| enish, inc. (3667) |
 |
|
||||||||
|
 |
|
Company |
enish, inc. |
||
Code No. |
3667 |
||
Exchange |
1st Section of Tokyo Stock Exchange |
||
Industry |
Information, Communications |
||
President |
Kouhei Antoku |
||
HQ Address |
Roppongi Hills Mori Tower 39F 6-10-1, Roppongi Minato-ku, Tokyo |
||
Year-end |
December |
||
URL |
|||
|
 |
|
* Stock price as of close on May 2, 2014.
|
||||||||||||||||||||||||
|
 |
|
|
|
* Estimates are those of the Company. 20 for 1 and 2 for 1 stock splits were performed in September 2012 and October 2013 respectively.
* EPS has been adjusted to reflect these stock splits. * There are currently no dividend estimates for FY12/14. |
|
| Key Points |
 |
| Company Overview |
|
Native applications are applications which can be enjoyed by users by downloading them to their smartphones. At the same time, browser applications are not downloaded but can be accessed and enjoyed over various platforms like GREE, mixi, and Mobage. Both forms of applications are provided for free, but various items including tools (In the case of "Boku no Restaurant 2," recipes and items to decorate the interior of restaurants can be purchased to make the games more fun to use and more attractive to virtual customers within the game) used in the games to make them more enjoyable are offered for purchase. Responsibility for collection of the fees charged to users for items purchased over browser applications is seconded to the social network services (SNS) platform providers, and a fee is paid by enish to the platform providers as usage fees. <Business Description>
enish maintains only a single business segment entitled social applications business. In this business, games developed in-house are provided via "GREE," "Mobage," "mixi," "d Game," "Ameba," (Accounting for 38%, 15%, 23% 12%, and 9% of FY12/13 sales respectively) and other SNS and social game platforms to be played by feature phone and smartphone users.
 <Corporate History>
Against the backdrop of the birth of the "Open SNS Platforms" trend at the time of enish's establishment, Mr. Kohei Antoku and Mr. Yoshiyuki Kumon began providing social applications in October 2009 based on the philosophy of "creating services that are unique and exciting to use." The social application market is steadily expanding, and the number of new social application providers (SAP) entering the market is rapidly rising. In addition, enish is facilitating a new structure to deal with intense competition resulting from existing game software makers entering the market in increasing numbers. Fortification of the organization to expand the breadth of its business was undertaken with a view to the listing of the Company's shares, and the founders of ZAPPALLAS Inc., a major fortune telling contents company that is listed on the First Section of the Tokyo Stock Exchange, Mr. Masanori Sugiyama (Former President) and Mr. Kosuke Matsumoto (Current Managing Director) also joined enish. With their help, both the marketing and administrative functions were fortified. enish listed on the Mothers Market of the Tokyo Stock Exchange (TSE) in the fourth year of its operation in December 2012, and then moved to the First Section of the TSE during December 2013. Based upon the fortified development and financial structure of the Company in fiscal year December 2013 and with a view to a need to expand the native application business (Native application development begun in October 2013, and a subsidiary was established in Korea in November), the Company chose to appoint a new president. Consequently, Kohei Antoku was chosen to take the lead of enish as its new president in March 2014 because of his bountiful experiences in and familiarity of service technologies. Fiscal year December 2014 has been identified as the second stage of growth of the company. enish maintains a mission statement to "create ever more fans of enish around the world," and is implementing an expansion of its businesses not only within Japan but also around the globe. Furthermore, the Company is promoting an expansion strategy of its development and deployment of its business in the Japanese, Chinese and Korean markets based upon its successes in native applications.   |
| Growth Strategy |
 (1) Native Application Title Introduction
Including the impending launch of "Boku no Restaurant 3" in May 2014, three and two new titles are expected to be launched during the first and second halves of the current fiscal year respectively for a total of five new titles expected to be launched in the current year (enish is currently endeavoring to launch new titles during the first half as scheduled, but efforts to improve quality of the titles may lead to delays of between one to two months). "Boku no Restaurant 3" is a new version of the "Boku no Restaurant" series that bases its strength upon the quality of the current series and adds new functions and upgraded specifications to secure new users. Despite not having released any announcements regarding this new version, the number of pre-launch user registrations has exceeded 30,000 as of April 14, which is deemed to be a very strong performance for a simulation game.
