INTERTRADE Co., Ltd. (3747)
Takahiro Ozaki, President
Takahiro Ozaki,
Corporate Profile
Code No.
Mothers Market, TSE
Information, Communications
Takahiro Ozaki
HQ Address
Kayabacho First Building, 1-17-21 Shinkawa, Chuo-ku, Tokyo
Stock Information
Share Price Shares Outstanding (ex. Treasury Shares) Market Cap. ROE (actual) Trading Unit
¥229 7,185,600 shares ¥1.646 billion - 100 shares
DPS (Est.) Dividend Yield (Est.) EPS (Est.) PER (Est.) BPS (actual) PBR (actual)
¥3.00 1.3% ¥9.74 23.5x ¥292.28 0.8x
* Share price as of closing on November 26, 2014. Number of shares outstanding as of most recent quarter end, excluding treasury shares.
Consolidated Earnings Trends
Fiscal Year Sales Operating Profit Current Profit Net Profit EPS (¥) Dividend (¥)
September 2011 3,335 47 66 172 2,472.38 0.00
September 2012 2,811 -129 -104 7 106.66 300.00
September 2013 2,725 -98 -95 -128 -17.85 0.00
September 2014 2,463 -107 -103 -119 -16.67 3.00
September 2015 Est. 2,850 90 85 70 9.74 3.00
* Estimates are those of the Company. A 100 for 1 stock split was performed in April 2013.
This Bridge Report provides details of the fiscal year September 2014 earnings results, fiscal year September 2015 earnings estimates and other features of INTERTRADE Co., Ltd.
Key Points
Company Overview
INTERTRADE provides development and maintenance services for securities dealing, foreign exchange margin trading and other systems in its main "financial solutions business", develops group management packaged software and management support services based upon the stable earnings of the engineering dispatch services within its IT solutions business, manufacture and sales of health supplements and cosmetic products based upon sparassis crispa in the "health care business", and the complimentary proprietary fund management business within the financial solutions business.

The INTERTRADE Group is comprised of five consolidated subsidiaries. The Group includes BSJ Co., Ltd. (66.7% ownership) which provides management solutions primarily through its package called "GROUP CATS," Laboag Co., Ltd., (100% ownership) which manufactures and processes sparassis crispa, Kenko Plaza Pal Co. Ltd. (100% ownership), which conducts sales of sparassis crispa related products via catalog sales and the Internet, Beauty Glucan Co., Ltd. (Formerly called Z-Collection Co., Ltd., 100% ownership), which provides operations for cosmetic product targeting customers in their 20s over the Internet, and TRADEX Co., Ltd. (100% ownership), which conducts operations for proprietary fund management.
<Corporate History>
INTERTRADE was established in January 1999 by members who previously worked at Nihon Kangyo Kakumaru Securities (Currently Mizuho Investors Securities Co., Ltd.). The founding members started out by providing consulting services for front end systems based upon their experiences and later expanded their services into the development of packaged software for dealing and trading operations.

INTERTRADE became a pioneer in the dealing system packaged software business with the start of sales of "TradeOffice-SX," a packaged software system for securities companies' operations in September 2000. The Company has recorded rapid earnings growth due to the popularity of its packaged software systems, which are sought after by various securities companies seeking to bolster the deterioration in their earnings resulting from the deregulation of commissions accompanying the elimination of the trading floor operations and floor traders at the Tokyo Stock Exchange (TSE) in the end of April 1999. In March 2003, INTERTRADE leveraged its network technologies to widen its service menu and began providing an "information distribution service" (Distribution of market information for the TSE and other major exchanges), and in September 2004 INTERTRADE listed on the Mothers Section of the TSE. Thereafter, the Company has achieved strong business results in the realm of back office systems for securities companies (Client information and account reserves management systems) and middle office systems (Risk management systems to measure risks of contract positions) as securities companies have grown to increasingly favor total comprehensive solutions.

INTERTRADE fortified its packaged software lineup with the sales launch of the proprietary trading system "ITMonster" in January 2005, and the release of a foreign exchange margin trading system in August 2007. In April 2007, INTERTRADE acquired Bradea Co. Ltd., originally one of its competitors and the creator of a high performance and highly reliable trading system called "TIGER," to become a consolidated subsidiary (Merged into INTERTADE in October 2008) to expand its share of the front office systems market. In August 2008, a next generation securities dealing and trading system fusing the strengths of both INTERTRADE and Bradea called "TIGER Trading System" was released.

