Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Whoops They Did It Again..: In Afterpay’s Touch’s (APT.AU) [Afterpay] latest update, it was announced that Afterpay will allow Westpac Banking (WBC.AU) to offer its Banking-as-a-Service to Afterpay’s approximate 3.3 mn, which include deposit accounts and cash-flow management tools, as early as FY 2Q21. If successful, this partnership could transform the sleepy Australian banking market as we know it;  *Tencent Tutelage: Afterpay is helping Tencent enter markets earlier and with Tencent’s (700.HK) tutelage likely will help Afterpay more deeply penetrate North America.  We fully anticipate that Tencent will help Afterpay enter the Asian markets - uncharted territory with a large young population – with the big prize obviously being mainland China. Tencent’s digital expertise should also help Afterpay to improve its technology platform (e.g. its digital wallet checkout experience and its shopping platform, plus customer led generation). It also wouldn’t surprise us if Tencent took up greater than its pro rata share of the capital raise; and*Magic Fairy Dust: While no transaction particulars were disclosed, we calculate an average share purchase price of AUD 22.47 per share for the 5% stake or a hefty 6.8x P/BV for a company which is loss-making and where Tencent hasn’t control. Tencent has already earned 354% on this stake. Afterpay has already reached many of its key milestones, and we look forward to its quarterly update in a few weeks.

*Whoops They Did It Again..: In Afterpay’s Touch’s (APT.AU) [Afterpay] latest update, it was announced that Afterpay will allow Westpac Banking (WBC.AU) to offer its Banking-as-a-Service to Afterpay’s approximate 3.3 mn, which include deposit accounts and cash-flow management tools, as early as FY 2Q21. If successful, this partnership could transform the sleepy Australian banking market as we know it;  *Tencent Tutelage: Afterpay is helping Tencent enter markets earlier and with Tencent’s (700.HK) tutelage likely will help Afterpay more deeply penetrate North America.  We fully anticipate that Tencent will help Afterpay enter the Asian markets - uncharted territory with a large young population – with the big prize obviously being mainland China. Tencent’s digital expertise should also help Afterpay to improve its technology platform (e.g. its digital wallet checkout experience and its shopping platform, plus customer led generation). It also wouldn’t surprise us if Tencent took up greater than its pro rata share of the capital raise; and*Magic Fairy Dust: While no transaction particulars were disclosed, we calculate an average share purchase price of AUD 22.47 per share for the 5% stake or a hefty 6.8x P/BV for a company which is loss-making and where Tencent hasn’t control. Tencent has already earned 354% on this stake. Afterpay has already reached many of its key milestones, and we look forward to its quarterly update in a few weeks. 

*Simon Says: In Afterpay’s Touch’s (APT.AU) [Afterpay] latest move, it was announced that it will collaborate with Simon Property Group (SPG.US) in the US across it’s significant footprint of retail shopping malls  - over 200 across the country. This collaboration enables Afterpay to establish an in-store presence in the US where both companies will work side by side with retailers in Simon shopping malls;*Tencent Tutelage: Afterpay is helping Tencent enter markets earlier and with Tencent’s (700.HK) tutelage likely will help Afterpay more deeply penetrate North America.  We fully anticipate that Tencent will help Afterpay enter the Asian markets - uncharted territory with a large young population – with the big prize obviously being mainland China. Tencent’s digital expertise should also help Afterpay to improve its technology platform (e.g. its digital wallet checkout experience and its shopping platform, plus customer led generation). It also wouldn’t surprise us if Tencent took up greater than its pro rata share of the capital raise; and*Magic Fairy Dust: While no transaction particulars were disclosed, we calculate an average share purchase price of AUD 22.47 per share for the 5% stake or a hefty 6.8x P/BV for a company which is loss-making and where Tencent hasn’t control. Tencent has already earned 278% on this stake.

*Simon Says: In Afterpay’s Touch’s (APT.AU) [Afterpay] latest move, it was announced that it will collaborate with Simon Property Group (SPG.US) in the US across it’s significant footprint of retail shopping malls  - over 200 across the country. This collaboration enables Afterpay to establish an in-store presence in the US where both companies will work side by side with retailers in Simon shopping malls;*Tencent Tutelage: Afterpay is helping Tencent enter markets earlier and with Tencent’s (700.HK) tutelage likely will help Afterpay more deeply penetrate North America.  We fully anticipate that Tencent will help Afterpay enter the Asian markets - uncharted territory with a large young population – with the big prize obviously being mainland China. Tencent’s digital expertise should also help Afterpay to improve its technology platform (e.g. its digital wallet checkout experience and its shopping platform, plus customer led generation). It also wouldn’t surprise us if Tencent took up greater than its pro rata share of the capital raise; and*Magic Fairy Dust: While no transaction particulars were disclosed, we calculate an average share purchase price of AUD 22.47 per share for the 5% stake or a hefty 6.8x P/BV for a company which is loss-making and where Tencent hasn’t control. Tencent has already earned 278% on this stake. 

*Highlights of Investor Day: Alibaba Group (BABA.US/9988.HK) [Alibaba] held a virtual 2020 Investor Day, where it emphasized high quality growth, structural opportunities, and efficiency gains; and*Extracting Synergies: There remains an opportunity for Alibaba cross-sell and extract synergies. Some areas of focus include: DME; Freshippo; local services/Ant Financial; Cainiao; and Alibaba Cloud.

