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

<p>An old saying in stock investing is wait three days after a blowup to buy. OK…well Snap blew up 10 days ago…and Facebook last week. So, which to buy? Well, go buy Google first. It’s a better company than either Snap or Facebook, isn’t impacted by Apple’s changes, and has the more compelling growth adjusted valuation. But Snap or Facebook? We bought both.</p><div class="content-highlight"><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>

An old saying in stock investing is wait three days after a blowup to buy. OK…well Snap blew up 10 days ago…and Facebook last week. So, which to buy? Well, go buy Google first. It’s a better company than either Snap or Facebook, isn’t impacted by Apple’s changes, and has the more compelling growth adjusted valuation. But Snap or Facebook? We bought both.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>Supply constraints. Wage inflation. People shopping in stores. Fixed cost develeraging.</p><p>In 4Q20, Amazon earned $3.3B in EBIT for its retail businesses (NA + International). Amazon guided for $0–$3B in EBIT in 4Q21. If we assume the midpoint of Amazon’s guidance of $1.5B and subtract out the ~$10.5B in profits we expect from AWS and Amazon’s Advertising in 4Q21, that implies Retail is going to lose $9B (!!) in 4Q21. Amazon counts its ads business’ profitability within retail. We presume the Ad business has ~50% EBIT margins…which means this quarter Ads generated $4B in profits, while overall retail was breakeven on GAAP EBIT, meaning core retail lost $4B. Meaning, Amazon will have lost $13B in retail over the 2<sup>nd</sup> half of 2021. That is a staggering number. That only Amazon can absorb. And only Amazon will walk into 2022 with its already fortress retail moat stacked $13B higher than competitors can match. While a good amount of the $13B in losses are structural (wage inflation for instance), A LOT are also transitory…which means 2022 should see some significant operating leverage. THIS is when you invest in Amazon.</p><p> Amazon is our Top 2022 long idea. We think its worth $6,000.</p><div class="content-highlight"><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>

Supply constraints. Wage inflation. People shopping in stores. Fixed cost develeraging.In 4Q20, Amazon earned $3.3B in EBIT for its retail businesses (NA + International). Amazon guided for $0–$3B in EBIT in 4Q21. If we assume the midpoint of Amazon’s guidance of $1.5B and subtract out the ~$10.5B in profits we expect from AWS and Amazon’s Advertising in 4Q21, that implies Retail is going to lose $9B (!!) in 4Q21. Amazon counts its ads business’ profitability within retail. We presume the Ad business has ~50% EBIT margins…which means this quarter Ads generated $4B in profits, while overall retail was breakeven on GAAP EBIT, meaning core retail lost $4B. Meaning, Amazon will have lost $13B in retail over the 2nd half of 2021. That is a staggering number. That only Amazon can absorb. And only Amazon will walk into 2022 with its already fortress retail moat stacked $13B higher than competitors can match. While a good amount of the $13B in losses are structural (wage inflation for instance), A LOT are also transitory…which means 2022 should see some significant operating leverage. THIS is when you invest in Amazon. Amazon is our Top 2022 long idea. We think its worth $6,000.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.

Amazon 3Q21: 4Q’s $9 Billion Consumer Shock Absorber

Latest News from the World’s Leading Innovators

Granite Bay Capital

An innovation focussed investment company

Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity.

Thematic (Sector/Industry)

<h2>Headline Development</h2><p>Hertz (HTZZ) just made the largest EV purchase ever, acquiring 100k Teslas (TLSA) for a reported $4.2b - half of which will go to Uber (UBER) drivers.  On top of this, Hertz will also invest significantly in EV charging infrastructure across its global operations.</p>

Headline DevelopmentHertz (HTZZ) just made the largest EV purchase ever, acquiring 100k Teslas (TLSA) for a reported $4.2b - half of which will go to Uber (UBER) drivers.  On top of this, Hertz will also invest significantly in EV charging infrastructure across its global operations.

<p>We are more bullish on the deal logic than initial reaction from the market and sell-side and would buy Paypal on this pullback.</p><div class="content-highlight"><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 are more bullish on the deal logic than initial reaction from the market and sell-side and would buy Paypal on this pullback.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.  

