ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

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

Private Capital Markets

<div class="content-highlight">
<p>According to market sources, Bukalapak plans to raise around US$800m in an IPO in Jakarta on the IDX potentially by the end of July, making it the first Indonesian unicorn to list on the local bourse. This would potentially be followed by a SPAC merger in the US, which would value the company at US$4bn-5bn versus the last valuation range of US$2.5-3.0bn. </p>
</div>
<p>Based on the available financial information and recent indications of growth prospects and the path to profitability, we see the suggested valuations as achievable and find Bukalapak an attractive prospect.  </p>
<p>Bukalapak started as a C2C business and one of Indonesia's earliest e-commerce pioneers,  focusing on consumers and sellers outside the major cities in Indonesia, with a focus on specialty goods at low prices. </p>
<p>In 2017, the company started Mitra Bukalapak, which focused on digitalizing the sourcing of products for offline warungs and small kiosks, increasing the range of products and reducing their sourcing costs plus improving margins.</p>
<p>Bukalapak now has more than 7m kiosks and 6m merchants on the platform, which provides a self-sustaining ecosystem, which does not demand high levels of promotional activity. </p>
<p>Bukalapak saw +70% growth in its GMV last year and +130% growth in transactions, with around 34m MAUs and it should achieve +50% growth this year on the current run-rate according to management.</p>
<p>We look at the implied valuations given limited financial information. The company is further along the road to profitability than its e-commerce peers, given its differentiated strategy.</p>
<p>The platform has already attracted some high profile investors including <a href="https://www.smartkarma.com/entities/microsoft-corp" target="_blank" data-smartkarma-citation="entities:15273:1" rel="noopener">Microsoft Corp (MSFT US)</a> and <a href="https://www.smartkarma.com/entities/standard-chartered-plc" target="_blank" data-smartkarma-citation="entities:193:1" rel="noopener">Standard Chartered (STAN LN)</a>, both of which see opportunities to collaborate with Bukalapak.</p>
<div class="content-highlight">
<p>One obvious beneficiary of this IPO will be <a href="https://www.smartkarma.com/entities/elang-mahkota-teknologi-tbk" target="_blank" data-smartkarma-citation="entities:7752:1" rel="noopener">Emtek (EMTK IJ)</a>, which owns over 30% of Bukalapak, in that the investment should realise a higher valuation through its listing. There is also a potential that <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP)</a> may look to collaborate with Bukalapak in some way, given it has taken a 4% stake in <a href="https://www.smartkarma.com/entities/elang-mahkota-teknologi-tbk" target="_blank" data-smartkarma-citation="entities:7752:1" rel="noopener">Emtek (EMTK IJ)</a>.</p>
</div>
<p><br><br><br></p>


According to market sources, Bukalapak plans to raise around US$800m in an IPO in Jakarta on the IDX potentially by the end of July, making it the first Indonesian unicorn to list on the local bourse. This would potentially be followed by a SPAC merger in the US, which would value the company at US$4bn-5bn versus the last valuation range of US$2.5-3.0bn. 

Based on the available financial information and recent indications of growth prospects and the path to profitability, we see the suggested valuations as achievable and find Bukalapak an attractive prospect.  
Bukalapak started as a C2C business and one of Indonesia's earliest e-commerce pioneers,  focusing on consumers and sellers outside the major cities in Indonesia, with a focus on specialty goods at low prices. 
In 2017, the company started Mitra Bukalapak, which focused on digitalizing the sourcing of products for offline warungs and small kiosks, increasing the range of products and reducing their sourcing costs plus improving margins.
Bukalapak now has more than 7m kiosks and 6m merchants on the platform, which provides a self-sustaining ecosystem, which does not demand high levels of promotional activity. 
Bukalapak saw +70% growth in its GMV last year and +130% growth in transactions, with around 34m MAUs and it should achieve +50% growth this year on the current run-rate according to management.
We look at the implied valuations given limited financial information. The company is further along the road to profitability than its e-commerce peers, given its differentiated strategy.
The platform has already attracted some high profile investors including Microsoft Corp (MSFT US) and Standard Chartered (STAN LN), both of which see opportunities to collaborate with Bukalapak.

One obvious beneficiary of this IPO will be Emtek (EMTK IJ), which owns over 30% of Bukalapak, in that the investment should realise a higher valuation through its listing. There is also a potential that Grab (0967655D SP) may look to collaborate with Bukalapak in some way, given it has taken a 4% stake in Emtek (EMTK IJ).

