EFTA01039437.pdf

From: "Jeffrey E." [email protected]> To: Richard Kahn Subject: Re: NINTENDO: 600 MILLION REASONS TO BUY ON WEAKNESS Date: Sun, 10 Jun 2018 13:37:55 +0000 we certinaly dont need paul to buy berkshire, goog amaz ? and getting advie from amanda nuts. and a sprcadshet of sectors nonsense. very disappointing . On Sun, Jun 10, 2018 at 5:06 AM Richard Kahn < > wrote: ok Richard Kahn HBRK Associates Inc. 575 Lexington Avenue, 4th Floor New York, NY 10022 tel fax cell On Jun 10, 2018, at 6:46 AM, Jeffrey E. leevacation@gnan> wrote: Ask Paul re Nicole ytd On Sun, Jun 10, 2018 at 3:14 AM Richard Kahn <I > wrote: Yes Richard Kahn HBRK Associates Inc. 575 Lexington Avenue 4th Floor New York NY 10022 Tel Fax Cell On Jun 10, 2018, at 12:58 AM, jeffrey E. <[email protected]> wrote: AMANDA???? On Sat, Jun 9, 2018 at 10:58 PM jeffrey E. [email protected]> wrote: Forwarded messa e From: Paul Barrett Date: Sat, Jun 9, 2018 at 9:40 PM Subject: FW: NINTENDO: 600 MILLION REASONS TO BUY ON WEAKNESS To: jeffrey E. lifsacalion@gmaiLcom> And from ML EFTA01039437 Paul Barrett Alpha Group Capital LLC 142 W 47th Street, 11th Floor, New York, NY 10019 (o) (c) From: Ens, Amanda < Sent: Monday, June 4, 2018 9:28 AM To: Paul Barrett < Subject: NINTENDO: 600 MILLION REASONS TO BUY ON WEAKNESS From Ant Imam on our Japan Sales desk ;2,cid:[email protected] EFTA01039438 BUY NINTENDO (PO Y70,000, +55%): POKEMON WILL BOOST SWITCH SALES We've been waiting a long time to see the shake out of those momentum investors crowded into this name and that has finally started to occur, the naysayers and boo birds are back! The Switch console sales momentum has clearly slowed, their new Labo game has not been impressive, and the coming E3 expo has a decent lineup of games but nothing earth shattering leading us to another potential reason to sell down the stock further as momentum seems fleeting. The stock has broken its 200 dma and should settle in nicely at a fairly strong support level of Y36,000 (or PER of 15.7x) which is an excellent re-entry level as some very important catalysts still lie ahead of us. Pokimon Go had 600 mn downloads globally what Nintendo does to convert even a small percentage of these users will have a profound impact on future earnings and the stock will resurrect itself. Newt taunt out this company's management ecperiegywali the stock now trading at 17.6x our FY3/19 EPS of Y2 291. <Key Upside Factors> • Rokemon Games and Switch Console Upside; do not lose sight of the Switch tablet being a mobile device. Between now and November's PokEmon launch what if Nintendo: 1. develops a new Switch tablet that has both a cellular connection and a camera function ? 2. unveils the true intended purpose of the Poke Ball ? 3. converges smartly those 600 mn smartphones users, a newly designed Switch tablet, and the Switch online portal ? • Significant Room for Digital Sales Upside: Digital sales in FY3/18 was only 17% vs over 50% among overseas game software companies. There is a plenty of room for its increase. We project download sales ratio will rise to 40% over the next 3 years. • Smart device revenue/Switch online: Nintendo is getting serious about smart device game business opportunities evidenced by the operation alliance with Cygames (which has the highest ratio of hits of any domestic mobile game developer). We are expecting related sales to grow to Y87.9bn (+123.6%) in FY3/19, Y127.2bn (+44.7%) in FY3/20 and Y219.6bn in FY3/21. Also, Switch online will be launched in Sep 2018. The earnings impact will be limited, we think it will be a source of stable earnings like PS+. EFTA01039439  id:137979694 Arif EFTA01039440 Nintendo (7974) Time to factor in earnings upside on rising demand from casual gamers; reiterate Buy Reiterate Rating: BUY PO: 70,000 JPY I Price: 42,400 JPY Equity 130 May 2018 Key takeaways • Keep $70,000 PO, Buy; plenty of room to price in positive news • Casual gamer demand from Smash Bros. and Pokemon will drive consensus-beating growth • Focus on new title announcements at E3, initial sales trends for Mario Tennis Aces, Dragalia Lost FULL REPORT Keep Y70,000 PO, Buy; plenty of room to price in positive news Ahead of the E3 game show next month, we revise our estimates