High Conviction Concentrated Growth Investing, Fallacy Alarm

Fallacy Alarm

High Conviction Concentrated Growth Investing

High conviction concentrated growth investing. Blends single stock, macro and thematic research into powerful long and short ideas. I am convinced that a robust and comprehensive investment process requires macro and micro considerations. And it requires a deep understanding what you are looking for and what you are invested in. Digitization has changed the dynamics both how businesses operate and how investors compete for returns. Ideas can scale much faster and fail much faster than before. The biggest value creation happens before it can be spotted in financial statements. As a result, my approach can be best summarized as high conviction, high concentration growth investing, embedded into a macro framework built on the realization that our current demographic set-up, monetary paradigm and innovation cycle will likely deliver a strong decade for nominal and real returns of productive assets.

Equity Bottom-Up

<ul><li>Fiscal spending has been the key driver for this bull market as it reaccelerated in late 2022 following the inflation and subsequent interest rate shock.</li><li>This impulse will likely diminish over the next months. It will be replaced by a credit impulse from rate cuts, the first few of which will be very powerful.</li><li>Market mechanics will be accommodating. Leverage in the system is low. In fact, the pain trade is still higher.</li></ul>

Fiscal spending has been the key driver for this bull market as it reaccelerated in late 2022 following the inflation and subsequent interest rate shock.This impulse will likely diminish over the next months. It will be replaced by a credit impulse from rate cuts, the first few of which will be very powerful.Market mechanics will be accommodating. Leverage in the system is low. In fact, the pain trade is still higher.

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

<ul>
<li>
<a href="https://www.smartkarma.com/entities/amtd-digital" target="_blank" data-smartkarma-citation="entities:36214:1" rel="noopener">AMTD Digital (HKD US)</a> shares are up 230x since its listing at US$7.80 per ADS on 15 July. Its market cap is a staggering US$334 billion.</li>
<li>
<a href="https://www.smartkarma.com/entities/amtd-idea-group" target="_blank" data-smartkarma-citation="entities:28137:1" rel="noopener">AMTD Idea Group (AMTD US)</a> accounts for 99.4% of the voting power. In January 2022, it increased its AMTD Digital shareholding to 97.1% of outstanding shares at US$1.2 billion valuation.</li>
<li>AMTD Digital’s financials are uninspiring and cannot justify the share price ramp. No sane valuation methodology can support the share price.    </li>
</ul>



AMTD Digital (HKD US) shares are up 230x since its listing at US$7.80 per ADS on 15 July. Its market cap is a staggering US$334 billion.

AMTD Idea Group (AMTD US) accounts for 99.4% of the voting power. In January 2022, it increased its AMTD Digital shareholding to 97.1% of outstanding shares at US$1.2 billion valuation.
AMTD Digital’s financials are uninspiring and cannot justify the share price ramp. No sane valuation methodology can support the share price.    


Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>We believe that Upstart's share price has been excessively oversold since October 2021. Since its highs in October 2021, Upstart's share price has declined significantly by nearly 72%.</li>
<li>The combination of buying back shares, more attractive valuations, and a much stronger sales growth than its peers is likely to result in Upstart outperforming the market this year.</li>
<li>Our base case valuation of Upstart is implied market cap of $13.8 billion and target price of $165 per share, which is 47% higher than current share price.</li>
</ul>


We believe that Upstart's share price has been excessively oversold since October 2021. Since its highs in October 2021, Upstart's share price has declined significantly by nearly 72%.
The combination of buying back shares, more attractive valuations, and a much stronger sales growth than its peers is likely to result in Upstart outperforming the market this year.
Our base case valuation of Upstart is implied market cap of $13.8 billion and target price of $165 per share, which is 47% higher than current share price.


Upstart Holdings: Focus on the Share Buyback & Outstanding Growth of AI Driven Lending Platform

