Consumer Analyst / Channel Surveillance Specialist, Trudence Capital Advisors

Pranav Bhavsar

Consumer Analyst / Channel Surveillance Specialist

ASA Capital Management

ASA Capital Management is a boutique Research and Investment Advisory firm focusing on primary research in India. ASA provides bespoke research services to Institutional Clients with a focus on due diligence backed with primary research, Field Trips & Channel Checks.

Thematic (Sector/Industry)

Can <a href="https://www.smartkarma.com/entities/787" target="_blank" data-smartkarma-citation="entities:787:1">Alibaba Group Holding (BABA US)</a> 's Alipay and <a href="https://www.smartkarma.com/entities/26" target="_blank" data-smartkarma-citation="entities:26:1">Tencent Holdings (700 HK)</a> WeChat pay replicate their success in India? With the world's second highest mobile phone users and more than 45 pre-paid Payment Instruments providers, India is witnessing a fiercely competitive payments landscape. In this Insight, we explore options available for public market and VC/PE investors to play the Indian payments theme. We also provide an overview of Indian investments of <a href="https://www.smartkarma.com/entities/787" target="_blank" data-smartkarma-citation="entities:787:1">Alibaba Group Holding (BABA US)</a> , <a href="https://www.smartkarma.com/entities/24240" target="_blank" data-smartkarma-citation="entities:24240:1">Ant Financial (1051260D CH)</a> , <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group (9984 JP)</a> , <a href="https://www.smartkarma.com/entities/11134" target="_blank" data-smartkarma-citation="entities:11134:1">Wal Mart Stores (WMT US)</a> , <a href="https://www.smartkarma.com/entities/21085" target="_blank" data-smartkarma-citation="entities:21085:1">Naspers Ltd (NPN SJ)</a> , <a href="https://www.smartkarma.com/entities/11369" target="_blank" data-smartkarma-citation="entities:11369:1">Alphabet Inc Cl C (GOOG US)</a> &amp; Sequoia Capital India.  Paytm, PhonePe, Amazon Pay and Mobikwik are the ones that really matter.
As payment providers move up from pure transactions to more value-added services like Wealth Management &amp; Offline payments, we also suggest possible channel checks for the focus companies with a view of understanding economics and competitive intensity.

Can Alibaba Group Holding (BABA US) 's Alipay and Tencent Holdings (700 HK) WeChat pay replicate their success in India? With the world's second highest mobile phone users and more than 45 pre-paid Payment Instruments providers, India is witnessing a fiercely competitive payments landscape. In this Insight, we explore options available for public market and VC/PE investors to play the Indian payments theme. We also provide an overview of Indian investments of Alibaba Group Holding (BABA US) , Ant Financial (1051260D CH) , Softbank Group (9984 JP) , Wal Mart Stores (WMT US) , Naspers Ltd (NPN SJ) , Alphabet Inc Cl C (GOOG US) &amp; Sequoia Capital India.  Paytm, PhonePe, Amazon Pay and Mobikwik are the ones that really matter.
As payment providers move up from pure transactions to more value-added services like Wealth Management &amp; Offline payments, we also suggest possible channel checks for the focus companies with a view of understanding economics and competitive intensity. 

India Payments | What Really Matters and Suggested Channel Checks

Investment Research - Asia Consumer Sector, Investory

Devi Subhakesan

Investment Research - Asia Consumer Sector

ASIA CONSUMER: INSIGHTS AND INVESTMENT IDEAS

Investory

Investory is a Singapore-based boutique independent equity research firm founded in January 2017 with a primary focus on consumption themes across Asia-Pacific.

We aim to generate investible ideas based on consumption trends and outlook. We screen our ideas on several parameters - product potential, long-term growth and management commitment being the most critical.  We follow a fundamental analysis approach in our stock selection process and are not restricted by market cap.

We aspire to grow into a leading source of unbiased research, free of conflict of interest, for investors yearning for independent and disciplined analysis. 

We also undertake bespoke research mandates to support our Institutional clients’ investment needs.

Our team comprises of professionals with extensive experience in the Asian equity markets, in areas ranging from research, servicing institutional clients and investment management.