   

Bukalapak - Leading the Unicorn Charge - Buy Emtek

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

Thematic (Sector/Industry)

<p>The MCO in Malaysia has been extended and many wonder what will happen to the <a href="https://www.smartkarma.com/entities/kuala-lumpur-composite-index" target="_blank" data-smartkarma-citation="entities:22913:1" rel="noopener">Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX)</a>after this. In this insight, we will discuss auto and TV sectors that benefit from supportive government policy and prolonged stay-home consumer behavior respectively, namely <a href="https://www.smartkarma.com/entities/umw-holdings-bhd" target="_blank" data-smartkarma-citation="entities:1700:1" rel="noopener">UMW Holdings (UMWH MK)</a> , <a href="https://www.smartkarma.com/entities/drb-hicom-bhd" target="_blank" data-smartkarma-citation="entities:19627:1" rel="noopener">DRB-Hicom Bhd (DRB MK)</a> and <a href="https://www.smartkarma.com/entities/astro-malaysia-holdings-bhd" target="_blank" data-smartkarma-citation="entities:1143:1" rel="noopener">Astro Malaysia Holdings (ASTRO MK)</a> .</p>

The MCO in Malaysia has been extended and many wonder what will happen to the Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX)after this. In this insight, we will discuss auto and TV sectors that benefit from supportive government policy and prolonged stay-home consumer behavior respectively, namely UMW Holdings (UMWH MK) , DRB-Hicom Bhd (DRB MK) and Astro Malaysia Holdings (ASTRO MK) .

Global Gaming and Casinos Industry Specialist, Casino Business Review LLC

Howard J Klein

Global Gaming and Casinos Industry Specialist

Equity Bottom-Up

<ul>
<li>Genting has announced its Hong Kong based cruise business pandemic based financial woes have worsened, signaling our long held concerns about their over-reach in global casino gaming markets bringing collateral challenges.</li>
<li>Resorts World Las Vegas all important pre-opening budget could be limited below where history shows huge pre-opening costs needed to launch a major property.</li>
<li>Prospects for all Genting gaming properties still include reopening delays, underperformance in the US question corporate vision of global brand building.</li>
</ul>


Genting has announced its Hong Kong based cruise business pandemic based financial woes have worsened, signaling our long held concerns about their over-reach in global casino gaming markets bringing collateral challenges.
Resorts World Las Vegas all important pre-opening budget could be limited below where history shows huge pre-opening costs needed to launch a major property.
Prospects for all Genting gaming properties still include reopening delays, underperformance in the US question corporate vision of global brand building.


Genting: Continuing Financial Challenges May Impair Ramp of New US$4.3b Las Vegas Strip Resort

<p>For investors who are not based in Singapore, the mini lockdown in Singapore has started again due to the sudden increase in the number of community cases which previously was relatively under control. Before one thinks that it is a too-harsh of a policy, the rate of the increase of unlinked community cases in Singapore is high. This matters a lot because every Singapore residents need to check in every establishment using either an Identification card, Trace Together app, or token which has proved to be very effective as for months, most of the COVID-19 cases can be traced and therefore allows the government to take the necessary actions. </p>
<div class="content-highlight">
<p>This time is different. Alongside the third wave that has hit India and Thailand, Singapore, too, is hit. The Singapore government's response to this is very much like the first lock-down (Circuit Breaker), that they minimize public interactions so that the number of community cases does not increase and provide them with the time to perform contact tracing thoroughly. </p>
</div>
<p>In this report, we identify that <a href="https://www.smartkarma.com/entities/sheng-siong-group-ltd" target="_blank" data-smartkarma-citation="entities:6824:1" rel="noopener">Sheng Siong (SSG SP)</a> , <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> and <a href="https://www.smartkarma.com/entities/singapore-post-ltd" target="_blank" data-smartkarma-citation="entities:150:1" rel="noopener">Singapore Post (SPOST SP)</a>as winners while <a href="https://www.smartkarma.com/entities/comfortdelgro-corp-ltd" target="_blank" data-smartkarma-citation="entities:497:1" rel="noopener">Comfortdelgro Corp (CD SP)</a> and <a href="https://www.smartkarma.com/entities/genting-singapore-ltd" target="_blank" data-smartkarma-citation="entities:439:1" rel="noopener">Genting Singapore (GENS SP)</a>as losers. </p>

For investors who are not based in Singapore, the mini lockdown in Singapore has started again due to the sudden increase in the number of community cases which previously was relatively under control. Before one thinks that it is a too-harsh of a policy, the rate of the increase of unlinked community cases in Singapore is high. This matters a lot because every Singapore residents need to check in every establishment using either an Identification card, Trace Together app, or token which has proved to be very effective as for months, most of the COVID-19 cases can be traced and therefore allows the government to take the necessary actions. 

