Executive summary

Business overview

Sun* provides consulting, software development, recruiting, and other services to companies that seek to create value or businesses, including startups. In FY12/21, the company had revenue of JPY8.0bn, operating profit of JPY1.4bn, and an OPM of 17.6%. It operates a single segment, Digital Creative Studio, broken down into two service lines: Creative & Engineering (FY12/21 revenue of JPY6.8bn; 85.1% of total revenue) and Talent Platform (JPY1.2bn; 14.9%).

In the Creative & Engineering service line, the company offers creative and engineering services to support the creation of customers’ businesses, ranging from idea generation to product development and continued product growth. Since it was established in 2013, it has successfully completed over 500 projects in this field through processes and approaches that focus on value creation. The company supplies solutions by forming teams of business, technology, creative, and other experts. Its business consultants with expertise in digital transformation (DX) summarize the requirements for business launches. Its lead engineers—who have experience in setting up businesses as CTOs—and its user interface/user experience (UI/UX) designers oversee releases of first products. After a business or service gets off the ground, Sun* provides ongoing development and operational support (DevOps services) in part through its Vietnamese subsidiary, which has assembled a team of over 1,400 IT engineers.

The company in principle favors recurring revenue business (roughly 80% of its total revenue) that is predicated on long-term revenue and tied to the growth of customer businesses, over one-time revenue projects under which a completed product is delivered by a fixed date. It regards the number of recurring revenue customers (defined internally as customers under quasi-mandates contracts of more than three months) and monthly average revenue per user (ARPU) as key performance indicators (KPIs). As of end-FY12/21, the number of recurring revenue customers was 95 (85 at end-FY12/20), and the monthly ARPU was JPY4.5mn (JPY4.0mn).

Sun* adopts a customer-centric design approach in its projects, taking into account questions such as whether a solution will effectively resolve the problems faced by users, what the provided value should be, and whether a solution will be easy to use. In the initial stage of a project (roughly the first three months), the company tries to understand the fundamental problems faced by users, and designs a business by coming up with ideas and exploring business models. This process typically begins with small-scale and low-value products. As customers expand their businesses, their products enter the stages of full-scale development and functional expansion, which drive up fees for the company. Sun* aims to increase its ARPU by contributing to its customers’ businesses over the long term. It uses development approaches such as design thinking, lean startup, agile development, and expedited plan-do-check-act (PDCA) cycles. These are explained in further detail later in this report.

The company’s fees are a function of the monthly billing rate per employee and worker hours. According to the company, it faces little competition in its business field of digitalization and can therefore charge higher than the domestic average (monthly billing rate per employee of about JPY1mn). Its companywide OPM was 17.6% in FY12/21, above the 9.8% average for the top 10 Japanese system integrators (Shared Research estimate based mainly on FY03/22 data).

In the Talent Platform service line, Sun* provides recruiting services for companies including startups. In Japan, it operates a programming school, placing graduates in temporary or permanent positions at Japanese companies. Overseas, the company operates IT programs at nine universities in three countries in Asia (including Vietnam) and three universities in Brazil. It also recruits graduates from such programs for Japanese companies. The company receives success fees of JPY1mn per placement. The company started working with overseas universities in 2014, when it was requested by the Hanoi University of Science and Technology to take over a Japanese Official Development Assistance (ODA) project designed to cultivate advanced IT human resources with Japanese language proficiency. The students enrolled in this program increased from 459 in January 2015 to 2,248 in January 2022, and the company has placed some 400 graduates of the program with over 130 Japanese companies.

As the company’s core management resources are human resources such as IT engineers, personnel expenses account for the bulk of its costs. In FY12/21, labor expenses made up 9.4% of cost of revenue at the parent company and outsourcing costs 90.6%. The latter mainly consist of salaries for the 1,400-plus IT engineers employed by the company’s Vietnamese subsidiary, which represent about 80% of the group’s total workforce. IT staff play an essential role in the creation of businesses, but their recruitment has become difficult in Japan. Vietnam, on the other hand, promotes IT education as a national policy, and produces over 50,000 IT program graduates per year. Sun* regards Vietnamese human resources as essential to the realization of its vision, and has therefore become actively involved in their education.

Earnings trends

In FY12/21, revenue was JPY8.0bn (+49.6% YoY), operating profit JPY1.4bn (+59.2% YoY), recurring profit JPY1.6bn (+69.8% YoY), and net income attributable to owners of the parent JPY1.3bn (+61.8% YoY). Revenue in the Creative & Engineering service line was up 57.9% YoY. The number of recurring revenue customers rose to 95 companies (+11.8% YoY), and the monthly revenue per user averaged JPY4.8mn (+22.1% YoY). The monthly churn rate came to 3.45%. Revenue in the Talent Platform service line was up 15.3% YoY thanks to a gradual recovery in corporate hiring appetite.

For FY12/22, the company forecasts revenue of JPY10.9bn (+35.1% YoY), operating profit of JPY866mn (-38.6% YoY), recurring profit of JPY1.1bn (-32.8% YoY), and net income attributable to owners of the parent of JPY769mn (-40.9% YoY). For the Creative & Engineering service line, it looks for recurring revenue customers to rise to 111 companies (+16.8% YoY) but monthly ARPU to fall to JPY5.0mn (-2.0% YoY). The company plans to invest in post-merger integration (PMI) for Trys (consolidated in September 2021) and in new businesses in the entertainment and other fields.

Sun* does not disclose a medium-term business plan with quantitative targets, but it releases qualitative targets related to KPI growth. To increase its number of recurring revenue customers, the company works to acquire potential customers via alliances with other companies and through its subsidiaries. To expand its ARPU, the company aims to increase the share of its enterprise customers, which have relatively large IT investment budgets. It plans to establish an earnings structure predicated on a revenue sharing model, and is also exploring other earnings streams such as capital gains accompanying exit strategies (such as IPOs, M&A, and MBOs) for the startups it supports.

Strengths and weaknesses

Shared Research thinks Sun* has the following strengths:

Sun* has an early mover advantage in the business creation field.

Access to specialists and advanced business and software development approaches enable the company to form teams of experts and charge a high billing rate per employee to existing customers.

The company employs over 1,400 engineers at its development bases in Vietnam, which allows it to develop software at half the cost compared with the costs of Japanese engineers while accumulating expertise.

We think it has the following weaknesses:

Personnel expenses account for roughly 90% of cost of revenue, leaving little room for cost reductions to support profit when economic slowdowns depress the top line.

The business does not scale as the company charges per hour (number of workers multiplied by development period).

The company uses development bases in Vietnam, a business model that makes it vulnerable to forex fluctuations.

Key financial data

Income statement		FY02/16	FY02/17	FY02/18	FY12/18	FY12/19	FY12/20	FY12/21	FY12/22
(JPYmn)		Non-cons.	Non-cons.	Non-cons.	Cons.	Cons.	Cons.	Cons.	Est.
Revenue		862	1,413	1,933	2,219	4,530	5,368	8,031	10,853
	YoY	-	63.9%	36.9%	-	-	18.5%	49.6%	35.1%
Gross profit					1,260	2,397	2,852	4,062
	YoY				-	90.2%	19.0%	42.4%
	Gross profit margin				56.8%	52.9%	53.1%	50.6%
Operating profit					301	475	886	1,411	866
	YoY				-	-	86.8%	59.2%	-38.6%
	Operating profit margin				13.6%	10.5%	16.5%	17.6%	8.0%
Recurring profit		10	9	131	326	486	927	1,574	1,058
	YoY	-	-8.5%	-	-	-	90.6%	69.8%	-32.8%
	Recurring profit margin	1.2%	0.6%	6.8%	14.7%	10.7%	17.3%	19.6%	9.7%
Net income		7	7	93	277	411	804	1,302	769
	YoY	-	-11.7%	-	-	-	95.8%	61.8%	-40.9%
	Net margin	0.9%	0.5%	4.8%	12.5%	9.1%	15.0%	16.2%	7.1%
Per-share data (split-adjusted; JPY)
Shares issued at year-end ('000 shares)		-	-	-	31,000	33,104	36,840	37,734
EPS (JPY)		-	-	-	9.0	13.2	22.9	34.8	20.4
EPS (fully diluted; JPY)		-	-	-	-	-	20.8	32.2
Dividend per share (JPY)		-	-	-	0.0	0.0	0.0	0.0	0.0
Book value per share (JPY)		-	-	-	20	61	136	175
Balance sheet (JPYmn)
	Cash and cash equivalents	-	-	-	773	2,383	5,073	5,729
Total current assets		-	-	-	1,303	2,950	5,795	7,108
Tangible fixed assets		-	-	-	110	106	72	102
Investments and other assets		-	-	-	106	209	269	586
Intangible assets		-	-	-	102	91	81	600
Total assets		225	387	738	1,621	3,356	6,217	8,395
	Short-term debt	-	-	-	118	298	209	141
Total current liabilities		-	-	-	752	970	1,011	1,516
	Long-term debt	-	-	-	205	310	153	219
Total fixed liabilities		-	-	-	243	357	188	293
Total liabilities		190	346	604	994	1,327	1,199	1,809
	Shareholders' equity	35	41	134	626	2,029	5,018	6,586
Total net assets		35	41	134	626	2,029	5,018	6,586
Total liabilities and net assets		225	387	738	1,621	3,356	6,217	8,395
Total interest-bearing debt		-	-	-	323	608	362	359
Cash flow statement (JPYmn)
Cash flows from operating activities		-	-	-	387	462	863	1,188
Cash flows from investing activities		-	-	-	-141	-297	-982	-1,388
Cash flows from financing activities		-	-	-	251	1,284	1,982	-181
Financial ratios
ROA (RP-based)		4.4%	3.0%	23.3%	27.6%	19.5%	19.4%	21.5%
ROE		21.4%	17.3%	106.1%	72.8%	30.9%	22.8%	22.4%
	Equity ratio	15.4%	10.6%	18.1%	38.6%	60.5%	80.7%	78.5%
	Total asset turnover	383.8%	364.6%	262.1%	136.9%	182.0%	112.1%	109.9%
	Net margin	0.9%	0.5%	4.8%	12.5%	9.1%	15.0%	16.2%

Source: Shared Research based on company data
Note: FY12/18 was an irregular 10- month period due to a change in the company’s accounting period. In FY12/19, Sun* acquired another company.

Trends and outlook

Quarterly trends and results

Cumulative		FY12/20				FY12/21				FY12/22				FY12/22
(JPYmn)		Q1	Q1-Q2	Q1-Q3	Q1-Q4	Q1	Q1-Q2	Q1-Q3	Q1-Q4	Q1	Q1-Q2	Q1-Q3	Q1-Q4	% of forecast	FY forecast
Revenue		1,407	2,697	3,969	5,368	1,822	3,632	5,724	8,031	2,604	5,196	7,990		73.6%	10,853
	YoY	-	-	-	18.5%	29.5%	34.7%	44.2%	49.6%	42.9%	43.0%	39.6%			35.1%
Gross profit		740	1,446	2,111	2,852	957	1,895	2,944	4,062	1,218	2,424	3,732
	YoY	-	-	-	19.0%	29.2%	31.1%	39.5%	42.4%	27.3%	27.9%	26.7%
	Gross profit margin	52.6%	53.6%	53.2%	53.1%	52.5%	52.2%	51.4%	50.6%	46.8%	46.7%	46.7%
SG&A expenses		441	897	1,417	1,966	539	1,113	1,815	2,650	912	1,965	3,082
	YoY	-	-	-	2.3%	22.4%	24.0%	28.1%	34.8%	69.1%	76.6%	69.8%
	SG&A ratio	31.3%	33.3%	35.7%	36.6%	29.6%	30.6%	31.7%	33.0%	35.0%	37.8%	38.6%
Operating profit		300	549	694	886	417	782	1,130	1,411	306	460	650		75.0%	866
	YoY	-	-	-	86.8%	39.2%	42.6%	62.8%	59.2%	-26.7%	-41.3%	-42.5%			-38.6%
	Operating profit margin	21.3%	20.3%	17.5%	16.5%	22.9%	21.5%	19.7%	17.6%	11.7%	8.8%	8.1%			8.0%
Recurring profit		303	564	722	927	392	840	1,207	1,574	177	457	812		76.8%	1,058
	YoY	-	-	-	90.6%	29.2%	48.8%	67.2%	69.8%	-54.7%	-45.5%	-32.7%			-32.8%
	Recurring profit margin	21.5%	20.9%	18.2%	17.3%	21.5%	23.1%	21.1%	19.6%	6.8%	8.8%	10.2%			9.7%
Net income		269	501	650	804	333	719	1,035	1,302	135	339	622		80.9%	769
	YoY	-	-	-	95.8%	23.8%	43.5%	59.2%	61.8%	-59.5%	-52.8%	-39.9%			-40.9%
	Net margin	19.1%	18.6%	16.4%	15.0%	18.3%	19.8%	18.1%	16.2%	5.2%	6.5%	7.8%			7.1%
Quarterly		FY12/20				FY12/21				FY12/22
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Revenue		1,407	1,290	1,272	1,399	1,822	1,810	2,091	2,307	2,604	2,591	2,795
	YoY	-	-	-	-69.1%	29.5%	40.3%	64.5%	65.0%	42.9%	43.2%	33.6%
Gross profit		740	706	665	742	957	938	1,049	1,117	1,218	1,206	1,308
	YoY	-	-	-	-69.1%	29.2%	33.0%	57.9%	50.7%	27.3%	28.5%	24.6%
	Gross profit margin	52.6%	54.7%	52.3%	53.0%	52.5%	51.9%	50.2%	48.4%	46.8%	46.6%	46.8%
SG&A expenses		441	457	519	549	539	573	702	836	912	1,053	1,117
	YoY	-	-	-	-71.4%	22.4%	25.5%	35.2%	52.2%	69.1%	83.6%	59.2%
	SG&A ratio	31.3%	35.4%	40.8%	39.3%	29.6%	31.7%	33.6%	36.2%	35.0%	40.6%	40.0%
Operating profit		300	249	146	192	417	365	348	281	306	154	190
	YoY	-	-	-	-59.5%	39.2%	46.7%	138.9%	46.3%	-26.7%	-57.9%	-45.2%
	Operating profit margin	21.3%	19.3%	11.4%	13.8%	22.9%	20.2%	16.6%	12.2%	11.7%	5.9%	6.8%
Recurring profit		303	261	157	205	392	448	367	368	177	280	355
	YoY	-	-	-	-57.8%	29.2%	71.5%	133.4%	79.1%	-54.7%	-37.5%	-3.3%
	Recurring profit margin	21.5%	20.2%	12.4%	14.7%	21.5%	24.7%	17.5%	15.9%	6.8%	10.8%	12.7%
Net income		269	232	149	154	333	386	316	267	135	204	283
	YoY	-	-	-	-62.4%	23.8%	66.3%	112.0%	72.7%	-59.5%	-47.1%	-10.4%
	Net margin	19.1%	18.0%	11.7%	11.0%	18.3%	21.3%	15.1%	11.6%	5.2%	7.9%	10.1%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Revenue by service line