Equity Bottom-Up

BabyTree (1761.HK)'s reported results for FY2018 continues to be impacted by the 'shift in e-commerce strategy' post collaboration with <a href="https://www.smartkarma.com/entities/787" target="_blank" data-smartkarma-citation="entities:787:1">Alibaba Group Holding (BABA US)</a> (also a key investor).  China's leading parenting community platform that went public in November 2018 has announced a revenue decline of 4% during 2H2018; its e-commerce revenues were down 70% as its being 'integrated' with Alibaba. This is expected to be completed by 2Q2019. While the details of the collaboration (and revenue share, if any) are not given, Management has stated that Alibaba will manage the back-end e-commerce at a reduced cost and better efficiency while it will 'manage' users. Despite the fall in revenues, gross profits were up 18% helped by growth in advertisement revenues which now account for 85% of the total. Advertising as a revenue source has limited long term growth and valuation potential compared to e-commerce. The stock is up 25% since results announcement on March 27th, likely enthused by Net profit for FY2018 at Rmb526.2 mn and EPS of Rmb0.29 (implied current Year P/E of 23x). Key risk will be failure to revive e-commerce revenues post 'integration'.
BabyTree also announced its first global foray - it has invested USD8mn in Healofy, amongst the top 3 leading parenting apps in India currently. India's online Parenting app segment has numerous players and revenue generation/growth may not be easy in the near term for Healofy. However,  our analysis suggests that India's overcrowded parenting app segment is now witnessing consolidation and this funding could probably help Healofy solidify its ranking amongst top 3 parenting platforms in India. In this context, BabyTree's foray into India seems well timed. Healofy could potentially follow BabyTree's operating model and fit into <a href="https://www.smartkarma.com/entities/787" target="_blank" data-smartkarma-citation="entities:787:1">Alibaba Group Holding (BABA US)</a> 's India e-commerce strategy (Refer our earlier report <a href="https://www.smartkarma.com/insights/alibaba-s-india-game-plan-more-than-meets-the-eye-investor-day-analysis-part-ii" target="_blank" data-smartkarma-citation="insights:24338">Alibaba's India Game Plan - More than Meets the Eye; Investor Day Analysis (Part II)</a> ).  
In the detailed report that follows, we briefly comment on BabyTree's reported 2018 results and also present a quick overview of India Parenting App segment - key players, investors and why we think it may be on a consolidation mode.

BabyTree (1761.HK)'s reported results for FY2018 continues to be impacted by the 'shift in e-commerce strategy' post collaboration with Alibaba Group Holding (BABA US) (also a key investor).  China's leading parenting community platform that went public in November 2018 has announced a revenue decline of 4% during 2H2018; its e-commerce revenues were down 70% as its being 'integrated' with Alibaba. This is expected to be completed by 2Q2019. While the details of the collaboration (and revenue share, if any) are not given, Management has stated that Alibaba will manage the back-end e-commerce at a reduced cost and better efficiency while it will 'manage' users. Despite the fall in revenues, gross profits were up 18% helped by growth in advertisement revenues which now account for 85% of the total. Advertising as a revenue source has limited long term growth and valuation potential compared to e-commerce. The stock is up 25% since results announcement on March 27th, likely enthused by Net profit for FY2018 at Rmb526.2 mn and EPS of Rmb0.29 (implied current Year P/E of 23x). Key risk will be failure to revive e-commerce revenues post 'integration'.
BabyTree also announced its first global foray - it has invested USD8mn in Healofy, amongst the top 3 leading parenting apps in India currently. India's online Parenting app segment has numerous players and revenue generation/growth may not be easy in the near term for Healofy. However,  our analysis suggests that India's overcrowded parenting app segment is now witnessing consolidation and this funding could probably help Healofy solidify its ranking amongst top 3 parenting platforms in India. In this context, BabyTree's foray into India seems well timed. Healofy could potentially follow BabyTree's operating model and fit into Alibaba Group Holding (BABA US) 's India e-commerce strategy (Refer our earlier report Alibaba's India Game Plan - More than Meets the Eye; Investor Day Analysis (Part II) ).  
In the detailed report that follows, we briefly comment on BabyTree's reported 2018 results and also present a quick overview of India Parenting App segment - key players, investors and why we think it may be on a consolidation mode. 

