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

<div>Freee, the Japanese cloud-based accounting and HR/Payroll software provider to SMEs has seen a huge rally in its share price over the past few months. The company’s share price has more than doubled to JPY7,950 per share since we last wrote on the company in February this year.</div><div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/163/071/original/image_23875405221601636185351.png?1601636187" class="editor-image img-responsive" data-smartkarma-image-id="163071"></figure></div><div class="content-caption">Source: Cap IQ</div><div>In this insight, we have examined the company’s operating matrices, its ability to turn around the business into profits and the company’s valuation. </div>

Freee, the Japanese cloud-based accounting and HR/Payroll software provider to SMEs has seen a huge rally in its share price over the past few months. The company’s share price has more than doubled to JPY7,950 per share since we last wrote on the company in February this year.Source: Cap IQIn this insight, we have examined the company’s operating matrices, its ability to turn around the business into profits and the company’s valuation. 

Freee KK: Quantamental Reveals the Company May Break-Even Over the Next 2-Years

Japan Specialist

Mark Chadwick

<ul>
<li>
<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> provides online accounting software for Japan's SMEs, providing all of the time-saving tools that small business owners need to grow. It is the Japanese version of <a href="https://www.smartkarma.com/entities/xero-ltd" target="_blank" data-smartkarma-citation="entities:390:1" rel="noopener">Xero Ltd (XRO AU)</a> or Quickbooks by <a href="https://www.smartkarma.com/entities/intuit-inc" target="_blank" data-smartkarma-citation="entities:8235:1" rel="noopener">Intuit Inc (INTU US)</a> </li>
<li>Money Forward (MF) and its domestic peer <a href="https://www.smartkarma.com/entities/freee-kk" target="_blank" data-smartkarma-citation="entities:28424:1" rel="noopener">freee (4478 JP)</a> dominate the Japanese online market, which is growing in the region of 60-70% YoY.</li>
<li>There is a huge addressable market with low online penetration. MF has the potential to build a strong competitive moat, in the absence of the global majors.</li>
<li>Today, MF looks similar to Xero in 2013. If MF follows the same growth trajectory, investors could be looking at a 9-bagger.  </li>
</ul>



Money Forward (3994 JP) provides online accounting software for Japan's SMEs, providing all of the time-saving tools that small business owners need to grow. It is the Japanese version of Xero Ltd (XRO AU) or Quickbooks by Intuit Inc (INTU US) 
Money Forward (MF) and its domestic peer freee (4478 JP) dominate the Japanese online market, which is growing in the region of 60-70% YoY.
There is a huge addressable market with low online penetration. MF has the potential to build a strong competitive moat, in the absence of the global majors.
Today, MF looks similar to Xero in 2013. If MF follows the same growth trajectory, investors could be looking at a 9-bagger.  


Small Cap Growth: Money Forward (3994) - Be Audit You Can Be

<p>Sansan Inc, the business card digitisation company, reported its full-year FY05/2020 results early this week which saw strong growth in revenue and operating profits. At the same time, both revenue and OP beat consensus estimates by a significant margin and the results marked the company’s first full-year of operating profits despite being affected by the Covid-19 pandemic.</p>

Sansan Inc, the business card digitisation company, reported its full-year FY05/2020 results early this week which saw strong growth in revenue and operating profits. At the same time, both revenue and OP beat consensus estimates by a significant margin and the results marked the company’s first full-year of operating profits despite being affected by the Covid-19 pandemic.

Sansan 4QFY05/20 Results: First Full-Year of Operating Profits Despite Covid-19 Impact

Supun Walpola

<p><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>’s (MF) share price has increased by around 70% since the first week of April. This is mostly due to the perception that enterprise SaaS operations are a defensive business model during the pandemic. However, we believe the concerns we had about MF in our previous notes are still valid. Despite shifting to a more affordable (at the same time less profitable for MF) price plan, and spending heavily on subsidies, MF’s enterprise SaaS business has not seen a marked increase in new customers. We see positives for MF in its fintech operations, however, these businesses are still in their early stages of monetisation. We also believe MF’s chances of turning profitable is slim in the next few years as we expect the company to spend heavily on customer acquisition. We believe further upside for MF is limited in the short-run. Our SOTP valuation gives MF a FY1 target price of JPY 6,707, which is only a slight upside from the current market price (of JPY 6,580 as of 8th of July 2020).</p>

Money Forward (3994 JP)’s (MF) share price has increased by around 70% since the first week of April. This is mostly due to the perception that enterprise SaaS operations are a defensive business model during the pandemic. However, we believe the concerns we had about MF in our previous notes are still valid. Despite shifting to a more affordable (at the same time less profitable for MF) price plan, and spending heavily on subsidies, MF’s enterprise SaaS business has not seen a marked increase in new customers. We see positives for MF in its fintech operations, however, these businesses are still in their early stages of monetisation. We also believe MF’s chances of turning profitable is slim in the next few years as we expect the company to spend heavily on customer acquisition. We believe further upside for MF is limited in the short-run. Our SOTP valuation gives MF a FY1 target price of JPY 6,707, which is only a slight upside from the current market price (of JPY 6,580 as of 8th of July 2020).

Money Forward: Upside Is Capped in the Short-Run

<p>Freee, the Japanese cloud-based accounting and HR/Payroll software to small and medium businesses reported its 2QFY06/2020 results today which are the company’s first post-IPO earnings. During the second quarter, Freee reported revenues of JPY1,580m, a 56.1% increase compared to the same quarter a year ago. The growth in revenue was mainly driven by an increase in the number of paid customers alongside growth in ARPU during the quarter.</p>

Freee, the Japanese cloud-based accounting and HR/Payroll software to small and medium businesses reported its 2QFY06/2020 results today which are the company’s first post-IPO earnings. During the second quarter, Freee reported revenues of JPY1,580m, a 56.1% increase compared to the same quarter a year ago. The growth in revenue was mainly driven by an increase in the number of paid customers alongside growth in ARPU during the quarter.

Freee’s First Post-IPO Results: Revenues and Paid Customers Increase

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 KK: Quantamental Reveals the Company May Break-Even Over the Next 2-Years

Freee, the Japanese cloud-based accounting and HR/Payroll software provider to SMEs has seen a huge rally in its share price over the past few...

Shifara Samsudeen, ACMA, CGMA

Small Cap Growth: Money Forward (3994) - Be Audit You Can Be

Money Forward (3994 JP) is the Japanese

Mark Chadwick

Sansan 4QFY05/20 Results: First Full-Year of Operating Profits Despite Covid-19 Impact

Sansan Inc, the business card digitisation company, reported its full-year FY05/2020 results early this week which saw strong growth in revenue and...

Shifara Samsudeen, ACMA, CGMA

Money Forward: Upside Is Capped in the Short-Run

Money Forward (3994 JP)’s (MF) share price has increased by around 70% since the first week of April. This is mostly due to the perception that...

Supun Walpola

Freee’s First Post-IPO Results: Revenues and Paid Customers Increase

Freee, the Japanese cloud-based accounting and HR/Payroll software to small and medium businesses reported its 2QFY06/2020 results today which are...

Shifara Samsudeen, ACMA, CGMA

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