Capcom: Initiating With a Narrow Moat and a Fair Value Estimate of JPY 3,000

We initiate our coverage of Capcom, with a fair value estimate of JPY 3,000 and a narrow moat rating based on intangible assets. Capcom is a Japanese video game developer best known for its long-running hit series, Resident Evil (since 1996), Monster Hunter (since 2004), and Streetfighter (since 1987). By focusing on its core intellectual property, Capcom continues to deliver high-quality and widely popular AAA titles every year and monetizes them year after year by releasing sequels, remakes, and downloadable content consistently, thereby mitigating earnings volatility. We believe Capcom will continue to capitalize on its widely popular IP and maintain a high operating margin of 41%-46% in the next five years. We think shares are currently fairly valued.