3683.T

• Company Overview & Business Model

  • Founded in 1964, headquartered in Wakayama City, with 903 employees including 2 subsidiaries, and operations nationwide. It started as an agent for Matsushita Communication Industrial, expanded into distribution retail and mobile network businesses, and launched the Trust business in 2021.
  • Its core business model is "Share Cloud", where multiple companies share a single cloud system to deliver low-cost, efficient services. This generates stable recurring (stock-type) revenue, which the company positions as its most important performance indicator. Share Cloud is not suitable for heavy customisation for unique company requirements, but delivers low-cost, always-updated, no dedicated operational staff benefits for standardisable business processes.
  • The company views the "death of SaaS" narrative driven by generative AI as not a major threat. Its core industry-specialised end-to-end services supporting complex business processes are not easily replaced by generative AI, and in-house operation/ maintenance by clients is economically and risk-wise irrational. The company will actively integrate generative AI to improve its own service competitiveness.
  • The company's 4 business segments are all focused on essential daily life sectors, creating a portfolio that is resilient to economic cycles.

• Segment Strategies

  • Distribution Cloud Business:
    • It is the only provider of specialised cloud services focused exclusively on the Japanese food distribution industry, with a deep industry position and unique moat. It focuses on food retail and food wholesale segments, with expansion into drug stores and home improvement stores already underway.
    • Core products include the core system @rms (new V6 version launched in 2024 targeting mid-to-large scale retailers), Sendoh Net (fresh food specific ordering system), @rms Automatic Ordering (AI-powered demand forecasting service launched 2024), and BXNOAH (processed food order data interchange with wholesalers).
    • Four product development priorities: 1) Integrate AI to automate decision-making and improve operational efficiency for clients; 2) Strengthen security and disaster resilience to add value; 3) Adopt open-source technology to offset rising software costs and maintain price competitiveness; 4) Use generative AI to improve in-house development productivity.
    • The C2Platform project works with the Japan Processed Food Wholesalers Association to standardise and automate end-to-end negotiations across the entire food supply chain from manufacturers to retailers, with adoption already underway at Life Corporation.
  • Government Cloud Business
    • Growth is driven by two pillars: growing national cloud services and stable local community-focused services. It holds an overwhelming share in Wakayama Prefecture and a strong base in surrounding Osaka and Nara.
    • ActiveCity, a digital document management and approval service, has exceeded 130 implementing public bodies, with growing large contract wins. The company acquired an AI technology firm to add AI-powered document search to the service, and there is large remaining growth potential across Japan's 1700 local governments.
    • Minna no Madoguchi is an online administrative procedure service that allows users to complete applications and consultations online via My Number Card, aligned with national digital government policy, and will add AI features to improve efficiency.
    • Local services include disaster prevention system construction, resident information management, and network infrastructure, focused on supporting safe daily life for local residents.
  • Trust Business
    • The market is shifting toward Web3.0, where users control their own data rather than relying on large platforms, and regulation is evolving to support this shift. Key required technologies are digital ID, verifiable digital certificates (VC), and eKYC advanced online identity verification.
    • The company holds relevant government certifications, has launched My Trust Power of Attorney and My Sign electronic contract services, acquired the blockchain-based CloudCerts digital certificate service, and is developing a national qualification examination system, building out the full technical foundation required for Web3.0 digital trust. It targets building a full end-to-end digital certification service infrastructure to serve as social infrastructure for Web3.0.
  • Mobile Network Business
    • The market faces long-term terminal sales decline due to population aging and shifting consumer behavior to online channels. The company targets evolving stores into daily life support centers that help local residents access digital convenience, while improving in-store operational productivity.

• Human Capital & Financial Strategy

  • Human Capital Strategy: The company recognises key challenges including long working hours, incomplete training systems, difficulty securing talent, and need for productivity improvement. It is working to improve working environments, training, recruiting, organisational activation, and personnel systems to build a work environment where all employees can work efficiently, healthily, and fulfilled.
  • Capital and Shareholder Return Strategy:
    • As of 2025, the company's PBR is 1.7x, which is below the Standard Market information and communications industry average of 2.6x; ROE is 15.3%, above industry average, and PER is 10.8x, well below industry average. 2030 targets are PBR of 2.2x+, ROE of 13.0%+, and PER of 17x+.
    • The company targets a 30% payout ratio, follows a progressive dividend policy, and targets increasing dividends from 17 yen to 30 yen per share for FY2025, 35 yen per share for FY2026, and over 60 yen per share by 2030, with incremental annual dividend increases aligned with profit growth.
    • Cash Allocation: Over the 5-year mid-term plan, operating cash flow is projected at ~14.0 billion yen (after deducting human capital and R&D spending). Approximately 5.2 billion yen will be allocated to growth investment including M&A, with a balance between capital efficiency and financial soundness to maximise corporate value.

