retirement benefit liability 2,470 1,387 193 211 226 235 1,312 733 Asset retirement obligations 142 145 217 221 226 230 235 240 244 249 Provision for retirement benefits 3,674 3,270 Long-term guarantee deposits 207 206 Other 398 615 634 634 661 756 927 923 Total fixed liabilities 6,711 7,607 6,643 10,526 9,488 7,808 4,893 6,059 6,614 28,012 Tot al liabilit ies 123,052 121,707 134,427 147,364 160,288 138,433 170,581 172,014 134,193 123,058 NET A SSETS Capital stock 16,354 16,354 16,354 16,354 16,354 16,354 16,354 16,354 16,354 16,354 Capital surplus 3,893 3,893 3,893 3,893 3,893 3,893 3,893 3,893 3,893 3,893 Retained earnings 11,382 10,495 13,179 17,679 29,098 40,122 52,932 65,128 76,831 77,344 Treasury stock -38 -38 -44 -49 -53 -59 -62 -158 -159 -1,154 Accumulated other comprehensive income -265 1,705 1,769 6,792 4,708 5,839 5,830 7,415 4,297 6,527 Non-controlling interests 64 77 105 188 235 228 225 347 488 545 Total net assets 31,390 32,487 35,258 44,861 54,238 66,380 79,175 92,981 101,703 103,509 Tot al liabilit ies and net assets 154,442 154,194 169,685 192,225 214,526 204,813 249,756 264,995 235,896 226,567 Working capital -4,023 -9,360 4,369 3,553 2,889 43,412 54,964 40,941 74,149 54,740 Total interest-bearing debt 10,929 2,745 9,250 9,068 4,958 4,989 2,049 1,930 26,769 26,918 Net debt -6,952 -20,352 -8,965 -9,250 -45,716 -17,593 -26,816 -47,215 -2,780 -7,255 Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

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Cash flow statement

Cash flow statement FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 (JPYmn) Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons. Cash flows from operating activities (1) -11,486 14,264 -9,302 2,111 39,003 -23,545 16,226 29,694 -33,439 11,629 Pre-tax profit 2,348 -260 3,895 8,105 19,246 18,929 22,353 22,932 21,831 4,671 Depreciation 560 617 564 576 563 680 867 1,077 1,252 1,287 Impairment losses 230 533 40 84 Change in working capital -2,713 5,654 -13,728 792 23,529 -32,982 8,253 15,272 -69,020 17,064 Cash flows from investing activities (2) 20 -619 -2,072 -1,525 -334 -1,717 -3,383 -5,786 -7,488 -3,753 Purchase of tangible/intangible fixed assets -3,795 -1,748 -798 -2,324 -3,402 -5,644 -7,876 -3,351 Proceeds from sale of tangible/intangible fixed assets 315 181 136 150 Free cash flow (1+2) -11,466 13,645 -11,374 586 38,669 -25,262 12,843 23,908 -40,927 7,876 Cash flows from financing activities 4,704 -8,569 6,476 -675 -6,035 -2,788 -6,457 -3,575 21,604 -3,308 Net increase in short-term borrowings 6,000 -6,000 7,000 -3,000 -4,000 25,000 -20,000 Net increase in long-term borrowings -93 -2,095 -396 2,920 -81 -81 -3,082 -83 -80 19,919 Increase (decrease) in cash and cash equivalents -6,782 5,216 -4,882 102 32,356 -28,091 6,283 20,279 -19,595 4,624 Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods. Cash flows from operating activities In FY03/12, operating activities used JPY11.5bn in cash. This figure reflects difficulty in obtaining orders and deteriorating profitability as tight supply of skilled workers led to soaring labor costs. Other fiscal years had cash outflows as well, but they were affected not only by poor profit margins, but also terms of payment from the customers, and the timing of payment for large projects. In FY03/21, a decline in accounts payable and income tax payments generated outflows, but the company booked per-tax profit of JPY4.7bn and a decrease in accounts receivable for a total of JPY11.6bn in cash inflows from operating activities (cash outflows of JPY33.4bn in FY03/20).

Cash flows from investing activities The JPY2.1bn outflow in FY03/14 was the result of acquiring the Gotanda Brick Building and investment in construction of the Miho bell pepper plant. Net cash used in investing activities came to JPY3.4bn in FY03/18, due to increase R&D investment and the purchase of office buildings for leasing. In FY03/19 investing activities used JPY5.8bn. This was because of the purchase of Higashi Kanda 1-chome Office and other office buildings for leasing. In FY03/21, outflows from the purchase of tangible and intangible fixed assets and from the purchase of shares in subsidiaries resulting in a change in the scope of consolidation totaled JPY3.8bn (outflows of JPY7.5bn in FY03/20).

Cash flows from financing activities In FY03/21, the company booked inflows from an increase in long-term borrowings but outflows from a decrease in short-term borrowings, for total cash outflows of JPY3.3bn (inflows of JPY21.6bn in FY03/20).

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Historical performance

Q3 FY03/21 results Summary Despite lower SG&A expenses, revenue in cumulative Q3 FY03/21 came to JPY154.7bn (-37.7% YoY) due to a substantial decrease in revenue from completed construction. Operating profit came to JPY2.1bn (-88.1% YoY) and recurring profit was JPY2.7bn (-85.5% YoY). Net income attributable to owners of the parent, after tax expenses, was JPY1.5bn (-87.8% YoY).

Shareholders’ equity as of end-Q3 FY03/21 stood at JPY101.5bn, with the equity ratio improving 5.4pp from end-FY03/20 to 48.3%.

Orders in cumulative Q3 FY03/21 were JPY186.1bn (+61.4% YoY). This recovery occurred because the company broadened its acceptable range of orders after previously having narrowed it during the previous financial year. Building construction orders were JPY146.7bn (+90.8% YoY) and civil engineering orders were JPY39.3bn (+2.5% YoY).

