FinTech Global Incorporated FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥14.43B
• Operating Income: ¥3.41B
• Net Income: ¥1.84B
• EPS: ¥10.91

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Fintech Global Co., Ltd. (8789) delivered solid FY2025 Q4 consolidated results under JGAAP, with revenue of ¥14,432 million (+4.5% YoY) and operating income of ¥3,406 million (+32.5% YoY), indicating strong operating leverage. Gross profit of ¥7,356 million implies a high gross margin of roughly 51.0%, suggesting favorable mix and pricing discipline. Net income reached ¥2,121 million (+26.6% YoY), translating to a net margin of 14.7%, which is robust for a company with investment and project-related businesses. DuPont analysis shows ROE of 17.61% driven by a 14.70% net margin, asset turnover of 0.535, and financial leverage of 2.24x. ROA is approximately 7.9%, reflecting healthy profitability relative to the asset base. EBITDA was ¥3,849 million (26.7% margin), and interest coverage is strong at 21.1x, indicating ample buffer against financing costs. Liquidity metrics are solid: the current ratio is 159.6% and working capital stands at ¥5,239 million. Although the reported equity ratio is 0.0%, this appears to be a disclosure limitation; based on total equity of ¥12,042 million and total assets of ¥26,994 million, the calculated equity ratio is approximately 44.6%, suggesting a sound capital structure. Cash flow quality is a key watchpoint: operating cash flow was negative at -¥664 million and free cash flow was -¥2,254 million, implying earnings did not convert to cash during the period, likely due to working capital build or investment-led growth. Investing cash outflows of -¥1,590 million and positive financing cash flow of ¥3,130 million indicate growth funding via external capital. The effective tax rate shown as 0.0% is a data artifact; using reported taxes of ¥542 million vs. ordinary income of ¥3,242 million suggests a more realistic tax burden in the mid-teens (~16–17%), with post-tax net margin consistent with strong profitability. No dividend was paid (DPS ¥0, payout 0%)—consistent with reinvestment and liquidity preservation while FCF is negative. Overall, profitability momentum and operating leverage are positive, but sustainability depends on improving cash conversion and managing project and financing risks. Data limitations (notably equity ratio, cash balance, inventories, and share count reported as zero) constrain precision; analysis relies on available non-zero items and calculated ratios. The company appears to be executing well on margin expansion within an asset-heavy, relatively low-turnover model, supported by moderate leverage. Future performance will hinge on stabilizing working capital, maintaining high margins, and balancing investment with internal cash generation.

Profitability Analysis

ROE decomposition indicates: net profit margin 14.70% × asset turnover 0.535 × financial leverage 2.24 = ROE 17.61%, confirming high return on equity primarily driven by margins rather than asset velocity. Gross margin is elevated at 51.0%, implying strong unit economics and/or favorable sales mix, possibly from high-margin service, licensing, or project fees. Operating margin of 23.6% (¥3,406m / ¥14,432m) rose materially YoY given operating income growth of +32.5% vs. revenue +4.5%, demonstrating meaningful operating leverage. EBITDA margin of 26.7% shows healthy contribution before depreciation, with D&A of ¥443m representing modest capital cost burden relative to revenue. The spread between operating income (¥3,406m) and ordinary income (¥3,242m) reflects net non-operating costs (including interest expense of ¥161m), which are well-covered (interest coverage 21.1x). Effective tax implied by reported tax expense (~¥542m) suggests a mid- to high-teens rate on ordinary income, which supports sustainable after-tax profitability. Profitability quality is solid, but the negative OCF signals either working capital absorption or timing effects that temporarily depress cash yields on earnings. Overall, the company demonstrates strong margin quality with low asset turnover typical of asset-heavy or project-driven businesses; sustaining ROE will require maintaining margins while gradually improving turnover or optimizing the asset base.

Growth Assessment

Top-line growth was modest at +4.5% YoY to ¥14,432m, while operating income expanded +32.5%, pointing to mix improvements, cost control, or scale benefits. Net income grew +26.6%, trailing operating income growth due to non-operating costs and taxes yet still strong. The high gross margin (51.0%) and expanded operating margin suggest structural improvements rather than purely cyclical tailwinds. However, negative OCF (-¥664m) indicates growth has been investment- or working-capital-intensive, which could constrain future expansion if not offset by internal cash generation. Asset turnover at 0.535 is relatively low, hinting at an asset-intensive model; revenue sustainability depends on utilization and throughput of existing assets (e.g., facilities/projects) and maintaining high-yield projects. With financing inflows of ¥3,130m supporting investments (-¥1,590m), the company appears to be positioning for future growth, but the cash conversion of that growth will be critical. Profit quality remains high at the P&L level (strong margins), yet near-term growth outlook should be tempered by funding needs and working capital dynamics. Without segment disclosures, it is difficult to assess concentration risk, but project concentration and attendance/usage sensitivity (if applicable) are typical sector risks. Near-term outlook: stable-to-positive, contingent on maintaining margin gains and improving OCF as investments mature.