Cumulative			FY12/20				FY12/21				FY12/22				FY12/22
(JPYmn)			Q1	Q1-Q2	Q1-Q3	Q1-Q4	Q1	Q1-Q2	Q1-Q3	Q1-Q4	Q1	Q1-Q2	Q1-Q3	Q1-Q4	% of forecast	FY forecast
Revenue			1,407	2,697	3,969	5,368	1,822	3,632	5,724	8,031	2,604	5,196	7,990		73.6%	10,853
		YoY	-	-	-	18.5%	29.5%	34.7%	44.2%	49.6%	42.9%	43.0%	39.6%			35.1%
	Creative & Engineering		1,120	2,147	3,187	4,329	1,525	3,032	4,827	6,833	2,316	4,512	6,908		73.5%	9,393
		YoY	-	-	-	36.5%	36.1%	41.2%	51.5%	57.9%	51.9%	48.8%	43.1%			37.5%
		% of total	79.6%	79.6%	80.3%	80.6%	83.7%	83.5%	84.3%	85.1%	88.9%	86.8%	86.4%			86.5%
	Talent Platform		287	550	782	1,039	298	600	897	1,198	288	684	1,083		74.2%	1,460
		YoY	-	-	-	-23.5%	3.7%	9.0%	14.7%	15.3%	-3.1%	14.0%	20.7%			21.9%
		% of total	20.4%	20.4%	19.7%	19.4%	16.3%	16.5%	15.7%	14.9%	11.1%	13.2%	13.6%			13.5%
Quarterly			FY12/20				FY12/21				FY12/22
(JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Revenue			1,407	1,290	1,272	1,399	1,822	1,810	2,091	2,307	2,604	2,591	2,795
		YoY	-	-	-	-	29.5%	40.3%	64.5%	65.0%	42.9%	43.2%	33.6%
	Creative & Engineering		1,120	1,027	1,040	1,142	1,525	1,508	1,794	2,007	2,316	2,196	2,396
		YoY	-	-	-	-64.0%	36.1%	46.8%	72.6%	75.8%	51.9%	45.6%	33.5%
		% of total	79.6%	79.6%	81.8%	81.6%	83.7%	83.3%	85.8%	87.0%	88.9%	84.7%	85.7%
	Talent Platform		287	263	232	257	298	302	297	301	288	396	399
		YoY	-	-	-	-81.1%	3.7%	14.8%	28.1%	0.0%	-3.1%	30.8%	34.3%
		% of total	20.4%	20.4%	18.2%	18.4%	16.3%	16.7%	14.2%	13.0%	11.1%	15.3%	14.3%

Source: Shared Research based on company data

Number of recurring revenue customers

	FY12/20				FY12/21				FY12/22
	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Enterprise customers	19	20	17	22	25	26	26	26	26	26	29
SMB customers	56	57	60	63	63	66	66	69	72	79	78
Total	75	77	77	85	88	92	92	95	98	105	107

Source: Shared Research based on company data

Monthly ARPU for recurring revenue customers

(JPY'000)		FY12/20				FY12/21				FY12/22
		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Enterprise customers		5,860	7,500	7,490	5,930	6,760	7,290	8,490	8,670	8,670	7,170	6,940
	YoY	-	-	-	-	15.4%	-2.8%	13.4%	46.2%	28.3%	-1.6%	-18.3%
SMB customers		2,680	2,790	2,960	3,460	3,500	3,380	3,640	3,740	4,000	4,170	4,440
	YoY	-	-	-	-	30.6%	21.1%	23.0%	8.1%	14.3%	23.4%	22.0%
ARPU		3,450	3,990	4,000	4,080	4,391	4,470	5,010	5,110	5,244	4,940	5,110
	YoY	-	-	-	-	27.3%	12.0%	25.3%	25.2%	19.4%	10.5%	2.0%

Source: Shared Research based on company data

VND/JPY exchange rate

		FY12/20				FY12/21				FY12/22
		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
VND/JPY		0.00469	0.00458	0.00458	0.00451	0.00460	0.00475	0.00481	0.00499	0.00511	0.00563	0.00590

Source: Shared Research based on Bloomberg data
*The VND/JPN exchange rate for each quarter is the average for the period.

Cumulative Q3 FY12/22 results (out November 9, 2022)

Summary

Revenue: JPY8.0bn (+39.6% YoY)
Operating profit: JPY650mn (-42.5% YoY)
Recurring profit: JPY812mn (-32.7% YoY)
Net income attributable to owners of the parent: JPY622mn (-39.9% YoY)

Progress rate

The progress rate of cumulative Q3 results toward the full-year plan was 73.6% for revenue (versus 71.3% of full-year results in cumulative Q3 FY12/21), 75.0% for operating profit (80.1%), 76.8% for recurring profit (76.6%), and 80.9% for net income attributable to owners of the parent (79.5%).

Key performance indicators (KPIs), etc.

Number of recurring revenue customers: 107 companies (+16.3% YoY), of which 29 were enterprise customers (+11.5% YoY) and 78 were small and medium-sized business (SMB) customers (+18.2% YoY)

Monthly ARPU (June–September 2022): JPY5,110,000 (+2.0% YoY), breaking down into JPY6,940,000 for enterprise customers (-18.3% YoY) and JPY4,440,000 for SMB customers (+22.0% YoY)

Monthly average churn rate: 3.51% (monthly contract cancellations divided by the number of total customers; average for the 93 months from January 2015 to September 2022)

Key points

Revenue

Revenue for the Creative & Engineering service line was JPY6.9bn (+43.1% YoY) driven by increased orders from existing customers and continued growth in new customers. At end-September 2022, the number of recurring revenue customers was 107 companies (+16.3% YoY). The average monthly ARPU for Q3 (June–September 2022) was JPY5,110,000 (+2.0% YoY). The company saw steady growth in ARPU as it cultivated new customers while raising ARPU. The decline in ARPU for enterprise customers to JPY6,940,000 (-18.3% YoY) was due to an increase in new customers, many of whom start with small transaction amounts. ARPU for SMB customers was JPY4,440,000 (+22.0% YoY). This is because the company gained customer trust while customers maintained their business expansion cycle. Cumulative Q3 revenue at Trys, Inc., which was made a consolidated subsidiary in September 2021, came to JPY1.1bn.

Revenue in the Talent Platform service line was JPY1.1bn (+20.7% YoY). The increase was due to a recovery trend in companies' willingness to hire, although intercompany adjustments increased on a consolidated basis due to a rise in the share of personnel placement to the Creative & Engineering service line.

Operating profit

Operating profit was JPY650mn (-42.5% YoY). The JPY480mn decrease in operating profit breaks down as a revenue contribution of JPY2.3bn, offset by a cost increase of JPY1.3bn, JPY668mn increase in personnel costs under SG&A expenses, JPY78mn increase in outsourcing expenses, JPY386mn foreign exchange impact, and JPY343mn increase in other expenses. OPM was down 11.6pp YoY to 8.1%.

For Q3 FY12/22 (three months), operating profit reached JPY188mn, exceeding the JPY108mn projected as of Q2. This was due to a reduction in outsourcing expenses as the company brought more work in-house. Revenue, which was higher than expected, also contributed to profit.

Foreign exchange

The company, which uses Vietnamese bases for project development, is affected by the exchange rate between the Vietnamese dong and the Japanese yen. For Q3 FY12/22 (three months), the dong was traded at 0.00590 against the yen. The value of the yen depreciated from Q3 FY12/21, when the dong was traded at 0.00481. The yen's depreciation lowered cumulative Q3 operating profit by JPY386mn.

Topics

The company increased the number of account representatives for enterprise customers in response to a decline in monthly ARPU. ARPU for enterprise customers, which was JPY8.7bn (+28.3% YoY) in Q1 FY12/22, declined to JPY7.2bn (-1.6% YoY) in Q2 FY12/22 and to JPY6.9bn (-18.3% YoY) in Q3 FY12/22. This was due to the downsizing and termination of large projects for enterprise customers in Q2 FY12/22. In response, the company increased the number of account representatives to propose new projects to existing customers. The company will seek to win orders continuously through this and other measures and stabilize ARPU for enterprise customers.

The company achieved its FY12/22 hiring target in Q2. The hiring is progressing according to plan partly because of the company's referral-based recruiting, a hiring method based on referrals or recommendations from existing employees. Referral-based hiring costs less than the use of recruiting agents. Thus, company has been able to rein in recruiting expenses more than its rivals as it steadily increases hiring.

FY12/22 company forecast

		FY12/20			FY12/21			FY12/22
(JPYmn)		1H Act.	2H Act.	FY Act.	1H Act.	2H Act.	FY Act.	1H Act.	2H Est.	FY Est.
Revenue		2,697	2,670	5,368	3,632	4,399	8,031	5,196	5,657	10,853
	YoY			18.5%	34.7%	64.7%	49.6%	43.0%	28.6%	35.1%
Operating profit		549	338	886	782	629	1,411	460	406	866
	YoY			86.8%	42.6%	86.2%	59.2%	-41.3%	-35.4%	-38.6%
	Operating profit margin	20.3%	12.7%	16.5%	21.5%	14.3%	17.6%	8.8%	7.2%	8.0%
Recurring profit		564	363	927	840	735	1,574	457	601	1,058
	YoY			90.6%	48.8%	102.6%	69.8%	-45.5%	-18.2%	-32.8%
	Recurring profit margin	20.9%	13.6%	17.3%	23.1%	16.7%	19.6%	8.8%	10.6%	9.7%
Net income		501	303	804	719	583	1,302	339	430	769
	YoY			95.8%	43.5%	92.0%	61.8%	-52.8%	-26.2%	-40.9%
	Net margin	18.6%	11.4%	15.0%	19.8%	13.2%	16.2%	6.5%	7.6%	7.1%

Source: Shared Research based on company data

On August 10, 2022, the company revised its full-year FY12/22 targets as follows.

Revenue: JPY10.9bn (+35.1% YoY)
Operating profit: JPY866mn (-38.6% YoY)
Recurring profit: JPY1.1bn (-32.8% YoY)
Net income attributable to owners of the parent: JPY769mn (-40.9% YoY)

The company targets the following KPIs.

Number of recurring revenue customers: Total of 111 companies (+16.8% YoY), of which 32 enterprise customers (+23.1% YoY) and 79 small and medium-sized business (SMB) companies (+14.5% YoY).

Monthly ARPU: JPY5,010,000 for all customers (-2.0% YoY), of which JPY7,370,000 for enterprise customers (-15.0% YoY) and JPY4,200,000 for SMB customers (+12.3% YoY).

The company forecasts revenue of JPY10.9bn (+35.1% YoY), breaking down into JPY9.4bn (+37.5% YoY) for the Creative & Engineering service line and JPY1.5bn (+21.9% YoY) for the Talent Platform service line.

In the Creative & Engineering service line, the number of recurring revenue customers is expected to increase for both enterprise and SMB customers. Monthly ARPU is projected to increase for SMB customers, but fell for enterprise customers as of Q2 and is projected to fall for the full year. The company looks for revenue of JPY1.4bn from Trys (versus JPY306mn booked for October–December 2021 in FY12/21).

In the Talent Platform service line, the company plans to continue scouting and educating IT talent in Japan and overseas, and support the promotion of digitalization at customers through recruiting services. Demand for IT labor has been increasing, and the company expects this trend to continue in FY12/22.

The company forecasts operating profit of JPY866mn (-38.6% YoY), and sees OPM declining 9.6pp YoY to 8.0%. It plans to invest in post-merger integration (PMI) for Trys, which was made a consolidated subsidiary in September 2021, and in new businesses in the entertainment and other fields. Higher expenses at the subsidiary in Vietnam are expected due to yen depreciation. For Trys, the company expects operating profitability after goodwill amortization.

The company does not disclose its target number of recruits, but plans to hire the largest number of employees both in Japan and Vietnam in FY12/22. The company said that as of end Q2 it has made good progress against its full-year hiring plan.

Medium-term business plan

Sun* does not disclose a medium-term business plan with quantitative targets, but it releases qualitative targets in the form of business strategies to increase its number of recurring revenue customers and ARPU, which are both KPIs. Its main strategies by service line are as follows.

Creative & Engineering: The company aims to increase points of contact with customers it has thus far been unable to approach (especially, large companies that are likely to need high-value projects).

Talent Platform: The company aims to enhance and expand its proprietary data platform, and further step up industry-academia collaboration.

In addition, although its Startup Studio* program had yet to generate sufficient profit as of FY12/21, Sun* will continue to invest in the program, and work to build new business models.

The company plans to explore revenue sharing or capital gains models to generate additional earnings from business growth at its investment targets.

* A startup studio refers to an organization or method that aims to create businesses simultaneously and successively. It provides a comprehensive range of functions (including business ideas, management personnel, capital, user experience and user interface [UX/UI] design, installation, and marketing) needed by entrepreneurs and innovators to create concepts.

Creative & Engineering strategies

Sun* is implementing the following measures as growth strategies to acquire customers and drive up ARPU.

Alliances and business tie-ups: The company will expand its customer base through collaboration with major consulting firms and startup studios.

Launch of consolidated subsidiary: Newh Inc. (established in January 2021) provides business incubation and consulting services to large companies.

Investment in its Startup Studio program: The company will aim to bring in more startup customers, increase its ARPU, and expand its earnings (discussed in more detail below).

Alliances

Sun* collaborates with Microsoft Japan Co., Ltd. and Deloitte Tohmatsu Venture Support Co., Ltd. (DTVS). Both have long supplied services to customers that qualify as enterprise customers^* under the company’s definition. By collaborating with these heavyweights, Sun* aims to generate synergies that support earnings growth, and expand its customer base. In July 2021, Sun* also became one of the founding partners of Startup Studio combo.

^* Sun* defines an enterprise customer as one of the following: (1) a listed company that is included in the Nikkei 225, the Nikkei 400, or the Nikkei 500, (2) a group member of a company that matches one of the criteria in (1), or (3) a company with a market cap, revenue scale, and workforce equivalent to a listed company.

Collaboration with Microsoft Japan

In June 2021, Sun* became the first Japanese partner in Microsoft Japan’s “Microsoft for Startups” program, which aims to support the growth of early-stage startups by giving them free access to technology platforms such as Azure and GitHub.

Microsoft has formulated a five-year plan (launched in December 2019) that seeks to expand its collaboration with startups to 500 companies by 2025, and increase the scale of its cloud business for startups 10-fold from 2021. It also intends to match startups and enterprises.

While startups normally need to undergo a screening by Microsoft to become eligible for free usage of Azure and other platforms, startups that receive support services from Sun* (i.e., those that have signed quasi-mandate contracts with the company) qualify for the Microsoft for Startups program on a priority basis. As a partner in the program, the company explains that it can promote the growth of customers it supports, and it also expects to reap benefits in the form of lead acquisition.

Collaboration with DTVS

DTVS has developed Startup Compass, a digital tool that supports the development of businesses. Under its collaboration with DTVS, Sun* helps customers verify hypotheses^* related to business creation. Startup Compass is an online service that offers support for the many challenges faced by startups in the process of building a businesses.

Startup Compass divides the process of business development into five phases: idea creation, customer/issue verification, product/solution verification, product market fit (PMF: market suitability) verification, and growth verification. It presents specific items to be confirmed or verified as well as points of emphasis for each phase. It guides users by helping them move forward while confirming and verifying each step and thus preventing mistakes. Sun* supports the creation of hypotheses that need to be verified in each phase, and it presents concrete methods to verify such hypotheses. It also introduces specialized companies that can help verify hypotheses.

* Hypotheses for a new business are verified at the conceptual or planning stage of the business. The aim is to confirm certain assumptions such as the existence of a new market or existing demand among users. If a hypothesis is proven to be true, this increases the probability that a business will be successfully developed. On the flipside, if a hypothesis is revealed to be flawed during the planning phase, this can help reduce losses to a minimum.

Sun* was selected by DTVS as a partner because it has accumulated a greater range and depth of knowledge and expertise in the process of business development than DTVS. The company has insights and resources in back-end operations that follow idea creation, such as UX design, UX research, minimum viable product (MVP) development, and product development. Through Startup Compass, Sun* supports business development in the areas of MVP-based hypothesis verification and UI/UX.

