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

Freee offers cloud-based online accounting and HR/Payroll software to small and medium businesses (SMBs) in Japan. The company operates a subscription-based revenue model, and the adoption of cloud-based accounting and HR software among SMBs is still at a nascent stage compared to other Western markets.The company’s shares have gained 177% YTD outperforming both Nikkei 225 Index and Topix.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/972/original/image_65217007521606637862376.png?1606637863" class="editor-image img-responsive" data-smartkarma-image-id="174972"></figure><div class="content-caption">Source: Cap IQ</div>Our “2021 High Conviction” calls for an upside potential of at least 50%. Given the company is a few quarters away from reporting OP, we believe it is likely that the company’s share price will rally more than 50% over the next 12-months.

Freee offers cloud-based online accounting and HR/Payroll software to small and medium businesses (SMBs) in Japan. The company operates a subscription-based revenue model, and the adoption of cloud-based accounting and HR software among SMBs is still at a nascent stage compared to other Western markets.The company’s shares have gained 177% YTD outperforming both Nikkei 225 Index and Topix.Source: Cap IQOur “2021 High Conviction” calls for an upside potential of at least 50%. Given the company is a few quarters away from reporting OP, we believe it is likely that the company’s share price will rally more than 50% over the next 12-months.

2021 High Conviction - Rapid User Growth Will Set You Freee From Losses

Japan Specialist

Mark Chadwick

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<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>  Business is the key growth driver. New Prime Minister Suga’s push for greater digitalization underpins long-term market growth. A tight labour market and the need to accommodate more flexible work styles are additional tailwinds for Software as a Service (SaaS) providers, a shift that is far behind other developed markets.  
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Improving momentum of mid-sized corporate customer acquisition. While Money Forward offers services to both individuals and corporations, it is the Business Segment that is the clear earnings and value driver. An expanding suite of SaaS products is about to be rolled out to mid-sized companies, which will drive higher revenue and gross margins.  
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Earnings forecasts and valuation. We expect strong top line growth of 43% annually through FY11/22. Recurring revenue from the Business domain will continue to rise as a proportion of consolidated sales. A clearer outlook for growth in this segment combined with rising gross margins is expected to support higher stock market valuations. We have high conviction on Money Forward as we head into the New Year.  
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Money Forward (3994 JP)  Business is the key growth driver. New Prime Minister Suga’s push for greater digitalization underpins long-term market growth. A tight labour market and the need to accommodate more flexible work styles are additional tailwinds for Software as a Service (SaaS) providers, a shift that is far behind other developed markets.  


Improving momentum of mid-sized corporate customer acquisition. While Money Forward offers services to both individuals and corporations, it is the Business Segment that is the clear earnings and value driver. An expanding suite of SaaS products is about to be rolled out to mid-sized companies, which will drive higher revenue and gross margins.  


Earnings forecasts and valuation. We expect strong top line growth of 43% annually through FY11/22. Recurring revenue from the Business domain will continue to rise as a proportion of consolidated sales. A clearer outlook for growth in this segment combined with rising gross margins is expected to support higher stock market valuations. We have high conviction on Money Forward as we head into the New Year.  




2021 High Conviction – Money Forward's Great Leap

<a href="https://www.smartkarma.com/entities/oro-co-ltd" target="_blank" data-smartkarma-citation="entities:26941:1" rel="noopener">oRo Co Ltd (3983 JP)</a> reported its 3Q2020 results today which saw 22.8% YoY decline in revenue while OP for the quarter dropped 32.1% YoY during the quarter. Both business segments saw YoY decline in revenue during the period. The company’s revenue and OP both fell below consensus estimates by 13.6% and 15.8% respectively.In our previous insight on the company <a href="https://www.smartkarma.com/insights/oro-another-stock-capable-of-making-pm-suga-s-digitalisation-dream-a-real" target="_blank" data-smartkarma-citation="insights:43954" rel="noopener">oRo: Another Stock Capable of Making PM Suga’s Digitalisation Dream a Real</a> , we highlighted that the company’s revenues and margins are impacted by the ongoing Covid-19 pandemic. During the company’s 1H2020 earnings announcement, the company mentioned that the business conditions have recovered since June, however, 3Q2020 results show that the conditions have not yet improved as evident by the QoQ drop in revenue and margins.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/171/157/original/image_16203616221605205781684.png?1605205782" class="editor-image img-responsive" data-smartkarma-image-id="171157"></figure><div class="content-caption">Source: Company Disclosures</div>