Building construction orders recovered substantially because the company broadened the range of orders it would accept after previously having narrowed it during the previous financial year. Orders for logistics warehouses are on the rise due primarily to expansion in e-commerce. The company received orders for facilities such as GLP ALFALINK Sagamihara (scheduled for completion in November 2021), DPL Chiba Yotsukaido (scheduled for completion in February 2022), and Nomura Real Estate Development Landport Ageo II (scheduled for completion in May 2022). Additionally, the company has agreed to involvement in a redevelopment project in front of Shin-Tsunashima Station on the Tokyu Shin-Yokohama train line (scheduled for completion in 2023). Orders for hotels, commercial facilities, and other similar structures were sluggish due primarily to the COVID-19 pandemic.

In the category of civil engineering orders, domestic public orders amounted to JPY27.4bn (+156.8% YoY) while domestic private orders totaled JPY10.9bn (-56.3% YoY). Performance in terms of domestic public civil engineering projects up for bid was strong thanks to national resilience policies implemented by the Japanese government, and the company received an order for underground construction on National Route 246. Meanwhile, with regard to domestic private civil engineering orders, railway construction orders from private railway companies were limited by a significant extent due to a decline in revenue from passengers caused by the COVID-19 pandemic.

1H FY03/21 results Summary In the construction market in 1H FY03/21, although public-sector construction investment began picking up, private-sector capex declined as many companies reviewed their business plans, so the company’s earnings decreased YoY. In terms of construction costs, both labor costs and equipment and materials expenses were flat YoY.

Revenue came to JPY95.4bn (-48.0% YoY), about half the record high in 1H FY03/20, as revenue from completed construction declined after some large projects ended. Operating profit came to JPY1.2bn (-92.7% YoY) and recurring profit was JPY1.7bn (- 90.1% YoY). Net income attributable to owners of the parent, after tax expenses, was JPY759mn (-93.4% YoY).

Orders rose 70% YoY, mainly on progress in Building Construction orders. 1H orders were at just 37% of the full-year target, but the company thinks the overall environment for orders is robust, since inquiries about large logistics facilities, for example, indicate that some areas have remained relatively solid despite the COVID-19 pandemic.

Parent revenue

▷ Parent revenue was JPY87.7bn (-48.6% YoY).

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▷ Civil Engineering revenue from completed construction came to JPY30.5bn (-29.4% YoY), with the decline mainly due to absence of revenue from a large joint venture subcontracting work booked in 1H FY03/20.

▷ Building Construction revenue from completed construction was JPY56.4bn (-55.5% YoY) as large projects such as Shibuya redevelopment ran their course and some orders were delayed in FY03/20.

▷ Real Estate revenue came to JPY777mn (+15.4% YoY) with the accumulation of old rental properties—in central Tokyo and areas along the Tokyu railway lines, where the company has strengths—that can be expected to generate synergies with construction business.

Parent gross profit

▷ Parent gross profit was JPY7.5bn (-66.4% YoY).

▷ Civil Engineering gross profit from completed construction was JPY2.6bn (-36.7% YoY), with the decline caused by the pandemic’s impact on some overseas projects and lack of improvement on additional construction due to the small number of projects being completed.

▷ Building Construction gross profit from completed construction was JPY4.5bn (-74.9% YoY). GPM of completed construction fell 6.1pp YoY in an unfavorable comparison with 1H FY03/20 when there was substantial improvement in GPM of large projects that reached their conclusion.

▷ Real Estate gross profit was JPY418mn (+10.9% YoY).

Factors affecting net income

▷ Increase in real estate profit: +JPY59mn impact on net income

▷ Decrease in SG&A expenses: +JPY477mn

▷ Decrease in taxes expenses: +JPY4.8bn

▷ Decrease in gross profit from complete construction: -JPY15.7bn

▷ Extraordinary losses (loss on valuation of investment securities): -JPY284mn

▷ Decrease in equity-method profits: -JPY107mn

▷ Other: -JPY7mn

Income and expenses at consolidated subsidiaries (net income/loss)

▷ Tokyu Renewal: JPY304mn

▷ Plantaardig farm: JPY11mn

▷ Osaka Firefighting Private Financial Initiative (PFI): JPY7mn

▷ Tokyu Industry: -JPY21mn

▷ Golden Tokyu Construction: -JPY36mn

▷ PT Tokyu Construction Indonesia: -JPY58mn

Income and expenses at equity-method affiliates (equity-method profit/loss)

▷ Seikitokyu Kogyo: JPY426mn

▷ Ch. Karnchang-Tokyu Construction: JPY59mn

▷ Asuka Soken: JPY45mn

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▷ Tokyo Green System: -JPY9mn

Financial status Shareholders’ equity as of end-1H FY03/21 declined to JPY100.0bn following the payment of dividends from surplus. The equity ratio improved 3.6pp from end-FY03/20 to 46.5%, due mainly to a decrease in accounts payables accompanying the fall in revenue.

Civil Engineering orders (parent)

▷ Domestic public: JPY17.2bn (+209.7% YoY), including an order for a Ministry of Land, Infrastructure, Transport and Tourism (MLIT) project

▷ Domestic private: JPY7.0bn (-67.5% YoY), with the decline caused by a drop in railway construction as construction related to safety measures ran its course and railway companies restrained their investment due to the COVID-19 pandemic

▷ Overseas: JPY624mn (-59.6% YoY)

Building Construction orders (parent)

▷ Domestic public: JPY3.2bn (-23.8% YoY)

▷ Domestic private: JPY94.0bn (+140.9% YoY), with the increase caused by substantial growth in general private-sector construction, including university buildings and logistics warehouses (logistics-related work accounted for 40% of orders due to increased e-commerce business)

▷ Overseas: JPY436mn (flat YoY)

Construction carried forward (parent; as of end-September 2020)

▷ Total: JPY287.0bn (+12.5% YoY)

▷ Civil Engineering: JPY112.7bn (-11.5% YoY)

▷ Building Construction: JPY174.3bn (+36.3% YoY) Q1 FY03/21 results Summary

▷ In Q1 FY03/21, revenue came to JPY42.7bn, down 45.8% YoY. The downturn was the result of a decline in revenue from completed construction due to the low level of work carried over at the start of the year, which was due largely to a decrease in orders received last year and the completion of large projects.

