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

<div>
<p><a href="https://www.smartkarma.com/entities/coupang" target="_blank" data-smartkarma-citation="entities:28425:1" rel="noopener">Coupang (CPNG US)</a> is the largest e-commerce platform in South Korea, according to Euromonitor. Coupang is best known for Rocket Delivery, which provides free, next-day delivery for orders placed any time of the day.</p>
<p>At the proposed IPO price range of $27-30 per share, Coupang will have a market cap of $46-51 billion. The IPO which comprises of a primary and secondary offering will raise total gross proceeds up to $3.6 billion.  At the mid-point of the IPO price range, the net proceeds from the primary raise are $2.8 million. </p>
</div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/coupang-ipo-initiation-delivering-the-goods" target="_blank" data-smartkarma-citation="insights:48125" rel="noopener">Coupang IPO Initiation: Delivering the Goods</a>, we opined that Coupang's fundamentals tick all the right boxes and worth a look, in our view. Coupang is a new-economy growth story and at the IPO price range, is attractively priced for its growth potential vs global e-commerce peers. Consequently, we would participate in the IPO. </p></div></div></div>


Coupang (CPNG US) is the largest e-commerce platform in South Korea, according to Euromonitor. Coupang is best known for Rocket Delivery, which provides free, next-day delivery for orders placed any time of the day.
At the proposed IPO price range of $27-30 per share, Coupang will have a market cap of $46-51 billion. The IPO which comprises of a primary and secondary offering will raise total gross proceeds up to $3.6 billion.  At the mid-point of the IPO price range, the net proceeds from the primary raise are $2.8 million. 
In Coupang IPO Initiation: Delivering the Goods, we opined that Coupang's fundamentals tick all the right boxes and worth a look, in our view. Coupang is a new-economy growth story and at the IPO price range, is attractively priced for its growth potential vs global e-commerce peers. Consequently, we would participate in the IPO. 

Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

<p>Z Holdings has closed its long-awaited merger with LINE and will now step up to battle global Internet challengers. The new company will invest c. $5bn over five years to boost its AI heft to expand its market share in Japan as well as leverage LINE’s overseas footprint. Investors hoping for an upgrade to profitability targets may be disappointed as the FY23 operating income target is unchanged but the top-line targets are aggressive enough and an accelerated investment program is a compelling story.  That is good for Z Holdings and parent Softbank Corp but less so for its main domestic challenger Rakuten as the cost of business in Japan keeps going up.  </p>

Z Holdings has closed its long-awaited merger with LINE and will now step up to battle global Internet challengers. The new company will invest c. $5bn over five years to boost its AI heft to expand its market share in Japan as well as leverage LINE’s overseas footprint. Investors hoping for an upgrade to profitability targets may be disappointed as the FY23 operating income target is unchanged but the top-line targets are aggressive enough and an accelerated investment program is a compelling story.  That is good for Z Holdings and parent Softbank Corp but less so for its main domestic challenger Rakuten as the cost of business in Japan keeps going up.  

Z Holdings -  With Merger Close, Investment Will Accelerate

Internet Initiative Japan / Equity Bottom-Up

<p>IIJ has fired its salvo in the pricing wars with c. 10-40% reductions in consumer mobile plans although a shift in bundle sizes could minimize the impact as subscribers are upsold. Unsurprisingly, there are no sub 1GB plans since Rakuten is giving that away but the 2GB/¥780 plan is competitive (Rak: 1-3GB for ¥980) whilst IIJ is adding tiers higher than 12GB for the first time. On the aggregate, other businesses including Enterprise Mobile are generating sufficient growth that consumer mobile erosion is unlikely to have a material impact on consolidated numbers. Meanwhile, an impending announcement of mobile wholesale rates for FY20 is meaningful especially if costs are less than expected. </p>

IIJ has fired its salvo in the pricing wars with c. 10-40% reductions in consumer mobile plans although a shift in bundle sizes could minimize the impact as subscribers are upsold. Unsurprisingly, there are no sub 1GB plans since Rakuten is giving that away but the 2GB/¥780 plan is competitive (Rak: 1-3GB for ¥980) whilst IIJ is adding tiers higher than 12GB for the first time. On the aggregate, other businesses including Enterprise Mobile are generating sufficient growth that consumer mobile erosion is unlikely to have a material impact on consolidated numbers. Meanwhile, an impending announcement of mobile wholesale rates for FY20 is meaningful especially if costs are less than expected. 

