Fintech & EM-focused Analyst, KT Capital Group

Alec Tseung

Fintech & EM-focused Analyst

Private Capital Markets

<p>For an investment in MoMo, which is a leading e-wallet in Vietnam, our analysis shows that <strong>the most sensitive factor </strong><strong>that would impact a potential investor's return is the company's take rate</strong>.</p><p>Hence, even if the digital payments and e-wallets sector in Vietnam could present significant growth, the return from investing in MoMo could still be unattractive if its take rate drops in the future, given the sector's intensifying competition.</p><p><strong>The key to defending its future take rate </strong><strong>is diversifying away from e-wallets and payments to become a financial facilitator with a complete ecosystem </strong>in the coming 3 – 5 years, like Ant Group in China. This is also the strategy Grab Financial Group is going after.  </p>

For an investment in MoMo, which is a leading e-wallet in Vietnam, our analysis shows that the most sensitive factor that would impact a potential investor's return is the company's take rate.Hence, even if the digital payments and e-wallets sector in Vietnam could present significant growth, the return from investing in MoMo could still be unattractive if its take rate drops in the future, given the sector's intensifying competition.The key to defending its future take rate is diversifying away from e-wallets and payments to become a financial facilitator with a complete ecosystem in the coming 3 – 5 years, like Ant Group in China. This is also the strategy Grab Financial Group is going after.  

Vietnam's MoMo: A Venture Capital Investment With Private Equity Return?

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>Kakao Bank (KB), South Korea’s largest digital bank, raised US$2.2bn in its South Korean IPO. It ended the first day of trading up 79% from its IPO price. </p></div><div>We have covered various aspects of the deal in our previous notes:</div><div><ul>
<li>
<a href="https://www.smartkarma.com/insights/kakao-bank-ipo-riding-on-parent-s-network-but-boundaries-with-kakao-pay-remain-unclear" target="_blank" rel="noopener">Kakao Bank IPO - Riding on parents network but boundaries with Kakao Pay remain unclear</a>, </li>
<li><a href="https://www.smartkarma.com/insights/kakao-bank-ipo-pricey-as-it-should-be" target="_blank" rel="noopener">Kakao Bank IPO - Pricey as It Should Be</a></li>
<li><a href="https://www.smartkarma.com/insights/kakao-bank-ipo-lack-of-lock-up-and-msci-ftse-index-implications" target="_blank" rel="noopener">Kakao Bank IPO - Lack of Lock-Up and MSCI, FTSE Index Implications, and</a></li>
<li><a href="https://www.smartkarma.com/insights/kakao-bank-ipo-trading-one-for-instis-closer-look-at-ftse-and-msci-inclusion-remain-buyers" target="_blank" rel="noopener">Kakao Bank IPO Trading - One for Instis, Closer Look at FTSE and MSCI Inclusion. Remain Buyers</a></li>
</ul></div><div><p>In this note, we will talk about the first day trading and index inclusion.</p></div>

Kakao Bank (KB), South Korea’s largest digital bank, raised US$2.2bn in its South Korean IPO. It ended the first day of trading up 79% from its IPO price. We have covered various aspects of the deal in our previous notes:

Kakao Bank IPO - Riding on parents network but boundaries with Kakao Pay remain unclear, 
Kakao Bank IPO - Pricey as It Should Be
Kakao Bank IPO - Lack of Lock-Up and MSCI, FTSE Index Implications, and
Kakao Bank IPO Trading - One for Instis, Closer Look at FTSE and MSCI Inclusion. Remain Buyers
In this note, we will talk about the first day trading and index inclusion.

Kakao Bank - MSCI Done, Missed FTSE by a Whisker.

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

<p><strong><em>*Competitor Sees 73% Upside: </em></strong> A bulge bracket competitor recently published a table pounding note on the shares of Tencent Holdings (700.HK) [Tencent], which states that the shares are undervalued to the tune of 73%; and  </p><p><strong><em>*We Beg To Differ:</em></strong> Mainland China's crackdown on capital markets has rapidly expanded under the broad narrative of "financial stability". We have witnessed fines at Tencent, new user WeChat suspensions. Tencent may have to give up its exclusive music rights and possibly dispose of Kuwo and Kugou, and likely form of a financial holding company. The big table pounding report and a massive need for equity; this has all of the markings of the usual near-term gigantic capital raise.      </p>

*Competitor Sees 73% Upside:  A bulge bracket competitor recently published a table pounding note on the shares of Tencent Holdings (700.HK) [Tencent], which states that the shares are undervalued to the tune of 73%; and  *We Beg To Differ: Mainland China's crackdown on capital markets has rapidly expanded under the broad narrative of "financial stability". We have witnessed fines at Tencent, new user WeChat suspensions. Tencent may have to give up its exclusive music rights and possibly dispose of Kuwo and Kugou, and likely form of a financial holding company. The big table pounding report and a massive need for equity; this has all of the markings of the usual near-term gigantic capital raise.      

