Brains Technology, Inc., an enterprise AI software company, develops and provides data search and data analysis products and services using AI and machine learning. It offers Impulse, an anomaly detection solution; Neuron ES, an enterprise search engine; and Neuron Smart Repository, a file server visualization solution. The company was incorporated in 2008 and is based in Tokyo, Japan.

Japan

Brains Technology, Inc.

Technology

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

4075.T reported revenue of JPY 1 005mn in the last 12 months, down 5% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 61% from FY23 to JPY 8.75. Market expects EPS to reach JPY 18.30 in FY25.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). It has underperformed this peer group by 6ppts over six months and grown 7ppts faster in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported good EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 23.5% in the last 12 months, a decline from 30.9% in FY23. 

Historically, 4075.T has reported modest net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 2.8%, down from 15.3% in FY23. 

Brains Technology, Inc. reported a return on equity (RoE) of 2.0% in the last 12 months, up from 2.0% in FY24. The market consensus projects an RoE of 2.5% in FY25, again behind its peers. 

In the last 12 months, the return on capital employed (RoCE) grew to 2.0%, below the peers. The consensus estimate for FY25 for RoCE is 3.8%, again behind the peers. 

Another important profitability metric, return on assets (RoA), amounted to 1.7% in the last 12 months, an increase from 1.7% in FY24. The market analysts predict that RoA will be 2.1% in FY25, again weaker than its peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.6 in the past several years. This ratio implies a weak shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

4075.T has very poor trading liquidity. It will take considerable time for the average private investor to sell a common position under normal market conditions. Liquidity is unstable and is somewhat unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. The stock has a tiny market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note robust profitability, strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, slow historical revenue growth, and negligible return on capital.

In highly turbulent market conditions, 4075.T is highly volatile. In other words, the stock will fall substantially more than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be significant. 

In normal market circumstances, 4075.T is exceptionally volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change quite unpredictably. The stock's losses on its worst days (less than 1-5% of the time) will range from critical to immense. 

From both historical and forecast perspectives, the stock is slightly overpriced compared to similar stocks. In particular, the stock is overpriced on P/E, of fair value on EV/EBITD. 

Brains Technology, Inc.

¥ 645

2

Brains Technology, Inc.

¥ 645

2

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

¥ 645

About

About

About

About