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

Palantir Technologies  / Equity Bottom-Up

<p>When we took a deep dive into Palantir, we thought it would be as a long. Up 90% in the past month? Its a short.</p>
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<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>
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When we took a deep dive into Palantir, we thought it would be as a long. Up 90% in the past month? Its a short.

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.


Founder/CEO of ROK Advisory, ROK Advisory LLC

Ken S. Kim

Founder/CEO of ROK Advisory

ROK Advisory LLC

ROK is an independent research advisory firm. We guide you to minimize the information gap between foreign and local investors in Northeast Asia with a focus in Korea, Taiwan and Japan.

Independent Research Advisory Firm

<div>While the details are scarce, local press is reporting that SKT and AMZN has been in talks for more than a year and would allow really an export/import biz on both of their channels (ie Korean products to be bought by US consumers and US products to be bought thru 11th St (SK's ecommerce portal) for Koreans. </div><div></div><div>This can't be good for the ecommerce players in Korea.  In the US, if you hear that AMZN is coming in whatever business, the whole sector falls.   Is Naver next? </div>

While the details are scarce, local press is reporting that SKT and AMZN has been in talks for more than a year and would allow really an export/import biz on both of their channels (ie Korean products to be bought by US consumers and US products to be bought thru 11th St (SK's ecommerce portal) for Koreans. This can't be good for the ecommerce players in Korea.  In the US, if you hear that AMZN is coming in whatever business, the whole sector falls.   Is Naver next? 

AMZN into Korea - "We Are Not Here to Take Part, We're Here to Take Over!"

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

<p><a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> just released its 3Q2020 numbers and yet again hit the ball out of the park on revenue growth, with +110% growth in its digital entertainment (DE) revenues to US$944.7m and +173% growth in its e-commerce (EC) revenues to US$618.7m.</p>
<p>Digital Entertainment revenues grew by +31.9% QoQ in 3Q2020, whilst e-commerce expanded by +39.7% QoQ. Total group revenues for 3Q2020 grew by +98.7% YoY to US$1,212.2m.</p>
<p>The company also registered a positive EBITDA of US$120.4m in 3Q2020 versus (US$30.8m) loss for 3Q2019 and US$7.7m in 2Q2020 but it still booked a net loss of (US$346m) after share-based compensation and changes in the value of the 2017 convertible notes versus (US$175m) in 3Q2019.</p>
<p><a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> booked a +99% growth rate in total GAAP revenue US$1.2bn, whilst gross profits grew by +100.6% YoY in 3Q2020 to US$407.6m. Gross merchandise value (GMV) increased +103% to US$9.3bn in 3Q2020. </p>
<p><a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> has yet again demonstrated its ability to lead the pack both through Garena in gaming and Shopee for e-commerce in terms of extraordinary rates of revenue growth, with its digital entertainment effectively bankrolling its e-commerce business.</p>
<p>E-commerce is also marching in the right direction with the EBITDA loss per order continuing to decline QoQ as it winds its way towards profitability, although that will not happen until 2023.</p>
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<p>Looking out to FY21E, the average EV/Sales for the company's peers stands at 5.5x versus <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> on 9.45x but it is forecast to grow sales at +43.6%, twice the average growth rate of peers. Investors will pay a premium for this growth and its market leadership, with an increasing focus on profitability. </p>
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Sea Ltd (SE US) just released its 3Q2020 numbers and yet again hit the ball out of the park on revenue growth, with +110% growth in its digital entertainment (DE) revenues to US$944.7m and +173% growth in its e-commerce (EC) revenues to US$618.7m.
Digital Entertainment revenues grew by +31.9% QoQ in 3Q2020, whilst e-commerce expanded by +39.7% QoQ. Total group revenues for 3Q2020 grew by +98.7% YoY to US$1,212.2m.
The company also registered a positive EBITDA of US$120.4m in 3Q2020 versus (US$30.8m) loss for 3Q2019 and US$7.7m in 2Q2020 but it still booked a net loss of (US$346m) after share-based compensation and changes in the value of the 2017 convertible notes versus (US$175m) in 3Q2019.
Sea Ltd (SE US) booked a +99% growth rate in total GAAP revenue US$1.2bn, whilst gross profits grew by +100.6% YoY in 3Q2020 to US$407.6m. Gross merchandise value (GMV) increased +103% to US$9.3bn in 3Q2020. 
Sea Ltd (SE US) has yet again demonstrated its ability to lead the pack both through Garena in gaming and Shopee for e-commerce in terms of extraordinary rates of revenue growth, with its digital entertainment effectively bankrolling its e-commerce business.
E-commerce is also marching in the right direction with the EBITDA loss per order continuing to decline QoQ as it winds its way towards profitability, although that will not happen until 2023.

