Japan Tech – Internet

GMO Internet (9449 JP)

COMPANY NOTE 1 August 2016

Ticker 9449 JP Stronger Momentum Expected Ahead

Recommend. BUY
Target Price 1,800 Raise TP to 1,800 from 1,600 and reiterate our bullish stance with BUY rating: GMO
(Pri or) 1,600
Internet (“GMO”) is the largest internet infrastructure company in Japan, and it includes
Up(Down)side +32% such businesses as domain registrar, hosting server, internet security seal and online
Current Pri ce 1,368 payment etc. GMO unveiled its Q2 earnings today after market close. Its Q2 operating
profit was strong with JPY 5.0bn vs. JPY 4.0bn of Bloomberg consensus or JPY 4.3bn of our
1Year Performance bullish forecast.
120
In addition to its recovery of existing businesses, GMO will start the sales of “.shop”
100
domain as a global wholesaler of the domain from July 1st, and this could push up the
80
numbers of its domain business directly and other infrastructure businesses such as
60
hosting server, internet security and payment settlement indirectly from Q2.
40
We raise our target price to JPY 1,800 from JPY 1,600 and reiterate our bullish stance on
20
the company with a BUY rating.
-
Feb/16
Aug/15

May/16
Nov/15

Q2 earnings: Its main businesses in internet infrastructure segment start to recovery:

GMO
Source: Bloomberg, CFHK Research
ANALYST
Naoshi NEMA, CPA
+ 852 3558 5546
nnema@cantor.com
Market data priced at close of
st
business (Tokyo) 1 August
2016
Cantor Fitzgerald Asia
Publications are also available
on Bloomberg and Factset
Please see analyst certification
and important regulatory
disclaimers on pages 8 – 10.
Brexit benefited its FX business and the business had JPY 3.3bn or +18% YoY in its Q2
TOPIX operating profit. Not only under such a special occasion, GMO has not failed to have more
than 30% operating profit margin in these five consecutive quarters or more than 20%
margin in fifteen consecutive quarters despite its high volatility nature of the business. Its
internet infrastructure segment improve its operating profit margin to 10% from 9% in Q1
or 6% in Q4 last year. Also, its cost management in mobile entertainment segment worked
effectively and the operating loss shrunk to JPY 70mn in Q2 from 222mn in Q1 or 467 mn
in Q4 last year.
To be a wholesaler of “.Shop” domain could be a big deal for GMO: GMO won an auction
to become a global seller of “.shop” domain and will start selling the domain to each
trademark holders such as “amazon.shop” or “sony.shop” from July 1st to August 30th.
Then, GMO will start auctions for premium domain such as “wine.shop” or “book.shop”
from September 2nd to 27th. The general sales will start from September 27th.
The unit price of a domain for trademark holders would be close to JPY 200,000. The
premium domains were sold for high prices such as “1.xyz” for USD 183,000 or
“lending.club” for USD 250,000 in past. The registered domains of “.xyz” and “.club” are
2.78 million and 760 thousands respectively as of the end of April this year.
Although we put JPY 2 billion revenue impact in our one year forecast after GMO’s sales
start, it could be more and also it could positively affect its peripheral internet
infrastructure businesses such as hosting server, internet security and payment settlement.
Valuation and Risk: We adopt sum of the parts, which adopt P/E 23x (global peer
medium) to our next year forecast EPS of non-financial businesses and add back its
holding value (82%) of GMO Click (7177.JP – N/R). Its investment risks are high volatility of
FX and incubation businesses and an aggressive upfront investment in new businesses.

