Mixi (2121) - Valuations Cheap for a Reason
The recent upward trend in mixi’s share price (+13.7% since the earnings announcement date May 10) is supported by a better than expected FY15 earnings results. It is further helped by a share buyback program (3.56% of the total outstanding shares of up to ¥10bil) that runs from mid-May to the end of September. We do not think the share price appreciation has a close link to the earnings potential of the company as the growth prospect is rather dim. We see four medium- and long-term risk factors related to: Monster Strike (MS) in the domestic and overseas markets; other titles; and the new video and content business. Meanwhile, rewards are lacking, at least in the short term, as profitability is likely to decline on the back of rising expenses and lower sales.
Key Points
- FY16 guidance suggests MS is losing popularity at home
- MS’s success overseas, especially in the US and China, is not within sight
- Other titles have yet to show the wow factor
- The video and content business may drain company resources…
- …costs are likely to rise significantly due to extensive promotional activities and upfront investment
- Hence, OPM is likely to drop about 10ppts from 45.5% to 35.5% over the next two years.
Mixi is an information technology company with two business segments. Entertainment Segment is engaged in the development and distribution of Smartphone-native games. Media Platform Segment is engaged in the operation of SNSs under the site name "mixi" and recruitment site called "Find Job!" The site offers various services, such as Blog services, Internet discussion boards as well as the distribution of domestic and overseas news. In this Segment, Co. is also engaged in the Internet research business, the photo book service called "nohana" and the wedding support business.
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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