12 July 2016 Asia Pacific/Japan Equity Research Internet CyberAgent (4751 / 4751 JP) Rating OUTPERFORM* Price (11 Jul 16, ¥) 6,420 INITIATION Target price (¥) 8,000¹ Chg to TP (%) 24.6 Market cap. (¥ bn) 403.27 (US$ 3.96) Initiate at OUTPERFORM; downside risk near term, Enterprise value (¥ bn) 467.13 Number of shares (mn) 62.81 but growth potential in existing, new businesses Free float (%) 70.0 52-week price range 6,570 - 4,235 ■ Action: We initiate coverage of CyberAgent with an OUTPERFORM rating *Stock ratings are relative to the coverage universe in each and a ¥8,000 target price (potential return 24.6%). Despite the risk of a analyst's or each team's respective sector. ¹Target price is for 12 months. share-price dip in 2H from seasonality and other factors, we see significant potential for earnings growth over the medium term. Research Analysts Keiichi Yoneshima ■ Investment case: CyberAgent's online ad agency business is growing 81 3 4550 9740 faster than the online ad market. Its game business, which develops and
[email protected] hosts some of Japan's most popular game apps, looks strong. In the media business, AbemaTV, which is in a cost-intensive startup phase, will likely contribute to future earnings. Near term, we flag downside share-price risk from a 2H FY9/16 earnings slowdown due to seasonality and up-front expenses. Over the medium term, however, we look for valuation gains driven by earnings growth from existing and new businesses and therefore assign an OUTPERFORM rating. ■ Catalysts/risks: Catalysts include: (1) sales contributions from new game titles (2) the AbemaTV business's earnings contribution.