1|P a g e
Summary of Numbers
(JPY millions) F2011 F2012 F2013 F2014 F2015 F2016e F2017e F2018e
Sales 61,691 74,376 93,704 109,368 126,337 134,464 145,255 153,878
Gross Profit 37,406 43,460 52,505 58,537 66,269 70,103 76,985 81,555
Operating Profit 7,525 9,149 11,000 12,931 14,803 17,392 18,675 19,568
Recurring Profit 7,016 9,175 10,941 12,734 14,857 17,051 18,675 19,568
Profit before Tax 6,019 9,444 10,360 12,575 25,148 17,065 19,007 19,900
Net Profit 4,286 4,518 5,244 5,841 13,419 8,294 10,174 10,737
EBITDA 10,953 13,497 16,827 19,053 20,714 23,392 24,875 25,968
% YoY Growth
Sales 38.7% 20.6% 26.0% 16.7% 15.5% 6.4% 8.0% 5.9%
Gross Profit 51.4% 16.2% 20.8% 11.5% 13.2% 5.8% 9.8% 5.9%
Operating Profit 31.4% 21.6% 20.2% 17.6% 14.5% 17.5% 7.4% 4.8%
Recurring Profit 22.3% 30.8% 19.2% 16.4% 16.7% 14.8% 9.5% 4.8%
Profit before Tax 9.5% 56.9% 9.7% 21.4% 100.0% -32.1% 11.4% 4.7%
Net Profit 94.0% 5.4% 16.1% 11.4% 129.7% -38.2% 22.7% 5.5%
EBITDA 42.9% 23.2% 24.7% 13.2% 8.7% 12.9% 6.3% 4.4%
% Profit Margin
Gross Profit 60.6% 58.4% 56.0% 53.5% 52.5% 52.1% 53.0% 53.0%
Operating Profit 12.2% 12.3% 11.7% 11.8% 11.7% 12.9% 12.9% 12.7%
Recurring Profit 11.4% 12.3% 11.7% 11.6% 11.8% 12.7% 12.9% 12.7%
Profit before Tax 9.8% 12.7% 11.1% 11.5% 19.9% 12.7% 13.1% 12.9%
Net Profit 6.9% 6.1% 5.6% 5.3% 10.6% 6.2% 7.0% 7.0%
EBITDA 17.8% 18.1% 18.0% 17.4% 16.4% 17.4% 17.1% 16.9%
(Tax rate) (13.7%) (36.7%) (32.8%) (37.1%) (41.0%) (38.7%) (37.0%) (37.0%)
EPS (¥) 36.4 38.4 44.5 49.6 113.9 70.4 86.4 91.1
BPS (¥) 221.8 258.2 313.1 372.4 527.6 577.0 637.4 701.5
DPS (¥) 12.0 13.0 15.0 17.0 38.0 21.0 26.0 27.0
P/E (x) 8.1 14.5 31.0 20.7 14.1 19.4 15.8 15.0
P/S (x) 0.6 0.9 1.7 1.1 1.5 1.2 1.1 1.0
P/B (x) 1.3 2.2 4.4 2.8 3.0 2.4 2.1 2.0
EV/EBITDA (x) 2.6 4.0 8.4 5.0 8.5 5.8 4.9 4.1
Dividend Yield 4.1% 2.3% 1.1% 1.7% 2.4% 1.5% 1.9% 2.0%
Free CF Interest 22.2% 19.7% 7.3% 9.5% 0.3% 9.8% 14.7% 15.8%
ROE 18.0% 16.0% 15.6% 14.5% 25.3% 14.8% 14.8% 14.3%
ROA 2.3% 1.9% 1.5% 1.3% 2.6% 1.6% 1.8% 2.0%
Capital Ratio 12.7% 11.0% 8.6% 9.1% 11.2% 12.5% 13.8% 14.9%
D/E Ratio (x) -0.5 -0.7 -0.9 -0.9 -0.6 -0.7 -0.8 -0.9
Payout Ratio 33.0% 33.9% 33.7% 34.3% 33.4% 30.0% 30.0% 30.0%
CF from Operation 12,379 13,722 14,156 14,509 (12,624) 17,117 21,495 20,561
CF from Investment (6,012) (3,057) (3,794) (5,396) 13,077 (3,746) (3,738) (3,744)
CF from Finance (1,434) (1,509) 562 3,100 9,437 (2,165) (2,184) (2,303)
Free CF 6,367 10,665 10,362 9,113 453 13,371 17,757 16,817
CAPEX (1,028) (1,517) (2,047) (1,522) (3,530) (3,500) (3,500) (3,500)
Depreciation 3,428 4,348 5,827 6,122 5,911 6,000 6,200 6,400
EV 28,720 54,167 141,325 96,181 175,039 136,266 120,693 106,179
Market Cap. 34,635 65,736 162,574 121,106 188,727 161,160 161,160 161,160
(Net Debt) (13,533) (20,892) (33,124) (39,548) (36,153) (47,359) (62,932) (77,446)
Debt 19,395 21,193 24,357 30,000 39,826 39,826 39,826 39,826
Cash & Deposit 32,928 42,085 57,481 69,548 75,979 87,185 102,758 117,272
Minority Interests 7,618 9,323 11,875 14,623 22,465 22,465 22,465 22,465
Shareholders' Equity 26,125 30,418 36,884 43,876 62,156 67,976 75,087 82,643
Total Assets 205,055 275,960 429,762 483,367 554,625 542,863 545,767 554,953
Share # EOF ('000) 117,807 117,807 117,807 117,807 117,807 117,807 117,807 117,807
Stock Price (¥) 294 558 1,380 1,028 1,602 1,368 1,368 1,368
Source: Bloomberg, Company data, CFHK Research estimates.
Notes: Market data priced at close of business (Tokyo) 1st August 2016.

