Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

<ul>
<li>
An NDR About Nothing: A competitor held a non-deal roadshow for Tencent Holdings (700.HK) [Tencent]. Management only addressed matters discussed at its challenged 3Q21 results; </li>
<li>
Elephant In The Room:Management continues to avoid any serious discussion of  mainland China’s broad restrictions on FinTech – which represents a growing 30.4% of revenue; and </li>
<li>
Stop The Spin Doctoring:No matter Tencent’s spin, a financial holding company represents significant downside risks as earnings will compress and capital requirements increase.</li>
</ul>



An NDR About Nothing: A competitor held a non-deal roadshow for Tencent Holdings (700.HK) [Tencent]. Management only addressed matters discussed at its challenged 3Q21 results; 

Elephant In The Room:Management continues to avoid any serious discussion of  mainland China’s broad restrictions on FinTech – which represents a growing 30.4% of revenue; and 

Stop The Spin Doctoring:No matter Tencent’s spin, a financial holding company represents significant downside risks as earnings will compress and capital requirements increase.


Tencent Holdings – Seinfeld-Ian Roadshow

<ul>
<li>
Results Weaker: Tencent Holdings’ (700.HK) [Tencent] 3Q21 GAAP net income declined another CNY 5.2 bn (6.7%) on a linked quarter basis. </li>
<li>
Challenges: Results were challenged by a cost of revenue increase; operating expense increase; increased losses in associates; higher impairment charges; a higher tax rate and weaker online advertising; and    </li>
<li>
Elephant In Room: China's crackdown on capital markets has rapidly expanded under the broad narrative of "financial stability". Tencent is following Alibaba in its formation of a financial holding company. </li>
</ul>



Results Weaker: Tencent Holdings’ (700.HK) [Tencent] 3Q21 GAAP net income declined another CNY 5.2 bn (6.7%) on a linked quarter basis. 

Challenges: Results were challenged by a cost of revenue increase; operating expense increase; increased losses in associates; higher impairment charges; a higher tax rate and weaker online advertising; and    

Elephant In Room: China's crackdown on capital markets has rapidly expanded under the broad narrative of "financial stability". Tencent is following Alibaba in its formation of a financial holding company. 


Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

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.

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/paytm-mobile-solutions-pvt-ltd" target="_blank" data-smartkarma-citation="entities:26149:1" rel="noopener">Paytm (PAYTM IN)</a>, India’s largest digital ecosystem for consumers and merchants has opened its book-building which will run from 08th November to the 10th of November. Paytm plans to raise INR183bn (approx. US$2.4bn) through the issuance of a mix of new shares (approx. INR83bn) and existing shares (INR00bn) at an indicative price range of INR2,080-2,150 per share. At the above price range, Paytm will have a market capitalisation of INR1,351.1-1,396.6bn and a post-money enterprise value of INR1,254.1-1,296.8bn.<table class="table table-striped"><tbody>
<tr>
<td style="width: 192.0pt;">Paytm IPO Details</td>
<td style="width: 137.0pt;">@ INR2,080 </td>
<td style="width: 87.0pt;">@ INR2,150</td>
</tr>
<tr>
<td style="width: 192.0pt;">Shares Outstanding Pre-IPO (m)</td>
<td style="width: 137.0pt;">                                            609.7</td>
<td style="width: 87.0pt;">                       609.7</td>
</tr>
<tr>
<td style="width: 192.0pt;">Offer Shares/New Shares Issued (m)</td>
<td style="width: 137.0pt;">                                              39.9</td>
<td style="width: 87.0pt;">                         38.6</td>
</tr>
<tr>
<td style="width: 192.0pt;">Total Shares Outstanding post-IPO (m)</td>
<td style="width: 137.0pt;">                                            649.6</td>
<td style="width: 87.0pt;">                       648.3</td>
</tr>
<tr>
<td style="width: 192.0pt;">Market Cap (INRm)</td>
<td style="width: 137.0pt;">                                1,351,111.5</td>
<td style="width: 87.0pt;">           1,393,788.4</td>
</tr>
<tr>
<td style="width: 192.0pt;">Post-Money Enterprise Value (INRm)</td>
<td style="width: 137.0pt;">                                1,254,116.5</td>
<td style="width: 87.0pt;">           1,296,793.4</td>
</tr>
</tbody></table>Source: Company disclosures (offer shares calculated by dividing new share issue of INR83bn by the IPO price, Enterprise value after adjusting for net debt and net IPO proceeds (we have assumed underwriting and other costs to be about 7.25% of gross proceeds) and cash and debt as of June 2021)The company has already raised INR82.3bn from anchor investors (about 45.0% of the total offer) ahead of its IPO at a price of INR2,150 per share, and according to the company, its cornerstone investment was oversubscribed by more than 10x. These anchor investors include BlackRock, Vanguard, CPPIB, BirlaMF and GIC.Paytm plans to use the net proceeds from the IPO on growing and strengthening its Paytm ecosystem, investing on new business initiatives, acquisitions and strategic partnerships and for other general corporate purposes.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/240/442/original/image_54411635561636403842771.png?1636403843" class="editor-image img-responsive" data-smartkarma-image-id="240442"></figure>Source: Company disclosures

