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.

Equity Bottom-Up

<p>In between earnings seasons, we are trying to catch up on the flurry of TMT IPOs over the past few months that have caught our eye. Why Digital Ocean? We're pretty big Amazon bulls cause of AWS, so when we heard there was this mini-AWS that the developer community swears by, had 30%+ EBITDA margins, was accelerating growth by growing dollar retention rates and ARPUs...we had to learn more. Strikes us at the type of business that could be a 5 to 10-bagger over the next year or two. </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>

In between earnings seasons, we are trying to catch up on the flurry of TMT IPOs over the past few months that have caught our eye. Why Digital Ocean? We're pretty big Amazon bulls cause of AWS, so when we heard there was this mini-AWS that the developer community swears by, had 30%+ EBITDA margins, was accelerating growth by growing dollar retention rates and ARPUs...we had to learn more. Strikes us at the type of business that could be a 5 to 10-bagger over the next year or two. 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>The headline for Amazon’s quarter was that its revenue growth decelerated 1700bps to 24% YoY , and appears set to decelerate another 1000bps in 3Q. Tough comps people. Tough comps.</p><p>The company has to invest more and more money to keep up with demand…historically, these are the times you invest in Amazon, when its going through capacity buildouts…its just never happened before that Amazon has had ongoing investment cycles for multiple years. In the end…the absolute size and profitability of the business will be larger. It might just take 2-3 quarters to prove out.</p><p>In the meantime, its higher margin AWS and Advertising businesses are ACCELERATING. AWS on a $59B runrate, growing 37% (500bps acceleration QoQ), Advertising on a $32B runrate, growing 87% (1400bps acceleration). We value these two businesses at ~2T….which is 30% ahead of the current market cap. We think retail is also worth ~$1T, which is what get us to our $3T valuation, which equates to $6,000 a share. </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>

The headline for Amazon’s quarter was that its revenue growth decelerated 1700bps to 24% YoY , and appears set to decelerate another 1000bps in 3Q. Tough comps people. Tough comps.The company has to invest more and more money to keep up with demand…historically, these are the times you invest in Amazon, when its going through capacity buildouts…its just never happened before that Amazon has had ongoing investment cycles for multiple years. In the end…the absolute size and profitability of the business will be larger. It might just take 2-3 quarters to prove out.In the meantime, its higher margin AWS and Advertising businesses are ACCELERATING. AWS on a $59B runrate, growing 37% (500bps acceleration QoQ), Advertising on a $32B runrate, growing 87% (1400bps acceleration). We value these two businesses at ~2T….which is 30% ahead of the current market cap. We think retail is also worth ~$1T, which is what get us to our $3T valuation, which equates to $6,000 a share. 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.

Amazon 2Q21: Pay Attention to AWS and Advertising

<p>Just a monster quarter. The type Facebook used to print in 2015. We've been pushing Snap as a core long since the beginning of the pandemic. We continue to push Snap as a core long...and are probably even more bullish today then we were a year ago. Facebook's market cap is 10x Snap's. We would bet that gap closes rapidly.</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>

Just a monster quarter. The type Facebook used to print in 2015. We've been pushing Snap as a core long since the beginning of the pandemic. We continue to push Snap as a core long...and are probably even more bullish today then we were a year ago. Facebook's market cap is 10x Snap's. We would bet that gap closes rapidly.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.

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.

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shift-up-corp" target="_blank" data-smartkarma-citation="entities:36232:1" rel="noopener">Shift Up (462870 KS)</a> raised around US$320m in its South Korean IPO, after pricing at the top.</li>
<li>Shift Up is a South Korean games developer, which as released three games so far for the global markets.</li>
<li>We have looked at the company’s performance and valuation in our earlier notes. In this note, we talk about the trading dynamics.</li>
</ul>



Shift Up (462870 KS) raised around US$320m in its South Korean IPO, after pricing at the top.
Shift Up is a South Korean games developer, which as released three games so far for the global markets.
We have looked at the company’s performance and valuation in our earlier notes. In this note, we talk about the trading dynamics.


Shift Up IPO Trading - Strong Demand for Quality Asset but It Has Slipped Out of the Top Games

Event-Driven

<ul>
<li>KKR raised around US$730m via selling some stake in <a href="https://www.smartkarma.com/entities/kokusai-electric-corp" target="_blank" data-smartkarma-citation="entities:40152:1" rel="noopener">Kokusai Electric (6525 JP)</a> Japan IPO in Sep 2023. Its remaining stake will be released from its IPO linked lockup soon.</li>
<li>KE main business activities consist of the manufacturing, sales and maintenance service of semiconductor manufacturing equipment.</li>
<li>In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.</li>
</ul>


KKR raised around US$730m via selling some stake in Kokusai Electric (6525 JP) Japan IPO in Sep 2023. Its remaining stake will be released from its IPO linked lockup soon.
KE main business activities consist of the manufacturing, sales and maintenance service of semiconductor manufacturing equipment.
In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.


Kokusai Electric IPO Lock-Up - KKR Will Be Tempted by the US$2.7bn Release but Might Have to Wait

United States

Snap Inc. provides technology and social media services. The Company develops mobile camera application products and services that allow users to send and receive photos, drawings, text, and videos. Snap serves customers worldwide.

