Morgan Stanley has identified the top-performing Japanese Software-as-a-Service (SaaS) companies in the Internet & Media sector, highlighting firms that are addressing Japan’s critical labor shortage challenges through digital transformation solutions.
Rakus Co Ltd (TYO:3923) leads the pack with smooth progression in both top-line and profit growth. The company dominates the expense management SaaS market with the largest share of corporate users.
While this segment has matured, RAKUS is successfully balancing profitability with continued sales growth by expanding its client base and increasing average fees through enhanced product value. Its invoice SaaS business faces intense competition, but strong brand recognition and competitive pricing are driving high growth and expanding market share.
Morgan Stanley maintains an Overweight rating with a price target of ¥2,900, noting that RAKUS’s new medium-term plan will likely emphasize profitability while maintaining sales growth, potentially including M&A activities.
Sansan Inc (TYO:4443) secures the second position with its stable Sansan business growth and profit generation. The company’s contact management DX service maintains stability through its overwhelming market share, while the Bill One invoicing SaaS drives top-line growth.
However, Bill One is currently addressing sales staff training challenges, with growth expected to accelerate in the second half of the year. Morgan Stanley assigns an Equal Weight rating with a ¥2,300 price target, noting upside potential from Sansan’s entry into the contract DX market.
Appier Group Inc (TYO:4180) ranks third despite sales growth slightly trailing behind plan in the first half. The company’s operating profit exceeded expectations, and both top-line and profit growth trends are anticipated to continue into the second half.
Appier’s internet advertising platform is well-positioned with its proprietary AI algorithm enhancing campaign ROI. Morgan Stanley maintains an Equal Weight rating with a price target of ¥1,800, though noting potential industry concerns due to advances in generative AI.
Money Forward Inc (TYO:3994) takes fourth place as a major player in ERP solutions, particularly cloud accounting. The company’s strategy of focusing on the mid-market segment in its Business domain is clearly reflected in its numbers.
Morgan Stanley assigns an Equal Weight rating with a ¥5,500 price target, highlighting significant stock price appreciation after earnings (30% relative to TOPIX over three months), partly due to activist interest.
Freee Kk (TYO:4478) rounds out the top five with its focus on accounting and HR labor SaaS solutions for small and medium enterprises.
The company maintains strong revenue momentum and has achieved profitability on a period basis, though near-term margin expansion may be delayed due to front-loaded investments.
After a prolonged phase of customer acquisition investment, Freee’s SaaS segment has achieved profitability with a high gross profit margin and operating leverage.
Source :
https://www.investing.com/news/stock-market-news/morgan-stanley-lists-top-5-japanese-saas-companies-leading-digital-transformation-4236765