From 2012 onwards, efforts to diversify the Company's overall business have been implemented with the management solutions development company BSJ Co., Ltd. being turned into a subsidiary in October 2012, and the change of the subsidiary INTERTRADE Asset Management Co., Ltd. into Laboag Co., Ltd. for the development of the healthcare business (Previously known as the food service business). With the goal of securing sales channels for the healthcare business in 2013, Pal Co., Ltd. (Currently known as Kenko Plaza Pal Co., Ltd.) was turned into a subsidiary to provide catalog sales in February, and Z-Collection Co., Ltd. (Currently known as Beauty Glucan Co., Ltd.) was established in August to provide Internet sales.
Growth Strategy
The Market Integrating Open Platforms (MIOP) concept is being promoted with the financial solutions business, sales of the "GroupMAN@IT e2" management integration administrative solution packaged software and management support services in the IT solutions business, and original self-branded sparassis crispa related products sales in the healthcare business as the key elements in the strategy of fortifying and expanding INTERTRADE's earnings structure.
<Financial Solutions Business>
(1) Best Execution as the Key Word, Prospect and Other Revolutionary Solutions
The Ultimate Application of the MIOP Concept is "TIGER Trading Platform Prospect"
Efforts are being implemented to realize the Market Integrating Open Platforms (MIOP). The MIOP concept is a next generation platform and advanced and high value added services developed cooperatively by various market participants (Market operators, information vendors, financial institutions) that allows for borderless transactions of various financial instruments including "equities," "interest rates," "foreign exchange," and "commodities".

The MIOP concept that was announced at the end of 2010 calls for the dealing and trading systems to be provided to customers on an ASP basis in order to concentrate liquidity of securities companies. At the same time, INTERTRADE seeks to establish a huge financial community by introducing its "TIGER Trading System" on an ASP basis and has fortified its service lineup in recent years. Currently, development work to fortify the platform function of "TIGER Trading Platform Prospect" (Hereafter called Prospect) is being conducted with development expected to be completed during fiscal year March 2015 and the first user of this system has already been acquired. One of the unique features of "Prospect" is its interactive communication capability. For example, similar to how the Internet made interactive communication possible when only one way communication channels such as radio and television were the main media sources, the need to introduce interactive communication capability technologies and services used in Europe and North America is vital to increasing the operating efficiency of financial markets in Japan. This infrastructure is a service that allows for customized processing of orders in line with the requirements of the clients, and enables an approach to liquidity which has been hidden in recent years. Furthermore, the development costs of these types of specialized services had been extremely large, but the system has been designed to deliver quick responses to the various needs of customers through the restructuring and integration of infrastructure, standardization of orders and information categories and the provision of API. "Prospect" is a system that allows for the "creation of a virtual market that is based on an enormous network, and taps into hidden liquidity." In addition, INTERTRADE seeks to expand the range of its clients through mutual introductions, and by fortifying the service line up provided by "Prospect" and by aggressively promoting joint businesses with foreign and domestic partners that deal with the markets. Therefore, "Prospect" is not only implemented at securities companies but also at various other market participant companies that are seeking to increase their opportunities to expand their earnings.
"Prospect" Makes One Stop Access to Various Markets Possible
"Prospect" is an ASP service provided to major securities companies and other clients and can provide easy access to overseas securities exchanges through these clients who are users and business partners of "Prospect" to act as brokers. In addition to implementing measures to capture business for proprietary trading system (PTS) and other various off exchange transactions, this system provides access to markets for instruments other than "interest rates", "foreign exchange", "commodities" and "securities."

