Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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

<ul>
<li>Square Enix announced the of sale Eidos Interactive, Crystal Dynamics, Square Enix Montreal and associated IPs to Embracer for $300m. </li>
<li>We had been puzzling over Square Enix’s strangely low guidance despite excellent momentum in its MMO business for some time. </li>
<li>Considering the underperformance in HD Games profitability and this sale we think we can now put two and two together.</li>
</ul>


Square Enix announced the of sale Eidos Interactive, Crystal Dynamics, Square Enix Montreal and associated IPs to Embracer for $300m. 
We had been puzzling over Square Enix’s strangely low guidance despite excellent momentum in its MMO business for some time. 
Considering the underperformance in HD Games profitability and this sale we think we can now put two and two together.


Square Enix – Eidos Sale Removes Downside Risks

<ul>
<li>Square Enix held their 20th anniversary event for Kingdom Heart over the weekend announcing a number of mobile titles as well the next mainline title Kingdom Hearts 4. </li>
<li>While a release date was not offered we would expect a launch during the next fiscal year.</li>
<li>Just as importantly, the announcement lends added weight to already leaked information on the company’s upcoming pipeline.</li>
</ul>


Square Enix held their 20th anniversary event for Kingdom Heart over the weekend announcing a number of mobile titles as well the next mainline title Kingdom Hearts 4. 
While a release date was not offered we would expect a launch during the next fiscal year.
Just as importantly, the announcement lends added weight to already leaked information on the company’s upcoming pipeline.


Square Enix – Kingdom Hearts 4 and the Implications for Next Year’s Pipeline

<ul>
<li>Square Enix had four of the twelve titles featured at today’s Sony State of Play. </li>
<li>While none of the titles was one of they IPs for Square Enix they demonstrate the depth of IP possessed. </li>
<li>In addition, the trailers point to Square Enix’s domestic development studios maintaining high quality standards even for smaller titles.</li>
</ul>


Square Enix had four of the twelve titles featured at today’s Sony State of Play. 
While none of the titles was one of they IPs for Square Enix they demonstrate the depth of IP possessed. 
In addition, the trailers point to Square Enix’s domestic development studios maintaining high quality standards even for smaller titles.


Square Enix – Four Games at State of Play Show Depth of Content

<ul>
<li>We said that we expected MMO Final Fantasy XIV to drive a strong beat and FY OP towards ¥70bn rather than consensus’ ¥55bn. </li>
<li>With 3Q OP of ¥21.0bn easily beating consensus at ¥14.4bn we believe we are nicely on track. </li>
<li>Oh and there were some tidbits about NFTs which should get some segments of the market interested.</li>
</ul>


We said that we expected MMO Final Fantasy XIV to drive a strong beat and FY OP towards ¥70bn rather than consensus’ ¥55bn. 
With 3Q OP of ¥21.0bn easily beating consensus at ¥14.4bn we believe we are nicely on track. 
Oh and there were some tidbits about NFTs which should get some segments of the market interested.


Square Enix – A Beat, A Bump and More to Come

Japan Specialist

Mark Chadwick

<ul>
<li>Blockchain games are gaining popularity and traction with new players. There are now over 1.4m people playing blockchain games daily  </li>
<li>The economics of blockchain gaming and NFT is driving a flood of new investment into the space, with $4b committed by VCs in 2021. This year will be significantly higher  </li>
<li>Square Enix understands that blockchain games are here to stay despite opposition from “legacy fans.” We expect further announcements on blockchain gaming to drive the stock</li>
</ul>


Blockchain games are gaining popularity and traction with new players. There are now over 1.4m people playing blockchain games daily  
The economics of blockchain gaming and NFT is driving a flood of new investment into the space, with $4b committed by VCs in 2021. This year will be significantly higher  
Square Enix understands that blockchain games are here to stay despite opposition from “legacy fans.” We expect further announcements on blockchain gaming to drive the stock


Japan

SQUARE ENIX HOLDINGS CO., LTD. develops and sells entertainment software for home video game consoles including Dragon Quest and Final Fantasy series. The Company also publishes books such as informational guide books for its game software, and comic magazines and books.  Additionally, Square Enix sells character goods and stationery items from its software products.

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Square Enix Holdings (9684 JP)

Square Enix – Eidos Sale Removes Downside Risks

Square Enix's sale of its overseas studios opens up the possibility for a significant rebound in HD Games profitability in our view.

Mio Kato

Square Enix – Kingdom Hearts 4 and the Implications for Next Year’s Pipeline

The announcement of Kingdom Hearts 4 lends added weight to already leaked information on the Square Enix's upcoming pipeline.

Mio Kato

Square Enix – Four Games at State of Play Show Depth of Content

Square Enix had four of the twelve titles featured at Sony State of Play. The trailers point to Square Enix’s domestic development studios...

Mio Kato

Square Enix – A Beat, A Bump and More to Come

We said that we expected Final Fantasy XIV to drive a strong beat and FY OP towards ¥70bn rather than consensus’ ¥55bn. With 3Q OP of ¥21.0bn...

Mio Kato

Square Enix – WAGMI

Blockchain games really took off last year, garnering the attention of both gamers and investors. Square Enix will embrace blockchain games/NFTs...

Mark Chadwick

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