enish, inc. (3667)
Kouhei Antoku, President
Kouhei Antoku,
Corporate Profile
enish, inc.
Code No.
1st Section of Tokyo Stock Exchange
Information, Communications
Kouhei Antoku
HQ Address
Roppongi Hills Mori Tower 39F 6-10-1, Roppongi Minato-ku, Tokyo
Stock Information
Share Price Shares Outstanding Market Cap. ROE (actual) Trading Unit
¥1,635 6,918,720 shares ¥11.312 billion 32.3% 100 shares
DPS (Est.) Dividend Yield (Est.) EPS (Est.) PER (Est.) BPS (actual) PBR (actual)
- -% ¥119.96 13.6x ¥429.90 3.8x
* Stock price as of close on May 2, 2014.
Consolidated Earnings Trends
Fiscal Year Sales Operating Profit Current Profit Net Profit EPS (¥) Dividend (¥)
December 2010 415 64 71 55 821.99 0.00
December 2011 2,590 526 523 298 147.81 0.00
December 2012 4,430 666 654 373 87.28 28.00
December 2013 6,624 1,109 1,078 653 121.89 22.00
December 2014 Est. 8,700 1,350 1,350 830 119.96 -
* 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.
We present this Bridge Report reviewing the first quarter of fiscal year December 2014 earnings results and other details about enish, Inc.
Key Points
Company Overview
enish is a social game development company that boasts of the highly popular restaurant management simulation game "Boku no Restaurant 2", apparel shop management simulation game "Galsho☆", and card battle game "Dragon Tactics." Effective March 2014, Kohei Antoku was appointed to serve as the new president. The Company will pursue a strategy of maintaining profitability of browser applications, while creating new hit native applications, and pursuing a strategy of deploying its contents distribution throughout Asia as well as Japan.

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
enish will pursue a strategy of maintaining profitability of browser applications, while creating new hit native applications and pursuing a strategy of deploying its contents distribution throughout Asia as well as in Japan.
2014 represents the "founding year for launch of native applications" for enish, and the following three points have been identified as being crucial for success of the Company: 1) introduction of native application titles, 2) global deployment of business with an initial focus upon Japan, China and Korea, and 3) maintenance of profitability of browser games.
(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.
enish boasts of a pipeline of seven titles, including the above mentioned five titles scheduled to be launched within the current term, three of which target female users and are expected to provide stable earnings with the remaining four titles targeting male mid-core users and expected to become megahits. At the same time, the localization of these titles is also being conducted for their launch in other various Asian markets.
(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.
During the first quarter of fiscal year December 2014, spending on advertising for applications released during the previous term was halted due to the outlook for diminished effectiveness of these advertisements. At the same time, enish stepped up its hiring for native application related positions due to tits improved ability to attract talent on the back of the move of its shares to the First Section of the Tokyo Stock Exchange and relocation of its headquarter offices.
The total number of staff stood at 184 at the end of March 2014 (Including 30 consigned staff). 60% of staff were shifted to native applications to accelerate the fortification of the development and operational structure.
At the end of the first quarter, total assets declined by ¥250 million from the end of the previous term to ¥3.772 billion. The major factor behind this decline in total assets was a decline in current assets arising from payments of corporate taxes. Fixed assets increased on the back of the acquisition of tangible fixed assets due to the relocation of enish's headquarter office. Equity ratio improved by 4.4% points from the end of the previous term to 78.8%.
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)
2014 represents the "founding year for launch of native applications" for enish. Therefore, the ability to create hit native applications is crucial for the success of the Company. Since listing in 2012, enish has endeavored to secure both capital and human resources as a means of facilitating its native application development structure. Amidst the severe operating environment surrounding the browser application business, its existing browser applications have been able to maintain high levels of sales growth due to their superior operability. However, the genuine worth of enish as a social applications development company will be tested from now on. This is a reason for the appointment of Kohei Antoku as the new president, with his familiarity of the market, clients and services, and his leadership at the helm of the Company is greatly looked forward to.

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.
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.

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