Expanding Chiba Jets Arena And Mixi2 Launch May Drive Future Revenue Despite Current Challenges

Key Takeaways

• TIPSTAR's high growth through improvements is bolstering revenues and EBITDA, while FamilyAlbum's expansion bolsters future revenue streams.
  
• Monster Strike's revenue improves through popular collaborations, and mixi2's rapid user growth could drive significant medium-term earnings.
  
• Strong growth in Sports and Lifestyle segments and successful new service launches may boost revenue, while TIPSTAR's engagement increases betting revenue.

Catalysts

Engages in the sports, digital entertainment, lifestyle, and investment businesses in Japan.

• The expansion of the Chiba Jets’ spectator sports arena has doubled its capacity, leading to sold-out games and potentially increased revenue from ticket sales and merchandise, positively impacting future revenues.
  
• TIPSTAR is experiencing high growth due to product improvements and functionality enhancements. The continued year-on-year sales growth of 37.1% will likely boost the company’s revenues and EBITDA.
  
• The Lifestyle segment, particularly FamilyAlbum, is expanding with new digital products and free print services. As the user base surpasses 25 million, this growth trajectory could positively affect future revenue streams.
  
• Monster Strike's ARPU is increasing through collaborations with popular intellectual properties despite a decline in active users. Continued focus on popular collaborations may improve revenue and margins in the digital entertainment segment.
  
• The introduction of mixi2 as a new SNS platform has reached 1.2 million registered users within a short time frame. If this growth continues, it could become a significant revenue driver in the medium term, impacting overall earnings.

MIXI Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming MIXI's revenue will grow by 2.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 6.6% today to 13.5% in 3 years time.
• Analysts expect earnings to reach ¥22.0 billion (and earnings per share of ¥283.16) by about February 2028, up from ¥10.1 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ¥15.5 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.5x on those 2028 earnings, down from 22.8x today. This future PE is lower than the current PE for the JP Entertainment industry at 24.4x.
• Analysts expect the number of shares outstanding to decline by 2.16% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.21%, as per the Simply Wall St company report.

MIXI Future Earnings Per Share Growth

Risks

• The strong sales growth in the Sports segment, driven by increased arena capacity and new player additions, could positively impact revenue and operating income if these trends continue to attract more fans and maintain high attendance levels.
  
• The steady growth in the betting business from TIPSTAR, Chariloto, and Net Dreamers, particularly TIPSTAR's 37.1% increase in sales year-on-year, could contribute to increased revenue and EBITDA if these platforms continue enhancing user engagement and functionality.
  
• Improvements in the Lifestyle segment, particularly the significant user growth of FamilyAlbum and expansion into digital products, may boost overall revenue and reduce deficits over time as sales growth continues.
  
• In the Digital Entertainment segment, despite a decline in Monster Strike's MAU, increased ARPU through collaborations with popular IPs could help stabilize or increase earnings if these collaborations continue to be popular among users.
  
• The successful launch and user adoption of new services like mixi2, which exceeded 1.2 million registered users, could drive medium-term revenue growth and contribute to diversifying the company’s revenue streams.

Valuation

• The analysts have a consensus price target of ¥3000.0 for MIXI based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ¥3400.0, and the most bearish reporting a price target of just ¥2600.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ¥162.2 billion, earnings will come to ¥22.0 billion, and it would be trading on a PE ratio of 10.5x, assuming you use a discount rate of 6.2%.
  
• Given the current share price of ¥3345.0, the analyst price target of ¥3000.0 is 11.5% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.