Fantasista Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥9.42B
• Operating Income: ¥179M
• Net Income: ¥-453M
• EPS: ¥-1.56

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: FY2025 Q4 was a top-line growth but profit compression quarter, with positive free cash flow offset by a swing to net loss and weak returns. Revenue grew 7.0% YoY to 94.22, but operating income fell 74.5% YoY to 1.79, and net income declined to -2.64, indicating significant margin pressure. Gross profit was 15.58 (gross margin 16.5%), while SG&A of 13.79 (14.6% of revenue) absorbed most of the gross profit, leaving a thin operating margin of roughly 1.9%. Non-operating expenses of 2.35 materially exceeded non-operating income of 0.15, driving ordinary income to -0.41. Below ordinary income, further one-off or special losses (not itemized) pulled profit before tax down to -2.08 despite revenue growth. As a result, net margin printed at -2.8%, and DuPont ROE deteriorated to -4.2% on the back of margin weakness, even as asset turnover was a healthy 1.024 and financial leverage modest at 1.45x. Operating margin compressed materially: versus last year’s implied ~8.0% operating margin, the current ~1.9% indicates about 607 bp compression. Operating cash flow was strong at 24.62 versus a net loss of -2.64, producing an OCF/NI ratio of -9.33x (a quality flag due to directionality), and free cash flow was robust at 14.37 after -4.08 of capex. Liquidity is ample (current ratio 363.6%, cash 17.84 vs short-term loans 0.51), but earnings power is insufficient to comfortably cover interest (interest coverage 0.76x), highlighting an income statement weakness rather than a balance sheet one. Equity remains sizable at 63.51 despite accumulated deficits (retained earnings -49.37), supported by paid-in capital. ROIC is low at 3.3% (below the 5% warning threshold), underscoring that growth is not yet translating into value creation. The negative effective tax rate (-27.4%) stems from tax expense against a pre-tax loss, a further drag on bottom line. Financing cash outflows (-26.49) likely reflect debt repayments or other financing uses, tightening the cash bridge despite strong OCF. Forward-looking, the key to recovery is restoring operating margin by controlling SG&A and improving gross margin, while maintaining disciplined capex and preserving liquidity. Near-term earnings visibility is constrained absent a clearer breakdown of special losses and SG&A components. Overall, while cash generation and liquidity are strengths, margin repair and interest coverage must improve to re-rate returns and support sustainable shareholder returns.

Profitability Analysis

DuPont decomposition: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (-2.8%) × 1.024 × 1.45 ≈ -4.2%. The largest negative contributor is Net Profit Margin, which deteriorated sharply due to operating margin compression and higher non-operating expenses. Asset Turnover at 1.024 is reasonable and broadly stable for an asset-light model relative to total assets of 92.04; Financial Leverage at 1.45x is moderate and not the key driver of ROE volatility. Business drivers: gross margin of 16.5% left limited room after SG&A at 14.6% of revenue, squeezing operating margin to ~1.9%, while non-operating expenses (interest expense 2.35) overwhelmed non-operating income (0.15). The step-down from ordinary income (-0.41) to pre-tax (-2.08) suggests additional non-recurring or special costs below ordinary income, further depressing NPM. Sustainability: without explicit cost initiatives, the low operating margin appears at risk of persistence; however, given the strong OCF, some of the below-ordinary losses may be one-off. Watch for normalization of special losses and interest expenses to gauge durability. Concerning trends include: SG&A intensity (14.6% of sales) nearly absorbing gross profit, operating income down 74.5% YoY despite +7% sales, and interest coverage at 0.76x indicating earnings-based debt service strain.

Growth Assessment

Revenue grew 7.0% YoY to 94.22, indicating demand resilience, but profit growth was negative due to severe margin compression. Operating income fell to 1.79 (−74.5% YoY), and net income to −2.64 (−72.4% YoY), implying negative operating leverage. The implied operating margin decline from ~8.0% to ~1.9% reflects either pricing pressure, mix shift to lower-margin work, or cost inflation not offset by pricing, and higher SG&A burden. Non-operating headwinds (interest expense of 2.35) further limited ordinary profit. While cash generation was strong (OCF 24.62; FCF 14.37), translating revenue growth into sustainable profit will require margin restoration. Outlook hinges on: stabilizing gross margin, tightening SG&A, reducing financing costs, and avoiding special losses; otherwise, top-line gains may not convert to earnings. Given limited segment disclosure, revenue sustainability is assumed moderate, but profit quality remains weak until operating margin and interest coverage improve.

