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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<p><a href="https://www.smartkarma.com/entities/paytm-mobile-solutions-pvt-ltd" target="_blank" data-smartkarma-citation="entities:26149:1" rel="noopener">Paytm (PAYTM IN)</a>, formally known as One97 Communications, is India’s largest payments platform based on the number of consumers, number of merchants, number of transactions and revenue as of 31 March 2021, according to RedSeer. Paytm has an overall payments transaction volume market share of 40%, and wallet payments transaction market share of 65-70% in India as of FY21, according to RedSeer. Paytm’s shareholders include <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> (29.6% of outstanding shares), Softbank Vision Fund (18.3%), <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> (7.2%) and <a href="https://www.smartkarma.com/entities/berkshire-hathaway-inc-cl-b" target="_blank" data-smartkarma-citation="entities:8635:1" rel="noopener">Berkshire Hathaway Inc Cl B (BRK/B US)</a> (2.8%).  </p>
<p>Paytm is in talks with firms such as Abu Dhabi Investment Authority, GIC, Blackrock and Noumra to become anchor investors in its upcoming IPO, according to press reports. Paytm is also seeking to raise up to Rs166.0 billion ($2.2 billion) at a $20-22 billion valuation, according to press reports. </p>
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<p>In <a href="https://www.smartkarma.com/insights/paytm-ipo-initiation-a-payments-led-super-app" target="_blank" data-smartkarma-citation="insights:54983" rel="noopener">Paytm IPO Initiation: A Payments-Led Super-App</a>, we opined that as India’s largest payments platform, Paytm is well placed to benefit from this structural tailwind. The advent of UPI has increased competition (Google Pay, PhonePe, <a href="https://www.smartkarma.com/entities/one-mobikwik-systems-ltd" target="_blank" data-smartkarma-citation="entities:33952:1" rel="noopener">One Mobikwik Systems (1235487D IN)</a>) but Paytm is also leveraging its dominance in digital payments to build a synergistic ecosystem of complementary services, resulting in a strong claim to the “super-app” tag. While the COVID-19 pandemic was disruptive particularly to the non-payments business, Paytm should return to growth as the impact of the pandemic wanes and vaccination rates rise in India. We concluded that Paytm's fundamentals are attractive. </p>
<div class="content-highlight"><p>In this note, we take a first look at Paytm's valuation. Overall, based on our valuation analysis, we think that the rumoured IPO valuation can be justified.</p></div>
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Paytm (PAYTM IN), formally known as One97 Communications, is India’s largest payments platform based on the number of consumers, number of merchants, number of transactions and revenue as of 31 March 2021, according to RedSeer. Paytm has an overall payments transaction volume market share of 40%, and wallet payments transaction market share of 65-70% in India as of FY21, according to RedSeer. Paytm’s shareholders include Ant Financial Services Group (6688 HK) (29.6% of outstanding shares), Softbank Vision Fund (18.3%), Alibaba Group (BABA US) (7.2%) and Berkshire Hathaway Inc Cl B (BRK/B US) (2.8%).  
Paytm is in talks with firms such as Abu Dhabi Investment Authority, GIC, Blackrock and Noumra to become anchor investors in its upcoming IPO, according to press reports. Paytm is also seeking to raise up to Rs166.0 billion ($2.2 billion) at a $20-22 billion valuation, according to press reports. 

In Paytm IPO Initiation: A Payments-Led Super-App, we opined that as India’s largest payments platform, Paytm is well placed to benefit from this structural tailwind. The advent of UPI has increased competition (Google Pay, PhonePe, One Mobikwik Systems (1235487D IN)) but Paytm is also leveraging its dominance in digital payments to build a synergistic ecosystem of complementary services, resulting in a strong claim to the “super-app” tag. While the COVID-19 pandemic was disruptive particularly to the non-payments business, Paytm should return to growth as the impact of the pandemic wanes and vaccination rates rise in India. We concluded that Paytm's fundamentals are attractive. 
In this note, we take a first look at Paytm's valuation. Overall, based on our valuation analysis, we think that the rumoured IPO valuation can be justified.


Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/upstart-holdings-inc" target="_blank" data-smartkarma-citation="entities:29727:1" rel="noopener">Upstart Holdings Inc (UPST US)</a> has been one of the best performing SaaS stocks in the United States in the past year. Upstart Holdings completed its IPO in December 2020 at an IPO price of $20 per share. Since then, its share price has skyrocketed by 1,252% to reach $270.46 per share. Upstart's market cap has also jumped to $21 billion. Upstart Holdings is also one of the comps to Kakao Pay that the bankers used to price the Kakao Pay IPO. </p><div class="content-highlight">
<p>All in all, Upstart Holdings has experienced extraordinary growth in sales and profits in the past couple of years, driven by its superior AI driven technologies in the personal and auto loans sector. Upstart Holdings is clearly one of the most important companies to pay attention in the global AI-driven lending industry. </p>
<p>As Kakao Pay is trying to complete its IPO next month, it has chosen to include Upstart Holdings as one of the comps. However, we have concerns that investors are likely to put significant discount on the relative valuations of Kakao Pay as compared to Upstart due to the following factors such as increased regulatory scrutiny on the fintech services provided by Kakao Pay and higher marketing and operating costs that are likely to be required to change the way its current financial services are provided.</p>
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Upstart Holdings Inc (UPST US) has been one of the best performing SaaS stocks in the United States in the past year. Upstart Holdings completed its IPO in December 2020 at an IPO price of $20 per share. Since then, its share price has skyrocketed by 1,252% to reach $270.46 per share. Upstart's market cap has also jumped to $21 billion. Upstart Holdings is also one of the comps to Kakao Pay that the bankers used to price the Kakao Pay IPO. 
All in all, Upstart Holdings has experienced extraordinary growth in sales and profits in the past couple of years, driven by its superior AI driven technologies in the personal and auto loans sector. Upstart Holdings is clearly one of the most important companies to pay attention in the global AI-driven lending industry. 
As Kakao Pay is trying to complete its IPO next month, it has chosen to include Upstart Holdings as one of the comps. However, we have concerns that investors are likely to put significant discount on the relative valuations of Kakao Pay as compared to Upstart due to the following factors such as increased regulatory scrutiny on the fintech services provided by Kakao Pay and higher marketing and operating costs that are likely to be required to change the way its current financial services are provided.


Upstart Holdings - Up 1,252% from the IPO Price & A Key Comp for Kakao Pay

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.

Event-Driven

<div><p>Kakao Bank (KB), South Korea’s largest digital bank, raised US$2.2bn in its South Korean IPO. It ended the first day of trading up 79% from its IPO price. </p></div><div>We have covered various aspects of the deal in our previous notes:</div><div><ul>
<li>
<a href="https://www.smartkarma.com/insights/kakao-bank-ipo-riding-on-parent-s-network-but-boundaries-with-kakao-pay-remain-unclear" target="_blank" rel="noopener">Kakao Bank IPO - Riding on parents network but boundaries with Kakao Pay remain unclear</a>, </li>
<li><a href="https://www.smartkarma.com/insights/kakao-bank-ipo-pricey-as-it-should-be" target="_blank" rel="noopener">Kakao Bank IPO - Pricey as It Should Be</a></li>
<li><a href="https://www.smartkarma.com/insights/kakao-bank-ipo-lack-of-lock-up-and-msci-ftse-index-implications" target="_blank" rel="noopener">Kakao Bank IPO - Lack of Lock-Up and MSCI, FTSE Index Implications, and</a></li>
<li><a href="https://www.smartkarma.com/insights/kakao-bank-ipo-trading-one-for-instis-closer-look-at-ftse-and-msci-inclusion-remain-buyers" target="_blank" rel="noopener">Kakao Bank IPO Trading - One for Instis, Closer Look at FTSE and MSCI Inclusion. Remain Buyers</a></li>
</ul></div><div><p>In this note, we will talk about the first day trading and index inclusion.</p></div>

Kakao Bank (KB), South Korea’s largest digital bank, raised US$2.2bn in its South Korean IPO. It ended the first day of trading up 79% from its IPO price. We have covered various aspects of the deal in our previous notes:

Kakao Bank IPO - Riding on parents network but boundaries with Kakao Pay remain unclear, 
Kakao Bank IPO - Pricey as It Should Be
Kakao Bank IPO - Lack of Lock-Up and MSCI, FTSE Index Implications, and
Kakao Bank IPO Trading - One for Instis, Closer Look at FTSE and MSCI Inclusion. Remain Buyers
In this note, we will talk about the first day trading and index inclusion.

