INTERTRADE Co., Ltd. (3747)
Takahiro Ozaki, President
Takahiro Ozaki,
Corporate Profile
Code No.
TSE, Second Section
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
¥232 7,185,600 shares ¥1.667 billion - 100 shares
DPS (Est.) Dividend Yield (Est.) EPS (Est.) PER (Est.) BPS (actual) PBR (actual)
¥0.00 0.0% ¥9.74 23.8x ¥244.50 0.9x
* Share price as of closing on December 3, 2015. 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 2012 2,811 -129 -104 7 106.66 300.00
September 2013 2,725 -98 -95 -128 - 0.00
September 2014 2,463 -107 -103 -119 -16.67 3.00
September 2015 2,459 -165 -164 -331 -46.08 0.00
September 2016 Est. 2,500 90 85 70 9.74 0.00
* Estimates are those of the Company. From the current fiscal year, the definition for net profit has been changed to net profit attributable to parent company shareholders (Abbreviated as parent net profit).
This Bridge Report provides details of the fiscal year September 2015 earnings results 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 provides management and information technology support services based upon the stable earnings of the engineering dispatch services within its business solutions business (Previously called the IT solutions business), manufacture and sales of health supplements and cosmetic products based upon sparassis crispa in the healthcare business, and the complimentary proprietary fund management business within the financial solutions business.

As of November 1, 2015, the INTERTRADE Group consists of the Company itself and its four consolidated subsidiaries: 1) BSJ Co., Ltd. (66.7% ownership) which provides management solutions primarily through its packaged software, 2) Laboag Co., Ltd., (100% ownership) which manufactures and processes sparassis crispa, 3) Kenko Plaza Pal Co. Ltd. (100% ownership), which conducts sales of sparassis crispa related product sales via the Internet/catalog mail order, and 4) TRADEX Co., Ltd. (100% ownership), which conducts operations for proprietary fund management. Beauty Glucan Co., Ltd., which provides operations for cosmetic products targeting customers in their 20s sold over the Internet, was absorbed by Kenko Plaza Pal.
<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, 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 September 2004, INTERTRADE listed on the Mothers Section of the TSE. Thereafter, the Company 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 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 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) for which demand is expected to grow given the underlying trend for aging of the Japanese society. 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 2013.
Growth Strategy
The updated "TIGER Trading Platform Prospect" began operating from October 2015, with efforts to expand sales to major Japanese and foreign securities companies being implemented in the financial solutions business. At the same time, a three-pronged strategy including engineer dispatch, support center and packaged product service provision was conducted to create a stable earnings foundation in the business solutions business. Moreover, joint research based upon scientific evidence for sparassis crispa was conducted along with efforts to expand sales of original sparassis crispa products in the healthcare business.
<Financial Solutions Business>
"TIGER Trading Platform Prospect"
Efforts have been implemented since 2010 to realize the MIOP concept (Which calls for market operators, information vendors, and financial institutions to conduct common services on an integrated platform that allows for "one stop" transactions of "equities", "interest rates", "foreign exchange", "commodities" and other financial instruments) as a common platform in the "TIGER Trading Platform Prospect" ("Prospect" hereafter) which began operating from October 2015. "Prospect" is provided as an ASP service to connect proprietary trading systems (PTS) with domestic stock exchanges over high speed processing servers and high capacity communication lines. Moreover, "Prospect" is designed to link business partners through contracts in place of domestic stock exchanges and PTS to allow partnering major securities companies and foreign exchange brokers to enable transactions of securities, foreign exchange, and commodities.

