ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Private Capital Markets

GoTo Gojek Tokopedia Tbk PT / Private Capital Markets

<p><a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek</a> and <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia</a> have finally announced that they will merge to form GoTo Group, in what will be Indonesia's largest-ever business deal to date. The new GoTo Group will also seek a dual listing both in Jakarta and the US but it is yet unclear what shape the listing will take at this stage. </p>
<p>This will create an Indonesia-focused digital powerhouse with exposure to Ride-Hailing, Food Delivery, Digital Payments, Digital Finance, and e-commerce, making it a formidable player in Indonesia's booming digital economy.</p>
<p>The merged entity will present a challenge, not just to <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> and its Shopee platform but more pertinently for <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab,</a> which is in the process of seeking a listing in the US through the largest SPAC listing to date.</p>
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<p>One key area of overlap between <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek</a> and <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia</a> is on digital payments, where GoPay and OVO compete head-on. Given that Tokopedia holds a 36.1% stake in OVO, it is unclear what comes next although it is likely Tokopedia will look to migrate its customers to GoPay and sell its stake in OVO.</p>
<p><a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek </a>has already stepped up its move into the digital banking space through the recent increase in its stake in <a href="https://www.smartkarma.com/entities/bank-jago-tbk-pt" target="_blank" data-smartkarma-citation="entities:31094:1" rel="noopener">Bank Jago (ARTO IJ)</a> to 22% but it also has strong backers for GoPay in the shape of <a href="https://www.smartkarma.com/entities/facebook-inc-a" target="_blank" data-smartkarma-citation="entities:665:1" rel="noopener">Facebook Inc A (FB US)</a> and <a href="https://www.smartkarma.com/entities/paypal-holdings-inc" target="_blank" data-smartkarma-citation="entities:4747:1" rel="noopener">Paypal Holdings (PYPL US).</a></p>
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<p>The combined entity will be a huge enabler for MSMEs from food providers to small businesses and as a result, will likely get significant support from the Indonesian government. </p>
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<p>There will be significant synergies between the two companies in areas such as deliveries, payments, and financial services, with an ever-increasing use-case for GoPay.</p>
<p><a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener"></a>The combined size of the two companies would be around US$18bn under the latest valuations but it is suggested that it could command a valuation of US$40bn with a US listing, although it is not yet sure what shape or form that listing will take although its looks likely it will be a dual listing by the end of this year.</p>
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<p>A straight IPO rather than a SPAC listing would be the most straightforward and the preferred option, even if it takes a bit longer to execute. The merged entity will be a more formidable adversary for other digital players and especially <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> but also for Shopee (<a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US))</a>,  <a href="https://www.smartkarma.com/entities/lazada-group" target="_blank" data-smartkarma-citation="entities:26148:1" rel="noopener">Lazada Group (LAZADA SP)</a>, and Bukalapak.</p>
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Gojek and Tokopedia have finally announced that they will merge to form GoTo Group, in what will be Indonesia's largest-ever business deal to date. The new GoTo Group will also seek a dual listing both in Jakarta and the US but it is yet unclear what shape the listing will take at this stage. 
This will create an Indonesia-focused digital powerhouse with exposure to Ride-Hailing, Food Delivery, Digital Payments, Digital Finance, and e-commerce, making it a formidable player in Indonesia's booming digital economy.
The merged entity will present a challenge, not just to Sea Ltd (SE US) and its Shopee platform but more pertinently for Grab, which is in the process of seeking a listing in the US through the largest SPAC listing to date.

One key area of overlap between Gojek and Tokopedia is on digital payments, where GoPay and OVO compete head-on. Given that Tokopedia holds a 36.1% stake in OVO, it is unclear what comes next although it is likely Tokopedia will look to migrate its customers to GoPay and sell its stake in OVO.
Gojek has already stepped up its move into the digital banking space through the recent increase in its stake in Bank Jago (ARTO IJ) to 22% but it also has strong backers for GoPay in the shape of Facebook Inc A (FB US) and Paypal Holdings (PYPL US).


