Yahoo!Japan Earnings: Revenue Growth Continues Across Divisions

Yahoo! Japan Corporation (OTC:YAHOY) reported its Q2 FY 2017 results on November 1st. (Fiscal year ends in March.) In line with our expectation, Yahoo! Japan’s revenues grew 48.5% year over year to ¥205.3 billion ($1.96 billion), primarily on the back of 29.7% surge in transaction value of shopping business (e-commerce). Additionally, operating income grew by 14.9% to ¥49.5 billion ($472 million) after adjusting for remeasurement related to business combination of ASKUL Corp. While the company reported 5.7% growth in advertising revenues to ¥69.4 billion ($662 million), the transaction value across shopping, auctions and listing services grew to ¥432.4 billion ($4.126 billion). Revenue from Mobile continued to boost revenues during the quarter as Japanese consumers continued to use smartphones for shopping and accessing websites. The company also invested close to ¥6.5 billion in new ventures in order to diversify and strengthen its revenue streams. The highlights of the results are below.

See our complete analysis of Yahoo! JAPAN here

Mobile Boosts Ads Revenue And Transaction Value

According to our estimates, mobile advertising contributes nearly 20% to Yahoo! Japan’s total value. As stated in our pre-earnings note, Japan leads the Asian region for the number of all online retail transactions are made on either a smartphone or tablet. As a result, mobile transaction accounted for over 45.5% (¥219 billion) of all transaction value for Yahoo! Japan. Furthermore, the increasing penetration of mobile devices aided in growth of mobile ads revenue as Smartphone revenue ratio exceeded 49.5%. Furthermore, the mobile user base (at 60 million) exceeded desktop daily unique browsers. ^[1] We believe that revenues from this division will account for almost 25% (of total revenues) by 2022, as ad budgets increasingly shift to mobile users. We also believe that as the company is increasing content across its properties, it will be able to leverage its dominant position in the Japanese Internet landscape to drive mobile revenue growth in the coming years.

Transaction Value Across E-commerce Properties Grows as Listings Rise

While the search and listings ads division contributes 16.7% of Yahoo! Japan’s total value, the online shopping and auction division contributes 14.5%, according to our estimates. The company removed listing and tenant fees for its websites in Q2 FY14 (Q3 CY13) to stimulate growth and increase the number of listed sellers. The number of listed sellers is important for Yahoo! Japan’s shopping division because as listings grow, more users are likely to find and buy products on its site, which will increase the transaction value across Yahoo! Japan’s shopping websites.

As a result of this strategy, the company added over 100,326 store ids for its shopping portal, of which 23,695 were added in Q2, resulting a in growth of over 28.9% year over year to 447,214. With this increase in store ids, the number of products listed across its shopping website increased by 50 million year over year to nearly 230 million. The transactions value, across shopping, auction and listing divisions, grew by 29.7% year over year to ¥432.4 billion ($4.12 billion). We expect that, as product listing gains more traction, Yahoo! Japan’s revenues will increase due to higher transaction value across its sites.

Transaction Value And Membership Across Credit Card Business Grows

In 2014, Yahoo! Japan forayed into credit card services in 2014. Over the past few quarter, the credit card transaction value for the company has increased by 4.2x. This trend continued in Q2 as transaction value increased by 2.8x and number of valid card holders increased by 2x to 2.83 million.

 Investments Gain Pace

In search of new revenue streams, and to leverage its footprint in the Japanese e-commerce vertical, the company formed three joint ventures and acquisitions during the quarter.

Recent Investments in Q2 (Source: Yahoo! Japan Presentation)

These partnerships are important for Yahoo! Japan as it helps the company in offering engaging content and new services for its users. As the number of transactions across its websites grows, we expect pageviews and transaction value across Yahoo! Japan to increase due to its leadership in the Japanese market. Currently, we expect page views to remain constant at around 1,030 per month, by the end of our forecast period. Furthermore, as stated earlier, we also anticipate transaction value to increase.

We are in the process of updating our Yahoo! Japan model. At present, we have a $8.29 price estimate for Yahoo! Japan, which is 9% above the current market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

More Trefis Research

1. Yahoo! Japan KPI Metrics [↩]