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

<p><a href="https://www.smartkarma.com/entities/finaccel-pte-ltd" target="_blank" data-smartkarma-citation="entities:33791:1" rel="noopener">FinAccel (1411023D SP)</a>, the parent of Kredivo, is the leading buy now, pay later (BNPL) platform in Indonesia with an e-commerce BPNL market share of around 40%-45%. Kredivo intends to go public in the US through a SPAC merger with VPC Impact Acquisition Holdings II.</p><p>The combined company will have an EV of $2.0 billion and an equity value of $2.5 billion at closing. The deal implies 6.3x 2022 EV/Sales based on Kredivo’s forecasted revenue. The transaction involves a 100% rollover by existing Kredivo shareholders, a $120 million fully committed PIPE (led by Marshall Wace, Corbin Capital, SV Investment, <a href="https://www.smartkarma.com/entities/palantir-technologies-inc" target="_blank" data-smartkarma-citation="entities:27728:1" rel="noopener">Palantir Technologies Inc (PLTR US)</a>, Maso Capital, and sponsor Victory Park Capital) in addition to a $55 million convertible note funded by existing investors <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a> and Square Peg. Kredivo is expected to receive over $430 million of gross proceeds. Existing shareholders will have an 83% ownership of the combined company including the concurrent investment. </p><p>The BNPL market is rapidly becoming a must-have product for payment providers. This necessity has spurred the launch of in-house solutions from global payment providers such as <a href="https://www.smartkarma.com/entities/paypal-holdings-inc" target="_blank" data-smartkarma-citation="entities:4747:1" rel="noopener">Paypal Holdings (PYPL US)</a> as well the M&amp;A as evidenced by <a href="https://www.smartkarma.com/entities/square-inc" target="_blank" data-smartkarma-citation="entities:23755:1" rel="noopener">Square Inc (SQ US)</a>'s bid for <a href="https://www.smartkarma.com/entities/afterpay-limited" target="_blank" data-smartkarma-citation="entities:26940:1" rel="noopener">Afterpay Touch (APT AU)</a>.  </p><div class="content-highlight"><p>Since its launch in 2016, Kredivo has established itself as a leading BNPL player in Indonesia due to sustainable competitive advantages built around an in-house credit bureau and low customer acquisition costs. Kredivo is not resting on its laurels but increasing its addressable market through international expansion in adjacent countries and the launch of a new business line (Lime). Kredivo is using its market-leading position to deliver high growth with a declining loss margin. Refreshingly the YTD performance suggests that management are well on track to meet their forecasts. Finally, the proposed valuation is also attractive in comparison to global BNPL peers. </p></div>

FinAccel (1411023D SP), the parent of Kredivo, is the leading buy now, pay later (BNPL) platform in Indonesia with an e-commerce BPNL market share of around 40%-45%. Kredivo intends to go public in the US through a SPAC merger with VPC Impact Acquisition Holdings II.The combined company will have an EV of $2.0 billion and an equity value of $2.5 billion at closing. The deal implies 6.3x 2022 EV/Sales based on Kredivo’s forecasted revenue. The transaction involves a 100% rollover by existing Kredivo shareholders, a $120 million fully committed PIPE (led by Marshall Wace, Corbin Capital, SV Investment, Palantir Technologies Inc (PLTR US), Maso Capital, and sponsor Victory Park Capital) in addition to a $55 million convertible note funded by existing investors Naver Corp (035420 KS) and Square Peg. Kredivo is expected to receive over $430 million of gross proceeds. Existing shareholders will have an 83% ownership of the combined company including the concurrent investment. The BNPL market is rapidly becoming a must-have product for payment providers. This necessity has spurred the launch of in-house solutions from global payment providers such as Paypal Holdings (PYPL US) as well the M&amp;A as evidenced by Square Inc (SQ US)'s bid for Afterpay Touch (APT AU).  Since its launch in 2016, Kredivo has established itself as a leading BNPL player in Indonesia due to sustainable competitive advantages built around an in-house credit bureau and low customer acquisition costs. Kredivo is not resting on its laurels but increasing its addressable market through international expansion in adjacent countries and the launch of a new business line (Lime). Kredivo is using its market-leading position to deliver high growth with a declining loss margin. Refreshingly the YTD performance suggests that management are well on track to meet their forecasts. Finally, the proposed valuation is also attractive in comparison to global BNPL peers. 