Some PTSs already allow for nighttime transactions, and will therefore allow for trading to be undertaken from home in the event that exchanges begin offering nighttime trading. Also, systems allow for the provision of text information on a real time basis, and connections with multiple information vendors have already been formed.
Contribute to Reduction in All Kinds of Transaction Costs
The main costs of transaction of securities companies include commissions paid to stock exchanges and the Japan Securities Depository Center, Inc., and ask and bid spreads. Amongst these cost factors, the most favorable ask to bid spreads can be chosen to reduce transaction costs by comparing the pricing of various exchanges and PTS systems. Prospect provides one stop access to a diverse range of markets through collaboration with business partners, and offers highly refined algorithms that allow for instantaneous selection of the most favorable pricing and ability to order, thereby reducing ask to bid spreads to a minimum. The system also provides functions to reduce transaction commissions and to avoid market impact costs to reduce execution costs associated with transactions and to provide support to realize best execution.

The operation of the new "Arrowhead" transaction system by the Tokyo Stock Exchange allows for high levels of speed, safety, and expansion capability combined with the increased liquidity offered by PTS to increase orders and contracts that go unseen by exchanges by allowing for favorable pricing of multiple PTS to be compared and selected for orders from the perspective of TCA. An updated system called "Arrowhead 2" is expected to be introduced by the Tokyo Stock Exchange in fall 2015 and will offer increased order response speed. Therefore, the renewal of the Arrowhead system will act as a large business opportunity.

Moreover, INTERTRADE expects to expand sales of MEX III, MSR III in response to the renewal of Arrowhead. MEX III, MSR III are simulation systems that allow for conditions within the market on a specific day to be simulated to validate the performance of algorithms. Inquiries with regards to these systems from foreign and other major securities companies have been received.
<IT Solutions Business>
During fiscal year September 2014, engineering dispatch services accounted for 72.6% of this segment's sales. But in fiscal year September 2015, INTERTRADE seeks to raise the sales ratio of packaged software developed in-house to 50% based upon the stable earnings of the engineer dispatch services, and profitability is expected to improve significantly.
Management Integration Administrative Solution "Group MAN@IT e2" Deployment
In addition to fortification of sales of the in-house developed group management solution "Group MAN@IT e2", support services provided to companies and support organizations of companies implementing this system will be cultivated.
"GroupMAN@IT e2" Sales
"GroupMAN@IT e2" (Hereafter referred to as "e2") is a packaged software system (Group management solution) that allows for visualization of the conditions of companies that are members of a group on a real time basis. This system also allows for uses in applications in corporate groups where different backbone and operating systems of differing vendors have been implemented. INTERTRADE seeks to book orders for four clients who are currently considering implementation of this system.
"Services" Concept for Support Centers
Along with packaged software sales, services provided to various organizations (Tax accountants, consultants, others) supporting corporations will also be implemented. Specifically, INTERTRADE will establish concentrated processing centers for companies implementing "e2" to quantify the client's management plans (Forecasts for profit and loss statements and balance sheets) on behalf of the clients to provide support in various tasks of the supporting organizations (Tax accountants and consultants that create internal control for small to medium sized companies, provide support for negotiations with financial institutions).
A characteristic of "e2" is its provision of various operating systems and collaborative functions for related data to be used by INTERTRADE's "e2" Center to come up with profit and loss, and balance sheet data, thereby reducing the burden of companies having to come up with their own forecasts for profit and losses and balance sheets for use in quantitative documents. These documents can then be used by tax accountants and consultants to provide management advice to companies.
Securing Stable Revenues from Engineer Dispatch
Strong demand for dispatched engineers allowed sales of engineer dispatch services to rise by over 20% during fiscal year September 2014. The "ability to dispatch engineers who match the needs of customers" is the key to this business. But efforts to promote facilitation of an order structure specifically targeting maintenance and operations have also shown success. Consequently this business is expected to trend strongly during fiscal year September 2015.
Sales Channel Expansion for "Gadics MAN@IT"
INTERTRADE's efforts to expand its sales channels through its sales partners have been successful with just under 900 units being implemented during fiscal year September 2014. Demand from small to medium sized companies is increasing, and the number of sales partners is expected to be expanded during fiscal year September 2015 by three times to 30. By expanding the provision of "Gadics MAN@IT", INTERTRADE seeks to establish the realm of virtual engineer services within Japan (Already an established realm in Europe and the United States).
<Healthcare Business>
In order to make large progress as an advanced scientific healthcare company, INTERTRADE will continue to gather scientific evidence as part of its efforts to fortify its lineup of original products developed in-house and to strengthen the earnings generation capability of this business.

