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

<div><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></div><div></div><div>
<p>We have covered most aspects of the deal in our earlier notes:</p>
<ul>
<li><a href="https://www.smartkarma.com/insights/kakao-pay-ipo-guided-by-ant-financial-to-be-a-mini-ant" target="_blank" rel="noopener">Kakao Pay IPO - Guided by Ant Financial to be a mini Ant, </a></li>
<li><a href="https://www.smartkarma.com/insights/kakao-pay-ipo-peer-comparison-local-and-international" target="_blank" rel="noopener">Kakao Pay IPO - Peer comparison - local and international, and</a></li>
</ul>
</div><ul><li><a href="https://www.smartkarma.com/insights/kakao-pay-ipo-valuation-and-likely-impact-of-latest-announcement" target="_blank" rel="noopener">Kakao Pay IPO - Valuation and Likely Impact of Latest Announcement</a></li></ul><div><p>As the company is slated to be in front of investors again and finally launch its bookbuilding next week, in this note we will talk about the updates from the refiled prospectus and have a relook at valuations.</p></div>

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.
We have covered most aspects of the deal in our earlier notes:

Kakao Pay IPO - Guided by Ant Financial to be a mini Ant, 
Kakao Pay IPO - Peer comparison - local and international, and

Kakao Pay IPO - Valuation and Likely Impact of Latest AnnouncementAs the company is slated to be in front of investors again and finally launch its bookbuilding next week, in this note we will talk about the updates from the refiled prospectus and have a relook at valuations.

Kakao Pay IPO - Low-End Still Appear Reasonable but Stock Will More Likely Be Driven by Sentiment

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.

<div>
<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>
</div><div><div>
<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>
</div></div>


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>
</div>

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

<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 plans to raise up to Rs166.0 billion ($2.2 billion) with a primary/secondary split of 50%/50%, according to the DHRP filing. </p><p>The Indian Government is highly supportive of digital payments and in 2016, introduced demonetisation efforts through the launch of Unified Payment Interface (UPI) to reduce the reliance on cash. However, India continues to be a cash-driven economy which underscores the opportunity. Due to government initiatives, improving technology, growing awareness, digital payments by value in India are expected to more than double from $20 trillion in FY21 to $40-50 trillion by FY26, according to RedSeer. </p><div class="content-highlight"><p>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, MobiKwik) 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. Overall, we think that Paytm's fundamentals are attractive. </p></div>

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 plans to raise up to Rs166.0 billion ($2.2 billion) with a primary/secondary split of 50%/50%, according to the DHRP filing. The Indian Government is highly supportive of digital payments and in 2016, introduced demonetisation efforts through the launch of Unified Payment Interface (UPI) to reduce the reliance on cash. However, India continues to be a cash-driven economy which underscores the opportunity. Due to government initiatives, improving technology, growing awareness, digital payments by value in India are expected to more than double from $20 trillion in FY21 to $40-50 trillion by FY26, according to RedSeer. 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, MobiKwik) 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. Overall, we think that Paytm's fundamentals are attractive. 

Paytm IPO Initiation: A Payments-Led Super-App

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.

Event-Driven

<ul>
<li>Multiple announcements from <a href="https://www.smartkarma.com/entities/banco-inter-sa" target="_blank" data-smartkarma-citation="entities:28162:1" rel="noopener">Banco Inter SA (BIDI11 BZ)</a> have been well received by the market</li>
<li>The key news item, in our view, is that <a href="https://www.smartkarma.com/entities/stoneco-ltd" target="_blank" data-smartkarma-citation="entities:27564:1" rel="noopener">StoneCo Ltd (STNE US)</a>  is to invest BRL2.5bn in Banco Inter via new shares issued in an up and coming follow on issue, as a cornerstone investor</li>
<li>StoneCo is also granted the right of first refusal in the case of change of control of Banco Inter, for a period of 6 years</li>
<li>Banco Inter and StoneCo are to explore business opportunities that can leverage the strength of both companies to enhance growth potential</li>
<li>In addition, Banco Inter is also studying and assessing a potential corporate reorganization including the migration of its Banco Inter shareholder base to holdco Inter Platform Inc, shares of which would be intended to be NASDAQ listed</li>
<li>These developments do not change our view on Banco Inter; we have argued in past reports that it would need more capital to grow and it has now announced a follow-on, even if the potential downside risks has been offset by the prospective new investor StoneCo and the potential for their commercial partnerships</li>
<li>Our view is that both Banco Inter and StoneCo, although sound partners, have a major challenge to justify their premium valuations, at a time when competition across the board in digital financial services in Brazil is only intensifying</li>
<li>Risks to our bearish views on Banco Inter and StoneCo include better than expected revenue growth from cross-selling and synergies in their partnership, as well as better than expected loan growth and merchant services penetration</li>
</ul>


Multiple announcements from Banco Inter SA (BIDI11 BZ) have been well received by the market
The key news item, in our view, is that StoneCo Ltd (STNE US)  is to invest BRL2.5bn in Banco Inter via new shares issued in an up and coming follow on issue, as a cornerstone investor
StoneCo is also granted the right of first refusal in the case of change of control of Banco Inter, for a period of 6 years
Banco Inter and StoneCo are to explore business opportunities that can leverage the strength of both companies to enhance growth potential
In addition, Banco Inter is also studying and assessing a potential corporate reorganization including the migration of its Banco Inter shareholder base to holdco Inter Platform Inc, shares of which would be intended to be NASDAQ listed
These developments do not change our view on Banco Inter; we have argued in past reports that it would need more capital to grow and it has now announced a follow-on, even if the potential downside risks has been offset by the prospective new investor StoneCo and the potential for their commercial partnerships
Our view is that both Banco Inter and StoneCo, although sound partners, have a major challenge to justify their premium valuations, at a time when competition across the board in digital financial services in Brazil is only intensifying
Risks to our bearish views on Banco Inter and StoneCo include better than expected revenue growth from cross-selling and synergies in their partnership, as well as better than expected loan growth and merchant services penetration


Banco Inter & StoneCo – Interesting Concept, Challenging on Execution

Brazil

StoneCo Ltd. is a Brazilian financial technology and software solutions provider. The company offers a cloud-based platform for payments, digital banking, and credit solutions primarily to micro, small, and medium businesses (MSMBs). It also provides Point of Sale (POS) and Enterprise Resource Planning (ERP) solutions. Headquartered in George Town, Cayman Islands, StoneCo was founded in 2012.

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StoneCo (STNE US)

Kakao Pay IPO - Low-End Still Appear Reasonable but Stock Will More Likely Be Driven by Sentiment

Kakao Pay aims to raise up to US$1.3bn in its South Korean IPO. In this note, we will look at the recent updates and revisit our valuation.

Sumeet Singh

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

Paytm IPO Initiation: A Payments-Led Super-App

Paytm plans to raise up to Rs166.0 billion ($2.2 billion) with a primary/secondary split of 50%/50%, according to the DHRP filing. Overall, we...

Arun George

Banco Inter & StoneCo – Interesting Concept, Challenging on Execution

We believe that Inter and StoneCo are sound business partners, but have a big challenge to justify their premium valuations, when competition in...

Victor Galliano

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