4776 Cybozu

Cybozu sells kintone, software that lets Japanese companies build their own work apps without programmers. Revenue grew 17% last quarter, and existing customers spend 22% more each year.

▲ Cybozu raised kintone prices 38% over two years and customers stayed and paid. That is rare, direct proof of pricing power.  ▼ The price rise is now in the numbers. Of each new yen of revenue, only 27 sen becomes profit, down from 67, as ad and research spending grows.

Once a company builds its daily work apps on kintone, switching means rebuilding everything. Customers absorbed the big price increase without leaving — the clearest evidence the lock-in is real.

▲ A 38% price increase that flowed almost entirely to profit shows customers cannot easily leave.  ▼ Cybozu has not said whether it can raise prices like that again. The lever may already be spent.

Founder-CEO Aono holds 17%. Cybozu announced its largest buyback since listing — ¥3bn, about 6.5% of shares — plus a ¥50 dividend, together about 71% of this year's expected profit.

▲ About 71% of profit is already committed to shareholders this year. A second buyback or a written policy would make it a habit.  ▼ About ¥11.5bn has gone into a loss-making US unit, one investment was just written off, and Aono is seriously considering building an arena in Ehime.

The business sells for 9.2 years of operating profit. Its capital earns 56.0%. Net cash is 10.8% of the market cap; 31.1% of profit goes out as dividends. Today's dividend yield is 2.1%. If the company paid out all of its profit, the yield at today's price would be 6.9% — past the 6% level where Japanese small caps tend to find buyers. Raising the payout 10 points a year would reach 6% in about 5.6 years. At the current payout, the cash pile alone equals today's market cap in about 18.8 years. How this valuation floor works →