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Granite Bay Capital

An innovation focussed investment company

Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity.

Thematic (Sector/Industry)

<p>Headline Developments The battle is on between Fortnite developer Epic Games (private) and Apple (AAPL) - a David and Goliath case which, in a nutshell, will ask whether Apple is acting fairly by charging developers a 15-30% fee for all revenues made via subscriptions and in-app purchases.</p>

Headline Developments The battle is on between Fortnite developer Epic Games (private) and Apple (AAPL) - a David and Goliath case which, in a nutshell, will ask whether Apple is acting fairly by charging developers a 15-30% fee for all revenues made via subscriptions and in-app purchases.

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>Snap is a deservedly crowded long. It had heightened expectations coming into the quarter, especially for the 2Q21 guide, which buyside expected to be a huge number given the easy comp. And Snap didn’t disappoint. The key takeaway for us about why one can (kind of) ignore valuation, which at 20x forward sales seems extremely high, is that Snap has entered the Facebook zone from 2015-2017, when the company had finally hit its stride at executing self-serve targeted direct response advertising at scale, reducing friction for advertisers to enter the platform. Facebook became part of THE online ad duopoly and started adding millions of businesses every year because of the highest ROI in online advertising, growing revenues 50%+ annually, even as it scaled from $12B to $40B in revenues because of the unlimited optionality around new ad units…and yet to be monetized massive products like Instagram. We aren’t saying Spotlight or Maps is the equivalent of Instagram, but we do think Snap has long passed the threshold of required advertising platform for large advertisers and can compound for years, even despite its meteoric rise in the past year.</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>

Snap is a deservedly crowded long. It had heightened expectations coming into the quarter, especially for the 2Q21 guide, which buyside expected to be a huge number given the easy comp. And Snap didn’t disappoint. The key takeaway for us about why one can (kind of) ignore valuation, which at 20x forward sales seems extremely high, is that Snap has entered the Facebook zone from 2015-2017, when the company had finally hit its stride at executing self-serve targeted direct response advertising at scale, reducing friction for advertisers to enter the platform. Facebook became part of THE online ad duopoly and started adding millions of businesses every year because of the highest ROI in online advertising, growing revenues 50%+ annually, even as it scaled from $12B to $40B in revenues because of the unlimited optionality around new ad units…and yet to be monetized massive products like Instagram. We aren’t saying Spotlight or Maps is the equivalent of Instagram, but we do think Snap has long passed the threshold of required advertising platform for large advertisers and can compound for years, even despite its meteoric rise in the past year.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.

SNAP 1Q21: Spotlight on Spotlight…Why Snap Is Still a Multi Bagger

Global TMT analyst with Asia ex-Japan focus.

Mitchell Kim

<p><a href="https://www.smartkarma.com/entities/coupang" target="_blank" data-smartkarma-citation="entities:28425:1" rel="noopener">Coupang (CPNG US) </a>is set for IPO on 11 March 2021 at a revised-up range of USD32-34.  This is one of the blockbuster listings among the Korean companies and thrusting Coupang to the five largest companies in Korea.  There have been healthy debates on this IPO with a consensus that the valuation is very expensive, yet, Coupang appears to be set to fetch close to USD50 billion valuation.</p><p><strong>We are on the “expensive” camp and willing to wait for a better entry price.</strong> We arrived at this conclusion by focusing on direct head-to-head growth and valuation comparisons with its peer, JD.com, instead of comparing with a broad base of peers. Simply put, would you rather have JD.com or Coupang shares?  They are both mostly online retailers with nearly 90% of revenues from retail.     </p><p><strong>Coupang’s market value is priced at 67% premium to JD.com’s market value in 2015</strong> when the latter was in a similar growth stage but with higher upside potential for online consumption outlook.  The only explanation is the outlook for better growth and other considerations we discuss in this report.   </p><p>In this report, we highlight the following:</p><ol>
<li>How does Coupang stack up against JD.com at the past similar growth stage?</li>
<li>Is Coupang expensive?  Yes, on most multiples including EV/Sales and EV/Gross Profit.</li>
<li>How can the market justify paying such a premium? High growth expectation.</li>
<li>Is Coupang’s growth in 2020 sustainable?  Unlikely.</li>
</ol>

