Asean-focused. Ex-Head of Thai Research

Athaporn Arayasantiparb, CFA

Asean (Thailand) Focused Independent Research

M Corp Review

M Corp is led by Athaporn Arayasantiparb who served as Head of Research for UOB and ANZ in Thailand and was an award-winning telecoms analyst at UBS in 2010 (AsiaMoney Thailand category) and Regional Strategist for DMG in Singapore. Prior to that, he also served as Kasikornbank credit analyst and scholar. He has a total work experience of 17 years, of which 14 were in research and 4 in research management roles. He started his career as an engineer for PTT and currently manages family investments. He holds an MBA from Stern (NYU) and CFA Charter since 2006. Apart from IPO Radar, which focuses on future listings, MCorp Review also provides six on-going thematic series ranked by frequency in descending order, namely: 1) Silicon Stories (technology) 2) Sathorn Series (financial services) 3) Thai-Coons (billionaire origin stories) 4) Reality Check (data-driven, investigative) 5) Thai Media Spotlight; and 6) Thai Macro Watch (global market drivers).

Thematic (Sector/Industry)

Resistance is futile in the world of technology. In this review, we observe a number of Thai companies getting on the bandwagon. Others are finding it more difficult to adapt. For those with the strength to make real progress, it may be worth a look.<ul>
<li>
BAY upgrades Finnovate to venture capital after years of being an integral part of the bank. Finnovate's portfolio now includes Omise (cryptocurrency), Grab (food delivery), and Finnomena (financial advisory).</li>
<li>
Rise of robots. Thailand emerges as top ten user of industrial robots globally and key player in emerging markets and threatening both agricultural and industrial jobs nationwide, according to TNN Business Watch.</li>
<li>
RS reported strong profit growth of over 60% but more importantly, much of this is driven by yet a new business....e-commerce.</li>
<li>
Three interesting Thai startups were recently identified based on their strong funding: 1) a CP Group-backed AI firm Amity; 2) aCommerce, an e-commerce end-to-end enabler; and 3) Synqa, the parent company of Omise.</li>
<li>
Lazada goes omni-channel. Lazada sets up its first pop-up store at Siam Center emulating American leaders like WalMart and Amazon. They may have lost the crown to Shoppee, but it's still a better investment that local defender COL, which partners with rival JD.com.</li>
</ul>

Resistance is futile in the world of technology. In this review, we observe a number of Thai companies getting on the bandwagon. Others are finding it more difficult to adapt. For those with the strength to make real progress, it may be worth a look.

BAY upgrades Finnovate to venture capital after years of being an integral part of the bank. Finnovate's portfolio now includes Omise (cryptocurrency), Grab (food delivery), and Finnomena (financial advisory).

Rise of robots. Thailand emerges as top ten user of industrial robots globally and key player in emerging markets and threatening both agricultural and industrial jobs nationwide, according to TNN Business Watch.

RS reported strong profit growth of over 60% but more importantly, much of this is driven by yet a new business....e-commerce.

Three interesting Thai startups were recently identified based on their strong funding: 1) a CP Group-backed AI firm Amity; 2) aCommerce, an e-commerce end-to-end enabler; and 3) Synqa, the parent company of Omise.

Lazada goes omni-channel. Lazada sets up its first pop-up store at Siam Center emulating American leaders like WalMart and Amazon. They may have lost the crown to Shoppee, but it's still a better investment that local defender COL, which partners with rival JD.com.


Silicon Stories M: If You Can't Beat Them, Join Them

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Event-Driven

<a href="https://www.smartkarma.com/entities/dufry-ag" target="_blank" data-smartkarma-citation="entities:22344:1" rel="noopener">Dufry AG (DUFN SW)</a> is an operator of more than 2,400 travel retail stores globally under several famous brands including Dufry and World Duty Free. Yesterday, 6th October 2020, the company held an extraordinary general meeting and obtained shareholder approval to issue up to 25 million new shares to raise about CHF 700m ($764m).Existing holders will get priority over Alibaba and Advent International to participate in the secondary offering via an “at-market” rights offering of 4 new shares per every 9 existing shares held.Dufry has already secured a CHF 415m equity investment commitment from funds managed by Advent International Corporation and its affiliates to purchase shares at CHF 28.50 per share.On 5th October 2020, Dufry announced a strategic partnership with the <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a>. The partnership involves creating a JV in China (51% Alibaba and 49% Dufry) and a capital injection of CHF 250m by Alibaba in exchange for a maximum of 9.99% ownership of Dufry’s post-offering share capital.The shares not taken up by existing shareholders will be first offered to Advent International and the remaining is offered to Alibaba Group at CHF 28.50 per share- subject to a minimum participation of 8.8% of Dufry’s post-offering share capital.Remaining shares will be offered to the market via a public offering in Switzerland and private placements in certain jurisdictions outside Switzerland.Both Alibaba and Advent International have agreed to a lock-up period of 6 months.If the offer price is higher than CHF 28.50 per share, Advent International and Alibaba will not be obliged to purchase Dufry shares.

