In this briefing:
1. GMO Internet Reports Solid FY12/18 Despite Heavy Losses Incurred in Crypto Mining Business
GMO Internet, Inc. (9449 JP) announced its consolidated financial results for its full-year FY12/18 yesterday (12th February). Despite heavy losses incurred in the cryptocurrency mining business in FY12/18, GMO managed to achieve a solid year with 20% YoY growth in top-line alongside a 23.5% YoY growth in operating profits. Excluding the crypto losses, the operating profit increased 35.7% YoY, with an OPM of 13.2% compared to 11.4% reported a year ago. For the full-year, the company has reported a net loss of JPY20.7bn as opposed to a net profit of JPY8bn in FY12/17, blaming the crypto losses for the decline. For FY12/18, the management has proposed a dividend of JPY29.5 per share (compared to JPY23 paid in FY12/17) in spite of reporting net losses for the fiscal year. Further, the company has also allocated JPY1.36bn (equivalent to 0.7% of outstanding shares at the current price) for share repurchases in FY2019.
JPY (bn) | FY12/17 | FY12/18 | YoY Change | FY12/18 Excluding Crypto | FY12/18 Excl. Crypto Vs. FY12/17 | Consensus | Company Vs. Consensus |
Revenue | 154.3 | 185.2 | 20.1% | 180.9 | 17.3% | 183.3 | 1.0% |
Operating Profit | 17.6 | 21.8 | 23.5% | 23.9 | 35.7% | 22.8 | -4.5% |
OPM | 11.4% | 11.8% |
| 13.2% | 12.4% |
| |
Net Profit | 8.0 | -20.7 | -357.9% | 8.4 | 4.1% |
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GMO is currently trading at JPY1,741 per share which we believe is undervalued compared to its combined equity stake in 8 listed subsidiaries. The company share price has lost more than 40% since it peaked in June last year due to the negativity surrounding its cryptocurrency and mining segment. However, we believe further downside is limited as the company has closed down a majority of its mining related business which weighs very little on the consolidated performance of the company. Further, the company’s key businesses, Internet Infrastructure, Online Advertising & Media and Internet Finance generate solid recurring revenues, which should help the company achieve strong growth. Following its earnings announcement, the share price gained 5.6% from the previous days close.
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