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Bangkok Expressway and Metro / Equity Bottom-Up

<p>Low ridership and reopening have presented a dilemma to investors whether it is time to start building positions in the mass transport operator <a href="https://www.smartkarma.com/entities/bangkok-expressway-and-metro-68c0c1b3-af0c-4380-a380-f3dc7ba5d5ac" target="_blank" data-smartkarma-citation="entities:22849:1" rel="noopener">Bangkok Expressway and Metro (BEM TB)</a> . On one hand, the low ridership presents room for improvement which means recovery of net income, therefore, a lower forward PE multiple. On the other hand, the reopening is yet to happen and how much is the increase in ridership is unclear. </p>
<p>With the reopening date is set, coming back to school, and the support from the Thai government to jump-start the tourism sector by having a grandiose New Year celebration with no less than sending an invite to the world-renown Andrea Bocelli to perform,  the mass transport ridership is set to increase from both the domestic reopening as well as from the increase in tourists arrival.</p>
<p>Compared to <a href="https://www.smartkarma.com/entities/airports-of-thailand-pcl" target="_blank" data-smartkarma-citation="entities:239:1" rel="noopener">Airports of Thailand (AOT TB)</a> which trades at 8x book value, BEM (at 3.6x book value) does not look expensive.  BEM'share price is trailing behind <a href="https://www.smartkarma.com/entities/stock-exchange-of-thailand-set-index" target="_blank" data-smartkarma-citation="entities:22915:1" rel="noopener">Thailand SET Index (SET INDEX)</a> in the recovery from COVID-19.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/236/285/original/image_21721413921634706788909.png?1634706789" class="editor-image img-responsive" data-smartkarma-image-id="236285"></figure>
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<p>source: Reuters</p>
</div>

Low ridership and reopening have presented a dilemma to investors whether it is time to start building positions in the mass transport operator Bangkok Expressway and Metro (BEM TB) . On one hand, the low ridership presents room for improvement which means recovery of net income, therefore, a lower forward PE multiple. On the other hand, the reopening is yet to happen and how much is the increase in ridership is unclear. 
With the reopening date is set, coming back to school, and the support from the Thai government to jump-start the tourism sector by having a grandiose New Year celebration with no less than sending an invite to the world-renown Andrea Bocelli to perform,  the mass transport ridership is set to increase from both the domestic reopening as well as from the increase in tourists arrival.
Compared to Airports of Thailand (AOT TB) which trades at 8x book value, BEM (at 3.6x book value) does not look expensive.  BEM'share price is trailing behind Thailand SET Index (SET INDEX) in the recovery from COVID-19.



source: Reuters


Bangkok Expressway (BEM): Ridership Increase

United States

Twitter, Inc. provides online social networking and microblogging service. The Company offers users the ability to follow other users activity, read, and post tweets. Twitter serves customers worldwide.

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Twitter Inc (TWTR US)

Do You Buy Snap or Facebook or Both?

Snapchat blew up on earnings last week, Facebook followed. We think both merit buying; Snapchat will revert to 50%+ growth, while Facebook is too...

Aaron Gabin

Amazon 3Q21: 4Q’s $9 Billion Consumer Shock Absorber

Supply constraints. Wage inflation. People shopping in stores. Fixed cost develeraging. Amazon's retail business will lose $13B in 2H21. 2022...

Aaron Gabin

Weekly Innovation Review (WIRE) #55

Hertz (HTZZ) just made the largest EV purchase ever, acquiring 100k Teslas (TLSA) for a reported $4.2b - half of which will go...

Granite Bay Capital

Paypal + Pinterest Initial Thoughts

We are more bullish on the deal logic than initial reaction from the market and sell-side and would buy Paypal on this pullback.

Aaron Gabin

Bangkok Expressway (BEM): Ridership Increase

the reopening date is set, and with the support from the Thai government to jump-start the tourism sector, the MRT ridership is set to increase....

Henry Soediarko

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