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.

Equity Bottom-Up

Roblox, an online gaming platform geared towards children, is poised to continue the accelerating usage and monetization triggered by the pandemic. Its business model produces a flywheel where its audience grows as new games are introduced, further incentivizing its user/developers to create more user generated content that strengthens the platform. A large, hyper engaged youth audience offers Roblox open-ended optionality around advertising, sponsorships, and other new monetization avenues. Already highly cash generative, Roblox is poised to invest in localization efforts to expand its global reach, while potentially introducing new metaverse-based gaming platforms for older demographics. 
Base Case Valuation: $30B Bull Case: $60B Bear Case: $10B
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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.  
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Roblox, an online gaming platform geared towards children, is poised to continue the accelerating usage and monetization triggered by the pandemic. Its business model produces a flywheel where its audience grows as new games are introduced, further incentivizing its user/developers to create more user generated content that strengthens the platform. A large, hyper engaged youth audience offers Roblox open-ended optionality around advertising, sponsorships, and other new monetization avenues. Already highly cash generative, Roblox is poised to invest in localization efforts to expand its global reach, while potentially introducing new metaverse-based gaming platforms for older demographics. 
Base Case Valuation: $30B Bull Case: $60B Bear Case: $10B

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.  


Roblox: If Its in the Game, Its in the Game

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

In this insight, we provide an updated valuation analysis on the <a href="https://www.smartkarma.com/entities/roblox-corp" target="_blank" data-smartkarma-citation="entities:29697:1" rel="noopener">ROBLOX Corp (RBLX US)</a> direct public listing. The company has provided a guidance that it plans to complete its direct listing on or near March 10th. The company has also provided the full year results in 2020. Roblox plans to sell 198,917,280 shares in this direct listing. In January 2021, the company sold about 12 million shares of convertible preferred stock in a private placement at $45 per share, valuing the company at<a href="https://www.barrons.com/articles/roblox-sets-date-to-go-public-through-a-direct-listing-51614036401" target="_blank" rel="noopener"> $29.5 billion. </a><div class="content-highlight">Our revised valuation of Roblox is an implied market cap of $49.4 billion and implied price of $75.3 per share. Our valuation of the company has been slightly lowered by 1.2% versus our previous estimate. At a valuation of $49.4 billion, this would represent 67% higher levels than the last private market value of $29.5 billion.</div>

In this insight, we provide an updated valuation analysis on the ROBLOX Corp (RBLX US) direct public listing. The company has provided a guidance that it plans to complete its direct listing on or near March 10th. The company has also provided the full year results in 2020. Roblox plans to sell 198,917,280 shares in this direct listing. In January 2021, the company sold about 12 million shares of convertible preferred stock in a private placement at $45 per share, valuing the company at $29.5 billion. Our revised valuation of Roblox is an implied market cap of $49.4 billion and implied price of $75.3 per share. Our valuation of the company has been slightly lowered by 1.2% versus our previous estimate. At a valuation of $49.4 billion, this would represent 67% higher levels than the last private market value of $29.5 billion.

Roblox Direct Public Listing Valuation Update

Roblox, one of the leading global game platforms, announced on Friday (8 January) that it plans to go public through a Direct Public Listing (DPL), instead of the traditional IPO. Ahead of this direct public listing, <a href="https://www.cnbc.com/2021/01/08/roblox-expects-direct-listing-on-nyse-in-february.html" target="_blank" rel="noopener">Roblox</a> raised $520 million in private financing, valuing the company at $29.5 billion or $45 per share.<div class="content-highlight">Our valuation analysis suggests a base case implied market cap of $50 billion and a target price of $76.20 per share for Roblox. This would represent 69% higher level than its most recent private capital raise of $520 million, valuing the company at $29.5 billion or $45 per share. The direct listing valuation range is from $40.5 billion to $60.5 billion, according to our valuation sensitivity analysis. </div>

Roblox, one of the leading global game platforms, announced on Friday (8 January) that it plans to go public through a Direct Public Listing (DPL), instead of the traditional IPO. Ahead of this direct public listing, Roblox raised $520 million in private financing, valuing the company at $29.5 billion or $45 per share.Our valuation analysis suggests a base case implied market cap of $50 billion and a target price of $76.20 per share for Roblox. This would represent 69% higher level than its most recent private capital raise of $520 million, valuing the company at $29.5 billion or $45 per share. The direct listing valuation range is from $40.5 billion to $60.5 billion, according to our valuation sensitivity analysis. 

Quality-first, Business-perspective Strategy, Urbem (HK) Limited

Steven Chen

Quality-first, Business-perspective Strategy

<ul>
<li>The Shenzhen-based game developer trades at an attractive valuation;</li>
<li>Meanwhile, the business has been growing at a nearly triple-digit rate while maintaining an above 30% return on equity and invested capital;</li>
<li>Should investors buy into this (seemingly quality) growth story?  We want to take a deep dive.</li>
</ul>


The Shenzhen-based game developer trades at an attractive valuation;
Meanwhile, the business has been growing at a nearly triple-digit rate while maintaining an above 30% return on equity and invested capital;
Should investors buy into this (seemingly quality) growth story?  We want to take a deep dive.


