Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

It has been a roller-coaster week for Vision Fund performance with Coupang pricing its IPO at a premium to already heady valuations whilst at the opposite end of the spectrum fintech investee Greensill has completed a rather quick move to insolvency. Markets seems to have taken both in stride as Softbank shares continues to hover above the ¥10,000 level whilst the corresponding discount to underlying public values remains at c. 20%. Since Softbank reported Q3 results, tech shares in the US have weakened and Vision Fund portfolio companies are down 14%/$7bn. Whilst expectations of further IPOs (Grab and or Didi) are supportive, share price performance will rely heavily on US tech sentiment going forward. HighlightsCoupang has reportedly priced its IPO at $35, which is well ahead of our fair value but not surprising in a frothy market. Coupang’s recent growth acceleration and move towards profitability make the stock attractive despite the premium valuation. The reported price implies a 3.1x EV/FY21e sales which is much higher than a direct peer group that includes Amazon (2.8x sales).Greensill has collapsed with Vision Fund exposure of up to $2bn. That is a lot of money but Coupang upside will outshine the impact on Vision Fund performance when quarterly numbers come out. What is worrisome is that this marks the second time a Softbank-backed financial firm has failed following Wirecard last summer. In addition, Greensill reportedly provided funding to four or five Vision Fund companies (Katerra, Oyo, View, Fair, Guazi) and without any disclosure it is not known whether Greensill’s demise would have a knock-on effect.Vision Fund’s public portfolio is down 14% since Q3 results. The volatility in tech valuations in the US has had an impact on Vision Fund’s public portfolio which is down 14% (or $6.9bn) since 9 February led by a 28% decline in DoorDash and a 19% decline in Beike (in VF 2).  That excludes any losses that may come at the cash management subsidiary Northstar which had $22bn invested in liquid tech assets at the end of Dec. AT Q3 results, Softbank said a $1bn loss at the end of the quarter had inverted to a c. $1bn gain by 9 February and that easily could have inflected again.

It has been a roller-coaster week for Vision Fund performance with Coupang pricing its IPO at a premium to already heady valuations whilst at the opposite end of the spectrum fintech investee Greensill has completed a rather quick move to insolvency. Markets seems to have taken both in stride as Softbank shares continues to hover above the ¥10,000 level whilst the corresponding discount to underlying public values remains at c. 20%. Since Softbank reported Q3 results, tech shares in the US have weakened and Vision Fund portfolio companies are down 14%/$7bn. Whilst expectations of further IPOs (Grab and or Didi) are supportive, share price performance will rely heavily on US tech sentiment going forward. HighlightsCoupang has reportedly priced its IPO at $35, which is well ahead of our fair value but not surprising in a frothy market. Coupang’s recent growth acceleration and move towards profitability make the stock attractive despite the premium valuation. The reported price implies a 3.1x EV/FY21e sales which is much higher than a direct peer group that includes Amazon (2.8x sales).Greensill has collapsed with Vision Fund exposure of up to $2bn. That is a lot of money but Coupang upside will outshine the impact on Vision Fund performance when quarterly numbers come out. What is worrisome is that this marks the second time a Softbank-backed financial firm has failed following Wirecard last summer. In addition, Greensill reportedly provided funding to four or five Vision Fund companies (Katerra, Oyo, View, Fair, Guazi) and without any disclosure it is not known whether Greensill’s demise would have a knock-on effect.Vision Fund’s public portfolio is down 14% since Q3 results. The volatility in tech valuations in the US has had an impact on Vision Fund’s public portfolio which is down 14% (or $6.9bn) since 9 February led by a 28% decline in DoorDash and a 19% decline in Beike (in VF 2).  That excludes any losses that may come at the cash management subsidiary Northstar which had $22bn invested in liquid tech assets at the end of Dec. AT Q3 results, Softbank said a $1bn loss at the end of the quarter had inverted to a c. $1bn gain by 9 February and that easily could have inflected again.   

Softbank Group - Vision Fund Ups and Downs: Coupang and Greensill

TMT & Consumer Independent Equity Research Analyst, Obex Capital Research

Aaron Gabin

TMT & Consumer Independent Equity Research Analyst

TMT & Consumer Independent Equity Research

Obex Capital Research

“Obex” is Latin for Barriers to Entry. Obex Capital Management’s investment philosophy is driven by an intense focus on which business model’s Barriers to Entry are able to withstand the ever increasing competitive disruption in the TMT and Consumer Sectors.

