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

For over a year we have been discussing the opportunity Square Enix has to displace Blizzard’s World of Warcraft –<a href="https://www.smartkarma.com/insights/square-enix-what-the-witcher-says-about-content-synergies-and-implications-for-game-developers" target="_blank" rel="noopener">Square Enix – What the Witcher Says About Content Synerg ... (smartkarma.com)</a><a href="https://www.smartkarma.com/insights/square-enix-ff7re-is-the-cherry-not-the-sundae" target="_blank" rel="noopener">Square Enix – FF7RE Is the Cherry, Not the Sundae (smartkarma.com)</a><a href="https://www.smartkarma.com/insights/square-enix-strength-of-balanced-business-portfolio-shines-through" target="_blank" rel="noopener">Square Enix – Strength of Balanced Business Portfolio Sh ... (smartkarma.com)</a>That opportunity was a pile of tinder wood in search of a match and it appears that the name of that match is Asmongold.

For over a year we have been discussing the opportunity Square Enix has to displace Blizzard’s World of Warcraft –Square Enix – What the Witcher Says About Content Synerg ... (smartkarma.com)Square Enix – FF7RE Is the Cherry, Not the Sundae (smartkarma.com)Square Enix – Strength of Balanced Business Portfolio Sh ... (smartkarma.com)That opportunity was a pile of tinder wood in search of a match and it appears that the name of that match is Asmongold.

Square Enix – Behold the Asmongold Effect

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<div class="content-highlight">In this insight, we discuss the 9 major risks (excluding valuation issues) for Krafton. Overall, we believe these significant risk factors could result in much lower than expected demand for the Krafton IPO shares, especially among the institutional investors unless the IPO price range is lowered significantly. </div>1) Too much dependent on one game PUBG2) Krafton's big political risk with China (Game for Peace)3) Political risks of operating PUBG in overseas countries such as India  4) Company's sales growth in 2020 helped by COVID-195) Declining sales and profit growth in 1Q 20216) Comparable companies' worsening sales and profit trend in 1Q 20217) Potential acquisitions may not add value8) Expansion into other entertainment related business may involve execution risks9) Insiders are selling too much in this IPO

In this insight, we discuss the 9 major risks (excluding valuation issues) for Krafton. Overall, we believe these significant risk factors could result in much lower than expected demand for the Krafton IPO shares, especially among the institutional investors unless the IPO price range is lowered significantly. 1) Too much dependent on one game PUBG2) Krafton's big political risk with China (Game for Peace)3) Political risks of operating PUBG in overseas countries such as India  4) Company's sales growth in 2020 helped by COVID-195) Declining sales and profit growth in 1Q 20216) Comparable companies' worsening sales and profit trend in 1Q 20217) Potential acquisitions may not add value8) Expansion into other entertainment related business may involve execution risks9) Insiders are selling too much in this IPO 

International Games System / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/international-games-system-co-ltd" target="_blank" data-smartkarma-citation="entities:3486:1" rel="noopener">International Games System (3293 TT)</a> (IGS) is one of the leading social online gaming companies in Taiwan. IGS's core products include social casino games, casual games, and arcade games.Despite risks including declining sales of Arcade Games and potential regulatory risks associated with social casino online games, we believe many investors will focus on the positives and continue to add to their positions of this undervalued stock. Key catalysts of the company are as follows:<ul>
<li>Tremendous growth in online/mobile social casino &amp; casual games</li>
<li>Strong sales growth in Jan-Apr 2021 </li>
<li>Improving profit margins</li>
<li>High dividend payout</li>
</ul>

International Games System (3293 TT) (IGS) is one of the leading social online gaming companies in Taiwan. IGS's core products include social casino games, casual games, and arcade games.Despite risks including declining sales of Arcade Games and potential regulatory risks associated with social casino online games, we believe many investors will focus on the positives and continue to add to their positions of this undervalued stock. Key catalysts of the company are as follows:
Tremendous growth in online/mobile social casino &amp; casual games
Strong sales growth in Jan-Apr 2021 
Improving profit margins
High dividend payout


International Games System: An Undervalued Online Social Gaming Stock in Taiwan

Latest News from the World’s Leading Innovators

Granite Bay Capital

An innovation focussed investment company

Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity.