 (2) Promote Global Deployment of Business with an Initial Focus upon Japan, China, and Korea
With a management target of "firmly establishing its global contents distribution structure with an initial focus upon Asia," enish is endeavoring to fortify its pipeline and distribution channels through the formation of alliances with strong partners in various Asian countries. With regards to the fortification of its pipeline, enish seeks to leverage its overseas facilities to establish studios and offshore development functions as a means of achieving high cost effectiveness. As a part of this strategy, a subsidiary was established in Korea in November 2013 and another in Shanghai, China in April 2014. Currently, joint development work for three titles is being promoted offshore (Two titles in Korea and one in China). Moreover, the Japanese, Chinese, and Korean markets for mobile games are expected to grow to account for roughly half of the worldwide market for mobile games within the next several years. Furthermore, native applications currently being developed are also expected to be launched in Asian countries other than Korea and China (Global distribution strategy), with the distribution function expected to be consigned to major publishing companies in the respective regional areas.
(3) Maintain Profitability of Browser Games
A certain level of decline in browser games is expected, but enish seeks to maintain and leverage its stable operational structure for browser games while at the same time cultivating the native application business.
|
| First Quarter of Fiscal Year December 2014 Earnings Results |
 Sales Rose 10.1%, Current Profit Declined 46.2%
Sales rose by 10.1% year-over-year to ¥1.763 billion. Amidst the severe operating trends surrounding the browser game market, "Galsho☆" (Released during the fourth quarter of FY12/10) was able to achieve record high quarterly sales, and "Sakigake! Otokojuku" (Released during the second quarter of FY12/13) also contributed to sales growth. Furthermore enish was able to offset the declines in sales of "Boku no Restaurant 2" and "Dragon Tactics" with other operations and the sales achieved were basically in line with targets.However, increases in labor and outsourcing costs accompanying development for native applications expected to be released from the second quarter onwards, and higher commissions paid associated with the increase in sales contributed to a 30.1% year-over-year increase in cost of goods sold to ¥1.250 billion (Cost of goods sold to sales ratio rose by 10.8% points to 70.9%). Increased hiring and other personnel related expenses contributed to a rise in sales, general and administrative expenses and caused operating profit to fall by 46.2% year-over-year to ¥220 million.       |
| Fiscal Year December 2014 Earnings Estimates |
|
(1) First Half, Full Year Earnings Estimates Remain Unchanged, Sales and Current Profit Expected to Rise 31.3% and 25.2%
Earnings in the first quarter were basically in line with expectations. From the second quarter onwards, five native application titles including "Boku no Restaurant 3," to be released in May, are expected to be released. At the same time, anticipatory costs are expected to arise from development and overseas facilities establishment during the first half, but the contribution from new titles during the second half is expected to allow profits to rise.
 (2) Dividend Undetermined
enish maintains a policy of raising corporate value through sustained growth while at the same time fortifying internal reserves. Based upon this policy, the Company also maintains a total payout ratio for returns to shareholders of 20%. Moreover, total payout ratio is a benchmark that reflects the amount of net profits distributed to shareholders. (Total payout ratio = (Total dividends + Treasury stock acquired) / Net profit)
|
| Conclusions |
|
Currently, enish is making adjustments to the new title releases to improve their quality, and delays in their launch of between one to two months may be possible. Therefore, the potential for a slight undershooting of earnings estimates during the current term cannot be overlooked. Consequently enish's ability to achieve expectations for earnings over the longer term is more important than that in the current term. And a key to assessing the Company's ability to achieve expectations for future growth lie in its ability to successfully ramp up the native applications business and its overseas business deployment. Disclaimer
This report is intended solely for information purposes, and is not intended as a solicitation to invest in the shares of this company. The information and opinions contained within this report are based on data made publicly available by the Company, and comes from sources that we judge to be reliable. However we cannot guarantee the accuracy or completeness of the data. This report is not a guarantee of the accuracy, completeness or validity of said information and or opinions, nor do we bear any responsibility for the same. All rights pertaining to this report belong to Investment Bridge Co., Ltd., which may change the contents thereof at any time without prior notice. All investment decisions are the responsibility of the individual and should be made only after proper consideration.Copyright(C) 2014 Investment Bridge Co., Ltd. All Rights Reserved. |
 |
