■Future outlook for Nex Group ＜6634＞

Going forward, starting with “FORXAI” by Konica Minolta ＜4902＞, we will continue to acquire edge device certification for AI utilization platform services with AI software groups for each use case, AI software installation verification with AI development vendors, and advance operation-confirmed terminal certification for each telecommunications carrier, and support smooth introduction and utilization for customers with issues they want to solve with AI, and create business opportunities in various industries and business categories. Since real-time image recognition technology is expected to be deployed in various fields such as security fields such as face recognition systems and video analysis of surveillance cameras, defective product detection on factory lines, monitoring in the nursing care field, disaster prevention such as river water level monitoring, etc., and autonomous driving and driving assistance for automobiles, we believe there is a high possibility that it will contribute to future profit expansion.

As for data communication terminals, the 5G data terminal “UNX-05G” is sold. Carrier infrastructure development was later than expected in the 2023/11 fiscal year, but plans are currently underway to deploy base stations to 98% of Japan. Also, even in local 5G, where companies, local governments, etc. can be flexibly constructed in a spot manner limited to specific areas such as their respective sites, demonstrations have been carried out in various fields and industries, and efforts to make it applicable to small and medium-sized enterprises and small-scale projects, including cost and ease of use, etc. are accelerating.

Sales of existing LTE products will continue, and demand for switching from LTE products to 5G products is anticipated due to sales of new 5G products. Also, it has been decided that the 3G service “FOMA” provided by NTT DOCOMO will end and stop broadcasting on 2026/3/31. Since 3G lines continued to be used in most devices controlled using communication lines, companies in the M2M industry have reached a stage where it is necessary to replace devices called migration. We believe that demand for the transition to 4G and 5G lines will be a tailwind for the company's business. Priority has been given to the development of 5G infrastructure for smartphones, and there are no products available for IoT. While there are few similar terminals, it has a certain competitive advantage, and we believe that it will greatly contribute to future sales growth in the same business.

(3) Crypto assets/blockchain business

We will continue to work on the formation and value improvement of a token economy using NCXC. As an effort aimed at improving value, we will promote use in the GameFi field. Regarding the release of the “NCXC GameFi Platform,” the timing is estimated while closely monitoring the trends of each company providing content, such as the Tokyo Communications Group ＜7359＞, which is an alliance partner. GameFi is a rapidly growing market, but there are several issues. As for tokens used in existing GameFi, it is common to issue 1 token for 1 game. Therefore, when the boom is transient, there is a risk that the market for tokens themselves will collapse due to user withdrawal. Also, on the user side, there are many cases where it is necessary to purchase expensive NFTs when starting, and game companies also need to develop blockchain technology in addition to normal game development, issue their own tokens, and list them on crypto asset exchanges. The GameFi platform developed by the company is a policy to solve these problems and provide sustainable services for both users and game companies. Going forward, in parallel with the development of the same platform, we will also focus on developing alliances that provide game titles on the platform. In negotiations for alliances, there are many opinions that “I want to consider it after actually seeing the platform,” so it is expected that development will accelerate after the platform is released. Since increasing use cases and promoting distribution is an issue in improving the value of crypto assets, we believe that these efforts will contribute to expanding usage opportunities.

3. Our view

In the 2024/11 fiscal year, two new companies, KSP and Skeb, were added due to M&A.

KSP has a track record of over 30 years as a general trading company, and already has fixed sales and operating profit. There is also very little goodwill generated at the time of acquisition, and sales and operating profit directly contribute. Also, along with the establishment of a subsidiary, Mr. Komada Kazuo (Komada Kazuo), who is the representative director of KSP, took office as a director of the company. He has appropriate experience and business connections through over 30 years of company management. In addition to connections with listed companies, there is also a wide network with unlisted companies, and powerful information such as M&A and business alliances can be obtained. Furthermore, connections with companies that provide food and beverage services are also strong, and it is expected that this will lead to strengthening agricultural product sales in the company's agricultural ICT business.

The service growth rate of “Skeb” operated by Skeb is growing rapidly and the scale is expanding year by year. Current growth has not declined, and the cryptographic “skebcoin,” which was issued in 2022/9, was listed on Zaif in 2024/5. About 25 to 30% of users are overseas users, and since there are many Chinese users, a further increase in overseas users can be expected since payments using cryptographic assets are possible. Skeb has been acquired through a stock exchange, and the amount of goodwill is expected to be approximately 1,500 million yen. If the amortization period of goodwill is hypothetically 10 years, although there will be an impact on profit and loss due to amortization of about 150 million yen per year, the contribution amount to operating cash flow through the business is expected to be an appropriate amount. Also, since implementation of trade functions between NexCoin and Skebcoin issued by the company can also be considered as a possibility, we believe that synergy due to improved use cases of crypto assets can also be expected.

The financial results for the fiscal year ending 2023/5 of KSP alone are sales of 1,483 million yen (up 10.3% from the previous fiscal year), operating income of 72 million yen (down 14.3% from the same period), and the financial results for the fiscal year ending 2023/1 of Skeb alone are sales of 222 million yen (up 54.2% from the same period) and operating income of 43 million yen (up 330% from the same period), and since an impact on the company's full-year financial results is expected, we believe there is a possibility of an upward revision.

(Written by FISCO Guest Analyst Ryoji Mogi)