This time is different. Alongside the third wave that has hit India and Thailand, Singapore, too, is hit. The Singapore government's response to this is very much like the first lock-down (Circuit Breaker), that they minimize public interactions so that the number of community cases does not increase and provide them with the time to perform contact tracing thoroughly. 

In this report, we identify that Sheng Siong (SSG SP) , Sea Ltd (SE US) and Singapore Post (SPOST SP)as winners while Comfortdelgro Corp (CD SP) and Genting Singapore (GENS SP)as losers. 

Singapore Mini Lockdown: Winners and Losers

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<div>
<p>Back on the 29 April 2020, <a href="https://www.smartkarma.com/entities/melco-international-development-ltd" target="_blank" data-smartkarma-citation="entities:809:1" rel="noopener">Melco International Development (200 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0429/2020042900625.pdf" target="_blank" rel="noopener">announced</a> <a href="https://www.smartkarma.com/entities/melco-crown-entertainme-adr" target="_blank" data-smartkarma-citation="entities:810:1" rel="noopener">Melco Resorts &amp; Entertainment (MLCO US)</a> had sold its 9.99% stake in <a href="https://www.smartkarma.com/entities/crown-resorts-ltd" target="_blank" data-smartkarma-citation="entities:808:1" rel="noopener">Crown Resorts (CWN AU)</a> to Blackstone.</p>
</div>
<div>
<p>A brief recap of recent events leading to this sale:</p>
</div>
<div>
<div>
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 105.734px;">
<h2>Date</h2>
</td>
<td style="width: 597.798px;">
<h2>Data in the Date</h2>
</td>
</tr>
<tr>
<td style="width: 105.734px;">9-Apr-19</td>
<td style="width: 597.798px;">
<p><a href="https://www.asx.com.au/asxpdf/20190409/pdf/4445cxw9qtdqsv.pdf" target="_blank" rel="noopener">Crown Resorts (CWN AU) announced</a> it is in confidential discussions with <a href="https://www.smartkarma.com/entities/606" target="_blank" data-smartkarma-citation="entities:606:1" rel="noopener">Wynn Resorts (WYNN US)</a> concerning an acquisition of Crown by way of a Scheme. The announcement states that Wynn has approached Crown on more than one occasion.</p>
<p></p>
<p>WYNN confirmed it and released an <a href="https://wynnresortslimited.gcs-web.com/static-files/78ae4df4-3d63-4f65-b21a-58a4f4d11469" target="_blank" rel="noopener">8K</a> in the early hours of the 9th saying they would not comment further.</p>
<p>Several hours later, WYNN apparently said it was terminating deal talks with Crown because of the "premature disclosure of preliminary discussions".</p>
</td>
</tr>
<tr>
<td style="width: 105.734px;">30-May-19</td>
<td style="width: 597.798px;">
<p>Melco <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0530/ltn201905301127.pdf" target="_blank" rel="noopener">announced</a> an intention to acquire 19.99% in Crown from James Packer,  in a transaction spread across two tranches. The first tranche was completed on the 6 June.</p>
</td>
</tr>
<tr>
<td style="width: 105.734px;">8-Aug-19</td>
<td style="width: 597.798px;">
<p>Crown <a href="https://www.asx.com.au/asxpdf/20190808/pdf/447bdl046231kq.pdf" target="_blank" rel="noopener">announced</a> the NSW Independent Liquor and Gaming Authority would be conducting an inquiry, under section 143 of the <a href="https://www.legislation.nsw.gov.au/#/view/act/1992/15/part10/sec143" target="_blank" rel="noopener">Casino Control Act 1992 (NSW)</a>. On the 28 August, Crown and MLCO <a href="https://www.asx.com.au/asxpdf/20190829/pdf/447zqp91kz1r5l.pdf" target="_blank" rel="noopener">amended</a> the share sale agreement, which effectively put on hold the sale of the second tranche until the inquiry was completed satisfactorily.<br><br></p>
<p>The inquiry was predicated on reports of money laundering at Crown casinos and organised crime involved in running junkets. Crown had previously <a href="https://www.asx.com.au/asxpdf/20190730/pdf/4470lbwt6dd5s4.pdf" target="_blank" rel="noopener">announced</a> it would fully co-operate with any investigation, and that it had a comprehensive anti-money laundering and counter-terrorism financing program.</p>
</td>
</tr>
<tr>
