Money Forward (3994.T): Initiate coverage at Sell; Break-even in FY11/26, profitable in FY11/27, but lacks valuation appeal amid industry-wide AI disruption concerns

Research evidence excerpt

Money Forward (3994.T): Initiate coverage at Sell; Break-even in FY11/26, profitable in FY11/27, but lacks valuation appeal amid industry-wide AI disruption concerns

Goldman Sachs Money Forward (3994.T)

Market trends

ERP software market

The ERP software market, Money Forward’s core focus, has many players, and the

market is formed according to the scale of companies’ annual sales (Exhibit 10).

Germany’s SAP and US-based Oracle have high market shares for large enterprises;

OBIC, Fujitsu, and NEC for mid-sized to large enterprises; OBC, Money Forward, freee,

PCA Corporation, and Miroku Jyoho Service for small and medium-sized enterprises

(SMEs); and Yayoi for sole proprietors. The larger the customer, the higher the

performance requirements from users, meaning the degree of software customization

tends to be greater. For SMEs and mid-sized enterprises (mainly companies with

relatively small annual sales among mid-sized enterprises), which are Money

Forward’s main focus, the need for customization is limited, and the company

provides purely non-customized cloud software.

While there have been moves in recent years, such as OBIC entering the market for

mid-sized to large enterprises, we do not believe SAP or Oracle will become competitors

to Money Forward, as the market for upper-range mid-sized to large enterprises is

fundamentally segmented from the market for mid-sized and smaller companies (where

a large number of users results in low sales efficiency). Although Money Forward serves

sole proprietors, mid-sized enterprises, and SMEs, its focus area going forward is

mid-sized enterprises and SMEs.

Exhibit 10: Money Forward primarily targets SMEs

ERP software market by customer size

S/4 HANA (SAP) Large

Business Suite (SAP)