Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

Equity Bottom-Up

<ul><li>This is our first report on Guidewire, a leading provider of software solutions for property and casualty (P&C) insurers worldwide.</li><li>The company reported an excellent finish to its fiscal year and beat Wall Street expectations on all counts.</li><li>Guidewire also introduced 13 new solution partners to the Guidewire Marketplace, bringing the total number of solution partners on its platform to over 160.</li></ul>

This is our first report on Guidewire, a leading provider of software solutions for property and casualty (P&C) insurers worldwide.The company reported an excellent finish to its fiscal year and beat Wall Street expectations on all counts.Guidewire also introduced 13 new solution partners to the Guidewire Marketplace, bringing the total number of solution partners on its platform to over 160.

Guidewire Software Inc.: Initiation of Coverage – Strong Market Position & Other Drivers

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.

<p>Some updated thinking on our shorts: We like the Teradata short setup into 2Q21, and think Tesla may finally be <em>safe</em> to short. Well, safe as it ever gets. Apple remains our preferred large cap short, while Disney we flip from long biased to short biased as Disney+ subscriber numbers have decelerated massively. </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>

Some updated thinking on our shorts: We like the Teradata short setup into 2Q21, and think Tesla may finally be safe to short. Well, safe as it ever gets. Apple remains our preferred large cap short, while Disney we flip from long biased to short biased as Disney+ subscriber numbers have decelerated massively. 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.  

Equity Analyst, LightStream Research

Shifara Samsudeen, FCMA, CGMA

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.

Equity Capital Markets

<p>The Chinese financial technology company <a href="https://www.smartkarma.com/entities/bairong" target="_blank" data-smartkarma-citation="entities:31486:1" rel="noopener">Bairong (1569395D CH)</a>  has set the terms for its IPO. Bairong plans to issue 123.8m shares at an indicative IPO price range of HK$26.5-31.8 per share and will raise approx. HK$3.4bn (US$447.2m) at the midpoint of the IPO price range of HK$29.15 per share.</p><table class="table table-striped"><tbody>
<tr><td colspan="2" style="width: 100.0pt;"><p style="text-align: center;"><strong>Bairong IPO Details</strong></p></td></tr>
<tr>
<td style="width: 50.0pt;"><p>No. of Shares Issued</p></td>
<td style="width: 50.0pt;"><p style="text-align: right;">                      123,822,500</p></td>
</tr>
<tr>
<td style="width: 50.0pt;"><p>IPO Price per Share (HK$)</p></td>
<td style="width: 50.0pt;"><p style="text-align: right;">26.5-31.8</p></td>
</tr>
<tr>
<td style="width: 50.0pt;"><p>Offer as a % of Outstanding Shares</p></td>
<td style="width: 50.0pt;"><p style="text-align: right;">25.00%</p></td>
</tr>
<tr>
<td style="width: 50.0pt;"><p>Total Shares Outstanding</p></td>
<td style="width: 50.0pt;"><p style="text-align: right;">495,289,330</p></td>
</tr>
<tr>
<td style="width: 50.0pt;"><p>Net Proceeds (HK$m)</p></td>
<td style="width: 50.0pt;"><p style="text-align: right;">3,440.70</p></td>
</tr>
<tr>
<td style="width: 50.0pt;"><p>Market Capitalisation (HK$m)</p></td>
<td style="width: 50.0pt;"><p style="text-align: right;">14,437.68</p></td>
</tr>
<tr>
<td style="width: 50.0pt;"><p>Enterprise Value (HK$m)</p></td>
<td style="width: 50.0pt;"><p style="text-align: right;">10,807.23</p></td>
</tr>
</tbody></table><p><em>Source: Company disclosures, LSR (net proceeds, market capitalisation and EV are at the midpoint of the IPO price range, EV is adjusted for net IPO proceeds and net cash)</em></p><p>Bairong plans to spend approx. 45% of the net IPO proceeds over the next three years on funding business expansion, particularly the company’s FSP (Financial Service Provider) client base while also penetrating the existing FSP client base. The company also plans to use 30% of the net proceeds on R&amp;D over the next three years to develop and improve its technology infrastructure such as AI algorithm and automatic real-time analysis.</p><p>The company also has entered into cornerstone investment agreements with Cederberg, China Structural Reform Fund and Franchise Fund who have agreed to purchase approx. US$220m (HK$1.7m) worth of shares offered at the IPO.</p>