2|P a g e
Annual Segment Revenue
(JPY mn) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016e FY 2017e FY 2018e
Sales 61,691 74,376 93,704 109,368 126,337 134,464 145,255 153,878
Internet Infrastructure 24,361 30,213 38,175 46,181 55,410 66,169 76,117 82,567
Access 1,203 2,020 4,645 7,647 10,648 13,113 14,528 15,808
Domain 3,215 4,123 4,614 5,574 6,265 8,416 10,939 11,632
Cloud Hosting 10,929 12,586 13,684 13,654 13,922 14,020 14,333 14,476
Ecommerce Solutions 2,224 2,699 3,414 4,710 6,308 8,516 10,081 11,207
Security 1,704 1,976 2,664 3,476 4,340 4,748 5,341 5,875
Payment Processing 3,926 4,824 5,928 7,300 9,496 12,804 15,890 18,064
Others 1,160 1,985 3,216 3,815 4,431 4,550 5,005 5,506
Internet Ad & Media 22,039 26,078 31,519 35,306 40,569 41,732 43,282 45,455
Internet Securities 14,757 16,525 21,430 22,989 29,803 28,542 28,000 28,000
Mobile Entertainment 1,932 2,860 4,354 6,396 4,096 2,406 2,288 2,288
Incubation - - 149 1,768 791 52 40 40
Adjustment -1,398 -1,300 -1,924 -3,276 -4,332 -4,437 -4,472 -4,472
% YoY Growth Rate
Sales 39% 21% 26% 17% 16% 6% 8% 6%
Internet Infrastructure 20% 24% 26% 21% 20% 19% 15% 8%
Access 10% 68% 130% 65% 39% 23% 11% 9%
Domain 41% 28% 12% 21% 12% 34% 30% 6%
Cloud Hosting 16% 15% 9% 0% 2% 1% 2% 1%
Ecommerce Solutions 17% 21% 26% 38% 34% 35% 18% 11%
Security 8% 16% 35% 30% 25% 9% 13% 10%
Payment Processing 22% 23% 23% 23% 30% 35% 24% 14%
Others 38% 71% 62% 19% 16% 3% 10% 10%
Internet Ad & Media 3% 18% 21% 12% 15% 3% 4% 5%
Internet Securities 406% 12% 30% 7% 30% -4% -2% 0%
Mobile Entertainment - 48% 52% 47% -36% -41% -5% 0%
Incubation - - - 1087% -55% -93% -23% 0%
Adjustment - - - - - - - -
% to Sales
Sales 100% 100% 100% 100% 100% 100% 100% 100%
Internet Infrastructure 39% 41% 41% 42% 44% 49% 52% 54%
Access 2% 3% 5% 7% 8% 10% 10% 10%
Domain 5% 6% 5% 5% 5% 6% 8% 8%
Cloud Hosting 18% 17% 15% 12% 11% 10% 10% 9%
Ecommerce Solutions 4% 4% 4% 4% 5% 6% 7% 7%
Security 3% 3% 3% 3% 3% 4% 4% 4%
Payment Processing 6% 6% 6% 7% 8% 10% 11% 12%
Others 2% 3% 3% 3% 4% 3% 3% 4%
Internet Ad & Media 36% 35% 34% 32% 32% 31% 30% 30%
Internet Securities 24% 22% 23% 21% 24% 21% 19% 18%
Mobile Entertainment 3% 4% 5% 6% 3% 2% 2% 1%
Incubation - - 0% 2% 1% 0% 0% 0%
Adjustment -2% -2% -2% -3% -3% -3% -3% -3%
Source: Bloomberg, Company data, CFHK Research estimates.