Startup Compass is designed for managers or supervisors of new businesses at major companies and startups. Through its alliance with DTVS, Sun* hopes to acquire new leads (prospective customers).

Participation in Startup Studio combo (combo inc.: unlisted)

Startup Studio combo is an organization founded by Party Inc. (unlisted) in July 2021. It has eight partners, including Sun*. The company decided to join as a partner as it felt aligned with the founding vision (described below) of Startup Studio combo, and because it saw opportunities to utilize its expertise, experience, and resources. Through its own Startup Studio program, Sun* provides similar business support services as Startup Studio combo. The main advantage of joining Startup Studio combo is that it will be able to increase its points of contact with customers that would have been difficult to approach independently.

Founding vision of Startup Studio combo: Startup Studio combo helps startups expand not only by supplying funding like a venture capital firm, but also by providing non-financial support. Specifically, it aims to offer promotional and branding support to startups, execute various business ideas, and swiftly implement high-quality prototypes. To this end, it relies on the marketing, UI/UX, implementation (incorporation of software and functions), and public relations (PR) capabilities of its partners, as well as on creative contributions from Party (specifically, content designed and produced by creators at Party).

Eight partners: The eight Startup Studio combo partners are Party, Sun*, Toppan Inc. (TSE Prime: 7911), Geek Pictures Inc. (unlisted), Vector Inc. (unlisted), for Startups, Inc. (unlisted), Uzabase, Inc. (TSE Growth: 3966), and Unicorn Financial Advisory (unlisted).

Launch of consolidated subsidiary Newh Inc.

Founded in January 2021, Newh is a consolidated subsidiary of Sun* that offers consulting services to large companies with a focus on the development of businesses and services (business incubation). It consults on all processes needed to launch a business ranging from the formulation of project strategies to idea creation, proofs of concept (PoC), and earnings plans.

Sun* says it looks to expand its points of contact with hitherto hard-to-reach major (enterprise) customers by strengthening its business incubation systems. It takes over the projects that have been formulated by Newh for customers, and translates these into actual development processes. As of September 2021, Newh had already begun supporting the development of businesses at multiple enterprise companies.

Newh is providing support to a major cosmetics manufacturer (product and brand development), a leading insurance company and a major entertainment company (platform services development), a major electronics manufacturer (design of new services, community research), a major beverage manufacturer (rebuilding of services), a major payment settlement provider (product brand development), and a major construction company (digital transformation [DX] support for a municipality).

Entry into NFT market

In April 2022, Sun* announced it had established Sony Network Communications Singapore Pte. Ltd., a Singapore-based contracted development and consulting company dealing with non-fungible tokens (NFT), with Sony Network Communications Inc. (unlisted; a consolidated subsidiary of Sony Group Corporation [TSE Prime: 6758]). The shareholding ratios are 70% for Sony Network Communications and 30% for Sun*.

The new company will promote contracted development and consulting businesses in the growing NFT market by harnessing Sony Network Communications' knowledge and track record in communications and service solutions along with Sun*'s system development and operation resources, know-how, and technological capabilities to contribute to the construction of a diverse economic zone in the new world of Web3.0. Specifically, the new company will develop strategies for the NFT business while supporting NFT issuance, NTF game development, and the promotion of NFTs.

Talent Platform strategies

In the Talent Platform service line, the company has accumulated expertise and insights on digitalization (creating value and developing businesses with digital technologies), and captured related data. By continually sharing this data with its engineers and creatives, the company enhances its ability to reproduce business successes.

Five data platforms

The company believes it can continue to grow this service line by further expanding and polishing the five data platforms below.

Rubato: Optimal talent allocation platform

Rubato is a system that facilitates skillset management for engineers and creatives, personnel evaluation, the formation of an HR portfolio, and project operation management for the Sun* group. When building teams for new projects, the company deploys the optimal human resources based on the data stored in Rubato. In this way, it aims to increase the reproducibility of business successes.

Sun* CI: DevOps^* platform

Sun* CI is a system that supports DevOps, and therefore creates an environment in which engineers can concentrate on business growth. It automates tasks such as source code review, security checks, function testing, and product builds.

* DevOps: A development process predicated on collaboration between development and operations team. It increases the value of a business through systems and software, and ensures such value is delivered reliably and rapidly to end users.

Viblo: Knowledge sharing platform

Viblo is a free social media service operated by the company. It allows engineers and creatives (including those not affiliated with Sun*) in Vietnam to share their insights and knowledge. In addition, Sun* distributes the knowledge it has accumulated and other information on the platform to enhance the capabilities of engineers working in Vietnam.

As of June 2021, the platform had over 330,000 monthly active users (MAU).

The service is comparable to the Japanese Qiita platform operated by Qiita Inc., an unlisted subsidiary of Ateam Inc. (TSE Prime: 3662).

xseeds Hub: Student resume database

xseeds Hub is an online database system that manages the resumes of students and supports their employment. The students registered in the database are enrolled in a curriculum operated by Sun* (industry-academia program xseeds) at universities in three countries, including Vietnam. The system allows Japanese companies to recruit human resources online from Japan.

Process through job offer: After registering for the system, a company can search for students and send out job offers on the system. If a student expresses interest in a position, the company holds an online screening (with interpretation). If the student meets the requirements, the company extends a formal job offer. The student then decides whether or not to accept the offer.

Affiliated universities (and number of participants): Hanoi University of Science and Technology (five-year program: 750 students), Da Nang University of Science and Technology (four-year program: 250 students), Vietnam National University Hanoi College of Technology (three-year program: 190 students), VNUHCM University of Information Technology (two-year program: 190 students), Gadjah Mada University (Indonesia), and University of Technology Malaysia (Malaysia).

Schooler: Online learning management platform

Schooler is a platform that helps systemize and visualize university education systems. It provides functions to manage classes, schedules, attendance and academic performance, and course contents, and also offers support for report creation and output. The company has rolled out the platform at eight overseas universities in three countries. It is used by more than 2,000 students.

Development of new earnings model that takes advantage of Startup Studio program

In June 2019, Sun* launched its Startup Studio program. A startup studio refers to an organization—typically a shareholder—that provides financing to startups, which generally lack capital and engineers at the time of their launch, alongside a comprehensive range of resources (including human resources, goods, funds, and expertise) necessary to launch a business. It can also refer to the method used to achieve this. Rather than simply receiving and placing orders, Sun* co-creates businesses with its customers. Over the medium to long term, it aims to promote further collaboration with the startups it invests in under a revenue sharing model, or target capital gains. As of end-December 2021, the company had invested in 23 companies.

Number of startups that have received Startup Studio investment (cumulative)

	FY12/19	FY12/20	FY12/21
Investees	16	18	23

Source: Shared Research based on company materials

Overview of Startup Studio

Through Startup Studio, Sun* operates two investment programs that are distinguished by the growth stage of the investee. The first is Build, a program that provides support to startups that start a business from scratch. The second is Boost, a program that aims to accelerate business growth.

Build program

The purpose of the Build program is to invest in startups that have yet to be incorporated or are 100% independently funded. Through the program, Sun* co-creates startups with entrepreneurs, and provides support in the following areas.

Polishing business ideas

Advisory services related to business strategy and capital policy

Free provision of development resources

Free provision of proprietary DevOps tools

Free provision of office environment

Provision of public relations, advertising, recruiting, and business analytics and optimization (BAO) functions

Office welfare services equivalent to Sun*

Capital participation (maximum of 20%) at time of incorporation or first-round investment in Japanese keep it simple securities (J-KISS)

Companies that have received Build program investment

Investee	Founded	Business description	Notes
tenanta inc.	Apr 2019	Matches tenants looking for commercial properties with real estate companies that provide such properties.	Sun* dispatched an individual with experience in launching and selling startups to serve as acting CTO.
Zenkigen, Inc.	Oct 2017	Plans and operates the online interview service Harutaka, and operates the HR event service Next HR Conference.	System development is handled by a team of nine people, including three Japanese members dispatched by Sun* (project manager/tech lead, etc.) and six overseas engineers. Launched service (beta version) within five months.
Tent Inc.	Jul 2017	Operates a rental service for outdoor equipment, develops and operates rental platforms and RFID inventory management systems.	Sun* has provided support from the specification design stage, before the development structure was put in place.

Source: Shared Research based on company materials

Boost program

The purpose of the Boost program is to provide funds to early to middle-stage startups that are in the process of raising capital and wish to make use of the company’s resources. Through the program, Sun* provides capital and resources to startups in an effort to support their growth. It provides support in the following areas.

Advisory services related to business strategy and capital policy

Provision of development resources at a discount

Free provision of proprietary DevOps tools

Provision of public relations, advertising, recruiting, and BAO functions

Investment of up to JPY50mn per company

Companies that have received Build program investment

Investee	Founded	Business description	Notes
Liver Bank K.K.	Dec 2020	Livestream communication production business, livestream-based fan community production business	Sun* acquired a small number of shares from Liver Bank through a third-party allocation (stake undisclosed). It has also entered a business alliance with Liver Bank to develop the fan community platform Mooos.
K.K. Flare	Jan 2017	Develops and operates mobility-related businesses in Thailand.	Sun* acquired shares through a third-party allocation (stake undisclosed).
Tryeting Inc.	Jun 2016	Augmented intelligence (AI) technology R&D and license selling business	-
Japan Cloud Capital, inc.	Nov 2015	Operates Fundinno, a crowdfunding platform that allows backers to invest in a company in exchange for shares.	Sun* invested in Japan Cloud Capital (stake undisclosed).
lafool Inc.	Nov 2011	Mental health tech business, sleep tech business, and childcare business	Sun* provided resources mainly in the form of engineers (in Vietnam) to resolve a shortage of development resources at lafool.

Source: Shared Research based on company materials

Example of project operated under revenue sharing model

Mooos

In June 2021, Sun* released the proprietary app Mooos and started collaborating with Avex Management Inc. Mooos is a fan community platform for artists, and Avex Management is an entertainment company that manages numerous artists.

Sun* develops customized apps that stream content for specific artists to core fans. Avex Management and the company generate revenue by offering paid services such as livestreams through the app. Fans can access these services by either purchasing a monthly subscription or paying per use. The two companies split the revenue under a revenue sharing model.

According to the company, major social media and video streaming platforms tend to be open communities that are also used by casual fans and critics. When designing a monetization strategy for artists or management companies for such platforms, the streamed content must comply with the rules of the platform. Another challenge is that unilateral changes in specifications for a platform can complicate the design of a medium- to long-term strategy for artists. The company believes that Mooos resolves such issues.

Business

Business overview

Company vision and mission

Vision: “Create a world where everyone has the freedom to make awesome things that matter”

Sun* aims to create value by supporting the launch of startups and business development for existing companies. Its services create value by promoting digitalization in various industries and accordingly revitalizing society (by, for example, resolving social issues). The company refers to these practices as Digital Creative Studio operations.

Sun* aims to digitalize existing industries mainly by “co-creating businesses while taking advantage of technology and creatives” and by “scouting and educating fresh IT talent.”

Mission: “Create radical products and businesses with people who actually care about what they do”

The company’s goal is to use digital technologies not to enhance the efficiency of existing businesses, but rather to tackle a broad range of social issues. Sun* works with entrepreneurs such as startup founders and business developers to address social issues via new businesses with the help of digital technologies.

According to the company, the lion’s share of IT investment to date has been geared toward improving the efficiency of existing business processes through digital technologies, and IT education has therefore historically concentrated on cultivating expertise in system operation and maintenance to support the continuation of existing businesses. However, Sun* believes that society will need IT investment that transforms business models through digital technologies (digital transformation [DX]).

Sun* specializes in software development that supports startups and business development. Consequently, it does not develop or update conventional business software (business management software for production, sales, inventory, finances, or accounting; or related Software as a Service [SaaS]). It also does not provide operation and maintenance services for large-scale existing systems, nor does it sell general-purpose software to a larger number of unspecified customers.

Business overview

Sun* provides consulting, software development, recruiting, and other services that help create businesses or value. It offers these services to companies that seek to create businesses, including startups. The company operates in a single segment: Digital Creative Studio. In FY12/21, it reported revenue of JPY8.0bn, operating profit of JPY1.4bn, and an OPM of 17.6%.

Affiliated companies

The Sun* group comprises the parent company and the following four wholly-owned consolidated subsidiaries.

Sun Asterisk Vietnam Co., Ltd. (unlisted): Employs over 1,400 engineers at development bases in Vietnam (Hanoi, Da Nang and Ho Chi Minh City).

Groove Gear, Inc. (unlisted): Operates programming education, IT staff recruiting and dispatch, corporate training, and other businesses in Japan.

Newh Inc. (unlisted): Established in January 2021, Newh is a design and consulting studio that specializes in the development of businesses and services for large companies.

Trys, Inc.: A team of creators based in Japan that specializes in the production of digital content and the development of apps for social media platforms and smartphones.

Overview of service lines

Sun* operates in a single segment: Digital Creative Studio. The segment name embodies the company’s aspiration to develop, grow, and monetize businesses through digital technologies (mainly software development).

The company’s operations are divided into two service lines: Creative & Engineering (FY12/21 revenue of JPY6.8bn; 85.1% of the total) and Talent Platform (JPY1.2bn; 14.9%). The former mainly encompasses consulting and software development, and the latter the recruiting of engineers trained by Sun* for Japanese companies.

Creative & Engineering

In its Creative & Engineering service line, Sun* mainly supports Japanese customers through creative and engineering (digital technologies) services in the stages of idea generation, product development, and continued product growth. It also provides startups with financial support as a startup studio. It puts together teams with the optimal skillset for each project, with members including IT engineers, business consultants, directors, web designers, former CTOs, and entrepreneurs.

Talent Platform

In its Talent Platform service line, the company supports the creation of businesses through recruiting services. It trains, recruits, and dispatches IT staff in Japan and overseas. It is involved in industry-academia collaboration projects in eight universities in three overseas countries, including Vietnam. It operates university courses for overseas students who wish to work as an engineer in Japan (open to selected students only), and introduces the IT talent it has trained to Japanese companies at its own job fairs. In Japan, Groove Gear operates Geek Job programming school, placing graduates in temporary or permanent positions at Japanese companies.

Creative & Engineering

Business model

Revenue

Projects under which a completed product is delivered by a fixed date, i.e., one-time revenue businesses, account for a small share of the company’s total orders. The revenue generated by the company in this service line is not a reflection of compensation for delivered work, but rather a function of the work hours of the company’s engineer team. This is because the purpose of the company’s operations is not to deliver completed software, but to help customers create businesses. As a result, revenue corresponds to the contract fees for each stage of the business creation process (namely, strategy formulation, business development, product development, and business growth). Contract fees are not based on the delivery of completed work (hardware or software), but determined by the number of engineers deployed by the company in the process of creating value, their monthly billing rate, and work hours (development period).

The company’s development approach is based on a user-centric design (see the Value chain section). It does not seek to roll out functions that its customers (or their users) will need to become familiar with over time, but rather considers questions such as whether a proposed solution will effectively resolve a customer’s problem, what the provided value should be, and whether a solution will be easy to use. As a result, revenue (contracted fees) tends to be low during the initial stage of a project, but rises as contracts are renewed in tandem with business (user) growth.

The company generates revenue under quasi-mandate contracts (“jun-inin”)* and contracts for work (“ukeoi”)**. As a rule, it books revenue on a monthly basis (following monthly inspections) regardless of the contract period.

* Quasi-mandate contracts (“jun-inin”) are agreements that guarantee a certain amount of administrative processing or work, rather than the completion of work. The contractor receives compensation if the work is conducted appropriately, even if the system or software is not completed.

