Japan Specialist

Mark Chadwick

Equity Bottom-Up

<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

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.

Sansan Inc, the business card digitisation company, reported its full-year FY05/2020 results early this week which saw strong growth in revenue and operating profits. At the same time, both revenue and OP beat consensus estimates by a significant margin and the results marked the company’s first full-year of operating profits despite being affected by the Covid-19 pandemic.

Sansan Inc, the business card digitisation company, reported its full-year FY05/2020 results early this week which saw strong growth in revenue and operating profits. At the same time, both revenue and OP beat consensus estimates by a significant margin and the results marked the company’s first full-year of operating profits despite being affected by the Covid-19 pandemic.

Sansan 4QFY05/20 Results: First Full-Year of Operating Profits Despite Covid-19 Impact

Supun Walpola

<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 (MF) share price has increased by around 70% since the first week of April. This is mostly due to the perception that enterprise SaaS operations are a defensive business model during the pandemic. However, we believe the concerns we had about MF in our previous notes are still valid. Despite shifting to a more affordable (at the same time less profitable for MF) price plan, and spending heavily on subsidies, MF’s enterprise SaaS business has not seen a marked increase in new customers. We see positives for MF in its fintech operations, however, these businesses are still in their early stages of monetisation. We also believe MF’s chances of turning profitable is slim in the next few years as we expect the company to spend heavily on customer acquisition. We believe further upside for MF is limited in the short-run. Our SOTP valuation gives MF a FY1 target price of JPY 6,707, which is only a slight upside from the current market price (of JPY 6,580 as of 8th of July 2020).

Money Forward (3994 JP)’s (MF) share price has increased by around 70% since the first week of April. This is mostly due to the perception that enterprise SaaS operations are a defensive business model during the pandemic. However, we believe the concerns we had about MF in our previous notes are still valid. Despite shifting to a more affordable (at the same time less profitable for MF) price plan, and spending heavily on subsidies, MF’s enterprise SaaS business has not seen a marked increase in new customers. We see positives for MF in its fintech operations, however, these businesses are still in their early stages of monetisation. We also believe MF’s chances of turning profitable is slim in the next few years as we expect the company to spend heavily on customer acquisition. We believe further upside for MF is limited in the short-run. Our SOTP valuation gives MF a FY1 target price of JPY 6,707, which is only a slight upside from the current market price (of JPY 6,580 as of 8th of July 2020).

Money Forward: Upside Is Capped in the Short-Run

Freee, the Japanese cloud-based accounting and HR/Payroll software to small and medium businesses reported its 2QFY06/2020 results today which are the company’s first post-IPO earnings. During the second quarter, Freee reported revenues of JPY1,580m, a 56.1% increase compared to the same quarter a year ago. The growth in revenue was mainly driven by an increase in the number of paid customers alongside growth in ARPU during the quarter.

Freee, the Japanese cloud-based accounting and HR/Payroll software to small and medium businesses reported its 2QFY06/2020 results today which are the company’s first post-IPO earnings. During the second quarter, Freee reported revenues of JPY1,580m, a 56.1% increase compared to the same quarter a year ago. The growth in revenue was mainly driven by an increase in the number of paid customers alongside growth in ARPU during the quarter.

Freee’s First Post-IPO Results: Revenues and Paid Customers Increase

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

2019 marked our first full year of operations as an Independent Research Company, post spin-off from Smartkarma in August 2018. With our full-fledged focus on only covering IPOs and Placements, our main focus for 2019 was on improving our accuracy rate (as defined at the end of this report) across both IPOs and Placements. We ended 2019 with an accuracy rate of 80.21% across 96 IPOs and 70.48% across 105 placements. Both were our best performances since we started, in 2015.For those not familiar with our coverage, we aim to cover all IPOs and placements with a minimum deal size of US$100m across Asia-Pacific (ex-Korea), including China ADRs.

2019 marked our first full year of operations as an Independent Research Company, post spin-off from Smartkarma in August 2018. With our full-fledged focus on only covering IPOs and Placements, our main focus for 2019 was on improving our accuracy rate (as defined at the end of this report) across both IPOs and Placements. We ended 2019 with an accuracy rate of 80.21% across 96 IPOs and 70.48% across 105 placements. Both were our best performances since we started, in 2015.For those not familiar with our coverage, we aim to cover all IPOs and placements with a minimum deal size of US$100m across Asia-Pacific (ex-Korea), including China ADRs.

Aequitas 2019 IPOs and Placements Performance - Things We Got Right/Wrong and Things We Plan to Do

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) - Be Audit You Can Be

Money Forward (3994 JP) is the Japanese

Mark Chadwick

Sansan 4QFY05/20 Results: First Full-Year of Operating Profits Despite Covid-19 Impact

Sansan Inc, the business card digitisation company, reported its full-year FY05/2020 results early this week which saw strong growth in revenue and...

Shifara Samsudeen, FCMA, CGMA

Money Forward: Upside Is Capped in the Short-Run

Money Forward (3994 JP)’s (MF) share price has increased by around 70% since the first week of April. This is mostly due to the perception that...

Supun Walpola

Freee’s First Post-IPO Results: Revenues and Paid Customers Increase

Freee, the Japanese cloud-based accounting and HR/Payroll software to small and medium businesses reported its 2QFY06/2020 results today which are...

Shifara Samsudeen, FCMA, CGMA

Aequitas 2019 IPOs and Placements Performance - Things We Got Right/Wrong and Things We Plan to Do

2019 marked our first full year of operations as an Independent Research Company, post spin-off from Smartkarma in August 2018. With our...

Sumeet Singh

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