Financial Health

Liquidity is strong: current assets 74.79 vs current liabilities 20.57 yield a current ratio of 363.6% and quick ratio of 363.6%; no warning on liquidity (both >1.0). Cash and deposits of 17.84 comfortably exceed short-term loans of 0.51, indicating low near-term refinancing risk and limited maturity mismatch. Solvency appears conservative: total liabilities 28.52 against equity 63.51 (D/E ~0.45x) with long-term loans of 7.29; leverage is manageable. There is no explicit disclosure of off-balance sheet obligations; none are assumed, but lack of detail is a limitation. Despite healthy balance sheet metrics, income statement coverage is weak (interest coverage 0.76x), meaning earnings, not liquidity, is the primary constraint. No explicit warning thresholds triggered for current ratio (<1.0) or D/E (>2.0).

Cash Flow Quality

OCF/Net Income at -9.33x flags a divergence: strong operating cash inflow (24.62) despite a net loss (-2.64). This suggests substantial non-cash charges and/or working capital release. With accounts payable and receivable balances very small (0.01 and 0.25), the OCF driver may include collection of contract assets/advances or other working capital items not itemized; the precise driver is undisclosed. Free cash flow was solid at 14.37 after capex of -4.08, supporting balance sheet strength. Financing cash outflows of -26.49 likely relate to debt repayments or other financing uses; dividends were unreported. While cash conversion is strong this period, sustainability is uncertain given weak margins; watch for OCF normalization if working capital tailwinds reverse. No clear indications of aggressive working capital management from disclosed balances, but limited granularity constrains assessment.

Dividend Sustainability

Dividend disclosures are unreported; payout ratios are not calculable. Given negative net income and accumulated deficits (retained earnings -49.37), capacity for cash dividends appears constrained by profit base, despite positive FCF. Any dividend would need to be funded from cash/paid-in capital, which is generally unsustainable without earnings recovery. Policy outlook likely prioritizes reinvestment and balance sheet stability over distributions until profitability improves and ROE turns positive.

Risk Assessment

Business Risks:

• Margin compression risk: gross margin 16.5% vs SG&A 14.6% yields thin operating margin (~1.9%).
• Cost inflation or adverse mix risk reducing operating margin despite revenue growth.
• Execution risk on projects/contracts leading to below-ordinary one-off losses (PBT below ordinary by -1.67).
• Customer concentration or order timing risk (typical for small-cap project-based businesses; not disclosed).

Financial Risks:

• Interest coverage weakness at 0.76x, exposing the company to financing cost shocks.
• Low ROIC at 3.3% (<5% threshold) indicating under-earning relative to capital employed.
• Potential OCF volatility if working capital tailwinds reverse.
• Accumulated deficits (retained earnings -49.37) limiting distribution capacity and financial flexibility.

Key Concerns:

• Sustained operating margin compression (implied -607 bp YoY).
• Non-operating expense burden (interest expense 2.35 exceeding non-op income 0.15).
• Negative effective tax rate (-27.4%), suggesting tax burden despite losses.
• Data limitations (lack of SG&A breakdown, special loss details) impede root-cause analysis.

Investment Implications

Key Takeaways:

• Top-line grew 7% but operating income fell 74.5% YoY, indicating negative operating leverage.
• Operating margin compressed to ~1.9% from an implied 8.0% last year (-607 bp).
• Ordinary income turned negative due to non-operating expense burden; PBT further weakened by special items.
• OCF was strong (24.62) and FCF positive (14.37), supporting liquidity despite losses.
• Balance sheet is liquid (current ratio 3.6x) with moderate leverage (D/E 0.45x), but earnings-based coverage is weak (0.76x).
• ROE -4.2% and ROIC 3.3% highlight value creation shortfall.

Metrics to Watch:

• Gross margin and SG&A ratio trends (target: OPM >5%).
• Interest expense and interest coverage (>2x near term, >5x medium term).
• Below-ordinary items and special losses bridging ordinary income to PBT.
• Working capital movements and OCF sustainability (OCF/NI >1.0).
• ROIC trajectory toward >5% initially and >7% longer term.
• Capex discipline and financing cash flows (debt repayments vs new borrowings).

Relative Positioning: Relative to domestic small-cap peers in project-based sectors, the company shows stronger liquidity and positive FCF this period but lags on profitability and capital efficiency, with subpar ROIC/ROE and inadequate interest coverage; margin normalization is necessary to improve its standing.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
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