TMT & Consumer Independent Equity Research Analyst, Obex Capital Research

Aaron Gabin

TMT & Consumer Independent Equity Research Analyst

TMT & Consumer Independent Equity Research

Obex Capital Research

“Obex” is Latin for Barriers to Entry. Obex Capital Management’s investment philosophy is driven by an intense focus on which business model’s Barriers to Entry are able to withstand the ever increasing competitive disruption in the TMT and Consumer Sectors.

Thematic (Sector/Industry)

<p>So many datapoints in the past week speak to how strong earnings should be for the biggest online advertising players. Our order of preference for 1Q21: Facebook, Amazon, Google, Snap, eBay, Pinterest.</p><div class="content-highlight"><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div>

So many datapoints in the past week speak to how strong earnings should be for the biggest online advertising players. Our order of preference for 1Q21: Facebook, Amazon, Google, Snap, eBay, Pinterest.Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

TMT Weekly 4/9/2021: Be Long Online Advertising for Earnings

Asia Consumer Research, Investory

Devi Subhakesan

Asia Consumer Research

ASIA CONSUMER: INSIGHTS AND INVESTMENT IDEAS

Investory

Investory is a Singapore-based boutique independent equity research firm founded in January 2017 with a primary focus on consumption themes across Asia-Pacific.

We aim to generate investible ideas based on consumption trends and outlook. We screen our ideas on several parameters - product potential, long-term growth and management commitment being the most critical.  We follow a fundamental analysis approach in our stock selection process and are not restricted by market cap.

We aspire to grow into a leading source of unbiased research, free of conflict of interest, for investors yearning for independent and disciplined analysis. 

We also undertake bespoke research mandates to support our Institutional clients’ investment needs.

Our team comprises of professionals with extensive experience in the Asian equity markets, in areas ranging from research, servicing institutional clients and investment management.

Equity Capital Markets

Flipkart Online Services / Equity Capital Markets

<p>In this insight, we discuss (1) the likely catalysts triggering <a href="https://www.smartkarma.com/entities/flipkart-online-services-private-limited" target="_blank" data-smartkarma-citation="entities:31076:1" rel="noopener">Flipkart Online Services </a> (Flipkart) going public, (2) a quick primer on Flipkart and its multiple business verticals, (3) the listed players/peers that may potentially be impacted by Flipkart's listing. </p><p><a href="https://www.smartkarma.com/entities/flipkart-online-services-private-limited" target="_blank" data-smartkarma-citation="entities:31076:1" rel="noopener">Flipkart Online Services (Flipkart)</a>'s upcoming IPO will offer investors an opportunity to take direct exposure in India's fast-growing eCommerce segment. Flipkart is a pureplay India eCommerce and related services (digital payments, logistics) company with a dominant presence across multiple verticals. Flipkart's listing could be a test of investor appetite and valuation potential for India based eComm players and may pave the way for other players to go public. </p>

In this insight, we discuss (1) the likely catalysts triggering Flipkart Online Services  (Flipkart) going public, (2) a quick primer on Flipkart and its multiple business verticals, (3) the listed players/peers that may potentially be impacted by Flipkart's listing. Flipkart Online Services (Flipkart)'s upcoming IPO will offer investors an opportunity to take direct exposure in India's fast-growing eCommerce segment. Flipkart is a pureplay India eCommerce and related services (digital payments, logistics) company with a dominant presence across multiple verticals. Flipkart's listing could be a test of investor appetite and valuation potential for India based eComm players and may pave the way for other players to go public. 