<p><a href="https://www.smartkarma.com/entities/policybazaar-insurance-web-aggregator" target="_blank" data-smartkarma-citation="entities:33470:1" rel="noopener">Policybazaar Insurance Web Aggregator (1569999D IN)</a>/PB Fintech operates the <em>Policybazaar</em> and <em>Paisabazaar</em> platforms in India. <em>Policybazaar</em> is India’s largest digital insurance marketplace with a 93.4% market share based on the number of policies sold in FY20, according to Frost &amp; Sullivan. <em>Paisabazaar</em> is India’s largest digital consumer credit marketplace with a 53.7% market share, based on disbursals in FY21, according to Frost &amp; Sullivan. PB Fintech’s shareholders include SoftBank Vision Fund, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, Tiger Global and <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><p>PB Fintech will launch its IPO on 01 November at an indicative price range of Rs940-980. The IPO comprises a primary raise of Rs37,500 million ($502 million) and a secondary raise up to Rs19,600 million ($262 million). The main secondary seller is SoftBank Vision Fund which aims to sell up to Rs18,750 million ($250 million) worth of shares. </p><p>In <a href="https://www.smartkarma.com/insights/pb-fintech-policybazaar-ipo-initiation-insurance-policy" target="_blank" data-smartkarma-citation="insights:55735" rel="noopener">PB Fintech (Policybazaar) IPO Initiation: Insurance Policy</a>, we stated that <em>Policybazaar</em>, which is India’s largest digital consumer credit marketplace, is a direct play on the rising insurance penetration rates in India. PB Fintech operates an asset-light capital model and does not underwrite any insurance or retain any credit risk on loans. The business is well-positioned to benefit from the post-COVID-19 recovery in insurance policies sales and loan disbursals by its partners. Helped by strong brand recognition and retention rates, the favourable unit economics also suggest that medium-term profitability is within reach. </p><div class="content-highlight"><p>In this note, we look at the updated prospectus which outlines the 1QFY22 results (for the quarter ending June) and recent developments. Overall, the recent results reinforce our view that PB Fintech has attractive fundamentals. We will discuss valuation in our next note.  </p></div>

Policybazaar Insurance Web Aggregator (1569999D IN)/PB Fintech operates the Policybazaar and Paisabazaar platforms in India. Policybazaar is India’s largest digital insurance marketplace with a 93.4% market share based on the number of policies sold in FY20, according to Frost &amp; Sullivan. Paisabazaar is India’s largest digital consumer credit marketplace with a 53.7% market share, based on disbursals in FY21, according to Frost &amp; Sullivan. PB Fintech’s shareholders include SoftBank Vision Fund, Tencent (700 HK), Tiger Global and Info Edge India (INFOE IN).   PB Fintech will launch its IPO on 01 November at an indicative price range of Rs940-980. The IPO comprises a primary raise of Rs37,500 million ($502 million) and a secondary raise up to Rs19,600 million ($262 million). The main secondary seller is SoftBank Vision Fund which aims to sell up to Rs18,750 million ($250 million) worth of shares. In PB Fintech (Policybazaar) IPO Initiation: Insurance Policy, we stated that Policybazaar, which is India’s largest digital consumer credit marketplace, is a direct play on the rising insurance penetration rates in India. PB Fintech operates an asset-light capital model and does not underwrite any insurance or retain any credit risk on loans. The business is well-positioned to benefit from the post-COVID-19 recovery in insurance policies sales and loan disbursals by its partners. Helped by strong brand recognition and retention rates, the favourable unit economics also suggest that medium-term profitability is within reach. In this note, we look at the updated prospectus which outlines the 1QFY22 results (for the quarter ending June) and recent developments. Overall, the recent results reinforce our view that PB Fintech has attractive fundamentals. We will discuss valuation in our next note.  

PB Fintech (Policybazaar) IPO: Signs of Life

<header id="article-header_2-0"><p data-tooltip="Khadija Khartit is a strategy, investment, and funding expert, and an educator of fintech and strategic finance in top universities. She has been an investor, entrepreneur, and advisor for more than 25 years. She is a FINRA Series 7, 63, and 66 license holder." data-inline-tooltip="true" data-tooltip-position-x="left" data-tooltip-position-y="top">Founded in 2013, <a href="https://www.smartkarma.com/entities/moneylion-inc" target="_blank" data-smartkarma-citation="entities:34686:1" rel="noopener">MoneyLion (ML US)</a> is a fintech company that provides lending, mobile banking, cash advances, financial advisory, and investment services including crypto trading to its users. The company aims to empower mobile banking and other financial products through machine learning and artificial intelligence technologies. Since its launch in 2013, MoneyLion has engaged with nearly 8.7 million users. </p></header><p data-tooltip="Khadija Khartit is a strategy, investment, and funding expert, and an educator of fintech and strategic finance in top universities. She has been an investor, entrepreneur, and advisor for more than 25 years. She is a FINRA Series 7, 63, and 66 license holder." data-inline-tooltip="true" data-tooltip-position-x="left" data-tooltip-position-y="top">In February 2021,<a href="https://www.reuters.com/technology/mobile-bank-moneylion-go-public-via-blank-check-merger-29-bln-deal-2021-02-12/" target="_blank" rel="noopener"> MoneyLion</a> agreed to go public through a merger with a blank-check firm Fusion Acquisition Corp <a href="https://www.reuters.com/companies/FUSE.N" target="_blank" rel="noopener">(FUSE.N)</a>, that would value the equity of the combined company at $2.9 billion. As of 26 October 2021, MoneyLion's market cap is $1.4 billion. MoneyLion completed its public listing on the NYSE in September 2021.</p><div class="content-highlight">
<h2>Valuation</h2>
<p>Our base case valuation of MoneyLion over the next year is $9.5 per share, which would be 59% higher than current share price. Our base case valuation is based on EV/S of 7.5x using our estimated sales of $257 million in 2022. We took a 10% discount to the company's guidance sales in 2022 to be more conservative. </p>
<p>The EV/S multiple of 7.5x is about 50% discount to the average EV/S multiple of its peers, which is mainly due to its lower operating margins and size effect. However, if the company is able to generate higher sales growth and more sizeable improvement to operating margins than its peers in the next several quarters, this valuation discount is likely to decline considerably. </p>
<p>Unlike in 2H 2020 to 1Q 2021 when there was a much positive sentiment on SPACs and SPAC related mergers, this sentiment has worsened considerably in the past six months. This is probably one of the reasons why the stock has taken such a beating since going public in the past month. We would argue that the fundamentals of the company is improving and the financial metrics of MoneyLion remain solid. Therefore, we would be a Buyer of <a href="https://www.smartkarma.com/entities/moneylion-inc" target="_blank" data-smartkarma-citation="entities:34686:1" rel="noopener">MoneyLion (ML US)</a> shares at current depressed levels.</p>
</div>

