Kyoto Day 1 – Dec. 6, 2018

The second day I took a train from Kobe to Kyoto.

After checking in Hotel The Celestine Kyoto Gion, I had late lunch at Mametora Gion which specializes in small dishes cuisines. The environment there was quite comfortable in terms of distance between tables and interior styling & lighting. As it is supposedly to be, the presentation of dishes was great and taste was ordinary ( for me, the taste of this kind of cuisine is never the highlight in the dining experience).

The restaurant of my first dinner in Kyoto was a local store recommended by the concierge of hotel. The food was edible but not delicate as its clientele base is probably the neighborhood round southern area of Kenninji. The area might be one of the most densely populated of Michilin-starred Japanese restaurants in the world but ordinary restaurants are still viable since there’s demand for casual dinning to be met.

As usual, I had gyoza at Senmonten (泉門天) as my main late-night snack in Kyoto. I also had ramen at Tenkaippin as supplementary but it turned out that I’m not a fan of their style.

The release of Super Smash Bros. Ultimate / Special (JP) is the highlight of this trip. As expected nothing special happened on Hanamikoji Dori in Gion.

I was so bored in the hotel that I watched live streaming gameplay of SSBU on Youtube. While I think  gaming is one of my tracking industry, this was my first time to watch live streaming gameplay. To my surprise, it’s quite satisfying and healing to watch the gameplay when the host is shown as anime-style character with cute voice in tandem with facial / body expression.

I will further explore the economics on gaming, eSport and video / music streaming after going back to Taiwan.

Resume Following Nintendo (7974.JP / NTDOY.US)

I have been more quiet about Nintendo since the Nintendo Switch passed its first year installed base build-up.  However, I was triggered by discussion on a Bloomberg article, Nintendo Switch Loses Shine With Shipments Seen Missing Target, on twitter.

I resume following Nintendo by posting two charts about the most important issue in the second year of Nintendo Switch – The Release Schedule of System Sellers.

Seasonality

The sell-side consensus of Nintendo Switch shipment is relatively pessimistic. Due to the cluster of two major system sellers release date (both in Calendar Year 4Q 2018), the seasonality will exacerbate this year making sales distribution stray away from historical data. The effect of lacking system seller in 1Q-3Q 2018 can be easily observed by charting tie-ratio which is defined as software shipment during a specific fiscal period divided by installed base by the end of that fiscal period. Nintendo’s tie-ratio dropped from around 1.69x in 4Q 2017 to around 0.91-1.06x during  during 1Q-3Q 2018.

If an analyst relies on historical seasonality, she/he might find it’s hard for Nintendo achieve the company guidance of 20M Nintendo Switch shipment target in fiscal year ending March 2019. It might be difficult for an analyst to estimate the impact from seasonality outlier. That said, the choice for analyst might be relatively easy, to follow the guidance or to be conservative. (if the analyst takes reputation risk or even occupation risk into consideration, obviously there’s no reason to be aggressive or optimistic)

As the company has been sticking with its target and probably managed the supply chain accordingly which is reflected in it’s CY3Q18 balance sheet with ballooned inventory level (less likely to have supply constraint issue), whether it can reach or exceed the target purely depends on the market reception of two strongest Nintendo franchises, Pokemon and Super Smash Bros.

Invtory

It might be hard for investors who are less familiar with Nintendo’s IPs to stomach that skyrocketing inventory level which might make them avoid the execution risk.

It will be interesting to know how much of the inventory level will be reduced during the holiday season in the next earnings release.