Performance trend of CAICA DIGITAL <2315>
Looking back on the revenue since October 2016, the development projects for existing major SIers has generally performed well. The reason for the poor growth in revenue in October 2017 was due to the allocation of resources for the development and experimentation of blockchain technology. In October 2018, the company achieved significant revenue growth through consolidated effects such as Nex Solutions and e-warrant securities (Kaikei Securities). However, the October 2019 period was sluggish due to external factors and the exclusion of Nex Solutions from consolidation, as well as the impact of the spread of the novel coronavirus (hereafter referred to as the coronavirus pandemic) affecting the 2020 October period. Although the 2021 October period was affected by the exclusion of Quim, the consolidation of Kaikei Exchange Holdings (which added 6 months) ensured near stability. The October 2022 period achieved increased revenue due to the consolidation effect of Kaikei Exchange Holdings (adding the remaining 6 months) and growth in the IT service business. However, it fell below the planned target due to the confusion in the cryptocurrency market. The 2023 October period was also sluggish due to continued impact from the slump in the cryptocurrency market, despite the steady growth of the IT service business, which led to a sharp decline in the financial services business. However, the 2024 October period, which involved the transfer of three consolidated subsidiaries including Zaif and the restructuring of the financial service business, is expected to achieve increased revenue through the growth of the IT service business.
On the profit side, while the operating margin in October 2017 was at the level of 5.6%, the company has been recording operating losses since October 2018. In addition to advance costs for the future, such as development costs for the cryptocurrency exchange system and infrastructure improvement in the financial product trading business, profit has been squeezed due to the deterioration of trading income caused by the coronavirus pandemic in the October 2020 period. Operating losses have continued since October 2021 due to the downturn in the cryptocurrency-related business due to the declining market. As for ordinary profit, attention should be paid to the large fluctuations due to the effects of equity investment income and gains and losses on the sale of cryptocurrencies. In particular, the October 2018 period became a situation where the operating losses were greatly covered by gains on the sale of cryptocurrencies (JPY 915 million), but in the October 2019 period, the loss was further expanded due to the equity investment losses by FDAG. Since October 2022, operating losses have been recorded due to the slump in the cryptocurrency market. The October 2024 period is expected to achieve a significant improvement in profit and loss (turning to profit) due to the effects of the reorganization of the financial services business.
As for the financial situation, the total assets at the end of October 2018 exceeded JPY 10 billion due to aggressive M&A, and the scale exceeded JPY 100 billion by the end of October 2021 due to the consolidation of Kaikei Exchange Holdings, which owns Zaif. As for the capital adequacy ratio, although it remained at 21.7% at the end of October 2016, it has been improved by exercising subscription rights, increasing retained earnings, and implementing a third-party allotment of newly-issued shares in November 2017. In addition, the company achieved capital increase through the rights offering in 2020, and the capital adequacy ratio at the end of October 2020 improved significantly to 81.8%. However, as mentioned, the financial situation at the end of October 2021 underwent significant changes due to the consolidation of Kaikei Exchange Holdings, and the capital adequacy ratio also decreased to 10.3%. Nevertheless, the balance sheet is expected to be significantly compressed by the transfer of 3 consolidated subsidiaries including Zaif in the October 2023 period, and the capital adequacy ratio is expected to return to a level exceeding 70%.
(Written by Fisco Guest Analyst Ikuo Shibata)