Kakao Bank - MSCI Done, Missed FTSE by a Whisker.

<div><p>Kakao Bank (KB), South Korea’s largest digital bank, raised up to US$2.2bn in its South Korean IPO. Kakao will hold a 27.26% stake post listing. The share will begin to trade on 6th Aug 2021.</p></div><div><p>Even though Kakao started operations only in July 2017, by 2020 it had already garnered more than 1% market share of overall loans and deposits in South Korea. KB’s loans have grown by 138% over 2018 to 1Q21 to reach KRW21.6tn, while its deposits have grown by 197% over the same period to reach KRW24.2tn. </p></div><div><p>Over 2018-20, its total income (Net interest income plus net fee income) grew by 216%, while it went from booking a loss in 2018 to reporting a 26% profit margin by 2020. KB’s total income was up another 60% YoY in 1Q21, while PAT was up 153% YoY.</p></div><div><p>We have covered various aspects of the deal in our previous notes, <a href="https://www.smartkarma.com/insights/kakao-bank-ipo-riding-on-parent-s-network-but-boundaries-with-kakao-pay-remain-unclear" target="_blank" rel="noopener">Kakao Bank IPO - Riding on parents network but boundaries with Kakao Pay remain unclear</a>, <a href="https://www.smartkarma.com/insights/kakao-bank-ipo-pricey-as-it-should-be" target="_blank" rel="noopener">Kakao Bank IPO - Pricey as It Should Be </a>and <a href="https://www.smartkarma.com/insights/kakao-bank-ipo-lack-of-lock-up-and-msci-ftse-index-implications" target="_blank" rel="noopener">Kakao Bank IPO - Lack of Lock-Up and MSCI, FTSE Index Implications</a>.</p></div><div><p>In this note, we will talk about the deal's trading dynamics.</p></div>

Kakao Bank (KB), South Korea’s largest digital bank, raised up to US$2.2bn in its South Korean IPO. Kakao will hold a 27.26% stake post listing. The share will begin to trade on 6th Aug 2021.Even though Kakao started operations only in July 2017, by 2020 it had already garnered more than 1% market share of overall loans and deposits in South Korea. KB’s loans have grown by 138% over 2018 to 1Q21 to reach KRW21.6tn, while its deposits have grown by 197% over the same period to reach KRW24.2tn. Over 2018-20, its total income (Net interest income plus net fee income) grew by 216%, while it went from booking a loss in 2018 to reporting a 26% profit margin by 2020. KB’s total income was up another 60% YoY in 1Q21, while PAT was up 153% YoY.We have covered various aspects of the deal in our previous notes, Kakao Bank IPO - Riding on parents network but boundaries with Kakao Pay remain unclear, Kakao Bank IPO - Pricey as It Should Be and Kakao Bank IPO - Lack of Lock-Up and MSCI, FTSE Index Implications.In this note, we will talk about the deal's trading dynamics.

Kakao Bank IPO Trading - One for Instis, Closer Look at FTSE and MSCI Inclusion. Remain Buyers

Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

Thematic (Sector/Industry)