3|P a g e
Annual Segment Operating Profit
(JPY mn) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016e FY 2017e FY 2018e
Operating Profit 7,525 9,149 11,000 12,931 14,803 17,392 18,675 19,568
Internet Infrastructure 3,076 4,254 5,281 4,791 4,310 7,012 9,134 9,908
Internet Ad & Media 1,598 2,026 1,965 1,636 1,201 1,166 1,189 1,308
Internet Securities 4,386 4,440 4,776 6,243 9,665 9,797 8,800 8,800
Mobile Entertainment -1,543 -2,129 -1,189 -1,108 -753 -432 -280 -280
Incubation - - -84 1,013 332 -185 -200 -200
Adjustment 8 558 167 1,369 380 -151 -168 -168
% YoY Growth Rate
Operating Profit 31% 22% 20% 18% 14% 17% 7% 5%
Internet Infrastructure 2% 38% 24% -9% -10% 63% 30% 8%
Internet Ad & Media -16% 27% -3% -17% -27% -3% 2% 10%
Internet Securities 492% 1% 8% 31% 55% 1% -10% 0%
Mobile Entertainment - - - - - - - -
Incubation - - - - -67% - - -
Adjustment -89% 6875% -70% 720% -72% - - -
% Profit Margin
Operating Profit 12% 12% 12% 12% 12% 13% 13% 13%
Internet Infrastructure 13% 14% 14% 10% 8% 11% 12% 12%
Internet Ad & Media 7% 8% 6% 5% 3% 3% 3% 3%
Internet Securities 30% 27% 22% 27% 32% 34% 31% 31%
Mobile Entertainment -80% -74% -27% -17% -18% -18% -12% -12%
Incubation - - -56% 57% 42% -356% -500% -500%
Adjustment -1% -43% -9% -42% -9% 3% 4% 4%
% to Total Profit
Operating Profit 100% 100% 100% 100% 100% 100% 100% 100%
Internet Infrastructure 41% 46% 48% 37% 29% 40% 49% 51%
Internet Ad & Media 21% 22% 18% 13% 8% 7% 6% 7%
Internet Securities 58% 49% 43% 48% 65% 56% 47% 45%
Mobile Entertainment -21% -23% -11% -9% -5% -2% -1% -1%
Incubation - - -1% 8% 2% -1% -1% -1%
Adjustment 0% 6% 2% 11% 3% -1% -1% -1%
Source: Bloomberg, Company data, CFHK Research estimates.

4|P a g e
Quarterly Income Statement
(JPY mn) F15 F16 F17 F18
Q1 Q2 Q3 Q4 Q1 Q2 Q3e Q4e Q1e Q2e Q3e Q4e Q1e Q2e Q3e Q4e
03/'15 06/'15 09/'15 12/'15 03/'16 06/'16 09/'16 12/'16 03/'17 06/'17 09/'17 12/'17 03/'18 06/'18 09/'18 12/'18
Sales 32,583 30,988 31,264 31,502 33,173 33,534 32,851 34,906 36,580 35,479 35,678 37,518 38,909 37,607 37,714 39,648
Gross Profit 16,653 17,047 16,632 15,937 16,453 17,739 17,411 18,500 19,387 18,804 18,909 19,885 20,622 19,932 19,989 21,013
Operating Profit 3,850 4,641 3,584 2,728 3,657 5,033 4,201 4,502 4,700 4,521 4,677 4,777 4,949 4,735 4,889 4,995
Recurring Profit 3,882 4,488 3,585 2,902 3,552 4,797 4,201 4,502 4,700 4,521 4,677 4,777 4,949 4,735 4,889 4,995
Profit before Tax 3,603 9,327 3,400 8,818 3,317 4,880 4,284 4,585 4,783 4,604 4,760 4,860 5,032 4,818 4,972 5,078
Net Profit 1,862 5,234 1,457 4,866 1,361 2,246 2,249 2,438 2,563 2,450 2,549 2,612 2,720 2,585 2,682 2,749
YoY Growth Rate
Sales 21% 22% 14% 7% 2% 8% 5% 11% 10% 6% 9% 7% 6% 6% 6% 6%
Gross Profit 18% 26% 12% -1% -1% 4% 5% 16% 18% 6% 9% 7% 6% 6% 6% 6%
Operating Profit 71% 71% 0% -38% -5% 8% 17% 65% 29% -10% 11% 6% 5% 5% 5% 5%
Recurring Profit 73% 67% 2% -32% -9% 7% 17% 55% 32% -6% 11% 6% 5% 5% 5% 5%
Profit before Tax 38% 245% 5% 119% -8% -48% 26% -48% 44% -6% 11% 6% 5% 5% 4% 4%
Net Profit 97% 194% 17% 160% -27% -57% 54% -50% 88% 9% 13% 7% 6% 6% 5% 5%
% to Sales
Sales 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Gross Profit 51% 55% 53% 51% 50% 53% 53% 53% 53% 53% 53% 53% 53% 53% 53% 53%
Operating Profit 12% 15% 11% 9% 11% 15% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13%
Recurring Profit 12% 14% 11% 9% 11% 14% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13%
Profit before Tax 11% 30% 11% 28% 10% 15% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13%
Net Profit 6% 17% 5% 15% 4% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7%
Corporate Tax Rate 37% 37% 51% 43% 43% 39% 37% 37% 37% 37% 37% 37% 37% 37% 37% 37%
Source: Company data, CFHK Research estimates

5|P a g e
Quarterly Segment Revenue
(JPY mn) F15 F16 F17 F18
Q1 Q2 Q3 Q4 Q1 Q2 Q3e Q4e Q1e Q2e Q3e Q4e Q1e Q2e Q3e Q4e
03/'15 06/'15 09/'15 12/'15 03/'16 06/'16 09/'16 12/'16 03/'17 06/'17 09/'17 12/'17 03/'18 06/'18 09/'18 12/'18
Sales 32,583 30,988 31,264 31,502 33,173 33,533 32,851 34,906 36,580 35,479 35,678 37,518 38,909 37,607 37,714 39,648
Internet Infrastructure 13,040 13,330 14,141 14,899 15,323 15,882 16,932 18,032 18,433 18,282 19,282 20,120 20,175 19,871 20,820 21,702
Internet Ad & Media 11,604 9,076 9,556 10,333 11,504 10,363 9,455 10,410 11,683 10,733 9,931 10,934 12,270 11,272 10,430 11,483
Internet Securities 7,522 7,838 7,681 6,762 6,734 7,808 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000
Mobile Entertainment 1,279 1,056 981 780 690 572 572 572 572 572 572 572 572 572 572 572
Incubation 99 672 8 12 5 27 10 10 10 10 10 10 10 10 10 10
Adjustment -961 -984 -1,103 -1,284 -1,083 -1,119 -1,118 -1,118 -1,118 -1,118 -1,118 -1,118 -1,118 -1,118 -1,118 -1,118
YoY Growth Rate
Sales 20.6% 21.9% 13.9% 6.9% 1.8% 8.2% 5.1% 10.8% 10.3% 5.8% 8.6% 7.5% 6.4% 6.0% 5.7% 5.7%
Internet Infrastructure 16.0% 16.6% 22.8% 24.3% 17.5% 19.1% 19.7% 21.0% 20.3% 15.1% 13.9% 11.6% 9.5% 8.7% 8.0% 7.9%
Internet Ad & Media 27.4% 10.2% 12.9% 8.8% -0.9% 14.2% -1.1% 0.7% 1.6% 3.6% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Internet Securities 35.5% 63.5% 35.8% -3.2% -10.5% -0.4% -8.9% 3.5% 4.0% -10.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Mobile Entertainment -25.2% -36.4% -36.3% -47.5% -46.1% -45.8% -41.7% -26.7% -17.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Incubation 518.8% 16700.0% -99.4% -97.5% -94.9% -96.0% 25.0% -16.7% 100.0% -63.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Adjustment - - - - - - - - - - - - - - - -
% to Total Sales
Sales 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Internet Infrastructure 40% 43% 45% 47% 46% 47% 52% 52% 50% 52% 54% 54% 52% 53% 55% 55%
Internet Ad & Media 36% 29% 31% 33% 35% 31% 29% 30% 32% 30% 28% 29% 32% 30% 28% 29%
Internet Securities 23% 25% 25% 21% 20% 23% 21% 20% 19% 20% 20% 19% 18% 19% 19% 18%
Mobile Entertainment 4% 3% 3% 2% 2% 2% 2% 2% 2% 2% 2% 2% 1% 2% 2% 1%
Incubation 0% 2% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Adjustment -3% -3% -4% -4% -3% -3% -3% -3% -3% -3% -3% -3% -3% -3% -3% -3%
Source: Company data, CFHK Research estimates