Looking out to FY21E, the average EV/Sales for the company's peers stands at 5.5x versus Sea Ltd (SE US) on 9.45x but it is forecast to grow sales at +43.6%, twice the average growth rate of peers. Investors will pay a premium for this growth and its market leadership, with an increasing focus on profitability. 


Sea Ltd (SE US) - Gaming the E-Commerce Epiphany

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<p>In this insight, we provide an updated valuation of <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a>. We believe now is the time to go Underweight on Naver Corp, which is up 51% YTD versus KOSPI which is up 16% in the same period.</p><p>There are three major reasons why we believe investors should Underweight Naver Corp now.</p><ul>
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<strong>First,</strong> our valuation analysis suggests that Naver Corp shares are overvalued.</li>
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<strong>Second</strong>, we believe there could be a major shift in capital allocations away from some of the biggest beneficiaries of COVID-19 this year.</li>
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<strong>Third,</strong> we believe the new partnership between Amazon &amp; 11st could pose a greater competitive threat to the entire e-commerce industry, negatively impacting Naver's e-commerce business.</li>
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In this insight, we provide an updated valuation of Naver Corp (035420 KS). We believe now is the time to go Underweight on Naver Corp, which is up 51% YTD versus KOSPI which is up 16% in the same period.There are three major reasons why we believe investors should Underweight Naver Corp now.

First, our valuation analysis suggests that Naver Corp shares are overvalued.

Second, we believe there could be a major shift in capital allocations away from some of the biggest beneficiaries of COVID-19 this year.

Third, we believe the new partnership between Amazon &amp; 11st could pose a greater competitive threat to the entire e-commerce industry, negatively impacting Naver's e-commerce business.


Naver - Time to Go Underweight (Covid Recovery + Amazon)

