Main topics of No.1 <3562>

1. Active investment in growth areas through M&A (strategy)

On April 24, 2024, the company and Alexon incorporated OZ MODE, which handles SES business*1 and software development contracting, and IT Engineering*2 as subsidiaries, achieving entry into the SES business as a new venture. This is the first investment in new business areas in line with the medium-term management plan "Evolution 2027," aimed at entering growth areas. Furthermore, on October 11, 2024, S.I.T*3, which engages in the sale and lease of telephones, multifunction devices, and PCs, as well as communications consulting, was incorporated as a subsidiary, establishing a foothold for expansion into the Tohoku region.

*1 Abbreviation for System Engineering Service business. A service that provides engineers (technicians) necessary for the continuous operation of software and system development, maintenance, and operation for the required period.

*2 For the company overview of OZ MODE and IT Engineering, as well as the aims of M&A, refer to the previous FISCO corporate research report (published on May 28, 2024).

*3 S.I.T is based in Kitakami City, Iwate Prefecture, focusing on industrial clusters primarily in semiconductors and automobiles manufacturing. The company has similar products and sales methods, and currently carries few information security devices, meaning that quick wins from synergy effects through cross-selling can be expected. It is also intended to serve as a foothold for expansion into the previously vacant Tohoku and surrounding areas. In the most recent period (ending December 2023), revenue was 174 million yen with an operating profit of 10 million yen.

2. Strengthening the business foundation through business partnerships

(1) Business partnership with Hyper

On March 14, 2024, a capital and business alliance was established involving NDS, a subsidiary that provides corporate cloud operation and maintenance services "Digital Telus" and web solutions, and Hyper, which develops IT service businesses and Ascle agent businesses, accompanied by a third-party allocation of shares. There had been collaboration with Hyper before, but there was a consensus that further synergy creation could be expected, leading to this agreement. In particular, the "Digital Telus" and web solutions provided by NDS have a high affinity with the target medium-sized corporate sector (around 100 employees) that Hyper is aiming for, and there is a significant goal to develop a new customer base.

NDS allocated 3,000 shares of common stock to Hyper (the funding amount is 30 million yen). After this transaction, Hyper's shareholding in NDS will be 30% (while its own shareholding ratio is 65%).

(2) Collaboration with Something

As of September 6, 2024, a collaboration began with Something, a subsidiary of SAAF Holdings <1447>. Something aims for "transparency in the ground industry" and is conducting ground surveys, ground improvement works, and ground guarantees at 28 locations nationwide. Both parties have many customers in the construction-related sector, resulting in a high affinity in sales collaboration. Additionally, joint development of new services is also being considered.

(3) Business alliance with Digital Connect and Blue Tiger Consulting

On September 20, 2024, NDS signed a business alliance agreement with Digital Connect and Blue Tiger Consulting. The aim is to develop new business services by the four companies, including the aforementioned Hyper. Digital Connect provides consulting services targeting corporate clients in finance, manufacturing, and distribution sectors, including business strategies, digital strategies, project promotion, and talent development enhancement. Additionally, Blue Tiger Consulting specializes in ERP system implementation support and has a number of successful implementations as a partner of Oracle and Microsoft. NDS aims for new developments in the DX business, including the uncharted field of ERP system implementation services, focusing on technology cooperation, strengthening collaboration, and improving market competitiveness.

(Written by Fisco Guest Analyst Ikuo Shibata)