Equity Analyst, LightStream Research

Supun Walpola

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

<p><a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a> plans to raise around $5bn through an issue of ADS and convertible bonds. PDD will offer $1.75bn worth of 5-year bonds convertible from 2023-25 and around 22m ADS worth around $3bn (at the market price of $132.4 as of 17/11/2020).</p>
<p>Proceeds from the placement will be used to invest in agricultural logistics infrastructure and responsive manufacturing as a part of the company’s broader strategy to take on e-commerce giants like <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> and <a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a> by tapping into the emerging online grocery shopping market.</p>
<p>In this note, we revisit our thesis on PDD ahead of the proposed placement.</p>
<p><strong>PDD’s valuation looks bit of a stretch against Chinese e-commerce peers, however, not so much against other high-growth large-cap names. PDD’s share price has increased by more than 200% YTD and the momentum is still quite strong. With PDD potentially nearing profitability, we believe there could be further gains to be made on good news over the next few quarters. We would participate in the placement at the current valuation.  </strong></p>

Pinduoduo (PDD US) plans to raise around $5bn through an issue of ADS and convertible bonds. PDD will offer $1.75bn worth of 5-year bonds convertible from 2023-25 and around 22m ADS worth around $3bn (at the market price of $132.4 as of 17/11/2020).
Proceeds from the placement will be used to invest in agricultural logistics infrastructure and responsive manufacturing as a part of the company’s broader strategy to take on e-commerce giants like Alibaba Group (BABA US) and JD.com Inc (ADR) (JD US) by tapping into the emerging online grocery shopping market.
In this note, we revisit our thesis on PDD ahead of the proposed placement.
PDD’s valuation looks bit of a stretch against Chinese e-commerce peers, however, not so much against other high-growth large-cap names. PDD’s share price has increased by more than 200% YTD and the momentum is still quite strong. With PDD potentially nearing profitability, we believe there could be further gains to be made on good news over the next few quarters. We would participate in the placement at the current valuation.  

Pinduoduo Placement: As Expensive As It May Seem, There Could Be More Upside

Alpha-Centric ESG Research

Kyle Rudden

<p>Sometimes, the "ESG stuff" can really alter the outcome of an IPO. The <a href="https://www.smartkarma.com/entities/saudi-aramco" target="_blank" data-smartkarma-citation="entities:27317:1" rel="noopener">Saudi Aramco (ARAMCO AB)</a> debut was curbed by Environmental concerns. WeWork's failed IPO is a case study in founder-led Governance risk. Palantir quashed its "adjustable voting power for founders" after an uproar.</p>
<p>ESG impacts IPOs. But not Ant's IPO.</p>
<p>Ant's ESG profile is strong. There a few skeletons in the closet if you look hard enough, but they are bygone and irrelevant . Current ESG blemishes are minor. There isn't much dirt for ESG idealists to wallow in. If they are even looking at all; as a "China deal," ESG has a different relevance for Ant.</p>
<p>Ant's IPO is a momentous ESG event, but not in the traditional and obvious way.</p>
<p>This is not about ESG impacting Ant's IPO. This is about Ant's IPO impacting ESG.</p>
<p>Looking at Ant through a typical ESG lens will make one's head spin. But step back and look again, and it becomes clear that Ant is a strategically-integrated masterpiece at the vanguard of a critical crossroads – the intersection of Fintech, financial inclusion, green finance, and sustainability.</p>
<p>It is all a matter of perspective.</p>
<p>Seeing the forest for the trees.</p>

Sometimes, the "ESG stuff" can really alter the outcome of an IPO. The Saudi Aramco (ARAMCO AB) debut was curbed by Environmental concerns. WeWork's failed IPO is a case study in founder-led Governance risk. Palantir quashed its "adjustable voting power for founders" after an uproar.
ESG impacts IPOs. But not Ant's IPO.
Ant's ESG profile is strong. There a few skeletons in the closet if you look hard enough, but they are bygone and irrelevant . Current ESG blemishes are minor. There isn't much dirt for ESG idealists to wallow in. If they are even looking at all; as a "China deal," ESG has a different relevance for Ant.
Ant's IPO is a momentous ESG event, but not in the traditional and obvious way.
This is not about ESG impacting Ant's IPO. This is about Ant's IPO impacting ESG.
Looking at Ant through a typical ESG lens will make one's head spin. But step back and look again, and it becomes clear that Ant is a strategically-integrated masterpiece at the vanguard of a critical crossroads – the intersection of Fintech, financial inclusion, green finance, and sustainability.
It is all a matter of perspective.
Seeing the forest for the trees.

