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

<p>We think Match’s stock pulled back on the quarter due to lower relative guidance on the recently acquired Hyperconnect business and a lower EBITDA guidance than expected, given that Google has pushed out pending algorithm changes to next year (removing a marketing cost headwind). But there is an ongoing lawsuit regarding Tinder’s valuation brought by its founder Sean Rad, where Rad accuses IAC and Match of suppressing Tinder’s valuation. There are an extra $15M in legal costs here. Bottomline…this is an irrelevant figure and not worthy of the big selloff post earnings. We think the key drivers of this stock are Tinder and increasingly Hinge and these are as strong as ever.</p><p>Part of the reason we remain bullish on Match is that inevitably, the pandemic will get under control…and people will return to wanting to meet people…but the delta variant has definitely thrown a monkey wrench into the timing of Match’s inevitable resurgence. Good opportunity to add on this earnings pullback. As we have said over the past few quarters...Match is rarity in midcap internet properties – a wildly profitable platform quasi-monopolist which trades for a rightfully high EBITDA multiple and offers few entry points – much like Adobe in software. This is a good entry point.</p><p></p><div class="content-highlight"><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></div>

We think Match’s stock pulled back on the quarter due to lower relative guidance on the recently acquired Hyperconnect business and a lower EBITDA guidance than expected, given that Google has pushed out pending algorithm changes to next year (removing a marketing cost headwind). But there is an ongoing lawsuit regarding Tinder’s valuation brought by its founder Sean Rad, where Rad accuses IAC and Match of suppressing Tinder’s valuation. There are an extra $15M in legal costs here. Bottomline…this is an irrelevant figure and not worthy of the big selloff post earnings. We think the key drivers of this stock are Tinder and increasingly Hinge and these are as strong as ever.Part of the reason we remain bullish on Match is that inevitably, the pandemic will get under control…and people will return to wanting to meet people…but the delta variant has definitely thrown a monkey wrench into the timing of Match’s inevitable resurgence. Good opportunity to add on this earnings pullback. As we have said over the past few quarters...Match is rarity in midcap internet properties – a wildly profitable platform quasi-monopolist which trades for a rightfully high EBITDA multiple and offers few entry points – much like Adobe in software. This is a good entry point.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.

Match 2Q21 Earnings: Still Waiting on the Resurgence

<p>The 2Q21 guidance is overly conservative…growth inline with 1Q21 despite a far easier comp (500bps revenue growth decel…17% comp in Q1 vs. 12% in Q2) and an EBITDA guidance calling for a 300bps EBITDA margin contraction…which seems massively unlikely given all the ARPU supportive commentary. Management is being cautious to set a low bar given the huge disruptions currently in India, Latin America , and Japan, its key global growth markets. Keep the eye on the ball… Match is still driven by the biggest US urban centers…and these markets are reopening fastest. We’ve said the past two quarters that Match is rarity in midcap internet properties – a wildly profitable platform quasi-monopolist which trades for a rightfully high EBITDA multiple and offers few entry points – much like Adobe in software. The fact that the company’s EV/EBITDA multiple is lower today (36x) then it was 6 months ago (42x) and we are 6 months closer to not just a normalization, but likely massive acceleration in the business means Match is really much cheaper than it appears and investors have a great entry point.</p><div class="content-highlight"><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></div>

The 2Q21 guidance is overly conservative…growth inline with 1Q21 despite a far easier comp (500bps revenue growth decel…17% comp in Q1 vs. 12% in Q2) and an EBITDA guidance calling for a 300bps EBITDA margin contraction…which seems massively unlikely given all the ARPU supportive commentary. Management is being cautious to set a low bar given the huge disruptions currently in India, Latin America , and Japan, its key global growth markets. Keep the eye on the ball… Match is still driven by the biggest US urban centers…and these markets are reopening fastest. We’ve said the past two quarters that Match is rarity in midcap internet properties – a wildly profitable platform quasi-monopolist which trades for a rightfully high EBITDA multiple and offers few entry points – much like Adobe in software. The fact that the company’s EV/EBITDA multiple is lower today (36x) then it was 6 months ago (42x) and we are 6 months closer to not just a normalization, but likely massive acceleration in the business means Match is really much cheaper than it appears and investors have a great entry point.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.

Match 1Q21 Earnings: Looking for an Opening

Equity Analyst - Asia Consumer Sector, Investory

Devi Subhakesan

Equity Analyst - Asia Consumer Sector

ASIA CONSUMER: INSIGHTS AND INVESTMENT IDEAS

Investory

Investory is a Singapore-based boutique independent equity research firm founded in January 2017 with a primary focus on consumption themes across Asia-Pacific.

