Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, 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.

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/Freee-kk" target="_blank" data-smartkarma-citation="entities:28424:1" rel="noopener">freee (4478 JP)</a> reported 2QFY06/2022 earnings today. Revenue grew 38.5% YoY to JPY3.31bn, marginally below consensus revenue of JPY3.47bn.</li>
<li>Operating losses for the quarter was JPY544m (16.4% of revenues vs 17.8% in 2QFY06/2021) which was well below consensus operating loss of JPY673.1 (19.4% of consensus revenue.</li>
<li>Though revenues fell slightly below consensus, we think 2Q results have eased some of the concerns we had over freee’s acquisition of Ninja Sign and its path to profits.</li>
</ul>



freee (4478 JP) reported 2QFY06/2022 earnings today. Revenue grew 38.5% YoY to JPY3.31bn, marginally below consensus revenue of JPY3.47bn.
Operating losses for the quarter was JPY544m (16.4% of revenues vs 17.8% in 2QFY06/2021) which was well below consensus operating loss of JPY673.1 (19.4% of consensus revenue.
Though revenues fell slightly below consensus, we think 2Q results have eased some of the concerns we had over freee’s acquisition of Ninja Sign and its path to profits.


Freee 2Q: OP Beat Wipes Out Concerns on Mid/Large User Growth and Profitability

Equity Capital Markets

<ul>
<li>M3’s shares have dropped 37.3% over the last 12-months to JPY5,774 from JPY9,207 as the company’s earnings growth has started slowing down. </li>
<li>The Medical Platform business was a key beneficiary of pandemic which saw accelerated transformation in pharma marketing. Strong growth of Medical Platform helped offset declines in other businesses during pandemic.</li>
<li>M3’s share price has been on a correction as pandemic drove its valuations to all-time highs. M3’s recent earnings revealed that its earnings growth has started decelerating.</li>
</ul>


M3’s shares have dropped 37.3% over the last 12-months to JPY5,774 from JPY9,207 as the company’s earnings growth has started slowing down. 
The Medical Platform business was a key beneficiary of pandemic which saw accelerated transformation in pharma marketing. Strong growth of Medical Platform helped offset declines in other businesses during pandemic.
M3’s share price has been on a correction as pandemic drove its valuations to all-time highs. M3’s recent earnings revealed that its earnings growth has started decelerating.


M3: Share Price Heading into a Correction and Further 20-25% Downside Likely

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.

<ul>
<li>Net Protections Holdings (NPH), a buy now pay later service provider, raised around US$570m via selling a mix of primary and secondary shares in its Japan IPO.</li>
<li>As per Yano Research, it had 40% market share in the domestic BNPL market for B2C transactions.</li>
<li>In this note we will talk about the trading dynamics.</li>
</ul>


Net Protections Holdings (NPH), a buy now pay later service provider, raised around US$570m via selling a mix of primary and secondary shares in its Japan IPO.
As per Yano Research, it had 40% market share in the domestic BNPL market for B2C transactions.
In this note we will talk about the trading dynamics.


Net Protections IPO Trading - Peers Have Moved Lower. Provides the Only Exposure to BNPL in Japan

<ul>
<li>Freee’s shares have lost about 38.2% over the last 12-months. The company is trading at FY+2 EV/Revenue of 15.23x at a slight premium to historical low of 11.27x.</li>
<li>Freee’s acquisition of Sight Visit has dragged down the market sentiment as the upside from the acquisition is lower. We expect the monetisation of Ninja Sign to be faster and successful.</li>
<li>We think Freee’s current multiples are a lot cheaper and offers a good opportunity to buy the stock.</li>
</ul>


Freee’s shares have lost about 38.2% over the last 12-months. The company is trading at FY+2 EV/Revenue of 15.23x at a slight premium to historical low of 11.27x.
Freee’s acquisition of Sight Visit has dragged down the market sentiment as the upside from the acquisition is lower. We expect the monetisation of Ninja Sign to be faster and successful.
We think Freee’s current multiples are a lot cheaper and offers a good opportunity to buy the stock.


