Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<p>It was announced after the market close that <a href="https://www.smartkarma.com/entities/big-hit-entertainment-co-ltd" target="_blank" data-smartkarma-citation="entities:28959:1" rel="noopener">HYBE (352820 KS)</a> will conduct a block deal worth 850 billion won. STIC Investment will sell its 2.867 million shares of HYBE at 283,000 won to 296,400 won per share, which would be 5% and 9.3% discount to the closing price on 28 June, respectively. </p><p>All in all, we believe that STIC Investment selling nearly all of its remaining shares in HYBE is not a good sign for the company. We are especially wary of HYBE's burdensome valuations and as such we would avoid this block deal. </p>

It was announced after the market close that HYBE (352820 KS) will conduct a block deal worth 850 billion won. STIC Investment will sell its 2.867 million shares of HYBE at 283,000 won to 296,400 won per share, which would be 5% and 9.3% discount to the closing price on 28 June, respectively. All in all, we believe that STIC Investment selling nearly all of its remaining shares in HYBE is not a good sign for the company. We are especially wary of HYBE's burdensome valuations and as such we would avoid this block deal. 

A Block Deal Sale of HYBE by STIC Investment

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<p>Krafton announced today that it will <a href="https://www.sedaily.com/NewsView/22NRW6IJDV" target="_blank" rel="noopener">delay</a> its IPO process. Originally, the bookbuilding was supposed to start on 28 June. Now it appears that this will be delayed by at least a week. This has negative implications since it suggests that many institutional investors believe the IPO price range may be too high.</p>
<p>Also, delaying the IPO process by a week means that the company will not benefit from the duplicate IPO subscription by the retail investors in Korea, which is likely to reduce the overall demand for the IPO. This is certainly a double whammy. </p>
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Krafton announced today that it will delay its IPO process. Originally, the bookbuilding was supposed to start on 28 June. Now it appears that this will be delayed by at least a week. This has negative implications since it suggests that many institutional investors believe the IPO price range may be too high.
Also, delaying the IPO process by a week means that the company will not benefit from the duplicate IPO subscription by the retail investors in Korea, which is likely to reduce the overall demand for the IPO. This is certainly a double whammy. 


AlphaSituations-Event/Catalyst Driven Research, AlphaSituations

Robert Sassoon

AlphaSituations-Event/Catalyst Driven Research

AlphaSituations

Since its establishment, AlphaSituations has delivered a track record of outperformance with a hit rate of winners of more than 70% of its portfolio of ideas generating annualized average returns of 20%. In January 2022, AlphaSituations was contracted by Water Tower Research, an investor engagement and stakeholder communication platform to provide coverage of Special Situations

Event-Driven

<p>We believe that the proposed merger of <a href="https://www.smartkarma.com/entities/at-t-inc" target="_blank" data-smartkarma-citation="entities:784:1" rel="noopener">At&amp;T Inc (T US)</a> 's  media assets with <a href="https://www.smartkarma.com/entities/discovery-inc" target="_blank" data-smartkarma-citation="entities:11395:1" rel="noopener">Discovery, Inc. (DISCA, DISCK, DISCB US)</a>  via a Reverse Morris Trust transaction promises to unlock substantial value for Discovery shareholders. Our insight discusses why the transaction has been beset by investor apathy, why we think this creates an excellent value creating opportunity and how best to take advantage of the opportunity.</p>

We believe that the proposed merger of At&amp;T Inc (T US) 's  media assets with Discovery, Inc. (DISCA, DISCK, DISCB US)  via a Reverse Morris Trust transaction promises to unlock substantial value for Discovery shareholders. Our insight discusses why the transaction has been beset by investor apathy, why we think this creates an excellent value creating opportunity and how best to take advantage of the opportunity.

MergerTalk: Why Market Apathy To Discovery's Merger With WarnerMedia Is A Gift To Value Investors

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.

Thematic (Sector/Industry)

<p>Headline Developments China is looking to continue its rout on crypto, pushing for the suspension of some crypto mining operations late last week.  Chinese Vice Premier Liu He told a group of officials that the Government would “clamp down on bitcoin mining and trading activity” to achieve financial stability.</p>

Headline Developments China is looking to continue its rout on crypto, pushing for the suspension of some crypto mining operations late last week.  Chinese Vice Premier Liu He told a group of officials that the Government would “clamp down on bitcoin mining and trading activity” to achieve financial stability.

