Global equities research in innovation & tech

Vishal Hargovan

An innovation focussed investment company

Granite Bay Capital

Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity.

Equity Bottom-Up

<ul>
<li>Affirm is a leading North American based BNPL provider that is well placed to grow aggressively over the next decade</li>
<li>Their advantages are threefold:</li>
</ul><ol>
<li>Excellence at technology and data which enables Affirm to win enterprise scale platforms</li>
<li>The ability to address transactions across the average order value scale hence address a larger proportion of credit card displacement TAM</li>
<li>Transparency and fairness with a commitment to never charge late fees appeals to merchants who share this value set / brand ethos</li>
</ol><ul><li>There will be multiple winners in the BNPL space and while Afterpay is our preferred pick, we believe Affirm’s strengths cannot be ignored and warrants strong consideration in a long portfolio</li></ul>


Affirm is a leading North American based BNPL provider that is well placed to grow aggressively over the next decade
Their advantages are threefold:

Excellence at technology and data which enables Affirm to win enterprise scale platforms
The ability to address transactions across the average order value scale hence address a larger proportion of credit card displacement TAM
Transparency and fairness with a commitment to never charge late fees appeals to merchants who share this value set / brand ethos
There will be multiple winners in the BNPL space and while Afterpay is our preferred pick, we believe Affirm’s strengths cannot be ignored and warrants strong consideration in a long portfolio

Affirm (AFRM) – The Rise of the Financial Super App

Key points
<ul>
<li>Afterpay is well on its way to becoming an "Internet Scale" company facilitating viral customer growth in multiple markets.</li>
<li>AfterPay’s flywheel results in aggregation of demand and supply with exceptionally low marginal cost of acquisition.</li>
<li>Afterpay is exposed to two winning trends - growth in eCommerce and migration away from credit cards.</li>
<li>Afterpay is Global - low-cost acquisitions in Europe and Asia will enable it to scale in new geographies quickly and attract global retailers.</li>
<li>It brings retailers new customers, higher conversion, hard to reach millennials and higher AOVs.</li>
<li>It drives repeat purchases with each new cohort increasing frequency of use over the previous cohort.</li>
<li>We still see further upside, despite Afterpay being up almost 5X since the beginning of 2020 (valuation article to follow).</li>
</ul>

Key points

Afterpay is well on its way to becoming an "Internet Scale" company facilitating viral customer growth in multiple markets.
AfterPay’s flywheel results in aggregation of demand and supply with exceptionally low marginal cost of acquisition.
Afterpay is exposed to two winning trends - growth in eCommerce and migration away from credit cards.
Afterpay is Global - low-cost acquisitions in Europe and Asia will enable it to scale in new geographies quickly and attract global retailers.
It brings retailers new customers, higher conversion, hard to reach millennials and higher AOVs.
It drives repeat purchases with each new cohort increasing frequency of use over the previous cohort.
We still see further upside, despite Afterpay being up almost 5X since the beginning of 2020 (valuation article to follow).


Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Broad global indexes (MSCI ACWI, ACWI ex-US, EAFE, and EM) were able to shrug off recent news of a more contagious Covid variant that popped-up in the UK. Additionally, Covid fears have done nothing to derail ongoing positive market dynamics. As long as support levels hold and market dynamics remain positive, our outlook remains bullish and we continue to view any weakness as a buying opportunity. Actionable Themes in today's report: Services, Technology, Manufacturing, and Materials.

Broad global indexes (MSCI ACWI, ACWI ex-US, EAFE, and EM) were able to shrug off recent news of a more contagious Covid variant that popped-up in the UK. Additionally, Covid fears have done nothing to derail ongoing positive market dynamics. As long as support levels hold and market dynamics remain positive, our outlook remains bullish and we continue to view any weakness as a buying opportunity. Actionable Themes in today's report: Services, Technology, Manufacturing, and Materials.