▷ Operating profit came to JPY34mn (-99.5% YoY). In addition to a decline in revenue on a drop in work on hand from 2H FY03/20, large projects with additional work required, including Shibuya Scramble Square Central Tower and Minami Machida Grandberry Park, were generally completed in 1H FY03/20, resulting in the gross profit margin on parent building construction dropping to 8.0% from 14.4% one year ago. Recurring profit was JPY258mn (-96.3% YoY). Net income attributable to owners of the parent was JPY60mn (-98.8% YoY).

▷ Parent construction carried forward as of the end of Q1 FY03/21 was JPY240.1bn (-21.5% YoY), with the decline due in part to the completion of large projects.

▷ Shareholders’ equity as of end-Q1 FY03/21 stood at JPY99.0bn, with the equity ratio improving 4.0pp from end-FY03/20 to 46.9%.

▷ Parent orders as of Q1 FY03/21 stood at JPY27.7bn (+4.0% YoY). Building construction orders were up 39.5% YoY to JPY24.1bn thanks to multiple projects being pushed back from FY03/20. Civil engineering orders were down 61.3% YoY to JPY3.6bn, with the decline due largely to delays in administrative procedures due to the COVID-19 pandemic.

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Full-year FY03/20 results Summary The construction market did well in FY03/20 thanks to solid private-sector capex and public-sector investment as corporate earnings improved. At the same time, the cost environment in the construction industry fell within the anticipated range for the year as labor costs continued to rise, while materials and equipment prices eased down.

In FY03/20, consolidated revenue came to JPY322.2bn (-2.8% YoY) as major construction works largely tapered off in 1H and work in 2H declined due to postponements, leading to lower revenue from completed construction on an annual basis. Although revenue may have declined, it still maintained historically high levels.

In terms of consolidated income, gross profit increased 0.3% YoY to a record-high of JPY36.2bn thanks to improvement in construction profit margins. Operating profit came to JPY20.3bn (-7.6% YoY) as increased hiring and the accompanying rise in payroll costs, among other factors, drove up SG&A expenses by JPY1.8bn. Equity-method gains climbed JPY757mn YoY to JPY1.5bn thanks to improved earnings at Seikitokyu Kogyo Co., Ltd. (TSE1: 1898). This and other factors resulted in recurring profit of JPY22.0bn (-4.2% YoY). After factoring a JPY500mn decline in tax expenses and a JPY138mn increase in extraordinary losses, net income attributable to owners of the parent came to JPY14.9bn (-3.9% YoY).

Thanks to factors including improvement in payment terms to subcontractors, cash used in operating activities came to JPY33.4bn (compared to cash provided of JPY29.7bn in FY03/19). Shareholders’ equity as of end-FY03/20 stood at JPY101.2bn, with the equity ratio improving 7.9pp YoY to 42.9%.

Parent orders fell JPY69.7bn YoY to JPY193.3bn due largely to delayed construction starts. Orders thus fell below JPY200bn due to factors including a fallback from overseas civil engineering orders obtained in FY03/19 and postponement in private-sector construction starts to FY03/21. The parent gross profit margin improved 0.4pp YoY to 11.2% thanks largely to improvement in project margins.

Segment earnings Building Construction Orders plummeted to JPY150.3bn (-27.5% YoY) as orders for several large domestic private-sector projects were postponed to FY03/21 and domestic public work projects decreased, despite an increase in orders for overseas projects. Revenue from completed construction was JPY231.6bn, with revenue increasing for domestic public work projects, but decreasing for domestic private-sector projects and overseas projects. Subsidiary Tokyu Renewal Co., Ltd. saw net profit rise to JPY1.8bn (vs. JPY1.3bn in FY03/19) as demand for building renovation grew.

Bolstered by enhanced project profitability, segment profit (operating profit basis) improved 1.5% YoY to JPY20.5bn. The construction gross profit margin rose 2.1pp YoY to 11.9% thanks to greater than anticipated improvement in margins on large completed projects.

Civil Engineering Orders were JPY64.9bn (-17.0% YoY) as orders for domestic public work projects and domestic private-sector projects improved but overseas projects saw a fallback from orders obtained in FY03/19. Revenue from completed construction totaled JPY88.5bn (+25.3% YoY), with revenue increasing for domestic public work projects and overseas projects, but decreasing for domestic private-sector projects. Segment profit (operating profit basis) declined 13.5% YoY to JPY6.9bn. The civil engineering gross profit margin fell 4.8pp YoY to 9.3% due to a higher percentage of low-margin joint-venture subcontracting work as well as the playing out of the benefits of the greater than anticipated obtainment of design change/addition projects in FY03/19.

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Real Estate In the Real Estate segment, revenue was JPY2.1bn (+10.5% YoY) but operating loss came to JPY152mn (operating profit/loss basis, versus an operating loss of JPY304mn in FY03/19). The leasing business was profitable thanks to acquisition of largely revenue-generating properties with potential for increased value through renovation. However, the company posted an operating loss in the segment largely on provision for loss on real estate business in line with the company’s revision of revenue and costs in the large-scale development business.