<td style="width: 105.734px;">6-Feb-20</td>
<td style="width: 597.798px;">
<p>Melco/MLCO <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0206/2020020601305.pdf" target="_blank" rel="noopener">announced</a> it had terminated its obligation to purchase an additional 9.99% of Crown. MLCO said: "that due to the impact of the coronavirus epidemic, including the severe drop in tourism in Asia to integrated resort facilities in the region, and the recent decision by the government of the Macau Special Administrative Region of the People's Republic of China to close all casinos in Macau, Melco Resorts has taken the decision to reassess all non-core investments to be made in 2020."</p>
</td>
</tr>
<tr>
<td style="width: 105.734px;">29-Apr-20</td>
<td style="width: 597.798px;">Blackstone <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0429/2020042900625.pdf" target="_blank" rel="noopener">acquires</a> MCLO's 9.99% stake in Crown</td>
</tr>
</tbody>
</table>
</div>
</div>
<div>
<p>Blackstone paid $551.55mn for the 67.675mn shares in Crown, or A$8.15/share, a 2.37% discount to the average closing price of A$8.348 over the preceding five days. MLCO paid A$13/share back in June the previous year.  9.99% confers a passive stake, with no board seat.  Media reports were that Blackstone's acquisition was opportunistic in nature, and that they had no plans to increase their stake.</p>
</div>
<div>
<p>"<em>For now, maybe</em>" was my assessment at the time, and that once the casino inquiry completed, and taking the view Crown remained on as the licensee, Blackstone would make its move. </p>
<p>Fast forward to the 9 February this year when the NSW Independent Liquor and Gaming Authority (ILGA) found that Crown – through its subsidiary Crown Sydney Gaming – was not suitable to hold the licence for the second Sydney casino at Barangaroo.</p>
<p>Some of the more damning conclusions in the extensive 18-month inquiry (encompassing 768 pages over two volumes - <a href="https://www.parliament.nsw.gov.au/tp/files/79129/Volume%201%20-%20Inquiry%20under%20section%20143%20of%20the%20Casino%20Control%20Act%201992.pdf" target="_blank" rel="noopener">here</a> &amp; <a href="https://www.parliament.nsw.gov.au/tp/files/79129/Volume%202%20-%20Inquiry%20under%20section%20143%20of%20the%20Casino%20Control%20Act%201992.pdf" target="_blank" rel="noopener">here</a>) concerned the facilitation of money laundering and the enabling of criminals to infiltrate the Melbourne and Perth casinos. </p>
<p>Subsequent to the ILGA report, five directors and CEO <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02341002-3A561139?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">Ken Barton</a> resigned.</p>
<h3>The New News</h3>
<div>Crown <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02355769-3A563928?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> today it has received an unsolicited, non-binding and indicative takeover <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02355769-3A563928?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">proposal</a>, by way of a Scheme, from Blackstone, at $11.85/share - a 19% premium to the average price of Crown's shares since the release of its <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02342917-3A561577?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">1H21 results</a>.</div>
</div>
<div></div>
<div>The Offer is subject to a raft of conditions including "<em>regulatory confirmation that a Blackstone-owned Crown is </em><em>considered suitable to own and operate the Sydney, Melbourne, and Perth casino licences</em>".</div>
<div></div>
<div>
<p>More below the fold. </p>
</div>


Back on the 29 April 2020, Melco International Development (200 HK) announced Melco Resorts &amp; Entertainment (MLCO US) had sold its 9.99% stake in Crown Resorts (CWN AU) to Blackstone.


A brief recap of recent events leading to this sale:







Date


Data in the Date



9-Apr-19

Crown Resorts (CWN AU) announced it is in confidential discussions with Wynn Resorts (WYNN US) concerning an acquisition of Crown by way of a Scheme. The announcement states that Wynn has approached Crown on more than one occasion.

