Japan Specialist

Mark Chadwick

Equity Bottom-Up

<p><span xml:lang="EN-US" data-contrast="auto"><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> is a financial platform for both individuals and businesses. The adoption of cloud-based Software as a Service (SaaS) is driving rapid sales growth for business accounting software and, with penetration still at low levels, this trend is expected to continue. Money Forward </span><span xml:lang="EN-US" data-contrast="auto">operates</span><span xml:lang="EN-US" data-contrast="auto"> under four main domains: MF Home (personal </span><span xml:lang="EN-US" data-contrast="auto">financial management</span><span xml:lang="EN-US" data-contrast="auto">), MF Business (cloud accounting), MF Finance (payment services / venture fund) and MF X (technology solutions)</span><span xml:lang="EN-US" data-contrast="auto">.  </span><span data-ccp-props='{"201341983":0,"335559739":160,"335559740":259}'> </span></p>

Money Forward (3994 JP) is a financial platform for both individuals and businesses. The adoption of cloud-based Software as a Service (SaaS) is driving rapid sales growth for business accounting software and, with penetration still at low levels, this trend is expected to continue. Money Forward operates under four main domains: MF Home (personal financial management), MF Business (cloud accounting), MF Finance (payment services / venture fund) and MF X (technology solutions).   

Small Cap Growth: Money Forward (3994) - Transforming Japan's Accounts

Equity Analyst, LightStream Research

Shifara Samsudeen, FCMA, CGMA

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.

<p><a href="https://www.smartkarma.com/entities/eguarantee-inc" target="_blank" data-smartkarma-citation="entities:6600:1" rel="noopener">eGuarantee, Inc. (8771 JP)</a> is engaged in the business of undertaking and transferring credit risks in Japan. The company offers guarantee services to about 70,000 businesses in Japan and the company transfers the credit risk of its portfolio across its several funds that are open to institutional investors. According to the company, it does not hold any risks associated with its credit portfolio and in the event of any bad debt, the fund will bear most of the costs.</p><p>The company shares have rallied 58% since the beginning of this year driven by the ongoing Covid-19 pandemic that is expected to cause a large number of businesses to go bankrupt in the country. During economic downturns and market volatilities, the company raises its guarantee fee to reflect the increased risk associated with its guaranteed counterparties, and any delay in payments.</p>

eGuarantee, Inc. (8771 JP) is engaged in the business of undertaking and transferring credit risks in Japan. The company offers guarantee services to about 70,000 businesses in Japan and the company transfers the credit risk of its portfolio across its several funds that are open to institutional investors. According to the company, it does not hold any risks associated with its credit portfolio and in the event of any bad debt, the fund will bear most of the costs.The company shares have rallied 58% since the beginning of this year driven by the ongoing Covid-19 pandemic that is expected to cause a large number of businesses to go bankrupt in the country. During economic downturns and market volatilities, the company raises its guarantee fee to reflect the increased risk associated with its guaranteed counterparties, and any delay in payments.

EGuarantee: A Resilient Business Model that Should Further Benefit from Pandemic Driven-Demand

Supun Walpola

<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

<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

<div>Freee, the Japanese cloud-based accounting and HR/Payroll software provider to SMEs has seen a huge rally in its share price over the past few months. The company’s share price has more than doubled to JPY7,950 per share since we last wrote on the company in February this year.</div><div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/163/071/original/image_23875405221601636185351.png?1601636187" class="editor-image img-responsive" data-smartkarma-image-id="163071"></figure></div><div class="content-caption">Source: Cap IQ</div><div>In this insight, we have examined the company’s operating matrices, its ability to turn around the business into profits and the company’s valuation. </div>

Freee, the Japanese cloud-based accounting and HR/Payroll software provider to SMEs has seen a huge rally in its share price over the past few months. The company’s share price has more than doubled to JPY7,950 per share since we last wrote on the company in February this year.Source: Cap IQIn this insight, we have examined the company’s operating matrices, its ability to turn around the business into profits and the company’s valuation. 

Freee KK: Quantamental Reveals the Company May Break-Even Over the Next 2-Years

Japan

freee K.K. develops software products. The Company produces cloud based accounting softwares, automatic online accounting systems, and other products. freee provides its services throughout Japan.

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Freee (4478 JP)

Small Cap Growth: Money Forward (3994) - Transforming Japan's Accounts

Money Forward provides cloud-based accounting software that is helping Japanese companies to transition to a digital future.

Mark Chadwick

EGuarantee: A Resilient Business Model that Should Further Benefit from Pandemic Driven-Demand

eGuarantee is engaged in the business of undertaking and transferring credit risks in Japan. In this insight, we deep dive into eGuarantee's...

Shifara Samsudeen, FCMA, CGMA

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

Freee KK: Quantamental Reveals the Company May Break-Even Over the Next 2-Years

Freee, the Japanese cloud-based accounting and HR/Payroll software provider to SMEs has seen a huge rally in its share price over the past few...

Shifara Samsudeen, FCMA, CGMA

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