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Construction work carried forward Principal construction work carried forward into FY03/20

Customer Project Harumi 5-chome West Category-1 Urban Area Redevelopment Mitsui Fudosan Residential, Business and nine other companies Construction and dismantling in line with Athletesʼ Village specifications Fukuoka Jisho New construction on Hotel Forza Sapporo Ekimae Tokyu Upgrade construction of Ikegami Station on the Ikegami Line and station building Redevelopment construction (main building construction) City of Tamana Construction work on Tamana Community Hall Shibuya-ward Ebisu Nishi 2-chome building complex construction City of Kawanishi Refuse collection office improvement work Railway Technical Research Institute Construction work on new experimental wing Wakayama Medical University New construction at Wakayama Medical University

Construction The Tokyo Organising Committee of Construction on the Athletesʼ Village team processing center the Olympic and Paralympic Games Japan Freight Railway Tokyo Rail Gate West renovation project Hokkaido Isuzu Motors New office construction project Sanshin Warehouse Planning and construction of senior housing in Shibaura 4- chome East Japan Railway Development, planning, and construction of the main structure for a building complex at Sakuragicho Station Tokyu Land Planning and new construction at Sakurashinmachi 2-chome, Setagaya-ku Ministry of Land, Infrastructure, Road construction in the Osanai Area, Road No. 45 Transport and Tourism Ministry of Land, Infrastructure, Construction of the Tsuchida Tunnel on the Misumi Masuda Road Transport and Tourism Ministry of Transport, Socialist Republic Extension of Hanoi City Ring Road No. 3 (Mai Dich – South of Viet Nam (Vietnam) Thang Long Section): Second package Tobu Railway Civil engineering component of elevated construction Near Tokyo Sky Tree Station Tokyu Construction to connect Hiyoshi Station on the Tokyu Toyoko Line and Meguro Line with the Sotetsu-Tokyu Direct Line Ministry of Transport and Yangon-Mandalay Railway Improvement Project: Phase 1, Communications, Union of Myanmar Section CP103 Tokyu and others New Construction on a temporary walkway at the West Exit in the Shibuya Station Area Development Plan Tokyu Construction on moving platform doors at Kajigaya Station on

Civil Engineering Civil the Den-en-toshi Line Japan Railway Construction, Transport Chuo Alps Tunnel on the Chuo Shinkansen (Hagi no Hira, Hirose) and Technology Agency Ministry of Construction, Union of Bago River Bridge Construction Work: Section 3 Myanmar Ministry of Land, Infrastructure, FY2018 road construction on the right bank of Shitara Dam Transport and Tourism Tokyo Metropolitan Government Seismic reinforcement work (43rd) on Nakagawa revetment City of Koriyama Construction of public sewerages on the No. 119 Rainwater Trunk Line: Section 1 Central Nippon Expressway Construction of Yubure Tunnel 1 on the Shin-Tomei Expressway Source: Annual Securities Report

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Main completed projects in FY03/20 Completed Customer Project Location Ministry of Land, Infrastructure, Construction and other work on Kanagawa Transport Bureau Branch Kanagawa Transport and Tourism Office (17) City of Tamana Construction of Tamana Civic Center Kumamoto Japan Freight Railway Company Tokyo Rail Gate West upgrade work (main unit construction) Tokyo Mitsubishi Estate Residence Co., Ltd., New construction for Shibuya Ward Nanpeidai 5 project Tokyo Obayashi-Shinseiwa Real Estate Co., Ltd., Building Tokyu Land Corporation Airport Facilities Co., Ltd. Arc Building expansion work Tokyo Daito Trust Construction Co., Ltd. New construction of Shinonome D Office Project (working name) Tokyo Tokyu Corporation Construction of new commerical facilites (middle plot) for the Minami- Tokyo Machida Project Ministry of Land, Infrastructure, Shibuya Sta. west exit underground section construction on National Rt. Tokyo Transport and Tourism 246 Ministry of Land, Infrastructure, Misumi-Masuda Route Tsuchida Tunnel construction Shimane Transport and Tourism Keikyu Corporation 〔1st phase of Daishi line continuous grade separation project) No. 4 Kanagawa section civil engineering (phase 34) Tokyu Railways Co., Ltd. Oimachi Line Yoroidai No.4 overbridge accompanying upgrade of City Tokyo Planning Road Support Route 163 (civil engineering 2nd and 3rd Civil engineering phases) Tokyu Corporation City of Machida Urban Planning Project: Groundwork for Land replotting Tokyo

Source: Shared Research based on company data

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Other information

History

Sep 1945 Tokyu Corporation set up an in-house temporary post-war reconstruction committee to consider establishing a construction company in the Tokyu Group Mar 1946 Tokyu Construction Industry Co., Ltd. was established Aug 1954 Merged with Tokyu Land Corporation (later the company’s Construction Industry Department) Nov 1959 Separating the department, Tokyu Construction Co., Ltd. was established Sep 1963 Listed shares on the Second Section of the Tokyo Stock Exchange Jan 1967 Separating Road Construction Unit, Tokyu Road KK (now Seikitokyu Kogyo Co., Ltd.) Aug Listed shares on the First Section of the Tokyo Stock Exchange Jun 1971 Established Institute of Technology May 1976 Established Overseas Division (now International Division) Aug 1977 Set up Housing and Residential Division Jul 2000 Introduced a Corporate Executive Officer System Apr 2003 Established TC Holdings Co., Ltd. Oct Succeeding the construction unit from the former Tokyu Construction, and renamed as the (new) Tokyu Construction Listed shares of the new Tokyu Construction in the First Section of the Tokyo Stock Exchange Renamed the Real Estate unit to TC Properties Co., Ltd. Apr 2012 Set up Shibuya Development Promotion Office Apr 2013 Conducted reorganization, moving from a general headquarters system to a divisional organization system; integrated and reorganized Tokyo Branch, Yokohama Branch and Railway Construction Division to Civil Project Metropolitan Branch and Building Project Metropolit an Branch Apr 2018 Reorganized the divisions and metropolitan branches Apr 2020 Reorganized the Wooden Building division and established Wooden Architecture Promotion group Source: Shared Research based on company data Established in 1946 to lead the postwar construction of Tokyu Group facilities Tokyu Construction Industry was established in 1946 at the behest of Tokyu Group founder Keita Goto. The Tokyu Group’s structures had been damaged significantly in World War II, which had concluded in the previous year. Goto thought the group needed a construction company to give its own group priority in rapid reconstruction efforts.