after reviewing FY3/18 results but leave our PO unchanged at (still based on a cash-adjusted PIE of 21x on our FY3/20 FY3/20 EPS estimate). Nintendo's share price has corrected owing to the weak data point after FY3/18 results. We, however, continue to see solid potential for sustained earnings growth, driven by the release of in-house developed titles such as Super Smash Bros. and Pokemon, a robust pipeline of titles from third-party developers in the US and Europe, and digital sales growth. Nintendo's shares look undervalued relative to its global peers, and with valuations looking increasingly attractive, we reiterate our Buy rating. Casual gamer demand to drive consensus-beating growth We make modest upward revisions to our OP estimates for FY3/19 from ¥366.4bn to ¥368.9bn (consensus ¥298.2bn) and for FY3/20 from ¥468.3bn to ¥470.4bn (4389.7bn). The revisions largely reflect our expectation of an improvement in Switch margins, thanks to growth in digital sales. In our view, the consensus outlook fails to sufficiently factor in the impact of digital sales, as well as to fully reflect the potential boost to hardware sales from the release of Nintendo IP titles (such as Mario Tennis Aces) or third-party titles. Our Switch hardware shipment assumptions are unchanged, at 26mn units for FY3/19 and 33mn units for FY3/20. Focus on new titles at E3, Mario Tennis Aces Potential catalysts include (1) positive feedback from this years E3 (12-14 June) for titles such as Super Smash Bros., (2) announcements on new titles for launch in FY3/19 and beyond (12 June), (3) initial sales for Mario Tennis Aces (scheduled launch 22 June) and (4) the launch of mobile game Dragalia Lost. Clear signs of tight demand for the Switch console could lead to heightened expectations that Nintendo will eventually raise guidance. Longer-term focus points include updates from Nintendo regarding the China business, as well as theme park and movie-related initiatives. EFTA01039441 Contents Maintain PO at ¥7O 000, reiterate Buy Reiterate Buy amid sluggish share-price performance 31I1S hardware guidance- is a new handheld on horizon'? Key for Switch's second year: Capturing casual gamer demand Prospects for monetizing smart-device games Siggiannuoom for digital sales ratio to rise Potential catalysts: E3 Mario Tennis Aces new smart-device game apps As 3DS slows hopes turn to introduction of strong new portable hardware platform Activity among existing users waning 'DS launch li0s performance but sustainability in doubt Awaiting release of next-generation handheld $witch: Reaching trend followers could pose a challenge in its second ysar )3risk start to the first fiscal year Differences between Switch and Wii sales Focus on successor to Nintendo Labo for stimulating casual game demand Profitabilityanalysiaineasinnamingaimprovement via digital sales ranansina Switch launch boosts earnings more than anticipated Digital boost to magnify Analysis of differences between FY3/18 results and our estimates FY3/18 results review Raising our estimates following FY3/18 results release Eamisganndel Hlroyasu Eguchi Se Research Analyst Merrill Lynch (Japan) This report is intended for Masahiro Honda EFTA01039442  ;j3olANIL logo Read the research report for complete information including important disclosures and analyst certification(s). 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If you have received this communication in error, please notify us immediately by return e-mail or by e-mail to jrrvaration@gmaanra, and destroy this communication and all copies thereof, including all attachments. copyright -all rights reserved please note The information contained in this communication is confidential, may be attorney-client privileged, may constitute inside information, and is intended only for the use of the addressee. It is the property of JEE Unauthorized use, disclosure or copying of this communication or any part thereof is strictly prohibited and may be unlawful. If you have received this communication in error, please notify us immediately by return e-mail or by e-mail to kevaration@gmailsani, and destroy this communication and all copies thereof, including all attachments. copyright -all rights reserved EFTA01039444