Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Nearly 30 years of experience in the Korean/Asian equity research. Major sectors coverage include the following:
- Technology 
- Consumer 
- Special Situations/Deep Value Plays
- Tender Offers/M&As
- Holdcos/Stubs
- Asian Unicorns/Private Companies

Korea/Asia, Events, IPOs

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Equity Capital Markets

<ul>
<li>Elastic IPO is expected to finalize its pricing on 4 October 2018. The original IPO price range was between US$26 to US$29 per share, but this price range was raised to US$33 to US$35 per share in recent days due to strong investors demand. </li>
<li>According to <a href="https://www.smartkarma.com/profiles/supreet-sethi" target="_blank">Supreet Sethi</a>, the head of technology at Smartkarma in terms of why it uses Elastic's products: "Elastic Search is run as a search service at Smartkarma. When consumers type in search box like in the screenshot, instead of database, search service like Elastic is used to serve those requests. Alternatives for Elastic are Apache Solr, LucidWorks Fusion and Amazon CloudSearch. Elastic is probably the technology leader in this particular sector. Elastic also has another product stack for log analysis called ELK (Elastic Logstash Kibana) which competes with Splunk!" 
</li>
<li>The company's ability to generate a positive free cash flow in three months ending July 2018 is a major boost in confidence among many investors. Elastic generated US$4.8 million in positive free cash flow (8% free cash margin) in the three months ending July 2018 versus negative free cash flow of US$23.8 million in FY17.</li>
<li> Using our estimated FY2019 sales of US$449.3 million as the base case and applying a range of P/S multiples (8-10x) suggests implied market cap ranging from US$3.6 billion to US$4.5 billion. Our base case scenario is the mid-point of US$4.0 billion in implied market cap for Upwork, using 9x P/S multiple. This would also suggest a base case share price of US$58.19 per share. The current mid point of the IPO range is US$34 per share and our base case scenario of US$58.19 would suggest a 71% upside. </li>
</ul>


Elastic IPO is expected to finalize its pricing on 4 October 2018. The original IPO price range was between US$26 to US$29 per share, but this price range was raised to US$33 to US$35 per share in recent days due to strong investors demand. 
According to Supreet Sethi, the head of technology at Smartkarma in terms of why it uses Elastic's products: "Elastic Search is run as a search service at Smartkarma. When consumers type in search box like in the screenshot, instead of database, search service like Elastic is used to serve those requests. Alternatives for Elastic are Apache Solr, LucidWorks Fusion and Amazon CloudSearch. Elastic is probably the technology leader in this particular sector. Elastic also has another product stack for log analysis called ELK (Elastic Logstash Kibana) which competes with Splunk!" 

The company's ability to generate a positive free cash flow in three months ending July 2018 is a major boost in confidence among many investors. Elastic generated US$4.8 million in positive free cash flow (8% free cash margin) in the three months ending July 2018 versus negative free cash flow of US$23.8 million in FY17.
 Using our estimated FY2019 sales of US$449.3 million as the base case and applying a range of P/S multiples (8-10x) suggests implied market cap ranging from US$3.6 billion to US$4.5 billion. Our base case scenario is the mid-point of US$4.0 billion in implied market cap for Upwork, using 9x P/S multiple. This would also suggest a base case share price of US$58.19 per share. The current mid point of the IPO range is US$34 per share and our base case scenario of US$58.19 would suggest a 71% upside. 


Elastic NV

Elastic IPO Preview