*Highlights of Investor Day: Alibaba Group (BABA.US/9988.HK) [Alibaba] held a virtual 2020 Investor Day, where it emphasized high quality growth, structural opportunities, and efficiency gains; and*Extracting Synergies: There remains an opportunity for Alibaba cross-sell and extract synergies. Some areas of focus include: DME; Freshippo; local services/Ant Financial; Cainiao; and Alibaba Cloud. 

* Solid Result: Despite the net transaction loss increase of AUD 20.6 mn (93%), we note particular improvement in Afterpay’s fundamental metrics: sales improved AUD 5.9 bn (112%) YOY to AUD 11.1 bn in FY 2020; gross losses to sales declined 20 bp (24%) to 0.9%; EBITDA improved AUD 18.7 mn (73%) to AUD 44.4 mn; active customers increased 5.3 mn (116%) to 9.9 mn; and active merchants increased 23.1 thousand (72%) 55.4 thousand;  *Asian Launch Underway: The earnings announcement was also chock full of recent positive developments as well, which include its Asia expansion. Afterpay is set to acquire a Singapore’s, Empatkali, which is a small buy now pay later provider in Indonesia and will be used as Afterpay’s Asia launching pad with Tencent (700.HK) providing further regional expansion guidance; and*Magic Fairy Dust: While no transaction particulars were disclosed, we calculate an average share purchase price of AUD 22.47 per share for the 5% stake or a hefty 6.8x P/BV for a company which is loss-making and where Tencent hasn’t control. Tencent has already earned 146% on this stake.

* Solid Result: Despite the net transaction loss increase of AUD 20.6 mn (93%), we note particular improvement in Afterpay’s fundamental metrics: sales improved AUD 5.9 bn (112%) YOY to AUD 11.1 bn in FY 2020; gross losses to sales declined 20 bp (24%) to 0.9%; EBITDA improved AUD 18.7 mn (73%) to AUD 44.4 mn; active customers increased 5.3 mn (116%) to 9.9 mn; and active merchants increased 23.1 thousand (72%) 55.4 thousand;  *Asian Launch Underway: The earnings announcement was also chock full of recent positive developments as well, which include its Asia expansion. Afterpay is set to acquire a Singapore’s, Empatkali, which is a small buy now pay later provider in Indonesia and will be used as Afterpay’s Asia launching pad with Tencent (700.HK) providing further regional expansion guidance; and*Magic Fairy Dust: While no transaction particulars were disclosed, we calculate an average share purchase price of AUD 22.47 per share for the 5% stake or a hefty 6.8x P/BV for a company which is loss-making and where Tencent hasn’t control. Tencent has already earned 146% on this stake. 

*Implications of Executive Order: On August 6, 2020, the Trump administration issued a pair of executive orders directed at mainland Chinese technology companies, banning US transactions with the companies after a deadline of September 20, 2020. The executive order imposes a ban on any transaction which is related to WeChat by any person, or with respect to any property subject to the jurisdiction of the United States, with Tencent; and*Tencent Ownership Can Be A Share Overhang Now: Any business with a Tencent ownership stake is potentially implicated since an abrupt departure of Tencent from the market could be problematic to the affiliates financial condition. The sheer scope of Tencent’s investments shows how ugly things could get for a number of American companies, which include the National Basketball Association.

*Implications of Executive Order: On August 6, 2020, the Trump administration issued a pair of executive orders directed at mainland Chinese technology companies, banning US transactions with the companies after a deadline of September 20, 2020. The executive order imposes a ban on any transaction which is related to WeChat by any person, or with respect to any property subject to the jurisdiction of the United States, with Tencent; and*Tencent Ownership Can Be A Share Overhang Now: Any business with a Tencent ownership stake is potentially implicated since an abrupt departure of Tencent from the market could be problematic to the affiliates financial condition. The sheer scope of Tencent’s investments shows how ugly things could get for a number of American companies, which include the National Basketball Association.

Australia

Afterpay Limited provides financial solutions. The Company offers payment platform that allow users to maintain financial wellness and control, by splitting payments in four, for both online and in-store purchases. Afterpay serves customers globally.

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Afterpay (APT AU)

Tencent Holdings – Sliced Bread

Tencent Holdings: AfterPay Is Like The Greatest Thing Since Sliced Bread For Tencent. Not Only Has Tencent Earned 354% On Its Stake But AfterPay...

Thomas J. Monaco

Tencent - One If By Land

*Simon Says: In Afterpay’s Touch’s (APT.AU) [Afterpay] latest move, it was announced that it will collaborate with Simon Property Group (SPG.US) in...

Thomas J. Monaco

Alibaba – Virtually There

*Highlights of Investor Day: Alibaba Group (BABA.US/9988.HK) [Alibaba] held a virtual 2020 Investor Day, where its emphasis was on high quality...

Thomas J. Monaco

Tencent - We’re Down With APT

* Solid Result: Despite the net transaction loss increase of AUD 20.6 mn (93%), we note particular improvement in Afterpay’s fundamental metrics:...

Thomas J. Monaco

Tencent - Untangling Trump

*Implications of Executive Order: On August 6, 2020, the Trump administration issued a pair of executive orders directed at mainland Chinese...

Thomas J. Monaco

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