Management Policy
Management Conscious of Cost of Capital and Stock Price
Perception of Stock Price
Relative stock valuation for the SEGA SAMMY Group is noticeably lower than that of other game companies. We recognize the main factors behind this are the presence of relatively large scale of our Pachislot & Pachinko Machines Business in our portfolio compared to other game companies as well as high volatility in the performance of the Entertainment Contents Business. We understand that a genuine recovery in our stock price requires the establishment of a revenue structure capable of generating sustainable and stable profits through greater visibility in profit growth in the Entertainment Contents Business and revenue generation of the Gaming Business. While addressing these challenges, we will continue our efforts to grow business profit, improve capital efficiency, and maintain an optimal capital structure and aim to expand our market capitalization by growing TSR through an expansion of equity spread and appropriate shareholder returns, thereby increasing corporate value.
▶ Stock Price (Rate of Change)
In the fiscal year ended March 2025, the first year of the medium-term plan,our stock price trended upward (1), driven mainly by strong performance in the Entertainment Contents Business, which we have positioned as a growth driver; however, it then shifted to a downward trend in response to changes in the operating environment across the entertainment industry as a whole, including threats from the rapid spread of AI (2), and our announcement of an outlook that falls short of medium-term plan targets due to factors such as the recognition of impairment losses (3).
Recently, the industry as a whole is on a recovery trend, and our stock price has also been recovering since the Q1 earnings announcement (4).
We aim to improve our valuation by continuing to address the challenges facing each of our businesses and returning to a growth trajectory.
▶ P/B Ratio
Our P/B ratio has remained above 1× but has stayed well below the average for the four major Japanese game publishers.
We recognize the challenges we need to address as follows: first, raising expectations for continued growth by reducing volatility in the Entertainment Contents Business and generating revenue in the Gaming Business; second, promoting stock market understanding of the effectiveness of our unique business portfolio, which combines these two businesses with the Pachislot & Pachinko Machines Business as a source of cash generation.
▶ ROE, COE, and Equity Spread
* COE: Cost of equity (Source: Bloomberg)
* Equity spread: ROE-COE
Having improved capital efficiency through appropriate use of financial leverage, enhancement of shareholder returns, and other measures, we have kept ROE at around the 10% level since the previous medium-term plan, with the equity spread also remaining positive.
More recently, ROE declined significantly due to factors such as the recognition of impairment losses, causing the equity spread to decrease significantly. However, we will continue to aim for improvement through greater capital efficiency and appropriate shareholder returns.
Logic Tree for TSR Expansion
The SEGA SAMMY Group aims to maximize corporate value by expanding its equity spread and providing appropriate shareholder returns. Using adjusted EBITDA and ROE as key indicators, we are pursuing a financial strategy that emphasizes capital efficiency alongside a growth strategy that leverages the strengths of each business.
Other Efforts to Improve Corporate Value
Initiatives for capital cost reduction
- Strengthen risk management >>> Compliance / Risk Management
- Strengthen materiality-based initiatives >>> Sustainability
- Strengthen performance management >>> Integrated Report: Message from CFO
- Strengthen communication with investors >>> Dialogue with the capital markets
Initiatives to raise employee awareness of stock price
Conduct internal IR activities >>> Dialogue with the capital markets
Increase the proportion of stock-based compensation in compensation for Directors, among other measures >>> Compensation Amount for Officers and the Method for Calculating Such Compensation