Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/base-inc" target="_blank" data-smartkarma-citation="entities:28353:1" rel="noopener">BASE Inc (4477 JP)</a> delivered 4Q20 results yesterday with revenue and gross profit growth of 104.8% and 108.4% YoY respectively in 4Q20. However, operating loss expanded 113% YoY to ¥343m due to an increase in promotional expenditure.</p><p>The company’s 2021 revenue guidance of ¥9,750-10,536m (17.6%-27.1% YoY) suggests that BASE Inc’s revenue growth is expected to decelerate rapidly following a temporary increase in 2020 due to COVID. This rapid deceleration in revenue growth is expected while there is a substantial increase in promotional spending. 2021 OP guidance ¥-1,433 to -929m compared to an operating profit of ¥803m in 2020. Therefore, Base Inc’s growth prospects in the domestic market could be somewhat limited and at 15.8x consensus FY+2 EV/Sales (2022 revenue: ¥15,593, 48% YoY), Base Inc appears significantly overvalued. However, the announced five to one stock split effective on 1<sup>st</sup> April 2021 could be a catalyst for a short-term rally. Thus, we would wait for Base Inc’s share price to react to the stock split news before arranging a short position.</p>

BASE Inc (4477 JP) delivered 4Q20 results yesterday with revenue and gross profit growth of 104.8% and 108.4% YoY respectively in 4Q20. However, operating loss expanded 113% YoY to ¥343m due to an increase in promotional expenditure.The company’s 2021 revenue guidance of ¥9,750-10,536m (17.6%-27.1% YoY) suggests that BASE Inc’s revenue growth is expected to decelerate rapidly following a temporary increase in 2020 due to COVID. This rapid deceleration in revenue growth is expected while there is a substantial increase in promotional spending. 2021 OP guidance ¥-1,433 to -929m compared to an operating profit of ¥803m in 2020. Therefore, Base Inc’s growth prospects in the domestic market could be somewhat limited and at 15.8x consensus FY+2 EV/Sales (2022 revenue: ¥15,593, 48% YoY), Base Inc appears significantly overvalued. However, the announced five to one stock split effective on 1st April 2021 could be a catalyst for a short-term rally. Thus, we would wait for Base Inc’s share price to react to the stock split news before arranging a short position.

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

<p>Many investors worried about a few things on <a href="https://www.smartkarma.com/entities/my-eg-services-bhd" target="_blank" data-smartkarma-citation="entities:19765:1" rel="noopener">My E.G. Services (MYEG MK)</a> including ties with the previous administration that will potentially cause loss of concession (corporate governance), and whether earnings stability is sustainable. </p>
<p>The company's valuation is still undervalued compared to its peers when the management has taken a dynamic and active approach to launch new initiatives such as online groceries and health screening services for COVID-19. </p>
<p>Investors should book some profit on the recent share price strengthening but I will suggest <strong>selling </strong><strong>a part or 50%</strong> of the current position as the company and management offers an excellent long-term prospect across the market cycle and when the hype is done and stock will weaken a little, take that opportunity for a better entry point. </p>
<p><em>This insight is labeled as bearish to reflect the action that investors should take given the share price increase. The insight provider is still bullish on the long-term's company's prospect.</em></p>

Many investors worried about a few things on My E.G. Services (MYEG MK) including ties with the previous administration that will potentially cause loss of concession (corporate governance), and whether earnings stability is sustainable. 
The company's valuation is still undervalued compared to its peers when the management has taken a dynamic and active approach to launch new initiatives such as online groceries and health screening services for COVID-19. 
Investors should book some profit on the recent share price strengthening but I will suggest selling a part or 50% of the current position as the company and management offers an excellent long-term prospect across the market cycle and when the hype is done and stock will weaken a little, take that opportunity for a better entry point. 
This insight is labeled as bearish to reflect the action that investors should take given the share price increase. The insight provider is still bullish on the long-term's company's prospect.

