Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<p>Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, aims to raise up to US$1.3bn in its South Korean IPO. Kakao held a 55% stake prior to listing, with Ant Financial holding the balance 45% stake.</p><p>As of 1H21, KP had a total of 36m users and around 20m monthly active users (MAU). It processed a total GMV of KRW66.9tn in 2020 and it had already generated KRW47.9tn GMV in 1H21 itself. As of the end of 1H21, it had dealings with more than 610,000 affiliated stores and 100 financial institutions.</p><p>KP began operation in Sep 2014 as a fintech division of Kakao to facilitate online payments. Ant Financial invested US$200m in the company in Feb 2017 and the division was spun out of Kakao in Apr 2017. Since spinning out, the number of MAUs have grown 14x from 2Q17 to 2Q21, while the quarterly transaction amount grew 61x from KRW0.4tn in 2Q17 to KRW24.5tn in 2Q21. </p><p>Over the past few years the company has been expanding its offering beyond payment processing to include other financial products. On the back of this, its revenue has been growing faster than its GMV.</p>

Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, aims to raise up to US$1.3bn in its South Korean IPO. Kakao held a 55% stake prior to listing, with Ant Financial holding the balance 45% stake.As of 1H21, KP had a total of 36m users and around 20m monthly active users (MAU). It processed a total GMV of KRW66.9tn in 2020 and it had already generated KRW47.9tn GMV in 1H21 itself. As of the end of 1H21, it had dealings with more than 610,000 affiliated stores and 100 financial institutions.KP began operation in Sep 2014 as a fintech division of Kakao to facilitate online payments. Ant Financial invested US$200m in the company in Feb 2017 and the division was spun out of Kakao in Apr 2017. Since spinning out, the number of MAUs have grown 14x from 2Q17 to 2Q21, while the quarterly transaction amount grew 61x from KRW0.4tn in 2Q17 to KRW24.5tn in 2Q21. Over the past few years the company has been expanding its offering beyond payment processing to include other financial products. On the back of this, its revenue has been growing faster than its GMV.

Kakao Pay IPO - Guided by Ant Financial to Be a Mini Ant

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Thematic (Sector/Industry)

<p>This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. </p><p><strong><em>Companies mentioned this week:</em></strong></p><p><a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, <a href="https://www.smartkarma.com/entities/netease" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a>, <a href="https://www.smartkarma.com/entities/yandex-nv-a" target="_blank" data-smartkarma-citation="entities:414:1" rel="noopener">Yandex (YNDX US)</a>, <a href="https://www.smartkarma.com/entities/prosus-nv" target="_blank" data-smartkarma-citation="entities:28104:1" rel="noopener">Prosus (PRX NA)</a>, <a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a>, Ant Financial, <a href="https://www.smartkarma.com/entities/nio-inc" target="_blank" data-smartkarma-citation="entities:27399:1" rel="noopener">NIO Inc (NIO US)</a>, <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Global (DIDI US)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a>, <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/semiconductor-manufacturing-international-corp-smic" target="_blank" data-smartkarma-citation="entities:14231:1" rel="noopener">Semiconductor Manufacturing International Corp (SMIC) (981 HK)</a> </p>

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. Companies mentioned this week:Tencent (700 HK), NetEase (9999 HK), Yandex (YNDX US), Prosus (PRX NA), Naspers (NPN SJ), Ant Financial, NIO Inc (NIO US), DiDi Global (DIDI US), JD.com Inc. (9618 HK), Alibaba Group (9988 HK), Semiconductor Manufacturing International Corp (SMIC) (981 HK) 

Global Emerging Markets Weekly: 3 September 2021

Latest News from the World’s Leading Innovators

Granite Bay Capital

An innovation focussed investment company

Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity.

<p>Headline Developments As has been widely expected, China has moved to greatly reduce the time under-18s spend playing computer games.  Under the new rule, younger gamers will be restricted to one hour (8 pm - 9 pm) of online games on Fridays, weekends and holidays, with online gaming companies barred from providing gaming services to minors in any form outside of those hours.</p>

Headline Developments As has been widely expected, China has moved to greatly reduce the time under-18s spend playing computer games.  Under the new rule, younger gamers will be restricted to one hour (8 pm - 9 pm) of online games on Fridays, weekends and holidays, with online gaming companies barred from providing gaming services to minors in any form outside of those hours.

