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

<ul>
<li>Netflix management came off as unprepared for its current circumstances. Ramping competition and TAM saturation have been known for 2 years.</li>
<li>Competitive responses sounded half baked: increasing price to deter password sharing and launching advertising tiers...in 2 years?</li>
<li>The viability of the longterm growth algorithm and 10 year DCFs that Netflix investors have leaned on for years has been rightfully vaporized. </li>
</ul>


Netflix management came off as unprepared for its current circumstances. Ramping competition and TAM saturation have been known for 2 years.
Competitive responses sounded half baked: increasing price to deter password sharing and launching advertising tiers...in 2 years?
The viability of the longterm growth algorithm and 10 year DCFs that Netflix investors have leaned on for years has been rightfully vaporized. 


Thematic (Sector/Industry)

<ul>
<li>New data from Deloitte shows US streaming subscription churn is 35% and over 50% for younger demographics. Whoa!</li>
<li>Competition for attention and competition for the wallet are causes, a combination of the volume of streaming services combined with social media, gaming, and UGC....many of which are free. </li>
<li>The LT takeaway is streaming services likely have to rely on free-ad supported tiers to retain customers. Higher customer acquisition costs and lower multiple ad revenues not good for streamers.</li>
</ul>


New data from Deloitte shows US streaming subscription churn is 35% and over 50% for younger demographics. Whoa!
Competition for attention and competition for the wallet are causes, a combination of the volume of streaming services combined with social media, gaming, and UGC....many of which are free. 
The LT takeaway is streaming services likely have to rely on free-ad supported tiers to retain customers. Higher customer acquisition costs and lower multiple ad revenues not good for streamers.


<ul>
<li>Incredible quarter for Parks, with sustainably higher levels of profitability in the cards due to Disney's pricing power.</li>
<li>Streaming is still worrisome, growth driven by bundling and Hotstar+ subs which we don't value as worth much to Disney.</li>
<li>SoTP gets us to ~$155 at best, which is where the stock trades post earnings. Not great risk reward here.</li>
</ul>


Incredible quarter for Parks, with sustainably higher levels of profitability in the cards due to Disney's pricing power.
Streaming is still worrisome, growth driven by bundling and Hotstar+ subs which we don't value as worth much to Disney.
SoTP gets us to ~$155 at best, which is where the stock trades post earnings. Not great risk reward here.


Disney 1Q2022: Knockin It Out of the Park

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/crown-resorts-ltd" target="_blank" data-smartkarma-citation="entities:808:1" rel="noopener">Crown Resorts (CWN AU)</a> backs Blackstone's revised Offer of A$13.10/share in cash, from A$12.50 previously, and up from A$11.85/share initially.  </li>
<li>The endgame approaches for the <a href="https://www.smartkarma.com/entities/bhp-group-ltd" target="_blank" data-smartkarma-citation="entities:147:1" rel="noopener">BHP (BHP AU)</a> Unification trade. S&amp;P announced the S&amp;P/ASX upweight would be one-shot, as expected. Regulatory approvals are in. SARB has set BHP SJ as "domestic."</li>
<li>The Offeror slashes the Offer price for <a href="https://www.smartkarma.com/entities/51-job-inc-adr" target="_blank" data-smartkarma-citation="entities:532:1" rel="noopener">51 Job (JOBS US)</a> by 27.6%, however, it's not clear how the new deal terms sidestep the regulator nor justify a reduction. </li>
</ul>



Crown Resorts (CWN AU) backs Blackstone's revised Offer of A$13.10/share in cash, from A$12.50 previously, and up from A$11.85/share initially.  
The endgame approaches for the BHP (BHP AU) Unification trade. S&amp;P announced the S&amp;P/ASX upweight would be one-shot, as expected. Regulatory approvals are in. SARB has set BHP SJ as "domestic."
The Offeror slashes the Offer price for 51 Job (JOBS US) by 27.6%, however, it's not clear how the new deal terms sidestep the regulator nor justify a reduction. 


Last Week in Event SPACE: BHP Group, Crown Resorts, 51job, Hitachi, Razer Inc

AlphaSituations-Event/Catalyst Driven Research, AlphaSituations

Robert Sassoon

AlphaSituations-Event/Catalyst Driven Research

AlphaSituations

Since its establishment, AlphaSituations has delivered a track record of outperformance with a hit rate of winners of more than 70% of its portfolio of ideas generating annualized average returns of 20%. In January 2022, AlphaSituations was contracted by Water Tower Research, an investor engagement and stakeholder communication platform to provide coverage of Special Situations

<ul>
<li>The prospect of significant value creation for <a href="https://www.smartkarma.com/entities/discovery-inc-11a748cc-a43f-43ac-9447-c908a531d355" target="_blank" data-smartkarma-citation="entities:2227:1" rel="noopener">Discovery, Inc. (DISCK US)</a> shareholders is much closer to realization with its merger with WarnerMedia  merger on track to complete by for mid-2022.</li>
<li>A conservative target share price target of $41 for WBD offers greater than 40% upside from the prevailing share prices of DISCA and DISCK.</li>
<li>Purchasing AT&amp;T shares at prevailing levels could effectively give investors a ~65% to 75% cheaper option to purchase WBD shares than currently through DISCK .</li>
</ul>


The prospect of significant value creation for Discovery, Inc. (DISCK US) shareholders is much closer to realization with its merger with WarnerMedia  merger on track to complete by for mid-2022.
A conservative target share price target of $41 for WBD offers greater than 40% upside from the prevailing share prices of DISCA and DISCK.
Purchasing AT&amp;T shares at prevailing levels could effectively give investors a ~65% to 75% cheaper option to purchase WBD shares than currently through DISCK .


MergerTalk: Why Playing the Pending Discovery/WarnerMedia Merger Through AT&T Could Pay Dividends

United States

Warner Bros. Discovery, Inc. operates as a media and entertainment company. The Company offers a complete portfolio of content, brands, and franchises across television, film, streaming, and gaming.

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Warner Bros Discovery (DISCA US)

Netflix 1Q22: Willfull Ignorance

Netflix management seemed unprepared for its current circumstances. Ramping competition and TAM saturation have been known for 2 years. Competitive...

Aaron Gabin

Streaming's New Hamster Wheel

New data shows US streaming subscription churn is 35% and over 50% for younger demographics. To compete, streamers will have to rely more on free...

Aaron Gabin

Disney 1Q2022: Knockin It Out of the Park

Despite a fantastic Parks quarter, which we think offers sustainably higher profits, the higher competitive intensity in streaming means the SoTP...

Aaron Gabin

Last Week in Event SPACE: BHP Group, Crown Resorts, 51job, Hitachi, Razer Inc

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

MergerTalk: Why Playing the Pending Discovery/WarnerMedia Merger Through AT&T Could Pay Dividends

Riding the coattails of AT&T may be the most lucrative way to gain exposure to the value creation expected from the post merger entity

Robert Sassoon

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