Japan is currently confronting various societal issues including the aging of its society. The problem of growing medical expenses arising from the aging of its society is severe and strategies to resolve this problem are being implemented. The Government's loosening of functionality display restrictions for healthcare products is part of these strategies, and it reflects the adoption of the preventative medicine approach commonly used in Europe and North America. Preventative medicine refers to various efforts to maintain health and avoid disease. Scientific evidence and safety of functions need to be collateralized because of the reality that effective treatments usually carry negative side effects. Therefore, INTERTRADE implements clinical trials to confirm the safety of its products.

With regards to agents found to have effect in Europe and North America, the effectiveness of these agents is being tested to determine their influence upon humans. Furthermore, INTERTRADE has entered a stage where it is conducting scientific analysis to determine the active ingredient and how they work upon humans. Facilitation of data to prove the effectiveness of supplemental health foods in preventative medicine is being conducted as part of INTERTRADE's strategy of full-scale entry to the healthcare business in recent years. Consequently, INTERTRADE is conducting joint research with institutions that boast of superior medical technologies to analyze the relationship of disease with genetics. Thereby, the effectiveness can be experienced by customers and the contributions to preventative medicine of health foods and their functionality effectiveness needs to be displayed. Analysis to determine the active ingredient in sparassis crispa and propolis and their effectiveness are being conducted as part of the strategy to strengthen the development of products based upon these naturally occurring substances and entry to the realm of preventative medicine. Related products are expected to lead to the securing of both health and beauty and they will be sold in overseas markets in addition to Japan.
Evidence Acquisition, Pursuit of Scientific Evidence
The health maintenance promotion display thus far allowed only for pharmaceutical products is expected to be allowed for health foods as well, along with the implementation of the "functionality display deregulation" revisions expected to be implemented during fiscal year September 2015. Along with this revision, supplements and other products backed by scientific data are expected to receive the support of consumers. In light of these changes, INTERTRADE has acquired quality evidence certification (Scientific proof of the effectiveness of high quality powdered "LB-Scr" used in both products for health and through clinical trials performed on human subjects) through human clinical trials for "Long Life Sparassis Crispa", "Ultra Beauty Sparassis Crispa" and other numerous in-house developed products.

Furthermore, searches for the active ingredient in sparassis crispa at the cellular and molecular level to discover the mechanism that makes this product effective have been started in cooperation with Tokyo Women's Medical University and the National Institute of Advanced Industrial Science and Technology (AIST) as part of industry academia government collaborative research (IT- sparassis crispa project).

Quality evidence certification is a certification that is issued by "Aichi Health Information Center", which is an affiliated organization of the Aichi Medical Association. In light of the need for objective scientific evidence gathered through clinical trials of health foods that is easy to access, this certification provides verification that the appropriate clinical trial methodology and procedures have been used
Fortify Sales of High Profitability In-House Developed Health Foods, Cosmetics, and Cosmetic Raw Materials
During fiscal year September 2015, INTERTRADE is expected to release sparassis crispa seasonings for sale at mass retail stores and use in nursing care homes from March 2015. And with the goal of diffusing the INTERTRADE brand of healthcare products, sales of green propolis products manufactured in Brazil are expected to start in January 2015. With regards to sales of cosmetic raw materials to overseas markets, sales are also expected to be booked in the coming year as well as fiscal year September 2014. The largest cosmetics manufacturer in China is expected to become a client on the back of growth in demand sparked by the increase in income levels within China. INTERTRADE will sell cosmetic materials derived from sparassis crispa, which is known for its moisture retention characteristics that are superior to hyaluronic acid.

With regards to profits, INTERTRADE seeks to raise its gross income margins by 10% points by increasing the sales mix of high profitability in-house developed products. As part of this strategy, sales channels will be expanded to include major mass retail store operators and to overseas wholesale markets such as Dubai, in addition to its traditional channel of catalog sales.
IT Sparassis Crispa Project
The INTERTRADE Group is searching for the active ingredient of sparassis crispa at the cellular and molecular level in order to discover the mechanism that makes this product effective in cooperation with Tokyo Women's Medical University and the National Institute of Advanced Industrial Science and Technology (AIST) as part of industry academia government collaborative research. In the future, the Company expects to promote commercialization of health food, pharmaceutical and adjuvant pharmaceutical products (Immunopotentiating agent).