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

<p><a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> announced its 1Q2021 results which look like a blowout set of numbers with +147% growth in total GAAP revenues with +117% growth in digital bookings for digital entertainment and +250% YoY growth in e-commerce GAAP revenues.</p>
<p>Gross Profit increased a staggering +212% YoY to US$645.4m in 1Q2021 and the company booked a positive EBITDA of US$88.1m versus a (US$69.9m) loss in 1Q2020.</p>
<p>The gross profit margin increased from 28% in 1Q2020 to 36% in 1Q2021, which is a testament to the fact that the company is moving along the path to profitability. Digital entertainment saw higher margins, while-commerce saw falling EBITDA loss per order.</p>
<p>In Digital Entertainment (DE) division continues to see strong growth in its user base with +61% YoY growth in quarterly active users (QAU) to 648.6m but more importantly quarterly paying users saw growth of +12.3% YoY to 79.8m signifying a higher level of monetization on its self-developed game <em>Free Fire.</em></p>
<p>The company continues to successfully expand its gaming business to new geographies, with India being the latest growth engine and players are spending more time on Free Fire and spending more. It continues to add new content and characters to increase the appeal and stickiness of <em>Free Fire</em>. It is also seeing huge response in the eSports arena for <em>Free Fire.</em></p>
<p>Shopee ranked number one in the shopping category by monthly active users and time spent in app in 1Q2021 for both South East Asia and Taiwan, according to App Annie. E-commerce continues to show supercharged growth and especially in the core market of Indonesia.</p>
<p><a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a>'s move into digital payments in South -East Asia under SeaMoney and ShopeePay in Indonesia continues to see strong momentum.  The mobile wallet total payment volume saw total payment volume triple in 1Q2021 to US$3.4bn. </p>
<p>The company is also expanding the offline use-cases for ShopeePay most recently extending use to Indomaret in Indonesia, the largest mini-market operator in the country.</p>
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<p><a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a>'s move into food delivery through ShopeeFood and evidence suggests that it has already had a strong reception to its launch in Jakarta, with growth similar to that in other categories.</p>
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<p>This latest set of results provides further proof of the success of the <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> growth model which generates huge EBITDA from gaming and reinvests that money into growing the company's e-commerce and digital finance businesses, whilst maintaining the investment momentum into the gaming cash cow, buy pushing out into new geographies such as India.</p>
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<p><a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> continues to standout as the best way to play the explosive growth in e-commerce in South East Asia, funded by the popularity of its self developed game <em>Free Fire </em>and its gaming business, together with its move into digital payments a third leg to future growth.</p>
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<section class="figure"><a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> valuations are higher than its listed peers on 13x and 9x EV/Sales for FY21E and FY22E respectively but it is growing at more than twice the pace in terms of sales to justify this. The market is also paying a premium for its unique financing plus its market leadership and strong track record on execution, with 11 consecutive quarters of triple-digit growth.</section>
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Sea Ltd (SE US) announced its 1Q2021 results which look like a blowout set of numbers with +147% growth in total GAAP revenues with +117% growth in digital bookings for digital entertainment and +250% YoY growth in e-commerce GAAP revenues.
Gross Profit increased a staggering +212% YoY to US$645.4m in 1Q2021 and the company booked a positive EBITDA of US$88.1m versus a (US$69.9m) loss in 1Q2020.
The gross profit margin increased from 28% in 1Q2020 to 36% in 1Q2021, which is a testament to the fact that the company is moving along the path to profitability. Digital entertainment saw higher margins, while-commerce saw falling EBITDA loss per order.
In Digital Entertainment (DE) division continues to see strong growth in its user base with +61% YoY growth in quarterly active users (QAU) to 648.6m but more importantly quarterly paying users saw growth of +12.3% YoY to 79.8m signifying a higher level of monetization on its self-developed game Free Fire.
The company continues to successfully expand its gaming business to new geographies, with India being the latest growth engine and players are spending more time on Free Fire and spending more. It continues to add new content and characters to increase the appeal and stickiness of Free Fire. It is also seeing huge response in the eSports arena for Free Fire.
Shopee ranked number one in the shopping category by monthly active users and time spent in app in 1Q2021 for both South East Asia and Taiwan, according to App Annie. E-commerce continues to show supercharged growth and especially in the core market of Indonesia.
Sea Ltd (SE US)'s move into digital payments in South -East Asia under SeaMoney and ShopeePay in Indonesia continues to see strong momentum.  The mobile wallet total payment volume saw total payment volume triple in 1Q2021 to US$3.4bn. 
The company is also expanding the offline use-cases for ShopeePay most recently extending use to Indomaret in Indonesia, the largest mini-market operator in the country.

Sea Ltd (SE US)'s move into food delivery through ShopeeFood and evidence suggests that it has already had a strong reception to its launch in Jakarta, with growth similar to that in other categories.

This latest set of results provides further proof of the success of the Sea Ltd (SE US) growth model which generates huge EBITDA from gaming and reinvests that money into growing the company's e-commerce and digital finance businesses, whilst maintaining the investment momentum into the gaming cash cow, buy pushing out into new geographies such as India.



Sea Ltd (SE US) continues to standout as the best way to play the explosive growth in e-commerce in South East Asia, funded by the popularity of its self developed game Free Fire and its gaming business, together with its move into digital payments a third leg to future growth.

Sea Ltd (SE US) valuations are higher than its listed peers on 13x and 9x EV/Sales for FY21E and FY22E respectively but it is growing at more than twice the pace in terms of sales to justify this. The market is also paying a premium for its unique financing plus its market leadership and strong track record on execution, with 11 consecutive quarters of triple-digit growth.

















United States

The Walt Disney Company is an entertainment company that conducts operations in media networks, studio entertainment, theme parks and resorts, consumer products, and interactive media. The Company produces motion pictures, television programs, and musical recordings, as well as books and magazines.

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The Walt Disney Co (DIS US)

A Block Deal Sale of HYBE by STIC Investment

It was announced after the market close that HYBE will conduct a block deal worth 850 billion won. We are especially wary of HYBE's burdensome...

Douglas Kim

Why Is Krafton Delaying Its IPO Process?

Krafton announced today that it will delay its IPO process. This has negative implications since it suggests that many institutional investors...

Douglas Kim

MergerTalk: Why Market Apathy To Discovery's Merger With WarnerMedia Is A Gift To Value Investors

The proposed merger of AT&T's WarnerMedia with Discovery has real shot of being a significant global competitor to leading streaming services...

Robert Sassoon

Weekly Innovation Review #33

Headline Developments China is looking to continue its rout on crypto, pushing for the suspension of some crypto mining operations late last week. ...

Granite Bay Capital

Sea Ltd - Supercharged

Sea Ltd (SE US) is the best way to proxy for the explosive growth in e-commerce in South East Asia, funded by its gaming revenue, with its move...

Angus Mackintosh

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