FISCO Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥655M
• Operating Income: ¥19M
• Net Income: ¥15M
• EPS: ¥0.33

Income Statement

Balance Sheet

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 Q3 shows modest top-line growth and a return to positive earnings, but profitability remains thin and capital efficiency is weak. Revenue rose 5.2% YoY to 6.55, with gross profit of 3.10 implying a 47.3% gross margin. Operating income printed at 0.19, translating to an operating margin of roughly 2.9% on reported revenue. Ordinary income was 0.20 and net income was 0.15, equating to a net margin of 2.3% and ROE of 1.0% via the provided DuPont breakdown. Asset turnover is low at 0.216 and financial leverage is 2.03x, underscoring a balance sheet that is not overly levered but is not translating assets into sales efficiently. Non-operating income (0.03) contributed 18.4% of operating income, indicating some reliance on non-core items. The balance sheet shows cash and deposits of 2.03 and investment securities of 13.38, highlighting a sizable financial asset portfolio relative to operating assets. Liquidity is ample with a current ratio of 343%, and current liabilities are modest at 1.12, limiting near-term refinancing risk. However, retained earnings remain negative (-5.34), signaling accumulated deficits despite the current quarter’s profitability. Reported ROIC is 0.9%, well below the 5% warning threshold, flagging structural capital efficiency challenges. There are internal data inconsistencies in the profit bridge (e.g., gross profit, SG&A, operating income, and profit before tax do not fully reconcile), suggesting the presence of undisclosed other operating items or special items under JGAAP classification. The reported tax line (-1.59) and profit before tax (-4.29) do not reconcile to the net income figure, implying material special factors not disclosed in this snapshot; we rely on the stated NI and OI for performance assessment. Earnings quality cannot be evaluated fully as operating cash flow is unreported; thus, cash conversion is unknown. Forward-looking, the company must improve operating leverage (SG&A discipline) and asset productivity to lift ROIC and ROE. With liquidity comfortable but efficiency low, the near-term focus should be on normalizing margins and demonstrating sustainable profitability without reliance on non-operating items.

Profitability Analysis

ROE decomposition: ROE (1.0%) = Net Profit Margin (2.3%) × Asset Turnover (0.216) × Financial Leverage (2.03x). The largest drag is asset turnover at 0.216, indicating low sales generation from the asset base (notably, investment securities of 13.38 dominate noncurrent assets). Net margin at 2.3% is positive but thin, and the contribution from non-operating income (18.4% of operating income) suggests limited core margin strength. Business reason: a sizable portfolio of investment securities ties up capital while core operations generate modest revenue, and SG&A pressure relative to gross profit limits operating leverage. Sustainability: absent clear cost restructuring or revenue mix upgrades, the low asset turnover and thin margins appear structural rather than one-time. Concerning trends: SG&A (4.11) exceeds gross profit (3.10) on the face of reported lines, implying reliance on other operating items to close the gap; without detailed breakdown, this points to fragile core profitability and the need for tighter expense control.

Growth Assessment

Revenue growth of +5.2% YoY to 6.55 indicates modest topline momentum. Operating income of 0.19 and ordinary income of 0.20 suggest some incremental improvement, but the margin base is low. YoY margin expansion/compression cannot be quantified due to lack of prior margin disclosures; current gross margin stands at 47.3% and operating margin at ~2.9%. Profit quality is mixed: non-operating income represents 18.4% of operating income, highlighting non-core support. With investment securities comprising 13.38 of assets, earnings could be sensitive to valuation and income from financial holdings rather than pure operating growth. Outlook: sustaining growth will require improving monetization of the asset base (raising asset turnover) and capturing higher value-added revenue streams to expand operating margin. Near-term KPIs to confirm momentum include sequential operating margin improvement and any reduction in SG&A intensity versus revenue.

Financial Health

Liquidity is strong: current ratio 343% and quick ratio 343%; no warning on liquidity (both >1.0). Solvency is acceptable: liabilities/equity (D/E proxy) at 1.03x, below the 2.0 warning threshold. Maturity profile: current liabilities of 1.12 are well covered by current assets of 3.85, indicating low near-term refinancing risk; noncurrent liabilities (14.32) are sizable but matched by total assets of 30.36. Interest coverage is robust at 65.74x on the provided metric, suggesting minimal interest burden. Equity quality: retained earnings are negative (-5.34), implying accumulated losses and limited internal capital buffers despite total equity of 14.93. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

Operating cash flow is unreported; OCF/NI cannot be assessed, so cash conversion and accrual intensity are unknown. Free cash flow and capital expenditures are also unreported, preventing an evaluation of reinvestment needs versus internal cash generation. With non-operating income contributing 18.4% of operating income, there is a risk that accounting earnings are aided by items that may not translate to cash. Working capital signals are incomplete; current assets exceed current liabilities comfortably, but without period movements we cannot assess potential working capital pulls or timing effects. In sum, earnings quality cannot be validated; we need OCF and FCF to judge sustainability.

Dividend Sustainability

Dividend data (DPS, payout, total dividends) are unreported. With NI positive but small (0.15) and no OCF/FCF disclosure, dividend capacity cannot be assessed. The retained earnings deficit (-5.34) suggests limited historical capacity to fund distributions from accumulated profits. Policy outlook is unclear without guidance; any dividend would need to be modest and preferably covered by operating cash once disclosed.

Risk Assessment

Business Risks:

• Low asset turnover (0.216) indicating underutilization of the asset base and dependence on investment securities.
• Thin operating margin (~2.9%) with SG&A pressure versus gross profit.
• Earnings sensitivity to non-operating items (non-operating income at 18.4% of OI).
• Potential volatility from valuation or income fluctuations in investment securities (13.38 of assets).

Financial Risks:

• Retained earnings deficit (-5.34) limiting internal capital buffers.
• Large noncurrent liabilities (14.32) relative to equity (14.93), though liquidity is currently sound.
• Unreported operating cash flow obscures cash generation and coverage of obligations.

Key Concerns:

• Capital efficiency: ROIC at 0.9% is materially below the 5% warning threshold.
• Data inconsistencies in the income statement bridge (e.g., PBT -4.29 vs NI 0.15 and tax -1.59) suggest undisclosed special items; true underlying profitability may differ.
• Reliance on financial assets could mask core operating weakness if market conditions turn.

Investment Implications

Key Takeaways:

• Modest revenue growth (+5.2% YoY) but slim profitability (ROE 1.0%, operating margin ~2.9%).
• ROIC of 0.9% flags structural efficiency issues; asset-heavy balance sheet not translating into earnings.
• Liquidity strong (current ratio 343%), reducing near-term financial risk despite accumulated losses.
• Non-operating contributions meaningful; sustainability of earnings needs validation via cash flows.
• Negative retained earnings indicate a need for sustained profitability before contemplating distributions.

Metrics to Watch:

• Operating cash flow and FCF once disclosed (OCF/NI target >1.0).
• Operating margin progression and SG&A-to-sales ratio.
• Asset turnover improvement and monetization of investment securities.
• Composition and volatility of non-operating income.
• Resolution of income statement reconciliation items (special gains/losses and tax effects).

Relative Positioning: Within small-cap JGAAP peers, the company exhibits stronger liquidity but weaker capital efficiency and thinner margins, with a higher reliance on non-operating items and financial asset holdings relative to operating earnings.

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
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis