Internet Sector: Updates On Two Saas Companies: Still Bullish On

Asia Pacific Equity Research
16 January 2021
Internet Sector
Updates on Two SaaS Companies: Still Bullish on
Bengo4.com, Rakus Reassuring
We revise our forecasts for Bengo4.com and Rakus based on recent developments Japan Equity Research
and our discussions with top management. The majority of SaaS names, including Internet, Telecom , Games
these two that we cover, saw strong share-price gains in 2020, and while their Haruka Mori AC
high valuations show them clearly trading on expectations, we think it is too soon (81-3) 6736-8632
to take profits given the acceleration in digital transformation (DX), especially haruka.mori@jpmorgan.com
among large corporations. We remain bullish on Bengo4.com (Overweight; new Bloomberg JPMA MORI <GO>
price target: ¥16,000) as we expect its electronic contract service to benefit from Ami Terai
continued government efforts to move away from personal seals, and also believe (81-3) 6736-8660
its CloudSign offering has been proven competitive against the many rival ami.terai@jpmorgan.com
services. We find Rakus (Neutral; new price target: ¥2,000) reassuring in view of JPMorgan Securities Japan Co., Ltd.
accelerating momentum for the Raku Raku Meisai service, which we expect to
become the next growth pillar, and the company’s ability to generate high profits.
 Bengo4.com: Watching for full-scale uptake by governments and large
corporations: Our focus through FY2021 is mainly on the following. (1)
Increased adoption of CloudSign by national and local governments:
Widespread government uptake hinges partly on changes to Japan’s Local
Autonomy Law and other legislative revisions, but progress in getting
government entities on board could have a major impact in terms of service
recognition and differentiation. (2) Enhanced functionality for large
corporations: CloudSign lags rival DocuSign in terms of the functionality large
corporations require (authority control, etc.), but the company is quickly
strengthening development here and could see faster adoption as these efforts
bear fruit. We once again raise our longer-term forecasts to factor in these
catalysts as well as the favorable trend in average pricing seen through 2Q
(reflecting stronger-than-anticipated acquisition of business-plan customers).
We look for operating profit to expand from FY2021 on. Near term, we see a
potential negative in news flow regarding the marketing offensive by rival GMO
GlobalSign, but also see this having little impact on fundamentals. For details,
please see the company section from page 7.
 Rakus: Set to resume aggressive investment in FY2021, but downside risk
relatively limited: FY2020 has seen the Raku Raku Seisan service (digital
settlement of travel & other expenses) hurt to some extent by COVID-19, but
adoption of Raku Raku Meisai (digital document issuance) has accelerated and
email distribution services have been in strong demand. The company had
designated FY2020 as a year of profit generation, and the fact that operating
profit guidance was much higher than initially expected helped drive the shares
sharply higher in 2H 2020. The shares remain strong at present, but we think
Equity Ratings and Price Targets
Mkt Cap Rating Price Target
Company Ticker (¥ bn) Price (¥) Cur Prev Cur End Prev End
Date Date
Bengo4.com (6027) 6027 JP 220.8 9,920 OW n/c 16,000 Dec-21 12,000 n/c
RAKUS (3923) 3923 JP 359.4 1,983 N n/c 2,000 Dec-21 750 Dec-20
Source: Bloomberg Finance L.P., J.P. Morgan estimates. n/c = no change.All prices as of 15 Jan 21.
See page 32 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
JPMorgan Securities Japan Co., Ltd. Asia Pacific Equity Research
Haruka Mori 16 January 2021
(81-3) 6736-8632
haruka.mori@jpmorgan.com
near-term upside looks limited as FY2020’s sharp pullback in investment is

likely to impede any further acceleration in growth through 1H FY2021. Longer
term, however, we think downside risk looks relatively limited despite high
valuations for the subsector at large given rising expectations for accelerated
enterprise DX and company-specific factors including (1) the strong
competitiveness of Raku Raku Seisan and other core services, (2) the company’s
proven ability to generate profits (=investment capacity), and (3) management’s
firm commitment to maintaining a high rate of growth (i.e., its plans to resume
aggressive investment from FY2021). We have underestimated all three of these
strengths and now raise our longer-term forecasts by a substantial amount. For
details, please see the company section from page 20.
 Valuation: We continue to derive our price targets using a DCF model (details
on individual-company pages). Using EV/sales as a comparison metric shows
Rakus trading broadly in line with the SaaS subsector average but Bengo4.com
looking distinctly overvalued. However, Bengo4.com’s CloudSign service has
only just begun seeing full-scale adoption (JPMe three-year sales CAGR:
+110%), and the shares accordingly look less overvalued on a two-year
timeframe (Figure 1). Given the proven competitiveness of both these
companies’ core services, we think their profits could begin rising in earnest in
three years’ time. CloudSign in particular has a massive potential market that we
think could see profit growth accelerate as adoption gains momentum.
Bengo4.com is currently trading at 52x/21x our EPS forecast for three/five years
out (CAGR +50%/+27%) vs. 94x/45x for Rakus (+43%/+31%), and we expect
Bento4.com’s sense of overvaluation to decline further.
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Table of Contents
Bengo4.com (6027)...................................................................7
RAKUS (3923) .........................................................................20
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Figure 1: SaaS companies valuation

Mkt. Cap EV/Sales(x) Sales 3yr EV/EBITDA(x) PER(x) EPS 3yr %GPM
Company Ticker Date (JPYbn) FY20E FY21E FY22E CAGR(%) FY20E FY21E FY22E FY20E FY21E FY22E CAGR(%) FY19 Business Overview
Japan
FREEE 4478 JT 15-Jan 448.5 43.5 31.1 23.5 38.9% - - 240.1 - - 245.4 - 77.4% Cloud serv ice for accounting softw are
RAKUS 3923 JT 15-Jan 359.4 23.4 18.4 14.5 28.3% 84.4 143.7 92.8 137.7 258.5 154.9 42.6% 66.0% Cloud serv ice for SMEs
Sansan 4443 JT 15-Jan 269.4 16.1 12.5 9.8 26.0% 143.6 80.4 47.9 451.8 244.4 106.9 94.6% 86.4% Contact management
Infomart 2492 JT 15-Jan 225.2 25.0 21.4 17.7 13.2% 96.9 67.8 52.8 234.3 146.8 91.5 8.6% 73.2% Food industry platform, inv oicing
Bengo4.com 6027 JT 15-Jan 220.8 40.3 26.2 16.5 47.6% 406.6 168.9 66.7 959.0 324.4 115.5 94.3% 85.2% Law portal site, electronic signature
Money Forw ard 3994 JT 15-Jan 210.8 13.5 10.0 9.2 25.5% 4,632.6 115.5 65.6 - 230.3 94.4 - 67.3% Back-office and financial solutions
Cy bozu 4776 JT 15-Jan 135.7 8.5 7.3 6.5 14.9% - - - 71.6 55.3 44.4 37.9% 92.0% Groupw are
GMO Globalsign 3788 JT 15-Jan 134.9 26.7 21.7 18.1 20.7% - - - 443.7 224.8 158.8 33.0% 82.3% Internet solution
PLAID 4165 JT 15-Jan 131.8 - - - - - - - - - - - 71.2% CX platform / media
UZABASE 3966 JT 15-Jan 126.4 9.0 7.8 6.5 15.3% 192.7 67.8 43.8 - 121.6 78.7 - 57.5% Information platform / media
HENNGE 4475 JT 15-Jan 101.8 7.3 7.2 6.6 4.0% - - - 102.1 118.6 77.8 6.3% 61.9% ID & access management
GIFTEE 4449 JT 15-Jan 76.3 27.7 21.0 18.3 31.5% 65.8 58.5 45.9 93.6 68.4 66.1 40.1% 89.7% Electronic gift
YAPPLI 4168 JT 15-Jan 72.2 - - - - - - - - - - - 53.9% App dev elopment, management and analy sis platform
Kaonav i 4435 JT 15-Jan 51.4 20.0 13.9 - - - - - 492.9 306.4 - - 75.1% Talent management
TeamSpirit 4397 JT 15-Jan 33.2 - - - - - - - 263.7 100.1 58.9 30.0% 60.7% Human resource management
Mean 21.7 16.5 13.4 24.2% 803.2 100.4 82.0 325.0 183.3 107.8 43.0% 73.3%
Median 20.0 13.9 12.1 23.1% 120.3 74.1 52.8 249.0 146.8 91.5 35.5% 72.2%
Mkt. Cap EV/Sales(x) Sales 3yr EV/EBITDA(x) P/E(x) EPS 3yr %GPM
Company Ticker Date (USDbn) FY20E FY21E FY22E CAGR(%) FY20E FY21E FY22E FY20E FY21E FY22E CAGR(%) FY19 Business Overview
Overseas
Salesforce.com CRM US 14-Jan 196.8 9.2 7.6 6.4 20.8% 31.5 28.0 23.9 46.5 61.7 50.9 12.3% 75.2% CRM
Zoom Video Communications ZM US 14-Jan 113.8 43.4 32.0 26.3 89.7% 121.1 105.8 81.1 131.8 129.5 107.5 116.7% 81.5% Video conferencing
Serv iceNow NOW US 14-Jan 101.6 22.5 18.0 14.4 26.4% 70.5 58.0 46.0 113.4 93.3 73.2 28.4% 77.0% IT serv ice management
Twilio TWLO US 14-Jan 58.9 33.7 25.5 19.5 36.5% 433.3 431.9 248.0 3,209.2 4,376.1 941.6 36.7% 53.7% Cloud communication platform
Atlassian TEAM US 14-Jan 55.3 28.7 24.4 19.8 19.3% 122.1 99.2 76.9 198.0 156.0 121.7 16.8% 83.3% Softw are dev elopment & collaboration tools
Workday WDAY US 14-Jan 54.6 12.5 10.7 9.0 18.0% 48.2 44.9 35.7 83.9 78.5 62.8 24.4% 70.6% Financial / human capital management
DocuSign DOCU US 14-Jan 47.3 33.2 25.2 19.6 35.3% 234.7 164.4 104.4 344.7 227.9 150.8 75.0% 75.0% Electronic signature
RingCentral RNG US 14-Jan 33.6 29.4 23.9 19.4 25.1% 208.9 171.2 136.4 392.0 322.2 247.6 22.8% 74.4% Communication & collaboration platform
Okta OKTA US 14-Jan 33.5 40.0 30.7 23.8 33.1% 1,419.9 1,276.3 366.5 5,513.0 17,274.0 643.0 - 72.8% ID & access management
Zscaler ZS US 14-Jan 28.1 45.0 34.1 26.7 33.8% 333.4 215.2 137.3 550.8 345.7 212.4 60.3% 77.8% Information security
Coupa Softw are COUP US 14-Jan 24.4 46.8 36.9 29.1 29.4% 380.2 294.8 168.3 723.4 914.0 358.6 22.2% 64.3% Business spend management
Slack Technologies WORK US 14-Jan 24.2 26.5 20.6 16.2 32.1% - - 299.2 - - 268.7 - 84.6% Team collaboration
Pay com PAYC US 14-Jan 23.8 28.5 23.7 19.2 18.8% 73.2 60.6 47.4 119.2 98.5 75.8 15.9% 85.1% Pay roll / HR
HubSpot HUBS US 14-Jan 17.8 20.0 16.4 13.3 24.6% 174.9 141.5 100.3 337.7 281.8 190.3 10.8% 80.7% Inbound sales / marketing
Zendesk ZEN US 14-Jan 17.0 16.4 13.2 10.6 25.0% 146.5 110.8 79.8 258.8 184.4 126.4 55.1% 71.3% Customer serv ice
Av alara AVLR US 14-Jan 13.5 25.5 20.2 16.5 25.4% 2,210.5 - 307.5 - - 1,288.0 - 69.9% Tax solutions
Anaplan PLAN US 14-Jan 10.2 22.4 18.0 14.5 25.5% - - 409.1 - - - - 73.9% Planning platform
Dropbox DBX US 14-Jan 9.2 4.8 4.3 4.0 11.4% 16.4 13.8 12.2 25.6 22.6 18.6 34.7% 75.3% Online Storage
Mean 27.2 21.4 17.1 29.5% 376.6 214.4 148.9 803.2 1,637.8 290.5 38.0% 74.8%
Median 27.5 22.1 17.9 25.4% 160.7 110.8 102.3 258.8 184.4 150.8 26.4% 75.1%
Source: Bloomberg Finance L.P.、J.P. Morgan estimates
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Figure 2: Quarterly sales and YoY sales growth of domestic SaaS companies
Company Business Overview Jul-Sep quarter sales (¥mn) YoY
Cybozu Groupware 3,866 16%
Sansan Contact management 3,667 18%
RAKUS Cloud service for SMEs 3,614 29%
Cloud business 2,916 35%
UZABASE Information platform / media 3,584 28%
SPEEDA+Other B2B business 1,746 25%
GMO GlobalSign HD Internet solution 3,271 2%
Solution business (including Agree) 263 11%
Money Forward Back-office and financial solutions 2,756 46%
Money Forward Business 1,862 61%
FREEE Cloud service for accounting software 2,225 49%
Infomart Food industry platform, invoicing 2,204 1%
Bengo4.com Law portal site, electronic signature 1,274 28%
CloudSign 344 148%
HENNGE ID & access management 1,146 26%
PLAID CX platform / media 1,116 -
Kaonavi Talent management 823 30%
TeamSpirit Human resource management 655 26%
GIFTEE Electronic gift 485 8%
Source: Company data, J.P. Morgan
Note: Sansan, Money Forward and TeamSpirit are Jun-Aug quarter
Figure 3: Share price performance of domestic SaaS companies

%
Based on share price as of 2021/1/15
Market Cap Last Last Last Last
Company Code Past week YTD
(Ybn) 12 months 6 m onths 3 months 1 month
<Coverage>
RAKUS CO LTD 3923 359.4 108.8 137.6 -8.3 -10.6 -10.3 -16.5
Bengo4.com 6027 220.8 82.7 74.6 -35.3 -6.7 -7.0 -3.4
<Non-Coverage>
FREEE KK 4478 448.5 190.4 161.2 0.7 -2.5 -9.3 -10.9
SANSAN INC 4443 269.4 54.5 100.0 21.7 34.1 25.4 24.1
INFOMART CORP 2492 225.2 -14.1 25.3 -10.7 -6.8 -5.2 -12.2
MONEY FORWARD INC 3994 210.8 73.3 87.7 -0.7 0.5 -10.1 -0.9
CYBOZU INC 4776 135.7 50.2 23.4 -27.7 -1.2 -3.5 -4.0
HENNGE KK 4475 134.9 315.7 175.9 -4.0 13.0 9.2 0.6
PLAID INC 4165 131.8 - - - - 5.4 -2.0
UZABASE INC 3966 126.4 39.7 81.2 -13.0 3.9 -2.3 -2.7
GMO GLOBALSIGN HOLDINGS KK 3788 101.8 234.7 298.3 -36.8 -7.5 -3.4 -7.3
GIFTEE INC 4449 76.3 58.4 100.0 -17.5 5.9 1.6 -10.2
YAPPLI INC 4168 72.2 - - - - 3.2 -2.1
KAONAVI INC 4435 51.4 16.3 39.3 -33.4 -7.4 -3.0 -3.8
TEAMSPIRIT INC 4397 33.2 -27.5 2.6 -6.4 -13.1 -3.1 0.0
TOPIX 7.3 16.8 13.8 4.2 1.7 3.5
Source: Bloomberg Finance L.P., J.P. Morgan
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Figure 4: 12 month forward EV/Sales of domestic SaaS companies

60x
Bengo4.com
Rakus
Infomart
UZABASE
50x
Money Forward
TeamSpirit
Kaonavi
40x Sansan freee
HENNGE
freee Bengo4.com
30x
HENNGE
Informart
Rakus
20x
Money Forward
Kaonavi
10x Sansan
TeamSpirit
UZABASE
0x
1/5/2018
2/5/2018
3/5/2018
4/5/2018
5/5/2018
6/5/2018
7/5/2018
8/5/2018
9/5/2018
10/5/2018
11/5/2018
12/5/2018
1/5/2019
2/5/2019
3/5/2019
4/5/2019
5/5/2019
6/5/2019
7/5/2019
8/5/2019
9/5/2019
10/5/2019
11/5/2019
12/5/2019
1/5/2020
2/5/2020
3/5/2020
4/5/2020
5/5/2020
6/5/2020
7/5/2020
8/5/2020
9/5/2020
10/5/2020
11/5/2020
12/5/2020
1/5/2021
Source: Bloomberg Finance L.P. consensus estimates、J.P. Morgan
Figure 5: 12 month forward EV/Sales of US SaaS companies

14x Weighted Average EV/Sales
12x Simple Average EV/Sales
10x
8x
6x
4x
2x
Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20
Source: Bloomberg Finance L.P. consensus estimates、J.P. Morgan
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Bengo4.com (6027)
Overweight
CloudSign Approaching a Tipping Point
6027.T,6027 JP
 Numerous company-specific positives through FY2021, too soon to take
Price (15 Jan 21): ¥9,920
profits: SaaS names have attracted heavy thematic buying since last year on
▲ Price Target (Dec-21): ¥16,000 expectations for corporate DX under COVID-19, but with valuations now
Prior (Dec-21): ¥12,000
looking high, we think further upside hinges on acceleration in growth
Japan momentum. Investors were especially quick to focus on Bengo4.com’s
Internet, Telecom , Games CloudSign electronic contract service as COVID-19 prompted a government-led
Haruka Mori AC drive to end Japan’s reliance on personal seals, and while the shares rose sharply,
(81-3) 6736-8632 they appear to have lost momentum since 2H 2020. We nonetheless think it is too
haruka.mori@jpmorgan.com soon to take profits as we believe prospects for CloudSign’s full-scale adoption
Bloomberg JPMA MORI <GO>
by government agencies have the service approaching a tipping point that could
JPMorgan Securities Japan Co., Ltd.
see uptake accelerate further from FY2021 centered on large corporations.
Key Changes (FYE Mar)  Raising our longer-term forecasts again: CloudSign sales were tracking in line
Prev Cur with our forecasts through 2Q (Jul–Sep), but we slightly raise our estimates for
Revenue - 22E (¥ mn) 8,970 8,390 2H and beyond given particularly steady progress in securing customers for high-
ASP business plans. With COVID-19 becoming protracted, we make only modest
Style Exposure revisions for FY2021 as we expect little contribution from the CloudSign Now
service for retail stores. However, growth from next year could outpace our
expectations if government uptake materializes, as this could have a major
promotional effect in attracting large corporate users and dovetail with the
company’s rapid progress in adding the functionality (authority control, etc.) that
large companies demand. We also look for the company to raise prices as it
introduces this enhanced functionality and have factored this into our longer-term
forecasts. We now expect CloudSign sales to rise from ¥1.6 billion (2.5x YoY,
Sources for: Style Exposure – J.P. Morgan Quantitative and guidance: around ¥1.4 billion) to ¥4.2 billion (2.6x YoY) in FY2021, around ¥15
Derivatives Strategy; all other tables are company data and
J.P. Morgan estimates.
billion in FY2023, and nearly ¥30 billion in FY2025 (Figure 14). While the
company remains in a period of aggressive investment, we also see it entering a
profit growth period from FY2021 (operating profit needs to reach ¥1 billion
before stock options can be exercised, so company consciousness around this
figure may be strong in the coming year).
 Potential legislative changes regarding CloudSign: We think the ordinary Diet
session that gets underway this month could bring revisions in the following laws
regarding electronic signatures. (1) Local Autonomy Act: This currently prohibits
use of electronic signatures that comply with Article 2 of the Electronic Signature
Law. (2) Real Estate Brokerage Act: This currently requires that documents be
issued in connection with real estate leasing and sales transactions. In anticipation
of a change in the Local Autonomy Act, Bengo4.com established a Digital
Government Support Office last October and launched a new flat-rate CloudSign
for Government service in December. The company has also begun verification
testing with some local municipalities. Given Bengo4.com’s leading market share
among domestic companies and its track record in making recommendations to
the Cabinet Regulatory Reform Promotion Council, we expect its service to see
broad adoption. We also note that uptake by government agencies would have
significance beyond simply expanding the customer base. Specifically, we think
the government’s use of CloudSign could make it easier for large corporations to
select it over rivals.
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Price Performance Summary Investment Thesis and Valuation

Investment Thesis
We think it is too soon to take profits as we believe prospects
for CloudSign’s full-scale adoption by government agencies
has the service approaching a tipping point that could see
uptake accelerate further from FY2021 centered on large
corporations.
Valuation
We set our DCF-based price target through December 2021
YTD 1m 3m 12m at ¥16,000. Our DCF assumptions are a risk-free rate of
Abs -3.1% -6.7% -35.3% 82.7%
Rel -6.0% -10.9% -49.1% 75.4% 0.5%, a market risk premium of 6.5%, beta of 1.0 and a
terminal growth rate of 3.0%. Our price target equates to
Company Data EV/sales of 39x on our FY2022 forecast and 22x on our
Shares O/S (mn) 22 FY2023 forecast.
52-week range (¥) 15,880-3,035
Market cap ($ bn) 2.1
Exchange rate 103.80 Performance Drivers
Free float(%) 31.9%
3M - Avg daily vol (mn) 0.28
3M - Avg daily val ($ mn) 34.7
Volatility (90 Day) 59
Index TOPIX
BBG BUY|HOLD|SELL 2|0|0
Key Metrics (FYE Mar)

¥ in millions 2020/3A 2021/3E 2022/3E 2023/3E
Financial Estimates
Revenue 4,133 5,450 8,390 13,300
EBITDA 520 540 1,300 3,290
EBIT 393 360 1,050 2,940
Net income 260 230 680 1,910
Reported EPS 11.71 10.34 30.58 85.90
BBG EPS - - - -
Cashflow from operations 541 465 1,288 2,859
FCFF 310 245 963 2,434
Margins and Growth
Revenue growth 31.9% 31.9% 53.9% 58.5%
EBIT margin 9.5% 6.6% 12.5% 22.1%
EBIT Growth -23.0% -8.4% 191.7% 180.0%
EBITDA margin 12.6% 9.9% 15.5% 24.7%
EBITDA growth -14.1% 3.8% 140.7% 153.1%
Net margin 6.3% 4.2% 8.1% 14.4%
Fully Diluted EPS growth -21.9% -11.6% 195.7% 180.9%
Ratios
Effective Tax Rate 34.2% 36.1% 35.2% 35.0%
Interest cover - - - -
Net debt/Equity NM NM NM NM
Net debt/EBITDA NM NM NM NM
ROE 13.0% 10.2% 25.2% 47.8%
Valuation
FCFF yield 0.1% 0.1% 0.4% 1.1%
Dividend yield 0.0% 0.0% 0.0% 0.0%
EV/Revenue NM NM NM NM
EV/EBITDA NM NM NM NM
P/E 847.5 959.0 324.4 115.5
Source: J.P. Morgan Quantitative and Derivatives Strategy for Performance Drivers; company data, Bloomberg Finance L.P. and J.P. Morgan estimates for all other tables.
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Expect adoption to ramp as laws are changed

Figure 6 shows government progress on legislative changes aimed at promoting
electronic contracts. Both national and local governments are rethinking existing
requirements for using personal seals, and Bengo4.com has responded by
establishing a Digital Government Support Office last October and launching a new
CloudSign for Government service from December. With the company’s usual
metered pricing ill-suited to government needs, the new service instead offers flat-
rate monthly and annual plans based on contract transmission volume. We look for
government adoption to expand as the aforementioned legislative changes come into
effect. We note that government agencies generate around 6 million contracts per
year in aggregate.
Figure 6: Government plans to greatly reduce use of hanko personal seals and corresponding CloudSign actions
Date Overview
2/2019 Revisions to enforcement rules of the Labor Standards Act
→Allows presentation of labor terms by fax, e-mail, SNS, and other means
5/2019 Promulgation of the Digital Procedures Act
→Formulates use of an online format for administrative procedures as a general rule (digital signature for confirmation of individual identity and fee
payments, digital payments, etc.)
5/2020 Clarification of the interpretaion of the Ordinance for Enforcement of the Companies Act, by the Ministry of Justice
→ Electronic signatures using CloudSign are certified as legal for use in the preparation of board meeting minutes
6/2020 Addition of Cloud Sign as a designated digital certificate for online applications on the Ministry of Justice's web site
→Contracts and other documents electronically signed by CloudSign allowed to be used in online application for commercial registration
7/2020 Cabinet decision on the "Plan for Implementing Regulatory Reforms"
→Calls for fundamental revisions to regulations that utilize paper documents, seals, and face-to-face contact in administrative procedures
Release of document regarding the interpretation of the Digital Signature Act's article, by the Ministry of Internal Affairs and Communications, the Ministry of
Justice, and the Ministry of Economy, Trade and Industry
→ CloudSign certified as complying with the Digital Signature Act
9/2020 Addition of "Q&A regarding digital contact service for encryption and other processes using the signature key of a service provider based on user instructions"
→Utilization of digital signature allowed to fulfill criteria of Article 3 (Q&A) by a user of subject authentication on Cloud Sign
Request by the Minister in Charge of Promotion of Regulatory Reform to all government ministries and agencies to stop using seals in administrative
procedures
10/2020 Statement of intent to revise regulations that hinder digitalization at all government ministries and agencies at the Council for Promotion of Regulatory Reform
→Move forward with revisions to halt the obligation to apply seals (besides some exceptions) for local government entities
Notification by the Ministry of Education, Culture, Sports, Science and Technology "regarding revisions to school requests for seal application from guardians,
etc. and digitalization of contact methods between schools and guardians, etc."
Digital Government Support Office established
12/2020 Released an instruction manual for local government's abolition of hanko seals in the government office procedures
Amendment of Contract Management Stipulations
→Enables use of cloud e-signature in e-contract between the government and companies
Started a demonstration experiment with Kasama City, Ibaraki
Started a demonstration experiment with Kuwana City, Mie
Started a demonstration experiment with Sagamihara City, Kanagawa
Launched CloudSign for Government
Source: Company data, media reports, J.P. Morgan
Note: The light blue highlights are CloudSign’s actions
Making rapid progress in developing new features for large corporate users
The company is steadily attracting new clients in tandem with legislative progress,
including large corporations, and we look for further acceleration here going forward.
The list of large corporate users has been gradually increasing since last September,
including Suntory Group and SBI Holdings (acquired through SMBC CloudSign, a
JV with SMFG). The company has been steadily adding new pricing plans and
functionality for CloudSign and expanding linkages with external services, but the
particular functionality needed by large corporations remains an outstanding issue
that the company is now rapidly addressing. It is working in particular on adding
better authority control, which is especially important for Japanese companies
because of their regular staff rotations, and also an audit log function. Rival
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DocuSign already offers these features, which gives it an advantage in securing large
corporate users despite its high prices. We accordingly see scope for Bengo4.com to
raise prices when it introduces the new functionality for CloudSign
Figure 7: CloudSign evolution and major company user acquisition

Apr-19 Start of Business plan for enterprises
May-19 Collaboration with Hupro’s Raku Raku Naitei function
Start of tie-up with MyQuick document management system
Jun-19 Release of CloudSign Salesforce version 2.0
Jul-19 Release of CloudSign CONNECT
Reached 50,000 user companies
Release of CloudSign #FINDER
Aug-19 Release of CData Drivers for CloudSign
Sep-19 Establishment of SMBC CloudSign, Inc.
First TV commercial aired
Strengthened authority management for CloudSign #MAKE for
Nov-19 enterprise
Dec-19 Release of CloudSign Sales Automation
Jan-20 System linkage with communication platform mitoco
Feb-20 Business alliance with Holmes
Linkage with cloud sales system RakuRaku Hanbai
Linkage with sales-focused web conference system bellFace
Ministry of Justice approves use in online applications for
Jun-20 commercial/corporate registrations
Jul-20 System linkage with administrative digitalization cloud SmartDB
API linkage with integrated real-estate contract management service
Musubell
Aug-20 Conformance with General Data Protection Regulation in Europe
Release of CloudSign AI
Sep-20 Corporate adoptions top 100,000
Release of Contract Management Option for CloudSign
Business alliance with Mitsui-Soko Business Partners
Product alliance with NTT Data Intramart
System linkage with contract management/operations specialist Ofigo
Contract Management Facil
Dec-20 Business alliance with Canon Marketing Japan
Release of advanced authentication request function
System linkage with ID integrated management KDDI Business ID
Source: Company data, J.P.Morgan
Note: Light blue highlighting indicates new functions and updates, gray highlighting indicates external collaboration
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Increased competition from GMO Agree bears watching near term

The GMO Agree electronic contract service offered by GMO GlobalSign Holdings
(3788, Not Covered) has been catching up to CloudSign in the pace of corporate
adoption (including both paid and free) on the back of aggressive promotions since
last year and attractive pricing. With electronic contract adoption still in its infancy,
we see little need for concern over competitive risk but do note near-term risk of
GMO gaining further ground on this readily comparable metric. However, GMO’s
offensive does not appear to be slowing acquisition of paid corporate users for
CloudSign, with large corporations apparently emphasizing convenience and safety
over price. We also think there may be some degree of demand for the registered seal
functionality that is a key strength of GMO Agree, but we see little possibility of this
demand increasing if government agencies adopt an electronic signature service
going forward (Bengo4.com says the lack of a registered seal feature has not been an
issue in marketing activities so far).
Figure 8: CloudSign and GMO e-Contract Service Agree comparison

CloudSign GMO e-Contract Service Agree
User companies/accounts 107,000 (Sep 2020) 70,000 (Nov 2020)
Total no. of contracts 570,000 (Jul-Sep 2020) 300,000 (Jul-Sep 2020)
Free plan Free plan Free plan
Monthly flat fee JPY 0 JPY0
Pay-per-use JPY 0 JPY0
No. of users 1 1
No. of contracts 5 10
Paid plan Standard plan Unregistered & Registered seal plan
Monthly flat fee JPY10,000 JPY8,800
*Plan unified and pricing changed in Dec 2020
*Standard plus plan: JPY20,000
(Previously, Unregistered plan: JPY10,000/Unregistered &
(Standard plan + Unitary document managing function)
Registered plan: 20,000)
JPY100 (Unregistered seal)
Pay-per-use JPY200
JPY300 (Registered seal)
No. of users Unlimited Unlimited
No. of contracts Unlimited Unlimited
Paid optional service example
Unitary document managing
Document importing function Scanned document management function
function
Monthly fee JPY10,000 JPY15,000
Additional fee +JPY10,000: 1,000 files +JPY5,000: 10GB
Storage 1,000 files 10GB
Paid plan (advanced) Business plan Enterprise plan
Monthly flat fee JPY100,000 Quote by function
Pay-per-use JPY200
No. of users Unlimited
No. of contracts Unlimited
Plan for government CloudSign for Government GMO e-Contract Service Agree
Fees Monthly/annual flat fee by no. of contracts Monthly/annual flat fee by no. of contracts
Start date Dec 2020 Dec 2020
Source: Company data, J.P. Morgan
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Figure 9: CloudSign: No. of user companies trend Figure 10: GMO e-Contract Service Agree: No. of user accounts trend
companies accounts
120,000 Number of User Companies 60,000 80,000 Number of User Accounts 50,000
YoY (RHS)
100,000 YoY (RHS) 50,000
40,000
60,000
80,000 40,000
30,000
60,000 30,000 40,000
20,000
40,000 20,000
20,000
20,000 10,000 10,000
0 0 0 0
3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q Nov
3/16 3/17 3/18 3/19 3/20 3/21 12/18 12/19 12/20
Source: Company data, J.P. Morgan Source: Company data, J.P. Morgan
Figure 11: CloudSign: No. of contracts trend Figure 12: GMO e-Contract Service Agree: No. of contracts
contracts contracts
600,000 Number of Contracts 350,000 350,000 Number of Contracts 200,000
YoY (RHS) YoY (RHS)
500,000 300,000 300,000
250,000 250,000 150,000
400,000
200,000 200,000
300,000 100,000
150,000 150,000
200,000
100,000 100,000 50,000
100,000 50,000 50,000
0 0 0 0
3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q 3Q 4Q 1Q 2Q 3Q
3/16 3/17 3/18 3/19 3/20 3/21 19/20 12/20
Source: Company data, J.P. Morgan Source: Company data, J.P. Morgan
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Figure 13: Bengo4.com: J.P. Morgan Estimates

¥ million, ¥, x
Sales yoy GP yoy OP yoy NP yoy EPS P/E
20/3 4,133 31.9% 3,489 30.8% 393 -23.0% 260 -21.9% 11.7 856.9
21/3E (new) 5,450 31.9% 4,620 32.4% 360 -8.4% 230 -11.6% 10.3 969.6
21/3E (old) 5,600 35.5% 4,660 33.6% 260 -33.8% 170 -34.7% 7.6 1,319.7
21/3CoE 5,200 25.8% - - - - - - - -
22/3E (new) 8,390 53.9% 7,160 55.0% 1,050 191.7% 680 195.7% 30.6 328.0
22/3E (old) 8,970 60.2% 7,630 63.7% 1,280 392.3% 830 388.2% 37.3 268.9
23/3E (new) 13,300 58.5% 11,570 61.6% 2,940 180.0% 1,910 180.9% 85.9 116.8
23/3E (old) 13,910 55.1% 12,070 58.2% 3,180 148.4% 2,070 149.4% 93.1 107.7
24/3E (new) 20,280 52.5% 18,050 56.0% 6,650 126.2% 4,320 126.2% 194.3 51.6
24/3E (old) 21,050 51.3% 18,710 55.0% 7,020 120.8% 4,560 120.3% 205.1 48.9
25/3E (new) 29,080 43.4% 26,350 46.0% 11,840 78.0% 7,700 78.2% 346.3 29.0
25/3E (old) 30,400 44.4% 27,560 47.3% 12,640 80.1% 8,220 80.3% 369.7 27.1
26/3E (new) 37,400 28.6% 34,170 29.7% 16,640 40.5% 10,820 40.5% 486.6 20.6
26/3E (old) 38,320 26.1% 34,980 26.9% 17,100 35.3% 11,110 35.2% 499.7 20.1
27/3E (new) 46,620 24.7% 42,890 25.5% 22,200 33.4% 14,430 33.4% 649.0 15.5
27/3E (old) 46,010 20.1% 42,170 20.6% 21,380 25.0% 13,900 25.1% 625.2 16.0
28/3E (new) 55,980 20.1% 51,750 20.7% 27,850 25.5% 18,100 25.4% 814.1 12.3
28/3E (old) 53,910 17.2% 46,570 10.4% 25,820 20.8% 16,780 20.7% 754.7 13.3
29/3E (new) 65,970 17.8% 61,240 18.3% 34,040 22.2% 22,130 22.3% 995.3 10.1
29/3E (old) 61,980 15.0% 57,140 22.7% 30,410 17.8% 19,770 17.8% 889.2 11.3
30/3E (new) 76,530 16.0% 71,300 16.4% 40,690 19.5% 26,450 19.5% 1,189.6 8.4
Source: Company data, J.P. Morgan estimates Note: Price as of Jan. 14.
Figure 14: CloudSign assumptions

¥million
3/19 3/20 3/21E 3/22E 3/23E 3/24E 3/25E 3/26E 3/27E 3/28E 3/29E 3/30E
Revenue 275 640 1,630 4,200 8,760 15,420 23,900 31,910 40,820 49,880 59,580 69,860
YoY% 132.7 154.7 157.7 108.6 76.0 55.0 33.5 27.9 22.2 19.4 17.3
CloudSign 275 637 1,630 4,170 8,590 14,860 22,640 29,810 37,660 46,150 55,280 64,990
YoY% 131.6 155.9 155.8 106.0 73.0 52.4 31.7 26.3 22.5 19.8 17.6
FY-end: no. of paid
companies 3,000 3,700 8,010 13,906 21,512 30,672 40,367 50,655 61,347 72,420 83,849 95,613
YoY 700 4,310 5,896 7,606 9,160 9,695 10,288 10,693 11,072 11,429 11,764
Standard 3,000 3,636 7,491 12,817 19,856 28,466 37,615 47,358 57,517 68,066 78,982 90,243
Business 0 64 519 1,089 1,656 2,207 2,751 3,296 3,831 4,354 4,867 5,369
ARPU (yen/month) 12,500 15,846 20,880 28,571 36,389 42,722 47,803 49,134 50,440 51,751 53,060 54,324
YoY 26.8 31.8 36.8 27.4 17.4 11.9 2.8 2.7 2.6 2.5 2.4
Average fixed fee (¥/month) 10,000 10,860 14,481 19,383 20,666 21,292 20,932 20,648 20,409 20,201 20,015 19,848
Average variable fee
(yen/month) 2,500 4,986 6,399 9,188 15,723 21,430 26,871 28,486 30,032 31,550 33,045 34,476
Standard 2,500 4,986 6,399 9,188 15,723 21,430 26,871 28,486 30,032 31,550 33,045 34,476
contracted number per
company (month) 30 24 37 40 60 80 100 100 100 100 100 100
Business - 6,000 15,000 24,000 60,000 90,000 120,000 150,000 180,000 210,000 240,000 270,000
contracted number per
company (month) - 30 75 120 200 300 400 500 600 700 800 900
CloudSign NOW - - - 30 170 560 1,260 2,100 3,160 3,730 4,300 4,870
YoY% - - - - 466.7 229.4 125.0 66.7 50.5 18.0 15.3 13.3
FY-end: no. of paid
companies - - 1 30 90 150 200 250 300 350 400 450
YoY - - 1 29 60 60 50 50 50 50 50 50
Total ID - - - 150 900 3,000 6,000 10,000 15,000 17,500 20,000 22,500
YoY 150 750 2,250 3,750 6,250 8,750 8,750 11,250 11,250
number of contract per
company - - - 5 10 20 30 40 50 50 50 50
ARPU (yen/month) - - - 110,000 190,000 370,000 590,000 770,000 950,000 950,000 950,000 950,000
YoY% - - 72.7 94.7 59.5 30.5 23.4 0.0 0.0 0.0
Average fixed fee
(yen/month) - 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Average ID usage fee
(yen/month) - 60,000 140,000 320,000 540,000 720,000 900,000 900,000 900,000 900,000
Source: Company data, J.P. Morgan estimates
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Figure15: Bengo4.com: Yearly PL

¥ million
3/19 3/20 3/21E 3/22E 3/23E 3/24E 3/25E 3/26E 3/27E 3/28E 3/29E 3/30E 3/21CoE
Sales 3,133 4,133 5,450 8,390 13,300 20,280 29,080 37,400 46,620 55,980 65,970 76,530 5,200
Cost of goods sold 464 643 830 1,230 1,730 2,230 2,730 3,230 3,730 4,230 4,730 5,230
Gross profits 2,668 3,489 4,620 7,160 11,570 18,050 26,350 34,170 42,890 51,750 61,240 71,300
SG&A expense 2,158 3,096 4,260 6,110 8,630 11,400 14,510 17,530 20,690 23,900 27,200 30,610
Operating profits 510 393 360 1,050 2,940 6,650 11,840 16,640 22,200 27,850 34,040 40,690
Non-Operating
1 3 0 0 0 0 0 0 0 0 0 0
Income
Non-Operating
0 1 0 0 0 0 0 0 0 0 0 0
Expense
Recurring profits 511 396 360 1,050 2,940 6,650 11,840 16,640 22,200 27,850 34,040 40,690
Extraordinary income 0 0 0 0 0 0 0 0 0 0 0 0
Extraordinary losses 8 0 0 0 0 0 0 0 0 0 0 0
Pretax profits 504 396 360 1,050 2,940 6,650 11,840 16,640 22,200 27,850 34,040 40,690
Taxes 170 135 130 370 1,030 2,330 4,140 5,820 7,770 9,750 11,910 14,240
Net profits 333 260 230 680 1,910 4,320 7,700 10,820 14,430 18,100 22,130 26,450
EBITDA 606 520 540 1,300 3,290 7,100 12,390 17,290 22,950 28,700 34,990 41,740
EPS (¥) 15.0 11.7 10.3 30.6 85.9 194.3 346.3 486.6 649.0 814.1 995.3 1,189.6
DPS (¥) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
CFPS (¥) 19.3 17.4 18.4 41.8 101.6 214.5 371.0 515.9 682.7 852.3 1,038.0 1,236.8
BPS (¥) 84.0 95.7 106.1 136.6 222.5 416.8 763.1 1,249.8 1,898.8 2,712.8 3,708.1 4,897.7
% YoY
Sales 35.1 31.9 31.9 53.9 58.5 52.5 43.4 28.6 24.7 20.1 17.8 16.0 25.8
Operating profit 1.4 -23.0 -8.4 191.7 180.0 126.2 78.0 40.5 33.4 25.5 22.2 19.5
Recurring profit 1.2 -22.6 -9.0 191.7 180.0 126.2 78.0 40.5 33.4 25.5 22.2 19.5
Net profit 3.1 -21.9 -11.6 195.7 180.9 126.2 78.2 40.5 33.4 25.4 22.3 19.5
% of sales
Gross profits 85.2 84.4 84.8 85.3 87.0 89.0 90.6 91.4 92.0 92.4 92.8 93.2
SG&A expense 68.9 74.9 78.2 72.8 64.9 56.2 49.9 46.9 44.4 42.7 41.2 40.0
Operating profits 16.3 9.5 6.6 12.5 22.1 32.8 40.7 44.5 47.6 49.7 51.6 53.2
Recurring profits 16.3 9.6 6.6 12.5 22.1 32.8 40.7 44.5 47.6 49.7 51.6 53.2
Net profits 10.6 6.3 4.2 8.1 14.4 21.3 26.5 28.9 31.0 32.3 33.5 34.6
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Figure16: Bengo4.com: Sales by Segment

¥ million, people
3/19 3/20 3/21E 3/22E 3/23E 3/24E 3/25E 3/26E 3/27E 3/28E 3/29E 3/30E
Marketing Support Service
1,789 2,105 2,380 2,610 2,820 3,020 3,220 3,420 3,610 3,800 3,960 4,120
for Lawyers
%YoY 15.2% 17.7% 13.1% 9.7% 8.0% 7.1% 6.6% 6.2% 5.6% 5.3% 4.2% 4.0%
FY-end of paid registered
4,476 4,998 5,498 5,926 6,343 6,753 7,163 7,576 7,958 8,311 8,638 8,940
lawyers (people)
%YoY 17.0% 11.7% 10.0% 7.8% 7.0% 6.5% 6.1% 5.8% 5.0% 4.4% 3.9% 3.5%
YoY 651 522 500 428 417 411 410 413 382 353 327 302
conversion ratio 27.1% 26.4% 25.4% 24.5% 24.0% 23.7% 23.8% 24.0% 24.2% 24.4% 24.6% 24.7%
FY-end of registered lawyers
16,493 18,941 21,641 24,141 26,441 28,441 30,141 31,541 32,841 34,041 35,141 36,241
(people)
%YoY 13.7% 14.8% 14.3% 11.6% 9.5% 7.6% 6.0% 4.6% 4.1% 3.7% 3.2% 3.1%
YoY 1,987 2,448 2,700 2,500 2,300 2,000 1,700 1,400 1,300 1,200 1,100 1,100
Paid services for individual 553 657 610 610 660 690 720 740 770 800 840 870
%YoY 31.4% 18.8% -7.2% 0.0% 8.2% 4.5% 4.3% 2.8% 4.1% 3.9% 5.0% 3.6%
FY-end of paid users
174,324 178,291 160,607 177,804 188,448 195,147 202,360 210,106 218,445 227,443 237,178 247,742
(people)
%YoY 31.0% 2.3% -9.9% 10.7% 6.0% 3.6% 3.7% 3.8% 4.0% 4.1% 4.3% 4.5%
YoY 41,255 3,967 -17,684 17,197 10,644 6,699 7,213 7,747 8,338 8,998 9,736 10,563
Advertisement and others
465 895 1,910 4,510 9,100 15,780 24,280 32,310 41,240 50,320 60,040 70,340
(incl. CloudSign)
%YoY 210.0% 92.5% 113.4% 136.1% 101.8% 73.4% 53.9% 33.1% 27.6% 22.0% 19.3% 17.2%
Total CloudSign (est.) 275 640 1,630 4,200 8,760 15,420 23,900 31,910 40,820 49,880 59,580 69,860
%YoY - 132.7% 154.7% 157.7% 108.6% 76.0% 55.0% 33.5% 27.9% 22.2% 19.4% 17.3%
a) CloudSign 275 650 1,630 4,170 8,590 14,860 22,640 29,810 37,660 46,150 55,280 64,990
%YoY - 136.4% 155.9% 155.8% 106.0% 73.0% 52.4% 31.7% 26.3% 22.5% 19.8% 17.6%
ARPU (yen/month) 12,500 16,169 20,880 28,571 36,389 42,722 47,803 49,134 50,440 51,751 53,060 54,324
%YoY - 29.4% 31.8% 36.8% 27.4% 17.4% 11.9% 2.8% 2.7% 2.6% 2.5% 2.4%
FY-end: number of paid
3,000 3,700 8,010 13,906 21,512 30,672 40,367 50,655 61,347 72,420 83,849 95,613
companies
YoY - 700 4,310 5,896 7,606 9,160 9,695 10,288 10,693 11,072 11,429 11,764
Standard 3,000 3,636 7,491 12,817 19,856 28,466 37,615 47,358 57,517 68,066 78,982 90,243
b) CloudSign NOW - - - 30 170 560 1,260 2,100 3,160 3,730 4,300 4,870
%YoY - - - - 466.7% 229.4% 125.0% 66.7% 50.5% 18.0% 15.3% 13.3%
Advertisement (est.) 190 260 280 310 340 360 380 400 420 440 460 480
%YoY - 36.8% 7.7% 10.7% 9.7% 5.9% 5.6% 5.3% 5.0% 4.8% 4.5% 4.3%
Marketing Support Service
318 467 540 650 710 780 850 920 990 1,050 1,120 1,190
for Tax Accountants
%YoY 70.1% 46.9% 15.6% 20.4% 9.2% 9.9% 9.0% 8.2% 7.6% 6.1% 6.7% 6.3%
Registered tax accountant
3,068 5,258 6,000 6,700 7,400 8,100 8,800 9,500 10,200 10,900 11,600 12,300
(people)
%YoY 25.0% 71.4% 14.1% 11.7% 10.4% 9.5% 8.6% 8.0% 7.4% 6.9% 6.4% 6.0%
YoY 613 2,190 742 700 700 700 700 700 700 700 700 700
Other/ elimination 8 9 10 10 10 10 10 10 10 10 10 10
Total sales 3,133 4,133 5,450 8,390 13,300 20,280 29,080 37,400 46,620 55,980 65,970 76,530
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Figure17: Bengo4.com: Quarterly PL

¥ million
3/20 3/21
1Q 2Q 1H 3Q 4Q 2H 1Q 2Q 1H 3QE 4QE 2HE
Sales 936 994 1,929 1,065 1,138 2,203 1,161 1,274 2,435 1,420 1,590 3,010
Marketing Support Service for 500
515 1,015 535 555 1,090 569 587 1,156 610 610 1,220
Lawyers
%YoY 17.1% 17.8% 17.5% 17.1% 18.6% 17.8% 13.8% 14.0% 13.9% 14.0% 9.9% 11.9%
%QoQ 6.8% 3.0% - 3.9% 3.7% - 2.5% 3.2% - 0.0% 0.0% -
Paid services for individual 162 169 331 165 161 326 153 147 300 150 160 310
%YoY 30.6% 24.3% 27.3% 15.4% 7.3% 11.3% -5.6% -13.0% -9.4% -9.1% -0.6% -4.9%
%QoQ 8.0% 4.3% - -2.4% -2.4% - -5.0% -3.9% - 2.0% 6.7% -
Advertisement and others (incl. 176
202 378 235 282 517 318 413 731 520 660 1,180
CloudSign)
%YoY 141.1% 108.2% 122.4% 79.4% 72.0% 75.3% 80.7% 104.5% 93.4% 121.3% 134.0% 128.2%
%QoQ 7.3% 14.8% - 16.3% 20.0% - 12.8% 29.9% - 25.9% 26.9% -
Total CloudSign 124 144 268 170 212 382 262 344 606 450 570 1,020
%YoY - - - - 101.9% 0.0% 113.0% 147.5% - 167.9% 175.4% 172.0%
%QoQ 18.1% 16.1% - 18.1% 24.7% - 26.6% 31.3% - 30.8% 26.7% -
Advertisement (est.) 52 58 110 70 80 150 56 69 125 70 80 150
%YoY 0.0% 0.0% 0.0% 0.0% 35.6% 154.2% 7.7% 9.5% 0.0% 6.1% 8.1% 3.4%
Marketing Support Service for Tax 95
105 200 129 138 267 118 126 244 140 160 300
Accountants
%YoY 50.8% 54.4% 52.7% 61.3% 29.0% 42.8% 24.2% 20.0% 22.0% 8.5% 15.9% 12.4%
%QoQ -11.2% 10.5% - 22.9% 7.0% - -14.5% 6.8% - 11.1% 14.3% -
Other/ elimination 3 3 5 1 2 3 0 1 4 0 10 10
Cost of Goods Sold 133 155 289 171 184 355 172 193 364 220 250 470
Gross Profit 802 838 1,641 895 954 1,849 989 1,082 2,071 1,200 1,350 2,550
SG&A 620 762 1,381 926 789 1,715 982 981 1,962 1,090 1,210 2,300
Operating profits 183 77 259 -32 165 134 7 101 108 110 140 250
Non-Operating Income 0 1 1 1 2 3 1 4 5 0 -10 -10
Non-Operating Expense 0 0 0 0 0 0 0 0 0 0 0 0
Recurring profits 183 77 260 -31 166 136 8 101 109 110 140 250
Pretax profits 183 77 260 -31 166 136 8 101 108 110 140 250
Taxes 63 37 100 -12 48 35 3 38 41 40 0 90
Net profits 119 40 160 -18 119 101 4 63 67 70 90 160
% YoY
Sales 35.9 34.3 35.1 31.1 27.7 29.3 24.0 28.2 26.2 33.3 39.7 36.6
Operating profit 46.6 -35.9 6.2 - 3.8 -49.8 -95.9 31.8 -58.2 - -15.2 87.2
Recurring profit 46.4 -35.5 6.3 - 4.2 -49.1 -95.4 30.7 -58.0 - -15.9 83.9
Net profit 46.6 -45.2 2.9 - 1.1 -43.5 -96.4 55.9 -57.9 - -24.3 59.2
% of sales
Gross profits 85.7 84.4 85.0 84.0 83.8 83.9 85.2 84.9 85.0 84.5 84.9 84.7
SG&A expense 66.2 76.7 71.6 86.9 69.3 77.8 84.6 77.0 80.6 76.8 76.1 76.4
Operating profits 19.5 7.7 13.4 -3.0 14.5 6.1 0.6 7.9 4.4 7.7 8.8 8.3
Recurring profits 19.5 7.8 13.5 -2.9 14.6 6.2 0.7 7.9 4.5 7.7 8.8 8.3
Net profits 12.8 4.1 8.3 -1.7 10.5 4.6 0.4 4.9 2.8 4.9 5.7 5.3
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Figure18: Bengo4.com: Balance Sheet and Cash Flow

¥ million
3/19 3/20 3/21E 3/22E 3/23E 3/24E 3/25E 3/26E 3/27E 3/28E 3/29E 3/30E
[Balance sheet]
Current assets 1,896 1,946 2,057 2,746 4,703 9,112 16,940 27,894 42,488 60,773 83,122 109,827
Cash and deposits 1,396 1,198 1,376 1,697 3,041 6,578 13,306 23,220 36,662 53,778 74,879 100,264
Accounts receivable 456 610 665 1,023 1,622 2,473 3,546 4,560 5,685 6,826 8,044 9,332
Other 45 139 16 25 40 61 88 113 141 169 199 231
Fixed assets 357 574 614 689 764 839 914 989 1,064 1,139 1,214 1,289
Tangible assets 67 75 85 100 115 130 145 160 175 190 205 220
Intangible assets 187 272 302 362 422 482 542 602 662 722 782 842
Investment and other
104 227 227 227 227 227 227 227 227 227 227 227
assets
Total assets 2,254 2,521 2,671 3,435 5,468 9,951 17,854 28,883 43,552 61,912 84,336 111,116
Current liabilities 384 390 310 394 517 680 883 1,092 1,331 1,592 1,885 2,215
Accounts payable 137 162 195 234 281 337 404 485 582 698 838 1,005
Accrued expenses 45 31 31 31 31 31 31 31 31 31 31 31
Other 203 196 84 129 205 312 448 576 718 862 1,016 1,179
Long-term liabilities 0 0 0 0 0 0 0 0 0 0 0 0
Total liabilities 384 390 310 394 517 680 883 1,092 1,331 1,592 1,885 2,215
Shareholder's equity 1,868 2,129 2,359 3,039 4,949 9,269 16,969 27,789 42,219 60,319 82,449 108,899
Total net assets 1,870 2,131 2,361 3,041 4,951 9,271 16,971 27,791 42,221 60,321 82,451 108,901
Total of liabilities and net
2,254 2,521 2,671 3,435 5,468 9,951 17,854 28,883 43,552 61,912 84,336 111,116
assets
Net debt -1,396 -1,198 -1,376 -1,697 -3,041 -6,578 -13,306 -23,220 -36,662 -53,778 -74,879 -100,264
% of total assets
Current assets 84.1 77.2 77.0 79.9 86.0 91.6 94.9 96.6 97.6 98.2 98.6 98.8
Fixed assets 15.9 22.8 23.0 20.1 14.0 8.4 5.1 3.4 2.4 1.8 1.4 1.2
Current liabilities 17.0 15.5 11.6 11.5 9.4 6.8 4.9 3.8 3.1 2.6 2.2 2.0
Total shareholders' equity 82.9 84.5 88.3 88.5 90.5 93.1 95.0 96.2 96.9 97.4 97.8 98.0
ROE(%) 19.6 13.0 10.2 25.2 47.8 60.8 58.7 48.3 41.2 35.3 31.0 27.6
ROA(%) 16.1 10.9 8.9 22.3 42.9 56.0 55.4 46.3 39.8 34.3 30.3 27.1
[Cash flow]
Net profits 333 260 230 680 1,910 4,320 7,700 10,820 14,430 18,100 22,130 26,450
Depreciation 96 127 180 250 350 450 550 650 750 850 950 1,050
Increase in working capital 148 154 55 358 599 851 1,073 1,014 1,124 1,141 1,218 1,288
Capital expenditures 149 231 220 325 425 525 625 725 825 925 1,025 1,125
Financial balance 36 124 0 0 0 0 0 0 0 0 0 0
Free cash flow (FCF) 95 -121 135 247 1,236 3,394 6,552 9,731 13,231 16,884 20,837 25,087
17
(81-3) 6736-8632
Investment Thesis, Valuation and Risks

Bengo4.com, Inc. (Overweight; Price Target: ¥16,000)
Investment Thesis
We think it is too soon to take profits as we believe prospects for CloudSign’s full-
scale adoption by government agencies has the service approaching a tipping point
that could see uptake accelerate further from FY2021 centered on large corporations.
Valuation
We set our DCF-based price target through December 2021 at ¥16,000. Our DCF
assumptions are a risk-free rate of 0.5%, a market risk premium of 6.5%, beta of 1.0
and a terminal growth rate of 3.0%. Our price target equates to EV/sales of 39x on
our FY2022 forecast and 22x on our FY2023 forecast.
Risks to Rating and Price Target

Upside Scenario to Target Price/Rating
 Faster-than-expected acceleration in CloudSign uptake
 Faster-than-expected acceleration in monetization of the Zeirishi.com business
 Rapid growth in the electronic contract services market
Downside Scenario to Target Price/Rating
 Slower-than-expected uptake of electronic contract services
 Greater-than-expected industry competition for CloudSign
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Bengo4.com (6027): Summary of Financials

Income Statement 2019/3A 2020/3A 2021/3E 2022/3E 2023/3E Cash Flow Statement 2019/3A 2020/3A 2021/3E 2022/3E 2023/3E
Revenue 3,133 4,133 5,450 8,390 13,300 Cash flow from operating activities 577 541 465 1,288 2,859
COGS (464) (643) (830) (1,230) (1,730) o/w Depreciation & amortization 96 127 180 250 350
Gross profit 2,668 3,489 4,620 7,160 11,570 o/w Changes in working capital 148 154 55 358 599
SG&A (2,158) (3,096) (4,260) (6,110) (8,630)
EBITDA 606 520 540 1,300 3,290 Cash flow from investing activities (146) (231) (220) (325) (425)
D&A (96) (127) (180) (250) (350) o/w Capital expenditure (146) (231) (220) (325) (425)
EBIT 510 393 360 1,050 2,940 as % of sales 4.7% 5.6% 4.0% 3.9% 3.2%
Net Interest - - - - -
PBT 504 396 360 1,050 2,940 Cash flow from financing activities 0 0 0 0 0
Tax (170) (135) (130) (370) (1,030) o/w Dividends paid 0 0 0 0 0
Minority Interest - - - - - o/w Shares issued/(repurchased) - - - - -
Net Income 333 260 230 680 1,910 o/w Net debt issued/(repaid) - - - - -
.
Reported EPS 14.99 11.71 10.34 30.58 85.90 Net change in cash 431 310 245 963 2,434
DPS 0.00 0.00 0.00 0.00 0.00 Adj. Free cash flow to firm 431 310 245 963 2,434
Payout ratio 0.0% 0.0% 0.0% 0.0% 0.0% y/y Growth 33.0% -28.0% -21.0% 293.3% 152.6%
Shares outstanding 22 22 22 22 22
.
Balance Sheet 2019/3A 2020/3A 2021/3E 2022/3E 2023/3E Ratio Analysis 2019/3A 2020/3A 2021/3E 2022/3E 2023/3E
Cash and cash equivalents 1,396 1,198 1,376 1,697 3,041 Gross margin 85.2% 84.4% 84.8% 85.3% 87.0%
Accounts receivable 456 610 665 1,023 1,622 EBITDA margin 19.3% 12.6% 9.9% 15.5% 24.7%
Inventories - - - - - EBIT margin 16.3% 9.5% 6.6% 12.5% 22.1%
Other current assets 45 139 16 25 40 Net profit margin 10.6% 6.3% 4.2% 8.1% 14.4%
Current assets 1,896 1,946 2,057 2,746 4,703
PP&E 67 75 85 100 115ROE 19.6% 13.0% 10.2% 25.2% 47.8%
LT investments 104 227 227 227 227ROA 16.1% 10.9% 8.9% 22.3% 42.9%
Other non current assets 187 272 302 362 422ROCE 18.3% 11.8% 9.4% 23.1% 44.6%
Total assets 2,254 2,521 2,671 3,435 5,468SG&A/Sales 68.9% 74.9% 78.2% 72.8% 64.9%
Net debt/Equity NM NM NM NM NM
Short term borrowings 181 194 226 265 312 Net debt/EBITDA NM NM NM NM NM
Payables - - - - -
Other short term liabilities 203 196 84 129 205 Sales/Assets (x) 1.5 1.7 2.1 2.7 3.0
Current liabilities 384 390 310 394 517 Assets/Equity (x) 1.2 1.2 1.2 1.1 1.1
Long-term debt - - - - - Interest cover (x) - - - - -
Other long term liabilities 0 0 0 0 0 Operating leverage 4.0% -72.1% -26.2% 355.3% 307.6%
Total liabilities 384 390 310 394 517 Tax rate 33.8% 34.2% 36.1% 35.2% 35.0%
.
Shareholders' equity 1,870 2,131 2,361 3,041 4,951 Revenue y/y Growth 35.1% 31.9% 31.9% 53.9% 58.5%
Minority interests - - - - - EBITDA y/y Growth 6.2% -14.1% 3.8% 140.7% 153.1%
Total liabilities & equity 2,254 2,521 2,671 3,435 5,468 EPS y/y growth 2.7% -21.9% -11.6% 195.7% 180.9%
.
BVPS 83.95 95.71 106.05 136.63 222.54 Valuation 2019/3A 2020/3A 2021/3E 2022/3E 2023/3E
y/y Growth 21.8% 14.0% 10.8% 28.8% 62.9% P/E (x) 661.9 847.5 959.0 324.4 115.5
P/BV (x) 118.2 103.7 93.5 72.6 44.6
Net debt/(cash) (1,214) (1,004) (1,149) (1,432) (2,730) EV/EBITDA (x) NM NM NM NM NM
Dividend Yield 0.0% 0.0% 0.0% 0.0% 0.0%
.
Source: Company data and J.P. Morgan estimates
Note: ¥ in millions (except per-share data).Fiscal year ends Mar. o/w - out of which
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RAKUS (3923)
Neutral
Resuming Aggressive Investment in FY2021, but Relatively
3923.T,3923 JP Reassuring
Price (15 Jan 21): ¥1,983
 Share-price downside relatively limited: We think further upside for the shares
▲ Price Target (Dec-21): ¥2,000 will require confirmation of further acceleration in topline growth in the cloud
Prior (Dec-20): ¥750
business, but FY2020’s sharp pullback in investment makes this unlikely for the
Japan near term in our view. Longer term, however, we think downside risk looks
Internet, Telecom , Games relatively limited despite excessive valuations for the subsector at large given
Haruka Mori AC rising expectations for accelerated enterprise DX and company-specific factors
(81-3) 6736-8632 including (1) the strong competitiveness of Raku Raku Seisan and other core
services, (2) the company’s proven ability to generate profits (=investment
Bloomberg JPMA MORI <GO>
capacity), and (3) management’s firm commitment to maintaining a high rate of
JPMorgan Securities Japan Co., Ltd.
growth (i.e., its plans to resume aggressive investment from FY2021). We have
Key Changes (FYE Mar) underestimated all three of these strengths and now raise our longer-term
Prev Cur forecasts by a substantial amount. We also raise our price target to ¥2,000 to
Revenue - 21E (¥ mn) 14,630 15,210 reflect the revised estimates and a change in some of our assumptions.
Revenue - 22E (¥ mn) 18,030 19,330
 Sharp profit decline in FY2021 could conversely drive expectations for
Style Exposure topline growth: We forecast sales of ¥15.2 billion (+31% YoY) in FY2020 and
¥19.3 billion (+27% YoY) in FY2021, with three-year CAGR from FY2020 of
+26% and five-year CAGR of +24%. We likewise forecast cloud-business sales
of ¥12.2 billion (+36% YoY) in FY2020 and ¥15.9 billion (+30% YoY) in
FY2021, with three-year CAGR of +28% and five-year CAGR of +26%, and
companywide operating profit of ¥3.8 billion (3.2x YoY) in FY2020 and ¥2
billion (-47% YoY) in FY2021, with three-year CAGR of +15% and five-year
CAGR of +26%. The company has designated FY2020 as a year of profit
Sources for: Style Exposure – J.P. Morgan Quantitative and
generation and looks likely to achieve sharply higher profits on the back of cost
Derivatives Strategy; all other tables are company data and controlcentered on advertising and promotional spending. Management plans to
J.P. Morgan estimates. resume aggressive investment from FY2021, however, and we think the topline
outlook hinges in part on the degree of investment in staffing and marketing.
However, we think FY2020’s pullback in investment is likely to limit topline
growth in 1H FY2021.
 Raku Raku Seisan has proven competitiveness: The company’s main target
here is SMEs with 50 to 1,000 employees, and its proven competitiveness in this
segment has us confident of stable growth going forward. The pace of growth
will depend largely on the degree to which marketing resources are allocated to
the business, but management has indicated plans to resume strengthening
staffing and sales channel expansion (direct sales currently account for 60% of
the total) from FY2021, and we expect adoption to accelerate (Figure 20). We
also focus on use by government organizations including smaller municipalities
as a new source of potential.
 Raku Raku Meisai seeing accelerated uptake: The Raku Raku Meisai service
is focused mainly on invoicing, and while it has numerous competitors, we see a
key strength in its combination of digital and analog functionality (documents can
also be sent by postal mail) that enables the user to adjust the pace of DX.
Adoption momentum is currently accelerating, and with demand rising, we think
growth could speed up as the company makes progress in expanding its sales
partners (dealers currently account for just 20% of total sales). Figure 21 shows
our detailed forecasts.
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(81-3) 6736-8632
 Raku Raku Romu starting to see gradual adoption: The company is making
gradual progress in selling its new Raku Raku Romu service (personnel/labor
management), but functionality remains short of competitors’. However, it is also
clear what functions need to be added, and we see no indications of any trial-and-
error struggles. We continue to watch the service as a potential growth driver
given the Raku Raku series’ brand strength and the company’s marketing
capabilities.
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Price Performance Summary Investment Thesis and Valuation

Investment Thesis
For the longer term, we think downside risk looks relatively
limited despite excessive valuations for the subsector at large
in view of rising expectations for accelerated enterprise DX
and company-specific factors including (1) the strong
competitiveness of Raku Raku Seisan and other core services,
(2) the company’s proven ability to generate profits
(=investment capacity), and (3) management’s firm
commitment to maintaining a high rate of growth (i.e., its
YTD 1m 3m 12m plans to resume aggressive investment from FY2021).
Abs -17.1% -10.6% -8.3% 108.8%
Rel -20.0% -14.8% -22.1% 101.5%
Valuation
Company Data We set our DCF-based price target through December 2021
Shares O/S (mn) 181 at ¥2,000. Our DCF assumptions are a risk-free rate of 0.5%,
52-week range (¥) 2,670-551
Market cap ($ bn) 3.5
a market risk premium of 6.5%, beta of 1.0 and a terminal
Exchange rate 103.80 growth rate of 2.5%. Based on our FY2024 forecast, our price
Free float(%) 37.0% target equates to an EV/sales multiple of 9.5x, P/E of 60x and
3M - Avg daily vol (mn) 1.74 EV/EBITDA of 38x.
3M - Avg daily val ($ mn) 38.1
Volatility (90 Day) 65
Index TOPIX Performance Drivers
BBG BUY|HOLD|SELL 4|3|0
Key Metrics (FYE Mar)

¥ in millions 2020/3A 2021/3E 2022/3E 2023/3E
Financial Estimates
Revenue 11,608 15,210 19,330 24,530
EBITDA 1,558 4,214 2,474 3,831
EBIT 1,174 3,780 1,990 3,310
Net income 800 2,610 1,390 2,320
Reported EPS 4.41 14.40 7.67 12.80
BBG EPS 3.88 14.52 14.12 19.88
Cashflow from operations 1,607 3,295 2,399 3,504
FCFF 232 2,236 755 1,547
Margins and Growth
Revenue growth 32.8% 31.0% 27.1% 26.9%
EBIT margin 10.1% 24.9% 10.3% 13.5%
EBIT Growth -20.0% 221.8% -47.4% 66.3%
EBITDA margin 13.4% 27.7% 12.8% 15.6%
EBITDA growth -13.6% 170.4% -41.3% 54.9%
Net margin 6.9% 17.2% 7.2% 9.5%
Fully Diluted EPS growth -21.5% 226.4% -46.7% 66.9%
Ratios
Effective Tax Rate 31.6% 31.0% 30.2% 29.9%
Interest cover - - - -
Net debt/Equity NM NM NM NM
Net debt/EBITDA NM NM NM NM
ROE 16.3% 41.1% 17.5% 25.1%
Valuation
FCFF yield 0.1% 0.6% 0.2% 0.4%
Dividend yield 0.1% 0.1% 0.1% 0.2%
EV/Revenue NM NM NM NM
EV/EBITDA NM NM NM NM
P/E 449.4 137.7 258.5 154.9
Source: J.P. Morgan Quantitative and Derivatives Strategy for Performance Drivers; company data, Bloomberg Finance L.P. and J.P. Morgan estimates for all other tables.
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Figure 19: Rakus: J.P. Morgan Estimates

¥ million, ¥, x
Sales yoy GP yoy OP yoy NP yoy EPS P/E
20/3 11,608 32.8% 7,662 33.2% 1,174 -20.0% 800 -21.5% 4.4 471.2
21/3E (new) 15,210 31.0% 10,002 30.5% 3,780 221.8% 2,610 226.4% 14.4 144.3
21/3E (old) 14,630 26.0% 9,760 27.4% 2,750 134.1% 1,900 137.6% 21.0 99.2
21/3CoE 15,119 30.2% - - 3,604 206.9% 2,720 240.2% 15.0 138.5
22/3E (new) 19,330 27.1% 12,402 24.0% 1,990 -47.4% 1,390 -46.7% 7.7 271.0
22/3E (old) 18,030 23.2% 12,240 25.4% 3,920 42.5% 2,700 42.1% 29.8 69.8
23/3E (new) 24,530 26.9% 15,672 26.4% 3,310 66.3% 2,320 66.9% 12.8 162.4
23/3E (old) 21,600 19.8% 14,900 21.7% 5,460 39.3% 3,770 39.6% 41.6 50.0
24/3E (new) 30,380 23.8% 19,492 24.4% 5,730 73.1% 4,010 72.8% 22.1 94.0
24/3E (old) 25,380 17.5% 17,740 19.1% 7,260 33.0% 5,010 32.9% 55.3 37.6
25/3E (new) 36,870 21.4% 23,782 22.0% 8,620 50.4% 6,030 50.4% 33.3 62.5
25/3E (old) 29,410 15.9% 20,810 17.3% 9,210 26.9% 6,350 26.7% 70.1 29.7
26/3E (new) 43,810 18.8% 28,642 20.4% 11,950 38.6% 8,360 38.6% 46.1 45.1
26/3E (old) 33,670 14.5% 24,150 16.0% 11,380 23.6% 7,850 23.6% 86.7 24.0
27/3E (new) 51,550 17.7% 34,332 19.9% 16,690 39.7% 11,680 39.7% 64.5 32.3
27/3E (old) 38,150 13.3% 27,600 14.3% 13,900 22.1% 9,590 22.2% 105.9 19.6
28/3E (new) 60,380 17.1% 41,012 19.5% 21,080 26.3% 14,760 26.4% 81.5 25.5
28/3E (old) 42,970 12.6% 31,470 14.0% 16,510 18.8% 11,390 18.8% 125.7 16.5
29/3E (new) 70,350 16.5% 48,872 19.2% 26,920 27.7% 18,840 27.6% 104.0 20.0
29/3E (old) 48,120 12.0% 35,570 13.0% 19,340 17.1% 13,340 17.1% 147.3 14.1
30/3E (new) 81,530 15.9% 57,572 17.8% 33,760 25.4% 23,630 25.4% 130.4 15.9
Note: Price as of Jan 14.
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Figure 20: 10 year estimates for Raku Raku Seisan

¥million
3/18 3/19 3/20 3/21E 3/22E 3/23E 3/24E 3/25E 3/26E 3/27E 3/28E 3/29E 3/30E
Sales of Raku Raku Seisan 1,601 2,579 3,935 5,520 7,350 9,430 11,980 14,800 17,840 21,040 24,500 28,230 32,210
YoY% 63.7 61.1 52.6 40.3 33.2 28.3 27.0 23.5 20.5 17.9 16.4 15.2 14.1
Number of paying companies
3,027 4,382 6,086 7,887 9,887 12,387 15,287 18,487 21,987 25,787 29,887 34,287 38,987
at year-end
YoY% 54.7 44.8 38.9 29.6 25.4 25.3 23.4 20.9 18.9 17.3 15.9 14.7 13.7
YoY(company) 1,070 1,355 1,704 1,801 2,000 2,500 2,900 3,200 3,500 3,800 4,100 4,400 4,700
Number of companies using at
2,640 3,650 5,069 6,567 8,198 10,240 12,576 15,097 17,795 20,662 23,693 26,882 30,223
year-end (estimates)
YoY% 62.4 38.3 38.9 29.6 24.8 24.9 22.8 20.0 17.9 16.1 14.7 13.5 12.4
YoY(company) 1,015 1,010 1,418 1,498 1,631 2,042 2,337 2,521 2,698 2,868 3,031 3,189 3,341
ARPU (yen, estimates) 60,062 64,937 69,712 74,219 78,600 81,000 83,600 85,700 87,400 88,500 89,700 90,900 92,100
YoY% 8.1 7.4 6.5 5.9 3.1 3.2 2.5 2.0 1.3 1.4 1.3 1.3
OP of Raku Raku Seisan 48 309 390 1,760 540 1,150 2,470 4,140 6,220 8,470 10,980 13,760 16,840
OPM% 3% 12% 10% 32% 7% 12% 21% 28% 35% 40% 45% 49% 52%
Source:: Company data, J.P. Morgan estimates
Figure 21: 10 year estimates for Raku Raku Meisai

¥million
3/18 3/19 3/20 3/21E 3/22E 3/23E 3/24E 3/25E 3/26E 3/27E 3/28E 3/29E 3/30E
Sales of Raku Raku Meisai 150 326 552 1,160 2,190 3,650 5,600 7,970 10,680 13,790 17,320 21,270 25,680
YoY% 114.3 117.3 69.3 110.1 88.8 66.7 53.4 42.3 34.0 29.1 25.6 22.8 20.7
Number of paid companies
as of year-end 363 629 1,190 2,212 3,712 5,912 8,612 11,812 15,512 19,712 24,412 29,612 35,312
YoY% 73.3 89.2 85.9 67.8 59.3 45.7 37.2 31.3 27.1 23.8 21.3 19.2
YoY(company) 363 266 561 1,022 1,500 2,200 2,700 3,200 3,700 4,200 4,700 5,200 5,700
Number of companies using
as of year-end (estimates) 336 558 1,046 2,020 3,411 5,391 7,762 10,506 13,603 17,037 20,791 24,850 29,199
YoY% 66.2 87.3 93.1 68.9 58.0 44.0 35.3 29.5 25.2 22.0 19.5 17.5
YoY(company) 336 223 488 974 1,391 1,980 2,371 2,743 3,097 3,434 3,754 4,059 4,349
ARPU (yen, estimates) 48,111 57,710 55,632 60,291 65,424 68,024 70,824 73,224 74,724 76,224 77,824 79,424 81,124
YoY% 20.0 -3.6 8.4 8.5 4.0 4.1 3.4 2.0 2.0 2.1 2.1 2.1
OP of Raku Raku Meisai -53 -78 -250 110 -570 -390 180 1,050 2,110 3,820 6,090 8,660 11,550
OPM% -35% -24% -45% 9% -26% -11% 3% 13% 20% 28% 35% 41% 45%
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Figure22: RAKUS: Yearly PL

¥million
3/18 3/19 3/20 3/21E 3/22E 3/23E 3/24E 3/25E 3/26E 3/27E 3/28E 3/29E 3/30E 3/21CE
Sales 6,409 8,743 11,608 15,210 19,330 24,530 30,380 36,870 43,810 51,550 60,380 70,350 81,530 15,119
Cost of Goods Sold 2,285 2,989 3,946 5,208 6,928 8,858 10,888 13,088 15,168 17,218 19,368 21,478 23,958
Gross Profit 4,124 5,754 7,662 10,002 12,402 15,672 19,492 23,782 28,642 34,332 41,012 48,872 57,572
SG&A 2,883 4,285 6,488 6,222 10,412 12,362 13,762 15,162 16,692 17,642 19,932 21,952 23,812
Operating Costs 5,168 7,275 10,434 11,430 17,340 21,220 24,650 28,250 31,860 34,860 39,300 43,430 47,770
Personnel Cost 3,230 4,254 5,973 7,800 9,100 10,600 11,800 12,900 13,800 14,700 15,500 16,400 17,200
Advertising Costs 790 1,269 2,252 950 3,990 4,910 5,490 5,840 6,270 6,470 6,430 6,550 6,390
Other 1,148 1,752 2,209 2,680 4,250 5,710 7,360 9,510 11,790 13,690 17,370 20,480 24,180
Operating profits 1,241 1,469 1,174 3,780 1,990 3,310 5,730 8,620 11,950 16,690 21,080 26,920 33,760 3,604
Non-Operating Income 7 6 3 0 0 0 0 0 0 0 0 0 0
Non-Operating Expense 0 0 0 0 0 0 0 0 0 0 0 0 0
Recurring profits 1,248 1,474 1,177 3,780 1,990 3,310 5,730 8,620 11,950 16,690 21,080 26,920 33,760 3,617
Extraordinary income 0 0 0 0 0 0 0 0 0 0 0 0 0
Extraordinary losses 1 0 8 0 0 0 0 0 0 0 0 0 0
Pretax profits 1,247 1,474 1,169 3,780 1,990 3,310 5,730 8,620 11,950 16,690 21,080 26,920 33,760 3,617
Taxes 372 456 370 1,170 600 990 1,720 2,590 3,590 5,010 6,320 8,080 10,130
Net profits 875 1,019 800 2,610 1,390 2,320 4,010 6,030 8,360 11,680 14,760 18,840 23,630 2,720
EBITDA 1,357 1,809 1,561 4,214 2,474 3,831 6,240 9,180 12,533 17,236 21,726 27,666 33,760
EPS (¥) 4.8 5.6 4.4 14.4 7.7 12.8 22.1 33.3 46.1 64.5 81.5 104.0 130.4 15.0
DPS (¥) 1.5 2.2 1.6 1.7 2.7 3.7 4.7 5.7 6.7 7.7 8.7 9.7 10.7
CFPS (¥) 5.3 6.6 5.6 15.9 9.4 14.8 24.0 35.5 48.6 67.5 85.0 108.1 135.1
BPS (¥) 20.5 25.3 28.7 41.4 46.4 55.6 73.1 100.7 140.2 197.0 269.8 364.1 483.8
% YoY
Sales 29.9 36.4 32.8 31.0 27.1 26.9 23.8 21.4 18.8 17.7 17.1 16.5 15.9 30.2
Operating profit 27.2 18.3 -20.0 221.8 -47.4 66.3 73.1 50.4 38.6 39.7 26.3 27.7 25.4 206.9
Recurring profit 28.3 18.2 -20.1 221.0 -47.4 66.3 73.1 50.4 38.6 39.7 26.3 27.7 25.4 207.2
Net profit 19.6 16.4 -21.5 226.4 -46.7 66.9 72.8 50.4 38.6 39.7 26.4 27.6 25.4 240.2
% of sales
Operating Costs 80.6 83.2 89.9 75.1 89.7 86.5 81.1 76.6 72.7 67.6 65.1 61.7 58.6
Personnel Cost 50.4 48.7 51.5 51.3 47.1 43.2 38.8 35.0 31.5 28.5 25.7 23.3 21.1
Advertising Costs 12.3 14.5 19.4 6.2 20.6 20.0 18.1 15.8 14.3 12.6 10.6 9.3 7.8
Operating profits 19.4 16.8 10.1 24.9 10.3 13.5 18.9 23.4 27.3 32.4 34.9 38.3 41.4 23.8
Recurring profits 19.5 16.9 10.1 24.9 10.3 13.5 18.9 23.4 27.3 32.4 34.9 38.3 41.4 23.9
Net profits 13.7 11.6 6.9 17.2 7.2 9.5 13.2 16.4 19.1 22.7 24.4 26.8 29.0 18.0
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Figure23: RAKUS: Segment Sales

¥million
3/18 3/19 3/20 3/21E 3/22E 3/23E 3/24E 3/25E 3/26E 3/27E 3/28E 3/29E 3/30E
[Segment sales]
Cloud Business 4,748 6,726 8,952 12,200 15,880 20,330 25,760 31,870 38,540 46,130 54,810 64,640 75,670
%YoY 36.0% 41.7% 33.1% 36.3% 30.2% 28.0% 26.7% 23.7% 20.9% 19.7% 18.8% 17.9% 17.1%
Subscription Sales 4,412 6,182 8,206
Sales Ratio 92.9% 91.9% 91.7%
Initial Costs 336 544 746
Raku Raku Seisan (Cloud + On-
1,601 2,579 3,935 5,520 7,350 9,430 11,980 14,800 17,840 21,040 24,500 28,230 32,210
premises)
%YoY 63.7% 61.1% 52.6% 40.3% 33.2% 28.3% 27.0% 23.5% 20.5% 17.9% 16.4% 15.2% 14.1%
Raku Raku Seisan (Cloud only) 1,596 2,576 - - - - - - - - - - -
%YoY 64.9% 61.4% - - - - - - - - - - -
Number of paying companies at
3,027 4,382 6,086 7,887 9,887 12,387 15,287 18,487 21,987 25,787 29,887 34,287 38,987
year-end
%YoY 54.7% 44.8% 38.9% 29.6% 25.4% 25.3% 23.4% 20.9% 18.9% 17.3% 15.9% 14.7% 13.7%
YoY 1,070 1,355 1,704 1,801 2,000 2,500 2,900 3,200 3,500 3,800 4,100 4,400 4,700
Mail Dealer (Cloud + On-premises) 1,339 1,538 1,733 2,020 2,170 2,300 2,420 2,490 2,540 2,600 2,650 2,710 2,770
%YoY 17.4% 14.9% 12.7% 16.6% 7.4% 6.0% 5.2% 2.9% 2.0% 2.4% 1.9% 2.3% 2.2%
Mail Dealer (Cloud only) 1,307 1,505 - - - - - - - - - - -
%YoY 18.0% 15.1% - - - - - - - - - - -
Email Distribution 939 1,410 1,574 1,910 2,020 2,080 2,110 2,110 2,110 2,120 2,120 2,140 2,150
%YoY 42.9% 50.2% 11.6% 21.3% 5.8% 3.0% 1.4% 0.0% 0.0% 0.5% 0.0% 0.9% 0.5%
Email Distribution (exc. Blastmail) 835 921 1,022 1,250 1,330 1,370 1,370 1,370 1,370 1,380 1,380 1,400 1,410
%YoY 27.1% 10.3% 10.9% 22.3% 6.4% 3.0% 0.0% 0.0% 0.0% 0.7% 0.0% 1.4% 0.7%
Effect of Blastmail 104 489 550 660 693 714 735 735 735 735 735 735 735
%YoY 369.9% 12.5% 20.0% 5.0% 3.0% 3.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Hataraku DB 445 598 867 1,270 1,790 2,410 3,070 3,700 4,300 4,850 5,400 5,950 6,500
%YoY 29.7% 34.4% 45.0% 46.5% 40.9% 34.6% 27.4% 20.5% 16.2% 12.8% 11.3% 10.2% 9.2%
Raku Raku Meisai 150 326 552 1,160 2,190 3,650 5,600 7,970 10,680 13,790 17,320 21,270 25,680
%YoY 114.3% 117.3% 69.3% 110.1% 88.8% 66.7% 53.4% 42.3% 34.0% 29.1% 25.6% 22.8% 20.7%
Other 274 275 291 320 360 460 580 800 1,070 1,730 2,820 4,340 6,360
%YoY -9.2% 0.3% 5.9% 9.9% 12.5% 27.8% 26.1% 37.9% 33.8% 61.7% 63.0% 53.9% 46.5%
IT outsourcing business 1,661 2,035 2,679 3,040 3,490 4,250 4,680 5,070 5,350 5,510 5,670 5,820 5,980
%YoY 15.2% 22.6% 31.6% 13.5% 14.8% 21.8% 10.1% 8.3% 5.5% 3.0% 2.9% 2.6% 2.7%
Adjustment 0 -18 -23 -30 -40 -50 -60 -70 -80 -90 -100 -110 -120
Total sales 6,409 8,743 11,610 15,210 19,330 24,530 30,380 36,870 43,810 51,550 60,380 70,350 81,530
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Figure24: RAKUS: Quarterly PL

¥million
3/20 3/21
Sales 2,591 2,800 5,391 3,017 3,200 6,217 3,460 3,614 7,074 3,930 4,210 8,140
Cost of Goods Sold 864 968 1,831 1,015 1,100 2,114 1,149 1,255 2,404 1,350 1,450 2,800
Gross Profit 1,727 1,832 3,560 2,003 2,100 4,103 2,311 2,360 4,670 2,580 2,760 5,340
SG&A 1,218 1,665 2,883 1,765 1,840 3,604 1,402 1,564 2,965 1,600 1,650 3,250
Operating Costs 2,082 2,633 4,715 2,779 2,939 5,719 2,551 2,819 5,369 2,950 3,100 6,050
Personnel Cost 1,347 1,430 2,777 1,525 1,671 3,196 1,770 1,912 3,682 2,000 2,100 4,100
Advertising Costs 248 644 892 693 667 1,360 198 252 450 300 300 600
Other 487 559 1,046 561 601 1,163 583 655 1,237 650 700 1,350
Operating profits 509 167 676 238 260 498 909 796 1,705 980 1,110 2,090
Non-Operating Income 0 2 3 0 1 1 8 3 11 0 0 0
Non-Operating Expense 0 1 1 0 -1 0 1 0 1 0 0 0
Recurring profits 509 169 678 238 262 499 916 798 1,714 980 1,110 2,090
Pretax profits 509 169 678 230 262 491 916 1,008 1,924 980 1,110 2,090
Taxes 174 70 244 92 33 125 300 324 624 300 390 690
Net profits 335 99 434 137 228 366 616 684 1,300 680 720 1,400
% YoY
Sales 30.4 34.1 32.3 33.8 32.6 33.2 33.5 29.1 31.2 30.2 31.6 30.9
Operating profit 9.7 -22.3 -0.4 -57.4 12.8 -36.9 78.5 376.7 152.2 311.6 326.5 319.4
Recurring profit 9.6 -22.5 -0.6 -57.6 12.8 -37.0 79.8 373.3 152.8 312.4 324.1 318.5
Net profit 12.3 -32.0 -2.2 -63.0 12.1 -36.4 83.8 594.1 199.7 395.0 215.2 282.7
% of sales
Operating Costs 80.3 94.0 87.5 92.1 91.9 92.0 73.7 78.0 75.9 75.1 73.6 74.3
Personnel Cost 52.0 51.1 51.5 50.5 52.2 51.4 51.2 52.9 52.0 50.9 49.9 50.4
Advertising Costs 9.6 23.0 16.5 23.0 20.8 21.9 5.7 7.0 6.4 7.6 7.1 7.4
Operating profits 19.7 6.0 12.5 7.9 8.1 8.0 26.3 22.0 24.1 24.9 26.4 25.7
Recurring profits 19.7 6.0 12.6 7.9 8.2 8.0 26.5 22.1 24.2 24.9 26.4 25.7
Net profits 12.9 3.5 8.0 4.6 7.1 5.9 17.8 18.9 18.4 17.3 17.1 17.2
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Figure25: RAKUS: Quarterly Segment Sales

¥million
3/20 3/21
[Segment sales]
Cloud Business 1,991 2,160 4,151 2,306 2,495 4,801 2,689 2,916 5,605 3,150 3,440 6,590
%YoY 31.6% 34.4% 33.1% 33.3% 32.9% 33.1% 35.1% 35.0% 35.0% 36.6% 37.9% 37.3%
Subscription Sales 1,838 1,968 3,806 2,112 2,288 2,474 2,674 5,148
Sales Ratio 92.3% 91.1% 91.7% 91.6% 91.7% 92.0% 91.7% 91.8%
Initial Costs 153 192 346 194 207 215 242 457 3,150
Raku Raku Seisan (Cloud + On-
843 954 1,797 1,017 1,117 2,134 1,204 1,320 2,524 1,430 1,560 2,990
premises)
%YoY 55.5% 59.0% 57.4% 50.9% 46.8% 48.7% 42.8% 38.4% 40.5% 40.6% 39.7% 40.1%
Raku Raku Seisan (Cloud only) 843 954 1,797 - - - - - - - - -
%YoY 55.8% 59.0% 57.5% - - - - - - - - -
Paying companies at year-end 4,677 5,122 - 5,560 6,086 - 6,366 6,837 - 7,317 7,887 -
%YoY 43.3% 42.2% - 40.6% 38.9% - 36.1% 33.5% - 31.6% 29.6% -
YoY 1,414 1,519 - 1,606 1,704 - 1,689 1,715 - 1,757 1,801 -
QoQ 295 445 - 438 526 - 280 471 - 470 550 -
Mail Dealer (Cloud + On-premises) 413 424 837 436 458 890 469 487 956 510 560 1,070
%YoY 13.2% 13.4% 13.3% 9.8% 14.5% 11.7% 13.6% 14.9% 14.2% 17.0% 22.3% 20.2%
Mail Dealer (Cloud only) 407 420 827 - - - - - - - - -
%YoY 13.4% 13.8% 13.6% - - - - - - - - -
Email Distribution 367 378 745 398 429 830 445 467 912 480 510 990
%YoY 7.9% 9.6% 8.8% 15.0% 14.1% 15.0% 21.3% 23.5% 22.4% 20.6% 18.9% 19.3%
Email Distribution (exc. Blastmail) 238 247 - 261 275 - 295 305 - 317 330 -
%YoY 6.1% 8.2% - 14.4% 16.2% - 23.5% 23.4% - 21.3% 19.9% -
Effect of Blastmail 129 131 - 137 154 - 150 162 - 164 185 -
%YoY 11.6% 12.3% 0.0% 16.2% 10.4% - 17.0% 23.9% 0.0% 20.0% 20.0% -
Hataraku DB 189 203 392 228 247 475 275 300 575 330 360 690
%YoY 46.5% 44.0% 45.2% 48.1% 44.4% 46.2% 45.5% 47.8% 46.7% 44.7% 45.7% 45.3%
Raku Raku Meisai 106 126 232 150 169 319 213 258 471 320 370 690
%YoY 60.6% 65.8% 63.4% 72.4% 76.0% 74.3% 100.9% 104.8% 103.0% 113.3% 118.9% 116.3%
Other 73 75 148 73 75 153 80 82 162 80 80 160
%YoY 3.7% 5.5% 4.6% 2.4% 2.8% 6.0% 9.7% 9.0% 9.3% 9.6% 6.7% 4.6%
IT outsourcing business 604 644 1,248 719 711 1,430 771 720 1,490 780 770 1,550
%YoY 26.6% 32.5% 29.6% 35.5% 31.4% 33.4% 27.5% 11.7% 19.4% 8.5% 8.2% 8.4%
Adjustment -4 -4 -9 -7 -7 -14 0 -21 -21 -5 -5 -10
Total sales 2,591 2,800 5,391 3,017 3,200 6,217 3,460 3,614 7,074 3,930 4,210 8,140
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Figure26: RAKUS: BS and CF

¥million
3/18 3/19 3/20 3/21E 3/22E 3/23E 3/24E 3/25E 3/26E 3/27E 3/28E 3/29E 3/30E
[Balance sheet]
Current assets 2,803 3,669 4,413 7,305 8,776 11,170 15,128 21,039 29,153 40,458 54,896 73,473 96,814
Cash and deposits 1,719 2,236 2,496 5,117 5,995 7,640 10,757 15,734 22,850 33,042 46,209 63,351 85,084
Accounts receivable 966 1,263 1,687 1,938 2,463 3,126 3,872 4,699 5,583 6,569 7,695 8,965 10,390
Other 117 170 231 250 318 403 499 606 720 848 993 1,157 1,340
Fixed assets 2,427 2,474 2,626 2,748 2,857 2,968 3,128 3,279 3,447 3,695 3,885 4,021 4,198
Tangible assets 201 322 619 898 1,157 1,396 1,614 1,813 1,992 2,100 2,139 2,108 2,128
Intangible assets 1,660 1,438 1,213 981 750 530 372 214 83 88 94 100 80
Investment and other
566 714 793 868 951 1,042 1,142 1,252 1,373 1,506 1,652 1,813 1,990
assets
Total assets 5,230 6,143 7,039 10,053 11,633 14,137 18,256 24,317 32,601 44,153 58,781 77,494 101,012
Current liabilities 1,418 1,436 1,774 2,477 3,147 3,992 4,944 5,999 7,128 8,386 9,822 11,443 13,261
Long-term liabilities 105 113 73 73 73 73 73 73 73 73 73 73 73
Total liabilities 1,523 1,549 1,847 2,550 3,220 4,065 5,017 6,072 7,200 8,459 9,895 11,516 13,334
Shareholder's equity 3,709 4,596 5,197 7,508 8,417 10,076 13,243 18,249 25,404 35,698 48,891 65,982 87,682
Total net assets 3,707 4,594 5,193 7,504 8,413 10,072 13,239 18,245 25,400 35,694 48,887 65,978 87,678
Total of liabilities and
5,230 6,143 7,039 10,053 11,633 14,137 18,256 24,317 32,601 44,153 58,781 77,494 101,012
net assets
Net debt -1,709 -2,236 -2,493 -5,114 -5,991 -7,637 -10,754 -15,731 -22,847 -33,038 -46,205 -63,348 -85,081
% of total assets
Current assets 53.6 59.7 62.7 72.7 75.4 79.0 82.9 86.5 89.4 91.6 93.4 94.8 95.8
Fixed assets 46.4 40.3 37.3 27.3 24.6 21.0 17.1 13.5 10.6 8.4 6.6 5.2 4.2
Current liabilities 27.1 23.4 25.2 24.6 27.1 28.2 27.1 24.7 21.9 19.0 16.7 14.8 13.1
Total shareholders'
70.9 74.8 73.8 74.7 72.4 71.3 72.5 75.0 77.9 80.9 83.2 85.1 86.8
equity
ROE(%) 26.4 24.5 16.3 41.1 17.5 25.1 34.4 38.3 38.3 38.2 34.9 32.8 30.8
ROA(%) 19.3 17.9 12.1 30.5 12.8 18.0 24.8 28.3 29.4 30.4 28.7 27.6 26.5
[Cash flow]
Net profits 875 1,019 800 2,610 1,390 2,320 4,010 6,030 8,360 11,680 14,760 18,840 23,630
Depreciation 82 171 220 270 320 358 346 396 446 546 646 746 846
Amortization of
27 164 164 164 164 164 164 164 136 0 0 0 0
Goodwill
Increase in working
246 297 424 252 525 663 746 827 884 986 1,125 1,271 1,425
capital
Capital expenditures 173 235 451 481 511 541 571 601 631 661 691 721 751
Financial balance 93 148 77 75 83 91 100 110 121 133 146 161 177
Free cash flow (FCF) 472 674 232 2,236 755 1,547 3,104 5,052 7,307 10,446 13,444 17,434 22,124
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Investment Thesis, Valuation and Risks

RAKUS Co., Ltd. (Neutral; Price Target: ¥2,000)
Investment Thesis
For the longer term, we think downside risk looks relatively limited despite excessive
valuations for the subsector at large given rising expectations for accelerated
enterprise DX and company-specific factors including (1) the strong competitiveness
of Raku Raku Seisan and other core services, (2) the company’s proven ability to
generate profits (=investment capacity), and (3) management’s firm commitment to
maintaining a high rate of growth (i.e., its plans to resume aggressive investment
from FY2021).
Valuation
We set our DCF-based price target through December 2021 at ¥2,000. Our DCF
assumptions are a risk-free rate of 0.5%, a market risk premium of 6.5%, beta of 1.0
and a terminal growth rate of 2.5%. Based on our FY2024 forecast, our price target
equates to an EV/sales multiple of 9.5x, P/E of 60x and EV/EBITDA of 38x.
Risks to Rating and Price Target

Upside Scenario to Target Price/Rating
 Stronger growth momentum at Raku Raku Seisan
 Faster growth at Raku Raku Meisai, which is expected to become a new growth
driver
 Faster-than-expected startup for Raku Raku HR
Downside Scenario to Target Price/Rating
 Slower growth momentum and weaker profitability at Raku Raku Seisan due to
more intense competition
 Stagnation at or unsuccessful mass advertising for Raku Raku Meisai, which is
expected to become a new growth driver
 Slower-than-expected market uptake of SaaS
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RAKUS (3923): Summary of Financials

Income Statement 2019/3A 2020/3A 2021/3E 2022/3E 2023/3E Cash Flow Statement 2019/3A 2020/3A 2021/3E 2022/3E 2023/3E
Revenue 8,743 11,608 15,210 19,330 24,530 Cash flow from operating activities 1,650 1,607 3,295 2,399 3,504
COGS (2,989) (3,946) (5,208) (6,928) (8,858) o/w Depreciation & amortization 335 384 434 484 521
Gross profit - - - - - o/w Changes in working capital 297 424 252 525 663
SG&A (4,285) (6,488) (6,222) (10,412) (12,362)
EBITDA 1,804 1,558 4,214 2,474 3,831 Cash flow from investing activities (235) (451) (481) (511) (541)
D&A (335) (384) (434) (484) (521) o/w Capital expenditure (235) (451) (481) (511) (541)
EBIT 1,469 1,174 3,780 1,990 3,310 as % of sales 2.7% 3.9% 3.2% 2.6% 2.2%
Net Interest - - - - -
PBT 1,474 1,169 3,780 1,990 3,310 Cash flow from financing activities (399) (290) (299) (480) (661)
Tax (456) (370) (1,170) (600) (990) o/w Dividends paid (399) (290) (299) (480) (661)
Minority Interest - - - - - o/w Shares issued/(repurchased) - - - - -
Net Income 1,019 800 2,610 1,390 2,320 o/w Net debt issued/(repaid) - - - - -
.
Reported EPS 5.62 4.41 14.40 7.67 12.80 Net change in cash 1,017 867 2,516 1,408 2,302
DPS 2.20 1.60 1.65 2.65 3.65 Adj. Free cash flow to firm 674 232 2,236 755 1,547
Payout ratio 39.1% 36.3% 11.5% 34.5% 28.5% y/y Growth 42.9% -65.7% 865.3% -66.2% 104.8%
Shares outstanding 181 181 181 181 181
.
Balance Sheet 2019/3A 2020/3A 2021/3E 2022/3E 2023/3E Ratio Analysis 2019/3A 2020/3A 2021/3E 2022/3E 2023/3E
Cash and cash equivalents 2,236 2,496 5,117 5,995 7,640 Gross margin - - - - -
Accounts receivable 1,263 1,687 1,938 2,463 3,126 EBITDA margin 20.6% 13.4% 27.7% 12.8% 15.6%
Inventories - - - - - EBIT margin 16.8% 10.1% 24.9% 10.3% 13.5%
Other current assets 170 231 250 318 403 Net profit margin 11.6% 6.9% 17.2% 7.2% 9.5%
Current assets 3,669 4,413 7,305 8,776 11,170
PP&E 322 619 898 1,157 1,396 ROE 24.5% 16.3% 41.1% 17.5% 25.1%
LT investments 714 793 868 951 1,042 ROA 17.9% 12.1% 30.5% 12.8% 18.0%
Other non current assets 1,438 1,213 981 750 530 ROCE 24.4% 16.5% 41.1% 17.5% 25.1%
Total assets 6,143 7,039 10,053 11,633 14,137 SG&A/Sales 49.0% 55.9% 40.9% 53.9% 50.4%
Net debt/Equity NM NM NM NM NM
Short term borrowings 0 3 3 3 3 Net debt/EBITDA NM NM NM NM NM
Payables 0 0 0 0 0
Other short term liabilities 1,436 1,770 2,473 3,143 3,989 Sales/Assets (x) 1.5 1.8 1.8 1.8 1.9
Current liabilities 1,436 1,774 2,477 3,147 3,992 Assets/Equity (x) 1.4 1.3 1.3 1.4 1.4
Long-term debt 0 0 0 0 0 Interest cover (x) - - - - -
Other long term liabilities 113 73 73 73 73 Operating leverage 50.4% -61.1% 714.9% -174.8% 246.6%
Total liabilities 1,549 1,847 2,550 3,220 4,065 Tax rate 30.9% 31.6% 31.0% 30.2% 29.9%
.
Shareholders' equity 4,596 5,197 7,508 8,417 10,076 Revenue y/y Growth 36.4% 32.8% 31.0% 27.1% 26.9%
Minority interests (3) (4) (4) (4) (4) EBITDA y/y Growth 33.6% -13.6% 170.4% -41.3% 54.9%
Total liabilities & equity 6,143 7,039 10,053 11,633 14,137 EPS y/y growth 16.4% -21.5% 226.4% -46.7% 66.9%
.
BVPS 25.35 28.65 41.41 46.43 55.58 Valuation 2019/3A 2020/3A 2021/3E 2022/3E 2023/3E
y/y Growth 23.9% 13.0% 44.5% 12.1% 19.7% P/E (x) 352.8 449.4 137.7 258.5 154.9
P/BV (x) 78.2 69.2 47.9 42.7 35.7
Net debt/(cash) (2,236) (2,493) (5,114) (5,991) (7,637) EV/EBITDA (x) NM NM NM NM NM
Dividend Yield 0.1% 0.1% 0.1% 0.1% 0.2%
.
Source: Company data and J.P. Morgan estimates
Note: ¥ in millions (except per-share data).Fiscal year ends Mar. o/w - out of which
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Analyst Certification: The Research Analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple Research
Analysts are primarily responsible for this report, the Research Analyst denoted by an “AC” on the cover or within the document
individually certifies, with respect to each security or issuer that the Research Analyst covers in this research) that: (1) all of the views
expressed in this report accurately reflect the Research Analyst’s personal views about any and all of the subject securities or issuers; 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 report. For all Korea-based Research Analysts listed on the front cover, if
applicable, they also certify, as per KOFIA requirements, that the Research Analyst’s analysis was made in good faith and that the views
reflect the Research Analyst’s own opinion, without undue influence or intervention.
All authors named within this report are Research Analysts unless otherwise specified. In Europe, Sector Specialists (Sales and Trading)
may be shown on this report as contacts but are not authors of the report or part of the Research Department.
Important Disclosures
 Market Maker/ Liquidity Provider: J.P. Morgan is a market maker and/or liquidity provider in the financial instruments of/related to
Bengo4.com (6027), RAKUS (3923).
 Debt Position: J.P. Morgan may hold a position in the debt securities of Bengo4.com (6027), RAKUS (3923), if any.
Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for
compendium reports and all J.P. Morgan–covered companies by visiting https://www.jpmm.com/research/disclosures, calling 1-800-477-
0406, or e-mailing research.disclosure.inquiries@jpmorgan.com with your request. J.P. Morgan’s Strategy, Technical, and Quantitative
Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-
0406 or e-mail research.disclosure.inquiries@jpmorgan.com.
Bengo4.com (6027) (6027.T, 6027 JP) Price Chart Date Rating Price (Y) Price Target
(Y)
02-Sep-19 OW 3825 6,000
25,806
22-Jul-20 OW 10270 12,000
21,505
17,204 OW Y6,000 OW Y12,000
Price(Y)
12,903
8,602
4,301
0
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan
18 18 18 18 19 19 19 19 20 20 20 20 21
Source: Bloomberg Finance L.P. and J.P. Morgan; price data adjusted for stock splits and dividends.
Initiated coverage Sep 02, 2019. All share prices are as of market close on the previous business day.
32
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RAKUS (3923) (3923.T, 3923 JP) Price Chart Date Rating Price (Y) Price Target
(Y)
02-Sep-19 N 765 750
4,296
3,580
2,864 N Y750
Price(Y)
2,148
1,432
716
0
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan
18 18 18 18 19 19 19 19 20 20 20 20 21
Source: Bloomberg Finance L.P. and J.P. Morgan; price data adjusted for stock splits and dividends.
Initiated coverage Sep 02, 2019. All share prices are as of market close on the previous business day.
The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire
period.
J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated
Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe:
J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if
applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy
reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a
recommendation or a rating. In our Asia (ex-Australia and ex-India) and U.K. small- and mid-cap equity research, each stock’s expected
total return is compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it
does not appear in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P.
Morgan’s research website, www.jpmorganmarkets.com.
Coverage Universe: Mori, Haruka: ASKUL (2678) (2678.T), Akatsuki (3932) (3932.T), BANDAI NAMCO Holdings (7832) (7832.T),
Bengo4.com (6027) (6027.T), CAPCOM (9697) (9697.T), CyberAgent (4751) (4751.T), DeNA (2432) (2432.T), Dentsu Group (4324)
(4324.T), Gree (3632) (3632.T), Hakuhodo DY Holdings (2433) (2433.T), KDDI Corp (9433) (9433.T), KONAMI HOLDINGS (9766)
(9766.T), Kakaku.com (2371) (2371.T), Mercari (4385) (4385.T), Nexon (3659) (3659.T), Nintendo (7974) (7974.T), Nippon Telegraph
& Telephone (9432) (9432.T), RAKUS (3923) (3923.T), Rakuten (4755) (4755.T), Recruit Holdings (6098) (6098.T), SQUARE ENIX
HOLDINGS (9684) (9684.T), Sega Sammy Holdings (6460) (6460.T), SoftBank (9434) (9434.T), SoftBank Group (9984) (9984.T), Z
Holdings (4689) (4689.T)
J.P. Morgan Equity Research Ratings Distribution, as of January 01, 2021

Overweight Neutral Underweight
(buy) (hold) (sell)
J.P. Morgan Global Equity Research Coverage 48% 39% 13%
IB clients* 53% 49% 35%
JPMS Equity Research Coverage 45% 40% 14%
IB clients* 78% 69% 51%
*Percentage of subject companies within each of the "buy," "hold" and "sell" categories for which J.P. Morgan has provided investment banking services
within the previous 12 months. Please note that the percentages might not add to 100% because of rounding.
For purposes only of FINRA ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating
category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above.
This information is current as of the end of the most recent calendar quarter.
33
(81-3) 6736-8632
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Completed 16 Jan 2021 01:36 AM JST Disseminated 16 Jan 2021 01:38 AM JST

Internet Sector: Updates On Two Saas Companies: Still Bullish On

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Asia Pacific Equity Research

near-term upside looks limited as FY2020’s sharp pullback in investment is

Figure 1: SaaS companies valuation

Source: Bloomberg Finance L.P.、J.P. Morgan estimates

Figure 3: Share price performance of domestic SaaS companies

Figure 4: 12 month forward EV/Sales of domestic SaaS companies

Figure 5: 12 month forward EV/Sales of US SaaS companies

12x Simple Average EV/Sales

Price Performance Summary Investment Thesis and Valuation

Key Metrics (FYE Mar)

Expect adoption to ramp as laws are changed

Figure 7: CloudSign evolution and major company user acquisition

Increased competition from GMO Agree bears watching near term

Figure 8: CloudSign and GMO e-Contract Service Agree comparison

Figure 13: Bengo4.com: J.P. Morgan Estimates

Figure 14: CloudSign assumptions

Figure15: Bengo4.com: Yearly PL

Figure16: Bengo4.com: Sales by Segment

Figure17: Bengo4.com: Quarterly PL

Figure18: Bengo4.com: Balance Sheet and Cash Flow

Investment Thesis, Valuation and Risks

Risks to Rating and Price Target

Bengo4.com (6027): Summary of Financials

Price Performance Summary Investment Thesis and Valuation

Key Metrics (FYE Mar)

Figure 19: Rakus: J.P. Morgan Estimates

Figure 20: 10 year estimates for Raku Raku Seisan

Figure 21: 10 year estimates for Raku Raku Meisai

Figure22: RAKUS: Yearly PL

Figure23: RAKUS: Segment Sales

Figure24: RAKUS: Quarterly PL

Figure25: RAKUS: Quarterly Segment Sales

Figure26: RAKUS: BS and CF

Investment Thesis, Valuation and Risks

Risks to Rating and Price Target

RAKUS (3923): Summary of Financials

17,204 OW Y6,000 OW Y12,000

J.P. Morgan Equity Research Ratings Distribution, as of January 01, 2021

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