The main costs of transaction of securities companies include commissions paid to stock exchanges and the Japan Securities Depository Center, Inc., and pricing spreads between the different exchanges (Including PTS). Amongst these cost factors, the most favorable pricing spreads can be chosen to minimize 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 bid-ask 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 provide best execution.
"One Stop" Comprehensive Services and Cost Reduction Capabilities Leveraged to Cultivate Customers
In order to expand earnings, the ability to increase in transactions of existing customers, to diversify financial instruments (Bonds, foreign exchange, etc. in addition to shares) and to cultivate new clients is necessary. A point of appeal for this is the ability to access multiple markets (Financial instruments) in collaboration with business partners through a "one stop" comprehensive service which provides highly optimized algorithms that reduce transaction costs. While INTERTRADE will naturally cultivate new clients on its own, the existence of business partners will be an effective support (referrals of customers, etc.).
"Prospect" is highly regarded by major securities companies in and outside Japan due to its superior built-in functions, such as the Order Management System (OMS) for processing buy or sell orders, etc.; the Algorithmic Trading Method, which is part of the OMS functions for automated computer trading; the Smart Order Routing (SOR), which is function allowing for selecting the best price from multiple markets; and the Liquidity Analyzer functions. Each of these functions will be sold on custom configurations in fiscal year September 2017 or later.
Improvement in Profitability, Expansion of Sales
During fiscal year September 2016, the Company expects to see sales on a par with those in fiscal year September 2015 and improvement in profitability, through efforts including stable operations of "Prospect," in-house manufacturing of middleware system used for communication control, and strengthened sales of exchange terminal "J1." With regards to middleware, INTERTRADE thus far used third-party products, but in-house manufacturing of middleware would achieve both improvement in performance and cost reduction. Furthermore, integrated development of middleware can significantly reduce failures that are difficult to analyze (Many of the troubles in the past arose from defects in middleware, and resolving these defects cost a lot of time because the faulty parts were not in-house products). In addition, potential sales of exchange terminal "J1" could result from the upgrade of the "J-GATE" derivative system for the Osaka Securities Exchange expected to take place in mid 2016, and the creation of applications of "J1" that has been configured for the Tokyo Commodity Exchange (TOCOM) is expected to lead to other new sales opportunities. While integrated systems for securities, foreign exchange and commodities are common in overseas markets, there are very few integrated systems on the market within Japan. "Prospect" is an integrated platform that allows for a wide range of trades with a view to global trends.

During fiscal year September 2017, INTERTRADE is also aiming to expand its earnings by developing components for major Japanese and foreign securities companies, who are its business partners. Sales of customized components that are highly advanced and flexible to introduce is expected to contribute to increases in value addition per client company when compared with traditional packaged products.
"Business Solutions Business (Formerly known as the IT Solutions Business)"
The business solution business provides general corporate services, and its three pillars are: 1) engineer dispatch service (SES), which mainly provides maintenance and operations, 2) management support center services, and 3) INTERTRADE's own in-house packaged products including "GroupMAN@IT e2" ("e2" hereafter) and "Gadics MAN@IT" ("Gadics" hereafter). The engineer dispatch service boasts of strengths in securities dealing systems, which require high levels of reliability, and experience in development and operations of foreign exchange margin trading system. Furthermore, business is being promoted by selectively choosing design and structure projects.

Packaged services are provided mainly in the forms of the integrated management solutions "e2" and the operation management support system "Gadics". "e2" is a management analysis packaged software (System infrastructure that proactively supports management), that is facilitated with the highly flexible interface "FLEX I/Oc that allows for data coordination within the same company and between systems serving different vendors, and data coordination between a subsidiary and the parent company when the two parties use different systems (INTERTRADE "FLEX I/O" technology leverages the ability to exchange information on securities transactions.). Companies often introduce multiple operational systems for accounting, human resources, payroll, marketing management, and other tasks, and in many instances each system is sold by a different vendor. Furthermore, the systems used for similar tasks of the parent company and subsidiaries are often different, which means there is no way to integrally control management information within a company or corporate group. That's why many companies invest a great amount in constructing a separate system for coordination. However, "e2" is provided as a packaged system, which allows cost reduction and a shortened introductory period. "Gadics", on the other hand, is not offered as a function. Instead, it provides automated security solutions, which were duties of a system administrator up to now. It also provides automated support for management of personal computers, etc. at low cost on a cloud basis for the four functions of "collection", "decision making", "implementation" and "confirmation." Along with the introduction of the "My Number" Social Security and Tax Number System in 2016, "Gadics" also can be used as technological security measure to protect "My Number" information.