FinAccel/Kredivo SPAC Deal: Smooth Shopping

<p><a href="https://www.smartkarma.com/entities/afterpay-limited" target="_blank" data-smartkarma-citation="entities:26940:1" rel="noopener">Afterpay Touch (APT AU)</a> is a leading buy now, pay later (BNPL) player. Afterpay revealed that <a href="https://www.smartkarma.com/entities/square-inc" target="_blank" data-smartkarma-citation="entities:23755:1" rel="noopener">Square Inc (SQ US)</a> had agreed to acquire it through a recommended scheme of arrangement. Square will offer a fixed exchange ratio of 0.375 Square shares per Afterpay share. Based on Square's closing price on 30 July, the implied transaction price of A$126.21 per share is a 30.6% premium to the share price of A$96.66 per share on the last trading date (30 July). The deal has an implied value of A$39 billion and if completed, would be the largest in Australian M&amp;A history. </p><p>The completion conditions include Afterpay and Square shareholder approval along with regulatory approval. Square intends to also establish a secondary listing on ASX. Afterpay shareholders will own 18.5% of the combined company on a fully diluted basis.</p><div class="content-highlight"><p>While the share price has traded recently above the implied offer price, we think that offer is attractive in comparison to historical EV/Sales multiples and average share prices. With BNPL competition steadily increasing, the all-scrip deal gives shareholders the opportunity to benefit from the ability of the combined Square + Afterpay to expand the customer base and strengthen the product portfolio. At Square's current price of US$274.93 at the time of writing (+11% on Friday close), Afterpay shares are trading at a 22% gross spread to the indicative offer.</p></div>

Afterpay Touch (APT AU) is a leading buy now, pay later (BNPL) player. Afterpay revealed that Square Inc (SQ US) had agreed to acquire it through a recommended scheme of arrangement. Square will offer a fixed exchange ratio of 0.375 Square shares per Afterpay share. Based on Square's closing price on 30 July, the implied transaction price of A$126.21 per share is a 30.6% premium to the share price of A$96.66 per share on the last trading date (30 July). The deal has an implied value of A$39 billion and if completed, would be the largest in Australian M&amp;A history. The completion conditions include Afterpay and Square shareholder approval along with regulatory approval. Square intends to also establish a secondary listing on ASX. Afterpay shareholders will own 18.5% of the combined company on a fully diluted basis.While the share price has traded recently above the implied offer price, we think that offer is attractive in comparison to historical EV/Sales multiples and average share prices. With BNPL competition steadily increasing, the all-scrip deal gives shareholders the opportunity to benefit from the ability of the combined Square + Afterpay to expand the customer base and strengthen the product portfolio. At Square's current price of US$274.93 at the time of writing (+11% on Friday close), Afterpay shares are trading at a 22% gross spread to the indicative offer.

Square Lobs a Market-Defining Bid for Afterpay

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)

Vietnam's MoMo: A Venture Capital Investment With Private Equity Return?

Take rate is the most critical factor that determines the return MoMo could bring to investors. The key to defending its take rate amid intense...

Alec Tseung

Kakao Bank - MSCI Done, Missed FTSE by a Whisker.

Kakao Bank (KB), South Korea’s largest digital bank, raised US$2.2bn in its South Korean IPO. It ended the first day of trading up 79% from its IPO...

Sumeet Singh

Tencent Holdings - Bulge Bracket Bull

TENCENT HOLDINGS: A competitor recently suggested the shares of Tencent have 73% upside. We beg to differ, further pain in these shares is expected...

Thomas J. Monaco

FinAccel/Kredivo SPAC Deal: Smooth Shopping

Kredivo is using its market-leading BNPL position to deliver high growth with a declining loss margin. Refreshingly the forecasts are reasonable...

Arun George

Square Lobs a Market-Defining Bid for Afterpay

Afterpay revealed that Square had agreed to acquire it through a recommended scheme of arrangement. We think that the all-scrip offer is attractive...

Arun George

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