Dufry AG (DUFN SW) is an operator of more than 2,400 travel retail stores globally under several famous brands including Dufry and World Duty Free. Yesterday, 6th October 2020, the company held an extraordinary general meeting and obtained shareholder approval to issue up to 25 million new shares to raise about CHF 700m ($764m).Existing holders will get priority over Alibaba and Advent International to participate in the secondary offering via an “at-market” rights offering of 4 new shares per every 9 existing shares held.Dufry has already secured a CHF 415m equity investment commitment from funds managed by Advent International Corporation and its affiliates to purchase shares at CHF 28.50 per share.On 5th October 2020, Dufry announced a strategic partnership with the Alibaba Group (BABA US). The partnership involves creating a JV in China (51% Alibaba and 49% Dufry) and a capital injection of CHF 250m by Alibaba in exchange for a maximum of 9.99% ownership of Dufry’s post-offering share capital.The shares not taken up by existing shareholders will be first offered to Advent International and the remaining is offered to Alibaba Group at CHF 28.50 per share- subject to a minimum participation of 8.8% of Dufry’s post-offering share capital.Remaining shares will be offered to the market via a public offering in Switzerland and private placements in certain jurisdictions outside Switzerland.Both Alibaba and Advent International have agreed to a lock-up period of 6 months.If the offer price is higher than CHF 28.50 per share, Advent International and Alibaba will not be obliged to purchase Dufry shares.

Supun Walpola

Equity Bottom-Up

Alibaba Group Holding  / Equity Bottom-Up

Improving marginal profitability both at the segment level and the consolidated level suggests that benefits from Alibaba’s upfront investments in new businesses are gradually starting to materialise. Our linear model suggests an OP margin improvement of around 400-500bps in the medium-term (from 18%-19% currently to around 21%-23%).However, negative marginal profitability of the Cloud Computing, and Innovation Initiatives and Other segments continue to put pressure on consolidated margins. We believe it would be unlikely for the OP margin to recover to the pre-FY03/18 level of 30%+ anytime soon.We remain positive about Alibaba’s longer-term prospects as its e-commerce initiatives outside of Taobao and Tmall are getting closer to making profits, however, we believe the company’s medium-term valuation would still be driven by its steady growth profile rather than a margin improvement. Nevertheless, given that Alibaba is trading close to an all-time high, and looks fairly priced compared to its trading history, we would wait for a pullback to enter.

Improving marginal profitability both at the segment level and the consolidated level suggests that benefits from Alibaba’s upfront investments in new businesses are gradually starting to materialise. Our linear model suggests an OP margin improvement of around 400-500bps in the medium-term (from 18%-19% currently to around 21%-23%).However, negative marginal profitability of the Cloud Computing, and Innovation Initiatives and Other segments continue to put pressure on consolidated margins. We believe it would be unlikely for the OP margin to recover to the pre-FY03/18 level of 30%+ anytime soon.We remain positive about Alibaba’s longer-term prospects as its e-commerce initiatives outside of Taobao and Tmall are getting closer to making profits, however, we believe the company’s medium-term valuation would still be driven by its steady growth profile rather than a margin improvement. Nevertheless, given that Alibaba is trading close to an all-time high, and looks fairly priced compared to its trading history, we would wait for a pullback to enter.

Alibaba: New E-Commerce Businesses Could Soon Turn Profitable but a Big Margin Improvement Unlikely

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

*Highlights of Investor Day: Alibaba Group (BABA.US/9988.HK) [Alibaba] held a virtual 2020 Investor Day, where it emphasized high quality growth, structural opportunities, and efficiency gains; and*Extracting Synergies: There remains an opportunity for Alibaba cross-sell and extract synergies. Some areas of focus include: DME; Freshippo; local services/Ant Financial; Cainiao; and Alibaba Cloud.