BabyTree(1761.HK) FY18 Results: E-Com Further Hit by 'integration' with Alibaba; India Foray Timely

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/083/132/original/2019-03-25_18-58-11.png?1553507902" class="editor-image img-responsive" data-smartkarma-image-id="83132"></figure>Source: Japan Analytics
</div>There are currently 241 listed Japanese companies that can be categorised as Internet businesses. Our classification overlaps with the TOPIX-33 Information &amp; Communication sub-Sector but is broader in that it encompasses all companies listed on all sections and exchanges but is also narrower in that we have excluded Telecommunications (including <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">S</a><a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">oftbank Group (9984 JP)</a>) and Information Technology companies. We have adopted a 'quantamental' approach which covers the long-term and current trends for Japan's Internet Sector as a whole, as well as eight sub-Sectors or Peer Groups and the Sectors' leading companies by market capitalisation.  Our focus is exclusively on the locally-listed universe and is based on disclosed financial and market data. We do not provide any forecasts, other than the companies' own forecasts and we do not attempt to make any business model or strategic judgments. Our focus is purely on financial and market performance. We do not cover unlisted and defunct companies such as Livedoor and, therefore, there is implicit survivor bias in the data. The broad themes that are developed in DETAIL below are grouped into six topics as follows: - • SUMMARY •  • FUNDAMENTAL OVERVIEW •  • SCORING - RESULTS &amp; REVISIONS / RELATIVE PRICE •  • RESULTS TRENDS •  • VALUATION • • RECOMMENDATIONS •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/083/206/original/2019-03-25_17-46-58.png?1553565764" class="editor-image img-responsive" data-smartkarma-image-id="83206"></figure><div class="content-caption">Source: Japan Analytics</div>OVERVIEW - As will be covered in greater DETAIL below, Japan has failed to evolve a substantial Internet Sector and, in many business models, has been passed by global competitors including in the home market. Although Internet Sector revenues have grown steadily and now account for close to 1% of the total for all listed companies, operating margins have declined by half in the last seven years and are now only four percentage points higher than the market average. Accordingly, as measured by our Results &amp; Revision Score, the Sector is close to a twelve-year low. The market's response is an unchanged Sector weight in the market composite despite the addition of 111 new companies in the last six years, and a Relative Price Score that has moved in a narrow range over that period. The Sector averages disguise the weak business and market performance of a handful of Sector leaders as well as the overvaluation of the Sector's more successful business models, which is partly a result of a lack of alternatives. Despite the world's most significant Internet investor - <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group (9984 JP)</a>'s Vision Fund - being based in Japan, this fund and other global investors in Internet business have been right to give Japan a 'pass'.


Source: Japan Analytics
There are currently 241 listed Japanese companies that can be categorised as Internet businesses. Our classification overlaps with the TOPIX-33 Information &amp; Communication sub-Sector but is broader in that it encompasses all companies listed on all sections and exchanges but is also narrower in that we have excluded Telecommunications (including Softbank Group (9984 JP)) and Information Technology companies. We have adopted a 'quantamental' approach which covers the long-term and current trends for Japan's Internet Sector as a whole, as well as eight sub-Sectors or Peer Groups and the Sectors' leading companies by market capitalisation.  Our focus is exclusively on the locally-listed universe and is based on disclosed financial and market data. We do not provide any forecasts, other than the companies' own forecasts and we do not attempt to make any business model or strategic judgments. Our focus is purely on financial and market performance. We do not cover unlisted and defunct companies such as Livedoor and, therefore, there is implicit survivor bias in the data. The broad themes that are developed in DETAIL below are grouped into six topics as follows: - • SUMMARY •  • FUNDAMENTAL OVERVIEW •  • SCORING - RESULTS &amp; REVISIONS / RELATIVE PRICE •  • RESULTS TRENDS •  • VALUATION • • RECOMMENDATIONS •Source: Japan AnalyticsOVERVIEW - As will be covered in greater DETAIL below, Japan has failed to evolve a substantial Internet Sector and, in many business models, has been passed by global competitors including in the home market. Although Internet Sector revenues have grown steadily and now account for close to 1% of the total for all listed companies, operating margins have declined by half in the last seven years and are now only four percentage points higher than the market average. Accordingly, as measured by our Results &amp; Revision Score, the Sector is close to a twelve-year low. The market's response is an unchanged Sector weight in the market composite despite the addition of 111 new companies in the last six years, and a Relative Price Score that has moved in a narrow range over that period. The Sector averages disguise the weak business and market performance of a handful of Sector leaders as well as the overvaluation of the Sector's more successful business models, which is partly a result of a lack of alternatives. Despite the world's most significant Internet investor - Softbank Group (9984 JP)'s Vision Fund - being based in Japan, this fund and other global investors in Internet business have been right to give Japan a 'pass'. 

