IR & Research Intelligence, Sessa Investment Research

Sessa Investment Research

IR & Research Intelligence

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Equity Bottom-Up

<ul><li>FY23/12 saw a strong push towards management initiatives aimed at a V-shaped recovery in financial performance.</li><li>On the other hand, conservative guidance was provided for FY24/12, due to the uncertain market sentiment, strategic cost increases, and the need to avoid downward revisions for three consecutive terms in the mid-year.</li><li>Although the stock price fell sharply after the 4Q FY23/12 earnings announcement, it has recently been recovering somewhat, perhaps fueled by the recognition and understanding of the conservatism of the guidance and the company's true earnings potential.</li></ul>

FY23/12 saw a strong push towards management initiatives aimed at a V-shaped recovery in financial performance.On the other hand, conservative guidance was provided for FY24/12, due to the uncertain market sentiment, strategic cost increases, and the need to avoid downward revisions for three consecutive terms in the mid-year.Although the stock price fell sharply after the 4Q FY23/12 earnings announcement, it has recently been recovering somewhat, perhaps fueled by the recognition and understanding of the conservatism of the guidance and the company's true earnings potential.

<ul><li>CARTA HD strives to become "The Evolution Factory” and operates mainly in the digital marketing field.</li><li>The company was established in January 2019 through the merger of the former VOYAGE Group, which had expanded earnings by creating a series of new businesses centered on the ad tech domain, and the former Cyber Communications, the largest media rep firm in Japan.</li><li>CARTA HD holds a 3.9% share in the Japanese online advertising market.</li></ul>

CARTA HD strives to become "The Evolution Factory” and operates mainly in the digital marketing field.The company was established in January 2019 through the merger of the former VOYAGE Group, which had expanded earnings by creating a series of new businesses centered on the ad tech domain, and the former Cyber Communications, the largest media rep firm in Japan.CARTA HD holds a 3.9% share in the Japanese online advertising market.

<ul><li>In 2023, the first year of CARTA Holdings’ new medium-term management plan, the company made a solid push to reform its business and organizational structure with the aim of executing a sharp recovery in business performance.</li><li>It moved forward with narrowing its focus, integrating four direct sales subsidiaries in the digital marketing business, and withdrawing from the low-profit game and hometown tax payment business in the internet-related services business.</li><li>In addition, the company announced and implemented additional measures to reduce fixed costs to the tune of ¥1 bn, including by calling for voluntary retirement during FY23/12, as its earnings may fall further than initially expected before bottoming out, mainly for reservation-based ads. </li></ul>

In 2023, the first year of CARTA Holdings’ new medium-term management plan, the company made a solid push to reform its business and organizational structure with the aim of executing a sharp recovery in business performance.It moved forward with narrowing its focus, integrating four direct sales subsidiaries in the digital marketing business, and withdrawing from the low-profit game and hometown tax payment business in the internet-related services business.In addition, the company announced and implemented additional measures to reduce fixed costs to the tune of ¥1 bn, including by calling for voluntary retirement during FY23/12, as its earnings may fall further than initially expected before bottoming out, mainly for reservation-based ads. 

<div><div><div><div><ul style="list-style-type: disc;"><li><p>Specific measures for structural reforms are being implemented one after another.</p></li><li><p>CARTA Holdings had announced the withdrawal from unprofitable businesses (game and hometown tax payment businesses), a ¥1 bn reduction in SG&amp;A expenses centered on fixed costs, the integration of four direct sales subsidiaries, and other streamlining measures leading up to the 2Q FY23/12 earnings announcement, and on September 5, 2023, the company's board of directors newly approved a resolution to call for voluntary retirement.</p></li><li><p>While the macroeconomic downturn was particularly noticeable in the April-June 2023 earnings results, with advertising companies downwardly revising their forecasts one after another, no other company has implemented such drastic measures like CARTA Holdings has, and this move is worth highlighting for its future sharp recovery.</p></li></ul></div></div></div></div>

Specific measures for structural reforms are being implemented one after another.CARTA Holdings had announced the withdrawal from unprofitable businesses (game and hometown tax payment businesses), a ¥1 bn reduction in SG&amp;A expenses centered on fixed costs, the integration of four direct sales subsidiaries, and other streamlining measures leading up to the 2Q FY23/12 earnings announcement, and on September 5, 2023, the company's board of directors newly approved a resolution to call for voluntary retirement.While the macroeconomic downturn was particularly noticeable in the April-June 2023 earnings results, with advertising companies downwardly revising their forecasts one after another, no other company has implemented such drastic measures like CARTA Holdings has, and this move is worth highlighting for its future sharp recovery.

Carta Holdings (3688 Jp) -Pushing Forward with Earnings Structure Improvements

<ul><li>In 1Q FY23/12, CARTA Holdings posted a 23.3% YoY increase in transaction volume for programmatic TV commercial service TELECY, and a 2.8-fold increase in gross sales in the retail domain, showing steady performance in the mass retail domain, which the company has positioned as a priority area in its medium-term management plan.</li><li>On the other hand, the weak macro environment continued to weigh on double-digit sales declines in reservation-based ads, resulting in a 7.7% YoY drop in sales and a 59.3% drop in operating profit overall. </li><li>YoY comparisons will ease off from the next quarter, but with 2Q usually being a slow period for advertising and the lack of activity from advertisers in the new fiscal year from April onward, earnings are expected to recovery smoothly rather than sharply.</li></ul>

In 1Q FY23/12, CARTA Holdings posted a 23.3% YoY increase in transaction volume for programmatic TV commercial service TELECY, and a 2.8-fold increase in gross sales in the retail domain, showing steady performance in the mass retail domain, which the company has positioned as a priority area in its medium-term management plan.On the other hand, the weak macro environment continued to weigh on double-digit sales declines in reservation-based ads, resulting in a 7.7% YoY drop in sales and a 59.3% drop in operating profit overall. YoY comparisons will ease off from the next quarter, but with 2Q usually being a slow period for advertising and the lack of activity from advertisers in the new fiscal year from April onward, earnings are expected to recovery smoothly rather than sharply.

Japan

Carta Holdings, Inc. provides on-line information retrieval services on a contract or fee basis.

Carta Holdings, Inc. (3688 JP)

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