Japan Specialist

Mark Chadwick

Equity Bottom-Up

<p><span xml:lang="EN-US" data-contrast="auto">A wrong hire, skills mismatch, and inadequate training equals low efficiency and lost productivity. Companies pay a significant price for not correctly managing talent. It does not stop there. Low transparency, missed opportunities, and weak management lead to frustration and dissatisfaction for employees. The result is a lack of motivation and employee exits. Both companies and employees suffer when talent is not </span><span xml:lang="EN-US" data-contrast="auto">adequately managed</span><span xml:lang="EN-US" data-contrast="auto">. Companies can scarcely afford to lose or </span><span xml:lang="EN-US" data-contrast="auto">misallocate</span><span xml:lang="EN-US" data-contrast="auto"> the right people as the costs are enormous - lost productivity, lost business, and a dysfunctional environment that hurts from the top to bottom line. Talent management plays a critical role in the modern company, and in many cases, it can mean the difference between a successful culture and going out of business. Enter <a href="https://www.smartkarma.com/entities/kaonavi-inc" target="_blank" data-smartkarma-citation="entities:29703:1" rel="noopener">Kaonavi Inc (4435 JP)</a> </span></p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/166/617/original/image_9811369031603321138858.png?1603321148" class="editor-image img-responsive" data-smartkarma-image-id="166617"></figure>

A wrong hire, skills mismatch, and inadequate training equals low efficiency and lost productivity. Companies pay a significant price for not correctly managing talent. It does not stop there. Low transparency, missed opportunities, and weak management lead to frustration and dissatisfaction for employees. The result is a lack of motivation and employee exits. Both companies and employees suffer when talent is not adequately managed. Companies can scarcely afford to lose or misallocate the right people as the costs are enormous - lost productivity, lost business, and a dysfunctional environment that hurts from the top to bottom line. Talent management plays a critical role in the modern company, and in many cases, it can mean the difference between a successful culture and going out of business. Enter Kaonavi Inc (4435 JP) 


Small Cap Growth: Kaonavi (4435) – Turning Talent into Teams

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<p><span xml:lang="EN-US" data-contrast="auto">In May, Facebook CEO Mark Zuckerberg said that more than 95% of the company’s workforce was working remotely and that it planned to ensure employees could continue to do so on a long-term basis. Google workers will stay remote until summer 2021. Many others made similar announcements. </span><span data-ccp-props='{"201341983":0,"335559739":160,"335559740":259}'> </span></p>
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<p><span xml:lang="EN-US" data-contrast="auto">This would have been unthinkable even a decade ago, but cloud-based platforms are enabling employees to work from anywhere, on any device. Companies must now deploy systems rapidly, in a cost-effective and scalable manner to adapt to this new worldview. </span><span data-ccp-props='{"201341983":0,"335559739":160,"335559740":259}'> </span></p>
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<p><span xml:lang="EN-US" data-contrast="auto"><a href="https://www.smartkarma.com/entities/teamspirit-inc" target="_blank" data-smartkarma-citation="entities:29704:1" rel="noopener">TeamSpirit Inc (4397 JP)</a> ’s</span><span xml:lang="EN-US" data-contrast="auto"> workforce management platform helps Japanese companies to support telework, not only an essential way of working following the outbreak of COVID-19, but also a necessity as companies shift to a hybrid workforce. </span><span data-ccp-props='{"201341983":0,"335559739":160,"335559740":259}'> </span></p>
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<p><strong> <span xml:lang="EN-US" data-contrast="auto">Recent FY8/20 numbers (13 October)</span> </strong></p>
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<p><span xml:lang="EN-US" data-contrast="auto">Q4 revenue +25% YoY to ¥654m (slowed from 38% YoY in Q3)</span><span data-ccp-props='{"201341983":0,"335559739":160,"335559740":259}'> </span></p>
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<p><span xml:lang="EN-US" data-contrast="auto">Gross margin 60%</span><span data-ccp-props='{"201341983":0,"335559739":160,"335559740":259}'> </span></p>
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<p><span xml:lang="EN-US" data-contrast="auto">Annual Recurring Revenue +32% to ¥2.2b</span><span data-ccp-props='{"201341983":0,"335559739":160,"335559740":259}'> </span></p>
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<p><span xml:lang="EN-US" data-contrast="auto">Number of active licenses rose 41% to 269,000</span><span data-ccp-props='{"201341983":0,"335559739":160,"335559740":259}'> <br></span><span xml:lang="EN-US" data-contrast="auto">Number of client companies 1,409 (+14% YoY; +2% QoQ)</span><span data-ccp-props='{"201341983":0,"335559739":160,"335559740":259}'> </span></p>
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<p><span xml:lang="EN-US" data-contrast="auto">Covid had a negative impact on the business. The inflow of leads slowed due to the cancellation of promotional events. On boarding was delayed as customer struggled with the unfamiliarity of telework, with small businesses in particular slowing in terms of </span><span xml:lang="EN-US" data-contrast="auto">licenses</span><span xml:lang="EN-US" data-contrast="auto"> added.</span><span xml:lang="EN-US" data-contrast="auto"> </span><span xml:lang="EN-US" data-contrast="auto">The company guided for 29% revenue growth in FY8/21</span><span data-ccp-props='{"201341983":0,"335559739":160,"335559740":259}'> </span></p>
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<p><span xml:lang="EN-US" data-contrast="auto">The stock has corrected by around 20% in the week following full year earnings and is worth looking at for long-term growth investors.</span></p>
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In May, Facebook CEO Mark Zuckerberg said that more than 95% of the company’s workforce was working remotely and that it planned to ensure employees could continue to do so on a long-term basis. Google workers will stay remote until summer 2021. Many others made similar announcements.  


