Stock Analysis & Valuation Koei Tecmo Holdings Co., Ltd. (3635.T)

• Previous Close: ¥1,718.50
• Sector Valuation Confidence Level: Low

Valuation method	Value, ¥	Upside, %
Artificial intelligence (AI)	2150.60	25
Intrinsic value (DCF)	1202.35	-30
Graham-Dodd Method	386.77	-77
Graham Formula	786.31	-54

Strategic Investment Analysis

Company Overview

Koei Tecmo Holdings Co., Ltd. is a leading Japanese entertainment company specializing in video game development, amusement arcades, and real estate operations. Headquartered in Yokohama, Japan, the company operates across three key segments: Entertainment (developing and selling PC and console games), Amusement (arcade management), and Real Estate (property leasing and management). Known for iconic franchises like 'Dead or Alive,' 'Ninja Gaiden,' and 'Nioh,' Koei Tecmo has a strong presence in Japan, North America, Europe, and Asia. The company benefits from a diversified revenue stream, combining high-margin game sales with stable real estate income. As part of the fast-growing Electronic Gaming & Multimedia sector, Koei Tecmo leverages its deep IP portfolio and strategic partnerships (including collaborations with Nintendo and Sony) to maintain relevance in the competitive gaming industry. With a market cap exceeding ¥758 billion, the firm is a key player in Japan's gaming ecosystem.

Investment Summary

Koei Tecmo presents a stable investment opportunity with low volatility (beta: 0.376) and consistent profitability (net income: ¥37.6B in FY2025). The company's debt-free balance sheet and ¥24B cash reserve provide financial flexibility, while a ¥60/share dividend offers yield appeal. However, reliance on legacy IP and limited mobile gaming exposure compared to peers like Bandai Namco may constrain growth. Investors should monitor the company's ability to refresh its franchise lineup and expand into live-service games. The stock suits conservative investors seeking exposure to Japan's gaming sector with lower risk than pure-play mobile developers.

Competitive Analysis

Koei Tecmo occupies a niche position between Japan's gaming giants (Capcom, Bandai Namco) and smaller studios, differentiating itself through historical/samurai-themed IP and fighting/action genres. Its competitive advantages include: 1) Deep expertise in character action games (Ninja Gaiden) and tactical RPGs (Romance of the Three Kingdoms), 2) Strong co-development partnerships (e.g., 'Fire Emblem: Three Houses' with Nintendo), and 3) Dual revenue streams from gaming and real estate. However, it lags behind Capcom in AAA game production values and Bandai Namco in multimedia franchise development. The company's arcade segment provides domestic stability but faces long-term decline. Koei Tecmo's real estate holdings (unusual for a game developer) provide downside protection but may indicate underinvestment in core gaming R&D. Its ¥83B revenue is dwarfed by global competitors, requiring strategic IP licensing to compete internationally.

Major Competitors

• Capcom Co., Ltd. (9697.T): Capcom leads in AAA game development (Resident Evil, Monster Hunter) with superior global reach (¥152B revenue vs. Koei's ¥83B). Its RE Engine technology provides graphical advantages, but lacks Koei's diversified business model. Capcom's operating margin (38%) significantly exceeds Koei Tecmo's (25%).
• Bandai Namco Holdings Inc. (7832.T): Bandai Namco dominates with multimedia franchises (Gundam, Dragon Ball) and arcade operations (¥1.1T revenue). Its toy/anime synergies outpace Koei's capabilities, but Koei maintains stronger margins in core game development. Bandai's mobile gaming success highlights Koei's relative weakness in this growth segment.
• Sega Sammy Holdings Inc. (6460.T): Sega Sammy combines gaming (Yakuza, Sonic) with pachinko operations (¥390B revenue). More diversified than Koei but suffers from pachinko market decline. Sega's stronger Western studio network (Creative Assembly, Relic) gives it broader genre coverage compared to Koei's Japan-centric development.
• Nintendo Co., Ltd. (NTDOY): Nintendo (¥2.3T revenue) operates at a different scale but collaborates with Koei on franchises like Fire Emblem. Nintendo's first-party IP strength makes it both partner and competitor. Koei benefits from Nintendo's platform success but cannot match its hardware/software ecosystem.
• Square Enix Holdings Co., Ltd. (SQNXF): Square Enix (¥356B revenue) leads in RPGs (Final Fantasy) and has stronger mobile/MMO presence. Koei's action game focus provides differentiation, but Square Enix's global publishing network and Marvel collaborations give it broader appeal. Both companies struggle with over-reliance on legacy IP.