4755 JP

Rakuten Inc

TMT


Presented:04/19/2017
Price:¥1,187.50
Cap:$14.15B
Current Price:¥961.30
Cap:$17.27B

Presented

Date04/19/2017
Price¥1,187.50
Market Cap$14.15B
Ent Value$14.27B
P/E Ratio44.55x
Book Value¥476.89
Div Yield0.01%
Shares O/S1,426.14M
Ave Daily Vol7,856,139
Short IntN/A

Current

Price¥961.30
Market Cap$17.27B
Rakuten, Inc. engages in the internet services business. It operates through the following segments: Internet Services, FinTech, and Others. The Internet Services segment manages e-commerce (EC), online cash-back, travel booking, and portal and digital content sites. The FinTech segment provides services over the internet related to banking and securities, credit cards, life insurance, and electronic money. The Others segment includes the provision of messaging and communication services; and management of a Japanese professional baseball team. The company was founded by Hiroshi Mikitani on February 7, 1997 and is headquartered in Tokyo, Japan.

Publicly traded companies mentioned herein: Amazon.com Inc (AMZN), Rakuten Inc (4755 JP), Yahoo! Japan Corporation (4689 JP)

Highlights

The presenter is long shares of Rakuten, the Japanese internet services (e-commerce) and FinTech company. At ¥1,180 the stock is meaningfully undervalued on a sum-of-the-parts basis, and in his opinion the fair value “far exceeds” Rakuten’s 2015 high of nearly ¥2,400. He noted that the core Rakuten Ichiba store has struggled because “Yahoo! Japan destroyed the market, sending [Rakuten’s] margins from the 30%s to the mid-teens over the past few years”. However, Yahoo! Japan appears to be done with its investments in e-commerce, Rakuten has moved into financial services, its revenue growth continues to outpace peers, and the company recently announced a buyback of up to 100 billion yen (~$880mm in Feb 2017; or nearly 10% of the company). The timing of the buyback is important, as Chairman Hiroshi Mikitani has a substantial portion of his wealth in company stock (Mikitani owns ~28% of the outstanding stock and, ~15% of the company overall) and in the 25-year history of the company Rakuten has only bought back stock one other time.

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