With regards to joint research, clinical trial data analysis is being conducted at the cellular and molecular level in order to discover the mechanism that makes this product effective in cooperation with Tokyo Women's Medical University along with other parties as part of industry academia government collaborative research. Incorporated administrative agencies are organizations that have been spun off from the government activities that are responsible for certain administrative and business tasks. The objective of spinning these organizations off from the government is to increase the transparency of their activities, establish autonomous management, improve efficiency, and invigorate tasks performed. In other words, incorporated administrative agencies are organizations that take on part of the government's activities and actually represent public policy itself. The participation of the government in this joint research reflects the fact that the Ministry of Economy, Trade and Industry has established a budget for this project.
Potential of Sparassis Crispa
Sparassis crispa is an unusual type of white mushroom that grows in regions over 1,000 meters in altitude and is rich with nutrients that are vital in maintaining health and food safety. It is well known for its effectiveness in treatments for various diseases, but is very difficult to obtain in nature. However, development of new cultivating technologies has made artificial cultivation of this rare mushroom possible.
When sparassis crispa grows in large numbers, the spores begin to appear and the taste and nutritional value deteriorates. Therefore, know-how and experience is required to ensure that the proper growth conditions are maintained and for the timing of the cultivation of mushrooms.
Sparassis crispa has been confirmed to have the highest levels of "β1-3D glucan" (About 30% on a dry substance basis) which has strong positive effect upon the immune function. Immunoactive agents (cytokine) are produced when immune system cells are stimulated, but the restraint of this function is also necessary to maintain normal health. Sparassis crispa has been found to contain bountiful amounts of this activating material (Compound amino acids) that are crucial in normal adjustment and restraint of this function, and it is believed to have synergistic action with "β1-3D glucan". However, there are many aspects of sparassis crispa that remain unexplained so further research will have to be conducted.
Sales of Brazilian Green Propolis Aged for 25 Years to Start
Sales of high quality Brazilian green propolis that is full of naturally occurring effective ingredients and extracted from rare aged propolis will be started in January 2015. This propolis product is taken from naturally occurring beehives in the forests of Brazil and not from artificial beehives.
Propolis Protecting Beehives from 42 Million Years Ago
Propolis is believed to be the key ingredient that has protected honey of bees from of 42 million years ago, long before man came into existence. Propolis is believed to be created by honey bees from protective constituents made by plants that they gather and then synthesize by the bees using enzymes to act as a natural antibacterial agent that gives propolis strong protective qualities.

This type of naturally occurring and aged Brazilian green propolis said to be especially high in quality is gathered from the large "killer bee" variety of bees found in Brazil (Western strain of African honey bees), and it has strong antibacterial and antivirus characteristics. The locals say that the greener the propolis is, the stronger its effectiveness.
Good Sources of Propolis Materials ~ Awarded "Gold Medal" by International Honey Bee Conference
INTERTRADE has taken on the task of development and research of Brazilian propolis that was first introduced in Japan by the Nakajima Natural Science Research Center and awarded with a "gold medal" at the International Honey Bee Conference held in Nagoya in 1985. INTERTRADE has taken on the task of using the high quality effective ingredient aged over long periods of time by Nakajima Natural Science Research Center, which has been recognized globally for its work on propolis.

At the same time, over-cultivation of beehives in the Brazilian wilderness has made it difficult to purchase high quality natural propolis. Therefore the propolis cultivated by INTERTRADE is expected to become even more valuable in the future.
Product Characteristics
Green propolis is refined through a long and detailed process from beehives in the state of Minas Gerais in Brazil. The resulting liquid concentrate is mixed with pollen essence to make it milder and diluted using alcohol in a ratio of 6 to 1 to produce the final product. This product is different from competing products in that it is higher in concentration, and has a very distinct flavor and smell. Because it is more concentrated, it is more effective in maintaining health.
Fiscal Year September 2014 Earnings Results
Operating Loss of ¥107 Million Incurred on Back of Large Contract Cancellation, Anticipatory Investment
Sales declined by 9.6% year-on-year to ¥2.463 billion. The full year contribution of Kenko Plaza Pal Co. Ltd., which was converted to a subsidiary from the second quarter in the previous fiscal year, allowed sales of the healthcare business to rise. However, the cancellation of a contract with a major client (Occurred in FY9/13) and the provision of main services on an ASP basis caused sales of the financial solutions business to decline. At the same time, the IT solutions business also saw lower sales due to the shift from consigned work to dispatched engineers.

