Capcom may take a step toward improving its paltry share with the closely-watched release in September of Monster Hunter Now, a game developed with Pokémon Go creator Niantic. The global smartphones games market brought in $US91.8 billion in revenue in 2022, far ahead of gaming consoles and PCs, according to data tracker Newzoo. The other challenge for Capcom is breaking through in the mobile arena. His foresight is largely to credit for Capcom’s pioneering strategy, according to Toyo’s Yasuda. One vulnerability for the company, however, is the advancing age of its 82-year-old founder, Kenzo Tsujimoto, who is considered vital for its success. Capcom’s stable of homegrown creators and engineering talent is another major asset in a chronically short-staffed industry, she added. “The company’s business model focused on selling older games has lengthened the lifetime of each game and that cut back on investors taking profits upon new game releases, a behaviour common for this industry,” said Mr Yamamura, who set a target share price of ¥6400, versus the current ¥5683. The company grew its operating profit for the 10th straight year in March, reporting an 18 per cent rise to ¥50.8 billion ($530 million). The stock is now the priciest in its peer group, when comparing enterprise value to earnings, but investors can’t find an off-ramp when growth has been so remarkably consistent, Citigroup Global Markets Japan analyst Junko Yamamura said. It’s also helped smooth out the massive swings in profits that business models relying on a constant flow of major new hits produce, making Capcom an investor darling. BloombergĬapcom was early to convert its older console hits into digital downloads for PCs, and that’s helped it realise the lucrative strategy it relies on today, Mr Fukuyama said. It’s set a goal of selling 100 million copies per year, from the 41.7 million mark it set in the fiscal year ended March.Ĭapcom shares have outperformed the gaming industry. The firm sells software in 230 countries and regions, by far the largest number among Japanese publishers, according to Toyo Securities analyst Hideki Yasuda. Its gross margin is consistently better than peers, with last year’s 58.6 per cent mark overshadowing Square Enix Holdings (51.2 per cent), Konami (38.9 per cent) and Bandai Namco (37.2 per cent). “Capcom has an extremely high operating profit margin and ROI which you can’t really find elsewhere, even outside Japan,” UBS Securities analyst Kenji Fukuyama said. The profit margin on a $US10 sale of an old game is effectively 100 per cent, as all development costs have already been accounted for in earlier years. Tapping underserved and developing markets, such as Brazil, Saudi Arabia and Turkey, with heavily discounted classic games has paid off. That’s helped the Osaka-based firm break the cycle of earnings volatility that depends on big new releases by capitalising heavily on its back catalogue of games, analysts said. About 70 per cent of its sales come from games released in the previous fiscal year or earlier, an unusually high proportion for an industry typically driven by new content, art and adventures. Of analysts covering the company, seven rate it a hold and 10 a buy, with one sell.Ĭapcom is somewhat of an oddity in the $US200 billion gaming industry. It’s doing so despite lagging peers in the smartphone gaming arena, which now makes up half the industry’s sales. The rally means Capcom, which reports earnings on Wednesday, is trading at valuations well in excess of many of its biggest rivals, from Konami Group to Bandai Namco Holdings. That’s in part because the $US11 billion ($16.2 billion) company has punched well above its weight, spawning Hollywood franchises such as Resident Evil and Monster Hunter.Ĭapcom has punched well above its weight, spawning Hollywood franchises such as Resident Evil and Monster Hunter. Japanese game publisher Capcom’s shares are up by a third this year, outpacing the broader Tokyo market and capping off a remarkable 1200 per cent surge over the past decade. Tokyo | While the gaming world fixates on the implications of a Microsoft-Activision deal and AI, a smaller player in their universe may deserve a closer look from investors.
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