Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>
Q3 Summary: Solid EBITDA beat with margin expansion to 12%, though top-line missed street estimates; core business KPIs broadly in line, with slightly soft ARPA growth.</li>
<li>
Thesis: Strong positioning in Japan’s underpenetrated SaaS back-office market, with regulatory tailwinds, operational leverage, and FY11/28 targets of ¥65B sales and ¥20B EBITDA. </li>
<li>
Valuation: Stock trades near our ¥5,700 fair value (~6x EV/revenue); short-term upside limited, but long-term fundamentals remain attractive.</li>
</ul>



Q3 Summary: Solid EBITDA beat with margin expansion to 12%, though top-line missed street estimates; core business KPIs broadly in line, with slightly soft ARPA growth.

Thesis: Strong positioning in Japan’s underpenetrated SaaS back-office market, with regulatory tailwinds, operational leverage, and FY11/28 targets of ¥65B sales and ¥20B EBITDA. 

Valuation: Stock trades near our ¥5,700 fair value (~6x EV/revenue); short-term upside limited, but long-term fundamentals remain attractive.


Money Forward (3994 JP) | Q3 FY11/25 Results - Better Profitability; Core KPIs In-Line

<ul>
<li>Shares up 18% since Q2; short-term correction likely as valuation nears fair value (~6x EV/Revenue); ValueAct holds 5.6% stake.</li>
<li>Q3 sales forecast +24% YoY to ¥12.1bn; adjusted EBITDA margin rising to 7% amid strong ARR growth from mid-sized corporates.</li>
<li>Money Forward sharpened focus on core business, divesting non-core assets and forming a ¥3bn JV with SMFG to expand digital banking services.</li>
</ul>


Shares up 18% since Q2; short-term correction likely as valuation nears fair value (~6x EV/Revenue); ValueAct holds 5.6% stake.
Q3 sales forecast +24% YoY to ¥12.1bn; adjusted EBITDA margin rising to 7% amid strong ARR growth from mid-sized corporates.
Money Forward sharpened focus on core business, divesting non-core assets and forming a ¥3bn JV with SMFG to expand digital banking services.


Money Forward (3994) | Banking on Focus; Q3 Preview

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.

<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><a href="https://www.smartkarma.com/entities/moneta-money-bank-as-91531fc9-8a67-43d7-8182-cf45abd5ebca" target="_blank" data-smartkarma-citation="entities:28372:1" rel="noopener"></a> MF’s recent earnings was no surprise to us as we continued to highlight that the company’s business model is far inferior to its counterpart freee. </li>
<li>The last 2-3 quarterly results have made that discrepancy clear and MF’s non-BO SaaS businesses are only dead weight and have helped conceal weaknesses of its business model.</li>
<li>MF’s share price is down 19.3% YTD and think the market has finally come to terms that MF is losing ground whereas freee has managed to turn around its profitability.</li>
</ul>



Money Forward (3994 JP) MF’s recent earnings was no surprise to us as we continued to highlight that the company’s business model is far inferior to its counterpart freee. 
The last 2-3 quarterly results have made that discrepancy clear and MF’s non-BO SaaS businesses are only dead weight and have helped conceal weaknesses of its business model.
MF’s share price is down 19.3% YTD and think the market has finally come to terms that MF is losing ground whereas freee has managed to turn around its profitability.


Money Forward: Business Model Begins to Breakdown

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 Core Business acceleration: Business segment sales +28% YoY, driven by Mid-sized corporate strength; ARR +32% YoY to ¥29.6bn.</li>
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Non-Core drag explains topline miss: Total sales +11.7% YoY to ¥11.5bn vs est. ¥12.1bn; ex-Hirac Fund, sales +18% YoY.</li>
<li>
 Margin strength: Record-high EBITDA of ¥0.8bn (7% margin), achieved without one-off gains; signals improving core profitability.</li>
</ul>



 Core Business acceleration: Business segment sales +28% YoY, driven by Mid-sized corporate strength; ARR +32% YoY to ¥29.6bn.

Non-Core drag explains topline miss: Total sales +11.7% YoY to ¥11.5bn vs est. ¥12.1bn; ex-Hirac Fund, sales +18% YoY.

 Margin strength: Record-high EBITDA of ¥0.8bn (7% margin), achieved without one-off gains; signals improving core profitability.


Money Forward (3994) | Mid-Sized Bets Start Paying Off

<ul>
<li>Q1 revenue and EBITDA missed expectations, with slowing growth in key business segment and corporate customer adds.</li>
<li>Macroeconomic risks, including US tariffs, may be weighing on business confidence and new customer acquisition.</li>
<li>Valuation now looks attractive, trading at a steep discount to global peers despite similar fundamentals.</li>
</ul>


Q1 revenue and EBITDA missed expectations, with slowing growth in key business segment and corporate customer adds.
Macroeconomic risks, including US tariffs, may be weighing on business confidence and new customer acquisition.
Valuation now looks attractive, trading at a steep discount to global peers despite similar fundamentals.


Money Forward (3994) | SaaS Is Slowing, But So Is the Price

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.

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Money Forward (3994 JP)