Financial Health

Liquidity is comfortable with a current ratio of 159.6% and working capital of ¥5,239m. Quick ratio equals current ratio due to inventories reported as zero (undisclosed), suggesting liquid current assets dominate. Solvency is sound: recalculated equity ratio is ~44.6% (¥12,042m equity / ¥26,994m assets), despite a reported 0.0% placeholder; leverage is moderate with debt-to-equity of ~0.82x (using total liabilities as a proxy due to lack of debt breakdown). Interest coverage is strong at 21.1x, indicating low near-term refinancing stress. Total liabilities of ¥9,917m vs. equity of ¥12,042m reflect a balanced capital structure. Positive financing cash flow (+¥3,130m) supported negative FCF, implying reliance on external capital during the period; this is manageable given leverage metrics but should normalize. Absence of reported cash and equivalents is a disclosure limitation, not an indication of zero cash; thus, precise short-term liquidity buffer cannot be verified.

Cash Flow Quality

Earnings quality is mixed: strong accrual profitability contrasts with weak cash conversion. Operating cash flow was -¥664m versus net income of ¥2,121m (OCF/NI = -0.31), implying material working capital outflows or timing differences. Free cash flow was -¥2,254m (OCF + investing CF), reflecting both operating outflows and investment spending of -¥1,590m. The positive financing CF of ¥3,130m funded the FCF deficit, indicating external capital dependence in the period. D&A of ¥443m vs. EBITDA of ¥3,849m suggests limited non-cash earnings inflation; the OCF shortfall likely stems from receivables, advances, or project inventory movements (details not disclosed). Sustainability improves if working capital normalizes and new investments begin contributing to cash. Monitoring OCF rebound relative to NI and the cadence of investing outlays will be critical.

Dividend Sustainability

The company paid no dividend (DPS ¥0; payout ratio 0%), which aligns with negative FCF (-¥2,254m) and a growth/investment phase. With OCF negative and investments ongoing, initiating or increasing dividends near term would reduce financial flexibility unless offset by stronger internal cash generation. FCF coverage of dividends is not applicable (0.00x reported), but on fundamentals current earnings are not cash-covered. Policy outlook likely favors reinvestment and balance sheet reinforcement over distributions until OCF turns sustainably positive and capex moderates.

Risk Assessment

Business Risks:

• Revenue concentration in specific projects/assets leading to utilization/attendance volatility
• Cyclical exposure to discretionary spending and capital markets for project monetization
• Execution risk on new investments with long payback periods
• Contract and regulatory risks tied to real assets and service operations
• Reputation and brand dependence if tied to destination or themed assets

Financial Risks:

• Negative operating cash flow and FCF requiring continued external funding
• Interest rate and refinancing risk if funding relies on variable-rate debt
• Working capital volatility affecting liquidity buffers
• Potential covenant constraints if leverage rises to fund growth
• Valuation and impairment risk on long-lived/project assets

Key Concerns:

• OCF/Net income of -0.31 indicates weak cash conversion
• Free cash flow of -¥2.254bn funded by +¥3.130bn financing inflow
• Low asset turnover (0.535) suggests dependence on high margins to sustain ROE
• Data limitations on cash balance, inventories, and share count hinder precision
• Reported equity ratio 0.0% conflicts with calculated ~44.6%, indicating disclosure gaps

Investment Implications

Key Takeaways:

• Strong margin-driven ROE (17.61%) with robust operating and EBITDA margins
• Operating leverage evident: operating income +32.5% vs. revenue +4.5%
• Sound solvency profile with calculated equity ratio ~44.6% and interest coverage 21.1x
• Cash generation is the main weak point: OCF -¥0.664bn and FCF -¥2.254bn
• Growth funded by external capital (+¥3.130bn financing), requiring careful balance sheet management

Metrics to Watch:

• Operating cash flow to net income conversion (>80% target over time)
• Working capital movements (receivables, advances, payables turnover)
• Capex and investing cash needs versus internal cash generation
• Interest-bearing debt levels, funding mix, and average cost of debt
• Asset turnover and utilization KPIs for major projects/assets
• Sustained gross and operating margins to support ROE

Relative Positioning: Versus small-cap Japanese asset-heavy/project-driven peers, the company exhibits above-average profitability and interest coverage with moderate leverage, but lags on cash conversion and asset turnover; near-term strength is margin-led while medium-term competitiveness hinges on improving OCF and capital efficiency.

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