DeNA (2432) – Weak Q1 but Improvement Expected
That DeNA’s Q1 FY17 results (¥7.4bil in non-GAAP OP and ¥36.5bil in revenue) were in line with the company’s guidance means that it had quite a weak quarter. The reason why IFRS OP didn’t meet the corporate plan (¥6.4bil vs ¥7.5bil) was the booking of ¥0.9bil in cost of sales as correction of costs attributed to DeNA Travel prior to FY17. Excluding the Sports business, all other businesses saw revenue shrink. It’s clear that difficult times are continuing for DeNA.
However, a number of growth catalysts are in sight. These include:
- DeNA’s two new games titles Uta Macross and Gyakuten Othellonia – which have been trending well and ranked No. 21 and No. 22 on the overall grossing charts as of August 10th
- The Sports business supported by the collaboration with City of Yokohama, and
- The Media business, with the establishment of MERY Co., Ltd, a JV with SHOGAKUKAN (66.67% SHOGAKUKAN, 33.34% DeNA) to jointly operate a digital media business mainly focused on women’s fashion.
- In addition, the strengthened governance and management structure should be beneficial to the company’s future business endeavours.
Valuations are undemanding; EV/OPe on consensus FY17 OPe is 9.5x.
DeNA is engaged in the developing and operation of a wide range of mobile and online services including e-commerce, games and entertainment contents distribution. Co. operates in four business segments. Gaming business is engaged in the developing, operating and marketing mobile games. Co.'s principal "Mobage" social game platform in Japan hosts a wide range of free-to-play mobile games. E-commerce business is engaged in the e-commerce related services including "DeNa SHOPPING." Sports business owns and operates a professional baseball team "Yokohama DeNA BayStars" and operates Yokohama stadium. New business/others business is engaged in the operation of curation platform.
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