Paytm (PAYTM IN), India’s largest digital ecosystem for consumers and merchants has opened its book-building which will run from 08th November to the 10th of November. Paytm plans to raise INR183bn (approx. US$2.4bn) through the issuance of a mix of new shares (approx. INR83bn) and existing shares (INR00bn) at an indicative price range of INR2,080-2,150 per share. At the above price range, Paytm will have a market capitalisation of INR1,351.1-1,396.6bn and a post-money enterprise value of INR1,254.1-1,296.8bn.

Paytm IPO Details
@ INR2,080 
@ INR2,150


Shares Outstanding Pre-IPO (m)
                                            609.7
                       609.7


Offer Shares/New Shares Issued (m)
                                              39.9
                         38.6


Total Shares Outstanding post-IPO (m)
                                            649.6
                       648.3


Market Cap (INRm)
                                1,351,111.5
           1,393,788.4


Post-Money Enterprise Value (INRm)
                                1,254,116.5
           1,296,793.4

Source: Company disclosures (offer shares calculated by dividing new share issue of INR83bn by the IPO price, Enterprise value after adjusting for net debt and net IPO proceeds (we have assumed underwriting and other costs to be about 7.25% of gross proceeds) and cash and debt as of June 2021)The company has already raised INR82.3bn from anchor investors (about 45.0% of the total offer) ahead of its IPO at a price of INR2,150 per share, and according to the company, its cornerstone investment was oversubscribed by more than 10x. These anchor investors include BlackRock, Vanguard, CPPIB, BirlaMF and GIC.Paytm plans to use the net proceeds from the IPO on growing and strengthening its Paytm ecosystem, investing on new business initiatives, acquisitions and strategic partnerships and for other general corporate purposes.Source: Company disclosures

Paytm IPO: More Expensive than Global Payment Giants and SOTP Suggests More Than 40% Discount

Oshadhi Kumarasiri

<a href="https://www.smartkarma.com/entities/kakao-pay-corp" target="_blank" data-smartkarma-citation="entities:29675:1" rel="noopener">Kakao Pay (377300 KS)</a> had a stellar debut yesterday with the share price rising more than 114% from the IPO price to close the first trading session at 193,000 won per share. This first-day pop has taken Kakao Pay’s valuation to an extremely unreasonable level and we are expecting the share price to pull back over the course of the next six months alongside the expiry of voluntary lock-up periods.

Kakao Pay (377300 KS) had a stellar debut yesterday with the share price rising more than 114% from the IPO price to close the first trading session at 193,000 won per share. This first-day pop has taken Kakao Pay’s valuation to an extremely unreasonable level and we are expecting the share price to pull back over the course of the next six months alongside the expiry of voluntary lock-up periods.

