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.

Thematic (Sector/Industry)

<p>So many datapoints in the past week speak to how strong earnings should be for the biggest online advertising players. Our order of preference for 1Q21: Facebook, Amazon, Google, Snap, eBay, Pinterest.</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>

So many datapoints in the past week speak to how strong earnings should be for the biggest online advertising players. Our order of preference for 1Q21: Facebook, Amazon, Google, Snap, eBay, Pinterest.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.

TMT Weekly 4/9/2021: Be Long Online Advertising for Earnings

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.

Event-Driven

<div>
<p><a href="https://www.smartkarma.com/entities/prosus-nv-75c7a0c4-16ff-4433-a40f-25ae5b24077d" target="_blank" data-smartkarma-citation="entities:28498:1" rel="noopener">Prosus NV (PROSY US)</a> aims to raise around US$14.5bn via selling a 2% stake in <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> overnight in Hong Kong.</p>
<p>We spoke about the placement in <a href="https://www.smartkarma.com/insights/tencent-placement-another-reluctant-but-well-flagged-sell-down-lifting-the-us-14-5bn-overhang" target="_blank" rel="noopener">Tencent Placement - Another Reluctant but Well-Flagged Sell Down, Lifting the US$14.5bn Overhang.</a></p>
</div><div><p>We have been covering the lock-up expiry since Feb 2021 in:</p></div><div><ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/tencent-placement-lock-up-expiry-us-10bn-block-and-buyback-linked-holdco-trade" target="_blank" rel="noopener">Tencent Placement Lock-Up Expiry - US$10bn+ Block and Buyback Linked Holdco Trade, and</a></li>
<li><a href="https://www.smartkarma.com/insights/tencent-placement-lock-up-expiry-block-and-buyback-linked-holdco-trade-update" target="_blank" rel="noopener">Tencent Placement Lock-Up Expiry -  Block and Buyback Linked Holdco Trade Update</a></li>
</ul></div><div><p>While the overall cash being raised should be positive for Prosus and Naspers, not all aspects of the deal will be viewed positively. </p></div>


Prosus NV (PROSY US) aims to raise around US$14.5bn via selling a 2% stake in Tencent Holdings (700 HK) overnight in Hong Kong.
We spoke about the placement in Tencent Placement - Another Reluctant but Well-Flagged Sell Down, Lifting the US$14.5bn Overhang.
We have been covering the lock-up expiry since Feb 2021 in:
Tencent Placement Lock-Up Expiry - US$10bn+ Block and Buyback Linked Holdco Trade, and
Tencent Placement Lock-Up Expiry -  Block and Buyback Linked Holdco Trade Update
While the overall cash being raised should be positive for Prosus and Naspers, not all aspects of the deal will be viewed positively. 

Tencent Placement and the Holdco Implications - Deal Almost Done, Now What?

Equity Capital Markets

<div>
<p><a href="https://www.smartkarma.com/entities/prosus-nv-75c7a0c4-16ff-4433-a40f-25ae5b24077d" target="_blank" data-smartkarma-citation="entities:28498:1" rel="noopener">Prosus NV (PROSY US)</a> aims to raise around US$14.5bn via selling a 2% stake in <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>.</p>
<p>The deal comes nearly three years, and right after the lock-up expiry, from the previous placement when on 22nd March 2018, <a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a> reluctantly sold US$10bn worth of <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> shares.  We have covered the previous placement in our earlier note, <a href="https://www.smartkarma.com/insights/tencent-placement-huge-deal-in-size-small-in-relative-terms-succumbing-to-the-holdco-discount" target="_blank" rel="noopener">Tencent Placement - Huge Deal in Size, Small in Relative Terms - Succumbing to the HoldCo Discount</a>.</p>
<p>We have been covering the lock-up expiry since Feb 2021 in:</p>
<ul>
<li><a href="https://www.smartkarma.com/insights/tencent-placement-lock-up-expiry-us-10bn-block-and-buyback-linked-holdco-trade" target="_blank" rel="noopener">Tencent Placement Lock-Up Expiry - US$10bn+ Block and Buyback Linked Holdco Trade, and</a></li>
<li><a href="https://www.smartkarma.com/insights/tencent-placement-lock-up-expiry-block-and-buyback-linked-holdco-trade-update" target="_blank" rel="noopener">Tencent Placement Lock-Up Expiry -  Block and Buyback Linked Holdco Trade Update</a></li>
</ul>
<p>In this note, we will talk about the deal dynamics.</p>
</div>


Prosus NV (PROSY US) aims to raise around US$14.5bn via selling a 2% stake in Tencent Holdings (700 HK).
The deal comes nearly three years, and right after the lock-up expiry, from the previous placement when on 22nd March 2018, Naspers (NPN SJ) reluctantly sold US$10bn worth of Tencent Holdings (700 HK) shares.  We have covered the previous placement in our earlier note, Tencent Placement - Huge Deal in Size, Small in Relative Terms - Succumbing to the HoldCo Discount.
We have been covering the lock-up expiry since Feb 2021 in:

Tencent Placement Lock-Up Expiry - US$10bn+ Block and Buyback Linked Holdco Trade, and
Tencent Placement Lock-Up Expiry -  Block and Buyback Linked Holdco Trade Update

In this note, we will talk about the deal dynamics.