** Contracts for work (“ukeoi”) are agreements that guarantee the work concerned will be completed. The party ordering the work pays compensation for its completion. Payment is made upon delivery of the completed system or software. Many of the projects handled by Sun* under contracts for work span roughly three months.

Recurring revenue share about 80%

The company regards projects under quasi-mandate contracts that span more than three months as recurring revenue projects, and projects under quasi-mandate contracts that span less than three months and projects under contracts for work as one-time revenue projects. In FY12/20, it generated recurring revenue of JPY3.6bn (83.8% of its total revenue) and one-time revenue of JPY703mn (16.2%).

Reasons behind higher share of recurring revenue

In the Creative & Engineering service line, Sun* supports the development of businesses and the launch of startups. It enters into contracts with customers on condition that it will not only get involved in the launch stage of a business, but consistently provide support through all growth phases of a business on a medium- to long-term basis. For this reason, it seldom undertakes projects that need to be completed and delivered in a short period such as three months. Since its founding, the company has provided support for roughly 500 projects, accompanying its customers from the launch stage of their business, which entails high risk, to the growth stage. In the process of supporting business launches, the company gains expertise, and it has therefore created a virtuous cycle whereby it can help an increasingly larger number of businesses get off the ground and become successful.

At the same time, Sun* handles some one-time revenue projects that are delivered within about three months. According to the company, such projects make up just below 20% of total revenue. It regards the first three months of a contract as a trial period in which it can gauge the feasibility of a business. In some cases, companies may alter their management policy during this period or reach the conclusion that their business idea has little marketability.

Breakdown of order prices

The company’s order prices are determined by the monthly billing rate per employee (engineer) and the number of worker hours (number of engineers multiplied by development period). Its monthly billing rate per employee is roughly JPY1–2mn, which is high compared with the average rate of roughly JPY1mn at general system integrators (Shared Research estimate), according to the company. Sun* believes that providing specialized solutions that support value creation in the field of digitalization, where it faces little competition, enables the company to charge higher rates than the domestic average.

Sun* says some overseas consulting firms charge monthly billing rates of several million yen per employee, which exceed its own rate. However, Shared Research understands that many of these companies handle large projects for major companies such as the development of core systems used across an entire company, which inevitably pushes up their rates.

Although Sun* frequently handles projects for large (enterprise) companies, Shared Research understands that these involve businesses undertaken by individual divisions rather than operations that span an entire company.

Teams composed of business, technology, and creative experts

Projects are undertaken by teams composed of business, technology, and creative experts. The company selects the optimal team members for each project, taking into account the scale of the work and phase of the development. For example, one team may comprise a director, a UI designer, and an engineer, while another team may consist of a project manager and five engineers in Vietnam. Project costs are calculated as follows.

For a project with three engineers (monthly billing rate per employee of JPY1,760,000 / monthly deployment of 0.5) and a development period of three months, the cost would come to JPY7,920,000 (= 1,760,000 x 0.5 x 3).

For a project that requires five engineers of the Vietnamese development bases working under the supervision of a project manager appointed by the customer company, the cost would come to JPY2,430,000 per month (Shared Research estimates the average monthly billing rate per engineer at JPY486,000).

Development period

Only a low share of the company’s orders is completed or delivered by a fixed date. Consequently, the development period agreed to by Sun* under contracts with customers does not refer to the completion period (deadline) for a business or project, but rather to the deployment period for its team, which is set based on the development, expansion, and other phases of the customer’s business. For example, Sun* allocates a development period of roughly three months to allow its user-experience (UX) designers and engineers to translate a business idea into a business model. Thereafter, it allocates another three months to develop a software prototype that crystallizes the business model, and reshuffles the project team accordingly.

Once it has confirmed that the business can be feasibly monetized through the prototype development, the company and its customer advance to the full-scale development. At this stage, it concludes an agreement with the customer for development and operation geared toward business expansion. On the whole, therefore, the continued transactions with the customer span from six months to a year. For the bulk of its projects, the company renews its contracts with the customer based on the growth of the business or product.

Cost structure and profitability

Personnel expenses for engineers and other employees make up the lion’s share of the company’s cost of revenue. In FY12/21, labor expenses accounted for 9.4% of the cost of revenue at the parent company and outsourcing expenses (mainly salaries for engineers at the Vietnamese subsidiary) accounted for 90.6%.

Sun* targets a project GPM of around 50¬–60%, and it has managed to keep its GPM steady regardless of the order price. It says it does not strategically set order prices to expand its customer base. When handling ad-hoc orders or the initial stage of a project, profitability can be affected by sales-related costs or a higher number of worker hours than initially anticipated, according to the company. However, Sun* explains that it is able to reduce costs and increase profitability as the relationship with a customer lengthens.

Breakdown of cost of revenue (parent)

		FY12/18	FY12/19	FY12/20	FY12/21
(JPYmn)		Non-cons.	Non-cons.	Non-cons.	Non-cons.	% of total
Cost of revenue		1,745	2,555	3,368	4,879	100.0%
	Outsourcing costs	1,671	2,409	3,003	4,421	90.6%
	Labor costs	85	144	290	458	9.4%
	Various costs	18	23	33	54	1.1%
	Manufacturing cost	1,775	2,577	3,326	4,933	101.1%
	Beginning work-in-process inventories	-	30	53	10	0.2%
	Total	1,775	2,607	3,378	4,943	101.3%
	Ending work-in-process inventories	30	53	10	64	1.3%
	Cost of revenue	1,745	2,555	3,368	4,879	100.0%

Source: Shared Research based on company materials

SG&A expenses (consolidated)

		FY12/18	FY12/19	FY12/20	FY12/21
(JPYmn)		Cons.	Cons.	Cons.	Cons.	% of total
SG&A expenses		959	1,922	1,966	2,650	100.0%
	Salaries and allowances	425	880	946	1,192	45.0%
	Provision for bonuses	6	16	28	51	1.9%
	Provision for doubtful accounts	0	22	8	11	0.4%

Source: Shared Research based on company materials

Key performance indicators

Sun* regards the number of recurring revenue customers and monthly average revenue per user (ARPU) as key performance indicators (KPIs) for its operations. It considers increases in these KPIs as growth indicators.

Increases in ARPU function as an indicator of growth because they demonstrate clearly that a startup or new business supported by the company has gained traction and is generating revenue.

Because the company’s work in the initial stage (three to six months) of a project only produces small outcomes (products), the order price tends to be low during this period. When a customer’s business gets off the ground and starts to expand, the project undertaken by the company transitions to the stages of full-scale development and functional expansion, leading to an increase in contract fees (order price).

At end-FY12/21, the number of recurring revenue customers stood at 95 (85 at end-FY12/20), and monthly ARPU was JPY4.8mn. The customer base broke down into 26 enterprise companies (i.e., companies included in the Nikkei 225, the Nikkei 400, or the Nikkei 500) with ARPU of JPY7.9mn, and 69 small and medium-sized business (SMB) customers with ARPU of JPY3.6mn. SMB companies mainly include medium-sized companies and startups that operate on a small scale.

KPIs used by the company

Number of recurring revenue customers

	FY02/16	FY02/17	FY02/18	FY12/18	FY12/19	FY12/20	FY12/21
Enterprise customers	3	6	9	11	16	22	26
SMB customers	26	35	44	51	56	63	69
Total	29	41	53	62	72	85	95

ARPU

(JPY'000)	FY02/16	FY02/17	FY02/18	FY12/18	FY12/19	FY12/20	FY12/21
Enterprise customers	3,960	3,863	4,014	5,727	5,813	6,685	7,855
SMB customers	1,600	1,804	2,292	2,475	2,417	2,985	3,569
ARPU	1,900	2,033	2,584	3,042	3,084	3,890	4,752

Source: Shared Research based on company materials

Other management indicators

In addition to the KPIs above, Sun* also discloses a net promotor score (NPS) and churn rates.

NPS is a metric that quantifies and measures customer loyalty (customer or user attachment to and trust in a company or brand) on a scale of 0 to 10. It assigns a score based on single survey question asking customers or users to rate the likelihood that they would recommend a company (or product or service) to an acquaintance, and calculates the share of responses for each score.
The NPS is calculated by subtracting the share of respondents that are least likely to promote a company, product, or service (ratings of 0–6) from those that are most likely to do so (ratings of 9–10). In FY12/21, Sun* had an NPS of 27.0%, indicating that the percentage of its promoters exceeds that of its detractors.

Classification of respondents: Detractors: rating of 0–6, passives: ratings of 7¬–8, and promotors: ratings of 9¬–10.

Net promotor score (NPS®)

	FY12/19	FY12/20	FY12/21
NPS	27.3%	25.4%	27.0%

Source: Shared Research based on company materials

Th monthly churn rate is calculated by dividing the number of monthly contract cancellations by the number of total customers at the end of the month. As of December 2021, it was 3.45%. The churn rate disclosed by the company represents the average since January 2015.

The main reason for contract cancellations is customers deciding to withdraw from a business after failing to commercialize it (for example, when market assumptions are proven to be inaccurate).

Monthly churn rate

	FY12/19	FY12/20	FY12/21
Monthly churn rate	3.52%	3.63%	3.45%

Note: The churn rate as of December 2021 represents the average for the 84 months from January 2015 to December 2021.
Source: Shared Research based on company materials

Value chain

Development process

Overview

The company adopts a user-centric design approach for its projects, taking into account questions such as whether a proposed solution will effectively resolve the problems faced by users, what the provided value should be, and whether the solution will be easy to use. In the initial stage of a project (roughly the first three months), it tries to understand the fundamental problems faced by users, and designs a business by producing ideas and exploring business models. Each project starts off with a small scale and low-value product. As customers expand their businesses, their products enter the stages of full-scale development and functional expansion, driving up the contract fees for the company. Sun* aims to increase its ARPU by contributing to its customers’ businesses over the long term. It uses development approaches such as design thinking, lean startup, agile development, and expedited plan-do-check-act (PDCA) cycles.

Three-stage solutions

The company provides solutions in three broad stages in line with its business development process. It sets goals and forms separate development teams for each stage under contract with its customers (generally quasi-mandate contracts). Its solutions range from short projects (business or contract period of one to three months) to minimum viable product (MVP) development (three to six months) and full-scale development (more than six months, with continued investment to drive service growth).

Solutions and approaches for each development process

Business development process	Strategy formulation	Business and product development				Business growth
Objectives by process	Gauge consumer and market potential	Clarify customer needs (issues to be resolved)		Explore methods to resolve customer issues, and verify their effectiveness	Verify market potential (whether the product is likely to be purchased) through prototypes	Conduct marketing and sales, obtain user feedback, and continually improve product
Solution	Short project (issue extraction, planning)
				Minimum viable product (MVP) development and proof of concept (PoC) (prototypes, trials)
					Boost (full-scale development, functional expansion)
Development approach	Design thinking		Lean startup		Agile development

Source: Shared Research based on company materials

Short project (issue extraction, planning)

In this stage, the company’s user-experience (UX) designers and engineers translate a rough business idea into a business model.

Customer issues: Unsure how to start the development of a business. Unable to prepare plans and materials that can receive internal sign-off. Lacks engineers.

Role of Sun*: Summarize and visualize the business plan through facilitation by in-house UX designers (consensus building and confirming everyone is on the same page).

Outcomes: Prepare summary materials and key visuals (website design and graphics, etc.).

Period: One to three months

Development approach: Design thinking (discussed below)

MVP development and proof of concept (prototypes, trials)

Minimum viable products (MVPs) are essentially prototypes. In this stage, Sun* develops an MVP, and releases it with minimal functionality. In this way, it can reduce costs, and gauge user feedback, outstanding issues, and needs before moving to full-scale development. Its lead engineers—who have experience in setting up businesses as CTOs—and user interface (UI)/UX designers supervise releases of first products.

Customer issues: Unclear about the scope of an MVP. Needs a partner that can provide agile development.

Role of Sun*: MVP development

Outcomes: MVP and related materials

Period: Three to six months

Development approach: Lean startup (discussed below)

Boost (full-scale development and functional expansion)

In this stage, Sun* starts developing the systems or software that will be rolled out to users based on its understanding of the issues faced by the customer gained through the prototype. It also provides ongoing development and operational support in large part through its Vietnamese subsidiary and IT teams, which have a global track record and possess related experience.

Customer issues: MVP and business plan completed, but shortage of engineers to engage in full-scale development.

Role of Sun*: Support the development of businesses by also involving the development bases in Vietnam. Conduct agile development and improve product UI and UX with proprietary DevOps* tools.

Outcomes: Programs, specifications, etc.

Period: More than six months with investment continuing to drive service growth

Development approach: Agile development (discussed below)

*DevOps: A development process predicated on collaboration between development and operations team. It increases the value of a business through systems and software, and ensures such value is delivered reliably and rapidly to end users.

Co-creation based on design thinking

Design thinking is a systematized thought process used in the design process. It is an approach used by companies to clarify the location or root of a problem when pursuing non-linear innovation.

The five stages of design thinking that power innovation are empathize, define, ideate, prototype, and test. Designers advance through these stages in a non-linear fashion, always maintaining the freedom to go back and make revisions. This allows them to discover problems, and clarify optimal solution strategies. Design thinking enables companies to develop services with a higher degree of originality, and to create value.

During the different stages of design thinking, Sun* gathers facts from—and conducts interviews with—decision-makers at various divisions as well as stakeholders of the customer to accurately grasp the relevant issues. It also believes facilitation (consensus building or confirming that everyone is on the same page) is a part of the design thinking process.

Business co-creation involves creating value through a collaboration between a company and its various stakeholders. Sun* has collaborated with its customer companies since its founding. In the short project stage, the company extracts issues and prepares plans for a new business, creating value through design thinking in collaboration with its customers.

Small start / lean startup

Lean startup is a management approach to launch companies or businesses. It involves formulating a hypothesis, rapidly developing a prototype service with the minimum functionality needed to test the hypothesis, and providing the service to users to elicit feedback. The service is subsequently improved and expanded with new functions based on interactions with the users to determine whether a viable market exists for the service. By rapidly repeating the cycle of user feedback, service improvement, and functional expansion, the approach aims to increase the success rate for startups and businesses.

Under the lean startup approach, its revenue per customer (contract fees under quasi-mandate contract) expands gradually in tandem with development progress and corresponding growth in the product or service.

During the initial stage of development, Sun* creates a prototype (beta version) equipped with the minimal functionality in an effort to keep costs as low as possible. It then collects user feedback, and reflects this during the full-scale development stage. Through this process, it not only lowers the initial investment in a business, but also confirms the market response (i.e., the viability of the business).

In the full-scale development stage (discussed below) that follows the prototype stage, customers often raise their IT investment (product development) budgets in tandem with earnings growth, and this gradually drives up the average revenue per user (ARPU) for the company.

Projects that are not conducive to growth in ARPU

In projects for which the budget has been fixed at the start, or in projects in which software is developed to upgrade or maintain existing systems (i.e., projects that do not involve business launches), it is common for the service vendor to record revenue as a lump sum at the start of the project, with subsequent revenue being derived from maintenance contracts. Although such projects also generate recurring revenue, they are typically not conducive to growth in ARPU as their scale does not expand over time.

Agile development

Agile development is an approach to develop systems or businesses. The approach assumes market environments and needs are in constant flux, and involves rapidly cycling through the process of formulating specifications, development, testing, and releasing, starting with high-priority functions. The goal is to improve products or services iteratively. Agile development not only expedites the launch of businesses, but also allows developers to flexibly accommodate changes in specifications and requirements. It prioritizes the needs of users, and enables efficient and rapid development and operation of products with a higher quality.