The combined entity will be a huge enabler for MSMEs from food providers to small businesses and as a result, will likely get significant support from the Indonesian government. 


There will be significant synergies between the two companies in areas such as deliveries, payments, and financial services, with an ever-increasing use-case for GoPay.
The combined size of the two companies would be around US$18bn under the latest valuations but it is suggested that it could command a valuation of US$40bn with a US listing, although it is not yet sure what shape or form that listing will take although its looks likely it will be a dual listing by the end of this year.


A straight IPO rather than a SPAC listing would be the most straightforward and the preferred option, even if it takes a bit longer to execute. The merged entity will be a more formidable adversary for other digital players and especially Grab (0967655D SP) but also for Shopee (Sea Ltd (SE US)),  Lazada Group (LAZADA SP), and Bukalapak.


Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

Thematic (Sector/Industry)

<p>Loan growth in Japan is uncharacteristically strong, accelerating dramatically from recent lows. At the other extreme is Indonesia, where loan growth has never been lower in our time series. The relative impact to profit favours Japan's banks. </p>

Loan growth in Japan is uncharacteristically strong, accelerating dramatically from recent lows. At the other extreme is Indonesia, where loan growth has never been lower in our time series. The relative impact to profit favours Japan's banks. 

Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

<p>Bank deposits hit an all-time high of ¥854.608 trillion (US$7.84 trillion) on 31 March 2021, according to the Japanese Bankers Association (JBA), rising +2.0% MoM and a remarkable +9.7% YoY.  According to the Bank of Japan (BoJ), average deposit balances in March 2021 were ¥1,067.259 trillion (US$9.79 trillion); this was also an all-time high level.</p><p>For Japanese bankers, however, such impressive statistics are anything but good news.  Already awash in surplus cash, adding another ¥6.0 trillion (US$55.15 billion) to the banks’ collective coffers in a single month is of almost no value to them whatsoever. The metaphorical equivalent of such an event would be something like turning a fire hose onto an already-flooded river.  It just makes an already bad situation far worse.  Major banks’ loan to deposit (LDR) ratios have now fallen to historic lows of 49%, underlining the fact that customer funds continue to flow into Japanese banks far faster than they are able to process that inflow and reinvest the proceeds as loans to help support an economic recovery. Banks simply do not need those mountains of money that pile higher and higher as each month passes.</p><p>January through mid-March saw an unusually strong rally in bank shares, in line with trends in other global stock markets.  Trees do not grow to Heaven, however, and stock prices do not rise for ever  –  especially Japanese bank stocks.  Having passed the ‘marker point’ for the end of perennial bank rallies, namely 15 March (“The Ides of March”), the sector has weakened noticeably over the last month (after peaking on 19 March 2021 at 162.08) with the mega-banks falling close to 10% while other major banks and large regional banks have seen their share prices falling by 15% or more.</p><p>“<em>Caveat Emptor!”</em> (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for the remainder of 2021 and beyond.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/203/578/original/image_7378929621619743178079.png?1619743180" class="editor-image img-responsive" data-smartkarma-image-id="203578"></figure>