Tencent Placement - Another Reluctant but Well-Flagged Sell Down, Lifting the US$14.5bn Overhang

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>Founded in 2011, <a href="https://www.smartkarma.com/entities/applovin-corp" target="_blank" data-smartkarma-citation="entities:32989:1" rel="noopener">AppLovin Corp (APP US)</a> is getting ready to complete its IPO in 2Q 2021. The company is aiming to raise about $1 billion in this IPO. KKR purchased a minority stake in the company in 2018 at about $2 billion valuation. The IPO valuation is likely to be much higher.</li>
<li>The <a href="https://www.cityindex.co.uk/market-analysis/applovin-ipo-background-guide/" target="_blank" rel="noopener">company</a> originally started its business helping customers to improve the smartphone customer experiences for all the users. In recent years, the company has become a much bigger player in the mobile gaming segment and it also helps developers to grow their users and improve monetization of their apps. </li>
<li>AppLovin's income statement shows strong sales growth in the past three years but declining profit margins. AppLovin generated sales of $1,451.1 million and an operating loss of $62.1 million in 2020. The company's sales have nearly tripled from 2018 to 2020. Despite the company's strong sales growth, one of the things that is not so clear in the prospectus is what percentage of the company's sales growth in the past three years has been driven by organic growth versus acquisitions.</li>
</ul>


Founded in 2011, AppLovin Corp (APP US) is getting ready to complete its IPO in 2Q 2021. The company is aiming to raise about $1 billion in this IPO. KKR purchased a minority stake in the company in 2018 at about $2 billion valuation. The IPO valuation is likely to be much higher.
The company originally started its business helping customers to improve the smartphone customer experiences for all the users. In recent years, the company has become a much bigger player in the mobile gaming segment and it also helps developers to grow their users and improve monetization of their apps. 
AppLovin's income statement shows strong sales growth in the past three years but declining profit margins. AppLovin generated sales of $1,451.1 million and an operating loss of $62.1 million in 2020. The company's sales have nearly tripled from 2018 to 2020. Despite the company's strong sales growth, one of the things that is not so clear in the prospectus is what percentage of the company's sales growth in the past three years has been driven by organic growth versus acquisitions.


Latest News from the World’s Leading Innovators

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.

<p>Headline Developments Facebook’s (FB) Reality Labs have provided a glimpse of a wrist-worn AR interface concept that would allow users to more fluidly interact with augmented environments, as in the video below.  More specifically, the device uses electromyography (EMG) sensors to interpret nerve signals and interact with the environment.</p>

Headline Developments Facebook’s (FB) Reality Labs have provided a glimpse of a wrist-worn AR interface concept that would allow users to more fluidly interact with augmented environments, as in the video below.  More specifically, the device uses electromyography (EMG) sensors to interpret nerve signals and interact with the environment.

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)

TMT Weekly 4/9/2021: Be Long Online Advertising for Earnings

Online Advertising and eCommerce is still buoyed by secular tailwinds despite the fears on tough pandemic driven comps. We prefer Amazon, Facebook,...

Aaron Gabin

Tencent Placement and the Holdco Implications - Deal Almost Done, Now What?

Prosus NV aims to raise around US$14.5bn via selling a 2% stake in Tencent. While the overall raising should be positive for Prosus and Naspers,...

Sumeet Singh

Tencent Placement - Another Reluctant but Well-Flagged Sell Down, Lifting the US$14.5bn Overhang

Prosus aims to raise around US$14.5bn via selling a 2% stake in Tencent. The deal comes nearly three years, and right after the lock-up expiry,...

Sumeet Singh

AppLovin IPO Preview

AppLovin Corp (APP US) is getting ready to complete its IPO in 2Q 2021. The company is aiming to raise about $1 billion in this IPO.

Douglas Kim

Weekly Innovation Review (WIRE) #23

Headline Developments Facebook’s (FB) Reality Labs have provided a glimpse of a wrist-worn AR interface concept that would allow users to more...

Granite Bay Capital

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