Internet Initiative Japan - New Pricing Plans Are Competitive and Impact Is Manageable

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Thematic (Sector/Industry)

<p>Supermarkets were much better prepared for Japan’s second state of emergency compared to the first last Spring. Most now have systems in place, both to make shopping safe and quick in stores, but also to offer a robust online ordering model.</p><p>There is now an opportunity for the best mid-sized chains to shine, with companies like Yaoko suggesting those customers used to ordering at the bigger online stores are switching to ordering from local chains.</p>

Supermarkets were much better prepared for Japan’s second state of emergency compared to the first last Spring. Most now have systems in place, both to make shopping safe and quick in stores, but also to offer a robust online ordering model.There is now an opportunity for the best mid-sized chains to shine, with companies like Yaoko suggesting those customers used to ordering at the bigger online stores are switching to ordering from local chains.

2nd Emergency Means New Opportunities for Supermarkets

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<div class="content-highlight">
<p><strong>Our base case valuation of Coupang is EV of $55.6 billion and implied market cap of $60.1 billion. </strong></p>
<p>We have used EV/GP as our primary method of valuing Coupang. We believe this is a better method than EV/S since Coupang has lower gross margins than its peers and its sales have a greater component of COGS than its peers. We used the average EV/GP of he comps (on a TTM) basis which is 19.3x. We then applied our estimated gross profit of $2.9 billion for Coupang in 2021 which resulted in an EV of $55.6 billion. Adjusting for net cash of $4.5 billion, this also suggests an implied market cap of $60.1 billion, which is over a 6-12 month view. </p>
<p><strong>First day pop</strong> - We believe there will be a first day pop for Coupang given the intensely bullish environment for high quality global tech stocks. We believe that the first day pop could lead to Coupang's <strong>market cap rising as high as</strong><strong>$81 billion</strong>, which would be 35% higher than our base case value of $60.1 billion. </p>
</div>


Our base case valuation of Coupang is EV of $55.6 billion and implied market cap of $60.1 billion. 
We have used EV/GP as our primary method of valuing Coupang. We believe this is a better method than EV/S since Coupang has lower gross margins than its peers and its sales have a greater component of COGS than its peers. We used the average EV/GP of he comps (on a TTM) basis which is 19.3x. We then applied our estimated gross profit of $2.9 billion for Coupang in 2021 which resulted in an EV of $55.6 billion. Adjusting for net cash of $4.5 billion, this also suggests an implied market cap of $60.1 billion, which is over a 6-12 month view. 
First day pop - We believe there will be a first day pop for Coupang given the intensely bullish environment for high quality global tech stocks. We believe that the first day pop could lead to Coupang's market cap rising as high as$81 billion, which would be 35% higher than our base case value of $60.1 billion. 


Japan

Rakuten Group, Inc. provides Internet services. The Company offers Internet finance services which including "Rakuten Card" and "Rakuten Bank". Rakuten Group also provides digital content services including electronic book services.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Rakuten (4755 JP)

Coupang IPO: Valuation Insights

The $27-30 price range implies gross proceeds up to $3.6 billion and values Coupang at $46-51 billion. At the price range, Coupang is attractively...

Arun George

Z Holdings - With Merger Close, Investment Will Accelerate

The biggest takeaway from the merger close is the ¥500bn investment program. If it fuels stronger revenue growth then profits should follow over...

Kirk Boodry

Internet Initiative Japan - New Pricing Plans Are Competitive and Impact Is Manageable

IIJ's new consumer mobile pricing plans are competitive with Rakuten and the financial impact on consolidated results should be immaterial

Kirk Boodry

2nd Emergency Means New Opportunities for Supermarkets

Japanese supermarkets suffered from genteel decline in the decade to 2020. And then Covid-19 forced everyone home, resulting in a propensity to...

Michael Causton

Coupang - Valuation Analysis

Our base case valuation of Coupang is EV of $55.6 billion and implied market cap of $60.1 billion. We have used EV/GP as our primary method of...

Douglas Kim

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)