Various support services are provided for package vendors, products, and peripheral businesses within the support services. The "e2" integrated management supervision solution is a comprehensive management system that can be coordinated with various supervisory systems. And other projects besides "e2" may appear due to the increase in contact with package vendors selling management systems and companies introducing these systems. Currently Super Stream (The accounting system of Super Stream Co., Ltd.) transition, corporate support and training support services are provided. The leveraging of "e2"management analysis function for management analysis data creation has contributed to an increase in the number of inquiries for projects that seek to leverage the knowhow and technological expertise gained through INTERTRADE's support center operations.
Along with the fortification of services provided, the business segment name has been changed from IT solutions business to business solutions business. Along with this change, INTERTRADE seeks to provide optimized solutions that meet more rigorous business standards.
<Healthcare Business>
Scientific evidence of the effective ingredient extracted from sparassis crispa, upon which great expectations have been placed within the healthcare business, is being acquired in an effort to expand sales of original products using the effective ingredient from sparassis crispa. Currently, efforts are being made to cultivate sales channels, overseas sales, ambassador shops, and medical institutions along with joint research on the physiological activity of the active ingredient in sparassis crispa promoted by the National Research and Development Agency National Institute of Advanced Industrial Science and Technology ("AIST" hereafter) and the Tokyo Women's Medical University ("TWMU" hereafter). In addition, the beauty realm (Cosmetics products and raw materials) will also be developed as health and beauty go hand in hand.
IT Sparassis Crispa Project (Joint Research conducted by AIST and TWMU)
The search for the active ingredient of sparassis crispa at the cellular and molecular level to discover the mechanism that makes this ingredient effective is being promoted in cooperation with TWMU and AIST as part of industry-academia-government collaborative research. With regards to joint research, TWMU takes charge of clinical trial data analysis, AIST shares the role of search and component analysis on the cellular and genetic level, and the INTERTRADE Group is responsible for commercialization of sparassis crispa as well as data collection and analysis. A National Research and Development Agency, by the way, is an organization with independent legal personality and is responsible for certain administrative and business tasks that have been spun off from the government activities. The objective of separating these organizations 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.
Fiscal Year September 2015 Earnings Results
Sales Decline by 0.2%, Operating Loss of ¥165 Million Incurred
Sales declined by 0.2% year-on-year to ¥2.459 billion. Cultivation of new clients contributed to an increase in the total number of clients, but cancelation of contracts contributed to 5.6% year-on-year decline in sales of the financial solutions business. At the same time, the IT solutions business recorded a strong 67.0% year-on-year increase in sales on the back of strong demand for support center services in the realm of management and IT supervisory tasks, and strong sales of in-house branded products allowed sales of the healthcare business to rise by 2.4% year-on-year.

With regards to profits, gross profit margin improved by 2.9% points year-on-year on the back of absorption of inventory valuation losses, infrastructure expenses and collaborating company expenses by cost reduction efforts. However, increases in research and development expenses (From ¥146 to ¥324 million) contributed to an expansion in the operating loss. Valuation losses of inventories and investment securities, and impairment loss of noncurrent assets contributed to the booking of an extraordinary loss of ¥153 million, and a net loss of ¥331 million.
In addition, sales can be divided into the three categories: 1) spot sales derived from new introductions of systems, 2) ongoing sales derived from fixed monthly fees for ASP, and 3) maintenance services, and sales derived from the healthcare business. Spot sales rose by 18.5% year-on-year to ¥564 million, while ongoing sales declined by 5.3% year-on-year to ¥1.710 billon.
The cost reduction efforts have actually been successful given that operating expenses would have declined by about 7% from ¥2.736 to ¥2.538 billion excluding the large influence of valuation changes in inventories. At the same time, research and development expenses including labor costs rose from ¥146 million in the previous term to ¥324 million in the current term.
Sales of the financial solutions business declined due to a drop in sales of securities dealing and foreign exchange margin trading systems. A number of newly signed contracts could not offset the cancelation of relatively large contracts. With regards to costs, development costs of the next generation backbone system "TIGER Trading Platform Prospect" were offset by declines in maintenance and facility usage expenses arising from increases in efficiency of maintenance and operations of securities dealing systems, with the growth of application service providers (ASPs) and efforts to reduce engineering processes resulting from increases in operational efficiencies, which resulted in a large decline in outsourcing expenses during the fourth quarter.

As for the IT solutions business, sales exceeded the breakeven point on the back of favorable trends in engineer dispatch and the contribution of management and IT supervision support center services performed at the in-house support center. A number of inquiries for the "e2" integrated management platform are in the final stages of purchase negotiations.