We aim to generate investible ideas based on consumption trends and outlook. We screen our ideas on several parameters - product potential, long-term growth and management commitment being the most critical.  We follow a fundamental analysis approach in our stock selection process and are not restricted by market cap.

We aspire to grow into a leading source of unbiased research, free of conflict of interest, for investors yearning for independent and disciplined analysis. 

We also undertake bespoke research mandates to support our Institutional clients’ investment needs.

Our team comprises of professionals with extensive experience in the Asian equity markets, in areas ranging from research, servicing institutional clients and investment management.

Equity Capital Markets

<p>This report gives an update on <a href="https://www.smartkarma.com/entities/bumble-inc" target="_blank" data-smartkarma-citation="entities:31309:1" rel="noopener">Bumble (BMBL US)</a>'s IPO valuations and upside potential, company's revenue drivers, risks and overview of online dating segment and its growth outlook. Pandemic-led social isolation has led singles <em>(or the romantically alone)</em> to increasingly resort to dating apps to find companionship. Online dating had become more popular over the last decade. <a href="https://www.smartkarma.com/entities/bumble-inc" target="_blank" data-smartkarma-citation="entities:31309:1" rel="noopener">Bumble (BMBL US)</a>, that owns the second highest-grossing dating app globally, will list today (Feb 11th), just ahead of Valentine's day, the <em>big day of love</em> for couples worldwide. Interestingly, Bumble's IPO was so overwhelmingly wooed by investors that it had to<strong> upsize the offer twice</strong>!! It has now issued 50 million shares at USD43/share (raising around USD2.15 Bn and valuing the company at USD 8 Bn) as against earlier upsized issue size of 45 million shares at USD39/share (vs. original IPO offer of 34.5 million shares at a price range of $28 to $30 a share). </p><p><a href="https://www.smartkarma.com/entities/bumble-inc" target="_blank" data-smartkarma-citation="entities:31309:1" rel="noopener">Bumble (BMBL US)</a> 's eponymous dating app is noted for its first-of-the-kind '<em>women make the first move</em>' feature that seeks to reset dating norms (and offer a better user experience) distinguishes it from other players by attracting more women users/subscribers to the platform. It has been favourably rated ahead of other dating apps when it comes to singles 'actually' seeking a relationship. <a href="https://www.smartkarma.com/entities/bumble-inc" target="_blank" data-smartkarma-citation="entities:31309:1" rel="noopener">Bumble (BMBL US)</a> was founded by Whitney Wolfe, previously co-founder of Tinder, the bigger and widely known dating app for all occasions. Bumble stands out as one of the few US-based tech companies founded by a woman, with a predominantly women-led board and management team. <a href="https://www.smartkarma.com/entities/blackstone-group-inc" target="_blank" data-smartkarma-citation="entities:27166:1" rel="noopener">Blackstone Group LP (BX US)</a> is a significant private investor in Bumble. </p>

This report gives an update on Bumble (BMBL US)'s IPO valuations and upside potential, company's revenue drivers, risks and overview of online dating segment and its growth outlook. Pandemic-led social isolation has led singles (or the romantically alone) to increasingly resort to dating apps to find companionship. Online dating had become more popular over the last decade. Bumble (BMBL US), that owns the second highest-grossing dating app globally, will list today (Feb 11th), just ahead of Valentine's day, the big day of love for couples worldwide. Interestingly, Bumble's IPO was so overwhelmingly wooed by investors that it had to upsize the offer twice!! It has now issued 50 million shares at USD43/share (raising around USD2.15 Bn and valuing the company at USD 8 Bn) as against earlier upsized issue size of 45 million shares at USD39/share (vs. original IPO offer of 34.5 million shares at a price range of $28 to $30 a share). Bumble (BMBL US) 's eponymous dating app is noted for its first-of-the-kind 'women make the first move' feature that seeks to reset dating norms (and offer a better user experience) distinguishes it from other players by attracting more women users/subscribers to the platform. It has been favourably rated ahead of other dating apps when it comes to singles 'actually' seeking a relationship. Bumble (BMBL US) was founded by Whitney Wolfe, previously co-founder of Tinder, the bigger and widely known dating app for all occasions. Bumble stands out as one of the few US-based tech companies founded by a woman, with a predominantly women-led board and management team. Blackstone Group LP (BX US) is a significant private investor in Bumble. 

