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

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<div><p><a href="https://www.smartkarma.com/entities/hello-inc" target="_blank" data-smartkarma-citation="entities:33031:1" rel="noopener">Hello Inc (1883864D US)</a>, which is backed by <a href="https://www.smartkarma.com/entities/ant-group-co-ltd" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial Services Group (6688 HK)</a>, is China's third-largest local services platform by transaction volume, according to iResearch. Hello offers bike-sharing and e-bike sharing services known as <em>Hello Bike</em> and <em>Hello e-Bike</em>. It also has a carpooling marketplace known as <em>Hello Carpooling</em>. Hello is seeking to raise $1 billion through a Nasdaq listing, according to press reports.   </p></div>
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<p>In <a href="https://www.smartkarma.com/insights/hello-ipo-initiation-goodbye" target="_blank" data-smartkarma-citation="insights:50795" rel="noopener">Hello IPO Initiation: Goodbye</a> we stated that Hello’s investor pitch is that its various businesses create a flywheel that drives user spending growth with limited user acquisition costs. However, Hello remains saddled with a core business (shared two-wheeler services) that has challenging prospects due to declining growth, low profitability and high cash burn.</p>
<div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/hello-ipo-1q21-update-does-not-change-the-avoid-tag" target="_blank" data-smartkarma-citation="insights:51119" rel="noopener">Hello IPO: 1Q21 Update Does Not Change the Avoid Tag</a>, we noted that at first glance, the 1Q21 update looks stunning due to accelerating growth and margin progression. However, a closer look, suggests that business continues to face daunting challenges. In this note, we present our forecasts and take the first look at Hello's potential valuation range. </p></div>
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Hello Inc (1883864D US), which is backed by Ant Financial Services Group (6688 HK), is China's third-largest local services platform by transaction volume, according to iResearch. Hello offers bike-sharing and e-bike sharing services known as Hello Bike and Hello e-Bike. It also has a carpooling marketplace known as Hello Carpooling. Hello is seeking to raise $1 billion through a Nasdaq listing, according to press reports.   

In Hello IPO Initiation: Goodbye we stated that Hello’s investor pitch is that its various businesses create a flywheel that drives user spending growth with limited user acquisition costs. However, Hello remains saddled with a core business (shared two-wheeler services) that has challenging prospects due to declining growth, low profitability and high cash burn.
In Hello IPO: 1Q21 Update Does Not Change the Avoid Tag, we noted that at first glance, the 1Q21 update looks stunning due to accelerating growth and margin progression. However, a closer look, suggests that business continues to face daunting challenges. In this note, we present our forecasts and take the first look at Hello's potential valuation range. 



Event-Driven

<p><a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP)</a> is Southeast Asia’s leading super-app and the largest online delivery platform, ride-hailing platform and digital wallet payments platform in Southeast Asia, according to Euromonitor. Grab intends to go public in the US through a SPAC merger with <a href="https://www.smartkarma.com/entities/altimeter-growth-corp" target="_blank" data-smartkarma-citation="entities:33007:1" rel="noopener">Altimeter Growth Corp (AGC US)</a>.</p><p>In <a href="https://www.smartkarma.com/insights/grab-spac-deal-delivering-the-goods" target="_blank" data-smartkarma-citation="insights:50305" rel="noopener">Grab SPAC Deal: Delivering the Goods</a>, we looked at Grab's fundamentals and management forecasts. We noted that Grab is using its super-app status to deliver high-growth with declining loss margin and cash burn. While certain management forecasts seem bullish, the overall forecasts are not outlandish.  </p><p>In this note, we look at the valuation. As a reminder, the deal values Grab at a post-money market cap of $39.6 billion and post-money EV of $31.3 billion. The deal implies 9.6x 2022 EV/Sales based on Grab’s forecasted adjusted net revenue.</p><div class="content-highlight">
<p>At first glance, Grab's implied multiples are eye-watering in comparison to global peers related to its delivery and mobility businesses. However, we think that judging Grab's multiples based on such peers is missing the point. Grab's key competitive advantage and investor pitch is that it can be credibly billed as a super-app rather than just a leading app in a narrow market category.</p>
<p>Super-apps tend to be rare and investors are starved of publicly listed opportunities. With the regulatory heat turned up on the Chinese super-apps, alternative super-app plays in Asia are likely to be in demand. When judged against global super-apps, Grab's implied multiples seems more justifiable for its forecast growth.  </p>
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Grab (0967655D SP) is Southeast Asia’s leading super-app and the largest online delivery platform, ride-hailing platform and digital wallet payments platform in Southeast Asia, according to Euromonitor. Grab intends to go public in the US through a SPAC merger with Altimeter Growth Corp (AGC US).In Grab SPAC Deal: Delivering the Goods, we looked at Grab's fundamentals and management forecasts. We noted that Grab is using its super-app status to deliver high-growth with declining loss margin and cash burn. While certain management forecasts seem bullish, the overall forecasts are not outlandish.  In this note, we look at the valuation. As a reminder, the deal values Grab at a post-money market cap of $39.6 billion and post-money EV of $31.3 billion. The deal implies 9.6x 2022 EV/Sales based on Grab’s forecasted adjusted net revenue.
At first glance, Grab's implied multiples are eye-watering in comparison to global peers related to its delivery and mobility businesses. However, we think that judging Grab's multiples based on such peers is missing the point. Grab's key competitive advantage and investor pitch is that it can be credibly billed as a super-app rather than just a leading app in a narrow market category.
Super-apps tend to be rare and investors are starved of publicly listed opportunities. With the regulatory heat turned up on the Chinese super-apps, alternative super-app plays in Asia are likely to be in demand. When judged against global super-apps, Grab's implied multiples seems more justifiable for its forecast growth.  


