Telco/Internet specialist

Kirk Boodry

Redex Research

Thematic (Sector/Industry)

The past nine months have been a wild ride. The industry has largely avoided the disruption of Covid-19 but NTT’s ¥4 trillion DoCoMo restructuring and regulatory-driven price reductions have shaken things up whilst competition from Rakuten is likely to heat up as it raises cash and accelerates investment. Mobile revenues will be down but that can be made up in other areas and whilst profitability in FY21 is flat at best and likely down modestly, shareholder returns are stable to growing.  NTT and KDDI are top picks with Softbank offering modest upside whilst we are more cautious on Rakuten after a 46% YTD run which largely captures the upside potential a more competitive mobile service offers.

The past nine months have been a wild ride. The industry has largely avoided the disruption of Covid-19 but NTT’s ¥4 trillion DoCoMo restructuring and regulatory-driven price reductions have shaken things up whilst competition from Rakuten is likely to heat up as it raises cash and accelerates investment. Mobile revenues will be down but that can be made up in other areas and whilst profitability in FY21 is flat at best and likely down modestly, shareholder returns are stable to growing.  NTT and KDDI are top picks with Softbank offering modest upside whilst we are more cautious on Rakuten after a 46% YTD run which largely captures the upside potential a more competitive mobile service offers.

Japan Telecom Sector: FY21 Will Be Tougher and More Competitive but Returns Can Still Rise

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

Spotify printed a 1Q21 miss on MAUs and mediocre guidance update for 2021. We’ve said this before and we’ll say it again…Spotify strikes us as one of the worst business models of a large cap TMT company we’ve ever seen. The future bliss of podcasting driven profitability is clearly just that…future bliss. Management has NEVER explained how podcasting will translate into a more profitable business other than through hazy comments about “holistic nature of churn reduction and new users”…it reminds us of Reed Hastings when he promised that one day Netflix would be FCF positive years ago…but at least Netflix had an operating model with inherent operating leverage and pricing power, neither of which is present with Spotify. We can justify downside to $125, but realistically think $200 is a reasonable price target. Stay Short.<div class="content-highlight">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.</div>

Spotify printed a 1Q21 miss on MAUs and mediocre guidance update for 2021. We’ve said this before and we’ll say it again…Spotify strikes us as one of the worst business models of a large cap TMT company we’ve ever seen. The future bliss of podcasting driven profitability is clearly just that…future bliss. Management has NEVER explained how podcasting will translate into a more profitable business other than through hazy comments about “holistic nature of churn reduction and new users”…it reminds us of Reed Hastings when he promised that one day Netflix would be FCF positive years ago…but at least Netflix had an operating model with inherent operating leverage and pricing power, neither of which is present with Spotify. We can justify downside to $125, but realistically think $200 is a reasonable price target. Stay Short.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.

Spotify 1Q21 Earnings: What Is an Audio Platform Worth? 2-3x Sales?

Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Equity Capital Markets

Kioxia Holdings  / Equity Capital Markets

In today's conference call, SK Hynix said an interesting thing about Kioxia.<ul>
<li>Hynix confirmed that Kioxia would give another shot to an IPO in the second half of this year instead of taking the Micron/WD offer.</li>
<li>Hynix said that was what it was told by the Bain Capital Consortium and the Kioxia management lately.</li>
</ul>

In today's conference call, SK Hynix said an interesting thing about Kioxia.
Hynix confirmed that Kioxia would give another shot to an IPO in the second half of this year instead of taking the Micron/WD offer.
Hynix said that was what it was told by the Bain Capital Consortium and the Kioxia management lately.


SK Hynix Conference Call Today: Kioxia IPO in 2H & Plan to Sell 31% After IPO

Summary: Coursera, an online education platform will see its business model decelerate faster than expected. While the TAM trajectory of online education has clearly inflected higher due to the pandemic, we think  the Coursera’s growth trajectory is being mismodeled based on 2020’s surge in signups. Coursera’s profitability is dependent on scaling its enterprise and degree customer bases. While the demand for upskilling employees is real, intense competition from LinkedIn, Pluralsight, and others may crimp growth and gross margins segment, while a lack of leverage with its content suppliers (university partners), plus edX’s open source alternative  weaken revenue sharing over time. A lack of tangible evidence of Coursera’s skills-based credentialing translating to jobs will result in underwhelming consumer growth and lack of pricing power. Downside risks around regulation and competitive incursion by tech platforms paired with an obscene valuation make a compelling short case. Base Case Valuation: $33                                  Bull Case: $57                                 Bear Case: $20<div class="content-highlight">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.</div>

