AI CROSS Inc. engages in the business communication platform business in Japan. The company is involved in the development and operation of messaging services; and planning, development, and operation of AI Analytics services. Its products include Zettai-Reach SMS, an SMS sending/receiving service for businesses; and HYOUMAN BOX that provides HR management service. The company was incorporated in 2015 and is based in Tokyo, Japan.

Japan

AI CROSS 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. 

4476.T reported revenue of JPY 3 706mn in the last 12 months, up 14% from FY23. The dynamics of cash flow, as measure by free cash flow (FCF), were rather similar. EPS fell 2% from FY23 to JPY 38.93.

Over the past six months, the stock has consistently climbed, resulting in 3% total increase. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Over the past six months the stock has exceeded the performance of this peer group by 3ppts and its growth decelerated by 2ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

The company has reported modest EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 9.5% in the last 12 months, up from 8.6% in FY23. 

Historically, 4476.T has reported modest net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 4.0%, down from 4.8% in FY23. 

AI CROSS Inc. reported a return on equity (RoE) of 8.8% in the last 12 months, down from 9.5% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 6.6% in the last 12 months, a decrease from 7.5% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to 8.8%, below the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 2.1 in the past several years. This ratio implies a strong 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.

4476.T has very poor trading liquidity. It will take at least a day or two for the average private investor to sell a common position under normal market conditions. Liquidity may be unstable and is average 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 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, bleak profitability, and poor working capital management.

In highly turbulent market conditions, 4476.T is as volatile as an index. In other words, the stock will move with 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 limited. 

In normal market circumstances, 4476.T is volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move much wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from limited to average. 

From both historical and forecast perspectives, the stock is considerably overpriced compared to similar stocks. Specifically, the stock is 'expensive' on P/E, neutral on EV/EBITD. 

AI CROSS Inc.

¥ 1764

3

AI CROSS Inc.

¥ 1764

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

¥ 1764

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