Flipkart's IPO in the Works - All You Need to Know for Now

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<div>
<p><a href="https://www.smartkarma.com/entities/prosus-nv-75c7a0c4-16ff-4433-a40f-25ae5b24077d" target="_blank" data-smartkarma-citation="entities:28498:1" rel="noopener">Prosus NV (PROSY US)</a> aims to raise around US$14.5bn via selling a 2% stake in <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>.</p>
<p>The deal comes nearly three years, and right after the lock-up expiry, from the previous placement when on 22nd March 2018, <a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a> reluctantly sold US$10bn worth of <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> shares.  We have covered the previous placement in our earlier note, <a href="https://www.smartkarma.com/insights/tencent-placement-huge-deal-in-size-small-in-relative-terms-succumbing-to-the-holdco-discount" target="_blank" rel="noopener">Tencent Placement - Huge Deal in Size, Small in Relative Terms - Succumbing to the HoldCo Discount</a>.</p>
<p>We have been covering the lock-up expiry since Feb 2021 in:</p>
<ul>
<li><a href="https://www.smartkarma.com/insights/tencent-placement-lock-up-expiry-us-10bn-block-and-buyback-linked-holdco-trade" target="_blank" rel="noopener">Tencent Placement Lock-Up Expiry - US$10bn+ Block and Buyback Linked Holdco Trade, and</a></li>
<li><a href="https://www.smartkarma.com/insights/tencent-placement-lock-up-expiry-block-and-buyback-linked-holdco-trade-update" target="_blank" rel="noopener">Tencent Placement Lock-Up Expiry -  Block and Buyback Linked Holdco Trade Update</a></li>
</ul>
<p>In this note, we will talk about the deal dynamics.</p>
</div>


Prosus NV (PROSY US) aims to raise around US$14.5bn via selling a 2% stake in Tencent Holdings (700 HK).
The deal comes nearly three years, and right after the lock-up expiry, from the previous placement when on 22nd March 2018, Naspers (NPN SJ) reluctantly sold US$10bn worth of Tencent Holdings (700 HK) shares.  We have covered the previous placement in our earlier note, Tencent Placement - Huge Deal in Size, Small in Relative Terms - Succumbing to the HoldCo Discount.
We have been covering the lock-up expiry since Feb 2021 in:

Tencent Placement Lock-Up Expiry - US$10bn+ Block and Buyback Linked Holdco Trade, and
Tencent Placement Lock-Up Expiry -  Block and Buyback Linked Holdco Trade Update

In this note, we will talk about the deal dynamics.


Tencent Placement - Another Reluctant but Well-Flagged Sell Down, Lifting the US$14.5bn Overhang

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>Founded in 2011, <a href="https://www.smartkarma.com/entities/applovin-corp" target="_blank" data-smartkarma-citation="entities:32989:1" rel="noopener">AppLovin Corp (APP US)</a> is getting ready to complete its IPO in 2Q 2021. The company is aiming to raise about $1 billion in this IPO. KKR purchased a minority stake in the company in 2018 at about $2 billion valuation. The IPO valuation is likely to be much higher.</li>
<li>The <a href="https://www.cityindex.co.uk/market-analysis/applovin-ipo-background-guide/" target="_blank" rel="noopener">company</a> originally started its business helping customers to improve the smartphone customer experiences for all the users. In recent years, the company has become a much bigger player in the mobile gaming segment and it also helps developers to grow their users and improve monetization of their apps. </li>
<li>AppLovin's income statement shows strong sales growth in the past three years but declining profit margins. AppLovin generated sales of $1,451.1 million and an operating loss of $62.1 million in 2020. The company's sales have nearly tripled from 2018 to 2020. Despite the company's strong sales growth, one of the things that is not so clear in the prospectus is what percentage of the company's sales growth in the past three years has been driven by organic growth versus acquisitions.</li>
</ul>


Founded in 2011, AppLovin Corp (APP US) is getting ready to complete its IPO in 2Q 2021. The company is aiming to raise about $1 billion in this IPO. KKR purchased a minority stake in the company in 2018 at about $2 billion valuation. The IPO valuation is likely to be much higher.
The company originally started its business helping customers to improve the smartphone customer experiences for all the users. In recent years, the company has become a much bigger player in the mobile gaming segment and it also helps developers to grow their users and improve monetization of their apps. 
AppLovin's income statement shows strong sales growth in the past three years but declining profit margins. AppLovin generated sales of $1,451.1 million and an operating loss of $62.1 million in 2020. The company's sales have nearly tripled from 2018 to 2020. Despite the company's strong sales growth, one of the things that is not so clear in the prospectus is what percentage of the company's sales growth in the past three years has been driven by organic growth versus acquisitions.


ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

<p>Shopee, the e-commerce arm of <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> has quietly launched ShopeeFood in Indonesia. This could potentially pose a threat to both <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a> and <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP)</a>, which currently dominate the food delivery market between them. </p>
<p>The two incumbent players do have a head start and an edge on logistics. ShopeePay's success in digital payments shows the company's ability to grab share quickly, suggesting that the firm’s new food delivery unit could be a force to be reckoned with.</p>
<p>There will also be synergies with ShopeePay, which could potentially provide discounts and cashback but overall it will help to increase the stickiness of the Shopee App.</p>
<p>The total gross merchandise value of the food delivery market in Indonesia reportedly amounted to US$3.7bn in 2020. If we were to assume that the market can grow by +15% in 2021 to US$4.2bn and Shopee could take 25% of the market then it could be worth US$1bn in GMV to Shopee.</p>
<p>Shopee certainly has the financial capacity to hire drivers, with the ShopeeFood Driver app, which is available on the google store already has over 100,000 downloads. Onboarding big and small will be key</p>
<p>Shopee’s biggest advantage over competitors remains its strength in terms of funding, given that it generates huge amounts of cash through its gaming business. <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> could now decide to channel resources into Shopee Food to grow that business rapidly.</p>
<p>It is early days for Shopee Food but it has the potential to be another revenue driver for the company, which will underpin future growth and hence its premium valuations. <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> trades on 13.3x FY21E EV/Sales and 9.5x FY22E EV/sales, with estimated sales growth of +78.8% and +38.4% for FY21E and FY22E respectively. </p>
<div></div>
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<p></p>
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</div>

Shopee, the e-commerce arm of Sea Ltd (SE US) has quietly launched ShopeeFood in Indonesia. This could potentially pose a threat to both Gojek (1379371D IJ) and Grab (0967655D SP), which currently dominate the food delivery market between them. 
The two incumbent players do have a head start and an edge on logistics. ShopeePay's success in digital payments shows the company's ability to grab share quickly, suggesting that the firm’s new food delivery unit could be a force to be reckoned with.
There will also be synergies with ShopeePay, which could potentially provide discounts and cashback but overall it will help to increase the stickiness of the Shopee App.
The total gross merchandise value of the food delivery market in Indonesia reportedly amounted to US$3.7bn in 2020. If we were to assume that the market can grow by +15% in 2021 to US$4.2bn and Shopee could take 25% of the market then it could be worth US$1bn in GMV to Shopee.
Shopee certainly has the financial capacity to hire drivers, with the ShopeeFood Driver app, which is available on the google store already has over 100,000 downloads. Onboarding big and small will be key
Shopee’s biggest advantage over competitors remains its strength in terms of funding, given that it generates huge amounts of cash through its gaming business. Sea Ltd (SE US) could now decide to channel resources into Shopee Food to grow that business rapidly.
It is early days for Shopee Food but it has the potential to be another revenue driver for the company, which will underpin future growth and hence its premium valuations. Sea Ltd (SE US) trades on 13.3x FY21E EV/Sales and 9.5x FY22E EV/sales, with estimated sales growth of +78.8% and +38.4% for FY21E and FY22E respectively. 







Sea Ltd (SE US) - The Stickiness of Shopee Food

United States

Amazon.com, Inc. is an online retailer that offers a wide range of products. The Company's products include books, music, videotapes, computers, electronics, home and garden, and numerous other products.  Amazon offers personalized shopping services, Web-based credit card payment, and direct shipping to customers.

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Amazon.com Inc (AMZN US)

TMT Weekly 4/9/2021: Be Long Online Advertising for Earnings

Online Advertising and eCommerce is still buoyed by secular tailwinds despite the fears on tough pandemic driven comps. We prefer Amazon, Facebook,...

Aaron Gabin

Flipkart's IPO in the Works - All You Need to Know for Now

Read for Likely catalysts triggering Flipkart's IPO, a quick primer on Flipkart and its multiple business verticals, the listed players/peers that...

Devi Subhakesan

Tencent Placement - Another Reluctant but Well-Flagged Sell Down, Lifting the US$14.5bn Overhang

Prosus aims to raise around US$14.5bn via selling a 2% stake in Tencent. The deal comes nearly three years, and right after the lock-up expiry,...

Sumeet Singh

AppLovin IPO Preview

AppLovin Corp (APP US) is getting ready to complete its IPO in 2Q 2021. The company is aiming to raise about $1 billion in this IPO.

Douglas Kim

Sea Ltd (SE US) - The Stickiness of Shopee Food

The launch of ShopeeFood in Indonesia potentially represents a threat to Gojek and Grab but also a potential future growth engine for Sea Ltd in...

Angus Mackintosh

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