Bank deposits hit an all-time high of ¥854.608 trillion (US$7.84 trillion) on 31 March 2021, according to the Japanese Bankers Association (JBA), rising +2.0% MoM and a remarkable +9.7% YoY.  According to the Bank of Japan (BoJ), average deposit balances in March 2021 were ¥1,067.259 trillion (US$9.79 trillion); this was also an all-time high level.For Japanese bankers, however, such impressive statistics are anything but good news.  Already awash in surplus cash, adding another ¥6.0 trillion (US$55.15 billion) to the banks’ collective coffers in a single month is of almost no value to them whatsoever. The metaphorical equivalent of such an event would be something like turning a fire hose onto an already-flooded river.  It just makes an already bad situation far worse.  Major banks’ loan to deposit (LDR) ratios have now fallen to historic lows of 49%, underlining the fact that customer funds continue to flow into Japanese banks far faster than they are able to process that inflow and reinvest the proceeds as loans to help support an economic recovery. Banks simply do not need those mountains of money that pile higher and higher as each month passes.January through mid-March saw an unusually strong rally in bank shares, in line with trends in other global stock markets.  Trees do not grow to Heaven, however, and stock prices do not rise for ever  –  especially Japanese bank stocks.  Having passed the ‘marker point’ for the end of perennial bank rallies, namely 15 March (“The Ides of March”), the sector has weakened noticeably over the last month (after peaking on 19 March 2021 at 162.08) with the mega-banks falling close to 10% while other major banks and large regional banks have seen their share prices falling by 15% or more.“Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for the remainder of 2021 and beyond.

Japanese Bank Deposits:  Mountain High, Value Low

<p>An old investment industry joke has it that long-term investments in equities are usually short-term investments that went wrong.  In the Japanese banking industry, short-term loans are euphemistically called “working capital finance” but, in many instances, act as a substitute for equity capital by being rolled-over or renewed every three to six months on an indefinite basis, as long as the interest continues to be paid on time.  Unlike Western banking practice, there is little to no effort ever made by Japanese banks to have these ‘short-term‘ loans cleaned-up and repaid, thereby minimizing the strain on corporate cash-flow over the longer-term while maximizing the banks’ interest income.</p><p>The arrival of the global COVID-19 pandemic at the beginning of 2020 created heavy demand for bank finance as companies rushed to secure sufficient cash and lines of credit.  The purpose of this ‘dash for cash’ was to ensure corporate survival and to tide them over what was hoped would be a short period of financial uncertainty. This additional lending was intended to be short-term in nature.  As Japan faces yet another wave of the coronavirus, with emergency declarations in several of her principal cities and more lockdowns just as the postponed 2020 Olympics is scheduled to begin, it is becoming increasingly apparent that some borrowers need not just cash but capital to survive.</p><p>Some banks are reportedly now considering whether to convert some of these ‘short-term’ emergency loans into long-term subordinated loans, thereby marginally improving the interest rate on the loan.  The clear advantage for the borrower would be the removal of any financial pressure to repay the loan any time soon.  For the banks, there might be other less obvious advantages than simply a better interest rate, including an opportunity to maintain potentially future non-performing loans in ongoing performing-loan status, which would obviate the need to set aside additional loan-loss provisions and preserve the banks’ own precious capital.</p><p>Why call a spade a spade when it could also be referred to as a shovel?</p><p>January through mid-March saw an unusually strong rally in bank shares, in line with trends in other global stock markets.  Trees do not grow to Heaven, however, and stock prices do not rise for ever  –  especially Japanese bank stocks, as has once again been proven.  Having passed the ‘marker point’ for the end of perennial bank rallies, namely 15 March (“The Ides of March”), the sector has weakened noticeably over the last month (after peaking on 19 March 2021 at 162.08) with the mega-banks falling close to 10% while other major banks and large regional banks have seen their share prices falling by 15% or more.</p><p>“<em>Caveat Emptor!”</em> (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for the remainder of 2021 and beyond.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/202/916/original/JBanks-2021-0428-TPNBNK+in+2021.jpg?1619500060" class="editor-image img-responsive" data-smartkarma-image-id="202916"></figure></section>