Merger with Tokyu Land Corporation To shore up the foundations of Tokyu Land Corporation, which it had established the preceding year, in 1954 the Tokyu Group disbanded Tokyo Construction Industry and relaunched it as the construction industry department. At this point, the company began accepting construction orders from outside the Tokyu Group.

Independence from Tokyu Land Corporation, relaunch, and appointment of Noboru Goto as president In 1959, Keita Goto passed away. The same year, Noboru Goto was appointed president, and Tokyu Construction became independent from Tokyu Land Corporation.

Promotion of the Tama Garden City development (Joseinan area development) business The company began construction in 1960 on a land readjustment project at Nogawa First District (Nogawa, Miyame-ku, Kawasaki), authorized in 1959 on the basis of the Land Readjustment Act. Construction was completed in 1962. The formation of land readjustment councils for other districts gained momentum. As of 1965, 15 councils had been authorized, and the company started full-scale development of Tama Garden City. The company undertook all site preparation work, beginning construction with the Nogawa First District and continuing with work on four blocks. By the time work was completed in 1988, the company had prepared a site extending over 3,000ha.

Construction of the Izu Kyuko railway line The company took part in civil engineering work surrounding construction of the Izu Kyuko railway line (between Ito and Shimoda). The project provided Tokyu Construction with the opportunity to work alongside large construction companies and gain technical and operational expertise. In 1959, the Tokyu Group obtained the license for facilities on the Izu Kyuko railway line, and construction commenced in 1960. Tokyu Construction joined in this work, rush construction work was completed in 1961, and the line began operating between Ito and Shimoda.

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Increasing orders for private-sector construction projects The building construction division received an order from Nippon Kokan K. K. (NKK, its largest private-sector client) to build a plant within NKK’s Kawasaki factory for making electric resistance-welded tubes. This was followed by other private-sector orders, such as new construction of the Koyasu factory and the Tsurumi shipyard. Along with a growing track record, the projects boosted the expertise of the company’s young engineers.

Increase in orders for civil engineering work leading up to the 1964 Tokyo Olympics The company received an order for its first large public-sector civil engineering project from the Metropolitan Expressway Public Corporation, for the construction of Highway No. 4. Public sector orders then increased. The company received an order for roadbed construction near the Minemachi Chofu area around the Tokaido Shinkansen, as well as an order from the Japan Highway Public Corporation for road construction on the Setagaya section of the Daisan Keihin Road. Most of these large projects were related to the 1964 Tokyo Olympics.

In private-sector civil engineering projects, in 1966 the company completed construction on an extension of the Tokyu Den-en- toshi Line (Mizonokuchi to Nagatsuta).

Listing on the TSE (Second, and then First section) Tokyu Construction listed its shares on the Second Section of the Tokyo Stock Exchange in 1963. This listing moved to the First Section in 1967, following several rounds of capital increases.

Developing new construction methods In the field of civil engineering, the company developed the shield method. In 1965, it performed experimental construction using a hand-mined shield machine with an outside diameter of 3.3m, mainly for backfilling and emphasizing ground movements. Seeing the results of this test, the Yokohama Waterworks Bureau placed an order with the company to construct the Sueyoshi branch line sewerage tunnel. The company also received an order from the Tokyo Metropolitan Government Bureau of Sewerage for construction on the Tamagawa main line. These projects were Japan’s first full-fledged “bent bolt” shield construction projects using flat reinforced concrete segments.

The civil engineering department proposed the Tokyu Traveler Construction Method, which was used in the construction of a multilevel crossing between Nakameguro and Toritsudaigaku on the Tokyu Toyoko Line, which commenced in 1966. This development was groundbreaking in the sense that it took place above a 2.5km segment of track that had 16 level crossings (some of them on major streets such as Komazawa-dori), a dense residential area, and trains that were running on packed schedules.

In the area of construction technology, the company developed the Tokyu SM method and the PH prefabrication methods to mass-produce residential housing. The Tokyu PH Method, which required no beams, allowed homes to be built with a larger usable space in a living room than standard public housing. The use of this method grew, becoming a mainstay product category for the company.

Focus on orders for public works projects Tokyu Construction was a relative latecomer to the construction industry, and private-sector construction projects (particularly from within the Tokyu Group) accounted for a high percentage of revenue. The company believed expanding its public works projects was a pressing concern. Specifically, it aimed to gain large orders for the public works projects. Leveraging its technology for civil engineering work on railways and background in construction for Japan, the company focused on obtaining construction orders from Japan Highway Public Corporation, which was stepping up construction of a nationwide expressway network.

The company received orders from Japan Railway to build the Sugita Tunnel on the Negishi Line and for tunnel construction on the Ban-etsu West Line Tunnel. Based on its record on these projects, the company obtained an order to build the Ikuta Tunnel on the Musashino Minami Line. Thereafter, it received an order to build a viaduct near Fukuyama Station on the Sanyo

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Shinkansen line. As a result of these projects, by 1969 Japan Railway had upgraded its ranking of Tokyu Construction from C (in 1966) to A. The company’s ranking was also upgraded by Japan Highway Public Corporation as a result of its accumulated track record.

Growing private-sector construction projects In postwar Japan, high levels of economic led to a surge in domestic investment in construction. Domestic investment in construction continued to rise from JPY2.5tn in 1960 to JPY50.2bn in 1981, following the second oil crisis. In the early 1980s, fiscal austerity measures in Japan led to a decrease in public-sector projects, and domestic investment in construction slumped. However, measures to stimulate an economy affected by yen appreciation after 1984 and bubble economy expansion caused domestic investment in construction to surge, peaking at JPY84.0tn in 1992. Tokyu Construction’s revenue rose in tandem, and profit increased.

Sharp rise in orders and performance during Japan’s bubble economy In FY03/88, revenue and profit turned upward, with performance continuing to grow through FY03/92. In FY03/88, orders reached JPY371.4bn, and revenue from completed construction hit JPY317.8bn, both of which were historic highs.