This would have been unthinkable even a decade ago, but cloud-based platforms are enabling employees to work from anywhere, on any device. Companies must now deploy systems rapidly, in a cost-effective and scalable manner to adapt to this new worldview.  


TeamSpirit Inc (4397 JP) ’s workforce management platform helps Japanese companies to support telework, not only an essential way of working following the outbreak of COVID-19, but also a necessity as companies shift to a hybrid workforce.  

 Recent FY8/20 numbers (13 October) 


Q4 revenue +25% YoY to ¥654m (slowed from 38% YoY in Q3) 


Gross margin 60% 


Annual Recurring Revenue +32% to ¥2.2b 


Number of active licenses rose 41% to 269,000  Number of client companies 1,409 (+14% YoY; +2% QoQ) 



Covid had a negative impact on the business. The inflow of leads slowed due to the cancellation of promotional events. On boarding was delayed as customer struggled with the unfamiliarity of telework, with small businesses in particular slowing in terms of licenses added. The company guided for 29% revenue growth in FY8/21 


The stock has corrected by around 20% in the week following full year earnings and is worth looking at for long-term growth investors.


Small Cap Growth: TeamSpirit (4397) - Nirvana for Workers

TMT & Consumer Independent Equity Research Analyst, Obex Capital Research

Aaron Gabin

TMT & Consumer Independent Equity Research Analyst

TMT & Consumer Independent Equity Research

Obex Capital Research

“Obex” is Latin for Barriers to Entry. Obex Capital Management’s investment philosophy is driven by an intense focus on which business model’s Barriers to Entry are able to withstand the ever increasing competitive disruption in the TMT and Consumer Sectors.

<p>The TikTok saga is far from over. Heck, by the time you read this, China or Trump may have nixed the deal on national security concerns, national dignity concerns, or just on a whim. We sketch out updated thoughts on valuation and the companies affected by the deal. Hint: We like Microsoft's ZeniMax acquisition. </p><p></p><div class="content-highlight"><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div>

The TikTok saga is far from over. Heck, by the time you read this, China or Trump may have nixed the deal on national security concerns, national dignity concerns, or just on a whim. We sketch out updated thoughts on valuation and the companies affected by the deal. Hint: We like Microsoft's ZeniMax acquisition. Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

TikTok: Microsoft's "Console-Ation" Prize

Equity Capital Markets

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<p>We've looked into many IPOs over the last 20 years, and think Snowflake is one of the better ones we've come across. Its architectural competitive advantages vs. legacy data warehouse providers are simply insurmountable, and while the cloud platforms loom as eventual rivals, we think this management team knows how to carve out a defensible place amongst the cloud titans.</p>
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<p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p>
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We've looked into many IPOs over the last 20 years, and think Snowflake is one of the better ones we've come across. Its architectural competitive advantages vs. legacy data warehouse providers are simply insurmountable, and while the cloud platforms loom as eventual rivals, we think this management team knows how to carve out a defensible place amongst the cloud titans.




Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.




<p>We have been pitching Coupa as a long since the March bottom, and have been blown away by the surge in its stock and multiple...it went from 15x forward sales to 25x last quarter and stands at 35x forward sales today. <span>A lack of disclosure around Coupa Pay progress and a potentially "conservative" 3Q21 billings guidance says to us its time to move to the sidelines on Coupa and await a better re-entry point</span>. </p><p></p><div class="content-highlight"><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div>

We have been pitching Coupa as a long since the March bottom, and have been blown away by the surge in its stock and multiple...it went from 15x forward sales to 25x last quarter and stands at 35x forward sales today. A lack of disclosure around Coupa Pay progress and a potentially "conservative" 3Q21 billings guidance says to us its time to move to the sidelines on Coupa and await a better re-entry point. Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

United States

VMware, Inc. provides virtualization solutions from the desktop to the data center. The Company's solution products addresses a range of IT problems, which includes cost and operational inefficiencies, business continuity, software lifecycle management and desktop management.

Electronic Arts Inc. develops, publishes, and distributes branded interactive entertainment software worldwide for video game consoles, personal computers, handheld game players, and cellular handsets. The Company also provides online game-related services.