Sun* uses this approach from the minimum viable product (MVP) development stage to the full-scale development stage. Specifically, it uses proprietary DevOps* tools to facilitate collaboration between development and operational teams. This contributes to swift development while ensuring system quality. Because the company also employs 1,400 engineers in Vietnam, it can form teams and provide support to meet different development scales ranging from system development to design.

* DevOps: A development process predicated on collaboration between development and operations team. It increases the value of a business through systems and software, and ensures such value is delivered reliably and rapidly to end users.

Supported programming languages

The engineers at the company’s development bases in Japan and Vietnam have expertise in development projects ranging from server-side to front-end development, and are well-versed in a variety of programming languages such as Ruby, Phyton, php, and Java.

Human resources

Human resources with expertise in business development

The company forms development teams for each stage (for each contract) of the business development process. It hires human resources that possess the expertise to develop businesses and also trains such people. Its ultimate goal on the recruiting front is to contribute to software development. The company also recruits personnel that can gauge the customer needs prior to development, as well as experienced business consultants to help develop business model concepts. It aspires to be a one-stop provider of support services for startups and companies that look to develop businesses.

Career background of the company’s team members

Business consultants	Business development directors	Business designers
CTOs	Project managers	Front-end engineers
Back-end engineers	Infrastructure engineers	QA engineers
User interface/user experience (UI/UX) designers	Public relations (PR) and advertising	Recruiters

Source: Shared Research based on company materials

Referral-based recruiting

From FY12/19 to FY12/20, over 80% of the new hires by the parent company were mid-career hires. In addition, some 60% of the new hires were referred to the company. The company says referral-based recruitment confers benefits such as lower expenses to gauge the affinity between candidates and its corporate culture, and a higher matching accuracy with candidates. It has mainly recruited people through referrals since its establishment.

Referral-based recruiting refers to recruiting activities that are based on referrals or recommendations from existing employees. Employees who refer qualified candidates to a company tend to be highly engaged in its operations, and their input therefore contributes to meaningful hires.

Number of new hires (parent company)

	FY2019	FY2020	FY2021
Total	39	67	71
Mid-career hires	36	56	59
New graduate hires	3	11	12

Source: Shared Research based on company materials

Team of over 1,400 engineers in Vietnam

Of the company’s consolidated workforce of roughly 1,800 employees (including the average number of temporary workers), some 1,400 are engineers affiliated with its Vietnamese subsidiary. To conduct offshore development, Sun* mainly hires human resources in Vietnam, a country that promotes the education of IT engineers as a national policy.

Since its founding, Sun* has regarded Vietnamese engineers as an important management resource. It has become increasingly difficult to recruit new IT staff in Japan due to worker shortages driven by a declining birthrate. The country is currently facing a notable shortage of IT engineers.

Vietnam, on the other hand, has promoted IT education as a national policy for many years. Taihei Kobayashi, the current representative director of Sun*, and his team recognized this skillset in Vietnam, and believed these human resources could help resolve the shortage of IT engineers in Japan. This was one of the reasons that prompted them to establish the company.

The benefits of recruiting staff in Vietnam are twofold. The country not only has a larger supply of IT labor, but its IT engineers also command lower wages than their Japanese counterparts. Vietnam has a population of 97mn, which is smaller than Japan’s population of 126mn. By age bracket, however, it has a larger number of young adults in their 20s (15mn compared with 12mn in Japan) and 30s (16mn compared with 14mn in Japan).

Comparison of Japanese and Vietnamese populations (2020 estimates)

('000)	Vietnam	Japan
Below 10	15,479	10,180
10s	13,599	11,267
20s	15,389	12,147
30s	16,201	14,455
40s	13,573	18,473
50s	11,110	16,542
60s	7,343	15,875
70 or older	4,645	27,537
Total	97,339	126,476

Source: Shared Research based on United Nations World Population Prospects (released in August 2019)

The Vietnamese government has long promoted science, technology, engineering and mathematics (STEM) education, and over 50,000 Vietnamese students graduate from specialized IT programs in the country each year. According to Sun*, IT engineering is a popular career path in Vietnam, and many IT graduates wish to put their IT skills to use at a Japanese company.

According to a survey by the Vietnamese research organization TopDev, the number of students graduating from IT programs in the country was 50,000 in 2019 and 53,000 in 2020. The same survey estimates 400,000 IT engineers worked in the Vietnamese software industry in 2019, and 430,000 in 2020.

The number of IT workers in the Japanese IT industry is estimated at roughly 1mn (according to a survey by the Ministry of Economy, Trade and Industry [METI], discussed below).

Sun* deploys Vietnamese engineers in various processes of its value chain ranging from full-scale business and product development to functional expansion when a customer’s business has entered a growth phase.

In the initial stage of business development, the company forms a team composed mainly of Japanese engineers. This is because the main focus in this stage is to extract issues for the business and verify hypotheses, which requires Japanese language proficiency and business development experience in Japan.

Wage comparison based on macro data

Vietnamese wages on average are lower than corresponding Japanese wages. For example, in 2020, the monthly average wage for middle management positions in the manufacturing industry in Vietnam was about USD1,000, compared with USD3,500 in Japan (after also including non-management positions). In the same year, the monthly average wage for management positions in non-manufacturing industries in Vietnam was about USD1,200. In contrast, the average wage in the overall food service sector (after including non-management and part-time positions) in Japan, commonly regarded as a comparatively low-wage industry within the country, was about USD1,100.

Comparison of general worker wages

Vietnam	USD	JPY	Japan	USD	JPY
(JETRO survey)			(MHLW survey)
Manufacturing industry workers (general engineering)	241	25,562	Manufacturing industry	3,537	377,584
Manufacturing industry engineers (mid-tier engineers)	471	49,947	Construction industry	3,910	417,398
Manufacturing industry middle management (section manager level)	1,025	108,703	Information and communication industry	4,601	491,153
Non-manufacturing industry staff (general staff)	595	63,100	Wholesale and retail industries	2,646	282,486
Non-manufacturing industry managers (section manager level)	1,249	132,403	Food service industry	1,101	117,574

Source: Shared Research based on data released by the Japan External Trade Organization (JETRO) and the Ministry of Health, Labour and Welfare (MHLW)

Vietnamese wages for IT positions similarly tend to be lower than their Japanese counterparts. In 2020, tech management officers (such as CTOs and CIOs) earned the highest monthly average wage in Vietnam, at USD5,776. While many job categories in Japan have a lower average monthly wage, the bulk of the overall IT workers in Vietnam earn less than USD4,000 per month. Shared Research understands that, on the whole, Vietnamese wages are lower than Japanese wages (see the table below). Sun* explains that the wages of Vietnamese engineers on average are about half those of Japanese engineers. However, for Vietnamese engineers that are proficient in Japanese and have extensive IT expertise and experience in developing businesses, the company says it pays wages that are commensurate with their abilities.

Comparison of average wages for IT workers (note: these do not reflect the wages paid by Sun*)

Vietnam	USD	JPY	Japan	USD	JPY
(TopDev survey)			(METI survey)
Tech management (CTO, CIO)	5,776	606,357	Consultants	7,248	773,750
Technical directors/engineering managers	4,165	437,236	Project managers	6,959	742,917
Solutions architects	4,069	427,158	Senior systems engineers or IT engineers (core design, IT architecture)	6,075	648,500
Technical architects	3,959	415,610	Systems engineers, programmers (development and implementation of systems for customers)	4,635	494,750
IT managers	3,768	395,559	Systems engineers, programmers (development and implementation of software products)	4,438	473,750
Cloud architects	3,121	327,638	Systems engineers, programmers (development and implementation of embedded software)	4,714	503,250
Machine learning/AI engineers	3,054	320,605	IT specialists (specified technologies)	5,919	631,833
Bridge system engineers	2,234	234,522	IT operation or administration (operation of information systems for customers)	4,751	507,167
DevOps engineers	2,057	215,941	IT maintenance (maintenance and support for information systems for customers)	4,623	493,500
Data scientists	2,032	213,317	IT education (IT-related lecturers, instructors, etc.)	5,082	542,500
Scrum masters	1,927	202,294	Sales or marketing in any of the fields above	6,115	652,750
Project managers	1,820	191,061
Data engineers	1,737	182,348	(Internet-related companies)
Cybersecurity engineers	1,736	182,243	Sales, marketing	5,325	568,417
Embedded developers	1,715	180,038	Producers, directors	6,190	660,750
Database developers	1,701	178,569	Content creators	3,208	342,500
Big data engineers	1,695	177,939	Engineers, programmers	4,623	493,500
Fullstack developers	1,348	141,511	Customer support (help desk)	3,051	325,750
System administrators	1,338	140,461	Other	4,600	491,083
Backend developers	1,300	136,472
Game developers	1,215	127,549
iOS developers	1,190	124,925
Android developers	1,125	118,101
Product managers	1,001	105,084
IT business analysts	966	101,409
UX/UI designers	917	96,265
Frontend developers	912	95,741
QA/QC	706	74,115
Testers	508	53,329
Technical support	362	38,002
IT helpdesk	322	33,803

Source: Shared Research based on the “Vietnam IT Market Report” by TopDev, and “Results of the Survey on Wages in the IT-related Industry Compiled” by METI (2017)

Bridge engineers

In development stages that rely in part on Vietnamese engineers, the company deploys bridge system engineers (i.e., engineers proficient in Japanese and Vietnamese) to mediate between IT engineers hired in Vietnam and project managers in Japan in an effort to reduce miscommunications stemming from the language barrier. The company’s offshore development does not involve outsourcing mechanical tasks at low rates, but rather entails the development of businesses and software. This type of work necessitates smooth communication between engineers, as is also the case for development that is handled exclusively in Japan.

Bridge engineers are system engineers that can communicate with customers and development teams in both languages, and possess expertise as an engineer. In addition to their language proficiency, the company’s bridge engineers are evaluated on criteria such as technical knowledge and the ability to communicate, analyze system requirements, and manage processes.

Approach toward customer acquisition

Startups and entrepreneurs

Many of the startups seek the support of Sun* after completing their Series A* funding round. The company helps them develop a service prototype and explore business expansion possibilities. The company has increased such customers through referrals from its existing customers and the startup community. The cross-industry network of a startup community has proved particularly effective in securing projects for business development. The company plans to further push ahead with community building, and strengthen its support for startups.

As part of this effort, it decided to become a partner in the Startup Studio combo initiative launched by Party Inc. (unlisted) in July 2021 (see the Medium-term business plan section).

* Series A funding round: One of the funding stages startups go through to procure capital. In accordance with their growth stage, startups raise increasing amounts of capital starting from the seed round (smallest amount), and proceeding through the Series A funding round (early stage), Series B funding round (middle stage), and Series C funding round (late stage).

Large (enterprise) customers

Sun* defines enterprise customers as one of the following: (1) a listed company that is included in the Nikkei 225, the Nikkei 400, or the Nikkei 500, (2) a group member of such a company, or (3) a company with a market cap, revenue scale, and workforce equivalent to a listed company.

To increase points of contact with enterprise customers, Sun* believes it is more effective to collaborate and build alliances with other companies and invest in advertising than to build up a community as is the case for startups. In particular, it intends to strengthen alliances with companies that provide services to enterprise customers. In this context, the company has partnered with Microsoft Japan Co., Ltd. and Deloitte Tohmatsu Venture Support Co., Ltd. (see the Medium-term business plan section).

Talent Platform

Business model

Revenue

In the Talent Platform service line, the company operates the Geek Job programming school in Japan, placing graduates in temporary or permanent positions at Japanese companies. Overseas, it operates programs that cultivate advanced IT talent (open to selected students only) at 12 universities in four countries, including Vietnam, and recruits graduates of the programs for Japanese companies. It also utilizes its proprietary human resources database to refer candidates for executive positions such as CTO and CFO to its customers (primarily startups).

Revenue in this service line is in principle derived from success fees. In Japan, the company mainly generates revenue under recruiting/dispatching contracts or outsourcing contracts, which account for roughly 30–35% of annual revenue.

Education business in Vietnam and other countries

In its overseas recruiting business (placement of Vietnamese talent with Japanese companies), Sun* records participation fees for job fairs it organizes (JPY300,000 per company) and success fees for placements (JPY1mn per placement) as revenue. It does not disclose annual data on the number of placements, the number of job fairs, or the number of companies participating in job fairs. Between 2014, when the business was launched, and FY12/20, the company placed a total of roughly 400 human resources with 133 companies.

Major cost items incurred until placement (compensation paid to Sun*)

Item	Amount
Screening setup fees	Held online; JPY300,000 per company
Success fees upon confirmation of placement	JPY1mn per placement

Source: Shared Research based on company materials

As of April 2020, the overseas education business was operated by 50 group employees, who mainly work as instructors or job fair operators. The team includes 10 Japanese and 24 Vietnamese instructors who teach Japanese at universities in Vietnam and other countries, and two Japanese and three Vietnamese instructors who teach IT (see table below). All instructors have received professional education in their fields of expertise and have related experience.

Structure of overseas educational business

Japanese language instructor team	Japanese instructors	10	Individuals who majored in Japanese language education at university, individuals who have passed the Japanese Language Teaching Competency Test
Japanese language instructor team	Vietnamese instructors	24	Graduates from a teachers’ college, graduates from Japanese language department instructor course
IT instructor team	Japanese instructors	2	Former supervisors and project managers of IT companies
IT instructor team	Vietnamese instructors	3	Graduates from IT departments, individuals who have worked as a system engineer at a Japanese IT company
Student management team	Team that manages hiring-related matters (undecided/confirmed) and job fairs	8	Individuals who have studied in Japan as international students, individuals who have acquired the N1 level of the Japanese Language Proficiency Test (JLPT), individuals with work experience at Japanese companies

Source: Shared Research based on company materials

Industry-academia collaboration

Start of industry-academia collaboration with Vietnamese university (from 2014)

Sun* operates IT engineering and Japanese language courses for students who aspire to work in Japan as an IT engineer at 12 universities in four countries. It dispatches its own employees as instructors to teach related subjects.

The company’s industry-academia collaboration activities began when it took over the Higher Education Development Support Project on ICT (HEDSPI) educational project at the Hanoi University of Science and Technology. The project was implemented as an Official Development Assistance (ODA) project funded by the Japanese government and as a Technical Cooperation project promoted by the Japan International Cooperation Agency (JICA) from 2006. It aims to “cultivate advanced IT human resources that are proficient in Japanese,” and has been established as an official department at various universities. When JICA’s support came to an end in 2014, the Hanoi University of Science and Technology requested that Sun* take over the project.

12 universities in four countries

Affiliated universities
Vietnam	Indonesia
Hanoi University of Science and Technology	Gadjah Mada University
The University of Danang-University Science and Technology	University of Indonesia
Vietnam National University Hanoi-University of Engineering and Technology
Vietnam National University HCMC-University of Engineering and Technology	Malaysia
Vietnam National University Hanoi-University of Science	Malaysian-Japan International Institute of Technology
Phenikaa University
Universities that offer the program
Brazil
University of Campinas
Federal University of Minas Gerais
University of São Paulo

Note: As of December 2021
Source: Shared Research based on company materials

The number of students enrolled in the programs operated by Sun* has increased each year, and was 2,248 as of January 2022 (+480 YoY). In 2020, roughly 500 students graduated from these programs. As of FY12/20, the company had successfully placed a total of 390 graduates from its programs with 133 Japanese companies.

Students enrolled in programs operated by the company

	Jan 2015	Jan 2016	Jan 2017	Jan 2018	Jan 2019	Jan 2020	Jan 2021	Jan 2022
Student enrollment	459	480	571	720	914	1,387	1,867	2,248

Source: Shared Research based on company data

Education provided

The curriculum offered by Sun* provides practical instruction to prepare students for work life in Japan, and includes general Japanese language courses, IT engineering-related Japanese language courses, and courses for students who have secured a job at a Japanese company (covering topics such as Japanese business practices and etiquette). The IT education in the curriculum incorporates the expertise gained by the company in its startup support projects. The content was prepared independently by Sun* without input from a Japanese governmental organization (such as JICA) or from the Vietnamese government.

