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Japan: the next opportunity
June 2024
Thomas Patchett, Japanese Equity Specialist
Donald Farquharson, Head of Japanese Equities
From paper to platforms: a domestic digitalisation story
Whether it's due to the limited supply of labour, rising wages, or the need for productivity gains and scale advantages, Japan is slowly but surely shifting online.
Having lagged other developed markets across most areas of digitalisation, such as ecommerce, cashless payments, software-as-a-service, and general enterprise IT investment, Japan has now recognised the critical need to develop these labour-saving solutions. This shift opens up significant long-term growth opportunities. Although this opportunity is still in its infancy – and is therefore far less prominent than in other developed markets – it is often accessible at little to no premium to the broader market.
Rakuten's ecosystem of services
Rakuten is home to Japan’s largest points-based ecosystem with over 100 million users accessing upwards of 70 online services (from hotel bookings to brokerage and banking). Despite consistently growing its top line for 27 years since inception, the company trades at a mere 0.6x sales, which is half that of the market average, because of the capital-intensive decision it made to develop its mobile phone network. Although this new venture required significant outlay, an accelerating pick-up in paying subscribers could soon see the network become profitable by year-end. As a standalone, we believe it could double the enterprise value of the group. Beyond that, we think it has the potential to add value to the entire ecosystem. By adding another customer touchpoint, it is improving its access to data and raising the potential to cross-sell more of its services.
www.bailliegifford.com/en/ireland/...xt-opportunity-10048027/
June 2024
Thomas Patchett, Japanese Equity Specialist
Donald Farquharson, Head of Japanese Equities
From paper to platforms: a domestic digitalisation story
Whether it's due to the limited supply of labour, rising wages, or the need for productivity gains and scale advantages, Japan is slowly but surely shifting online.
Having lagged other developed markets across most areas of digitalisation, such as ecommerce, cashless payments, software-as-a-service, and general enterprise IT investment, Japan has now recognised the critical need to develop these labour-saving solutions. This shift opens up significant long-term growth opportunities. Although this opportunity is still in its infancy – and is therefore far less prominent than in other developed markets – it is often accessible at little to no premium to the broader market.
Rakuten's ecosystem of services
Rakuten is home to Japan’s largest points-based ecosystem with over 100 million users accessing upwards of 70 online services (from hotel bookings to brokerage and banking). Despite consistently growing its top line for 27 years since inception, the company trades at a mere 0.6x sales, which is half that of the market average, because of the capital-intensive decision it made to develop its mobile phone network. Although this new venture required significant outlay, an accelerating pick-up in paying subscribers could soon see the network become profitable by year-end. As a standalone, we believe it could double the enterprise value of the group. Beyond that, we think it has the potential to add value to the entire ecosystem. By adding another customer touchpoint, it is improving its access to data and raising the potential to cross-sell more of its services.
www.bailliegifford.com/en/ireland/...xt-opportunity-10048027/
