4493 Cyber Security Cloud

CSC sells subscription tools that protect websites from attacks. Japan's cybersecurity spending grew 2.7 times in three years, and new defense legislation pushes more companies to buy protection.

▲ Sales have grown over 25% for six straight years, and rising AI bot traffic already pushes about 30% of WafCharm users into paying overage fees.  ▼ Shadan-kun, a third of recurring revenue, grew only 4.7% — the original flagship may have run out of customers in its niche.

More than half of CSC's recurring revenue runs on Amazon's cloud, which CSC does not control. Amazon is both its biggest sales channel and its biggest dependency.

▲ CSC ingests over 2 billion attacks a year, building detection data rivals would need years to match. Billing through Amazon makes leaving harder.  ▼ Amazon could build the same features into its own console. Palo Alto and CrowdStrike spend roughly 100 times more on research.

In March 2025 CSC sold new shares to a government-backed fund to raise acquisition money. A new investor, SilverCape, built a 9.5% stake and reserved the right to make demands.

▲ SilverCape went from zero to 9.5% in three filings and can push management on payouts and acquisition discipline.  ▼ CSC has only done two small acquisitions, yet diluted shareholders to fund much bigger untested deals instead of returning cash.

The business sells for 12.2 years of operating profit. Its capital earns 23.9%. Net cash is 18.8% of the market cap; 7.1% of profit goes out as dividends. Today's dividend yield is 0.3%. Even paying out all of its profit, the yield at today's price would be 4.8% — below the 6% floor, so the case rests on growth and the other squares. At the current payout, the cash pile alone equals today's market cap in about 18.2 years. How this valuation floor works →