The company says it provides a total of 1,220 hours of instruction to students at the Hanoi University of Science and Technology during the course of the five-year program, breaking down into 650 hours of general Japanese language instruction, 250 hours of IT-related Japanese language instruction, and 320 hours of instruction for students that have secured a job in Japan.

Market and value chain

IT investment market

Breakdown of IT investment

Categories of IT investment

Sun* divides IT investment into the categories of digitization and digitalization based on the underlying purpose. It believes its own business area falls in the category of digitalization.

The company thinks of digitization as IT investment geared toward optimizing operational efficiency. The goal is to streamline expenses by digitizing business processes. Sun* sees digitization as a form of investment to maintain and operate an existing business. Prime examples of digitization are projects to upgrade the core system of a company.

Under this type of investment, a system integrator and a user company define requirements (envision the completed system), and the system integrator generates earnings by delivering the completed system by a set deadline. Accordingly, the system integrator and user company typically enter into a contract for work.

The company regards digitalization as investment in new IT businesses. The goal is to create a business with the help of digital technologies, or achieve earnings growth through digital technologies. Sun* considers digitalization a form of investment to develop new business strategies that enhance value.

This type of investment often deals with the development and growth of businesses whose ultimate shape has yet to be clearly defined. Due to the absence of rigidly defined requirements and a clear vision for the completed business, the customer pays the solutions provider once a predetermined part of the work has been completed. Sun* undertakes this type of work under quasi-mandate contracts with its customers.

The Yano Research Institute estimates the value of private-sector IT investment in Japan at JPY13.3tn in FY2021. The company estimates this breaks down to digitization investment of JPY8.8tn and digitalization investment of JPY4.5tn (33.7% of total IT investment).

Scale of digitalization market (company estimates)

(JPYmn)		FY2015	FY2016	FY2017	FY2018	FY2019	FY2020	FY2021
IT investment (Japan; private-sector)		11,556,000	11,880,000	12,153,000	12,493,000	12,918,000	13,124,000	13,320,000
	Digitization				9,682,075			8,831,160
	Digitalization				2,810,925			4,488,840
	Digitalization share of IT investment				22.5%			33.7%

Note: Shaded figures are projections by the Yano Research Institute (as of November 2019). The data do not factor in COVID-19 impact.
Source: Shared research based on company data originally sourced from “Implementation of Survey regarding IT Investment at Domestic Companies (2019)” by the Yano Research Institute, and “Corporate IT Trends Survey Report 2020” by the Japan Users Association of Information Systems (JUAS)

Sun* believes that once companies have improved the efficiency of their businesses through digitization, investment budgets geared toward digitization will decline, freeing up capital that can be diverted toward digitalization. If that happens, the company explains that the market for digitalization and its share within overall IT investment are likely to expand in a non-continuous fashion.

IT labor market

Sun* expects IT workers, who drive software development, to remain in short supply as the software market continues to expand.

Based on the results of the IT Labor Supply-Demand Survey (March 2019) commissioned by the Ministry of Economy, Trade and Industry (METI), the company believes Japan had a shortfall of about 260,000 IT workers (approximate range of 210,000–310,000) in 2019, and it expects this gap to rise to 160,000–790,000 by 2030. Sun* believes that persistent shortages in IT labor in the future will continue to expand its business opportunities.

IT worker supply-demand gap (shortages)

			2018	2019	2020	2025	2030
Supply of IT human resources			1,031,538	1,045,512	1,059,876	1,110,122	1,133,049
IT demand growth rate: annual 1%
	Demand for IT human resources		1,231,538	1,255,266	1,259,006	1,277,873	1,297,020
		Shortages	200,000	209,754	199,130	167,751	163,971
		Shortage rate	16.2%	16.7%	15.8%	13.1%	12.6%
IT demand growth rate: annual 2–5%
	Demand for IT human resources		1,231,538	1,306,347	1,363,556	1,474,192	1,581,645
		Shortages	200,000	260,835	303,680	364,070	448,596
		Shortage rate	16.2%	20.0%	22.3%	24.7%	28.4%
IT demand growth rate: annual 3–9%
	Demand for IT human resources		1,231,538	1,357,427	1,472,276	1,694,140	1,920,154
		Shortages	200,000	311,915	412,400	584,018	787,105
		Shortage rate	16.2%	23.0%	28.0%	34.5%	41.0%

Note: Shortage rate = IT labor supply / (IT labor supply + shortages)
Source: Shared Research based on METI-commissioned IT Labor Supply-Demand Survey (March 2019) and company materials

The assumptions underlying the estimates above are as follows.

The survey in question estimated the IT labor supply-demand gap in 2018, and envisaged three growth scenarios for IT demand from 2019: CAGR of 1%, CAGR of 2–5%, and CAGR of 3–9%.

It assumed the labor productivity in the IT (information services) industry will increase at a CAGR of 0.7%, which is the historical growth rate for 2010–2018 (METI estimate).

Definition of IT labor

The IT labor cited in the METI-commissioned IT Labor Supply-Demand Survey corresponded to “system consultants and designers,” “software creators,” and “other information processing and communication engineers.” These categories follow the classification used in census data. Companies and businesses that hire IT labor are mainly defined in the survey as IT services companies, Internet-related services providers (mainly companies that provide IT services or software), and IT system divisions of companies that use IT services provided by third parties.

Competitors and industry peers

Shared Research understands that there are no other Japanese listed companies that operated under the same business model as Sun*. The company is a one-stop provider of value-creation processes ranging from business conception (consulting and other services) to development and operation. It mainly targets the digitalization market, which is populated by few companies. However, in subsegments of the company’s businesses such as consulting, user interface and user experience (UI/UX) design, and marketing, Sun* competes with foreign-affiliated consulting firms, venture capital firms, and other companies. In software development, Shared Research understands that Sun* competes with some domestic and overseas systems integrators.

Strengths and weaknesses

Strengths

Early mover in the business creation field—a market with strong growth potential and little competition—with extensive expertise in supporting business development accumulated in over 500 projects

Sun* provides consulting, software development, recruiting, and other services that support customers in the creation of businesses or value. It offers comprehensive support to companies (including startups) that seek to develop businesses, guiding them in the process from business creation to growth. While it qualifies as a “custom software services provider” under the Japan Standard Industrial Classification, the company believes it operates in a different business category than conventional system integrators and software developers.

Sun* specializes in the creation of value through digital technologies, a field it refers to as digitalization*1. It does not operate or maintain core systems, nor does it use digital technologies to enhance the efficiency of existing business operations, i.e., digitization. Since its founding, it has successfully completed around 500 value creation projects. In FY12/21, its companywide OPM reached 17.6%, exceeding the 9.8% average for the 10 leading Japanese system integrators (Shared Research estimate based mainly on FY03/22 data). The company predicts IT engineer shortages will persist in the digitalization market, its main business field, and it estimates Japan will face a shortfall of 430,000 IT engineers by 2025. As a result, it believes this market has significant room for growth.

^*1 Digitalization: Sun* defines “digitalization” as the use of digital technologies to create business models. It contrasts this term with “digitization,” which, according to the company, refers to the use of digital technologies to increase the efficiency of existing business processes.

Ability to form teams of experts and charge a high billing rate per employee to existing customers thanks to the access to specialists and advanced business and software development approaches

Sun* supports its customers develop businesses by forming teams of business, technology, creative, and other experts. When its customers wish to launch startups or businesses, the company first deploys business consultants with expertise in digital transformation (DX) to summarize the requirements. In the next stage, its lead engineers—who have experience in setting up startups or businesses as CTOs—and user interface/user experience (UI/UX) designers supervise the business creation process until the release of the first product. After a business or service gets off the ground, the company provides ongoing development and operational support in part through its Vietnamese subsidiary, which has assembled an IT team with a global track record and corresponding expertise.

The company uses development frameworks such as design thinking^*2, lean startup^*3, and agile development^*4 to swiftly improve products in accordance with user needs. It excels in development processes for business creation, and secures high order prices by co-creating businesses with its customers. Shared Research estimates the monthly billing rate per employee charged by the company is about JPY1.5–2.0mn, which exceeds the JPY1mn average rate at the leading Japanese system integrators.

*²Design thinking: An approach used by companies to clarify the location or root of a problem (rather than to resolve a problem) when pursuing non-linear innovation. The five stages of design thinking that power innovation are empathize, define, ideate, prototype, and test. Designers advance through these stages in a non-linear fashion, always maintaining the freedom to go back and make revisions as the situation demands.

*³Lean startup: A management approach to support company or business launches. It involves formulating a hypothesis, rapidly developing a prototype service with the minimum functionality needed to test the hypothesis, and providing the service to users to elicit feedback. The service is subsequently improved and expanded with new functions based on interactions with the users to determine whether a viable market exists. The goal is to increase the success rate for startups and new businesses by rapidly repeating the cycle of user feedback, service improvement, and functional expansion.

*⁴Agile development: An approach to develop systems or businesses. It assumes market environments and needs are in constant flux, and aims to improve functions iteratively by rapidly repeating the process of formulating specifications, development, testing, and releasing, starting with highly precise functions. Agile development expedites the launch of businesses, and helps developers to flexibly accommodate changes in specifications and requirements. It prioritizes the needs of users, and enables efficient and rapid development and operation of products with a higher quality.

Ability to accumulate expertise and develop software at half the cost compared with the costs of Japanese engineers thanks to its subsidiary in Vietnam, which employs over 1,400 engineers

Sun* provides offshore development for value creation through its Vietnamese subsidiary. The benefit of working with two teams is that the company can accumulate in-house expertise not only in Japan (about 200 employees) but also in Vietnam (over 1,400 employees). The extensive knowledge and competence the company has built in value creation has allowed it to maintain high billing rates.

The company is able to charge high billing rates while keeping its development costs low. In FY12/20, its employees received an estimated average annual salary of JPY2,537,000, calculated by dividing the total labor expenses and outsourcing costs (mainly salaries paid to the Vietnamese subsidiary) at the parent level—which approximate the company’s personnel expenses—by the total number of employees at the consolidated level. This was below the average annual salary of JPY8,342,000 for the leading 10 Japanese system integrators. In sum, the company’s highly profitable earnings structure is underpinned by high billing rates and low costs. In FY12/21, its OPM of 17.6% exceeded the 9.8% for the top 10 Japanese system integrators (average for the most recent fiscal year).

Weaknesses

Personnel expenses accounting for roughly 90% of cost of revenue, leaving little room for cost reductions to support profit when economic slowdowns depress the top line

Personnel expenses account for the bulk of the company’s costs. At the parent level, combined labor costs and outsourcing costs paid to the Vietnamese subsidiary (nearly entirely allocated toward personnel expenses for engineers) make up 100% of cost of revenue. Consolidated expenses also mostly consist of personnel expenses. Shared Research therefore infers that, in the event of sharp downturn in its top line, the company would have little leeway to absorb the resulting profit decline under its present cost structure, which only has a low share of variable costs.

Sun* achieved YoY revenue growth of 18.5% YoY in FY12/20, even as real GDP fell 4.6% YoY due to the COVID-19 pandemic. However, in 2009, the year after the global financial crisis erupted, capital procured by Japanese startups contracted 39.4% YoY (Shared Research estimate based on data released by the Japan Venture Capital Association [JVCA]). Shared Research thinks that financial crises that dramatically reduce the number of startups could erode the company’s earnings.

Earnings dependent on worker hours (number of workers x development period), as a result of which unexpected business growth at customers does not directly translate into additional earnings for the company

Sun* generates the bulk of its revenue under quasi-mandate contracts and contracts for work, which determine its compensation at the start of a project. This leaves it dependent on increases in worker hours (number of workers multiplied by development period) to expand its revenue. As a result, it is unable to benefit directly from unexpected business growth at customers through performance-based compensation that increases in proportion with such growth. The company has launched a revenue sharing model under which it becomes a partner (shareholder) of its customers, but such operations have yet to reach a scale that can affect its overall earnings.

The company uses development bases in Vietnam, a business model that makes it vulnerable to forex fluctuations

The company was established in 2013 with the hiring of engineers in Vietnam, which had been promoting IT education as a national policy. Taihei Kobayashi, the current representative director, recognized the skills of these engineers and realized that they could be instrumental in solving the shortage of IT engineers in Japan.

The company, based on this background, has created a low-cost business model in which it uses development bases in Vietnam. However, the reliance on these bases also means that the company is more vulnerable to forex fluctuations than its rivals, which handle development projects mainly in Japan. The company says that it takes into account the impact of forex fluctuations when it suggests prices to customers. Even so, we suspect that existing customers may not readily accept a price increase intended to pass on rising costs. We also believe that there is a time lag between a cost increase and the corresponding price increase, making the cost management difficult.

Historical results and financial statements

Income statement

Income statement			FY02/16	FY02/17	FY02/18	FY12/18	FY12/19	FY12/20	1H FY12/21
(JPYmn)			Parent	Parent	Parent	Cons.	Cons.	Cons.	Cons.
Revenue			862	1,413	1,933	2,219	4,530	5,368	8,031
	YoY		-	63.9%	36.9%	14.8%	104.1%	18.5%	49.6%
Cost of revenue						959	2,133	2,515	3,969
Gross profit						1,260	2,397	2,852	4,062
	Gross profit margin		-	-	-	56.8%	52.9%	53.1%	50.6%
SG&A expenses						959	1,922	1,966	2,650
	SG&A ratio		-	-	-	43.2%	42.4%	36.6%	33.0%
Operating profit						301	475	886	1,411
	YoY		-	-	-	-	57.4%	86.8%	59.2%
	Operating profit margin		-	-	-	13.6%	10.5%	16.5%	17.6%
Non-operating income						29	24	56	167
		Interest income				3	10	28	138
		Subsidy income				13	13	7	4
		Foreign exchange gains					-	21	11
		Other	-	-	-	13	1	1	14
Non-operating expenses						4	13	16	4
		Interest expenses				1	3	3	2
		Foreign exchange losses				-	7	-	-
		Listing expenses				-	-	6	-
		Share issuance expenses				-	-	6	-
		Rents				1	3	-	-
		Other	-	-	-	-	0	1	2
Recurring profit			10	9	131	326	486	927	1,574
		YoY	-	-8.5%	-	148.5%	49.2%	90.6%	69.8%
		Recurring profit margin	1.2%	0.6%	6.8%	14.7%	10.7%	17.3%	19.6%
Income taxes						49	75	123	261
	Implied tax rate		0.0%	0.0%	0.0%	15.1%	15.5%	13.2%	16.6%
Net income attributable to owners of the parent			7	7	93	277	411	804	1,302
	YoY		-	-11.7%	-	198.4%	48.4%	95.8%	61.8%
	Net margin		0.9%	0.5%	4.8%	12.5%	9.1%	15.0%	16.2%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

FY12/18 was an irregular 10-month period as the company changed its fiscal year-end from February to December.

In FY12/19, the growth in earnings was attributable to the two additional months compared with FY12/18, which was an irregular 10-month period, and the impact from the conversion of Groove Gear, Inc. into a wholly owned subsidiary in December 2018.