European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

Codemasters Group Holdings PLC / Event-Driven

Electronic Arts agreed on 14 December a reported £945 mn cash counter-offer for Codemasters (604p per share) to disrupt Take-Two's £759 mn already accepted cash and shares offer.
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<li>
For an implied EV of £892.15 mn (Codemasters has £50.747 mn of net cash).
</li>
<li>
The deal represents 7.4x EV/Fwd Revenue, 28.5x EV/Fwd EBITDA and 31.5x P/Fwd E.
</li>
<li>The court meeting and the EGM are expected to be held on December 21, 2020. The transaction is expected to close in Q1 2021.</li>
</ul>
<ul>
<li>
Codemasters shares went up by almost 20% to 640p, above the 604p offer price, suggesting market believes in the possibility of an increased bid by Take-Two. 
</li>
<li>
Take-Two has $2.2 bn of net cash.
</li>
</ul>
No longer the main objective is to sell the largest number of consoles, but to accumulate the largest number of players. Electronic Arts is interested in the racing games business of Codemasters. The move feels defensive because Take-Two is one of its main rivals and many of Electronic Arts' franchises are weakening relative to leaders.
A deal with Electronic Arts would bring under the same umbrella EA's sports and driving games (FIFA soccer and Need for Speed franchises) and Codemasters’ racing simulators.
By using a blended average of the median multiples of EV/Fwd EBITDA and P/Fwd E, a valuation up to 720p per share could be justified, c. 10% upside to current levels (and 19% over EA's bid). Recommendation is LONG Codemasters, TP 720p.
<ul>
<li>an equity value of £1,098 mn (EV of £1,047 mn).</li>
</ul>
Codemasters shares closed at 658p on 16 December, c. 9% above EA's offer.
A shareholder meeting to consider the offer has been scheduled for next Monday.

Electronic Arts agreed on 14 December a reported £945 mn cash counter-offer for Codemasters (604p per share) to disrupt Take-Two's £759 mn already accepted cash and shares offer.


For an implied EV of £892.15 mn (Codemasters has £50.747 mn of net cash).


The deal represents 7.4x EV/Fwd Revenue, 28.5x EV/Fwd EBITDA and 31.5x P/Fwd E.

The court meeting and the EGM are expected to be held on December 21, 2020. The transaction is expected to close in Q1 2021.



Codemasters shares went up by almost 20% to 640p, above the 604p offer price, suggesting market believes in the possibility of an increased bid by Take-Two. 


Take-Two has $2.2 bn of net cash.


No longer the main objective is to sell the largest number of consoles, but to accumulate the largest number of players. Electronic Arts is interested in the racing games business of Codemasters. The move feels defensive because Take-Two is one of its main rivals and many of Electronic Arts' franchises are weakening relative to leaders.
A deal with Electronic Arts would bring under the same umbrella EA's sports and driving games (FIFA soccer and Need for Speed franchises) and Codemasters’ racing simulators.
By using a blended average of the median multiples of EV/Fwd EBITDA and P/Fwd E, a valuation up to 720p per share could be justified, c. 10% upside to current levels (and 19% over EA's bid). Recommendation is LONG Codemasters, TP 720p.

an equity value of £1,098 mn (EV of £1,047 mn).

Codemasters shares closed at 658p on 16 December, c. 9% above EA's offer.
A shareholder meeting to consider the offer has been scheduled for next Monday.

Electronic Arts' Disruptive Counter-Offer

United States

Take-Two Interactive Software, Inc. develops, markets, distributes, and publishes interactive entertainment software games and accessories.  The Company's products are for console systems, handheld gaming systems and personal computers (including smartphones and tablets) and are delivered through physical retail, digital download, online and cloud streaming services.

Take Two Interactive Software, Inc (TTWO US)

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Take Two Interactive Software, Inc (TTWO US)

Roblox: If Its in the Game, Its in the Game

Roblox is set to IPO tomorrow. We think its a unique asset and are inclined to own this depending on how outlandish valuation turns out to be as...

Aaron Gabin

Roblox Direct Public Listing Valuation Update

Our revised valuation of Roblox is a market cap of $49.4 billion and implied price of $75.3 per share which would represent 67% higher levels than...

Douglas Kim

Roblox Valuation Analysis

Our base case valuation for Roblox is $50 billion and a target price of $76.20 per share. This would represent 69% higher than its most recent...

Douglas Kim

Fire Rock: A Value Play or Value Trap?

Another superior-return, fast-growing gaming business trading at an attractive level. Should investors buy into this (seemingly quality) growth...

Steven Chen

Electronic Arts' Disruptive Counter-Offer

A bidding war is likely. A valuation up to 720p per share could be justified (c. 10% upside to current levels). Recommendation is LONG Codemasters.

Jesus Rodriguez Aguilar

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