Yahoo Japan (4689) FY16 Results Comment
Yahoo Japan’s (YJ) FY16 earnings results would have come out in line with PSA expectations but for the operating loss of ¥13.0bil related to the fire at ASKUL’s logistics centre. All segments showed encouraging progress, with improvement to all key performance indices. While revenue should continue to grow in FY17, the company eyes a YoY decline in profit as well as margins, due to planned aggressive investment of ¥40bil. We therefore revise our forecasts (please refer to the table in the attached file), taking into account the company’s latest developments, and we discuss trends in each division.
We maintain our view that YJ is an attractive investment given that (1) it is not expensive, on an EV/OPe of under 12x our FY17 OP estimate, and (2) its strategies have been proved right so far. The short-term reduction in profitability is unavoidable but constructive, if the company is to realise long-term sustainable growth.
Yahoo Japan is engaged in the provision of Internet advertising and e-commerce services. Media Business segment provides marketing and advertising services including paid search, display, in-feed video advertising and other advertising-related services for corporations; and Yahoo! News and media-related services. Commerce Business segment provides e-commerce related services including YAHUOKU! (net auction site), Yahoo! Shopping, ASKUL, LOHACO and other shopping websites; membership services including Yahoo! Premium, Yahoo! BB and other services; and financial and payment-related services including credit card, e-money, foreign exchange margin trading and other related services.
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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