Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/carsales-com-ltd" target="_blank" data-smartkarma-citation="entities:701:1" rel="noopener">Carsales.Com Ltd (CAR AU)</a> is the leading online car sales platform in Australia, with meaningful consolidated operations in South Korea, China, Malaysia, Indonesia, Argentina, Chile, and Mexico. This is an extremely high-quality company, having delivered an average Return on Invested Capital of 20% and an average Free Cash Flow margin (post-M&amp;A) of 18.5%, over the past 5yrs. At 1.6x Net Debt to EBITDA, its balance sheet also remains strong, despite acquisitive international expansion efforts over the last 5yrs.   The company has a strong sustainable competitive advantage (moat) through the network effect it has created by being the market-leading platform in almost all the geographies in which they operate. Carsales.com’s core advertising revenue streams should be a beneficiary of a cyclical upswing in economic growth, from an incredibly low base, going into next year. The key controversy, however, on the stock is whether they will be able to accelerate their domestic digital advertising revenue growth in light of still-weak, albeit recovering, vehicle sales despite increased economic activity following a year heavily impacted by the COVID-19 pandemic AND whether this accelerating growth will be sufficient to surprise the lofty expectations already set by the Buy-side as indicated by its current 31x NTM PE ratio (a premium of more than 2 standard deviations above its 10yr historical average trading range).

Carsales.Com Ltd (CAR AU) is the leading online car sales platform in Australia, with meaningful consolidated operations in South Korea, China, Malaysia, Indonesia, Argentina, Chile, and Mexico. This is an extremely high-quality company, having delivered an average Return on Invested Capital of 20% and an average Free Cash Flow margin (post-M&amp;A) of 18.5%, over the past 5yrs. At 1.6x Net Debt to EBITDA, its balance sheet also remains strong, despite acquisitive international expansion efforts over the last 5yrs.   The company has a strong sustainable competitive advantage (moat) through the network effect it has created by being the market-leading platform in almost all the geographies in which they operate. Carsales.com’s core advertising revenue streams should be a beneficiary of a cyclical upswing in economic growth, from an incredibly low base, going into next year. The key controversy, however, on the stock is whether they will be able to accelerate their domestic digital advertising revenue growth in light of still-weak, albeit recovering, vehicle sales despite increased economic activity following a year heavily impacted by the COVID-19 pandemic AND whether this accelerating growth will be sufficient to surprise the lofty expectations already set by the Buy-side as indicated by its current 31x NTM PE ratio (a premium of more than 2 standard deviations above its 10yr historical average trading range).

Carsales.com: High Growth Recovery Expectations Already Baked In

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

The MSCI ACWI index (USD) is breaking out to all-time highs while the MSCI EM index (local) is breaking above its prior highs from January. This is bullish and will continue to be as long as there is an absence of breakdowns. On the other hand, Europe’s EURO STOXX 50 and Japan’s TOPIX have struggled to break above resistance and their RS remains near the lows -- be selective. In addition to covering important technical levels across all markets, we highlight additional ideas in the following Sectors: Services, Communications, Industrials, and Transportation.

The MSCI ACWI index (USD) is breaking out to all-time highs while the MSCI EM index (local) is breaking above its prior highs from January. This is bullish and will continue to be as long as there is an absence of breakdowns. On the other hand, Europe’s EURO STOXX 50 and Japan’s TOPIX have struggled to break above resistance and their RS remains near the lows -- be selective. In addition to covering important technical levels across all markets, we highlight additional ideas in the following Sectors: Services, Communications, Industrials, and Transportation.

Global Equity Strategy: Bullish Outlook Intact

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: Nichii Gakkan, Car Inc, Mcdonalds, Lynas, Casetek, Unicom, Evergrande

