BANDAI NAMCO Holdings Inc
Total Page:16
File Type:pdf, Size:1020Kb
05 August 2014 Asia Pacific/Japan Equity Research Leisure Products (Video Game (Japan)) / MARKET WEIGHT BANDAI NAMCO Holdings Inc. (7832 / 7832 JP) Rating OUTPERFORM Price (05 Aug 14, ¥) 2,676 RESULTS Target price (¥) 2,800¹ Chg to TP (%) 4.6 Market cap. (¥ bn) 587.90 (US$ 5.73) Guidance beaten in smartphone-native apps, Enterprise value (¥ bn) 432.10 Number of shares (mn) 219.69 Yo-Kai Watch products Free float (%) 80.0 52-week price range 2,676 - 1,562 Results impression: positive *Stock ratings are relative to the coverage universe in each ■ Bandai Namco Holdings reported Apr–Jun OP of ¥16.8bn, which beat the analyst's or each team's respective sector. ¹Target price is for 12 months. prior-year result by 26% and was also well above the 31 July Nikkei preview figure. We see a strong possibility of upward revisions to guidance each time Research Analysts quarterly results are announced. We also see negligible risk now of earnings Shunsuke Tsuchiya failing to meet the FY3/15 consensus forecast, and think the time has come 81 3 4550 9740 to start factoring in growth prospects for FY3/16 onward (please refer also to [email protected] our 28 July report entitled Upturn in momentum from 2Q; potential boost to Hanako Takahashi Yo-Kai Watch from Nintendo's amiibo). 81 3 4550 7366 [email protected] ■ Network business: Sales in Apr–Jun rose 6% YoY and 10% QoQ, with a decline in DeNA/Gree business (down 20% QoQ) offset by increased demand for smartphone-native apps (up more than 50% QoQ). At the profit level, margins on smartphone-native apps are improving more rapidly than we expected, with no apparent ill-effects from change in the product mix. ■ Other content business: Repeat sales of high-margin packaged game titles were higher than planned in Apr–Jun, as was demand for home-grown video content. While we see some risk that Jul–Sep sales will pale in comparison, we still expect outperformance vis-a-vis guidance and our forecast. ■ Toys and hobby business: Bandai Namco Holdings reported Yo-Kai watch sales of ¥6.5bn, roughly 4.5x the figure for the previous quarter. Sales in existing medal/watch/card businesses were stronger-than-forecast as well. With sales of other content also growing steadily, we now see a diminished risk of internal competition. There is ample scope, in our view, for earnings to outstrip forecasts in Jul–Sep onward, in the absence of higher upfront costs to boost production capacity for Yo-Kai Watch products. Figure 1: Earnings forecasts summary (Earnings: August 5, 3:00 PM | Briefing: August 5, 5:30 PM) Bandai Namco (7832) consolidated 05-Aug-14 Sales Operating profit Recurring profit Net profit EPS DPS P/E ¥2,676 ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) ¥ (x) Consolidated Mar-14 A 507,679 4.2 44,672 -8.2 47,456 -5.0 25,054 -22.6 114.1 -22.6 35.0 21.4 Mar-15 Q1 (new) 122,504 15.7 16,847 26.2 17,633 22.1 11,632 22.3 53.0 22.3 0 NM Mar-15 CS E 520,700 2.6 50,500 13.0 51,000 7.5 32,600 30.1 148.4 30.1 44.5 18.0 CoE 500,000 -1.5 45,000 0.7 45,000 -5.2 28,000 11.8 127.5 11.7 24.0 21.0 IBES E 515,937 1.6 52,911 18.4 53,485 12.7 33,178 32.4 151.4 32.8 40.1 17.7 Mar-16 CS E 535,100 2.8 55,500 9.9 56,000 9.8 35,900 10.1 163.4 10.1 49.0 16.4 IBES E 524,395 0.7 56,031 11.0 56,613 11.0 35,253 8.1 160.8 8.3 41.9 16.6 Mar-17 CS E 544,600 1.8 57,500 3.6 58,000 3.6 37,200 3.6 169.3 3.6 50.8 15.8 IBES E 524,343 0.0 58,281 4.0 58,958 4.1 36,652 4.0 167.7 4.3 45.4 16.0 Source: Company data, IBES, Credit Suisse estimates DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS ® BEYOND INFORMATION Client-Driven Solutions, Insights, and Access Companies Mentioned (Price as of 05-Aug-2014) BANDAI NAMCO Holdings Inc. (7832.T, ¥2,676, OUTPERFORM, TP ¥2,800) DeNA (2432.T, ¥1,307) Gree (3632.T, ¥844) Nintendo (7974.T, ¥11,200) Disclosure Appendix Important Global Disclosures I, Shunsuke Tsuchiya, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. 3-Year Price and Rating History for BANDAI NAMCO Holdings Inc. (7832.T) 7832.T Closing Price Target Price Date (¥) (¥) Rating 09-Sep-11 1,065 1,150 N 05-Feb-13 1,306 1,350 21-Jan-14 2,157 2,300 28-Jul-14 2,532 2,800 O * Asterisk signifies initiation or assumption of coverage. N EUT RAL O UT PERFO RM 3-Year Price and Rating History for DeNA (2432.T) 2432.T Closing Price Target Price Date (¥) (¥) Rating 01-Dec-11 2,330 3,000 O * 21-May-12 1,953 2,200 N 10-Dec-12 2,916 2,200 U 17-Jan-13 3,170 2,800 12-Apr-13 2,575 2,800 N 18-Jul-13 2,045 2,200 15-Jan-14 2,349 2,600 15-Apr-14 1,635 2,300 O * Asterisk signifies initiation or assumption of coverage. O U T PERFO RM N EU T RA L UNDERPERFORM 3-Year Price and Rating History for Gree (3632.T) 3632.T Closing Price Target Price Date (¥) (¥) Rating 01-Dec-11 2,457 3,500 O * 06-Apr-12 1,982 3,300 22-May-12 1,376 1,400 N 12-Apr-13 1,180 1,200 18-Jul-13 848 800 15-Jan-14 1,133 1,100 * Asterisk signifies initiation or assumption of coverage. O UT PERFO RM N EUT RAL 3-Year Price and Rating History for Nintendo (7974.T) 7974.T Closing Price Target Price Date (¥) (¥) Rating 13-Oct-11 12,150 13,500 N 01-Mar-12 12,000 12,500 28-Feb-14 12,555 12,000 * Asterisk signifies initiation or assumption of coverage. N EUT RAL The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10- 15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark. Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.