In the healthcare business, fortified marketing efforts for highly profitable in-house branded products contributed to a rise in their share of total sales and an improvement in gross profitability. However, sales declined on the back of a decrease in the number of catalog listings (Published four times a year) and subsequently sales of the healthcare business rose by a small margin. Anticipatory investments including expenses arising from jointly conducted research and development by AIST and TWMU School of Medicine and advertising and promotional expenses for magazines continued.
Total assets declined by ¥421 million from the end of the previous term to ¥2.327 billion at the end of the current term. Cash and equivalents declined on the back of negative cash flow, and net assets declined on the back of the net loss. Current, noncurrent, and capital adequacy ratios declined from 521.4% in the previous term to 468.6%, 27.0% to 22.8%, and 76.4% to 75.5% respectively.
An expansion in operating loss was offset by reductions in inventories, and allowed operating cash flow to turn from a net outflow in the previous term to a net inflow in the current term. The net outflow of free cash flow contracted significantly. Investments were primarily related to payments for "Prospect".
Fiscal Year September 2016 Earnings Estimates
Operating Profits Expected to Be Realized
While sales are expected to rise by only a small margin to ¥2.5 billion, reductions in operating expenses are expected to allow an operating profit of ¥90 million to be recorded, for a net improvement of ¥255 million from the operating loss recorded in the term just ended. Specifically, internalization of development is expected to contribute to a reduction in expenses of collaborating companies of ¥110 million, and the potential for inventory valuation losses to be reduced as production of sparassis crispa products is restrained and inventory levels are normalized. Moreover, cost savings of ¥18 million is expected to be derived from reductions in maintenance fees due to the creation of in-house software to replace middleware made by external vendors. And although the increase in sales is small, the profit contribution of the increase in support center services is expected to be large due to its high marginal profitability.
Financial Solutions Business: Operating Income Margin of 30%
A key issue during fiscal year September 2016 is the ability of INTERTRADE to realize its goal of maintaining sales while raising segment profitability by 5% points. With regards to sales, marketing for the "J1" exchange terminals will be fortified. INTERTRADE has strong expectations for sales of the updated version of the "J-GATE" derivative system for the Osaka Securities Exchange expected to be implemented from middle of 2016, and for sales of the "J1" terminals that have been configured for the needs Tokyo Commodity Exchange (TOCOM) to other companies that deal in commodities. At the same time, efforts will be made to reduce costs including activities to internalize and raise efficiencies of various tasks, and to achieve operations by a small number of staff through reallocation of excess staff to other segments. In addition to cost reduction measures including internalization of communications and other middleware systems, and complete internalization of tasks including fundamental design to integration testing, efforts are being made to increase the development efficiency though the integration of C# as the development language. Efforts to develop components for systems, achieve small team operations to raise the productivity, and reallocate excess staff to the business solutions and healthcare businesses will be implemented. INTERTRADE expects to begin sales of customized components of "Prospect" to Japan's major securities companies and foreign securities companies during fiscal year September 2017.
Business Solutions Business: Establish a Three-Pronged Strategy
An issue for INTERTRADE in fiscal year September 2016 is to strengthen earnings generation capability by raising sales composition of engineer dispatch (SES), support center, and package products services to over 20% each. With regards to the engineer dispatch service, stable sales are expected to be booked during the next and following terms on the back of strong demand for human resources. With regards to support center services, sales are expected to continue to grow on the back of favorable near-term orders remain combined with various support services projects for the shift to Super Stream. INTERTRADE will also endeavor to convert ongoing negotiations for "e2" packaged services into orders at an early stage, and expand the small to medium sized applications of "Gadics" as a technological security measure to protect "My Number" information.
Healthcare Business:   Gross Income to Rise 50% (Gross Income Margin to Rise from approx. 25% to approx. 38%)
A key issue in fiscal year September 2016 is the ability to increase gross income by 50% from the approximately ¥50 million recorded during the previous term. Therefore, management is expected to implement a strategy that emphasizes sales over production, and calls for curtailment of production and merger of sales subsidiaries to fortify sales. In addition, activities to raise sales and gross income will be pursued including efforts to market in-house products and quick sales of procured products.
Gain Recognition for Lifestyle Related Diseases Products
According to information released by INTERTRADE, the market for products responding to lifestyle related diseases is huge at ¥197.8 billion (2011), with the market for "immunostimulatory" products alone estimated to amount to ¥25.5 billion. In addition, the market for health food products derived from mushrooms is estimated to amount to ¥12.6 billion, with health products using sparassis crispa materials amounting to ¥0.6 billion (The top two selling products of agaricus and ganoderma lucidum are estimated to have sales of ¥4.5 and ¥3.2 billion respectively).