Grab SPAC Deal: A Sensible Super-App Valuation?

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.

<p>One of London’s most anticipated tech IPOs in recent history, <a href="https://www.smartkarma.com/entities/roofoods-ltd" target="_blank" data-smartkarma-citation="entities:27468:1" rel="noopener">Deliveroo (ROO LN)</a>, tumbled 26.3% on first day after pricing its shares at £3.90 per share, at bottom end of the lowered IPO price range. The share price went down to £2.71 per share in early trading before eventually ending the day at £2.87 per share.</p><p>Deliveroo managed to narrow losses last year, however if Deliveroo is requested to treat its riders as employees, all that could be easily undone. Therefore, we expect shares to remain under pressure medium term with additional pressure from retail selling towards mid next week as shares bought via the Deliveroo app becomes tradable from 7<sup>th</sup> April.</p>

One of London’s most anticipated tech IPOs in recent history, Deliveroo (ROO LN), tumbled 26.3% on first day after pricing its shares at £3.90 per share, at bottom end of the lowered IPO price range. The share price went down to £2.71 per share in early trading before eventually ending the day at £2.87 per share.Deliveroo managed to narrow losses last year, however if Deliveroo is requested to treat its riders as employees, all that could be easily undone. Therefore, we expect shares to remain under pressure medium term with additional pressure from retail selling towards mid next week as shares bought via the Deliveroo app becomes tradable from 7th April.

Deliveroo IPO First Day Trading: Too Risky to Hold Long Term

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<p>Established in 2013, Deliveroo is getting ready to complete its IPO on the London Stock Exchange in the next several weeks. Backed 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>, Deliveroo is one of the largest food delivery service companies in the U.K. Amazon owns a 16% stake in Deliveroo. The Deliveroo IPO is expected to be one of the biggest IPOs in the U.K. this year. It has been reported that the market that the company's market cap post IPO could be nearly <a href="https://edition.cnn.com/2021/03/08/investing/deliveroo-ipo-london/index.html" target="_blank" rel="noopener">$7 billion to $10 billion. </a></p><p>Deliveroo processed £4.1 billion ($5.7 billion) in total transactions on its platform in 2020, up 64% YoY. Adjusted EBITDA/GTV ratio improved significantly from -122.7% in 2019 to -2.7% in 2020. </p><div class="content-highlight"><p><strong>Comparison With DoorDash's Market Cap/GOV and Deliveroo's Implied Market Cap - </strong>DoorDash currently has a market cap of $43.7 billion. DoorDash had total marketplace GOV (gross order value) of $24.7 billion. If we divide market cap/GOV, this results in a ratio of 1.8x. If we use this multiple (1.8x) and apply it to Deliveroo's total gross transactional value of £4.1 billion ($5.7 billion), this results in an implied market cap of $10 billion for Deliveroo. </p></div>

