LINE (3938): FY17 Q1 FY17 Results Comment
LINE kicked off FY17 with a weak Q1: revenue expanded at a slower rate of 16.3% YoY (vs 19.0% in Q1 FY16), while OP shrank 24.6% YoY, with a deterioration in OPM of 5.7ppts.
At this rate, meeting PSA’s FY17 initial sales estimates would be a challenge. Moreover, due to a planned investment in the artificial intelligence (AI) platform, Clova, full-year profits are likely to be lower than our original expectations. We therefore revise our forecasts down (full details in the report).
LINE’s competitive advantages, including its leading position in its biggest four markets, are not something to be sniffed at. The company is in a good position to scale up its existing as well as new businesses. With a long-term perspective, we maintain our neutral stance despite LINE’s high valuation of an EV/OPe on PSA FY17 OP estimate of 28x and despite execution and competition risks.
Line is a global platform for mobile messaging and communication services, as well as provides communication and content and advertising services. Communication and content are primarily provided to end users via various communication and content. Communication mainly includes LINE Stickers. Content includes LINE Games and LINE PLAY. Others within Communication and Contents include LINE Friends service. Advertising services are provided via LINE advertising, livedoor blog and NAVER Matome. LINE advertising includes "messenger ads" such as LINE Official Accounts, LINE Sponsored Stickers and LINE Point Ads and "performance ads" on services such as Timeline and LINE NEWS.
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.
PSA produces both company and sector reports. The focus of PSA’s research is to identify winners and losers as new technologies impact the top and bottom lines of corporations. Critical to our research is the clear explanation of how these new technologies work and how they impact companies and industries.
The founding partners have worked closely together for twenty years and the team has more than doubled in size since 2012.
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