An old investment industry joke has it that long-term investments in equities are usually short-term investments that went wrong.  In the Japanese banking industry, short-term loans are euphemistically called “working capital finance” but, in many instances, act as a substitute for equity capital by being rolled-over or renewed every three to six months on an indefinite basis, as long as the interest continues to be paid on time.  Unlike Western banking practice, there is little to no effort ever made by Japanese banks to have these ‘short-term‘ loans cleaned-up and repaid, thereby minimizing the strain on corporate cash-flow over the longer-term while maximizing the banks’ interest income.The arrival of the global COVID-19 pandemic at the beginning of 2020 created heavy demand for bank finance as companies rushed to secure sufficient cash and lines of credit.  The purpose of this ‘dash for cash’ was to ensure corporate survival and to tide them over what was hoped would be a short period of financial uncertainty. This additional lending was intended to be short-term in nature.  As Japan faces yet another wave of the coronavirus, with emergency declarations in several of her principal cities and more lockdowns just as the postponed 2020 Olympics is scheduled to begin, it is becoming increasingly apparent that some borrowers need not just cash but capital to survive.Some banks are reportedly now considering whether to convert some of these ‘short-term’ emergency loans into long-term subordinated loans, thereby marginally improving the interest rate on the loan.  The clear advantage for the borrower would be the removal of any financial pressure to repay the loan any time soon.  For the banks, there might be other less obvious advantages than simply a better interest rate, including an opportunity to maintain potentially future non-performing loans in ongoing performing-loan status, which would obviate the need to set aside additional loan-loss provisions and preserve the banks’ own precious capital.Why call a spade a spade when it could also be referred to as a shovel?January through mid-March saw an unusually strong rally in bank shares, in line with trends in other global stock markets.  Trees do not grow to Heaven, however, and stock prices do not rise for ever  –  especially Japanese bank stocks, as has once again been proven.  Having passed the ‘marker point’ for the end of perennial bank rallies, namely 15 March (“The Ides of March”), the sector has weakened noticeably over the last month (after peaking on 19 March 2021 at 162.08) with the mega-banks falling close to 10% while other major banks and large regional banks have seen their share prices falling by 15% or more.“Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for the remainder of 2021 and beyond.

Japanese Banks:  When Spades Become Shovels

<p>Japan’s largest banks have seen steady and strong declines of credit costs during the past few quarters. Their earnings guidance upgrades do not seem to take this into account. Where credit costs remain low like the December 2020 quarter, FY22 earnings can be far stronger. </p>

Japan’s largest banks have seen steady and strong declines of credit costs during the past few quarters. Their earnings guidance upgrades do not seem to take this into account. Where credit costs remain low like the December 2020 quarter, FY22 earnings can be far stronger. 

Japan – Upgrading Earnings, Even Before Credit Costs Bottom

Japan

Mitsubishi UFJ Financial Group, Inc. (MUFG) is a holding company established through the merger of Mitsubishi Tokyo Financial Group and UFJ Holdings. As a financial group, the Company provides a variety of financial and investment services including commercial banking, trust banking, international finance, and assets management services.

Mitsubishi UFJ Financial (MUFG) (8306 JP)

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Mitsubishi UFJ Financial (MUFG) (8306 JP)

GoTo - Enter the Green Dragon

The confirmation of the merger between Gojek and Tokopedia creates an Indonesian digital powerhouse under GoTo Group, which will seek a dual...

Angus Mackintosh

Japan – Loan Growth Exceeds Indonesia

Loan growth in Japan is uncharacteristically strong, accelerating dramatically from recent lows. At the other extreme is Indonesia, where loan...

Daniel Tabbush

Japanese Bank Deposits: Mountain High, Value Low

Bank deposits hit an all-time high of ¥854.608 trillion (US$7.84 trillion) on 31 March 2021. For Japanese bankers, however, such impressive...

J. Brian Waterhouse

Japanese Banks: When Spades Become Shovels

As Japan faces yet another coronavirus outbreak, it is increasingly apparent that some borrowers need not just cash but capital to survive. Short...

J. Brian Waterhouse

Japan – Upgrading Earnings, Even Before Credit Costs Bottom

Japan’s largest banks have seen strong declines of credit costs. Their earnings guidance upgrades do not seem to take this into account. FY22 can...

Daniel Tabbush

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