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

<ul>
<li>Square Enix results were mildly above consensus (by 2.4% at the revenue line and 3.4% at the OP line). </li>
<li>The company did not provide guidance on account of the pending transfer of its overseas development studios. </li>
<li>However, we expect the sale to lift a significant burden from the bottom line enabling significant YoY OP growth.</li>
</ul>


Square Enix results were mildly above consensus (by 2.4% at the revenue line and 3.4% at the OP line). 
The company did not provide guidance on account of the pending transfer of its overseas development studios. 
However, we expect the sale to lift a significant burden from the bottom line enabling significant YoY OP growth.


Square Enix – Bounce Suggests Market Was Far Too Pessimistic

<ul>
<li>Square Enix announced the of sale Eidos Interactive, Crystal Dynamics, Square Enix Montreal and associated IPs to Embracer for $300m. </li>
<li>We had been puzzling over Square Enix’s strangely low guidance despite excellent momentum in its MMO business for some time. </li>
<li>Considering the underperformance in HD Games profitability and this sale we think we can now put two and two together.</li>
</ul>


Square Enix announced the of sale Eidos Interactive, Crystal Dynamics, Square Enix Montreal and associated IPs to Embracer for $300m. 
We had been puzzling over Square Enix’s strangely low guidance despite excellent momentum in its MMO business for some time. 
Considering the underperformance in HD Games profitability and this sale we think we can now put two and two together.


Square Enix – Eidos Sale Removes Downside Risks

<ul>
<li>Square Enix held their 20th anniversary event for Kingdom Heart over the weekend announcing a number of mobile titles as well the next mainline title Kingdom Hearts 4. </li>
<li>While a release date was not offered we would expect a launch during the next fiscal year.</li>
<li>Just as importantly, the announcement lends added weight to already leaked information on the company’s upcoming pipeline.</li>
</ul>


Square Enix held their 20th anniversary event for Kingdom Heart over the weekend announcing a number of mobile titles as well the next mainline title Kingdom Hearts 4. 
While a release date was not offered we would expect a launch during the next fiscal year.
Just as importantly, the announcement lends added weight to already leaked information on the company’s upcoming pipeline.


Square Enix – Kingdom Hearts 4 and the Implications for Next Year’s Pipeline

<ul>
<li>Square Enix had four of the twelve titles featured at today’s Sony State of Play. </li>
<li>While none of the titles was one of they IPs for Square Enix they demonstrate the depth of IP possessed. </li>
<li>In addition, the trailers point to Square Enix’s domestic development studios maintaining high quality standards even for smaller titles.</li>
</ul>


Square Enix had four of the twelve titles featured at today’s Sony State of Play. 
While none of the titles was one of they IPs for Square Enix they demonstrate the depth of IP possessed. 
In addition, the trailers point to Square Enix’s domestic development studios maintaining high quality standards even for smaller titles.


Square Enix – Four Games at State of Play Show Depth of Content

<ul>
<li>We said that we expected MMO Final Fantasy XIV to drive a strong beat and FY OP towards ¥70bn rather than consensus’ ¥55bn. </li>
<li>With 3Q OP of ¥21.0bn easily beating consensus at ¥14.4bn we believe we are nicely on track. </li>
<li>Oh and there were some tidbits about NFTs which should get some segments of the market interested.</li>
</ul>


We said that we expected MMO Final Fantasy XIV to drive a strong beat and FY OP towards ¥70bn rather than consensus’ ¥55bn. 
With 3Q OP of ¥21.0bn easily beating consensus at ¥14.4bn we believe we are nicely on track. 
Oh and there were some tidbits about NFTs which should get some segments of the market interested.


Square Enix – A Beat, A Bump and More to Come

Japan

OBIC Business Consultants Co.,Ltd. develops and markets business solution packaged software. The Company's products include software for accounting, banking, wage calculation, sales management, inventory control, and tax calculation. OBIC Business Consultants Co Ltd. also provides support and training services.

FUJI SOFT INCORPORATED is an independent software developer, specializing in communications and machine control software, business application software for bank and insurance companies, and operating system software.  Fuji Soft also installs, manages, and maintains computer systems.  The Company develops and sells word processing packaged software and also provides internet service.

Koei Tecmo Holdings Co.,Ltd. is a holding company which was established through the merger of Koei Co., Ltd. and Tecmo Ltd. The Company develops and distributes video game software for personal computers and home video game consoles. The Company also operates other media business such as marketing of books and CDs and amusement facility operation.