• 2030 Full-Year Targets: 22.1 billion yen in net sales (+22.1% compared to FY2025), 12.6 billion yen in recurring revenue (+44.8% compared to FY2025), and 3.0 billion yen in ordinary profit (+61.5% compared to FY2025). All key metrics are planned for strong growth over the 5-year period from 2025 to 2030.
• Interim Profit Projection: Profit growth is planned for FY2026, but a temporary profit decline is projected for FY2027 due to the winding down of special demand projects in the Government Cloud business. Resumed growth is projected from 2028 onward driven by expansion of the Distribution Cloud, Government Cloud, and Trust businesses, leading to the 2030 target of 3.0 billion yen in ordinary profit.
• Valuation Targets: By 2030, the company targets PBR of 2.2x or higher, ROE of 13.0% or higher, and PER of 17x or higher.
• Dividend Guidance: The company maintains a progressive dividend policy with a target 30% payout ratio. It targets 30 yen per share for FY2025, 35 yen per share for FY2026, and over 60 yen per share by 2030, with gradual incremental increases between 2027 and 2029 aligned with profit growth.
• Distribution Cloud Growth Targets: The company targets increasing company share among processed food wholesalers with annual revenue over 10 billion yen to 75% by 2030, up from 55% in 2025, with total 5-year recurring revenue growth of 2.25 billion yen.

Current performance data was not fully disclosed in the transcript, but the 2025-2030 planned performance per segment is as follows:

1. Distribution Cloud Business: Currently accounts for approximately 30% of total company revenue. From 2025 to 2030, planned recurring revenue will increase by 2.25 billion yen, with ordinary profit projected to grow from 0.7 billion yen to 1.8 billion yen, and it will be the largest profit growth engine among the four business segments. It is the top growth driver for the company, with food retail small and medium-sized businesses contributing +1.32 billion yen in recurring revenue growth (the largest single segment growth), followed by +0.36 billion yen from specialty stores, +0.35 billion yen from wholesale, and +0.20 billion yen from industry-wide services. The company already holds approximately 15% share (by store count/company count) in the sub-30 billion yen annual revenue food retail market, 30% of all domestic food supermarkets use at least one of its services, and 8 out of the top 10 processed food wholesalers use its services. It targets growing to 75% company share among processed food wholesalers with over 10 billion yen annual revenue by 2030, up from 55% in 2025.
2. Government Cloud Business: Steady growth is projected, with national cloud services contributing +0.7 billion yen in recurring revenue growth from ActiveCity and +0.05 billion yen from Minna no Madoguchi over the 5-year period. It holds a dominant share in Wakayama Prefecture for local community-focused services, and ActiveCity has already grown to over 130 implementing local governments, with recurring revenue growing steadily.
3. Trust Business: It was operating at a deficit as of 2025, and the company plans to turn it into a high-margin profitable business by 2030. It has accumulated implementation track records including digital certification for TOEIC official certificates and pharmacist qualification certificates, and has secured a development contract for a national qualification examination system, but full market growth is still dependent on broader adoption of digital verification infrastructure.
4. Mobile Network Business: It currently operates NTT Docomo shops within Wakayama Prefecture as a secondary agency, and serves as a stable profit contributor. While the market environment is challenging, the company targets maintaining recurring revenue through operational efficiency improvements.

• Market size decline in food distribution driven by population contraction, particularly among small and medium-sized retailers, combined with severe labor shortages and rising operating costs that may pressure client demand for new services.
• Trust business growth is dependent on broader market adoption of end-to-end digital verification infrastructure. Currently, there are limited entities in Japan that provide verification services for verifiable digital certificates, and most early client demand is only for basic digitization of paper certificates rather than full verification, which limits near-term revenue growth.
• The mobile network business faces long-term structural headwinds including terminal sales volume decline driven by population aging and growing shift to online service procedures, which pressure revenue.
• The company's current stock valuation is below industry averages, and there is risk that failure to deliver expected growth could lead to further stock price weakness.
• Rising cybersecurity threats including ransomware attacks, and growing frequency of extreme disasters that could disrupt service operations.
• Industry-wide difficulty securing IT talent, which could create bottlenecks for planned business expansion if recruitment and retention targets are not met.

Q: Can you share the current share of the food distribution market, and how many potential target stores are available?

A: Currently, the company holds approximately 15% share by both store count and company count in the sub-30 billion yen annual revenue market.