An operating loss of ¥107 million was incurred (Compared with a loss of ¥98 million in the previous term). Improvements in profitability of the financial solutions business due to the provision of main services on an ASP basis and a reduction in loss making projects in the IT solutions business allowed cost of sales ratio to improve by 3.8% points and gross income to rise by 2.2% year-on-year. But the higher gross income was not enough to cover increases in research and development (¥113 to ¥146 million) and advertising expenses that caused sales, general and administrative expenses to rise.
In the financial solutions business segment, "TIGER Trading System" accounts for about three quarters of the entire segment's sales (Roughly two thirds on a consolidated basis). The ASP version of "TIGER Trading System", introduced with the goal of improving its competitive standing with regards to pricing and to improve operational efficiency, caused spot sales to decline and the cancellation of an ASP contract in the previous term caused ongoing sales of customer support services to decline. However, sales of licenses rose on the back of the introduction of ASP services. With regards to profits, the lower sales also contributed to a decline in profits. However, the shift to ASP services led to declines in dealing system operational tasks and maintenance fees for servers. At the same time, large declines in outsourcing, maintenance and labor expenses allowed profit margins to improve from 23.3% in the previous term to 24.9%.
IT Solution Sales Fall 21.1% yy to ¥164 Million, Operating Loss of Reduced to ¥95 Million from ¥131 Million in Previous Term
In response to the loss making consigned development projects for "GROUP CATS" management solutions undertaken by the subsidiary BSJ Co., Ltd. in the previous term, a switch to license sales of "GROUP CATS" was taken along with a shift from consigned development services to engineer dispatch services. Despite the influence of this decline in sales, the operating loss actually contracted from the previous term. In the future, INTERTRADE will focus its efforts upon expanding sales of management integration administrative solution "Group MAN@IT e2"and IT asset management (Virtual engineer) "Gadics MAN@IT".
Healthcare Sales Rise 85.8% yy to ¥180 Million, Operating Loss Rises to ¥231 from ¥186 in Previous Term
The full year contribution from Kenko Plaza Pal Co. Ltd., which conducts catalog and Internet sales and was turned into a subsidiary in February 2013, allowed healthcare business segment sales to rise. And while the full contribution has yet to be seen, sales of cosmetic raw materials to customers in Asian markets have begun to be booked. At the same time, sales of Kenko Plaza Pal Co. Ltd. fell below expectations due to the weak consumption trends in the wake of the consumption tax hike and delays in new product launches. Despite these factors, operating income remained in line with expectations and rose despite higher labor costs arising from staff fortification, research and development expenses for development of new in-house branded products, and advertising expenses.