Forensic Analyst

Jason Yap, CFA

Forensic Accounting

<p><a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>'s share price retreated 3.2% overnight on news that China would restrict playing time for minors to 3 hours a week - that is, 8pm to 9pm time slots on Friday, Saturday and Sunday, with an extra hour on public holidays.  The share price erased these losses and recorded an intra-day gain of 3.3% by Tuesday's market close, suggesting that regulatory concerns were assuaged by Tencent's affirmation of low single-digit revenue contribution of minors. </p>
<p>Insight Provider Mio Kato wrote a unique but sensible piece about how the market may have misunderstood the significance of the restrictions, with the implications for the long-term growth of the industry more severe and an appreciation of the relevant issues would come sooner.  A key thrust of the argument is that habit-formation of gaming at an early age would be disrupted to an extent that gaming habits and user time spent do not carry over into adulthood. </p>
<p>Tencent's gaming revenue is derived primarily from the sales of in-game virtual items and the provision of adjacent services.  In this article, we expand on the above argument by highlighting how the habit-formation disruption not only affects user time spent but also have a knock-on impact with respect to in-game virtual item spending, subscription, and IP consumption. </p>
<p>Further, Tencent's revenue recognition on the provision of online games heavily depends on management's assumptions of the gamer's usage profile, which was in turn determined based on past gaming habits. This was historically raised as a Key Audit Matter in Tencent's Audit Opinions. Accordingly, we also discuss in this article how the underlying management assumptions might change as a result of the regulations and consequent impact on Tencent's gaming revenues. </p>

Tencent (700 HK)'s share price retreated 3.2% overnight on news that China would restrict playing time for minors to 3 hours a week - that is, 8pm to 9pm time slots on Friday, Saturday and Sunday, with an extra hour on public holidays.  The share price erased these losses and recorded an intra-day gain of 3.3% by Tuesday's market close, suggesting that regulatory concerns were assuaged by Tencent's affirmation of low single-digit revenue contribution of minors. 
Insight Provider Mio Kato wrote a unique but sensible piece about how the market may have misunderstood the significance of the restrictions, with the implications for the long-term growth of the industry more severe and an appreciation of the relevant issues would come sooner.  A key thrust of the argument is that habit-formation of gaming at an early age would be disrupted to an extent that gaming habits and user time spent do not carry over into adulthood. 
Tencent's gaming revenue is derived primarily from the sales of in-game virtual items and the provision of adjacent services.  In this article, we expand on the above argument by highlighting how the habit-formation disruption not only affects user time spent but also have a knock-on impact with respect to in-game virtual item spending, subscription, and IP consumption. 
Further, Tencent's revenue recognition on the provision of online games heavily depends on management's assumptions of the gamer's usage profile, which was in turn determined based on past gaming habits. This was historically raised as a Key Audit Matter in Tencent's Audit Opinions. Accordingly, we also discuss in this article how the underlying management assumptions might change as a result of the regulations and consequent impact on Tencent's gaming revenues. 

Tencent - An Analytical Framework For "Tomorrow's" Gaming Minors

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

Equity Bottom-Up

<section class="figure"><a href="https://www.smartkarma.com/entities/bukalapak" target="_blank" data-smartkarma-citation="entities:33575:1" rel="noopener">Bukalapak (BUKA IJ)</a> released a strong set of 2Q2021 results with +55.7% growth in TPV bringing 1H2021 TPV (Total Processing Value) growth to +54%. It reported a +37% YoY growth in revenue for 2Q2021.</section>
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<section class="figure"> The company's Mitra business continued to be the key driver, accounting for 48% of TPV in 2Q2021 versus 22% a year ago, with a growth rate of +292% YoY in 2Q2021.</section>
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<section class="figure">There was some reduction in the take-rate in 2Q2021, which some analysts may focus on but this was explained as due to a change in product mix and temporary. We address concerns regarding the take rate later but they seem overdone.</section>
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<section class="figure">Mitra Bukalapak continues to be the main growth engine for the company, with 2Q2021 Mitra TPV increasing by +237% YoY, to IDR14.2tn.</section>
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<p>Mitra Bukalapak’s contribution margin after S&amp;M cost improved from -1.0% of TPV in FY2020 to -0.5% of TPV in Mitra’s operating loss as a ratio to TPV improved from 1.2% in FY20 to 0.6% in 1H2021.</p>
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<section class="figure"><a href="https://www.smartkarma.com/entities/bukalapak" target="_blank" data-smartkarma-citation="entities:33575:1" rel="noopener">Bukalapak (BUKA IJ)</a> management re-iterated its strategy to continue to help enhance the performance of its Mitra's and sellers on the platform following a more of a Shopify model than one like <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>.</section>
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<p><a href="https://www.smartkarma.com/entities/bukalapak" target="_blank" data-smartkarma-citation="entities:33575:1" rel="noopener">Bukalapak (BUKA IJ)</a> maintains that around 90% of its Mitra customers use only <a href="https://www.smartkarma.com/entities/bukalapak" target="_blank" data-smartkarma-citation="entities:33575:1" rel="noopener">Bukalapak (BUKA IJ)</a> given that it addresses many uses and allows them to make more money. </p>
<p><a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia</a> and Shopee are much more reliant on aggressive capital to expand, which is not an effective long-term strategy for Mitra customers. It is also difficult to discount FMCG products for any length of time given that principles keep a handle on price levels.</p>
<p>Management also revealed that its first collaboration with <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab</a> will focus on GrabMart, providing fresh food products for GrabMart's restaurant customers but more collaboration is expected on an incremental basis going forward. <a href="https://www.smartkarma.com/entities/bukalapak" target="_blank" data-smartkarma-citation="entities:33575:1" rel="noopener"></a></p>
<p><a href="https://www.smartkarma.com/entities/bukalapak" target="_blank" data-smartkarma-citation="entities:33575:1" rel="noopener">Bukalapak (BUKA IJ)</a> management is expecting annual growth in TPV of +50%-75% per annum, with 2022 seen as a potentially even stronger year, with better purchasing power coming through post-pandemic and greater vaccination levels.</p>
<p>The company expects to break even at the EBITDA level by 2023 under current expectations. This accounts for rising revenues, growing take-rates, and lower S&amp;M costs. We continue to take a positive view on the outlook on <a href="https://www.smartkarma.com/entities/bukalapak" target="_blank" data-smartkarma-citation="entities:33575:1" rel="noopener">Bukalapak (BUKA IJ)</a> and do not see the short-term contraction in the take-rate as an issue.  Valuations look quite high relative to peers but the company is much closer to breakeven versus peers and given its predominantly 1P model, revenue is not far off the gross profit. </p>
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Bukalapak (BUKA IJ) released a strong set of 2Q2021 results with +55.7% growth in TPV bringing 1H2021 TPV (Total Processing Value) growth to +54%. It reported a +37% YoY growth in revenue for 2Q2021.