*Highlights of Investor Day: Alibaba Group (BABA.US/9988.HK) [Alibaba] held a virtual 2020 Investor Day, where it emphasized high quality growth, structural opportunities, and efficiency gains; and*Extracting Synergies: There remains an opportunity for Alibaba cross-sell and extract synergies. Some areas of focus include: DME; Freshippo; local services/Ant Financial; Cainiao; and Alibaba Cloud. 

Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

Equity Capital Markets

<ul>
<li>CreditTech, Ant Group’s credit arm, is one of its key growth areas, accounting for 39% of revenues in 1H20</li>
<li>Zhima Credit (Sesame Credit) acts as the group’s credit scoring gateway to assess the credit risk of Alipay users and merchants as potential borrowers</li>
<li>Zhima Credit adds value by providing Ant Group’s partner banks and affiliate lender MYbank with superior credit data, by tapping into alternative big data as well as public data</li>
<li>Effectively, Zhima Credit acts as a credit risk filter to provide enhanced underwriting performance; this has contributed to a low delinquency rate and low cost of risk</li>
<li>
<a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial (1051260D CH)</a> only retains c 2% of the total credit originated, yet good credit quality matters to Ant’s long term relationship with its partner banks as well as to its revenue stream and its SMB exposure via MYbank</li>
<li>In short, through Zhima Credit Ant Group has a Big Data opportunity in China by leveraging its data on 711m Alipay users and 80m plus merchants, and then aggregating and applying this data not only to expand its CreditTech arm, but also to potentially turning Zhima Credit into its own Big Data profit centre</li>
<li>At the mid-point of the assumed Ant IPO valuation range, we believe that Ant’s prospective trading multiples are attractive relative to the listed credit bureaus, and Ant Group is also attractive versus its Chinese MegaTech peers</li>
<li>Risks to our positive view on Ant Group and its Big Data prospects include increased competition from its core competitors, as well as banks, and also increased regulatory scrutiny and restrictions on the largest Chinese FinTech players</li>
</ul>


CreditTech, Ant Group’s credit arm, is one of its key growth areas, accounting for 39% of revenues in 1H20
Zhima Credit (Sesame Credit) acts as the group’s credit scoring gateway to assess the credit risk of Alipay users and merchants as potential borrowers
Zhima Credit adds value by providing Ant Group’s partner banks and affiliate lender MYbank with superior credit data, by tapping into alternative big data as well as public data
Effectively, Zhima Credit acts as a credit risk filter to provide enhanced underwriting performance; this has contributed to a low delinquency rate and low cost of risk

Ant Financial (1051260D CH) only retains c 2% of the total credit originated, yet good credit quality matters to Ant’s long term relationship with its partner banks as well as to its revenue stream and its SMB exposure via MYbank
In short, through Zhima Credit Ant Group has a Big Data opportunity in China by leveraging its data on 711m Alipay users and 80m plus merchants, and then aggregating and applying this data not only to expand its CreditTech arm, but also to potentially turning Zhima Credit into its own Big Data profit centre
At the mid-point of the assumed Ant IPO valuation range, we believe that Ant’s prospective trading multiples are attractive relative to the listed credit bureaus, and Ant Group is also attractive versus its Chinese MegaTech peers
Risks to our positive view on Ant Group and its Big Data prospects include increased competition from its core competitors, as well as banks, and also increased regulatory scrutiny and restrictions on the largest Chinese FinTech players


China

Alibaba Group Holding Limited provides online sales services. The Company provides internet infrastructure, electronic commerce, online financial, and internet content services through its subsidiaries. Alibaba Group Holding offers its products and services worldwide.

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Alibaba Group Holding (9988 HK)

Silicon Stories M: If You Can't Beat Them, Join Them

Resistance is futile in the world of

Athaporn Arayasantiparb, CFA

Alibaba to Buy 10% of Dufry

$dufry is the operator of more than 2,400 travel retail stores globally under several famous brands including Dufry and World Duty Free. Yesterday,...

Oshadhi Kumarasiri

Alibaba: New E-Commerce Businesses Could Soon Turn Profitable but a Big Margin Improvement Unlikely

Improving marginal profitability both at the segment level and the consolidated level suggests that benefits from Alibaba’s upfront investments in...

Supun Walpola

Alibaba – Virtually There

*Highlights of Investor Day: Alibaba Group (BABA.US/9988.HK) [Alibaba] held a virtual 2020 Investor Day, where its emphasis was on high quality...

Thomas J. Monaco

Ant Group: The Big Data Opportunity

CreditTech, Ant Group’s credit arm, is one of its key growth areas, accounting for 39% of revenues in 1H20 Zhima Credit (Sesame Credit) acts as...

Victor Galliano

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