Bumble IPO: The Dating App Where Women Lead. Likely Pop on Listing Today

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

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<p>On 9 February, it was announced that <a href="https://www.smartkarma.com/entities/match-group-inc" target="_blank" data-smartkarma-citation="entities:25903:1" rel="noopener">Match Group Inc (MTCH US)</a> has agreed to acquire <a href="https://www.reuters.com/article/hyperconnect-ma-match-grp/update-1-match-group-to-buy-s-korean-social-media-firm-hyperconnect-for-1-73-bln-idUSL4N2KF4T1" target="_blank" rel="noopener">Hyperconnect</a> for $1.7 billion. Match Group is the biggest global player in the online dating industry and the biggest competitor to <a href="https://www.smartkarma.com/entities/bumble-inc" target="_blank" data-smartkarma-citation="entities:31309:1" rel="noopener">Bumble (BMBL US)</a> which is getting ready to complete its IPO this week. <a href="https://www.reuters.com/article/hyperconnect-ma-match-grp/update-1-match-group-to-buy-s-korean-social-media-firm-hyperconnect-for-1-73-bln-idUSL4N2KF4T1" target="_blank" rel="noopener">Reuters</a> has mentioned that Hyperconnect reported revenue of more than $200 million in 2020 and it was profitable last year. With the valuation of $1.7 billion, this would suggest a P/S multiple of 8.6x.</p>
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On 9 February, it was announced that Match Group Inc (MTCH US) has agreed to acquire Hyperconnect for $1.7 billion. Match Group is the biggest global player in the online dating industry and the biggest competitor to Bumble (BMBL US) which is getting ready to complete its IPO this week. Reuters has mentioned that Hyperconnect reported revenue of more than $200 million in 2020 and it was profitable last year. With the valuation of $1.7 billion, this would suggest a P/S multiple of 8.6x.


Match Group Buys Hyperconnect for $1.7 Billion

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<p><strong>Our base case valuation for Bumble Inc is implied price per share of $72.3, representing a market cap of $13.9 billion and EV of $11.9 billion. Our target price represents an 85% upside to the high end of the IPO price range of $39 per share.</strong> Our valuation uses an EV/S (2021) multiple of 15.9x, which is in line with its main competitor Match Group. Our valuation sensitivity analysis suggests a value range of $60.5 to $85.3 per share. </p>
<p>We believe that the market is willing to put valuation multiples that are at least in line with its biggest competitor the Match Group due to three main reasons: a) Bumble has higher sales growth rate than the Match Group, b) Strong management team led by Whitney Herd. c) improving profit margins. </p>
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Our base case valuation for Bumble Inc is implied price per share of $72.3, representing a market cap of $13.9 billion and EV of $11.9 billion. Our target price represents an 85% upside to the high end of the IPO price range of $39 per share. Our valuation uses an EV/S (2021) multiple of 15.9x, which is in line with its main competitor Match Group. Our valuation sensitivity analysis suggests a value range of $60.5 to $85.3 per share. 
We believe that the market is willing to put valuation multiples that are at least in line with its biggest competitor the Match Group due to three main reasons: a) Bumble has higher sales growth rate than the Match Group, b) Strong management team led by Whitney Herd. c) improving profit margins. 


United States

Bumble Inc. develops application software. The Company offers an online dating application that enables users to meet new people for dating, friendship, and relationship. Bumble serves customers worldwide.

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Bumble (BMBL US)

Match 2Q21 Earnings: Still Waiting on the Resurgence

We remain bullish on Match because inevitably, the pandemic will get under control…but the delta variant impacted the timing of Match’s inevitable...

Aaron Gabin

Match 1Q21 Earnings: Looking for an Opening

Match's EV/EBITDA is lower today (36x) then it was 6 months ago (42x) and we are 6 months closer to not just a normalization, but likely massive...

Aaron Gabin

Bumble IPO: The Dating App Where Women Lead. Likely Pop on Listing Today

Bumble's IPO has been upsized twice before listing today. Insight offers an update on IPO valuations and upside, company's revenue drivers, risks...

Devi Subhakesan

Match Group Buys Hyperconnect for $1.7 Billion

On 9 February, it was announced that Match Group Inc (MTCH US) has agreed to acquire Hyperconnect for $1.7 billion. Match Group is the biggest...

Douglas Kim

Bumble IPO Valuation Analysis

Our base case valuation for Bumble Inc is implied price per share of $72.3, which represents an 85% upside to the high end of the IPO price range...

Douglas Kim

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