SG&A expenses

		FY02/16	FY02/17	FY02/18	FY12/18	FY12/19	FY12/20	FY12/21
(JPYmn)		Non-cons.	Non-cons.	Non-cons.	Cons.	Cons.	Cons.	Cons.
SG&A expenses					959	1,922	1,966	2,650
	Salaries and allowances				425	880	946	1,192
	Provision for bonuses				6	16	28	51
	Provision for doubtful accounts				0	22	8	11

Source: Shared Research based on company data

Breakdown of cost of revenue (parent)

		FY02/16	FY02/17	FY02/18	FY12/18	FY12/19	FY12/20	FY12/21
(JPYmn)		Non-cons.	Non-cons.	Non-cons.	Non-cons.	Non-cons.	Non-cons.	Non-cons.
Cost of revenue					1,745	2,555	3,368	4,879
	Outsourcing costs				1,671	2,409	3,003	4,421
	Labor costs				85	144	290	458
	Various costs				18	23	33	54
	Manufacturing cost				1,775	2,577	3,326	4,933
	Beginning work-in-process inventories				-	30	53	10
	Total				1,775	2,607	3,378	4,943
	Ending work-in-process inventories				30	53	10	64
	Cost of revenue				1,745	2,555	3,368	4,879

Source: Shared Research based on company data

Outsourcing expenses mainly comprise personnel expenses for IT engineers and other workers employed by the Vietnamese subsidiary Sun Asterisk Vietnam Co., Ltd. These are recorded as labor expenses under cost of revenue in the consolidated income statement.

Balance sheet

Balance sheet (JPYmn)		FY02/16	FY02/17	FY02/18	FY12/18	FY12/19	FY12/20	FY12/21
		Parent	Parent	Parent	Cons.	Cons.	Cons.	Cons.
Assets
	Cash and deposits				773	2,383	5,073	5,729
	Notes and accounts receivable				352	399	584	989
	Inventories				85	103	16	101
	Other				92	70	133	306
	Allowance for doubtful accounts				-	-6	-10	-18
Total current assets					1,303	2,950	5,795	7,108
	Buildings and structures				85	70	29	42
	Tools, furniture, and fixtures				25	36	43	60
Total tangible fixed assets					110	106	72	102
	Goodwill				101	91	81	597
	Other				1	0	0	3
Total intangible assets					102	91	81	600
	Investment securities				14	86	170	410
	Deferred tax assets				7	22	9	34
	Other				85	117	110	167
	Allowance for doubtful accounts				-	-16	-20	-25
Investments and other assets					106	209	269	586
Total fixed assets					318	406	421	1,287
Total assets		225	387	738	1,621	3,356	6,217	8,395

Liabilities
	Notes and accounts payable				166	137	142	300
	Short-term debt				118	298	209	141
	Accounts payable–other				121	34	24	61
	Accrued expenses				119	150	188	268
	Income taxes payable				27	63	70	208
	Advances received				97	155	154	279
	Provision for bonuses				11	16	28	51
	Other				93	117	194	280
Total current liabilities					752	970	1,011	1,516
	Long-term debt				205	310	153	219
	Asset retirement obligations				30	36	20	33
	Other				8	11	15	42
Total fixed liabilities					243	357	188	293
Total liabilities		190	346	604	994	1,327	1,199	1,809
Net assets
	Capital stock	15	15	15	55	555	1,668	1,704
	Capital surplus				40	540	1,653	1,689
	Retained earnings				535	946	1,751	3,052
	Accumulated other comprehensive income				-5	-12	-55	140
	Treasury stock				-	-	-	-0
	Share subscription rights				0	0	0	0
Total net assets		35	41	134	626	2,029	5,018	6,586
Total liabilities and net assets		225	387	738	1,621	3,356	6,217	8,395
Working capital		-	-	-	271	366	457	790
Total interest-bearing debt		-	-	-	323	608	362	359
Net debt		-	-	-	-450	-1,775	-4,711	-5,370

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Cash flow statement

Cash flow statement			FY02/16	FY02/17	FY02/18	FY12/18	FY12/19	FY12/20	FY12/21
(JPYmn)			Parent	Parent	Parent	Cons.	Cons.	Cons.	Cons.
Cash flows from operating activities (1)						387	462	863	1,188
		Pre-tax profit				326	486	927	1,563
		Depreciation				22	52	58	53
		Amortization of goodwill				-	10	10	25
		Change in provision for doubtful accounts				-	22	8	11
		Change in provision for bonuses				0	5	12	21
		Interest income				-3	-10	-28	-138
		Interest expenses				1	3	3	2
		Change in working capital				-47	-98	-101	-262
		Change in other assets				85	2	-47	-75
		Change in advances received				2	60	3	62
		Change in accounts payable–other				50	-87	-9	-88
		Change in accrued expenses				32	32	40	27
		Change in other liabilities				-13	32	61	-20
		Other				-2	-	-	7
		Interests received				3	10	28	138
		Interests paid				-1	-3	-3	-2
		Income taxes paid				-69	-54	-100	-137
Cash flows from investing activities (2)						-141	-297	-982	-1,388
		Payments into time deposits				-	-165	-1,248	-4,211
		Proceeds from withdrawal of time deposits				-	-	387	3,369
		Purchase of tangible fixed assets				-61	-44	-33	-52
		Purchase of investment securities				-14	-72	-86	-239
		Proceeds from sale of investment securities				-	-	-	10
		Purchase of shares of subsidiaries resulting in change in scope of consolidation				-68	-	-	-275
		Other				2	-17	-1	11
	Free cash flow (1+2)					245	165	-119	-200
Cash flows from financing activities						251	1,284	1,982	-181
		Net change in short-term borrowings				-	100	-70	-30
		Net change in long-term borrowings				170	185	-176	-222
		Proceeds from issuance of, and redemption of, bonds				-	-	-	-
		Proceeds from issuance of shares				80	999	2,228	71
		Proceeds from issuance of share subscription rights				0	-	-	-
Change in cash and cash equivalents						498	1,445	1,852	1,852

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Historical performance

1H FY12/22 results (out August 10, 2022)

Summary

Revenue: JPY5.2bn (+43.0% YoY)
Operating profit: JPY460mn (-41.3% YoY)
Recurring profit: JPY457mn (-45.5% YoY)
Net income attributable to owners of the parent: JPY339mn (-52.8% YoY)

Progress rate

The progress rate of 1H results toward the revised full-year plan (out August 10, 2022) was 47.9% for revenue (versus 45.2% of full-year results in 1H FY12/21), 53.1% for operating profit (55.4%), 43.2% for recurring profit (53.3%), and 44.1% for net income (55.2%).

Key performance indicators (KPIs), etc.

Number of recurring revenue customers: 105 companies (+14.1% YoY), of which 26 were enterprise customers (flat YoY) and 79 were small and medium-sized business (SMB) customers (+19.7% YoY)

Monthly ARPU (average for three months): JPY4,940,000 (+10.5% YoY), breaking down into JPY7,170,000 for enterprise customers (-1.6% YoY) and JPY4,170,000 for SMB customers (+23.4% YoY)

Monthly average churn rate: 3.51% (monthly contract cancellations divided by the number of total customers; average for the 90 months from January 2015 to June 2022)

Key points

Revenue

Revenue for the Creative & Engineering service line was JPY4.5bn (+48.8% YoY) driven by steady orders from existing customers and continued growth in new customers. At end-June 2022, the number of recurring revenue customers was 105 companies (+14.1% YoY). The average monthly ARPU for Q2 (three months) was JPY4,940,000 (+10.5% YoY). The company achieved substantial growth by cultivating new customers and raising the ARPU at the same time. 1H revenue at Trys, Inc., which was made a consolidated subsidiary in September 2021, came to JPY638mn.

Q2 monthly ARPU (average for three months) for enterprise customers was JPY7,170,000, down from JPY8,670,000 in Q1 (average for three months) due in large part to completion of a large project for an existing customer. The company said it was unable to upsell enough to existing customers as it had mainly conducted inbound sales from customers. The company also said it is currently reviewing the balance between new customer acquisition and existing customers retention/upselling.

Revenue in the Talent Platform service line was JPY684mn (+14.0% YoY). The increase was due to a recovery trend in companies' willingness to hire, although intercompany adjustments increased on a consolidated basis due to a rise in the share of personnel placement to the Creative & Engineering service line.

Operating profit

Operating profit was JPY460mn (-41.3% YoY). The JPY323mn decrease in operating profit breaks down as a revenue contribution of JPY1.6bn, offset by a cost increase of JPY909mn, JPY426mn increase in personnel costs under SG&A expenses, JPY101mn increase in outsourcing expenses, JPY216mn foreign exchange impact, and JPY232mn increase in other expenses. The foreign exchange impact was largely due to increased labor and other expenses at the Vietnam subsidiary owing to yen depreciation against the Vietnamese dong. OPM was down 12.7pp YoY to 8.8%.

Non-operating income

The company recorded a JPY72mn foreign exchange loss under non-operating loss. The loss resulted from the revaluation of JPY-denominated deposits of consolidated subsidiary Sun Asterisk Vietnam (JPY4.06bn at end-March 2022), using the exchange rate at quarter-end.

Q1 FY12/22 results (out May 11, 2022)

Summary

Revenue: JPY2.6bn (+42.9% YoY)
Operating profit: JPY306mn (-26.7% YoY)
Recurring profit: JPY177mn (-54.7% YoY)
Net income attributable to owners of the parent: JPY135mn (-59.5% YoY)

Key performance indicators (KPIs)

Number of recurring revenue customers: 98 companies (+11.4% YoY), of which 26 were enterprise customers (+4.0% YoY) and 72 were small and medium-sized business (SMB) customers (+14.3% YoY)
Monthly ARPU (average for three months): JPY5,244,000 (+19.4% YoY), breaking down into JPY8,670,000 for enterprise customers (+28.3% YoY) and JPY4,000,000 for SMB customers (+14.3% YoY)
Monthly average churn rate: 3.44% (monthly contract cancellations divided by the number of total customers; average for the 87 months from January 2015 to March 2022)

Progress rate

In Q1 FY12/22, revenue, operating profit, recurring profit, net income attributable to owners of the parent were 22.8%, 17.9%, 9.7%, and 9.0%, respectively, of the full-year forecast. For Q1 FY12/21, the figures were 22.7%, 29.6%, 24.9%, and 25.6% of the FY12/21 full-year results. Revenue and operating profit for Q1 FY12/22 were more or less in line with the company projection. Recurring profit missed the mark because the company posted a non-operating expense of JPY131mn related to a foreign exchange loss at consolidated subsidiary Sun Asterisk Vietnam.

Revenue

Q1 FY12/22 revenue was JPY2.6bn (+42.9% YoY), hitting a record quarterly high. JPY2.3bn (+51.9% YoY) came from the Creative & Engineering service line and JPY288mn (-3.1% YoY) from the Talent Platform service line.

In the Creative & Engineering service line, orders from existing customers remained stable and strong, and new customers continued to increase. At end-March 2022, the number of recurring revenue customers was 98 companies (+11.4% YoY). The average monthly ARPU for Q1 (three months) was JPY5,244,000 (+19.4% YoY). The company achieved substantial growth by cultivating new customers and raising the ARPU at the same time. Recurring revenue was up 32.3% YoY. Q1 revenue at Trys, Inc., which was made a consolidated subsidiary in September 2021, came to JPY340mn.

Revenue declined YoY in the Talent Platform service line. The booking of xseeds Hub revenue was pushed back (student enrollment was delayed due to restrictions on entry to Japan) and intercompany adjustments increased on a consolidated basis due to a rise in the share of personnel placement to the Creative & Engineering service line.

Operating profit

Operating profit was JPY306mn (-26.7% YoY); OPM was down 11.2pp YoY to 11.7%. The cost of revenue ratio increased by 5.7pp and the SG&A ratio by 5.4pp, mainly because of a rise in the number of employees and the amount of salaries. The cost increase was in line with the company projection. At the earnings results meeting, the company referred to a project that had run into trouble. However, the company explained that the impact of the incident was negligible.

Other

The company recorded a JPY131mn foreign exchange loss under non-operating loss. The loss resulted from the revaluation of JPY-denominated deposits of consolidated subsidiary Sun Asterisk Vietnam (JPY4.06bn at end-March 2022), using the exchange rate at quarter-end.

Full-year FY12/21 results (out February 9, 2022)

Summary

Revenue: JPY8.0bn (+49.6% YoY; 99.4% of the full-year target)
Operating profit: JPY1.4bn (+59.2% YoY; 113.9%)
Recurring profit: JPY1.6bn (+69.8% YoY; 117.0%)
Net income attributable to owners of the parent: JPY1.3bn (+61.8% YoY; 111.4 %)

Key performance indicators (KPIs), etc.

Number of recurring revenue customers: 95 companies (+11.8% YoY), of which 26 enterprise customers (+18.2% YoY) and 69 small and medium-sized business (SMB) customers (+9.5% YoY)

Monthly ARPU (average for three months): JPY5,110,000 (+25.2% YoY), breaking down into JPY8,670,000 for enterprise customers (+46.2% YoY) and JPY3,740,000 for SMB customers (+8.1% YoY)

Monthly average churn rate: 3.45% (monthly contract cancellations divided by the number of total customers; average for the 84 months from January 2015 to December 2021)

Key points

In FY12/21, the company reported revenue of JPY8.0bn (+49.6% YoY), breaking down into JPY6.8bn (+57.9% YoY) for the Creative & Engineering service line and JPY1.2bn (+15.3% YoY) for the Talent Platform service line.

In the Creative & Engineering service line, orders from existing customers remained stable and strong, and new customers continued to increase. At end-December 2021, the number of recurring revenue customers was 95 companies (+11.8% YoY). The average monthly ARPU for the full-year (12 months) was JPY4,752,000 (+22.2% YoY). Revenue in October–December 2021 at Trys, Inc., which was made a consolidated subsidiary in September 2021, came to JPY306mn.

The company was unable to keep up with robust demand for its human resources. Accordingly, it prioritized projects that were likely to generate long-term recurring revenue and received orders for such projects instead of one-time revenue projects that would increase revenue in the short term.

In the Talent Platform service line, revenue increased on a gradual recovery in corporate hiring appetite.

Operating profit was JPY1.4bn (+59.2% YoY), and OPM was up 1.1pp YoY to 17.6%.

Cumulative Q3 FY12/21 results (out November 10, 2021)

Summary

Revenue: JPY5.7bn (+44.2% YoY; 70.8% of the revised full-year target)
Operating profit: JPY1.1bn (+62.8% YoY; 91.2%)
Recurring profit: JPY1.2bn (+67.2% YoY; 89.7%)
Net income attributable to owners of the parent: JPY1.0bn (+59.2% YoY; 88.6%)
The company has revised its FY12/21 forecast (discussed below).

Key performance indicators (KPIs), etc.

Number of recurring revenue customers: 92 companies (77 in cumulative Q3 FY12/20), of which 26 enterprise customers (17) and 66 small and medium-sized business (SMB) customers (60)

Monthly ARPU (average for three months): JPY5,010,000 (+25.3% YoY), breaking down into JPY8,490,000 for enterprise customers (+13.4% YoY) and 3,640,000 for SMB customers (+23.0% YoY)

Monthly average churn rate: 3.47% (3.55% in Q2 FY12/21; the monthly average churn rate for Q3 is calculated by dividing the monthly contract cancellations by the number of total customers, and reflects the average for the 81 months from January 2015 to September 2021; the monthly average churn rate for Q2 reflects the average for the 78 months from January 2015 to June 2021)

Key points

In cumulative Q3 FY12/21, the company reported revenue of JPY4.8bn for the Creative & Engineering service line (+51.5% YoY) and JPY897mn for the Talent Platform service line (+14.7% YoY).

In the Creative & Engineering service line, revenue growth accelerated from 1H FY12/21 (+41.2% YoY), driven by an increase in orders from existing customers, particularly enterprise customers (26 companies as of end-Q3 FY12/21).