🇯🇵 Japan • Internet Sector Review - 'Japan Passing'

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Equity Capital Markets

Alibaba Group Holding  / Equity Capital Markets

A year ago we published a note that described how we expected corporate activity in China's domestic express  sector to play out in 2018 (see <a href="https://www.smartkarma.com/insights/2018-m-a-ipo-activity-preview-chinese-express-logistics-sectors-hit-by-slower-growth-baba-vs-jd" target="_blank" data-smartkarma-citation="insights:16447">2018 M&amp;A/IPO Activity Preview: Chinese Express, Logistics Sectors Hit by Slower Growth &amp; BABA Vs JD</a>). In this new piece, we look back at how things actually played out in the sector last year and look forward to 2019 and beyond. We've divided this year's piece into four sections:<ol>
<li>A quick review of our expectations from 2018, and how things actually played out</li>
<li>New (and ongoing) trends we expect to see in express sector M&amp;A this year</li>
<li>The continued battle for leadership between <a href="https://www.smartkarma.com/entities/787" target="_blank" data-smartkarma-citation="entities:787:1">Alibaba Group Holding (BABA US)</a> and <a href="https://www.smartkarma.com/entities/446" target="_blank" data-smartkarma-citation="entities:446:1">JD.com Inc (ADR) (JD US)</a>
</li>
<li>Potential IPO candidates for 2019 and beyond</li>
</ol>We expect Chinese domestic express demand to continue to moderate in 2019, and in response we expect the express companies to increase their investments in 'last-mile' and international delivery, which will probably create a drag on profitability in the medium-term. Although we believe e-commerce giants Alibaba and JD.com would like their growing portfolios of logistics investments to become self-funding sooner rather than later, we foresee somewhat limited investor appetite for more large Chinese logistics IPOs in 2019, since many high-profile offerings have faltered since going public.

A year ago we published a note that described how we expected corporate activity in China's domestic express  sector to play out in 2018 (see 2018 M&amp;A/IPO Activity Preview: Chinese Express, Logistics Sectors Hit by Slower Growth &amp; BABA Vs JD). In this new piece, we look back at how things actually played out in the sector last year and look forward to 2019 and beyond. We've divided this year's piece into four sections:
A quick review of our expectations from 2018, and how things actually played out
New (and ongoing) trends we expect to see in express sector M&amp;A this year
The continued battle for leadership between Alibaba Group Holding (BABA US) and JD.com Inc (ADR) (JD US)

Potential IPO candidates for 2019 and beyond
We expect Chinese domestic express demand to continue to moderate in 2019, and in response we expect the express companies to increase their investments in 'last-mile' and international delivery, which will probably create a drag on profitability in the medium-term. Although we believe e-commerce giants Alibaba and JD.com would like their growing portfolios of logistics investments to become self-funding sooner rather than later, we foresee somewhat limited investor appetite for more large Chinese logistics IPOs in 2019, since many high-profile offerings have faltered since going public.

2019 M&A/IPO Preview: Chinese Express Sector Quickly Building Out 'Last-Mile' & Int'l Capabilities

Event-Driven

Would <a href="https://www.smartkarma.com/entities/11134" target="_blank" data-smartkarma-citation="entities:11134:1">Wal Mart Stores (WMT US)</a> have paid USD16 bn last year for Flipkart, a leading online Indian retailer, if the recent clarification on India's policy on FDI in e-commerce were in place back then? Foreign owned online retailers in India ( <a href="https://www.smartkarma.com/entities/409" target="_blank" data-smartkarma-citation="entities:409:1">Amazon.com Inc (AMZN US)</a> , <a href="https://www.smartkarma.com/entities/11134" target="_blank" data-smartkarma-citation="entities:11134:1">Wal Mart Stores (WMT US)</a> and <a href="https://www.smartkarma.com/entities/787" target="_blank" data-smartkarma-citation="entities:787:1">Alibaba Group Holding (BABA US)</a>  ) will need to rejig their operating models and may face prospects of slower growth and even more distant breakeven targets, if the Indian Government is indeed determined to enforce its policy that e-commerce 'Marketplaces' operate only as platforms for third party vendors. Unsurprisingly, <a href="https://www.smartkarma.com/entities/409" target="_blank" data-smartkarma-citation="entities:409:1">Amazon.com Inc (AMZN US)</a> and <a href="https://www.smartkarma.com/entities/11134" target="_blank" data-smartkarma-citation="entities:11134:1">Wal Mart Stores (WMT US)</a> have <a href="https://www.livemint.com/Companies/Rit3PRTBiiVy58Gvf2UKJN/Amazon-and-Walmart-team-up-to-fight-against-govts-new-ecom.html" target="_blank">reportedly</a> teamed up to lobby the government on these regulations. 
The Indian Government had posted a one-page circular on Dec 26th giving further clarifications to its existing policy on foreign owned e-commerce entities. The detailing of policy specifics seems to be an attempt to enforce the existing policy restrictions on foreign owned online retailers; compliance has so far been sketchy. India do not allow majority foreign ownership in multi brand retail stores and online retailers are allowed to operate only as 'Marketplaces' and not as B2C entities. With national elections due in next few months, the Government cannot ignore demands from domestic lobby groups to reign in free play by deep pocketed foreign operators that have been hurting local retailers.
In the detailed note below, we present (1) an overview of the regulatory framework and restrictions under which online retailers operate in India (2) the updated policy and its impact on operating models of Amazon and Walmart in India (3) expectations for India's e-commerce players. Also, there is a likely gainer from all these - a listed Indian player aspiring to trump global majors in India's online retail turf.