 The company's Mitra business continued to be the key driver, accounting for 48% of TPV in 2Q2021 versus 22% a year ago, with a growth rate of +292% YoY in 2Q2021.


There was some reduction in the take-rate in 2Q2021, which some analysts may focus on but this was explained as due to a change in product mix and temporary. We address concerns regarding the take rate later but they seem overdone.




Mitra Bukalapak continues to be the main growth engine for the company, with 2Q2021 Mitra TPV increasing by +237% YoY, to IDR14.2tn.



Mitra Bukalapak’s contribution margin after S&amp;M cost improved from -1.0% of TPV in FY2020 to -0.5% of TPV in Mitra’s operating loss as a ratio to TPV improved from 1.2% in FY20 to 0.6% in 1H2021.





Bukalapak (BUKA IJ) management re-iterated its strategy to continue to help enhance the performance of its Mitra's and sellers on the platform following a more of a Shopify model than one like Amazon.com Inc (AMZN US).


Bukalapak (BUKA IJ) maintains that around 90% of its Mitra customers use only Bukalapak (BUKA IJ) given that it addresses many uses and allows them to make more money. 
Tokopedia and Shopee are much more reliant on aggressive capital to expand, which is not an effective long-term strategy for Mitra customers. It is also difficult to discount FMCG products for any length of time given that principles keep a handle on price levels.
Management also revealed that its first collaboration with Grab will focus on GrabMart, providing fresh food products for GrabMart's restaurant customers but more collaboration is expected on an incremental basis going forward. 
Bukalapak (BUKA IJ) management is expecting annual growth in TPV of +50%-75% per annum, with 2022 seen as a potentially even stronger year, with better purchasing power coming through post-pandemic and greater vaccination levels.
The company expects to break even at the EBITDA level by 2023 under current expectations. This accounts for rising revenues, growing take-rates, and lower S&amp;M costs. We continue to take a positive view on the outlook on Bukalapak (BUKA IJ) and do not see the short-term contraction in the take-rate as an issue.  Valuations look quite high relative to peers but the company is much closer to breakeven versus peers and given its predominantly 1P model, revenue is not far off the gross profit. 









China

NetEase, Inc. is an Internet technology company that develops applications, services and other Internet technologies in China. The Company's core businesses consist of email service, web portal and online entertainment, including online gaming services. NetEase also offers online advertising, search, mobile applications and e-commerce.

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NetEase Inc (NTES US)

Kakao Pay IPO - Guided by Ant Financial to Be a Mini Ant

Kakao Pay, one of South Korea’s largest payment and financial services apps, aims to raise up to US$1.3bn in its South Korean IPO. Kakao holds a...

Sumeet Singh

Global Emerging Markets Weekly: 3 September 2021

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity...

Wium Malan, CFA

Weekly Innovation Review (WIRE) #47

Headline Developments: As has been widely expected, China has moved to greatly reduce the time under-18s spend playing computer games. Under the...

Granite Bay Capital

Tencent - An Analytical Framework For "Tomorrow's" Gaming Minors

Tencent's investors' response to latest online gaming restrictions have been measured due to small revenue contribution from minors. We discuss how...

Jason Yap, CFA

Bukalapak (BUKA IJ) - The Magic of Mitra

Bukalapak released an impressive set of 2Q2021 results, with the MSME Mitra business now close to half its TPV and showing triple-digit YoY growth....

Angus Mackintosh

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