Sun* says it has earned the recognition of existing (recurring revenue) customers through the smooth execution of their projects, and this has led to not only additional investment in ongoing projects but also growth in inquiries for business launches. As a result, its companywide ARPU for recurring revenue customers reached JPY5,010,000 (three-month average for Q3, +25.3% YoY).

In cumulative Q3 FY12/21, one-time revenue was JPY1.1bn (+JPY404mn YoY, +95.9% YoY) and recurring revenue was JPY3.7bn (+JPY91mn YoY, +41.8% YoY). The growth in one-time revenue outpaced the rise in recurring revenue. As the company records revenue in the initial stage of a business (contract period of three months or less) as one-time revenue, the growth in one-time revenue signaled strong momentum in business launches.

Sun* says that the growth in the number of projects at end-Q3 FY12/21 exceeded its expectations. The company has increased its domestic personnel to meet robust demand from existing customers. However, this has proved insufficient, and it was unable to keep up with inquiries of new customers.

Other information

History

Events leading up to establishment (2012–2014): awareness of IT worker shortages; launch of business at Vietnamese base

Establishment

Sun* traces its roots to Framgia Japan Inc., which was founded by entrepreneur Makoto Hirai in July 2012. In October 2012, Mr. Hirai founded the subsidiary Framgia Vietnam Co., Ltd. in Vietnam, and appointed Taihei Kobayashi as COO of the subsidiary. In December 2017, Mr. Kobayashi replaced Mr. Hirai as representative director of the company, and he has since continued to serve in that position.

Mr. Hirai is currently a director at Sun* (in charge of recruiting as of December 2020), and remains a major shareholder of the company with a stake of 35.36% as of end-December 2020. In 2003, Mr. Hirai established I&G Partners, Inc. (currently Atrae, Inc., TSE Prime: 6194). He served as director of that company (retired as of December 2020).

Launch of business at Vietnamese base

Framgia Japan established a business in Vietnam with the aim of training local engineers who could offer development support for startups. Current Representative Director Kobayashi relocated to Vietnam as an engineer in 2012, and assumed the position of COO at Framgia Vietnam Co., Ltd. when it was established in October of the same year.

The name Framgia was derived from the words “From Asia,” and embodied the idea of creating value from Asia.

According to Mr. Kobayashi, the Vietnamese government has long promoted science, technology, engineering and mathematics (STEM) education, and its policies have driven growth in the number of IT engineers in the country. However, the bulk of these mainly handled core system operation and maintenance work under contracts for overseas companies that sought to reduce their cost burdens through offshore development. As Sun* developed software for businesses in Vietnam, Mr. Kobayashi explains it was able to hire Vietnamese IT talent that found little satisfaction in contracted system operations for overseas companies.

Start of industry-academia collaboration (2014)

In 2014, the company started offering IT engineering and Japanese language courses at the Hanoi University of Science and Technology to Vietnamese students who aspire to work as an IT engineer in Japan. This initiative evolved out of the Higher Education Development Support Project on ICT (HEDSPI) educational project implemented at the same university since 2006 as an Official Development Assistance (ODA) project funded by the Japanese government and as a Technical Cooperation project promoted by the Japan International Cooperation Agency (JICA). The HEDSPI project came to an end in 2014, at which time it was taken over by the company.

Through its industry-academia collaboration projects, the company has built a business model under which it introduces trained human resources (students at affiliated overseas universities) to Japanese companies at job fairs, and receives success fees for placements. At the same time, it aims to contribute to a medium to long-term resolution for the shortage in senior IT workers in Japan.

Established base in Japan: Adds recruiting business (from 2014)

In 2014, Singapore-based Framgia Holdings Pte. Ltd. (founded in June 2014) made IP’s K.K. (founded in 2013) a subsidiary as it operated in the same recruiting field. Framgia Vietnam helped place Vietnamese graduates with Japanese companies, while IP’s provided recruiting services in Japan.

Group restructuring, change of company name, and listing (from 2017)

In December 2017, the company restructured its group companies. Along with the reforms, Mr. Kobayashi replaced Mr. Hirai as representative director. The company also conducted a capital increase in June 2018, and made Groove Gear, Inc. (founded in 2008; unlisted) a wholly owned subsidiary in December 2018. Groove Gear provides programming education and IT staff dispatching and recruiting services, so its operations were deemed compatible with the company’s own recruiting business.

In March 2019, the company renamed Framgia Inc. and Framgia Vietnam Co., Ltd. to Sun* Inc. and Sun Asterisk Vietnam Co., Ltd., respectively, as part of a rebranding effort. While it had already to a certain extent built a name and reputation as an offshore software developer, the company was in the process of diversifying its operations, expanding into startup studio and acceleration services, the promotion of digital transformation (DX), and the education of IT workers. It decided to change its company name to revamp its old corporate identity as a software developer.

Origin of the company name

“Sun” is a reference to the central body of our solar system that is the source of all life on planet earth. It embodies the company’s aspiration to be a presence that creates groundbreaking services and innovation. The “*” symbol in the company name is used as a multiplication operator in many programming languages. Sun* therefore expresses the idea of collaborating or interacting with various people, intangibles, and locations in an effort to resolve a large number of problems, and accordingly “update” society in a positive way (i.e., create value that contributes to the resolution of problems).

Listing

In December 2020, Sun* listed on the TSE Mothers market. It has since worked to improve its profile in the stock market and build recognition and trust among (prospective) customers. It intends to disseminate information about its operations for investors to promote the digitalization of various industries and companies.

History

Year and month	History
Jul 2012	Established the former Framgia Japan Inc. in Chuo-ku, Tokyo.
Oct 2012	Established Framgia Vietnam Co., Ltd. in Vietnam.
Mar 2013	Established IP’s K.K. (currently Sun* Inc.) in Chiyoda-ku, Tokyo.
Jun 2014	Established Framgia Holdings Pte. Ltd. in Singapore.
Dec 2014	Framgia Holdings Pte. Ltd. acquired all shares in IP’s K.K., made it a subsidiary, and renamed IP’s K.K. to Framgia Japan Inc.
Nov 2015	Framgia Holdings Pte. Ltd. acquired all shares in Framgia Vietnam Co., Ltd., and made it a wholly owned subsidiary.
Dec 2017	As part of a group restructuring, the management team acquired shares in Framgia Japan Inc. from Framgia Holdings Pte. Ltd., and renamed Framgia Japan Inc. to Framgia Inc.
Feb 2018	Acquired all shares of Framgia Vietnam Co., Ltd. from Framgia Holdings Pte. Ltd., and made it a wholly owned subsidiary (transaction completed in October 2018).
Dec 2018	Acquired all shares in Groove Gear, Inc., and made it a subsidiary.
Mar 2019	Changed the names of Framgia Inc. and Framgia Vietnam Co., Ltd. to Sun* Inc. and Sun Asterisk Vietnam Co., Ltd., respectively.
Jul 2020	Shares listed on the Tokyo Stock Exchange’s Mothers market.
Jan 2021	Established Newh Inc. as a consolidated subsidiary.
Sep 2021	Acquired all shares in Trys, Inc., and made it a subsidiary.

Source: Shared Research based on company materials

ESG (Environment)

		FY12/19	FY12/20	FY12/21
Scope1 (kg-Co2)		0	0	0
	YoY	-	-	-
Scope2 (kg-Co2)		40,683	40,551	39,049
	YoY	-	-0.3%	-3.7%
Scope1,2 total		40,683	40,551	39,049
	YoY	-	-0.3%	-3.7%
Electricity usage(kwh)		78,399	87,228	86,844
	YoY	-	11.3%	-0.4%
Carbon intensity		898	756	486
	YoY	-	-15.8%	-35.7%

Note: Sun* only
Source: Shared Research based on company materials

Corporate governance

Form of organization and capital structure
Form of organization	Company with Audit and Supervisory Committee
Controlling shareholder	-
Directors and Audit & Supervisory Committee members
Number of directors under Articles of Incorporation	14
Number of directors	8
Directors' terms under Articles of Incorporation	1 year
Chairman of the Board of Directors	President
Number of outside directors	3
Number of independent outside directors	3
Number of members of Audit & Supervisory Committee under Articles of Incorporation	3
Number of outside members of Audit & Supervisory Committee	3
Voluntary establishment of committee(s) equivalent to Nominating Committee or Remuneration Committee	In place
Other
Participation in electronic voting platform	None
Providing convocation notice in English	None
Implementation of measures regarding director incentives	Performance-linked compensation system, Stock option plan
Eligible for stock option	Inside directors, outside members of Audit & Supervisory Committee, employees; directors and employees at subsidiaries
Disclosure of individual director's compensation	None
Policy on determining amount of compensation and calculation methodology	In place
Corporate takeover defenses	None

Source: Shared Research based on company materials

Top Management

Taihei Kobayashi, representative director (born November 17, 1983)

After dropping out of the Waseda Jitsugyo High School, Mr. Kobayashi played in a band while being homeless, and eventually started working at a club in Shinjuku. Thereafter, he became an IT engineer and joined a software development company in 2010, where he worked on social app development projects and accumulated experience in global development with Chinese and Vietnamese engineer teams. In July 2012, he relocated to Vietnam to help get Framgia Vietnam Co., Ltd. (currently Sun Asterisk Vietnam Co., Ltd.) off the ground as COO. He has served as the representative director of the company since December 2017.

Yusuke Hattori, director, in charge of management administration (born April 14, 1975)

Mr. Hattori graduated from the Graduate School of Economics at Nagoya University, majoring in Industrial Management Systems. In 1998, he joined Intelligence Co., Ltd. (currently Persol Career Co., Ltd.), where he gained experience by launching a recruiting business, promoting business process re-engineering (BPR) projects, developing businesses, and engaging in M&A deals in Japan and overseas. He subsequently promoted overseas business as general manager of the strategy department and executive officer in charge of overseas operations. In 2013, he founded IP’s K.K. (currently Sun*). He oversees the management of the Sun* group as director and general manager of the corporate administration division.

Takuya Umeda, director, in charge of business promotion (born March 24, 1981)

After graduating from a finance and investment program at Baruch College of The City University of New York, Mr. Umeda worked as a securities broker at an investment bank in New York, as a proprietary dealer in Japan, and as CFO at a startup from September 2014. In April 2018, he joined Sun* as Startup Studio manager. After serving as an executive officer, he became a director in December 2019. At present, he oversees overall business promotion.

Makoto Hirai, director, in charge of recruiting (born January 24, 1976)

After graduating from the Graduate School of Science and Technology at Sophia University, Mr. Hirai joined Mitsubishi Corporation in 2000, where he oversaw a new space satellites business in the information industry group. Thereafter, he　established group companies, and oversaw marketing, management planning, and other areas at Intelligence Co., Ltd. He subsequently founded Atrae, Inc., and became a director (2003). In 2012, he established Framgia Japan Inc. (currently Sun*), and served as its CEO. He oversees startup scouting and business support in various areas, utilizing his knowledge as a serial entrepreneur.

Dividends

Sun* has not paid dividends since its founding. Because its businesses are still in their growth phase, the company aims to strengthen its financial position and increase retained earnings to expand its businesses. It believes that channeling its retained earnings into investment and accordingly supporting the growth of its businesses is the best way to provide returns to shareholders.

Major shareholders (as of end-December 2021)

Major shareholders	Shares held ('000)	Shareholding ratio
Makoto Hirai	11,539	30.58%
Yusuke Hattori	5,774	15.30%
Kazunari Fujimoto	3,220	8.53%
Taihei Kobayashi	2,920	7.73%
Norinchukin Capital 2019 Investment Limited Partnership	1,357	3.59%
Kenichi Takakura	1,170	3.10%
Custody Bank of Japan, Ltd. (Trust account)	843	2.23%
Custody Bank of Japan, Ltd.(Securities investment trust account)	739	1.95%
Custody Bank of Japan, Ltd.	643	1.70%
Yasuyuki Ishizuka	620	1.64%
Total	28,828	76.40%

Source: Shared Research based on company materials

Employees (as of end-December 2021)

			FY02/16	FY02/17	FY02/18	FY12/18	FY12/19	FY12/20	FY12/21
			Non-cons.	Non-cons.	Non-cons.	Cons.	Cons.	Cons.	Cons.
Number of employees (consolidated)						990	1,263	1,298	1,633
		No. of temporary employees (annual average, not included above)				117	270	219	212
	Sun* Inc.		20	23	30	43	64	125	172
		No. of temporary employees (annual average, not included above)				1	1	1	1
	Sun Asterisk Vietnam Co., Ltd.					893	1,122	1,095	1,269
		No. of temporary employees (annual average, not included above)				95	250	205	193
	Groove Gear, Inc.					54	77	78	79
		No. of temporary employees (annual average, not included above)				21	19	13	5
	Newh Inc.								9
		No. of temporary employees (annual average, not included above)							1
	Trys, Inc.								104
		No. of temporary employees (annual average, not included above)							12

Source: Shared Research based on company materials

News and topics

Revisions to full-year FY12/22 earnings forecast

2022-08-12

On August 10, 2022, Sun* Inc. announced a downward revision to its forecast for full-year consolidated results for FY12/22.

Revised company forecast for full-year consolidated results for FY12/22

Revenue: JPY10.9bn (versus previous estimate of JPY11.4bn)
Operating profit: JPY866mn (JPY1.7bn)
Recurring profit: JPY1.1bn (JPY1.8bn)
Net income attributable to owners of the parent: JPY769mn (JPY1.5bn)

Explanation of downward revision

The Creative & Engineering service line saw steady growth in its customer base, but ARPU for existing enterprise customers was down and this had left 1H revenue below plan. Operating profit in 1H also finished below plan, having been hit hard by the weakness in the yen versus the Vietnamese don and the resulting increase in foreign currency translation costs booked in connection with its subsidiary in Vietnam. After taking into further consideration its outlook for earnings and foreign exchange rates in 2H, the company decided to lower its estimates for the full year.

Factors contributing to JPY844mn downward revision to initial operating profit estimate

Positive factor: JPY109mn increase in revenue from Talent Platform
Positive factor: JPY223mn decline in cost of revenue
Negative factor: JPY544mn decline in revenue from Creative & Engineering
Negative factor: JPY136mn decline in revenue from subsidiary Trys
Negative factor: JPY62mn increase in personnel costs booked under SG&A expenses
Negative factor: JPY390mn adverse shift in impact of foreign exchange rates
Negative factor: JPY44mn increase in other SG&A expenses

Establishment of new NFT-related company with Sony Network Communications

2022-04-11

On April 11, 2022, Sun* Inc. announced that it had established Sony Network Communications Singapore Pte. Ltd., a Singapore-based contract development and consulting company dealing with non-fungible tokens (NFT), with Sony Network Communications Inc. (unlisted), a subsidiary of Sony Group Corporation (TSE Prime: 6758).

Digital data can be copied and replicated easily. NFTs are digital data with irreplaceable value, which are creating new businesses and being increasingly utilized in industries such as games, art, sports, music, and real estate. The new company aims to promote contract development and consulting businesses in the growing NFT market by harnessing Sony Network Communications' knowledge and track record in communications and service solutions, and Sun*'s system development and operation resources, know-how, and technological capabilities to help build a diverse economic zone in the new world of Web3.0.

Company name: Sony Network Communications Singapore Pte. Ltd.
Address: 1 Raffles Place, #20-01 One Raffles Place Tower One, Singapore 048616
Established: April 2022
Capital: SGD1.2mn
Shareholding ratio: Sony Network Communications 70%, Sun* 30%
Business: Contract development and consulting businesses relating to NFTs and associated businesses

Sun* 4053