The Chinese financial technology company Bairong (1569395D CH)  has set the terms for its IPO. Bairong plans to issue 123.8m shares at an indicative IPO price range of HK$26.5-31.8 per share and will raise approx. HK$3.4bn (US$447.2m) at the midpoint of the IPO price range of HK$29.15 per share.
Bairong IPO Details

No. of Shares Issued
                      123,822,500


IPO Price per Share (HK$)
26.5-31.8


Offer as a % of Outstanding Shares
25.00%


Total Shares Outstanding
495,289,330


Net Proceeds (HK$m)
3,440.70


Market Capitalisation (HK$m)
14,437.68


Enterprise Value (HK$m)
10,807.23

Source: Company disclosures, LSR (net proceeds, market capitalisation and EV are at the midpoint of the IPO price range, EV is adjusted for net IPO proceeds and net cash)Bairong plans to spend approx. 45% of the net IPO proceeds over the next three years on funding business expansion, particularly the company’s FSP (Financial Service Provider) client base while also penetrating the existing FSP client base. The company also plans to use 30% of the net proceeds on R&amp;D over the next three years to develop and improve its technology infrastructure such as AI algorithm and automatic real-time analysis.The company also has entered into cornerstone investment agreements with Cederberg, China Structural Reform Fund and Franchise Fund who have agreed to purchase approx. US$220m (HK$1.7m) worth of shares offered at the IPO.

Bairong IPO Valuation: Appealing Valuation

<div><div><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></div></div><div><p>Summary: <a href="https://www.smartkarma.com/entities/guidewire-software-inc" target="_blank" data-smartkarma-citation="entities:15448:1" rel="noopener">Guidewire Software (GWRE US)</a>, the leading provider of core system software for the P&amp;C insurance industry is in the early stages of a SaaS business model transition. While the market is pricing in a smooth <a href="https://www.smartkarma.com/entities/adobe-systems-inc" target="_blank" data-smartkarma-citation="entities:8357:1" rel="noopener">Adobe Systems (ADBE US)</a> or <a href="https://www.smartkarma.com/entities/autodesk-inc" target="_blank" data-smartkarma-citation="entities:13211:1" rel="noopener">Autodesk Inc (ADSK US)</a> like transition, Guidewire will fail to deliver the expected “Adobe-like” rebound in revenue growth and profits due to a weak value proposition and inability to migrate much of its installed base. Our EPS estimates are ~25% below consensus. Despite the recent pullback on 1Q20 earnings, Guidewire still trades 10-11x price / forward sales, or ~25-30% above its historical 7-8x range. Put together, Guidewire could see as much as 50-60% downside from today’s ~$105.</p></div><div><ul>
<li>Base Case PT: $80                     </li>
<li>Upside PT: $120                                   </li>
<li>Bear Case PT: $55</li>
</ul></div><div>
<p>In Part I, we examined Guidewire's history, TAM, and competitive positioning. </p>
<p>In Part II, we walked through why the Street is misunderstanding the short case.</p>
<p>In this part, we walk through Guidewire's management and culture, along with its holders, investor positioning, and how we arrive at our price target. </p>
</div>

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.Summary: Guidewire Software (GWRE US), the leading provider of core system software for the P&amp;C insurance industry is in the early stages of a SaaS business model transition. While the market is pricing in a smooth Adobe Systems (ADBE US) or Autodesk Inc (ADSK US) like transition, Guidewire will fail to deliver the expected “Adobe-like” rebound in revenue growth and profits due to a weak value proposition and inability to migrate much of its installed base. Our EPS estimates are ~25% below consensus. Despite the recent pullback on 1Q20 earnings, Guidewire still trades 10-11x price / forward sales, or ~25-30% above its historical 7-8x range. Put together, Guidewire could see as much as 50-60% downside from today’s ~$105.
Base Case PT: $80                     
Upside PT: $120                                   
Bear Case PT: $55

In Part I, we examined Guidewire's history, TAM, and competitive positioning. 
In Part II, we walked through why the Street is misunderstanding the short case.
In this part, we walk through Guidewire's management and culture, along with its holders, investor positioning, and how we arrive at our price target. 