Pinterest, Inc. operates and maintains social networking site. The Company provides online venue for personal photos, ideas, oddities, decorations, places to visit, recipes, and other items. Pinterest serves customers worldwide.

Match Group, Inc. is a dating service provider. The Company offers diverse portfolio of apps and services which enables connections across the spectrum of age, race, gender, sexual orientation, and backgrounds. Match Group serves customers worldwide.

IAC Inc operates as a holding company. The Company, through its subsidiaries, provides media and Internet services. IAC serves customers worldwide.

EverQuote, Inc. operates as an Internet based marketing firm. The Company, through its platform, enables consumers to connect with auto insurance carriers and agents to meet their auto insurance needs. EverQuote serves customers in the United States.

Charter Communications, Inc. operates as a cable telecommunications company. The Company offers cable broadcasting, internet, voice, and mass media services. Charter Communications serves customers in the United States.

The Trade Desk, Inc. operates as an advertising technology company. The Company offers online advertising platform that manages display, social, mobile, and video advertising campaigns. Trade Desk serves customers worldwide.

World Wrestling Entertainment, Inc. operates as a media and entertainment company. The Company offers live wrestling events, television programming, music publishing, advertising, licensing, and home video streaming services. World Wrestling distributes its programs worldwide in various languages.

Fox Corporation operates as an entertainment company. The Company produces and licenses news, sports, and entertainment content for distribution through cable television systems, direct broadcast satellite operators, telecommunications companies, and online video distributors. Fox also manages broadcast studios, theaters, editing bays, sound stages, and other production facilities.

Roku, Inc. designs and manufactures consumer electronic products. The Company offers wireless enabled devices that stream audio and video content from the internet to home entertainment systems. Roku serves customers globally.

LY Corporation operates as an internet search engine "Yahoo! JAPAN". The Company provides electronic commerce and settlement finance services for small medium enterprises and individuals. LY also operates media business including search linked advertising and display advertising services.

CAR Group Limited operates as a digital marketplace for vehicles. The Company provides a diversified portfolio of brands to sell and buy cars. CAR Group serves customers worldwide.

Domain Holdings Australia Limited offers multi-platform property solutions. The Company operates an online portal that delivers property marketing solutions for residential, new development, and commercial properties. Domain Holdings Australia serves buyers, sellers, renters, and investors in Australia.

Hello Group Inc. operates as a mobile-based social networking platform. The Company enables users to establish and expand social relationships based on location and interests. Hello Group operates out of the Peoples Republic of China.

Nintendo Co., Ltd. globally develops, manufactures and sells home-use video game hardware and software in home entertainment business.  The company also produces home-game products including cards.

Sea Limited offers information technology services. The Company provides online personal computer and mobile digital content, e-commerce, and payment platforms. Sea serves customers worldwide.

NetEase, Inc. is an Internet technology company that develops applications, services and other Internet technologies in China. The Company's core businesses consist of email service, web portal and online entertainment, including online gaming services. NetEase also offers online advertising, search, mobile applications and e-commerce.

New Work SE operates an an online business network. The Company offers social network for business professionals to connect and share ideas, projects, jobs, and advice. New Work serves customers in Europe.

Vivendi, through its subsidiaries, conducts operations ranging from music, games and television to film and telecommunications.  The Company provides digital and pay television services, sells music compact discs (CDs), develops and distributes interactive entertainment, and operates mobile and fixed-line telecommunications.

WPP PLC operates a communications services group. The Company provides operations encompass advertising, media investment management, consultancy, public relations, healthcare and specialist communications, and branding and identity services. WPP serves customers worldwide.

Alphabet Inc. operates as a holding company. The Company, through its subsidiaries, provides web-based search, advertisements, maps, software applications, mobile operating systems, consumer content, enterprise solutions, commerce, and hardware products.

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Alphabet (GOOGL US)

Recent IPO Insights: Digital Ocean

Why Digital Ocean? When we heard there was this mini-AWS that the developer community swears by, had 30%+ EBITDA margins, was accelerating net...

Aaron Gabin

Amazon 2Q21: Pay Attention to AWS and Advertising

Retail decelerated ALOT. In the meantime, its higher margin AWS and Advertising businesses are ACCELERATING. We value these two businesses at...

Aaron Gabin

Snap: Forget Twitter, Look Out Facebook

We continue to push Snap as a core long...and are probably even more bullish today then we were a year ago. Facebook's market cap is 10x Snap's. We...

Aaron Gabin

Shift Up IPO Trading - Strong Demand for Quality Asset but It Has Slipped Out of the Top Games

Shift Up (462870 KS) raised around US$320m in its South Korean IPO, after pricing at the top. In this note, we talk about the trading dynamics.

Sumeet Singh

Kokusai Electric IPO Lock-Up - KKR Will Be Tempted by the US$2.7bn Release but Might Have to Wait

As per media reports, KKR is considering sell half its stake in Kokusai, with the company planning to buyback some shares as well. The company has...

Sumeet Singh

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