Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<p>Japan-based food delivery company <a href="https://www.smartkarma.com/entities/demae-can-co-ltd" target="_blank" data-smartkarma-citation="entities:10524:1" rel="noopener">Demae-Can Co., Ltd. (2484 JP)</a> launched a follow-on equity offering after market-close today to raise capital for business expansion. </p><p>In this offering the company will be issuing 55,436,400 new shares and selling 3,240,000 treasury shares out of which a total of 19,293,900 shares will be allocated to the public and 39,382,500 shares will be allocated for <a href="https://www.smartkarma.com/entities/z-holdings-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Z Holdings (4689 JP)</a> and South-Korea based <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a>. Based on today's closing price, the total size of this equity offering could be around ~¥105bn (US$950mn) and the portion allocated to public shareholders could be around ~¥35bn (US$315mn). However, the official announcement estimates the minimum size of the equity offering to be around ~¥80bn (US$726mn) and the above-mentioned allocation can change slightly depending on share price movement and public investor interest. </p><p>There is a really interesting event angle here which should pique the interest of investors. </p><p>More below.</p>

Japan-based food delivery company Demae-Can Co., Ltd. (2484 JP) launched a follow-on equity offering after market-close today to raise capital for business expansion. In this offering the company will be issuing 55,436,400 new shares and selling 3,240,000 treasury shares out of which a total of 19,293,900 shares will be allocated to the public and 39,382,500 shares will be allocated for Z Holdings (4689 JP) and South-Korea based Naver Corp (035420 KS). Based on today's closing price, the total size of this equity offering could be around ~¥105bn (US$950mn) and the portion allocated to public shareholders could be around ~¥35bn (US$315mn). However, the official announcement estimates the minimum size of the equity offering to be around ~¥80bn (US$726mn) and the above-mentioned allocation can change slightly depending on share price movement and public investor interest. There is a really interesting event angle here which should pique the interest of investors. More below.

Demae-Can's Latest Offering Preserves The Potential for TOPIX Inclusion

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>DoorDash’s had a fairly impressive 2Q21 after a solid 1Q21…the company even raised full year guidance by more than then the second quarter beat. However, they are guiding to deceleration in the backhalf of the year as reopenings pick up and normal seasonality sets in…. the question is when does that happen given how much the delta variant is preventing normalization.  We don’t usually short on valuation alone, you need a fundamental competitive flaw. We think DoorDash appears to be well run and is executing, buts its valuation is nonsensical at 12x forward sales vs. a peer group average of 4x. Grubhub and Postmates get acquired at 6x forward sales a year ago. With limited disclosures on international progress or non-food delivery or its Dashpass subscriber base, we don’t understand how investors can underwrite the valuation. We’d pair a Dash short with a Match long for COVID reopening.</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>

DoorDash’s had a fairly impressive 2Q21 after a solid 1Q21…the company even raised full year guidance by more than then the second quarter beat. However, they are guiding to deceleration in the backhalf of the year as reopenings pick up and normal seasonality sets in…. the question is when does that happen given how much the delta variant is preventing normalization.  We don’t usually short on valuation alone, you need a fundamental competitive flaw. We think DoorDash appears to be well run and is executing, buts its valuation is nonsensical at 12x forward sales vs. a peer group average of 4x. Grubhub and Postmates get acquired at 6x forward sales a year ago. With limited disclosures on international progress or non-food delivery or its Dashpass subscriber base, we don’t understand how investors can underwrite the valuation. We’d pair a Dash short with a Match long for COVID reopening.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.  

DoorDash 2Q21 Earnings: Awaiting Deceleration

Telco/Internet specialist

Kirk Boodry

Redex Research

<p>The last three quarters have largely been defined by the potential for Vision Fund portfolio companies to go public but a new theme is emerging as Softbank starts to take money off the table. There was much less discussion of liquidity events but more on asset sales including partial sales of <a href="https://www.smartkarma.com/entities/uber-technologies-inc" target="_blank" data-smartkarma-citation="entities:430:1" rel="noopener">Uber (UBER US)</a> , <a href="https://www.smartkarma.com/entities/ke-holdings-inc" target="_blank" data-smartkarma-citation="entities:29213:1" rel="noopener">KE Holdings Inc (BEKE US)</a> , <a href="https://www.smartkarma.com/entities/doordash-inc" target="_blank" data-smartkarma-citation="entities:28881:1" rel="noopener">DoorDash Inc (DASH US)</a> , Guardant Health and Northstar public equities in the quarter. With a further sale of Uber shares this month, that theme probably picks up steam as the quarter goes on, particularly if <a href="https://www.smartkarma.com/entities/coupang" target="_blank" data-smartkarma-citation="entities:28425:1" rel="noopener">Coupang (CPNG US)</a>  can hold its value into September when lockups expire.</p><p>Proceeds from these sales will be used to fund Vision Fund 2 commitments, which will get a further boost from Masa/management investing their own money alongside. That would seem to flag corporate governance concerns but as Masa already has an economic stake in Northstar and earlier plans for a management investment in VF1 passed board muster, this probably does not impact sentiment very much.</p><p>There is some modest dissonance in the results as Softbank said that it was not announcing a buyback because it was not selling assets like it did last year. Apparently that definition excludes investments like the ones above although Masa did tease that they thought about share buybacks every day because of the depth of the holding company discount. That could just be noise as there is no upside in ruling out buybacks entirely but there is precedent as management has been incentivized to act in the past when discounts reached extreme levels. That used to be around 50% (we are at c. 46% now) but last year’s 67%+ discount may have reset the bar on where shares are too cheap.</p>