Guidewire Software: Short This SaaS Transition III (Management, Culture, Valuation)

<div>
<div>
<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>
</div>
</div>
<div>
<p>Summary: <a href="https://www.smartkarma.com/entities/guidewire-software-inc" target="_blank" data-smartkarma-citation="entities:15448:1" rel="noopener">Guidewire Software (GWRE US)</a>, the leading provider of core system software for the P&amp;C insurance industry is in the early stages of a SaaS business model transition. While the market is pricing in a smooth <a href="https://www.smartkarma.com/entities/adobe-systems-inc" target="_blank" data-smartkarma-citation="entities:8357:1" rel="noopener">Adobe Systems (ADBE US)</a> or <a href="https://www.smartkarma.com/entities/autodesk-inc" target="_blank" data-smartkarma-citation="entities:13211:1" rel="noopener">Autodesk Inc (ADSK US)</a> like transition, Guidewire will fail to deliver the expected “Adobe-like” rebound in revenue growth and profits due to a weak value proposition and inability to migrate much of its installed base. Our EPS estimates are ~25% below consensus. Despite the recent pullback on 1Q20 earnings, Guidewire still trades 10-11x price / forward sales, or ~25-30% above its historical 7-8x range. Put together, Guidewire could see as much as 50-60% downside from today’s ~$105.</p>
</div>
<div>
<ul>
<li>Base Case PT: $80                     </li>
<li>Upside PT: $120                                   </li>
<li>Bear Case PT: $55</li>
</ul>
<p>In Part I, we examined Guidewire's history, TAM, and competitive positioning. In this piece, we walk through the mechanics of the short case. </p>
</div>




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.




Summary: Guidewire Software (GWRE US), the leading provider of core system software for the P&amp;C insurance industry is in the early stages of a SaaS business model transition. While the market is pricing in a smooth Adobe Systems (ADBE US) or Autodesk Inc (ADSK US) like transition, Guidewire will fail to deliver the expected “Adobe-like” rebound in revenue growth and profits due to a weak value proposition and inability to migrate much of its installed base. Our EPS estimates are ~25% below consensus. Despite the recent pullback on 1Q20 earnings, Guidewire still trades 10-11x price / forward sales, or ~25-30% above its historical 7-8x range. Put together, Guidewire could see as much as 50-60% downside from today’s ~$105.



Base Case PT: $80                     
Upside PT: $120                                   
Bear Case PT: $55

In Part I, we examined Guidewire's history, TAM, and competitive positioning. In this piece, we walk through the mechanics of the short case. 


Guidewire Software: Short This SaaS Transition II (Building the Short Case)

United States

Guidewire Software Inc. develops and publishes enterprise software for the property and casualty insurance industry. The Company's software supports the workflow, collaboration with external partners, and rule-based decision-making that characterize modern underwriting and claims operations.

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Guidewire Software (GWRE US)

Guidewire Software Inc.: Initiation of Coverage – Strong Market Position & Other Drivers

This is our first report on Guidewire, a leading provider of software solutions for property and casualty (P&C) insurers worldwide. The...

Baptista Research

2H21 Obex Research Short Portfolio

We like the Teradata short setup into 2Q21, and think Tesla may finally be safe to short. Apple remains our preferred large cap short, while...

Aaron Gabin

Bairong IPO Valuation: Appealing Valuation

We believe Bairong’s IPO is attractively priced given strong key FSP client base, ability to generate higher revenue per key FSP Client and better...

Shifara Samsudeen, FCMA, CGMA

Guidewire Software: Short This SaaS Transition III (Management, Culture, Valuation)

Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental...

Aaron Gabin

Guidewire Software: Short This SaaS Transition II (Building the Short Case)

Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental...

Aaron Gabin

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