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Albert (3906) | First look

Share price: ¥5,860 | Market cap: $260m | EV/Rev: 8.2x

Albert's expertise lies in artificial intelligence (AI) services for the automotive, manufacturing, communications, distribution, and financial sectors. Albert's services cover everything from big data collection to data analytics to algorithm development and systems deployment under the mantra "Build the future with data science." Over 85% of its 276 employees are AI engineers, focusing on project-based AI services for target clients. Listed on the TSE Mothers Exchange since 2015, the company aims to grow its reach by enhancing alliances with target clients.

Strategic change: In 2018 Albert undertook a drastic shift in strategy. With the change, the business was converted from a product-centered to a project-centered operation, focusing on specific industries and tackling large-scale projects. Albert aggressively hired data scientists, growing from 75 at the end of 2017 to 154 by the end of the following year, and there are now 250.

Growth and Profit: Albert has experienced rapid growth in sales and profits since completing its strategic transformation. In the most recent quarter, 1Q21, revenue totaled ¥886m, up 26 percent year over year and operating profit reached ¥141m, up 10 percent. The growth was due to continued business expansion with priority clients in focused industries, which now account for over 80% of sales.

MODEL Albert's business comprises three broad service lines: (a) Project-based services, (b) Own products and (c) Training support for data scientists. Moreover, the company has adopted a CATALYST Strategy, which is outlined below.

(a) Project-based services (80% of Sales): This business provides big-data analysis, algorithm development, and deployment of AI systems. In doing so, Albert works closely with priority clients to deploy AI. Priority industries are selected due to the high natural demand for AI services. Industry sectors include automotive, manufacturing, communications, distribution, and finance. Albert has some 250 data scientists with backgrounds in mathematics and statistics that support the evolving AI needs of its target industries and partners.

(b) Provision of own products (10% of Sales): This company offers AI-advanced chatbots called Sugures, as well as AI-image recognition services called Takuminome, earning money from product licenses.

(c) Data scientist training (10% of Sales): Training is provided to individuals to enable them to build the skills to become a data scientist. Clients tend to be capital and business alliance partners.

Catalyst Strategy: Albert's growth strategy involves deepening relationships with priority clients, primarily CATALYST partners. Hence, Albert aims to promote AI and data sharing between these focus industries, thereby becoming a "catalyst" to the establishment of an AI-driven networked society. Albert addresses several areas including autonomous cars, security risk management, smart life, supply chain management, and smart factories.

Catalyst Partners: Albert plans to identify about ten major industry partners. With the recent announcement of a capital and business alliance with SBI Securities (June 2021), the company will be in a stronger position to identify partners.

CATALYST partners' shareholdings.

MARKET Japan's AI market is divided into services, applications, and platforms. Fuji Chimera Research Institute estimates the overall market size was $9b in 2019. The same report predicted that the market would reach over $19b in 2025, growing at 12% pa. Albert has a significant opportunity to expand in such a large market and stands to gain from the market expansion due to the increasing trend toward AI-driven solutions and the severe shortage of data scientists in Japan.

MOAT Having partnered with a handful of large, focused clients, along with a financial tie-up, Albert is in a unique position to introduce and expand its services. Albert will be the central component of the network built by the CATALYST strategy. This will provide a significant barrier to entry for other AI companies in the digital transformation process at these companies. Since Albert is creating so much IP through data and algorithms, switching costs will be high, which will ensure Albert a solid revenue stream for years to come.


Takeshi Matsumoto (41 years old) became CEO in August 2017. Before Albert, Matsumoto held senior leadership positions at various technology firms. This appointment marked the beginning of the firm's strategic shift in 2018, which has already paid off handsomely. Matsumoto holds just over 1% of the outstanding shares, valued at just over $2mn.

A critical element of the company's growth prospects is the CATALYST strategy, which we have discussed in detail already. To ensure that it remains one of the best data science firms in Japan, the company will continue to expand its team of data scientists. As part of this strategy, restricted stock compensation is awarded to data scientists.


We compare Albert with the largest listed AI firms in our Japan Disruptive Innovation universe (JCVP Disruptive Innovation) and find the ¥24bn EV company trading at a discount on an EV/Rev basis. This company is attractive considering its long runway, widening moat, and growth potential.


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