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><a href="https://www.smartkarma.com/entities/paytm-mobile-solutions-pvt-ltd" target="_blank" data-smartkarma-citation="entities:26149:1" rel="noopener">Paytm (PAYTM IN)</a>, formally known as One97 Communications, is India’s largest payments platform based on the number of consumers, number of merchants, number of transactions and revenue as of 31 March 2021, according to RedSeer. Paytm has an overall payments transaction volume market share of 40%, and wallet payments transaction market share of 65-70% in India as of FY21, according to RedSeer. </div><div>Paytm will launch its IPO on 8 November at an indicative price range of Rs2,080-2,150 per share. The IPO comprises a primary raise of Rs83,000 million ($1.1 billion) and a secondary raise up to Rs100,000 million ($1.3 billion). The total IPO proceeds of $2.4 billion are around 10% higher than its earlier target. The three-day share sale will conclude on 10 November.</div><div>In <a href="https://www.smartkarma.com/insights/paytm-ipo-initiation-a-payments-led-super-app" target="_blank" data-smartkarma-citation="insights:54983" rel="noopener">Paytm IPO Initiation: A Payments-Led Super-App</a>, we stated as India’s largest payments platform, Paytm is well placed to benefit from this structural tailwind. While the COVID-19 pandemic was disruptive particularly to the non-payments business, Paytm should return to growth as the impact of the pandemic wanes and vaccination rates rise in India. </div><div><div><div class="content-highlight">In <a href="https://www.smartkarma.com/insights/paytm-ipo-bright-spot" target="_blank" data-smartkarma-citation="insights:59999" rel="noopener">Paytm IPO: Bright Spot</a>, we stated that the recent results show a strong return to growth, reducing loss margin and reinforce our view that Paytm has attractive fundamentals. Our valuation analysis suggests that the price range is reasonable.</div></div></div>

Paytm (PAYTM IN), formally known as One97 Communications, is India’s largest payments platform based on the number of consumers, number of merchants, number of transactions and revenue as of 31 March 2021, according to RedSeer. Paytm has an overall payments transaction volume market share of 40%, and wallet payments transaction market share of 65-70% in India as of FY21, according to RedSeer. Paytm will launch its IPO on 8 November at an indicative price range of Rs2,080-2,150 per share. The IPO comprises a primary raise of Rs83,000 million ($1.1 billion) and a secondary raise up to Rs100,000 million ($1.3 billion). The total IPO proceeds of $2.4 billion are around 10% higher than its earlier target. The three-day share sale will conclude on 10 November.In Paytm IPO Initiation: A Payments-Led Super-App, we stated as India’s largest payments platform, Paytm is well placed to benefit from this structural tailwind. While the COVID-19 pandemic was disruptive particularly to the non-payments business, Paytm should return to growth as the impact of the pandemic wanes and vaccination rates rise in India. In Paytm IPO: Bright Spot, we stated that the recent results show a strong return to growth, reducing loss margin and reinforce our view that Paytm has attractive fundamentals. Our valuation analysis suggests that the price range is reasonable.

United States

PayPal Holdings, Inc. operates as a technology platform company that enables digital and mobile payments on behalf of consumers and merchants. The Company offers online payment solutions. PayPal Holdings serves customers worldwide.

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Paypal Holdings (PYPL US)

Tencent Holdings – Seinfeld-Ian Roadshow

TENCENT: Tencent addressed matters it had already discussed at its challenged 3Q21 results. Unfortunately there was no serious discussion of...

Thomas J. Monaco

Tencent Holdings – Increasing Risk

TENCENT: Tencent's 3Q21 GAAP net income declined 6.7% QOQ, and were challenged by increases in cost of revenue, operating expenses, losses in...

Thomas J. Monaco

Paytm IPO: More Expensive than Global Payment Giants and SOTP Suggests More Than 40% Discount

With not so conservative assumptions, our SOTP valuation suggests that Paytm's shares are significantly overvalued at the IPO price range. At the...

Shifara Samsudeen, ACMA, CGMA

Kakao Pay IPO Trading: Time to Cash In

A tight free float and an unprecedented demand during book building saw Kakao Pay’s shares rise more than 114% from the IPO price on day one....

Oshadhi Kumarasiri

Paytm IPO: Valuation Insights

Paytm will launch its IPO on 8 November to raise $2.4 billion. Our valuation analysis suggests that the price range is reasonable.

Arun George

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