Money Forward, Inc. develops mobile application software. The Company produces automatic household account book softwares, household account book application softwares, and other products. Money Forward also provides personal financial management, cloud based accounting solutions, and other services.

Sansan, Inc. provides mobile application software solutions. The Company offers business card management service by scanning the cards from scanner and smartphone. Sansan provides its services throughout Japan.

NSD CO., LTD is an independent computer software development company. The Company's products include operating systems, business software for financial industry, and process control systems.  NSD also provides computer services including managing computer systems and data entry. The Company also sells computers and its peripheral equipment.

Trend Micro Incorporated develops and markets anti-virus computer software and internet security software.  The Company also sells its products in the United States, Europe, and Asia.

Justsystems Corporation develops and sells computer application software. The Company's products include Ichitaro, a Japanese language word processing program.  Justsystems also develops network software.

GungHo Online Entertainment, Inc. develops and distributes Internet games. The Company also develops applications for smartphones.

Systena Corporation develops firmware for mobile telecommunications. The Company also develops web application software for network systems, computer game software, and systems for financial firms.  Systena provides network consulting services as well.

Kingdee International Software Group Company Limited, through its subsidiaries, develops and sells enterprise management software, e-commerce application software and middleware software.  The Company also provides internet-based services and setting up e-commerce platforms for enterprises. In addition, Kingdee provides solution consulting and technical support services.

Kingsoft Corporation Ltd. develops and markets computer software.  The Company develops role-playing computer games and security, word processing, and spreadsheet software.

Technology One Limited is an Australian-based company that is engaged in the development, marketing, sales, implementation, support, and distribution of financial management and enterprise software solutions. The Company has operations in New Zealand, the United Kingdom, the South Pacific, and Malaysia.

Hundsun Technologies Inc develops application software for security firms, commercial banks, fund management firms, and other industries.  The Company also sells computer hardware and provides system integration services.

Blackbaud, Inc. provides software and related services designed specifically for non-profit organizations. The Company's products and services enable non-profit organizations to increase donations, reduce fundraising costs, improve communication with constituents, manage their finances, and optimize internal operations.

NCSOFT Corporation develops and markets on-line games that enable users to play over the Internet and computer software, such as web editing software.  The Company also designs and constructs databases, Intranet, and commercial Internet access systems.

RingCentral, Inc. is a provider of software-as-a-service, or SaaS, solutions for business communications. The Company offers a multi-user, enterprise-grade communications solution that enables customers and their employees to communicate via voice, text, HD video and web conferencing and fax, on multiple devices, including smartphones, tablets, PCs and desk phones.

ACI Worldwide, Inc. develops, markets, and supports software products for the global electronics funds transfer market.  The Company's products are used to process transactions involving credit cards, debit cards, smartcards, home banking services, checks, and automated clearing and settlement.

China National Software & Service Co., Ltd designs, develops, and integrates application software used for the taxation, railway telecommunication, military, commercial aviation, and financial industries.  The Company also designs Chinasoft Linux operating system and develops language conversion software to support Chinese, English, and Japanese

Workiva Inc. provides cloud-based and mobile-enabled platforms for enterprises. The Company offers software to collect, manage, report and analyze business data in real time.

SQUARE ENIX HOLDINGS CO., LTD. develops and sells entertainment software for home video game consoles including Dragon Quest and Final Fantasy series. The Company also publishes books such as informational guide books for its game software, and comic magazines and books.  Additionally, Square Enix sells character goods and stationery items from its software products.

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Square Enix Holdings (9684 JP)

Square Enix – Bounce Suggests Market Was Far Too Pessimistic

Square Enix could see significant OP uplift this year after the sale of its overseas studios and could benefit from numerous upside catalysts from...

Mio Kato

Square Enix – Eidos Sale Removes Downside Risks

Square Enix's sale of its overseas studios opens up the possibility for a significant rebound in HD Games profitability in our view.

Mio Kato

Square Enix – Kingdom Hearts 4 and the Implications for Next Year’s Pipeline

The announcement of Kingdom Hearts 4 lends added weight to already leaked information on the Square Enix's upcoming pipeline.

Mio Kato

Square Enix – Four Games at State of Play Show Depth of Content

Square Enix had four of the twelve titles featured at Sony State of Play. The trailers point to Square Enix’s domestic development studios...

Mio Kato

Square Enix – A Beat, A Bump and More to Come

We said that we expected Final Fantasy XIV to drive a strong beat and FY OP towards ¥70bn rather than consensus’ ¥55bn. With 3Q OP of ¥21.0bn...

Mio Kato

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