The last three quarters have largely been defined by the potential for Vision Fund portfolio companies to go public but a new theme is emerging as Softbank starts to take money off the table. There was much less discussion of liquidity events but more on asset sales including partial sales of Uber (UBER US) , KE Holdings Inc (BEKE US) , DoorDash Inc (DASH US) , Guardant Health and Northstar public equities in the quarter. With a further sale of Uber shares this month, that theme probably picks up steam as the quarter goes on, particularly if Coupang (CPNG US)  can hold its value into September when lockups expire.Proceeds from these sales will be used to fund Vision Fund 2 commitments, which will get a further boost from Masa/management investing their own money alongside. That would seem to flag corporate governance concerns but as Masa already has an economic stake in Northstar and earlier plans for a management investment in VF1 passed board muster, this probably does not impact sentiment very much.There is some modest dissonance in the results as Softbank said that it was not announcing a buyback because it was not selling assets like it did last year. Apparently that definition excludes investments like the ones above although Masa did tease that they thought about share buybacks every day because of the depth of the holding company discount. That could just be noise as there is no upside in ruling out buybacks entirely but there is precedent as management has been incentivized to act in the past when discounts reached extreme levels. That used to be around 50% (we are at c. 46% now) but last year’s 67%+ discount may have reset the bar on where shares are too cheap.

Softbank Group - Q1 21 Results Reaction: A Slow Shift in Focus

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

<div><p><a href="https://www.smartkarma.com/entities/zomato-media-pvt" target="_blank" data-smartkarma-citation="entities:28820:1" rel="noopener">Zomato (ZOM IN)</a> raised US$1.3bn in its India IPO, making it the the largest listing in India from the technology sector.</p></div><div>We have covered various aspects of the deal in our earlier notes  </div><div><ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/zomato-pre-ipo-filings-lack-narrative-a-little-bit-of-history-helps" target="_blank" rel="noopener">Zomato Pre-IPO - Filings Lack Narrative, a Little Bit of History Helps, </a></li>
<li><a href="https://www.smartkarma.com/insights/zomato-pre-ipo-food-delivery-revenue-was-probably-up-16x" target="_blank" rel="noopener">Zomato Pre-IPO - Food Delivery Revenue Was Probably up 16x, and</a></li>
<li><a href="https://www.smartkarma.com/insights/zomato-pre-ipo-peer-comparison-listed-and-domestic" target="_blank" rel="noopener">Zomato Pre-IPO - Peer Comparison - Listed and Domestic</a></li>
<li><a href="https://www.smartkarma.com/insights/zomato-ipo-strong-4q21-has-a-very-long-runway" target="_blank" rel="noopener">Zomato IPO - Strong 4Q21, Has a Very Long Runway</a></li>
</ul></div><div><p>In this note, we will talk about the updates and the trading dynamics.</p></div>

Zomato (ZOM IN) raised US$1.3bn in its India IPO, making it the the largest listing in India from the technology sector.We have covered various aspects of the deal in our earlier notes  
Zomato Pre-IPO - Filings Lack Narrative, a Little Bit of History Helps, 
Zomato Pre-IPO - Food Delivery Revenue Was Probably up 16x, and
Zomato Pre-IPO - Peer Comparison - Listed and Domestic
Zomato IPO - Strong 4Q21, Has a Very Long Runway
In this note, we will talk about the updates and the trading dynamics.

Zomato IPO Trading - Ample Demand for Unique Exposure

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.

<p>We previously examined <a href="https://www.smartkarma.com/entities/zomato-media-pvt" target="_blank" data-smartkarma-citation="entities:28820:1" rel="noopener">Zomato (ZOM IN)</a> and expressed our concerns regarding the company’s unit cost dynamics mentioning that the FY21 operating loss is a sign that Zomato is incapable of generating profits even from its most loyal customers who stuck with the company during the hardest days of COVID-19.</p><p>The offer period begins tomorrow (will continue till 16<sup>th</sup> July 2021) at a price range of INR 72.0-76.0 per share, which implies a market cap range of INR 569.6-596.2bn.</p>

We previously examined Zomato (ZOM IN) and expressed our concerns regarding the company’s unit cost dynamics mentioning that the FY21 operating loss is a sign that Zomato is incapable of generating profits even from its most loyal customers who stuck with the company during the hardest days of COVID-19.The offer period begins tomorrow (will continue till 16th July 2021) at a price range of INR 72.0-76.0 per share, which implies a market cap range of INR 569.6-596.2bn.

Zomato IPO Valuation: Making Losses In Most Favorable Circumstances

United States

DoorDash, Inc. provides restaurant food delivery services. The Company develops technology to connect customers with merchants through an on-demand food delivery application. DoorDash serves customers in the United States.

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DoorDash (DASH US)

Demae-Can's Latest Offering Preserves The Potential for TOPIX Inclusion

Japan-based food delivery company Demae-Can announced a large equity offering to boost their marketing expenditure and defend their market share in...

Janaghan Jeyakumar, CFA

DoorDash 2Q21 Earnings: Awaiting Deceleration

DoorDash appears to be well run and is executing, buts its valuation is nonsensical at 12x forward sales vs. a peer group average of 4x. We’d pair...

Aaron Gabin

Softbank Group - Q1 21 Results Reaction: A Slow Shift in Focus

The messaging is changing at Softbank as the IPO flywheel (20+ liquidity events) gives way to investment sales and realized gains. There are no...

Kirk Boodry

Zomato IPO Trading - Ample Demand for Unique Exposure

Zomato (ZOM IN) raised US$1.3bn in its India IPO, making it the the largest listing in India from the technology sector.

Sumeet Singh

Zomato IPO Valuation: Making Losses In Most Favorable Circumstances

Zomato made an operating loss of INR 4.9bn in FY21, indicating its impotence in generating profits even in the most favorable circumstances....

Oshadhi Kumarasiri

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