Ant Group Pre-IPO ESG Assessment: Seeing the Forest for the Trees

Covering IPOs, Healthcare and Technology Stocks

Andrei Zakharov

Algosun Global

Equity Bottom-Up

<p style="text-align: justify;">BigCommerce shares have significantly outperformed after IPO and rose to a record $162 a share after SaaS ecommerce platform provider enhanced strategic partnership with Facebook and Instagram to unlock checkout on Instagram feature for merchants in the United States. BigCommerce states, that partnership enables merchants to easily connect ecommerce storefronts catalogs to Instagram, providing customers with access to buy from their favorite brands directly on Instagram. This is just a new powerful integration while BigCommerce has already partnered with Facebook for years.</p><p style="text-align: justify;">Discussing 2Q:20 results, management announced financial outlook for the full year 2020. We expected BigCommerce annual revenue to reach $147M in CY 2020, 30%+ YoY growth rate. However, BigCommerce currently expects total revenue to be between $142.5M and $143.3M while non-GAAP operating losses to exceed $32M this year. This is slightly below our expectations keeping in mind there will be no revenue growth in Q3-20 compared to Q2-20.  In our insight we will focus on detailed analysis of 2Q:20 earnings and set a new 12-month price target on BigCommerce stock.</p>

BigCommerce shares have significantly outperformed after IPO and rose to a record $162 a share after SaaS ecommerce platform provider enhanced strategic partnership with Facebook and Instagram to unlock checkout on Instagram feature for merchants in the United States. BigCommerce states, that partnership enables merchants to easily connect ecommerce storefronts catalogs to Instagram, providing customers with access to buy from their favorite brands directly on Instagram. This is just a new powerful integration while BigCommerce has already partnered with Facebook for years.Discussing 2Q:20 results, management announced financial outlook for the full year 2020. We expected BigCommerce annual revenue to reach $147M in CY 2020, 30%+ YoY growth rate. However, BigCommerce currently expects total revenue to be between $142.5M and $143.3M while non-GAAP operating losses to exceed $32M this year. This is slightly below our expectations keeping in mind there will be no revenue growth in Q3-20 compared to Q2-20.  In our insight we will focus on detailed analysis of 2Q:20 earnings and set a new 12-month price target on BigCommerce stock.

Is It Time To Pile Into BigCommerce Shares? Our 2Q:20 Earnings Review and Mid-Term Outlook

Japan Specialist

Mark Chadwick

<div>
<p><span xml:lang="EN-US" data-contrast="auto"><a href="https://www.smartkarma.com/entities/makuake-inc" target="_blank" data-smartkarma-citation="entities:29281:1" rel="noopener">Makuake Inc (4479 JP)</a>  is a unique online platform that launches new products and services online. </span><span data-ccp-props='{"201341983":0,"335559739":160,"335559740":259}'> </span></p>
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<p><span xml:lang="EN-US" data-contrast="auto">The seven-year-old company is a product of the <a href="https://www.smartkarma.com/entities/cyberagent-inc" target="_blank" data-smartkarma-citation="entities:8197:1" rel="noopener">CyberAgent Inc (4751 JP)</a>  incubation umbrella and debuted on TSE Mothers in December 2019. Since then, sales have grown 128% to reach ¥2.1bn and operating profit +843% to ¥0.53bn. </span></p>
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<p><strong><span xml:lang="EN-US" data-contrast="auto">What does it do?</span><span xml:lang="EN-US" data-contrast="auto"> </span> </strong></p>
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<span xml:lang="EN-US" data-contrast="auto">Makuake’s</span><span xml:lang="EN-US" data-contrast="auto"> platform helps to launch new products, bring them in front of buyers (or supporters), before a formal market release. </span><span data-ccp-props='{"201341983":0,"335559739":160,"335559740":259}'> <span xml:lang="EN-US" data-contrast="auto">Makuake takes 20% of Gross Merchandise Value (GMV) on transactions.</span></span>
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<span xml:lang="EN-US" data-contrast="auto">Makuake</span><span xml:lang="EN-US" data-contrast="auto"> Incubator Studio (MIS) helps firms with strong R&amp;D to develop and commercialise products via their platform.</span><span xml:lang="EN-US" data-contrast="auto"> </span><span xml:lang="EN-US" data-contrast="auto">MIS charges a fixed fee for product development consultation plus 20% of GMV. </span><span data-ccp-props='{"201341983":0,"335559739":160,"335559740":259}'> </span>
</li>
</ol>
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<div>Makuake's <a href="https://www.makuake.com" target="_blank" rel="noopener">website</a> is home to a wide-range of products, from well-known brands such as <em>Asics</em> to entrepreneurs looking to raise funds for their creative ideas. Here is a selection of weird and wonderful products ranging from a "wallet that you cannot lose", to a "laptop carrying T-shirt", and a new "iPhone holder" for your car. </div>
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<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/159/765/original/image_82436874821600388336974.png?1600388337" class="editor-image img-responsive" data-smartkarma-image-id="159765"></figure>
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Makuake Inc (4479 JP)  is a unique online platform that launches new products and services online.  