At the same time, sales of the healthcare business amounted to ¥184 million during fiscal year September 2015, with sparassis crispa products amounting to only ¥30 million due to the inability to cultivate new customers for these products. And while sparassis crispa is known for its highly effective functions, as the high technological levels to manufacture products limited the amount of products that can be produced, research has seldom been conducted. Since recent studies was able to overcome this production issue, INTERTRADE is currently conducting joint research with AIST and the TWMU School of Medicine to confirm the immunostimulatory effect, etc. of the active ingredients in sparassis crispa. Once this effect, etc. is confirmed, the prospects will brighten immeasurably. Currently clinical trials to test its safety and efficacy are being conducted on mice with results expected to be announced in fiscal year September 2017. Should the desired results be achieved, INTERTRADE expects to begin marketing promotion activities for sparassis crispa products in lifestyle disease applications and the potential to achieve profitability of this segment will increase dramatically. Therefore, the expansion of sales channels is a highly important issue during fiscal year September 2016 and activities to gain recognition of these products will also be implemented.
Progress in Cultivating Sales Channels: Efforts with a View to Successful Results of Joint Research
Expansion of sales network is a top priority issue to be undertaken during fiscal year September 2016. One important sales channel is through Uny Co., Ltd., an operator of a general merchandise store (GMS) chain owned by Uny Group Holdings Co., Ltd. The sales of "Beauty Glucan" brand products from INTERTRADE to Uny stores are expanding. Currently, INTERTRADE supplies products to 15 Uny stores, of which half have special shelf locations for Beauty Glucan products. In addition, the cultivation of "ambassador shops" is proceeding smoothly with the number of affiliated stores having risen above 100 and relationships with all stores expected to be fortified within fiscal year September 2016 in order to raise the average sales price. Also, major clinics and veterinary hospitals have begun purchasing these products. At the same time, transactions with a number of sales companies to sell products in Asia have begun since the start of fiscal year September 2016. And because the value of these overseas transactions is relatively large, their contribution to gross income is also expected to be large. Moreover, INTERTRADE will leverage its collaborative partners to increase sales of cosmetic raw materials to Asia.
Cost Reductions: Contributions to Consolidated Earnings in Coming Term
The manufacturing subsidiary Laboag Co., Ltd. will be downsized with c being transferred to sales positions. Furthermore, INTERTRADE will focus its advertising budget on the most effective methods based upon the data from the last three years.
Interview with President Takahiro Ozaki
Investment Bridge held an interview with President Takahiro Ozaki on December 2, 2015, just one week after INTERTRADE's earnings announcement. We asked him to review fiscal year September 2015, and to speak about the company's strategy for fiscal year September 2016 and the prospects for fiscal year September 2017 onwards.
While INTERTRADE's efforts have yet to be reflected in your consolidated earnings, it appears that your strategies in each of your businesses are progressing smoothly. Could you summarize your strategies implemented during fiscal year September 2015?

In the financial solutions business, INTERTRADE has been continuously focusing on development and sales of packaged systems since our founding. However in light of the current shift from "system ownership" to "system usage", our Company has quickly shifted its focus upon provision of trading systems on an ASP basis. At the same time, we have also been focusing upon capturing customers who had traditionally dealt directly with the Tokyo Stock Exchange and Osaka Securities Exchange by leveraging our ASP service to channel transactions through our center. Therefore, we have been focusing upon integrated systems that provide customers with a "one-stop" service with which customers can access not only the Tokyo Stock Exchange and Osaka Securities Exchange, but also to transact multiple financial instruments including "interest rates", "commodities", and "foreign currencies". This ability to access a diverse range of financial instrument markets will allow INTERTRADE to expand its earnings.

The potential for multiple market integration and provision of comprehensive "one-stop" services are made possible by partnering with proprietary trading systems (PTS) and other market operators including major Japanese and overseas securities firms, foreign exchange brokers, commodities future trading companies, etc. By providing these market integrating open platforms (MIOP), we can contribute to an expansion in earnings of our partnering companies. Our MIOP platform called "TIGER Trading Platform Prospect" ("Prospect" hereafter) began operating in October 2015. Both Japanese and overseas securities companies have come to highly regard "Prospect" and its order management system, and we have been able to realize a highly precise Smart-Order Routing (SOR) function. The start of operations of "Prospect" also marks our entry to the MIOP concept business.

We have also established a three-pronged strategy within our business solutions business. In particular, the support center service is expected to become a growth driver. Our development and operation of systems is a reflection of technological capability of providing highly reliable securities dealing and foreign exchange margin trading systems that meet the needs of securities companies. In addition, INTERTRADE's ability to respond flexibly and speedily to customer needs is also another highly regarded feature of our Company. The shift from specific operations to the implementation of the accounting system Super Stream within the support center service is part of the corporate support and education services. The operational and technological knowhow gained in the support center service will be leveraged in the provision of business support services to corporate clients. Furthermore, the management analysis function of "e2" will be leveraged to create management analysis data, which in turn will be used to cultivate orders from the numerous inquiries we have received.