In FY03/89, orders exceeded JPY400.0bn for the first time, including JPY100.0bn from companies in the Tokyu Group. Despite such issues a shortage of construction foremen, a tight supply of skilled workers, and soaring materials prices, the company maintained a recurring profit margin of 2.4%.

As the bubble economy continued to expand, in FY03/92 consolidated revenue came to JPY649.3bn, and recurring profit reached JPY23.7bn, hitting new highs.

Increase in overseas projects Tokyu Corporation established overseas subsidiaries in an effort to localize overseas operations. Major projects included interior construction on a Tokyu Department Store (Thailand), site preparation for the Mauna Lani Racquet Club (Hawaii), an aviation fuel storage facility (Thailand), construction of the Dao Kanong Bridge (Thailand), the Pacific Star Hotel (Republic of Nauru), construction work on Mauna Lani (Hawaii), the Waianae wastewater treatment plant (Hawaii), construction to expand and remodel the Hotel Le Lagon (Vanuatu), construction to expand the Bangkok International Airport (Thailand), and refurbishment on the Moana Hotel (Hawaii).

Bursting of Japan’s economic bubble and an ensuing drop in orders In FY03/93, orders fell 25.7% YoY, to JPY529.7bn, as domestic private-sector construction business fell off. The company ranked 10th among general contractors by revenue from completed construction. However, it ranked 15th in orders, reflecting a relative lack of competitiveness in the public works projects.

In FY03/94, orders rose YoY, exceeding JPY540.0bn. Revenue from completed construction was JY603.8bn and total revenue (including the Real Estate segment) came to JPY620.8bn, reaching new levels. Reflecting the company’s efforts to boost profitability on construction and curtail costs companywide, recurring profit grew 46.6% YoY, to JPY20.2bn. However, net income was approximately JPY0.9bn, due to a JPY19.9bn extraordinary loss in a provision of allowance for doubtful accounts. This figure stemmed from a total of JPY39.8bn in loan guarantees the company had made to financial institutions for the acquisition of land by Roppongi Kaihatsu, an Azabu Tatemono subsidiary conducting development work in the Roppongi area. The guarantee was made to help Tokyu Construction gain an order for this business.

As Roppongi Kaihatsu’s cashflow situation deteriorated, financial obligations called on Tokyu Construction to perform its guarantee obligation of subrogation, based on the agreement. The company took over the acquired land and buildings as payment in kind and booked an extraordinary loss of JPY19.9bn as the difference between fair value and the subrogated amount of JPY39.8bn.

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Crisis of business failure From 1996, as Japan’s economic bubble burst the company booked substantial losses and reached a state of management crisis. In FY03/98, orders reached JPY481.1bn (-5.3% YoY), and revenue from completed construction was JPY530.3bn (+3.5% YoY). However, GPM on completed construction projects deteriorated YoY, to 7.3%. In the Real Estate segment, revenue rose 0.3% YoY, to JPY614.3bn, owing to the sale of its hotel business to Numazu Tokyu Hotel and the sale of a leased building, Mizonokuchi Nocty Plaza, as well as to JPY11.8bn from the sale of land in the Shibuya 3-chome area. Due to falling stock prices, the company also posted a loss on the valuation of available-for-sale securities. Interest-bearing debt increased, and the company’s financial balance deteriorated. The recurring loss expanded JPY4.1bn YoY, to JPY11.5bn. Extraordinary losses came to JPY11.8bn, including a loss on valuation of investment securities and a provision of allowance for doubtful accounts for long-overdue accounts receivable. The net loss came to JPY22.8bn. On a consolidated basis, interest-bearing debt totaled JPY379.7bn, with shareholders’ equity of JPY37.7bn, and the debt/equity ratio rose to 10.1x.

Medium-term business plan and sharp downturn in the operating environment As the company was getting its accounts in order for FY03/98, in February 1998 it announced a medium-term business plan that outlined dramatic management reform. This plan, for the three-year period from FY03/99 to FY03/01, had five main pillars: 1) maintain orders and revenue from completed construction of JPY500.0bn during the period, 2) generate gross profit of JPY42.0bn and GPM of 8.4% by the plan’s final year, 3) raise funds by selling real estate and marketable securities and reduce interest-bearing debt by JPY70.0bn, 4) write off JPY18.0bn in bad debt from subsidiaries, overseas business, and construction costs, and 5) reduce personnel numbers by 800, including early retirement for 300 people, and cut operating costs to result in an SG&A expense ratio of 5.7% by the final year of the plan. As a result of these measures, the plan called for reducing the number of employees from 4,794 at the start of FY03/99 to 3,997 at the end of FY03/01.

However, the enactment of nine financial revitalization laws in 1998 led financial institutions to close off access to new loans for working capital in 2H of FY03/99. Tokyu Construction’s financial institutions called on the company to pledge additional collateral and increased loan interest rates. In response, the company issued commercial paper and secured funding from within the Tokyu Group. At the same time, it underwrote capital increases and expanded the financing of working capital at affiliated companies.

Despite these measures, private-sector construction investment fell further than the company had expected, and orders for construction work continued to decrease. At the same time, falling stock prices led to additional losses on the valuation of securities. The operating environment continued to deteriorate after the launch of the medium-term management plan, and the company was unable to progress with management reform measures as it had expected. With its corporate fundamentals worsening, credit with financial institutions decreased. Some financial institutions went above the heads of Tokyu Construction’s management team to directly discuss loan collections with Tokyu Corporation’s finance department.

Formulation of a management restructuring plan Amid this crisis situation, in December 1998, the company formulated a new management restructuring plan, having seven focuses: 1) shrink orders from the historical level of JPY500bn to JPY300bn, 2) further reduce personnel numbers, from nearly 5,000 to 2,800, 3) improve gross profit margin on new construction and lower SG&A expenses, 4) liquidate and withdraw from domestic subsidiaries and overseas business, 5) sell off owned real estate and otherwise revamp the real estate business, 6) reduce interest-bearing debt, and 7) expand capital through a third-party allotment.