oRo Co Ltd (3983 JP) reported its 3Q2020 results today which saw 22.8% YoY decline in revenue while OP for the quarter dropped 32.1% YoY during the quarter. Both business segments saw YoY decline in revenue during the period. The company’s revenue and OP both fell below consensus estimates by 13.6% and 15.8% respectively.In our previous insight on the company oRo: Another Stock Capable of Making PM Suga’s Digitalisation Dream a Real , we highlighted that the company’s revenues and margins are impacted by the ongoing Covid-19 pandemic. During the company’s 1H2020 earnings announcement, the company mentioned that the business conditions have recovered since June, however, 3Q2020 results show that the conditions have not yet improved as evident by the QoQ drop in revenue and margins.Source: Company Disclosures

ORo: Earnings Growth Hasn’t Resumed Yet but We Are Looking for Entry Points

<a href="https://www.smartkarma.com/entities/freee-kk" target="_blank" data-smartkarma-citation="entities:28424:1" rel="noopener">freee (4478 JP)</a>  reported its 1QFY06/21 results yesterday (11th November) which saw a 49.2% YoY growth in revenues while operating losses for the quarter dropped to 12.2% of revenues from 32.6% in 1QFY06/20. The reported revenue beat consensus estimates by 4%. The consensus called for operating losses of JPY300m while the company reported operating losses of JPY272m for the first quarter of FY06/2021.

freee (4478 JP)  reported its 1QFY06/21 results yesterday (11th November) which saw a 49.2% YoY growth in revenues while operating losses for the quarter dropped to 12.2% of revenues from 32.6% in 1QFY06/20. The reported revenue beat consensus estimates by 4%. The consensus called for operating losses of JPY300m while the company reported operating losses of JPY272m for the first quarter of FY06/2021.

Freee KK: 1QFY21 Results Show Profits Are Possible Over the Next 12-18 Months

<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> is a financial platform for both individuals and businesses. The adoption of cloud-based Software as a Service (SaaS) is driving rapid sales growth for business accounting software and, with penetration still at low levels, this trend is expected to continue. Money Forward operates under four main domains: MF Home (personal financial management), MF Business (cloud accounting), MF Finance (payment services / venture fund) and MF X (technology solutions).

Money Forward (3994 JP) is a financial platform for both individuals and businesses. The adoption of cloud-based Software as a Service (SaaS) is driving rapid sales growth for business accounting software and, with penetration still at low levels, this trend is expected to continue. Money Forward operates under four main domains: MF Home (personal financial management), MF Business (cloud accounting), MF Finance (payment services / venture fund) and MF X (technology solutions).   

Small Cap Growth: Money Forward (3994) - Transforming Japan's Accounts

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)

2021 High Conviction - Rapid User Growth Will Set You Freee From Losses

Our “2021 High Conviction” calls for an upside potential of at least 50%. Given the company is a few quarters away from reporting OP, we believe it...

Shifara Samsudeen, ACMA, CGMA

2021 High Conviction – Money Forward's Great Leap

Money Forward is a high conviction BUY for 2021. We are bullish on the TAM for cloud-based accounting SaaS and believe Money Forward will see rapid...

Mark Chadwick

ORo: Earnings Growth Hasn’t Resumed Yet but We Are Looking for Entry Points

oRo reported its 3Q2020 results today which saw 22.8% YoY decline in revenue while OP for the quarter dropped 32.1% YoY during the quarter.

Shifara Samsudeen, ACMA, CGMA

Freee KK: 1QFY21 Results Show Profits Are Possible Over the Next 12-18 Months

Freee reported its 1QFY06/21 results yesterday (11th November) which saw a 49.2% YoY growth in revenues while operating losses for the quarter...

Shifara Samsudeen, ACMA, CGMA

Small Cap Growth: Money Forward (3994) - Transforming Japan's Accounts

Money Forward provides cloud-based accounting software that is helping Japanese companies to transition to a digital future.

Mark Chadwick

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