Progress of Line Integration Drives Z Holding’s Ad Revenue; Fair Value Estimate Raised to JPY 720

We revised our earnings forecast and raised Z Holdings’ fair value estimate to JPY 720, from JPY 700 previously, after considering the better-than-expected third-quarter performance, underpinned by the positive impact of the integration with the LINE business. Z holdings reported record high quarterly revenue of JPY 409.1 billion (year on year 29.2%), and operating income of JPY 61.0 billion (year on year 38.8%). Growth in advertising revenue, in particular Line advertising, was the biggest driver in the third quarter. We believe synergies with Line will continue to be realized in the coming five years and revised upward our revenue forecast, mainly for the media segment. Z Holdings’ shares have dropped approximately 30% from its recent peak in November 2021 as the growth expectation had been too high. We now believe Z Holdings’ shares are undervalued.