WYNN confirmed it and released an 8K in the early hours of the 9th saying they would not comment further.
Several hours later, WYNN apparently said it was terminating deal talks with Crown because of the "premature disclosure of preliminary discussions".



30-May-19

Melco announced an intention to acquire 19.99% in Crown from James Packer,  in a transaction spread across two tranches. The first tranche was completed on the 6 June.



8-Aug-19

Crown announced the NSW Independent Liquor and Gaming Authority would be conducting an inquiry, under section 143 of the Casino Control Act 1992 (NSW). On the 28 August, Crown and MLCO amended the share sale agreement, which effectively put on hold the sale of the second tranche until the inquiry was completed satisfactorily.  
The inquiry was predicated on reports of money laundering at Crown casinos and organised crime involved in running junkets. Crown had previously announced it would fully co-operate with any investigation, and that it had a comprehensive anti-money laundering and counter-terrorism financing program.



6-Feb-20

Melco/MLCO announced it had terminated its obligation to purchase an additional 9.99% of Crown. MLCO said: "that due to the impact of the coronavirus epidemic, including the severe drop in tourism in Asia to integrated resort facilities in the region, and the recent decision by the government of the Macau Special Administrative Region of the People's Republic of China to close all casinos in Macau, Melco Resorts has taken the decision to reassess all non-core investments to be made in 2020."



29-Apr-20
Blackstone acquires MCLO's 9.99% stake in Crown






Blackstone paid $551.55mn for the 67.675mn shares in Crown, or A$8.15/share, a 2.37% discount to the average closing price of A$8.348 over the preceding five days. MLCO paid A$13/share back in June the previous year.  9.99% confers a passive stake, with no board seat.  Media reports were that Blackstone's acquisition was opportunistic in nature, and that they had no plans to increase their stake.


"For now, maybe" was my assessment at the time, and that once the casino inquiry completed, and taking the view Crown remained on as the licensee, Blackstone would make its move. 
Fast forward to the 9 February this year when the NSW Independent Liquor and Gaming Authority (ILGA) found that Crown – through its subsidiary Crown Sydney Gaming – was not suitable to hold the licence for the second Sydney casino at Barangaroo.
Some of the more damning conclusions in the extensive 18-month inquiry (encompassing 768 pages over two volumes - here &amp; here) concerned the facilitation of money laundering and the enabling of criminals to infiltrate the Melbourne and Perth casinos. 
Subsequent to the ILGA report, five directors and CEO Ken Barton resigned.
The New News
Crown announced today it has received an unsolicited, non-binding and indicative takeover proposal, by way of a Scheme, from Blackstone, at $11.85/share - a 19% premium to the average price of Crown's shares since the release of its 1H21 results.


The Offer is subject to a raft of conditions including "regulatory confirmation that a Blackstone-owned Crown is considered suitable to own and operate the Sydney, Melbourne, and Perth casino licences".


More below the fold. 


Crown Resorts (CWN AU): Blackstone Rolls the Dice

Malaysia

Genting Berhad is an investment holding company.  The Company, through its subsidiaries, provides leisure and hospitality, gaming, and entertainment businesses. Genting also operates plantations, develops and manages property, provides tours and travel related services, manufactures and trades paper, explores oil and gas, and provides money lending services.

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Genting Bhd (GENT MK)

Bukalapak - Leading the Unicorn Charge - Buy Emtek

Bukalapak has outlined plans to list in Jakarta, giving access to its leading position in enabling warungs in Indonesia. The immediate beneficiary...

Angus Mackintosh

Malaysia MCO: Winners

auto and TV benefit from supportive government policy and prolonged stay-home consumer behavior respectively, namely UMW Holdings , DRB-Hicom Bhd...

Henry Soediarko

Genting: Continuing Financial Challenges May Impair Ramp of New US$4.3b Las Vegas Strip Resort

Genting Berhad's financial woes in its Hong Kong cruise business could squeeze its resources needed to open its $4.3b Las Vegas resort. It...

Howard J Klein

Singapore Mini Lockdown: Winners and Losers

In this report, we identify that Sheng Siong (SSG SP) , Sea Ltd (SE US) and Singapore Post (SPOST SP)as winners while Comfortdelgro Corp (CD SP)...

Henry Soediarko

Crown Resorts (CWN AU): Blackstone Rolls the Dice

Some investors feel $11.85/share is reasonable given Crown's plight. Yet this company is worth significantly more if there is a reset and...

David Blennerhassett

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