Thematic (Sector/Industry)

Headline Developments The battle is on between Fortnite developer Epic Games (private) and Apple (AAPL) - a David and Goliath case which, in a nutshell, will ask whether Apple is acting fairly by charging developers a 15-30% fee for all revenues made via subscriptions and in-app purchases.

Headline Developments The battle is on between Fortnite developer Epic Games (private) and Apple (AAPL) - a David and Goliath case which, in a nutshell, will ask whether Apple is acting fairly by charging developers a 15-30% fee for all revenues made via subscriptions and in-app purchases.

<div class="content-highlight">AppLovin announced its IPO price range of $75 to $85 per share. The company is selling 25 million shares and at the high end of the IPO price range, the company is aiming to raise $2.1 billion. At the high end of the IPO price range ($85 per share), AppLovin would be valued at $30.4 billion. </div>Our base case valuation of AppLovin is EV of $35.1 billion, implied market cap of $35.7 billion, and implied target price per share of $99.8. This represents 17% higher than the high end of the IPO price range of $85. We have a POSITIVE view of the AppLovin IPO. Our base case valuation of AppLovin is based on a 16x EV/S multiple (using 2021 sales estimate), which represents a 10% higher than the average EV/S multiple of the comps. It is also below the EV/S multiple of Unity Software and Roblox which trade at EV/S multiple of 26.8x and 19.2x, respectively. We estimate AppLovin to generate sales of $2.2 billion (up 51% YoY) and an operating profit of $65.2 million in 2021. From 2020 to 2025, we have assumed the company's sales to grow at a CAGR of 28.6%.

AppLovin announced its IPO price range of $75 to $85 per share. The company is selling 25 million shares and at the high end of the IPO price range, the company is aiming to raise $2.1 billion. At the high end of the IPO price range ($85 per share), AppLovin would be valued at $30.4 billion. Our base case valuation of AppLovin is EV of $35.1 billion, implied market cap of $35.7 billion, and implied target price per share of $99.8. This represents 17% higher than the high end of the IPO price range of $85. We have a POSITIVE view of the AppLovin IPO. Our base case valuation of AppLovin is based on a 16x EV/S multiple (using 2021 sales estimate), which represents a 10% higher than the average EV/S multiple of the comps. It is also below the EV/S multiple of Unity Software and Roblox which trade at EV/S multiple of 26.8x and 19.2x, respectively. We estimate AppLovin to generate sales of $2.2 billion (up 51% YoY) and an operating profit of $65.2 million in 2021. From 2020 to 2025, we have assumed the company's sales to grow at a CAGR of 28.6%.

United States

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.

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Activision Blizzard (ATVI US)

Square Enix – Behold the Asmongold Effect

Twitch streamer Asmongold has helped drive a surge in viewership and player numbers for FFXIV which could have a material impact on Square Enix's...

Mio Kato

Krafton IPO - 9 Major Risks

We discuss the 9 major risks (excluding valuation issues) for Krafton. Overall, we believe these significant risk factors could result in much...

Douglas Kim

Weekly Innovation Review (WIRE) #30

Headline Developments The battle is on between Fortnite developer Epic Games (private) and Apple (AAPL) - a David and Goliath case which, in a...

Granite Bay Capital

AppLovin IPO Valuation Analysis

Our base case valuation of AppLovin is implied market cap of $35.7 billion and target price per share of $99.8. This represents 17% higher than the...

Douglas Kim

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52-week Range

Market Cap (USDm)

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Dividend (Yield)

Square Enix – Behold the Asmongold Effect

Twitch streamer Asmongold has helped drive a surge in viewership and player numbers for FFXIV which could have a material impact on Square Enix's...

Mio Kato

Krafton IPO - 9 Major Risks

We discuss the 9 major risks (excluding valuation issues) for Krafton. Overall, we believe these significant risk factors could result in much...

Douglas Kim

International Games System: An Undervalued Online Social Gaming Stock in Taiwan

International Games System (3293 TT) is high growth, social games provider in Taiwan that we believe is undervalued versus leading global social...

Douglas Kim

Weekly Innovation Review (WIRE) #30

Headline Developments The battle is on between Fortnite developer Epic Games (private) and Apple (AAPL) - a David and Goliath case which, in a...

Granite Bay Capital

AppLovin IPO Valuation Analysis

Our base case valuation of AppLovin is implied market cap of $35.7 billion and target price per share of $99.8. This represents 17% higher than the...

Douglas Kim