KDDi (9433) Visit Feedback – Booming “Life Design Business†a Focus
KDDi is trading on a PER of 13x, FY16 EV/OP of 9x and a dividend yield of almost 3%. It is hard to find fault with KDDi as an investment, and yet the market seems so minded.
Monday April 3rd saw the shares fall to their lowest for this year – on decent volume (11mil shares) – despite an absence of news (Bloomberg’s automated research tool flatly pointed out that interest in news on KDDi was unusually high despite the absence of news; underscoring the need for everyone to find out why the shares are struggling). Highly relevant of course is the widespread investor fear that we might be coming to the end of a KDDi earnings journey which has seen the company’s operating profit double, from ¥477bil in FY11 to an expected ¥920bil in FY16. The fear is that when the company reports FY16 results on May 12th, it will forecast earnings growth of 5% or even less.
With earnings drivers such as auSmartPass and auSmartValue maturing, there’s a question over how much more KDDi, or indeed its rivals, can squeeze out of the 4G data consumption boom. There’s also the threat from MVNOs; plus a worry that the government will push down pricing.
Our visit to KDDi on March 30th was partly designed to address these issues. During that visit, a focus for discussion was KDDi’s booming “Life Design Business”, which to western minds seems to be one of those “perpetual motion machines” that one day must surely stop.
KDDI is a telecommunications company. Along with its affiliates, Co. operates in four principal business segments: personal, value, business, and global. Co. is engaged in the sale of mobile handset; and the provision of mobile telecommunication services under "au" brand name, Internet contents, settlement service, and electronic money service for individual customers. Co. offers information and communication technology ("ICT") solution services and data center services for domestic corporate customers, overseas companies and individual customers. Co. is also involved in the call center business, the research and technological development, and the telecommunication facilities maintenance.
Founded in 2009, Pelham Smithers Associates (PSA) provides market intelligence on Asian technology, focusing in particular on Japan. The industries covered by our team of specialists are: consumer electronics, telecomms, pharmaceuticals, internet, electronic parts and materials, automotive technology, retail and capital goods.
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