Coupang (CPNG US) is set for IPO on 11 March 2021 at a revised-up range of USD32-34.  This is one of the blockbuster listings among the Korean companies and thrusting Coupang to the five largest companies in Korea.  There have been healthy debates on this IPO with a consensus that the valuation is very expensive, yet, Coupang appears to be set to fetch close to USD50 billion valuation.We are on the “expensive” camp and willing to wait for a better entry price. We arrived at this conclusion by focusing on direct head-to-head growth and valuation comparisons with its peer, JD.com, instead of comparing with a broad base of peers. Simply put, would you rather have JD.com or Coupang shares?  They are both mostly online retailers with nearly 90% of revenues from retail.     Coupang’s market value is priced at 67% premium to JD.com’s market value in 2015 when the latter was in a similar growth stage but with higher upside potential for online consumption outlook.  The only explanation is the outlook for better growth and other considerations we discuss in this report.   In this report, we highlight the following:
How does Coupang stack up against JD.com at the past similar growth stage?
Is Coupang expensive?  Yes, on most multiples including EV/Sales and EV/Gross Profit.
How can the market justify paying such a premium? High growth expectation.
Is Coupang’s growth in 2020 sustainable?  Unlikely.


Coupang (CPNG US): Going Mano E Mano with JD.com

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.

Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/coupang" target="_blank" data-smartkarma-citation="entities:28425:1" rel="noopener">Coupang (CPNG US)</a> is the largest e-commerce platform in South Korea, according to Euromonitor. Coupang is best known for Rocket Delivery, which provides free, next-day delivery for orders placed any time of the day.</p></div><div><p>Coupang has priced its IPO at $35 per share, above the previously upsized IPO price range of $32-34 per share. The number of the offer shares has increased from 120 million to 130 million shares due to a 10 million shares increase in the secondary tranche. At the final IPO price of $35 per share, Coupang will have a market cap of $60 billion. </p></div><div><p>In <a href="https://www.smartkarma.com/insights/coupang-ipo-initiation-delivering-the-goods" target="_blank" data-smartkarma-citation="insights:48125" rel="noopener">Coupang IPO Initiation: Delivering the Goods</a>, we opined that Coupang's fundamentals tick all the right boxes and worth a look, in our view. In <a href="https://www.smartkarma.com/insights/coupang-ipo-valuation-insights" target="_blank" data-smartkarma-citation="insights:48708" rel="noopener">Coupang IPO: Valuation Insights</a> we noted was attractively priced for its growth potential vs global e-commerce peers at the original IPO price range of $27-30 per share. In <a href="https://www.smartkarma.com/insights/coupang-ipo-upsized-deal-size" target="_blank" data-smartkarma-citation="insights:48991" rel="noopener">Coupang IPO: Upsized Deal Size</a>, Coupang remained attractive at the upsized IPO price range of $32-34 per share.</p></div><div><div class="content-highlight"><p>Updating for the final IPO net raise, our base-case DCF derived price target of $39.46 per share. As DCF-based target prices are subject to a wide range of variability, we present a sensitivity table to help investors gauge where target prices could head. Our DCF sensitivity analysis shows that the IPO price has reasonable upside potential. </p></div></div>

Coupang (CPNG US) is the largest e-commerce platform in South Korea, according to Euromonitor. Coupang is best known for Rocket Delivery, which provides free, next-day delivery for orders placed any time of the day.Coupang has priced its IPO at $35 per share, above the previously upsized IPO price range of $32-34 per share. The number of the offer shares has increased from 120 million to 130 million shares due to a 10 million shares increase in the secondary tranche. At the final IPO price of $35 per share, Coupang will have a market cap of $60 billion. In Coupang IPO Initiation: Delivering the Goods, we opined that Coupang's fundamentals tick all the right boxes and worth a look, in our view. In Coupang IPO: Valuation Insights we noted was attractively priced for its growth potential vs global e-commerce peers at the original IPO price range of $27-30 per share. In Coupang IPO: Upsized Deal Size, Coupang remained attractive at the upsized IPO price range of $32-34 per share.Updating for the final IPO net raise, our base-case DCF derived price target of $39.46 per share. As DCF-based target prices are subject to a wide range of variability, we present a sensitivity table to help investors gauge where target prices could head. Our DCF sensitivity analysis shows that the IPO price has reasonable upside potential. 