Would Wal Mart Stores (WMT US) have paid USD16 bn last year for Flipkart, a leading online Indian retailer, if the recent clarification on India's policy on FDI in e-commerce were in place back then? Foreign owned online retailers in India ( Amazon.com Inc (AMZN US) , Wal Mart Stores (WMT US) and Alibaba Group Holding (BABA US)  ) will need to rejig their operating models and may face prospects of slower growth and even more distant breakeven targets, if the Indian Government is indeed determined to enforce its policy that e-commerce 'Marketplaces' operate only as platforms for third party vendors. Unsurprisingly, Amazon.com Inc (AMZN US) and Wal Mart Stores (WMT US) have reportedly teamed up to lobby the government on these regulations. 
The Indian Government had posted a one-page circular on Dec 26th giving further clarifications to its existing policy on foreign owned e-commerce entities. The detailing of policy specifics seems to be an attempt to enforce the existing policy restrictions on foreign owned online retailers; compliance has so far been sketchy. India do not allow majority foreign ownership in multi brand retail stores and online retailers are allowed to operate only as 'Marketplaces' and not as B2C entities. With national elections due in next few months, the Government cannot ignore demands from domestic lobby groups to reign in free play by deep pocketed foreign operators that have been hurting local retailers.
In the detailed note below, we present (1) an overview of the regulatory framework and restrictions under which online retailers operate in India (2) the updated policy and its impact on operating models of Amazon and Walmart in India (3) expectations for India's e-commerce players. Also, there is a likely gainer from all these - a listed Indian player aspiring to trump global majors in India's online retail turf.

A Pricey Deal in Hindsight, Walmart? India Reviews Policy - Amazon, Walmart May Need to Rejig Model

United States

Walmart Inc. operates discount stores, supercenters, and neighborhood markets. The Company offers merchandise such as apparel, house wares, small appliances, electronics, musical instruments, books, home improvement, shoes, jewelry, toddler, games, household essentials, pets, pharmaceutical products, party supplies, and automotive tools. Walmart serves customers worldwide.

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Walmart (WMT US)

India Payments | What Really Matters and Suggested Channel Checks

Can Alibaba Group Holding (BABA US) 's Alipay and Tencent Holdings (700 HK) WeChat pay replicate their success in India? With the world's second...

Pranav Bhavsar

BabyTree(1761.HK) FY18 Results: E-Com Further Hit by 'integration' with Alibaba; India Foray Timely

BabyTree (1761.HK)'s reported results for FY2018 continues to be impacted by the 'shift in e-commerce strategy' post collaboration with Alibaba...

Devi Subhakesan

🇯🇵 Japan • Internet Sector Review - 'Japan Passing'

There are currently 241 listed Japanese companies that can be categorised as Internet businesses. Our classification overlaps with the TOPIX-33...

Campbell Gunn

2019 M&A/IPO Preview: Chinese Express Sector Quickly Building Out 'Last-Mile' & Int'l Capabilities

A year ago we published a note that described how we expected corporate activity in China's domestic express sector to play out in 2018 (see 2018...

Daniel Hellberg

A Pricey Deal in Hindsight, Walmart? India Reviews Policy - Amazon, Walmart May Need to Rejig Model

Would Wal Mart Stores (WMT US) have paid USD16 bn last year for Flipkart, a leading online Indian retailer, if the recent clarification on India's...

Devi Subhakesan

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