Equity Analyst, LightStream Research

Farha Sabri

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>The global games market has transitioned from a console/PC oriented one to a mobile game-oriented market. Newzoo expects the mobile gaming market to grow at a 5-year CAGR of 19.4%, while the PC gaming market is expected to grow at 1.3% and the console gaming market is expected to grow at 4.3% (over 2016-21).</li>
<li>This is the landscape in which Capcom operates, mainly catering to the PC and console segments. In spite of the slow growth in PC and console gaming markets, Capcom has managed to show steady growth in financial performance over the last few years. </li>
<li>In the last fiscal year, the company’s top-line grew by 5.8% YoY while its OP grew by 13.1% YoY. This was due to strong performance across all major titles released, Monster Hunter: World, Devil May Cry 5 and Resident Evil 2.</li>
<li>In the current fiscal year, we expect a fall in topline at -3.3% YoY. Even guidance calls for a decline in revenue. We believe that this is mainly a result of increasing lower priced digital sales. However, on the long run we expect the company's revenue and OP to grow steadily due to expected higher prices for games on next generation consoles, and the advantage from game engines possessed by the company. </li>
<li>On our estimates, Capcom is trading at a FY1 PE multiple of 17.2x, in line with its5-year historical median of 17.3x. However, Capcom is trading at a 12% discount to its peer median FY1 PE of 19.5x.</li>
</ul>


The global games market has transitioned from a console/PC oriented one to a mobile game-oriented market. Newzoo expects the mobile gaming market to grow at a 5-year CAGR of 19.4%, while the PC gaming market is expected to grow at 1.3% and the console gaming market is expected to grow at 4.3% (over 2016-21).
This is the landscape in which Capcom operates, mainly catering to the PC and console segments. In spite of the slow growth in PC and console gaming markets, Capcom has managed to show steady growth in financial performance over the last few years. 
In the last fiscal year, the company’s top-line grew by 5.8% YoY while its OP grew by 13.1% YoY. This was due to strong performance across all major titles released, Monster Hunter: World, Devil May Cry 5 and Resident Evil 2.
In the current fiscal year, we expect a fall in topline at -3.3% YoY. Even guidance calls for a decline in revenue. We believe that this is mainly a result of increasing lower priced digital sales. However, on the long run we expect the company's revenue and OP to grow steadily due to expected higher prices for games on next generation consoles, and the advantage from game engines possessed by the company. 
On our estimates, Capcom is trading at a FY1 PE multiple of 17.2x, in line with its5-year historical median of 17.3x. However, Capcom is trading at a 12% discount to its peer median FY1 PE of 19.5x.


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Capcom Co Ltd

Is Capcom’s ‘Golden Age’ Here to Stay?