Traders chas­ing Poke­mon dream now bat­tle over Nin­tendo’s value

The Hamilton Spectator - - BUSINESS - YUKO TAKEO AND TOSHIRO HASEGAWA

Af­ter in­vestors pushed up Nin­tendo Co. shares with a fer­vour only matched by gamers chas­ing Pikachu, traders are now lock­ing horns over how much the high-fly­ing stock is worth.

Bears have boosted short in­ter­est in Nin­tendo to its high­est in five months af­ter the stock dou­bled in just over a week. The other camp in­cludes Ya­suo Sakuma of Bayview As­set Man­age­ment, who says the rally has long-term po­ten­tial as the mo­bile app Poke­mon Go is rolled out to more coun­tries and the gamemaker ex­pands its lo­ca­tion-map­ping tech­nol­ogy to the rest of its lineup, in­clud­ing Su­per Mario Broth­ers and Zelda.

“The way the stock has risen is ab­nor­mal,” says Sakuma, Toky­obased chief in­vest­ment of­fi­cer for the $2.6 bil­lion fund man­ager. “For now, the stock needs to cool down, but there isn’t enough ev­i­dence to say that the 4 tril­lion yen ($38 bil­lion) in mar­ket cap for the com­pany is too high.”

Nin­tendo added $18 bil­lion to its mar­ket cap af­ter re­leas­ing Poke­mon Go on July 6, with the mo­bile game be­com­ing an in­stant hit in coun­tries in­clud­ing the United States, Canada, the U.K. and Aus­tralia. The to­tal value of trad­ing in Nin­tendo was higher than any other com­pany in Tokyo Stock Ex­change his­tory on Tues­day, when $6.6 bil­lion worth of shares changed hands — more than the eq­uity turnover for ex­changes in Hong Kong, Aus­tralia, Ger­many and Switzer­land that day. On Wed­nes­day, the stock tum­bled 13 per cent, the most in five years.

“It’s been nuts,” said An­drew Clarke, Hong Kong-based di­rec­tor of trad­ing at Mirabaud Asia. “The hype over the game is huge. There’s been noth­ing like this since ... I can’t re­mem­ber re­ally.”

The surge is hard to jus­tify with fun­da­men­tals, even when fac­tor­ing in po­ten­tially sub­stan­tial billing rev­enue from in-app pur­chases, said Su­mito Takeda, an an­a­lyst at UBS Group. Given that Nin­tendo ef­fec­tively owns less than a third of the game — with Niantic Inc. hold­ing the rest — prof­its are likely to grow by just five per cent for Nin­tendo, said Deutsche Bank.

“It is pos­si­ble that Nin­tendo is on the fron­tier of pi­o­neer­ing new trends in video gam­ing,” said Deutsche Bank an­a­lyst Han Joon Kim. “How­ever, we would pre­fer to see a strong in­di­ca­tion of such be­fore con­sid­er­ing as­crib­ing a val­u­a­tion pre­mium to the stock.”

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