Smoak Capital, LP / Smoak Capital Management, LLC on M-up Holdings
Thesis
M-up is the dominant Japanese fan-club operator, combining fan clubs with e-ticketing and e-commerce in a two-sided marketplace serving artists and fans. Revenue has compounded at roughly 25% since FY22 while operating income has grown at roughly 40%, supported by operating leverage and the increasing contribution of higher-margin revenue streams. Its relationships with artists, accumulated operating expertise and extremely low fan-member churn make the business difficult to replicate and, in the manager's view, relatively insulated from AI disruption. The company also has substantial cash and investments, earns returns on equity above 30%, and has been repurchasing shares and increasing its dividend. Despite these characteristics, the shares trade at only 7.8x forward EV/FCF, which the manager believes prices in an unrealistic cessation of growth.
“M-up’s shares are priced as if growth will completely stop, which I believe is unlikely.”