The seven-year-old company is a product of the CyberAgent Inc (4751 JP)  incubation umbrella and debuted on TSE Mothers in December 2019. Since then, sales have grown 128% to reach ¥2.1bn and operating profit +843% to ¥0.53bn. 


What does it do?  




Makuake’s platform helps to launch new products, bring them in front of buyers (or supporters), before a formal market release.  Makuake takes 20% of Gross Merchandise Value (GMV) on transactions.


Makuake Incubator Studio (MIS) helps firms with strong R&amp;D to develop and commercialise products via their platform. MIS charges a fixed fee for product development consultation plus 20% of GMV.  



Makuake's website is home to a wide-range of products, from well-known brands such as Asics to entrepreneurs looking to raise funds for their creative ideas. Here is a selection of weird and wonderful products ranging from a "wallet that you cannot lose", to a "laptop carrying T-shirt", and a new "iPhone holder" for your car. 





Small Cap Growth: Makuake (4479) - Launching Innovative Ideas

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.

<p>We have always enjoyed following IAC because we share a worldview with management about investing behind THE major secular trend in the world today…offline to online transition of massive TAMs. Even the largest TAMs in the world – groceries, entertainment, autos, commerce, finance, real estate, etc. are still incredibly early in the long term replatforming of how the global economy functions.</p><p>COVID has turbocharged these trends, which may be why we’ve seen such massive outperformance by the stocks at the forefront of these trends.</p><div><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 always enjoyed following IAC because we share a worldview with management about investing behind THE major secular trend in the world today…offline to online transition of massive TAMs. Even the largest TAMs in the world – groceries, entertainment, autos, commerce, finance, real estate, etc. are still incredibly early in the long term replatforming of how the global economy functions.COVID has turbocharged these trends, which may be why we’ve seen such massive outperformance by the stocks at the forefront of these trends.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.

Canada

Shopify Inc. provides a cloud-based commerce platform. The Company offers a platform for merchants to create an omni-channel experience that helps showcase the merchant's brand. Shopify serves customers in Canada.

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Shopify (SHOP US)

Pinduoduo Placement: As Expensive As It May Seem, There Could Be More Upside

Pinduoduo (PDD US) plans to raise around $5bn through an issue of ADS and convertible bonds. In this note, we revisit our thesis on PDD ahead of...

Supun Walpola

Ant Group Pre-IPO ESG Assessment: Seeing the Forest for the Trees

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Kyle Rudden

Is It Time To Pile Into BigCommerce Shares? Our 2Q:20 Earnings Review and Mid-Term Outlook

BigCommerce shares have significantly outperformed after IPO and rose to a record $162 a share after SaaS ecommerce platform provider enhanced...

Andrei Zakharov

Small Cap Growth: Makuake (4479) - Launching Innovative Ideas

Makuake is a unique online platform that launches new products and services online. The seven-year-old company is a product of the Cyberagent...

Mark Chadwick

IAC / ANGI 2Q20: Doubling Down

We have always enjoyed following IAC because we share a worldview with management about investing behind THE major secular trend in the world...

Aaron Gabin

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