Founded in 2013, MoneyLion (ML US) is a fintech company that provides lending, mobile banking, cash advances, financial advisory, and investment services including crypto trading to its users. The company aims to empower mobile banking and other financial products through machine learning and artificial intelligence technologies. Since its launch in 2013, MoneyLion has engaged with nearly 8.7 million users. In February 2021, MoneyLion agreed to go public through a merger with a blank-check firm Fusion Acquisition Corp (FUSE.N), that would value the equity of the combined company at $2.9 billion. As of 26 October 2021, MoneyLion's market cap is $1.4 billion. MoneyLion completed its public listing on the NYSE in September 2021.
Valuation
Our base case valuation of MoneyLion over the next year is $9.5 per share, which would be 59% higher than current share price. Our base case valuation is based on EV/S of 7.5x using our estimated sales of $257 million in 2022. We took a 10% discount to the company's guidance sales in 2022 to be more conservative. 
The EV/S multiple of 7.5x is about 50% discount to the average EV/S multiple of its peers, which is mainly due to its lower operating margins and size effect. However, if the company is able to generate higher sales growth and more sizeable improvement to operating margins than its peers in the next several quarters, this valuation discount is likely to decline considerably. 
Unlike in 2H 2020 to 1Q 2021 when there was a much positive sentiment on SPACs and SPAC related mergers, this sentiment has worsened considerably in the past six months. This is probably one of the reasons why the stock has taken such a beating since going public in the past month. We would argue that the fundamentals of the company is improving and the financial metrics of MoneyLion remain solid. Therefore, we would be a Buyer of MoneyLion (ML US) shares at current depressed levels.


MoneyLion - An Oversold Fintech Stock Following a SPAC Merger

United States

Lemonade, Inc. operates as an insurance company. The Company offers artificial intelligence (AI) based technology for fire, property, liability, and other related insurance policy issuing and claim settlements. Lemonade serves customers in the United States.

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Lemonade Inc (LMND US)

Fallacy Alarm's Elevator Pitch Party

Fiscal spending has been the key driver for this bull market as it reaccelerated in late 2022 following the inflation and subsequent interest rate...

Fallacy Alarm

AMTD Digital: Irrational Frenzy 2.0

The shares are currently up 143% today. AMTD’s financials are uninspiring and cannot justify the share price ramp. No sane valuation assumption can...

Arun George

PB Fintech (Policybazaar) IPO: Signs of Life

PB Fintech (Policybazaar) will launch its IPO on 01 November to raise up to $764m. The updated prospectus reinforce our view that PB Fintech has...

Arun George

MoneyLion - An Oversold Fintech Stock Following a SPAC Merger

MoneyLion is an oversold fintech stock following a SPAC merger. Our base case valuation of MoneyLion over the next year is $9.5 per share, which...

Douglas Kim

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Fallacy Alarm's Elevator Pitch Party

Fiscal spending has been the key driver for this bull market as it reaccelerated in late 2022 following the inflation and subsequent interest rate...

Fallacy Alarm

AMTD Digital: Irrational Frenzy 2.0

The shares are currently up 143% today. AMTD’s financials are uninspiring and cannot justify the share price ramp. No sane valuation assumption can...

Arun George

Upstart Holdings: Focus on the Share Buyback & Outstanding Growth of AI Driven Lending Platform

The combination of buying back shares, more attractive valuations, and a much stronger sales growth than its peers is likely to result in Upstart...

Douglas Kim

PB Fintech (Policybazaar) IPO: Signs of Life

PB Fintech (Policybazaar) will launch its IPO on 01 November to raise up to $764m. The updated prospectus reinforce our view that PB Fintech has...

Arun George

MoneyLion - An Oversold Fintech Stock Following a SPAC Merger

MoneyLion is an oversold fintech stock following a SPAC merger. Our base case valuation of MoneyLion over the next year is $9.5 per share, which...

Douglas Kim