Moreover, sales of new sparassis crispa related in-house develop branded products including "βeauty Glucan Cu!" cosmetics, "Long Life Sparassis Crispa" and "Ultra Beauty Sparassis Crispa" new series of health foods for which evidence quality certification has been acquired were started.
Inventories increased on the back of purchases of cosmetic and propolis materials (¥78 to ¥243 million), but interest bearing liabilities were reduced, allowing total assets to decline by ¥382 million from the end of the previous term to ¥2.748 billion at the end of the current term. INTERTRADE effectively maintains "0" debt, and has high levels of short term payment capabilities, which exceed the 100% safety level at 521%, and fixed asset ratio, which was significantly below the 100% safety level at 27%. Equity ratio stood at 76.4%.
Fiscal Year September 2015 Earnings Estimates
Seek to Secure Operating Income of ¥90 Million
The results of the efforts in the term just ended are expected to contribute to increases in sales of IT solutions and healthcare business segments. At the same time, the financial solutions business is expected to see improvements in profitability. With regards to profits, research and development and advertisement expense burden for the healthcare business segment are expected to contribute to a loss. However, this loss is expected to be offset by higher sales and profits of the financial solutions business, and the turn to profits of the IT solutions business to allow operating income to improve from a ¥107 million loss in the term just ended to a profit of ¥90 million in fiscal year September 2015. A dividend payment of ¥3 per share is expected to be paid at the term end.
(2) Strategies by Business Segment
By cultivating new clients and strengthening relationships with existing clients, INTERTRADE expects to raise ongoing sales of the financial solutions business by 10% year-on-year during the fourth quarter of the coming year. In addition to expansion of sales of "TIGER Trading Platform Prospect", efforts will also be implemented to acquire new clients and strengthen relationships with existing clients through fortification of Venue (Competitive market) and collaboration with partners for provision of new services (TCA service, liquidity information). Amidst the disappearance of the impact of the provision of ASP services upon year-on-year comparisons, the need for responses by securities companies to the introduction of a renewed version of Arrowhead system by the Tokyo Stock Exchange in September 2015 is expected to act as a tailwind for INTERTRADE.

Efforts will be made to raise high profitability packaged software sales to 50% of the IT solutions business sales, and to turn operating income to profits. Currently, INTERTRADE is conducting negotiations with four clients for the purchase of "GroupMAN@IT e2", and if successfully booked these sales will significantly boost earnings. At the same time, engineer dispatch, maintenance and operation services are also expected to grow. Efforts will also be made to expand the number of sales partners for IT operational administrative solution (Virtual engineer) "GadicsMAN@IT".

With regards to the healthcare business segment, expansion of sales of high profitability in-house developed branded products (Health foods, cosmetics) and development of direct sales channels is expected to lead to improvements in gross income margin. With a "new functionality display system for foods" expected to be introduced in the coming fiscal year, INTERTRADE is gathering scientific evidence. As an in-house developed branded product, sales of Brazilian green propolis will begin from January 2015, along with sales of sparassis crispa seasonings through mass retail shops and for use in nursing care homes from March 2015. Exports of cosmetic materials to overseas markets are also expected.
A characteristic of the MIOP concept is the ability to create a "win-win" relationship with partners within Japan and in overseas markets that are not only limited to securities companies; the concept allows for a wide range of customers to be cultivated. Because this business differs largely from the traditional businesses of INTERTRADE where relationships with securities companies are pursued, the potential of this new business is large. Increased awareness of the need to reduce transaction costs arising from recoveries of securities company earnings on the back of monetary easing and higher share prices, globalization of financial instrument transactions, and expansion of PTS transactions is expected to act as a tailwind for the promotion of the MIOP concept. Should INTERTRADE be able to grow its ongoing sales from the fourth quarter of the coming year by 10% year-on-year as expected, ongoing sales should contribute to stable earnings from fiscal year September 2016 onwards, and help to absorb anticipatory investments of the IT solutions and healthcare businesses and secure profits.

With regards to the healthcare business, the main near term issue is the securing of profitability of sales within Japan. However, growth in sales of cosmetic materials for use by cosmetic manufacturers in China over the midterm, and positive results from "IT Sparassis Crispa Project" over the long term are anticipated. With regards to the IT solutions business, INTERTRADE will endeavor to establish a structure
based upon both sales and services, and supported by packaged software to secure stability and high levels of profitability in its earnings. INTERTRADE maintains multiple business opportunities with strong growth potential. Efforts to cultivate these opportunities could lead to radical changes in the overall business of the Company. A key is for INTERTRADE to achieve its earnings estimates in the coming year as a reflection of the future growth potential of these various new business opportunities.
This report is intended solely for information purposes, and is not intended as a solicitation to invest in the shares of this company. The information and opinions contained within this report are based on data made publicly available by the Company, and comes from sources that we judge to be reliable. However we cannot guarantee the accuracy or completeness of the data. This report is not a guarantee of the accuracy, completeness or validity of said information and or opinions, nor do we bear any responsibility for the same. All rights pertaining to this report belong to Investment Bridge Co., Ltd., which may change the contents thereof at any time without prior notice. All investment decisions are the responsibility of the individual and should be made only after proper consideration.

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