ServiceNow, Inc. provides enterprise information technology (IT) management software. The Company designs, develops, and produces prepackaged computer software, cloud services, and IT service management platform. ServiceNow serves customers throughout the United States.

Check Point Software Technologies Ltd. develops, markets and supports a range of software and hardware products and services for information technology (IT) security and offers its customers a network and gateway security solutions, data and endpoint security solutions and management solutions.

Fair Isaac Corporation provides analytics, including predictive modeling, decision analysis, intelligence management, decision management systems, and consulting services.  The Company helps companies in countries around the world acquire customers more efficiently, increase customer value, reduce fraud, lower operating expenses, and enter new markets more profitably.

Synopsys, Inc. supplies electronic design automation solutions to the global electronics market.  The Company provides design technologies to creators of advanced integrated circuits, electronic systems, and systems on a chip. Synopsys also provides consulting services and support to its customers to streamline the overall design process and accelerate time to market.

Activision Blizzard, Inc. publishes, develops, and distributes interactive entertainment software and peripheral products. The Company's products cover diverse game categories, including action/adventure, action sports, racing, role playing, simulation, first-person action, music-based gaming and strategy.

Workday, Inc. provides enterprise cloud-based applications. The Company offers human capital, spend, and financial management, as well as payroll, initiatives and higher education solutions. Workday serves the finance, healthcare, manufacturing, education, and technology industries worldwide.

HubSpot, Inc. provides a cloud-based marketing and sales software platform. The Company offers integrated applications that helps in lead generation and social marketing.

Fortinet Inc. provides network security solutions. The Company offers network security appliances and related software, and subscription services. Fortinet systems integrate the industry's broadest suite of security technologies, including firewall, VPN, antivirus, intrusion prevention (IPS), Web filtering, antispam, and traffic shaping.

Nintendo Co., Ltd. globally develops, manufactures and sells home-use video game hardware and software in home entertainment business.  The company also produces home-game products including cards.

Nexon Co., Ltd. mainly develops and services, online games for PC and mobile devices. The company also offers consulting services related to online-games. Nexon operates in Japan.

Dassault Systemes operates as a software company. The develops and offers 3Dexperience platform to create innovative new products and services using virtual experiences. Dassault Systemes serves aerospace, construction, business services, consumer packaged goods, high-tech, life science, health care, marine, energy, and industrial equipment industries worldwide.

WiseTech Global Pty Ltd provides various technology and information technology management solutions. The Company offers cloud based various technology platforms, market specific software and logistics technology solutions, such as edienterprise, a platform supply chain logistics management system, software-as-a-service, and clinical management software. 

Constellation Software Inc is a software holding company.  The Company acquires mission-critical, vertical market software companies, and helps them to grow.

Spotify Technology S.A. provides music streaming services. The Company offers commercial free music and ad-supported services to subscribers. Spotify Technology serves clients worldwide.

Dassault Systemes is a technology company. The company provides software applications services designed to support client company's innovation processes. The company's line of business includes provision of 3D design software, 3D digital mock up and product lifecycle Management. Dassault Systemes also provides several software brands.

Xero Limited offers an online accounting system.  The software features bank transaction importing, a cashbook, a general ledger, invoicing, accounts receivable, accounts payable, financial reporting, and management of expense claims.

CAPCOM CO., LTD. develops consumer video game software.  The Company also develops, manufactures, markets, and leases arcade game machines.  Capcom also operates amusement facilities.

International Games System Co., Ltd. plans, designs, develops, manufactures, and markets software and hardware for arcade games, PC games, and Internet on-line games.

Oracle Corporation supplies software for enterprise information management. The Company offers databases and relational servers, application development and decision support tools, and enterprise business applications. Oracle's software runs on network computers, personal digital assistants, set-top devices, PCs, workstations, minicomputers, mainframes, and massively parallel computers.

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Oracle Corp (ORCL US)

Small Cap Growth: Kaonavi (4435) – Turning Talent into Teams

Talent management plays a critical role in the modern company, and in many cases, it can mean the difference between a successful culture and going...

Mark Chadwick

Small Cap Growth: TeamSpirit (4397) - Nirvana for Workers

TeamSpirit is a cloud-based Workforce Management SaaS that enables workers to work from anywhere and allows companies to get the best out of their...

Mark Chadwick

TikTok: Microsoft's "Console-Ation" Prize

The TikTok saga is far from over. Heck, by the time you read this, China or Trump may have e

Aaron Gabin

Snowflake: Making It Rain

We've looked into many IPOs over the last 20 years, and think Our investment philosophy attracts us to investing behind THE major secular trend in...

Aaron Gabin

Coupa 2Q21: P/S Multiples Are Coup-Ed Up

We have been pitching Coupa as a long since the March bottom, and have been Obex’s fundamental research process is focused on secular change in...

Aaron Gabin

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