EUR 850.00 For Business Accounts Only

Morningstar | Progress on the Reform Plan Is Necessary to Add Value to Casio's share; Shares Fairly Valued

Casio Computer is a consumer electronic company that is focused on differentiating itself by selling niche devices at an affordable price. Casio established its identity by launching Casio Mini, known as the first personal calculator, in 1972; it replicated this success in 1995 with QV-10, the world’s first digital camera with an LCD display, and in 2002 with EX-S1, the first digital camera to achieve business-card size. Casio is also known for producing tough and functional wristwatches under the G-Shock brand name, which arrived in 1983. However, as both technologies and consumer preferences change quickly, and most digital products become mature and commoditized, it is quite difficult for consumer electronic companies to build up an economic moat that generates sustainable excess returns on capital. In fact, Casio’s profitability from handsets, digital cameras, and electronic music instruments has been unstable over the years, and Casio was forced to exit the handsets business in 2010 and the digital camera business in 2018, which both caused a huge operating loss.On the other hand, we think the market sometimes overlooks Casio’s rich free cash flow, mainly derived from its watch business, where the company has globally established a name for manufacturing tough and functional watches. We do not see the watch business as possessing an economic moat as the business has not established an ecosystem which prevents users switching to other brands, we believe Casio will leverage its singular position, especially in Asia, and expect that solid and stable growth will continue.