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/propertyguru-ltd" target="_blank" data-smartkarma-citation="entities:28149:1" rel="noopener">PropertyGuru (PGU AH)</a> is an online property classifieds marketplace with presence in five countries across South East Asia – Singapore, Vietnam, Malaysia, Thailand and Indonesia. PropertyGuru's retail offer period opened today and will run to 22 October. The final price will be announced on 24 October.In <a href="https://www.smartkarma.com/insights/propertyguru-ipo-initiation-rose-tinted-glasses-required" target="_blank" rel="noopener">our initiation note</a>, we stated that while PropertyGuru is a good company, we believe that the forecasts are based on a bull scenario, leaving little room for any setbacks. <a href="https://www.smartkarma.com/insights/propertyguru-ipo-valuation-guru-at-frothy-valuations" target="_blank" rel="noopener">Our valuation note</a> stated that the proposed IPO price range is unattractive. <div class="content-highlight">We dug deeper into website traffic data to get a more balanced perspective on PropertyGuru’s competitive positioning in Singapore – the core geography, which accounts for most of the profit. Our analysis of website traffic data points to three areas of caution for the core Singapore business.</div>

PropertyGuru (PGU AH) is an online property classifieds marketplace with presence in five countries across South East Asia – Singapore, Vietnam, Malaysia, Thailand and Indonesia. PropertyGuru's retail offer period opened today and will run to 22 October. The final price will be announced on 24 October.In our initiation note, we stated that while PropertyGuru is a good company, we believe that the forecasts are based on a bull scenario, leaving little room for any setbacks. Our valuation note stated that the proposed IPO price range is unattractive. We dug deeper into website traffic data to get a more balanced perspective on PropertyGuru’s competitive positioning in Singapore – the core geography, which accounts for most of the profit. Our analysis of website traffic data points to three areas of caution for the core Singapore business.

PropertyGuru IPO: Website Traffic Analysis Undermines Premium Rating

<a href="https://www.smartkarma.com/entities/propertyguru-ltd" target="_blank" data-smartkarma-citation="entities:28149:1" rel="noopener">PropertyGuru (PGU AH)</a> is an online property classifieds marketplace with presence in five countries across South East Asia – Singapore, Vietnam, Malaysia, Thailand and Indonesia. PropertyGuru set an indicative IPO price range of A$3.70-4.50 per CDI with the final price set to be announced on 24 October.<div class="content-highlight">In <a href="https://www.smartkarma.com/insights/propertyguru-ipo-initiation-rose-tinted-glasses-required" target="_blank" rel="noopener">our initiation note</a>, we stated that while PropertyGuru is a good company, we believe that the forecasts are based on a bull scenario, leaving little room for any setbacks. From a valuation perspective, we believe that the proposed IPO price range is unattractive.</div>

PropertyGuru (PGU AH) is an online property classifieds marketplace with presence in five countries across South East Asia – Singapore, Vietnam, Malaysia, Thailand and Indonesia. PropertyGuru set an indicative IPO price range of A$3.70-4.50 per CDI with the final price set to be announced on 24 October.In our initiation note, we stated that while PropertyGuru is a good company, we believe that the forecasts are based on a bull scenario, leaving little room for any setbacks. From a valuation perspective, we believe that the proposed IPO price range is unattractive.

PropertyGuru IPO Valuation: Guru at Frothy Valuations

Australia

CAR Group Limited operates as a digital marketplace for vehicles. The Company provides a diversified portfolio of brands to sell and buy cars. CAR Group serves customers worldwide.

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CAR Group (CAR AU)

Carsales.com: High Growth Recovery Expectations Already Baked In

Carsales.com is the leading online car sales platform in Australia and should be a benefit from a cyclical upswing in economic growth, but at 31x...

Wium Malan, CFA

Global Equity Strategy: Bullish Outlook Intact

The MSCI ACWI index (USD) is breaking out to all-time highs while the MSCI EM index (local) is breaking above its prior highs from January. This is...

Vermilion Research

Last Week in Event SPACE: Nichii Gakkan, Car Inc, Mcdonalds, Lynas, Casetek, Unicom, Evergrande

Last Week in Event SPACE ... At Nichii Gakkan Co (9792 JP) forthcoming EGM, investors will get squeezed out; but most of the ugliness about...

David Blennerhassett

PropertyGuru IPO: Website Traffic Analysis Undermines Premium Rating

PropertyGuru (PGU AH) is an online property classifieds marketplace with presence in five countries across South East Asia – Singapore, Vietnam,...

Arun George

PropertyGuru IPO Valuation: Guru at Frothy Valuations

PropertyGuru (PGU AH) is an online property classifieds marketplace with presence in five countries across South East Asia – Singapore, Vietnam,...

Arun George

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