Earnings outlook of Japanese Venture Capitals —

I focus on difficulty of Japanese venture capitals, based on both a Nihon Keizai Shinbun’s article “Venture Capital firms face bleaker earnings outlook,” as of September 11th and my yesterday’s blog. They are suffering from declines in capital gains resulted from decrease in the number of Japan’s IPOs in FY2008.

This article picked up listed venture capitals such as Japan Asia Investment Co., Ltd.(JAIC), SBI Holdings Inc.(SBI), Jafco Co. Ltd.(Jafco) and NIF SMBC Ventures Co. Ltd.(NIF SMBC). The recent financial results in FY2008 ending at March and forecast in FY2009 of those venture capitals are as follows. Regarding of forecast in FY2009, SBI, Jafco and NIF SMBC have not disclosed forecasts in net sales or earnings due to business characteristics where volatility in stock markets and the IPO environment in Japan. Therefore I show forecasts prepared by one of leading business magazine publisher Toyo Keizai Inc.

 
JAIC

(Unit:Million yen)	Net sales	Operating profit	Net income
FY2008	21,444	5,172	1,512
FY2009(est.)	28,000	7,500	3,000

JAIC revised its original forecast into 20,700 million of Net sales, 5,900 million yen of Operating loss and 7,200 million of Net loss as of September 5th. The revision is attributed by a bankruptcy filing by Nissan Rinkai Construction Co. by which JAIC is likely to suffer about 6.2 billion yen in associated losses.

 
SBI

(Unit:Million yen)	Net sales	Operating profit	Net income
FY2008	222,567	42,606	4,228
FY2009(est.)	200,000	33,000	21,000

Due to a bankruptcy filing by real estate firm Zephyr Co., SBI announced to book 9.469 billion yen as a special loss in FY 2009 as of July 30th. It should lower its full-year operating profit forecast substantially.

 
Jafco

(Unit:Million yen)	Net sales	Operating profit	Net income
FY2008	67,937	12,813	7,684
FY2009(est.)	36,000	11,000	7,700

 
NIF SMBC

(Unit:Million yen)	Net sales	Operating profit	Net income
FY2008	19,876	-13,732	-5,485
FY2009(est.)	22,000	2,000	1,500

I believe that they don’t expect revival of IPOs in Japan at all. What is worse is that they seem to lag behind U.S., U.K. or Korea venture capitals in terms of business deployment in emerging countries such as India, Russia and Brazil for the next source of revenues. Thus how could they get capital gains of IPO?