6|P a g e
Quarterly Segment Operating Profit
(JPY mn) F15 F16 F17 F18
Q1 Q2 Q3 Q4 Q1 Q2 Q3e Q4e Q1e Q2e Q3e Q4e Q1e Q2e Q3e Q4e
03/'15 06/'15 09/'15 12/'15 03/'16 06/'16 09/'16 12/'16 03/'17 06/'17 09/'17 12/'17 03/'18 06/'18 09/'18 12/'18
Operating Profit 3,850 4,640 3,584 2,728 3,657 5,033 4,201 4,502 4,700 4,521 4,677 4,777 4,949 4,735 4,889 4,995
Internet Infrastructure 1,128 1,216 1,005 961 1,390 1,596 1,863 2,164 2,212 2,194 2,314 2,414 2,421 2,385 2,498 2,604
Internet Ad & Media 564 219 267 151 449 217 250 250 400 239 275 275 440 263 303 303
Internet Securities 2,187 2,803 2,477 2,198 2,079 3,318 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200
Mobile Entertainment -62 -92 -132 -467 -222 -70 -70 -70 -70 -70 -70 -70 -70 -70 -70 -70
Incubation 8 481 -39 -118 -49 -36 -50 -50 -50 -50 -50 -50 -50 -50 -50 -50
Adjustment 25 13 6 3 10 8 8 8 8 8 8 8 8 8 8 8
% Growth Rate
Operating Profit 71% 71% 0% -38% -5% 8% 17% 65% 29% -10% 11% 6% 5% 5% 5% 5%
Internet Infrastructure 14% -11% -13% -25% 23% 31% 85% 125% 59% 37% 24% 12% 9% 9% 8% 8%
Internet Ad & Media 13% -45% -30% -58% -20% -1% -6% 66% -11% 10% 10% 10% 10% 10% 10% 10%
Internet Securities 54% 164% 92% -11% -5% 18% -11% 0% 6% -34% 0% 0% 0% 0% 0% 0%
Mobile Entertainment - - - - - - - - - - - - - - - -
Incubation - - - - - - - - - - - - - - - -
Adjustment -63% -84% -95% -96% -60% -38% 33% 167% -20% 0% 0% 0% 0% 0% 0% 0%
% Profit Margin
Operating Profit 12% 15% 11% 9% 11% 15% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13%
Internet Infrastructure 9% 9% 7% 6% 9% 10% 11% 12% 12% 12% 12% 12% 12% 12% 12% 12%
Internet Ad & Media 5% 2% 3% 1% 4% 2% 3% 2% 3% 2% 3% 3% 4% 2% 3% 3%
Internet Securities 29% 36% 32% 33% 31% 42% 31% 31% 31% 31% 31% 31% 31% 31% 31% 31%
Mobile Entertainment -5% -9% -13% -60% -32% -12% -12% -12% -12% -12% -12% -12% -12% -12% -12% -12%
Incubation 8% 72% -488% -983% -980% -133% -500% -500% -500% -500% -500% -500% -500% -500% -500% -500%
Adjustment -3% -1% -1% 0% -1% -1% -1% -1% -1% -1% -1% -1% -1% -1% -1% -1%
Source: Company data, CFHK Research estimates

7|P a g e
Analyst Certification and Regulatory Disclosures
Analyst Certification

The Research Analyst(s) on the front cover of this research note certifies (or, where multiple research analysts are
primarily responsible for this research note, with respect to each security that the research analyst covers in this research)
that; 1) all of the views expressed in this research note accurately reflect his or her personal views about any and all of the
subject companies and their securities; and 2) no part of any of the research analyst's compensation was, is or will be
directly or indirectly related to the specific recommendations or views expressed by the Research Analyst(s) in this
research note.

Other disclosures

“CFHK Research” means Cantor Fitzgerald (Hong Kong) Capital Markets Limited Research.

“TP” means target price or price target.

“UR” means Under Review.

“NC” means this entity is not being formally covered / has not been initiated on by any of the CFHK Research team or any
other affiliated Research team within the Cantor Fitzgerald Group. (The Cantor Fitzgerald Group does not include BGC
Partners, Inc. and its Subsidiaries).

Disclaimer

Cantor Fitzgerald (Hong Kong) Capital Markets Limited (“CFHK”) provides independent research of Asian equity markets,
which is designed to help our institutional clients outperform their respective benchmarks. In relation to our stocks under
formal coverage, our BUY recommendations are used to draw attention to stocks, which we believe are under-priced by
circa 15% or more and our SELL recommendations are used to draw attention to stocks, which we believe are over-priced
by circa 5% or more. Stocks under formal coverage which we believe will no longer achieve this price differential or stocks
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Table of Disclosures on Interests

1. The analyst(s) named on the front page of this research note and/ or his/ her associates is / are a holder(s) of the
following company (ies) mentioned / referenced in this research note
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Company Name Disclosure

GMO INTERNET INC (9449 JP) None
GMO CLICK HOLDIN (7177 JP) None

Cantor Fitzgerald (Hong Kong) Capital Markets Limited - Japan Technology – Internet & Telecoms Research

Naoshi Nema
+ 852 3558 5546
nnema@cantor.com

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