PSA Enterprise Software / Telecom: Internet Initiative Japan (3774 JT) – Better Value, Better Growth

The potential of Internet Initiative Japan’s (3774 JT) business has meant that it has rarely been a “cheap” stock in terms of earnings multiples. However, even by its own standards, it did become expensive by the end of 2021, trading on 21x EV/OP. However now, a year of the shares trading sideways while earnings have doubled from FY20 levels means that EV/OP is now back below 16x. This makes the shares even cheaper than those of the more pedestrian TIS (3626 JT) (15.6x vs 16.2x).
Internet Initiative Japan

Internet Initiative Japan is engaged in the provision of a comprehensive range of Internet connectivity services, WAN services, outsourcing services, systems integration and equipment sales to Co.'s customers mainly in Japan. Co.'s principal services are full-spec IP service, closed-network services, security-related outsourcing services, web server hosting and e-mail security service, as well as systems construction and systems operation and maintenance. Co., through its subsidiary, is engaged in the operation of ATMs and its network systems and receives a commission for each bank withdrawal transaction when a customer uses its serviced ATMs. As of March 31, 2018, Co. has 1,096 ATMs.

Pelham Smithers Associates Ltd
Pelham Smithers Associates Ltd

Founded in 2009, Pelham Smithers Associates (PSA) provides market intelligence on Asian technology, focusing in particular on Japan. The industries covered by our team of specialists are: consumer electronics, telecomms, pharmaceuticals, internet, electronic parts and materials, automotive technology, retail and capital goods. 

PSA produces both company and sector reports. The focus of PSA’s research is to identify winners and losers as new technologies impact the top and bottom lines of corporations. Critical to our research is the clear explanation of how these new technologies work and how they impact companies and industries. 

The founding partners have worked closely together for twenty years and the team has more than doubled in size since 2012. 

Pelham Smithers

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