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Event-Driven

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<p><a href="https://www.smartkarma.com/entities/wal-mart-stores-inc" target="_blank" data-smartkarma-citation="entities:11134:1" rel="noopener">Wal Mart Stores (WMT US)</a> will sell 85% of its stake in Seiyu, the Japanese general merchandise store (GMS) chain to <a href="https://www.smartkarma.com/entities/kkr-co-inc" target="_blank" data-smartkarma-citation="entities:27333:1" rel="noopener">KKR &amp; Co Inc (KKR US)</a> and <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten Inc (4755 JP). </a></p>
<p>This ends Walmart's original plans to relist its Japanese business and confirming widespread speculation that it has been trying to sell off its 330-store Japanese operation after 17 years of trying to turn the business around. The purchase price is a reported ¥172.5 billion, considerably less than the ¥441 billion Walmart paid for the business in 2007.</p>
<p>The deal is a win for KKR of course, but much more interestingly, is a huge win for Rakuten. <strong>We previously suggested <a href="https://www.smartkarma.com/insights/walmart-will-relist-japan-unit-soon-and-at-last-has-potential-to-grow-but-only-online" target="_blank" rel="noopener">in this Insight</a> that should the Walmart/Rakuten deal not grow fast enough, Rakuten would be a natural acquirer of the Seiyu business and this has turned out to be true – and for good strategic reasons.</strong></p>
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<p>As described before <a href="https://www.smartkarma.com/insights/online-food-demand-brings-new-ideas-and-innovations" target="_blank" rel="noopener">here</a> and <a href="https://www.smartkarma.com/insights/online-food-boom-rakuten-walmart-alliance-goes-live" target="_blank" rel="noopener">here</a>, the Japanese online food market is only just beginning to boom (penetration of food retail by online is still less than 3%) and many of the key players are jockeying for position, led by <a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409:1" rel="noopener">Amazon.com Inc (AMZN US)</a> in a joint venture with <a href="https://www.smartkarma.com/entities/life-corp" target="_blank" data-smartkarma-citation="entities:1743:1" rel="noopener">Life Corp (8194 JP).</a> </p>
<p>If Rakuten can begin to properly exploit Seiyu's physical store presence to quickly build out a nationwide online food delivery business, it should rapidly become one of the leaders in this fast-expanding market. And given how important the food/FMCG category is, leadership in food e-commerce equals leadership in BtoC e-commerce overall.</p>
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Wal Mart Stores (WMT US) will sell 85% of its stake in Seiyu, the Japanese general merchandise store (GMS) chain to KKR &amp; Co Inc (KKR US) and Rakuten Inc (4755 JP). 
This ends Walmart's original plans to relist its Japanese business and confirming widespread speculation that it has been trying to sell off its 330-store Japanese operation after 17 years of trying to turn the business around. The purchase price is a reported ¥172.5 billion, considerably less than the ¥441 billion Walmart paid for the business in 2007.
The deal is a win for KKR of course, but much more interestingly, is a huge win for Rakuten. We previously suggested in this Insight that should the Walmart/Rakuten deal not grow fast enough, Rakuten would be a natural acquirer of the Seiyu business and this has turned out to be true – and for good strategic reasons.

As described before here and here, the Japanese online food market is only just beginning to boom (penetration of food retail by online is still less than 3%) and many of the key players are jockeying for position, led by Amazon.com Inc (AMZN US) in a joint venture with Life Corp (8194 JP). 
If Rakuten can begin to properly exploit Seiyu's physical store presence to quickly build out a nationwide online food delivery business, it should rapidly become one of the leaders in this fast-expanding market. And given how important the food/FMCG category is, leadership in food e-commerce equals leadership in BtoC e-commerce overall.


The Walmart Japan Sell Off: A Huge Gain for Rakuten

United States

Amazon.com, Inc. is an online retailer that offers a wide range of products. The Company's products include books, music, videotapes, computers, electronics, home and garden, and numerous other products.  Amazon offers personalized shopping services, Web-based credit card payment, and direct shipping to customers.

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Amazon (AMZN US)

2021 High Conviction: Short Palantir

We take a deep dive into the Palantir business model and come away skeptical that the success of its first quarter as a public company is sustainable.

Aaron Gabin

AMZN into Korea - "We Are Not Here to Take Part, We're Here to Take Over!"

I guess the Koreans aren't scared of Amazon's entry into the ecommerce space! I'm a seller of Naver here on the news that Amazon will come into...

Ken S. Kim

Sea Ltd (SE US) - Gaming the E-Commerce Epiphany

Sea Ltd (SE US) continues to generate increasingly robust cashflows from its gaming business, which is used to bankroll the growth in its e...

Angus Mackintosh

Naver - Time to Go Underweight (Covid Recovery + Amazon)

In this insight, we provide an updated valuation of Naver Corp (035420 KS). We believe now is the time to go Underweight on Naver Corp, which is up...

Douglas Kim

The Walmart Japan Sell Off: A Huge Gain for Rakuten

We predicted the sale of Seiyu by Walmart to Rakuten and this is now happening (with KKR funding). It is a huge step for Rakuten in the war for...

Michael Causton

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