The announcement of this plan coincided with the resignation of three executives, including President Tetsu Goto, who were executive directors, along with Yuhei Yagi, a director and company advisor. Kuniyoshi Ihara, the vice president of Tokyu Corporation (who had been serving as part-time director of Tokyu Construction since the previous June), was appointed as Tokyu Construction’s president and representative director, and management restructuring commenced.

Regeneration: Progress on improving the management structure In FY03/00, revenue fell to JPY433.7, while recurring profit turned positive, to JPY5.0bn. As revenue from completed construction decreased, the cost of revenue also fell. As a result, GPM on completed construction projects improved YoY, from 7.3% to 8.4%.

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The SG&A expense ratio also fell from 7.3% to 5.0%, as the company cut SG&A expenses. These costs reductions helped the company return to profitability.

In FY03/04, the company began reinforcing its management structure under a new medium-term business plan, dubbed the “new profit plan.” In April 2003, the company split off its building construction business and transferred it to a new company, TC Holdings Co., Ltd., established for this purpose. The former Tokyu Construction delisted and concentrated on liquidating the real estate business. In October 2003, TC Holdings changed its name to Tokyu Corporation, maintaining its TSE First Section listing, and relaunched with a focus on the building reconstruction business.

Bid rigging In the early 2000s, a number of collusive bidding issues came to light, becoming a major problem. The bidding system was revised, and the five super general contractors issued a “declaration of non-collusion,” and the construction industry body pledged compliance. In 2006, the management of Obayashi Corporation was implicated in allegations of collusion in relation to construction on the Nagoya Municipal Subway. A participant in a joint venture with Obayashi, Tokyu Construction was also subjected to a compulsory investigation by the Nagoya District Public Prosecutors Office. The company was also subjected to a compulsory investigation by the Osaka District Public Prosecutors Office in relation to the obstruction of competitive bidding on a project awarded by Wakayama Prefecture. The company also received business suspension orders and other administrative dispositions from MLIT in relation to construction orders placed by Fukushima Prefecture and the Defense Facilities Administration Agency. These incidents prompted Tokyu Construction and other construction companies to enhance their compliance systems.

Revival: Continuing to evolve as a general contractor Private-sector construction demand continued to be low throughout the 2008 global financial crisis, the election to power of the Democratic Party of Japan in 2009, and the Great East Japan Earthquake of 2011. However, after the earthquake the government launched reconstruction efforts, and the Liberal Democratic Party (LDP) returned to power. As a result, in 2012 domestic investment in construction began to recover.

In 2011, the company formulated its corporate vision for 2020, of being a “general contractor that continues to embody ‘shinka,’” (which translates roughly as “deepening and evolving in the pursuit of genuine value”), and it moved toward a new phase of growth. The Japanese economy entered a period of long-term recovery, and reconstruction and recovery demand emerged following the Great East Japan Earthquake. Domestic investment in construction surged in anticipation of the 2020 Tokyo Olympics.

After completing two medium-term management plans (FY03/13 to FY03/15, FY03/16 to FY03/18), in FY03/19 the company posted record-level operating profit of JPY22.0bn. Shareholders’ equity amounted to JPY92.6bn, and the equity ratio reached 35%.

News and topics March 2021 On March 25, 2021, the company announced a joint venture agreement with Spancrete Corporation to develop a new business for precast concrete products.

As an initiative to improve productivity at construction sites, the company is promoting the use of labor-saving precast concrete* components as well as front-end loading** through the adoption of Building Information Modeling (BIM). Spancrete manufactures and sells precast products in addition to perforated prestressed concrete (PC) boards. In October 2018, the two companies started trial production of precast products for Tokyu Construction at Spancrete’s Iwase Plant, and have established a production and shipping system. The two companies have now decided to establish a joint venture to manufacture and sell precast products.

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By combining Spancrete's manufacturing technology with Tokyu Construction’s design and construction technology in precast concrete, and its expertise in environmental technology, in areas such as collaboration between precast products and BIM, the aim of both companies is to digitalize their construction production systems and contribute to the realization of a carbon-free society.

*Precast concrete: Concrete components that are mass-produced in advance at the factory and assembled locally to make up standard walls. This standardized wall is also called a PC panel. **Front-end loading: Creation of a 3D architectural model with required attribute information at start of the design process; simulation and verification based on this information. Bringing the work load forward enables improved design quality from the start, with the design carefully reviewed and problems identified in advance.

On March 12, 2021, the company announced that it has formulated its corporate vision “Vision 2030.”

The company group has formulated a vision every 10 years since 2000. The company’s Vision 2020 of being “a general contractor that continues to embody ‘shinka’” (which translates roughly as “deepening and evolving in the pursuit of genuine value”) reached its final year, and so the company has formulated “Vision 2030,” its new vision looking toward 2030.

Reference: Vision 2020, to be “a general contractor that continues to embody ‘shinka’” (“deepening and evolving in the pursuit of genuine value”) “Deepening”: Elevating competence in the core business of construction contracting “Evolving”: Undertaking challenges, and producing results, in new areas of business outside of contracting “Genuine Value”: Continuing to contribute to society as a general contractor of genuine value

The company plans to release details of “Vision 2030” on its corporate website from the end of March 2021. The company also plans to announce the long-term management plan for achieving “Vision 2030” in May 2021.

November 2020 On November 9, 2020, the company announced that it had revised its earnings forecast.

On the same day, the company announced that it had resolved to acquire treasury stock.

On the same day, the company announced the fundamental thinking behind its Vision 2030 long-term management plan.

August 2020 On August 6, 2020, the company announced a partial revision to the target indicators outlined in its Shinka 2020 medium-term management plan for 2018‒2020.

Corporate governance and top management Top management Tsuneo Iizuka, chairman of the Board of Directors Born August 5, 1948. From Kanagawa Prefecture. Joined the company in 1971, following graduation from Waseda University’s Faculty of Science and Engineering. Appointed executive officer (October 2003), senior executive officer (June 2004), director and senior executive officer (June 2006), general manager of the Civil Engineering Division (April 2008), representative director and senior managing executive officer (June 2009), and representative director and president (April 2010). Appointed representative director and chairman in June 2018. Later assumed the office of chairman of the Board of Directors (current position) in June 2021.

