Equity Analyst, LightStream Research

Supun Walpola

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<p>Despite shifting to a more affordable price plan and spending heavily on subsidies, <a href="https://www.smartkarma.com/entities/money-forward-inc" target="_blank" data-smartkarma-citation="entities:25919:1" rel="noopener">Money Forward (3994 JP)</a>’s enterprise SaaS business has failed to accelerate its user growth as expected. This continues to put pressure on MF’s profitability as the company keeps spending heavily on customer acquisition. Therefore, in contrast to its counterpart, <a href="https://www.smartkarma.com/entities/freee-kk" target="_blank" data-smartkarma-citation="entities:28424:1" rel="noopener">freee (4478 JP)</a>, MF’s recent price rally does not seem to be supported by improving profitability.  We expect a near-term correction as both customer growth and profitability disappoint over the next few quarters.  </p>

Despite shifting to a more affordable price plan and spending heavily on subsidies, Money Forward (3994 JP)’s enterprise SaaS business has failed to accelerate its user growth as expected. This continues to put pressure on MF’s profitability as the company keeps spending heavily on customer acquisition. Therefore, in contrast to its counterpart, freee (4478 JP), MF’s recent price rally does not seem to be supported by improving profitability.  We expect a near-term correction as both customer growth and profitability disappoint over the next few quarters.  

Money Forward: Recent Price Rally Is Not Backed by Improving Profitability – Unlike Freee

Japan Specialist

Mark Chadwick

<p><span xml:lang="EN-US" data-contrast="auto"><a href="https://www.smartkarma.com/entities/freee-kk" target="_blank" data-smartkarma-citation="entities:28424:1" rel="noopener">freee (4478 JP)</a>  provides cloud-based accounting software for small businesses and individuals. </span><span data-ccp-props='{"201341983":0,"335559739":160,"335559740":259}'> </span><span xml:lang="EN-US" data-contrast="auto">Freee</span><span xml:lang="EN-US" data-contrast="auto"> serves over 220,000 clients with an annualized recurring revenue of around $80m. </span><span data-ccp-props='{"201341983":0,"335551550":1,"335551620":1,"335559739":160,"335559740":259}'> </span><span xml:lang="EN-US" data-contrast="auto">In the year ended June, revenue grew 53% YoY. There is a huge opportunity to grow in the nascent cloud accounting market in Japan. With a strong and well-incentivised management team, Freee is well placed to build a strong moat around its business. At 68x TTM revenue, the valuation is way up in the clouds. <br></span></p><p></p><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/165/623/original/Annual-Recurring-Revenue-ARR_chartbuilder.png?1602902386" class="editor-image img-responsive" data-smartkarma-image-id="165623"></figure></section><p></p></section>

freee (4478 JP)  provides cloud-based accounting software for small businesses and individuals.  Freee serves over 220,000 clients with an annualized recurring revenue of around $80m.  In the year ended June, revenue grew 53% YoY. There is a huge opportunity to grow in the nascent cloud accounting market in Japan. With a strong and well-incentivised management team, Freee is well placed to build a strong moat around its business. At 68x TTM revenue, the valuation is way up in the clouds.  

Small Cap Growth: Freee (4478) - Counting Clouds

<ul>
<li>
<a href="https://www.smartkarma.com/entities/money-forward-inc" target="_blank" data-smartkarma-citation="entities:25919:1" rel="noopener">Money Forward (3994 JP)</a> provides online accounting software for Japan's SMEs, providing all of the time-saving tools that small business owners need to grow. It is the Japanese version of <a href="https://www.smartkarma.com/entities/xero-ltd" target="_blank" data-smartkarma-citation="entities:390:1" rel="noopener">Xero Ltd (XRO AU)</a> or Quickbooks by <a href="https://www.smartkarma.com/entities/intuit-inc" target="_blank" data-smartkarma-citation="entities:8235:1" rel="noopener">Intuit Inc (INTU US)</a> </li>
<li>Money Forward (MF) and its domestic peer <a href="https://www.smartkarma.com/entities/freee-kk" target="_blank" data-smartkarma-citation="entities:28424:1" rel="noopener">freee (4478 JP)</a> dominate the Japanese online market, which is growing in the region of 60-70% YoY.</li>
<li>There is a huge addressable market with low online penetration. MF has the potential to build a strong competitive moat, in the absence of the global majors.</li>
<li>Today, MF looks similar to Xero in 2013. If MF follows the same growth trajectory, investors could be looking at a 9-bagger.  </li>
</ul>



Money Forward (3994 JP) provides online accounting software for Japan's SMEs, providing all of the time-saving tools that small business owners need to grow. It is the Japanese version of Xero Ltd (XRO AU) or Quickbooks by Intuit Inc (INTU US) 
Money Forward (MF) and its domestic peer freee (4478 JP) dominate the Japanese online market, which is growing in the region of 60-70% YoY.
There is a huge addressable market with low online penetration. MF has the potential to build a strong competitive moat, in the absence of the global majors.
Today, MF looks similar to Xero in 2013. If MF follows the same growth trajectory, investors could be looking at a 9-bagger.  