The high levels of reliability in the engineer dispatch service of the financial solutions business has come to be highly regarded and inquiries for work are strong. Therefore, a selective approach to projects for design structure will be promoted. We have also received numerous inquiries for our "e2" package service, and several negotiations are on the finalization stage. Thanks to the highly flexible "FLEX I/O" interface function of "e2", integration of different systems of parent and subsidiary companies can be conducted at low costs. While results of full scale marketing, which has been conducted for less than a year, are yet to be fully realized, the potential of our products is strong and sales can be expected to accelerate after we gain further experience in product implementations.

In the healthcare business, efforts to expand sales channels for sparassis crispa products have begun to show success. Uny, an operator of general merchandise stores, has created special shelf space for our sparassis crispa products in reflection of their high expectations for this product. And while it may be difficult to fully realize the potential of these products while the results of the industry-academia-government collaborative research on the efficacy of sparassis crispa have yet to be announced, INTERTRADE will implement an aggressive strategy to expand the number of stores selling its products. The joint research partner AIST has direct ties with the Japanese Government, and therefore, AIST's participation in the research in such a manner may as well be interpreted as a reflection of strong interest in funding for research on sparassis crispa on the part of the Ministry of Economy, Trade and Industry. At the same time, release of information regarding the results of the joint research, which is also being conducted by TWMU School of Medicine, will be restricted while the research is ongoing.
Can you explain your strategies for fiscal year September 2016 and the outlook for fiscal year September 2017 onwards?
In the financial solutions business, development of middleware and creation of components for "Prospect" will be conducted, and we are in the final stages of preparations before entering our aggressive marketing stage. In general, it is common for corporations to use middleware produced by third parties. And while some middleware have been highly perfected like databases, middleware for communications applications have numerous issues. Once troubles arise, use of third party products often ends up taking a lot of time to repair. First of all, much time is needed to discover the cause of the problems. This is why we decided to make in-house production of middleware, in addition to the obvious cost-saving factor.

In addition to efforts to cultivate new clients and strengthen relationships with existing clients of "Prospect" during fiscal year September 2017, creation of components for "Prospect" will also be undertaken. The creation of components for "Prospect" targets major Japanese and foreign securities firms and will allow for sales of customized products (Contributes to ongoing revenues derived from maintenance) in place of the conventional ASP service. Consequently, this product is expected to contribute to both expand earnings opportunities and strengthen relationships with major Japanese and foreign securities firms.

In the business solutions business, we expect support services to grow and, when there are results, sales of "e2" will accelerate. Moreover, the stable income of the engineer dispatch service is expected to continue to contribute to overall earnings. Consequently, the outlook for fiscal year September 2017 is bright. Meanwhile, the sales of "Gadics" depends on how successfully INTERTRADE can capture demand for s the "My Number" Social Security and Tax Number System. The key period for earnings will be fiscal year September 2016.

We will endeavor to expand the sales channels for sparassis crispa products in the healthcare business. Positive results of the joint research are expected to be announced in 2017. Therefore, efforts to expand sales channels prior to this announcement are important. INTERTRADE believes that the results of the joint research will trigger marketing of sparassis crispa products responding to various forms of lifestyle diseases. In addition to the expansion of sales channels for sparassis crispa products, efforts to strengthen sales of procured products to expand overall sales of this segment will be conducted during fiscal year September 2016.
Finally, what is your message to the investors?
While the retreat from dealing operations by numerous securities companies created a difficult management environment for INTERTRADE, we are currently reconstructing our management base for the financial solutions business. At the same time, strategies in the business solutions and healthcare businesses are progressing favorably. Therefore, we expect to enter an earnings growth phase from fiscal year September 2017 onwards. We also will endeavor to recoup investments and pay returns to our shareholders.
With regards to the financial solutions business, INTERTRADE will implement measures to internalize middleware and increase sales of products customized through component creation during fiscal year September 2016. In the business solutions business, support center services are expected to act as a driver of sales growth based upon the favorable reception of this service for its flexibility, processing speed, reliability, and high levels of security. At the same time, the expansion in sales channels for the healthcare business is progressing smoothly. And while earnings are not likely to benefit until successful results of the ongoing joint research conducted by industry, government and academic partners can be announced, INTERTRADE will endeavor to expand their sales network in anticipation of successful research.

Therefore, the true test for earnings of fiscal year September 2017 and beyond will be the ability of INTERTRADE to provide investors with a sense of security by achieving profitability in fiscal year September 2016 in line with initial expectations.
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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