MYEG: Vaccine and Concession - Worries Unfounded

<p>Following two extremely successful quarters, <a href="https://www.smartkarma.com/entities/base-inc" target="_blank" data-smartkarma-citation="entities:28353:1" rel="noopener">BASE Inc (4477 JP)</a> shares rallied more than 1,000% from its IPO price to reach a high of ¥16,510 per share before declining 40% to ¥9,920 after the 3Q20 results release on 16<sup>th</sup> November 2020.</p><p>In its short history, Base Inc is known for showering investors with an overwhelming amount of information, mostly immaterial and unnecessary disclosure which could distract investors from reality. The unwarranted share price rally may have started this trend, as the company did its best to stay relevant and within sight of investors all times.</p>

Following two extremely successful quarters, BASE Inc (4477 JP) shares rallied more than 1,000% from its IPO price to reach a high of ¥16,510 per share before declining 40% to ¥9,920 after the 3Q20 results release on 16th November 2020.In its short history, Base Inc is known for showering investors with an overwhelming amount of information, mostly immaterial and unnecessary disclosure which could distract investors from reality. The unwarranted share price rally may have started this trend, as the company did its best to stay relevant and within sight of investors all times.

Base Inc Bubble Is Still Far From Bursting

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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<p>This week in StubWorld ...</p>
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<a href="https://www.smartkarma.com/entities/gmo-internet-inc" target="_blank" data-smartkarma-citation="entities:13631:1" rel="noopener">GMO Internet (9449 JP)</a> is trading wide on an NAV basis, and its implied stub with respect to <a href="https://www.smartkarma.com/entities/gmo-payment-gateway-inc" target="_blank" data-smartkarma-citation="entities:1492:1" rel="noopener">GMO Payment Gateway (3769 JP)</a> is at an all-time low.</div>
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<p>Preceding my comments on GMO are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed as a % - of at least 20%.</p>
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This week in StubWorld ...



GMO Internet (9449 JP) is trading wide on an NAV basis, and its implied stub with respect to GMO Payment Gateway (3769 JP) is at an all-time low.


Preceding my comments on GMO are the weekly setup/unwind tables for Asia-Pacific Holdcos.




These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed as a % - of at least 20%.




<p>We have been covering <a href="https://www.smartkarma.com/entities/base-inc" target="_blank" data-smartkarma-citation="entities:28353:1" rel="noopener">BASE Inc (4477 JP)</a> since its IPO in October 2019. Initially, BASE was valued in line with similar E-commerce platform multiples and the fast-growing payment processing business was ignored. However, the investor demand for COVID-resistant stocks drove the company’s valuation to unwarranted levels during the last six months.</p>
<p>In our last insight <a href="https://www.smartkarma.com/insights/base-inc-downside-risks-mount-as-ev-sales-peak" target="_blank" rel="noopener">BASE Inc: Downside Risks Mount As EV/​Sales Peak</a>, we suggested creating a short position when the share price peaked on 8<sup>th</sup> October. Since then, the share price has declined 21.5% to ¥12,500 per share.</p>
<p>On 16<sup>th</sup> October 2020, BASE Inc announced that it had invested in MOSH, a company involved in service E-Commerce.</p>

We have been covering BASE Inc (4477 JP) since its IPO in October 2019. Initially, BASE was valued in line with similar E-commerce platform multiples and the fast-growing payment processing business was ignored. However, the investor demand for COVID-resistant stocks drove the company’s valuation to unwarranted levels during the last six months.
In our last insight BASE Inc: Downside Risks Mount As EV/​Sales Peak, we suggested creating a short position when the share price peaked on 8th October. Since then, the share price has declined 21.5% to ¥12,500 per share.
On 16th October 2020, BASE Inc announced that it had invested in MOSH, a company involved in service E-Commerce.

BASE Inc Moves to Service E-Commerce Via MOSH Acquisition

Japan

GMO Payment Gateway, Inc. provides credit card transaction services for electronic commerce firms.

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GMO Payment Gateway (3769 JP)

Base Inc: Taking a Wrong Turn

We loved Base at the time of the IPO. However, we are considering changing that opinion, as losses are starting to head the wrong way while Base...

Oshadhi Kumarasiri

MYEG: Vaccine and Concession - Worries Unfounded

Many investors worried about a few things on My E.G. including ties with the previous government that will cause loss of concession (corporate...

Henry Soediarko

Base Inc Bubble Is Still Far From Bursting

Following two extremely successful quarters, BASE Inc shares rallied more than 1,000% from its IPO price to reach a high of ¥16,510 per share...

Oshadhi Kumarasiri

StubWorld: GMO Internet At Set-Up Levels

GMO Internet (9449 JP) is trading wide on a NAV basis, and its implied stub, with respect to GMO Payment Gateway (3769 JP), is at an all-time low.

David Blennerhassett

BASE Inc Moves to Service E-Commerce Via MOSH Acquisition

In our last insight, we suggested creating a short position when the share price peaked on 8th October. Since then, the share price has declined by...

Oshadhi Kumarasiri

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