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<li>Our key positive picks in payments are two Brazilian companies, <a href="https://www.smartkarma.com/entities/pagseguro-digital-ltd" target="_blank" data-smartkarma-citation="entities:27939:1" rel="noopener">Pagseguro Digital Ltd (PAGS US)</a> and <a href="https://www.smartkarma.com/entities/cielo-sa" target="_blank" data-smartkarma-citation="entities:24750:1" rel="noopener">Cielo SA (CIEL3 BZ)</a> </li>
<li>PagSeguro is our main pick, attractive on GARP metrics and with its higher take rate, it is our preference over its closest peer StoneCo</li>
<li>Cielo, the leading legacy payments company in Brazil, has seen its shares under pressure; yet fundamentals should be supported by the recent approval of WhatsApp Payments, given that Cielo is WhatsApp’s processor of payments</li>
<li>
<a href="https://www.smartkarma.com/entities/dlocal-ltd-uruguay" target="_blank" data-smartkarma-citation="entities:33377:1" rel="noopener">DLocal Ltd/Uruguay (DLO US)</a> listed on NASDAQ in early June; the shares are up by 150% from its IPO price, and, even given the growth potential, valuations are looking full, so we see an opportunity to take profits</li>
<li>
<a href="https://www.smartkarma.com/entities/square-inc" target="_blank" data-smartkarma-citation="entities:23755:1" rel="noopener">Square Inc (SQ US)</a> is another premium growth story, but one where we believe current valuations are running ahead of the fundamental prospects</li>
<li>
<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>  and <a href="https://www.smartkarma.com/entities/mastercard-inc-class-a" target="_blank" data-smartkarma-citation="entities:15529:1" rel="noopener">Mastercard (MA US)</a>, although not as compelling on valuations as PagSeguro and Cielo, are also attractive stocks</li>
<li>Risks to our positive view on Cielo include lower than expected revenues from the WhatsApp Payments contract and for PagSeguro this includes a weaker than expected business climate for its core SME client base; risks to our negative calls on DLocal and Square include stronger than expected transaction activity and revenue generation going forward</li>
</ul>


Our key positive picks in payments are two Brazilian companies, Pagseguro Digital Ltd (PAGS US) and Cielo SA (CIEL3 BZ) 
PagSeguro is our main pick, attractive on GARP metrics and with its higher take rate, it is our preference over its closest peer StoneCo
Cielo, the leading legacy payments company in Brazil, has seen its shares under pressure; yet fundamentals should be supported by the recent approval of WhatsApp Payments, given that Cielo is WhatsApp’s processor of payments

DLocal Ltd/Uruguay (DLO US) listed on NASDAQ in early June; the shares are up by 150% from its IPO price, and, even given the growth potential, valuations are looking full, so we see an opportunity to take profits

Square Inc (SQ US) is another premium growth story, but one where we believe current valuations are running ahead of the fundamental prospects

Paypal Holdings (PYPL US)  and Mastercard (MA US), although not as compelling on valuations as PagSeguro and Cielo, are also attractive stocks
Risks to our positive view on Cielo include lower than expected revenues from the WhatsApp Payments contract and for PagSeguro this includes a weaker than expected business climate for its core SME client base; risks to our negative calls on DLocal and Square include stronger than expected transaction activity and revenue generation going forward


Brazil

PagSeguro Digital Ltd. provides financial technology services. The Company offers multiple digital payment solutions, in-person payments via point of sales devices, and prepaid cards services. Pagseguro Digital serves clients in Brazil and the United States.

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Pagseguro Digital Ltd (PAGS US)

Paytm IPO: Valuation First Look

Paytm is seeking to raise up to $2.2 billion at a $20-22 billion valuation. Overall, based on our valuation analysis, we think that the rumoured...

Arun George

Upstart Holdings - Up 1,252% from the IPO Price & A Key Comp for Kakao Pay

Upstart Holdings has experienced extraordinary growth in sales and profits in the past couple of years, driven by its superior AI driven...

Douglas Kim

Kakao Bank - MSCI Done, Missed FTSE by a Whisker.

Kakao Bank (KB), South Korea’s largest digital bank, raised US$2.2bn in its South Korean IPO. It ended the first day of trading up 79% from its IPO...

Sumeet Singh

Kakao Bank IPO Trading - One for Instis, Closer Look at FTSE and MSCI Inclusion. Remain Buyers

Kakao Bank, South Korea’s largest digital bank, raised up to US$2.2bn in its South Korean IPO. Kakao will hold a 27.26% stake post listing. The...

Sumeet Singh

Payments Companies – Our Core Picks

From our review of ten payments companies, we pick PagSeguro and Cielo as buys; we would take profits on recently listed DLocal and Square; other...

Victor Galliano

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