Freee: Current Drop in Multiples Offer a Good Entry

Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>In <a href="https://www.smartkarma.com/insights/topix-inclusions-who-is-ready-4-0" target="_blank" data-smartkarma-citation="insights:61777" rel="noopener">TOPIX Inclusions: Who Is READY? 4.0</a>, I identified <a href="https://www.smartkarma.com/entities/freee-kk" target="_blank" data-smartkarma-citation="entities:28424:1" rel="noopener">freee (4478 JP)</a> as a potential TOPIX Inclusion candidate based on their ability to satisfy key Section Transfer Requirements.</li>
<li>Previously, I have discussed a pair trade involving <a href="https://www.smartkarma.com/entities/freee-kk" target="_blank" data-smartkarma-citation="entities:28424:1" rel="noopener">freee (4478 JP)</a> and its close competitor <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> in <a href="https://www.smartkarma.com/insights/topix-inclusion-money-forward-3994-could-outperform-freee-4478-until-end-of-month" target="_blank" data-smartkarma-citation="insights:54585" rel="noopener">TOPIX Inclusion: Money Forward (3994) Could Outperform Freee (4478)</a>.</li>
<li>Below is a look at the reasons for why the timing might be good for reversing this Trade and going <strong>LONG Freee - SHORT Money Forward.</strong>
</li>
</ul>


In TOPIX Inclusions: Who Is READY? 4.0, I identified freee (4478 JP) as a potential TOPIX Inclusion candidate based on their ability to satisfy key Section Transfer Requirements.
Previously, I have discussed a pair trade involving freee (4478 JP) and its close competitor Money Forward (3994 JP) in TOPIX Inclusion: Money Forward (3994) Could Outperform Freee (4478).
Below is a look at the reasons for why the timing might be good for reversing this Trade and going LONG Freee - SHORT Money Forward.



TOPIX Inclusion Pre-Event Pair Trade: LONG Freee - SHORT Money Forward

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 KK (4478 JP)

Freee 2Q: OP Beat Wipes Out Concerns on Mid/Large User Growth and Profitability

Freee’s share price started falling as earnings over the last 2-3 quarters concerned investors over its path to profits. 2Q OP beat has eased these...

Shifara Samsudeen, ACMA, CGMA

Net Protections IPO Trading - Peers Have Moved Lower. Provides the Only Exposure to BNPL in Japan

Net Protections Holdings (NPH), a buy now pay later service provider, raised around US$570m in its Japan IPO. In this note, we will talk about the...

Sumeet Singh

Freee: Current Drop in Multiples Offer a Good Entry

Freee’s acquisition of Sight Visit has dragged down the market sentiment. Freee’s current multiples are a lot cheaper and offers a good opportunity...

Shifara Samsudeen, ACMA, CGMA

TOPIX Inclusion Pre-Event Pair Trade: LONG Freee - SHORT Money Forward

Freee is a TOPIX Inclusion pre-event candidate and this might act as a catalyst to help them outperform their close peer Money Forward and the...

Janaghan Jeyakumar, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Freee 2Q: OP Beat Wipes Out Concerns on Mid/Large User Growth and Profitability

Freee’s share price started falling as earnings over the last 2-3 quarters concerned investors over its path to profits. 2Q OP beat has eased these...

Shifara Samsudeen, ACMA, CGMA

M3: Share Price Heading into a Correction and Further 20-25% Downside Likely

M3’s share price has been on a correction as pandemic drove its valuations to all-time highs. M3's earnings growth has started decelerating our...

Shifara Samsudeen, ACMA, CGMA

Net Protections IPO Trading - Peers Have Moved Lower. Provides the Only Exposure to BNPL in Japan

Net Protections Holdings (NPH), a buy now pay later service provider, raised around US$570m in its Japan IPO. In this note, we will talk about the...

Sumeet Singh

Freee: Current Drop in Multiples Offer a Good Entry

Freee’s acquisition of Sight Visit has dragged down the market sentiment. Freee’s current multiples are a lot cheaper and offers a good opportunity...

Shifara Samsudeen, ACMA, CGMA

TOPIX Inclusion Pre-Event Pair Trade: LONG Freee - SHORT Money Forward

Freee is a TOPIX Inclusion pre-event candidate and this might act as a catalyst to help them outperform their close peer Money Forward and the...

Janaghan Jeyakumar, CFA