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Mitsuhiro Terada, representative director, president Born March 1, 1957. From Shizuoka Prefecture. Graduated from the Faculty of Engineering at Tokushima University in March 1979 and joined the company in April that year. Appointed executive officer (June 2010), senior executive officer (April 2012), director and senior executive officer (June 2012), general manager of the Civil Engineering Division (April 2013), director and senior managing executive officer (April 2016), representative director and senior executive vice president (April 2018). Appointed representative director and president (current post) in June 2019.

Corporate governance The company employs a system of auditors. The Board of Directors includes outside directors, and the Board of Corporate Auditors includes outside auditors to supervise and audit the execution of business.

Form of organization and capital structure Company with Form of organization Audit & Supervisory Board Controlling shareholder and parent company None Directors and Audit & Supervisory Board members Number of directors under Articles of Incorporation 12 Number of directors 10 Directors' terms under Articles of Incorporation 1 (year) Chairman of the Board of Directors President Number of outside directors 4 Number of independent outside directors 4 Number of members of Audit & Supervisory Board under Articles of Incorporation 5 Number of members of Audit & Supervisory Board 5 Number of outside members of Audit & Supervisory Board 3 Number of independent outside members of Audit & Supervisory Board 3 Other Participation in electronic v oting platform Y es Providing convocation notice in English Yes Implementation of measures regarding director incentives Other Disclosure of individual director's compensation None Policy on determining amount of compensation and calculation methodology In place Corporate takeover defenses None Source: Shared Research based on company corporate governance report Note: Updated on June 25, 2021

As the company works to achieve Vision 2030, it has set forth the following policies to increase its directors’ effectiveness: 1) strengthening supervisory functions; 2) increasing ratio of independent directors; 3) promoting diversity; 4) improving independence and effectiveness of committees; and 5) reviewing compensation system.

The company aims to further separate the supervision and execution functions of the board of directors and continually enhance its supervisory function by improving its makeup and operation, with the following measures:

▷ Amply qualified independent outside directors to make up at least one-third of the board of directors

▷ The company will review the structure of the board of directors based on aspects including knowledge, experience, and ability (will disclose strategic skills matrix)

▷ The company will review deliberation methods and resolutions with the aim of efficient, high-quality discussions and decision- making

The company also aims to increase the transparency of the board of directors in relation to nominations and compensation by increasing the independence and effectiveness of the advisory committee with the following approach:

▷ Improve the effectiveness of the nomination and compensation committee by sharing human resources information and strengthening the involvement of independent outside directors

▷ Revise earnings indicators for executive compensation and link more closely to earnings to promote improvement in corporate value over the medium to long term

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▷ Improve the operation of succession planning and the system for fostering next-generation managers, taking into account diversity, to enhance effectiveness

Dividend policy

The company recognizes the importance of capital efficiency and is focused on providing stable and continuous shareholder returns that are not subject to short-term volatility in profits. It targets a dividend on equity ratio (DOE) of 4.0% or higher, while striking a balance between its medium- to long-term performance target of ROE of 10% or higher and dividend payout ratio of 40% or higher. In addition, the company will flexibly consider carrying out share repurchases.

For FY03/22, the company plans to pay an annual dividend of JPY40 per share (interim dividend of JPY20; year-end dividend of JPY20; DOE of 4.0%) after taking into consideration its new fundamental policy and earnings forecast.

Major shareholders

Shares held Shareholding Top shareholders ('000) ratio Tokyu Corporation 15,362 14.67% The Master Trust Bank of Japan, Ltd. (Trust account) 5,583 5.33% Mizuho Trust & Banking Co., Ltd. Taisei Corporation retirement benefits 4,000 3.82% trust account re-trust trustee Custody Bank of Japan, Ltd. Custody Bank of Japan, Ltd. (Sumitomo Mitsui Trust Bank, Ltd. Re-trust - 3,520 3.36% Tokyo Corporation retirement benefits trust account) Shimizu Corporation 3,000 2.86% Custody Bank of Japan, Ltd. (Trust account) 2,950 2.82% MSIP Client Securities 2,918 2.79% City Index Elevens Co., Ltd. 2,807 2.68% Morgan Stanley MUFG Securities Co., Ltd. 2,590 2.47% MUFG Bank, Ltd. 2,550 2.43% SUM 45,280 43.23% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods. As of end-March 2021

Employees

(no. of employees) FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 Consolidated 2,573 2,527 2,439 2,482 2,571 2,622 2,735 2,784 2,843 3,010 Construction 2,398 2,369 2,294 2,331 2,410 2,457 2,560 2,589 2,639 2,801 Real Estate 37404345474447495149 Company-wide 138 118 102 106 114 121 128 146 153 160 Parent 2,446 2,403 2,313 2,340 2,412 2,464 2,537 2,523 2,576 2,617 Average age 45.3 45.5 45.3 45.5 45.7 45.8 45.8 45.8 45.6 45.3 Avg. years of service 21.0 21.0 20.7 21.0 21.0 21.0 20.9 20.7 20.3 20.0 Avg. annual salary (JPY'000) 7,261 6,592 6,836 7,354 8,210 9,098 9,446 9,359 9,457 8,599 Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

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Profile

Company Name Head Office 1-16-14, Shibuya, Shibuya-ku, Tokyo Tokyu Construction Co., Ltd. 150-8340, Japan

Phone Listed On +81-3-5466-5061 the First Section of the Tokyo Stock Exchange Established Exchange Listing April 10, 2003 October 2003 Website Fiscal Year-End

https://www.tokyu-cnst.co.jp/en/ March IR Contact IR Web https://www.tokyu-cnst.co.jp/en/contact/ https://www.tokyu-cnst.co.jp/en/ir/

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