Small Cap Growth: Money Forward (3994) - Be Audit You Can Be

<p><a href="https://www.smartkarma.com/entities/money-forward-inc" target="_blank" data-smartkarma-citation="entities:25919:1" rel="noopener">Money Forward (3994 JP)</a> (MF) reported its 2Q FY11/20 financial results last week. MF’s 2Q FY11/20 revenue beat consensus by 6.1% and the operating loss was also lower than the consensus. However, despite this, we believe MF’s 2Q FY11/20 financial results should be interpreted with caution. We go through MF’s 2Q FY11/20 financial results in detail below.</p>

Money Forward (3994 JP) (MF) reported its 2Q FY11/20 financial results last week. MF’s 2Q FY11/20 revenue beat consensus by 6.1% and the operating loss was also lower than the consensus. However, despite this, we believe MF’s 2Q FY11/20 financial results should be interpreted with caution. We go through MF’s 2Q FY11/20 financial results in detail below.

Money Forward: 2Q Results Are a Mixed Bag; We Remain Cautious

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Thematic (Sector/Industry)

<div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/146/359/original/2020-07-16_06-39-04.png?1594849241" class="editor-image img-responsive" data-smartkarma-image-id="146359"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/146/360/original/2020-07-16_06-42-12.png?1594849361" class="editor-image img-responsive" data-smartkarma-image-id="146360"></figure><div class="content-caption">Source • Japan Analytics</div>
<p><strong><a href="https://www.smartkarma.com/entities/money-forward-inc" target="_blank" data-smartkarma-citation="entities:25919:1" rel="noopener">Money Forward (3994 JP)</a></strong>- Money Forward's impressive revenue growth continued unabated in the second quarter. However necessary the ¥611 million (22% of sales) quarterly advertising budget is to sustain such revenue momentum, the lack of 'margin' improvement has shaved two points from our Results Score. The shares are close to a new Relative Price Score high and to being Overbought. We would trim into any announcement bounce above ¥8,000.</p>
<p style="text-align: center;"><strong>DAILY STATS</strong></p>
</div><hr><div><p style="text-align: center;"><strong>66 Quarterly Results</strong></p></div><div><ul>
<li>
<strong>Results Score:</strong> 10 Positive / 9 Neutral / 47 Negative</li>
<li>
<strong>Average Results Score Change:</strong> -5.4</li>
<li>
<strong>Average % Change in Revenue:</strong> -14.7% Quarter YoY / +1.3% Rolling TTM YoY</li>
<li>
<strong>Average Operating Profit Margin Change:</strong> -3.2ppt</li>
<li>
<strong>Percentage Making Quarterly Losses:</strong> 42%</li>
</ul></div><hr><div><p style="text-align: center;"><br><strong>24 Annual • 9 Interim Forecasts/Revisions</strong></p></div><div><ul>
<li>
<strong>Annual Forecast/Revision Score:</strong> 7 Positive / 4 Neutral / 13 Negative</li>
<li>
<strong>Interim Forecast/Revision Score Change:</strong> 1 Positive / 0 Neutral / 8 Negative</li>
<li>
<strong>Average Forecast/Revision Score Change:</strong> -9.3</li>
</ul></div>


Source • Japan Analytics
Money Forward (3994 JP)- Money Forward's impressive revenue growth continued unabated in the second quarter. However necessary the ¥611 million (22% of sales) quarterly advertising budget is to sustain such revenue momentum, the lack of 'margin' improvement has shaved two points from our Results Score. The shares are close to a new Relative Price Score high and to being Overbought. We would trim into any announcement bounce above ¥8,000.
DAILY STATS
66 Quarterly Results

Results Score: 10 Positive / 9 Neutral / 47 Negative

Average Results Score Change: -5.4

Average % Change in Revenue: -14.7% Quarter YoY / +1.3% Rolling TTM YoY

Average Operating Profit Margin Change: -3.2ppt

Percentage Making Quarterly Losses: 42%
 24 Annual • 9 Interim Forecasts/Revisions

Annual Forecast/Revision Score: 7 Positive / 4 Neutral / 13 Negative

Interim Forecast/Revision Score Change: 1 Positive / 0 Neutral / 8 Negative

Average Forecast/Revision Score Change: -9.3


🇯🇵 JAPAN • Results & Revisions 15th July - Money Forward, TKP, Nachi-Fujikoshi, Tokyo Steel

Japan

Money Forward, Inc. develops mobile application software. The Company produces automatic household account book softwares, household account book application softwares, and other products. Money Forward also provides personal financial management, cloud based accounting solutions, and other services.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Money Forward (3994 JP)

Money Forward: Recent Price Rally Is Not Backed by Improving Profitability – Unlike Freee

Money Forward’s recent price rally does not seem to be supported by improving profitability. We expect a correction as both customer growth and...

Supun Walpola

Small Cap Growth: Freee (4478) - Counting Clouds

Small Cap Growth: Freee is Japan's number one provider of cloud accounting software. Early stage growth with large TAM. Visionary management team;...

Mark Chadwick

Small Cap Growth: Money Forward (3994) - Be Audit You Can Be

Money Forward (3994 JP) is the Japanese

Mark Chadwick

Money Forward: 2Q Results Are a Mixed Bag; We Remain Cautious

Money Forward (3994 JP) (MF) reported its 2Q FY11/20 financial results last week. MF’s 2Q FY11/20 revenue beat consensus by 6.1% and the operating...

Supun Walpola

🇯🇵 JAPAN • Results & Revisions 15th July - Money Forward, TKP, Nachi-Fujikoshi, Tokyo Steel

Money Forward (3994 JP)- Money Forward's impressive revenue growth continued unabated in the second quarter. However necessary the ¥611 million...

Campbell Gunn

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)