Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

<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

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<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> is a leading food delivery platform in India. Zomato has two core business-to-customer (B2C) offerings which are Food delivery and Dining-out. It also has a business-to-business (B2B) offering called Hyperpure and Zomato Pro, the customer loyalty program which encompasses both food delivery and dining-out. </p></div><div><p>Zomato will launch its IPO on 14 July at an IPO price range of Rs72-76 per share. The IPO will raise up to Rs93.75 billion ($1.3 billion) with a primary/secondary split of 96%/4%. The selling shareholder is <a href="https://www.smartkarma.com/entities/info-edge-india-ltd" target="_blank" data-smartkarma-citation="entities:14461:1" rel="noopener">Info Edge India (INFOE IN)</a>. </p></div><div>
<p>In <a href="https://www.smartkarma.com/insights/zomato-ipo-initiation-emerging-appetites" target="_blank" data-smartkarma-citation="insights:54141" rel="noopener">Zomato IPO Initiation: Emerging Appetites</a>, we stated that that the food delivery market in India is effectively a duopoly between Zomato and Swiggy. Zomato claims to be larger but the key differentiator will be execution to drive growth with positive unit economics. On this front, Zomato has demonstrated a commendable track record. In <a href="https://www.smartkarma.com/insights/zomato-ipo-results-point-to-a-favourable-trajectory" target="_blank" data-smartkarma-citation="insights:54220" rel="noopener">Zomato IPO: Results Point to a Favourable Trajectory</a>, we noted that the FY21 results support our view that Zomato has attractive fundamentals. </p>
<div class="content-highlight"><p>Our relative valuation suggests that Zomato is overvalued at the IPO price range for its forecasted growth. Our base-case DCF valuation is Rs62.84 per share, which is 15% below the mid-point of the IPO price range. Consequently, while we like the fundamentals, we think that the IPO price range is unattractive and are inclined to remain on the sidelines. </p></div>
</div>

Zomato (ZOM IN) is a leading food delivery platform in India. Zomato has two core business-to-customer (B2C) offerings which are Food delivery and Dining-out. It also has a business-to-business (B2B) offering called Hyperpure and Zomato Pro, the customer loyalty program which encompasses both food delivery and dining-out. Zomato will launch its IPO on 14 July at an IPO price range of Rs72-76 per share. The IPO will raise up to Rs93.75 billion ($1.3 billion) with a primary/secondary split of 96%/4%. The selling shareholder is Info Edge India (INFOE IN). 
In Zomato IPO Initiation: Emerging Appetites, we stated that that the food delivery market in India is effectively a duopoly between Zomato and Swiggy. Zomato claims to be larger but the key differentiator will be execution to drive growth with positive unit economics. On this front, Zomato has demonstrated a commendable track record. In Zomato IPO: Results Point to a Favourable Trajectory, we noted that the FY21 results support our view that Zomato has attractive fundamentals. 
Our relative valuation suggests that Zomato is overvalued at the IPO price range for its forecasted growth. Our base-case DCF valuation is Rs62.84 per share, which is 15% below the mid-point of the IPO price range. Consequently, while we like the fundamentals, we think that the IPO price range is unattractive and are inclined to remain on the sidelines. 


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.

<p>Some updated thinking on our shorts: We like the Teradata short setup into 2Q21, and think Tesla may finally be <em>safe</em> to short. Well, safe as it ever gets. Apple remains our preferred large cap short, while Disney we flip from long biased to short biased as Disney+ subscriber numbers have decelerated massively. </p><p></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>

Some updated thinking on our shorts: We like the Teradata short setup into 2Q21, and think Tesla may finally be safe to short. Well, safe as it ever gets. Apple remains our preferred large cap short, while Disney we flip from long biased to short biased as Disney+ subscriber numbers have decelerated massively. 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.  

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)

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

Zomato IPO: Valuation Insights

Our DCF valuation is Rs62.84 per share, 15% below the mid-point of the IPO price range. While we like the fundamentals, the IPO price range is...

Arun George

2H21 Obex Research Short Portfolio

We like the Teradata short setup into 2Q21, and think Tesla may finally be safe to short. Apple remains our preferred large cap short, while...

Aaron Gabin

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