Established in 2013, Deliveroo is getting ready to complete its IPO on the London Stock Exchange in the next several weeks. Backed by Amazon.com Inc (AMZN US), Deliveroo is one of the largest food delivery service companies in the U.K. Amazon owns a 16% stake in Deliveroo. The Deliveroo IPO is expected to be one of the biggest IPOs in the U.K. this year. It has been reported that the market that the company's market cap post IPO could be nearly $7 billion to $10 billion. Deliveroo processed £4.1 billion ($5.7 billion) in total transactions on its platform in 2020, up 64% YoY. Adjusted EBITDA/GTV ratio improved significantly from -122.7% in 2019 to -2.7% in 2020. Comparison With DoorDash's Market Cap/GOV and Deliveroo's Implied Market Cap - DoorDash currently has a market cap of $43.7 billion. DoorDash had total marketplace GOV (gross order value) of $24.7 billion. If we divide market cap/GOV, this results in a ratio of 1.8x. If we use this multiple (1.8x) and apply it to Deliveroo's total gross transactional value of £4.1 billion ($5.7 billion), this results in an implied market cap of $10 billion for Deliveroo. 

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>DoorDash’s first earnings call confirmed many of the concerns from our initiation. The key point for 2021? We think estimates that came up to reflect the easy COVID comp for 1Q21 will fall the rest of the year as COVID recedes, which will result in the rising customer acquisition costs cited in 4Q and 2021 meeting falling LTVs as customers return to dining out. DoorDash is likely to continually underperform expectations.</p><p>Why do we think DoorDash is worth maybe half its current valuation?</p><p>We’ll leave it to “NEUTRAL” rated Goldman Sachs to sum it up, “With the stock trading near <strong>20x 2022E EV/Gross Profit</strong> vs. GSe 28% 3-year Gross Profit CAGR compared to <strong>the peer average of 10x on 30% growth</strong> we believe much of that opportunity is reflected in the current valuation. Therefore, we remain <strong>Neutral rated</strong>, while our 12-month price target goes to $145 from $135 to reflect revised estimates and current comp multiples.”</p><p>As always, if you can’t explain why one company is worth 2x more then all its peers…it’s a neutral.</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>

DoorDash’s first earnings call confirmed many of the concerns from our initiation. The key point for 2021? We think estimates that came up to reflect the easy COVID comp for 1Q21 will fall the rest of the year as COVID recedes, which will result in the rising customer acquisition costs cited in 4Q and 2021 meeting falling LTVs as customers return to dining out. DoorDash is likely to continually underperform expectations.Why do we think DoorDash is worth maybe half its current valuation?We’ll leave it to “NEUTRAL” rated Goldman Sachs to sum it up, “With the stock trading near 20x 2022E EV/Gross Profit vs. GSe 28% 3-year Gross Profit CAGR compared to the peer average of 10x on 30% growth we believe much of that opportunity is reflected in the current valuation. Therefore, we remain Neutral rated, while our 12-month price target goes to $145 from $135 to reflect revised estimates and current comp multiples.”As always, if you can’t explain why one company is worth 2x more then all its peers…it’s a neutral.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.

DoorDash 4Q20 Earnings: This Is a Business Worth $50B?

Germany

Delivery Hero SE offers e-commerce services. The Company provides online food ordering services. Delivery Hero serves customers Germany.

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Delivery Hero SE (DHER GR)

Hello IPO: Valuation First Look

Hello is seeking to raise $1 billion through a Nasdaq listing, according to press reports. In this note, we present our forecasts and take the...

Arun George

Grab SPAC Deal: A Sensible Super-App Valuation?

Grab's implied multiples are eye-watering in comparison to global peers related to its businesses. When judged against other global super-apps,...

Arun George

Deliveroo IPO First Day Trading: Too Risky to Hold Long Term

If Deliveroo is requested to treat its riders as employees, the company's path to profitability is going to get impaired significantly. Therefore,...

Oshadhi Kumarasiri

Initial Thoughts on the Deliveroo IPO

Deliveroo IPO is expected to be one of the biggest IPOs in the U.K. this year. The company's market cap post IPO could be nearly $7 billion to $10...

Douglas Kim

DoorDash 4Q20 Earnings: This Is a Business Worth $50B?

DoorDash's 4Q20 earnings confirmed our bearish thesis. The company is continuing to spend higher and higher amounts on customer acquisition due to...

Aaron Gabin

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