<div><p><a href="https://www.smartkarma.com/entities/coupang" target="_blank" data-smartkarma-citation="entities:28425:1" rel="noopener">Coupang (CPNG US)</a> is the largest e-commerce platform in South Korea, according to Euromonitor. Coupang is best known for Rocket Delivery, which provides free, next-day delivery for orders placed any time of the day.</p></div><div><p>Coupang has increased its IPO price range from $27-30 per share to $32-34 per share. The number of the offer shares remains unchanged at 120 million shares and the primary/secondary split remains unchanged. At the upsized IPO price range of $32-34 per share, Coupang will have a market cap of $55-58 billion vs the previous market cap of $46-51 billion. At the mid-point of the IPO price range, the net proceeds from the primary raise are $3.2 billion ($2.8 billion previously). </p></div><div>
<p>In <a href="https://www.smartkarma.com/insights/coupang-ipo-initiation-delivering-the-goods" target="_blank" data-smartkarma-citation="insights:48125" rel="noopener">Coupang IPO Initiation: Delivering the Goods</a>, we opined that Coupang's fundamentals tick all the right boxes and worth a look, in our view. In <a href="https://www.smartkarma.com/insights/coupang-ipo-valuation-insights" target="_blank" data-smartkarma-citation="insights:48708" rel="noopener">Coupang IPO: Valuation Insights</a> we noted was attractively priced for its growth potential vs global e-commerce peers at the original IPO price range.</p>
<div class="content-highlight"><p>Our valuation analysis suggests that Coupang remains attractive at the upsized IPO price range of $32-34 per share. Our base-case DCF valuation is $39.35 per share and we would participate in the IPO.</p></div>
</div>

Coupang (CPNG US) is the largest e-commerce platform in South Korea, according to Euromonitor. Coupang is best known for Rocket Delivery, which provides free, next-day delivery for orders placed any time of the day.Coupang has increased its IPO price range from $27-30 per share to $32-34 per share. The number of the offer shares remains unchanged at 120 million shares and the primary/secondary split remains unchanged. At the upsized IPO price range of $32-34 per share, Coupang will have a market cap of $55-58 billion vs the previous market cap of $46-51 billion. At the mid-point of the IPO price range, the net proceeds from the primary raise are $3.2 billion ($2.8 billion previously). 
In Coupang IPO Initiation: Delivering the Goods, we opined that Coupang's fundamentals tick all the right boxes and worth a look, in our view. In Coupang IPO: Valuation Insights we noted was attractively priced for its growth potential vs global e-commerce peers at the original IPO price range.
Our valuation analysis suggests that Coupang remains attractive at the upsized IPO price range of $32-34 per share. Our base-case DCF valuation is $39.35 per share and we would participate in the IPO.


United States

eBay Inc. operates an online trading community.  The Company's service is used by buyers and sellers for the exchange of products and services such as coins, collectibles, computers, memorabilia, stamps and toys, as well as concert and sporting tickets.  eBay also offers, through a subsidiary, secure online payment services.

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Ebay Inc (EBAY US)

Weekly Innovation Review (WIRE) #30

Headline Developments The battle is on between Fortnite developer Epic Games (private) and Apple (AAPL) - a David and Goliath case which, in a...

Granite Bay Capital

SNAP 1Q21: Spotlight on Spotlight…Why Snap Is Still a Multi Bagger

Snap had a very strong 1Q21 and even stronger 2Q21 guidance. Despite a monster 1 year run, we think Snap is set up for a Facebook like multi-year...

Aaron Gabin

Coupang (CPNG US): Going Mano E Mano with JD.com

Coupang (CPNG US) is set for IPO on 11 March 2021 at a revised-up range of USD32-34. Our unique one-on-one comparison with JD.com should help...

Mitchell Kim

Coupang IPO: Trading Debut

Coupang has priced its IPO at $35 per share, above the previously upsized IPO price range of $32-34 per share. Our DCF sensitivity analysis shows...

Arun George

Coupang IPO: Upsized Deal Size

Coupang has increased its IPO price range from $27-30 per share to $32-34 per share. Our base-case DCF valuation is $39.35 per share and we would...

Arun George

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