Summary: Coursera, an online education platform will see its business model decelerate faster than expected. While the TAM trajectory of online education has clearly inflected higher due to the pandemic, we think  the Coursera’s growth trajectory is being mismodeled based on 2020’s surge in signups. Coursera’s profitability is dependent on scaling its enterprise and degree customer bases. While the demand for upskilling employees is real, intense competition from LinkedIn, Pluralsight, and others may crimp growth and gross margins segment, while a lack of leverage with its content suppliers (university partners), plus edX’s open source alternative  weaken revenue sharing over time. A lack of tangible evidence of Coursera’s skills-based credentialing translating to jobs will result in underwhelming consumer growth and lack of pricing power. Downside risks around regulation and competitive incursion by tech platforms paired with an obscene valuation make a compelling short case. Base Case Valuation: $33                                  Bull Case: $57                                 Bear Case: $20Obex’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.

Sona Blw Precision Forgings Lt / Equity Capital Markets

Sona Comstar (Sona) aims to raise around US$800m in its Indian IPO. The company is backed by Blackstone, which held a 66.2% stake prior to listing.Sona is an automotive technology company, designing, manufacturing and supplying highly engineered, mission critical automotive systems and components to automotive OEMs across US, Europe, India and China, for both electrified and non-electrified powertrain segments.Sona delivered a steady performance in 2019 with revenue up 16.6% and PAT up 24.1%. However, its revenue fell by 14.5% in FY20, although it still managed to grow its PAT by 4%. In addition, its 9M21 performance was propped by a single EV customer. While the company enjoys a long customer relationship, its largest customers haven’t consistently grown their contribution to revenue over the past few years.

Sona Comstar (Sona) aims to raise around US$800m in its Indian IPO. The company is backed by Blackstone, which held a 66.2% stake prior to listing.Sona is an automotive technology company, designing, manufacturing and supplying highly engineered, mission critical automotive systems and components to automotive OEMs across US, Europe, India and China, for both electrified and non-electrified powertrain segments.Sona delivered a steady performance in 2019 with revenue up 16.6% and PAT up 24.1%. However, its revenue fell by 14.5% in FY20, although it still managed to grow its PAT by 4%. In addition, its 9M21 performance was propped by a single EV customer. While the company enjoys a long customer relationship, its largest customers haven’t consistently grown their contribution to revenue over the past few years.

Sona Comstar Pre-IPO - Inconsistent Growth, Patchy Disclosures

United States

Apple Inc. designs, manufactures, and markets smartphones, personal computers, tablets, wearables and accessories, and sells a variety of related accessories. The Company also offers payment, digital content, cloud and advertising services. Apple Inc.'s customers are primarily in consumer, small & mid-sized business, education, enterprise and government markets worldwide.

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Apple (AAPL US)

Japan Telecom Sector: FY21 Will Be Tougher and More Competitive but Returns Can Still Rise

FY21 will be a tough year for mobile with 5% service revenue erosion but new services provide some offset and returns to shareholders can still...

Kirk Boodry

Spotify 1Q21 Earnings: What Is an Audio Platform Worth? 2-3x Sales?

Spotify printed a 1Q21 miss on MAUs and mediocre guidance update for 2021. Spotify is one of the worst business models of a large cap TMT company...

Aaron Gabin

SK Hynix Conference Call Today: Kioxia IPO in 2H & Plan to Sell 31% After IPO

This post briefly summarizes the Hynix conference call today about Kioxia IPO and its plan to sell the Kioxia stake after IPO.

Sanghyun Park

Coursera: Back to School

Coursera, an online education platform will see its business model decelerate faster than expected. Downside risks around regulation and...

Aaron Gabin

Sona Comstar Pre-IPO - Inconsistent Growth, Patchy Disclosures

Sona Comstar (Sona) aims to raise around US$800m in its Indian IPO. The company is backed by Blackstone, which held a 66.2% stake prior to listing.

Sumeet Singh

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