Unlock Intrinsic Equity Valuation, Capital Growth Strategies

Capital Growth Strategies

Unlock Intrinsic Equity Valuation

Established in 2024, Capital Growth Strategies is a Japan-based investment professional firm that conducts hands-on investment management and research alongside valuation-driven financial advisory.

Equity Bottom-Up

Hennge K.K. engages in software as a services business. The Company provides identity as a service, access control, secure browse, mail archive, secure transfer, customers mail cloud, mail application server, and other services. Hennge serves customers throughout Asia.

<ul><li>The four new services further strengthen the existing HENNGE One while expanding coverage to encompass devices and networks.</li><li>They can be positioned as a step toward solidifying the foundation for connecting to ARR growth, starting from an enhancement of the value proposition, and we view them as reinforcing confidence in HENNGE's medium-term ARR growth story within the current value-generation cycle.</li><li>Among the new services, the ones CGS focuses on in particular from the perspective of revenue impact are HENNGE Endpoint &amp; Managed Security and HENNGE Mesh Network.</li></ul>

The four new services further strengthen the existing HENNGE One while expanding coverage to encompass devices and networks.They can be positioned as a step toward solidifying the foundation for connecting to ARR growth, starting from an enhancement of the value proposition, and we view them as reinforcing confidence in HENNGE's medium-term ARR growth story within the current value-generation cycle.Among the new services, the ones CGS focuses on in particular from the perspective of revenue impact are HENNGE Endpoint &amp; Managed Security and HENNGE Mesh Network.

HENNGE; New Services Broaden Coverage, Boosting Value to Drive Mid-term ARR Growth

Genda Inc. operates amusement businesses. The Company provides amusement facilities operation, online crane game operation, amusement machine rental, and other services. Genda provides its services throughout Japan.

<ul>
<li>The root cause of the operational challenges is the failure of system integration following the Player One acquisition.</li>
<li>The Player One system specification that generates the next round route triggered by bank deposit completion, combined with the abolition of NEN’s cash rooms, led to an approximately 40% decline in rounder round frequency.</li>
<li>Additionally, data migration was incomplete, disrupting store-level data and delaying problem discovery.</li>
</ul>


The root cause of the operational challenges is the failure of system integration following the Player One acquisition.
The Player One system specification that generates the next round route triggered by bank deposit completion, combined with the abolition of NEN’s cash rooms, led to an approximately 40% decline in rounder round frequency.
Additionally, data migration was incomplete, disrupting store-level data and delaying problem discovery.


GENDA; What’s Happening in the North American Business? Key Takeaways from Our Discussion with CEO

GA Technologies Co., Ltd offers Internet based services. The Companyy mainly provides real estate comprehensive platform operation, rental property management, renovation planning and design, and other services. GAtechnologies also develops asset management related applications.

<ul><li>We do not see signs that higher funding costs are materially hurting investor sentiment.</li><li>Meanwhile, inflation is driving rent growth and increasing investors’ cash inflows.</li><li>We do not believe inflation is materially harming real estate investors or poses a serious threat to the RENOSY Marketplace business.</li></ul>

We do not see signs that higher funding costs are materially hurting investor sentiment.Meanwhile, inflation is driving rent growth and increasing investors’ cash inflows.We do not believe inflation is materially harming real estate investors or poses a serious threat to the RENOSY Marketplace business.

GA technologies; SPC Securities Acquisition Offers Attractive Terms and Strong Synergies

<ul><li>HENNGE’s SaaS business has achieved high ARR growth through the following stages: (i) the accumulation phase of trust assets (prior to FY2019); (ii) the price re-definition phase triggered by the Company’s listing (FY2019–FY2021); (iii) the growth re-acceleration phase accompanied by ARPU improvement (from FY2021 onward); and (iv) the price revision implemented in FY2024.</li><li>It can be said that the Company’s ability to convert favorable external conditions into growth—through the continuous addition of new functions and the enhancement of management resources—demonstrates its strong execution capability.</li><li>We also believe that the contribution of the development division has been significant, as the Company has continued to expand functionality without experiencing any major incidents.</li></ul>

HENNGE’s SaaS business has achieved high ARR growth through the following stages: (i) the accumulation phase of trust assets (prior to FY2019); (ii) the price re-definition phase triggered by the Company’s listing (FY2019–FY2021); (iii) the growth re-acceleration phase accompanied by ARPU improvement (from FY2021 onward); and (iv) the price revision implemented in FY2024.It can be said that the Company’s ability to convert favorable external conditions into growth—through the continuous addition of new functions and the enhancement of management resources—demonstrates its strong execution capability.We also believe that the contribution of the development division has been significant, as the Company has continued to expand functionality without experiencing any major incidents.

HENNGE; Evidence of Future Growth Seen Through the Trajectory of ARR Expansion.

<ul><li>GENDA will tighten investment discipline for both M&amp;A and organic growth within its capital allocation strategy.</li><li>Specifically, M&amp;A will focus on roll-ups in core areas, while investments outside the core will be limited and highly selective.</li><li>For organic growth investments, the company has raised the expected IRR hurdle rate under a non– going concern assumption and removed the previous requirement of 10% revenue growth for existing businesses, shifting toward a more balanced approach with investment efficiency.</li></ul>

GENDA will tighten investment discipline for both M&amp;A and organic growth within its capital allocation strategy.Specifically, M&amp;A will focus on roll-ups in core areas, while investments outside the core will be limited and highly selective.For organic growth investments, the company has raised the expected IRR hurdle rate under a non– going concern assumption and removed the previous requirement of 10% revenue growth for existing businesses, shifting toward a more balanced approach with investment efficiency.

GENDA; Analyzing Impact of Free Cash Flow Generation through Stricter Investment Discipline