Global Equity Strategy: Support Levels Holding; Bullish Outlook Intact

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

*Interesting Strategic Move: On December 23, 2020, Challenger (CGF.AU) announced its intention to acquire MyLifeMyFinance (MLMF), an Australian savings &amp; loan (S&amp;L) for AUD 35 mn from MyLifeMyMoney Superannuation Fund (known as “Catholic Super”). Following the acquisition, Challenger will hold an Australian Prudential Regulation Authority (APRA) authorized deposit-taking institution (ADI) license. Unlike traditional Australian banks, Challenger will relay far less on home lending an rather focus its asset generation on existing investment activities;  and*But A Pricey Deal: While this is an interesting strategic transaction for Challenger, it was not cheap. Challenger paid 2.4x P/BV for MLMF based on 3Q20 figures – well above the commercial bank average in Australia. We infer from Challenger’s guidance for FY 2021 that MLMF generates approximately AUD 2 mn per annum – implying a P/E of 17.5x. Taking its 60 bp cover of stated loans, we are confident that MLMF is actually understating its full cost by between AUD 2-3 mn. It’s a good thing the absolute dollar value was tiny.

*Interesting Strategic Move: On December 23, 2020, Challenger (CGF.AU) announced its intention to acquire MyLifeMyFinance (MLMF), an Australian savings &amp; loan (S&amp;L) for AUD 35 mn from MyLifeMyMoney Superannuation Fund (known as “Catholic Super”). Following the acquisition, Challenger will hold an Australian Prudential Regulation Authority (APRA) authorized deposit-taking institution (ADI) license. Unlike traditional Australian banks, Challenger will relay far less on home lending an rather focus its asset generation on existing investment activities;  and*But A Pricey Deal: While this is an interesting strategic transaction for Challenger, it was not cheap. Challenger paid 2.4x P/BV for MLMF based on 3Q20 figures – well above the commercial bank average in Australia. We infer from Challenger’s guidance for FY 2021 that MLMF generates approximately AUD 2 mn per annum – implying a P/E of 17.5x. Taking its 60 bp cover of stated loans, we are confident that MLMF is actually understating its full cost by between AUD 2-3 mn. It’s a good thing the absolute dollar value was tiny. 

*Crackdown Begins: The State Administration for Market Regulations (SAMR) or better know as mainland China’s antitrust regulator fined China Literature (772.HK), Tencent Holdings (700.HK) [Tencent] subsidiary CNY 500,000 for failing to gain certain acquisition or buyout approvals – thereby violating the country’s anti-monopoly laws; and *Small Fine, But Implications Large: The current Tencent fine is relatively small compared to the size of the company, however, it does serve as a wake-up call to halt M&amp;A activity without the requisite regulatory sign off. SAMR is also looking into a recent deal between Huya (HUYA.US) and Douyu (DOYU.US) where Tencent would have 68% of voting shares in the combined entity.

*Crackdown Begins: The State Administration for Market Regulations (SAMR) or better know as mainland China’s antitrust regulator fined China Literature (772.HK), Tencent Holdings (700.HK) [Tencent] subsidiary CNY 500,000 for failing to gain certain acquisition or buyout approvals – thereby violating the country’s anti-monopoly laws; and *Small Fine, But Implications Large: The current Tencent fine is relatively small compared to the size of the company, however, it does serve as a wake-up call to halt M&amp;A activity without the requisite regulatory sign off. SAMR is also looking into a recent deal between Huya (HUYA.US) and Douyu (DOYU.US) where Tencent would have 68% of voting shares in the combined entity.

Tencent Holdings – Slap On The Wrist For Now

Australia

Afterpay Limited provides financial solutions. The Company offers payment platform that allow users to maintain financial wellness and control, by splitting payments in four, for both online and in-store purchases. Afterpay serves customers globally.

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Afterpay (APT AU)

Affirm (AFRM) – The Rise of the Financial Super App

Affirm has a strong technology focus and a mission driven CEO who believes in bringing fairness to financial products. Investors should not...

Vishal Hargovan

Afterpay - An Internet Scale Company

Afterpay is on its way to becoming an "Internet Scale" company. We still see further upside driven by two winning trends - growth in eCommerce and...

Vishal Hargovan

Global Equity Strategy: Support Levels Holding; Bullish Outlook Intact

As long as support levels hold and market dynamics remain positive, our outlook remains bullish and we continue to view any weakness as a buying...

Vermilion Research

Challenger - Big Opportunity

CHALLENGER LTD: Challenger announced its intention to acquire MyLifeMyFinance . This deal, while small, was not cheap - but no doubt will be...

Thomas J. Monaco

Tencent Holdings – Slap On The Wrist For Now

TENCENT HOLDINGS: SAMR fined Tencent's subsidiary CNY 500,000 for failing to gain certain acquisition or buyout approvals. The fine is small but...

Thomas J. Monaco

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