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><strong>Summary: </strong>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.</p><p> <strong>Base Case Valuation: $33                                  Bull Case: $57                                 Bear Case: $20</strong></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>

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.

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

<p>A closer look at each of the Air Travel Pass requirements reveals that the residents from the above countries are not required to do Stay Home Notice/quarantine for 14 days anymore. Historically, tourists from China are the biggest constituents of the total number of tourists in Singapore. The fact that China has already been included in the Travel Bubble is good news for ComfortDelgro as there will be more ridership in Singapore's taxi and public transport. </p>
<p>Launch of lifestyle app (Zig), functionality improvement such as adding more destination in a single journey, increasing its online presence through Lazada is some of the initiatives that ComfortDelgro's management has initiated in a bid to win more market share in the taxi business. This will result in both an increase in revenue and a blended margin. </p>

A closer look at each of the Air Travel Pass requirements reveals that the residents from the above countries are not required to do Stay Home Notice/quarantine for 14 days anymore. Historically, tourists from China are the biggest constituents of the total number of tourists in Singapore. The fact that China has already been included in the Travel Bubble is good news for ComfortDelgro as there will be more ridership in Singapore's taxi and public transport. 
Launch of lifestyle app (Zig), functionality improvement such as adding more destination in a single journey, increasing its online presence through Lazada is some of the initiatives that ComfortDelgro's management has initiated in a bid to win more market share in the taxi business. This will result in both an increase in revenue and a blended margin. 

High Conviction Ideas 2021 Update: Travel Bubble, Taxi

Telco/Internet specialist

Kirk Boodry

Redex Research

<p>Z Holdings shares have sold off on disappointment over mid-term profitability targets that remain unchanged despite the addition of Line and possible synergies (and equity dilution). But management believes investments will pay off with stronger top-line growth. Some of its aspirational targets (like eCommerce leadership) seem to be a stretch but we do think that the merger gives it the resources to compete with heavyweights like Google (online ads), Facebook (social media), Amazon (eCommerce) and Rakuten (fintech). We are initiating coverage at Buy with a <a target="_blank">¥680 </a>FY21 (Mar-22) target price.</p>

Z Holdings shares have sold off on disappointment over mid-term profitability targets that remain unchanged despite the addition of Line and possible synergies (and equity dilution). But management believes investments will pay off with stronger top-line growth. Some of its aspirational targets (like eCommerce leadership) seem to be a stretch but we do think that the merger gives it the resources to compete with heavyweights like Google (online ads), Facebook (social media), Amazon (eCommerce) and Rakuten (fintech). We are initiating coverage at Buy with a ¥680 FY21 (Mar-22) target price.

Z Holdings - Great Expectations On (The) LINE (Initiation of Coverage)

<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

<p>We have been longtime fans of Netflix the product and Netflix’s management team can rightfully be described as visionary. They had the vision to have the public markets fund an experiment in business models that appears now set to breakeven on FCF in 2021. We have said since last year that Netflix is a good relative short given the extreme pull-in of demand from COVID, and the fact that Netflix’s stock performance tracks the pace of sub growth, and the shockingly weak guidance for 2Q21 implies this stock will continue to be the #1 large cap funding short for the foreseeable future. But for how long?</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>

We have been longtime fans of Netflix the product and Netflix’s management team can rightfully be described as visionary. They had the vision to have the public markets fund an experiment in business models that appears now set to breakeven on FCF in 2021. We have said since last year that Netflix is a good relative short given the extreme pull-in of demand from COVID, and the fact that Netflix’s stock performance tracks the pace of sub growth, and the shockingly weak guidance for 2Q21 implies this stock will continue to be the #1 large cap funding short for the foreseeable future. But for how long?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

Meta Platforms Inc. operates as a social technology company. The Company builds applications and technologies that help people connect, find communities, and grow businesses. meta Platform is also involved in advertisements, augmented and virtual reality.

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Meta Platforms (Facebook) (META US)

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

High Conviction Ideas 2021 Update: Travel Bubble, Taxi

Zig, adding more destinations in a single journey, cooperation with Lazada are some initiatives that ComfortDelgro's management has initiated in a...

Henry Soediarko

Z Holdings - Great Expectations On (The) LINE (Initiation of Coverage)

Z Holdings has sold off on disappointment over profitability targets that remain unchanged despite the addition of Line but near-term investments...

Kirk Boodry

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

Netflix 1Q21: We Ran Out of Content

Netflix just issued its weakest guidance in years. We think subscriber growth will reaccelerate in a few quarters, making Netflix a sneaky long by...

Aaron Gabin

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