DoorDash’s first earnings call confirmed many of the concerns from our initiation. The key point for 2021? We think estimates that came up to reflect the easy COVID comp for 1Q21 will fall the rest of the year as COVID recedes, which will result in the rising customer acquisition costs cited in 4Q and 2021 meeting falling LTVs as customers return to dining out. DoorDash is likely to continually underperform expectations.Why do we think DoorDash is worth maybe half its current valuation?We’ll leave it to “NEUTRAL” rated Goldman Sachs to sum it up, “With the stock trading near 20x 2022E EV/Gross Profit vs. GSe 28% 3-year Gross Profit CAGR compared to the peer average of 10x on 30% growth we believe much of that opportunity is reflected in the current valuation. Therefore, we remain Neutral rated, while our 12-month price target goes to $145 from $135 to reflect revised estimates and current comp multiples.”As always, if you can’t explain why one company is worth 2x more then all its peers…it’s a neutral.<div class="content-highlight">Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</div>

DoorDash’s first earnings call confirmed many of the concerns from our initiation. The key point for 2021? We think estimates that came up to reflect the easy COVID comp for 1Q21 will fall the rest of the year as COVID recedes, which will result in the rising customer acquisition costs cited in 4Q and 2021 meeting falling LTVs as customers return to dining out. DoorDash is likely to continually underperform expectations.Why do we think DoorDash is worth maybe half its current valuation?We’ll leave it to “NEUTRAL” rated Goldman Sachs to sum it up, “With the stock trading near 20x 2022E EV/Gross Profit vs. GSe 28% 3-year Gross Profit CAGR compared to the peer average of 10x on 30% growth we believe much of that opportunity is reflected in the current valuation. Therefore, we remain Neutral rated, while our 12-month price target goes to $145 from $135 to reflect revised estimates and current comp multiples.”As always, if you can’t explain why one company is worth 2x more then all its peers…it’s a neutral.Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

DoorDash 4Q20 Earnings: This Is a Business Worth $50B?

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

<a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a> just had a vote of confidence in its digital financial strategy, with GIC (Singapore's Sovereign Wealth Fund) revealing that it will invest in <a href="https://www.smartkarma.com/entities/bank-jago-tbk-pt" target="_blank" data-smartkarma-citation="entities:31094:1" rel="noopener">Bank Jago Tbk PT (ARTO IJ)</a>, where Gojek recently increased its own stake to 22.16%. 
GIC will invest around US$225m to acquire circa 9% 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 Tbk PT (ARTO IJ)</a> through a rights issue to take place in March.
The Indonesian bank is already in the process of transforming itself into a digital bank but bringing in GIC as a shareholder will bring comfort in terms of governance of the bank, as well as obviously bringing new funds.
<a href="https://www.smartkarma.com/entities/bank-jago-tbk-pt" target="_blank" data-smartkarma-citation="entities:31094:1" rel="noopener">Bank Jago Tbk PT (ARTO IJ)</a> will secure IDR7tn or US$497.3m through the issuance of new shares, increasing its total capital to IDR8tn or US$564.4m.
The potential customer base for <a href="https://www.smartkarma.com/entities/bank-jago-tbk-pt" target="_blank" data-smartkarma-citation="entities:31094:1" rel="noopener">Bank Jago Tbk PT (ARTO IJ)</a> will be even larger assuming the Gojek-Tokopedia merger goes through, opening up Tokopedia's customers and sellers as potential customers. 
<a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> is not standing still on digital finance in Indonesia and has recently acquired a local bank Bank BKE, which has been renamed SeaBank, which we also discuss below. <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> probably represents the most serious potential competitive threat for <a href="https://www.smartkarma.com/entities/bank-jago-tbk-pt" target="_blank" data-smartkarma-citation="entities:31094:1" rel="noopener">Bank Jago Tbk PT (ARTO IJ)</a>.
<div class="content-highlight">
Valuations for the merged <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a> and <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia PT (1087142D IJ)</a> have crept up to US$35bn-US$40bn and no doubt an early success with <a href="https://www.smartkarma.com/entities/bank-jago-tbk-pt" target="_blank" data-smartkarma-citation="entities:31094:1" rel="noopener">Bank Jago Tbk PT (ARTO IJ)</a> will help it command a higher multiple on the listing of the combined entity. 
</div>

Gojek (1379371D IJ) just had a vote of confidence in its digital financial strategy, with GIC (Singapore's Sovereign Wealth Fund) revealing that it will invest in Bank Jago Tbk PT (ARTO IJ), where Gojek recently increased its own stake to 22.16%. 
GIC will invest around US$225m to acquire circa 9% stake in Bank Jago Tbk PT (ARTO IJ) through a rights issue to take place in March.
The Indonesian bank is already in the process of transforming itself into a digital bank but bringing in GIC as a shareholder will bring comfort in terms of governance of the bank, as well as obviously bringing new funds.
Bank Jago Tbk PT (ARTO IJ) will secure IDR7tn or US$497.3m through the issuance of new shares, increasing its total capital to IDR8tn or US$564.4m.
The potential customer base for Bank Jago Tbk PT (ARTO IJ) will be even larger assuming the Gojek-Tokopedia merger goes through, opening up Tokopedia's customers and sellers as potential customers. 
Sea Ltd (SE US) is not standing still on digital finance in Indonesia and has recently acquired a local bank Bank BKE, which has been renamed SeaBank, which we also discuss below. Sea Ltd (SE US) probably represents the most serious potential competitive threat for Bank Jago Tbk PT (ARTO IJ).

Valuations for the merged Gojek (1379371D IJ) and Tokopedia PT (1087142D IJ) have crept up to US$35bn-US$40bn and no doubt an early success with Bank Jago Tbk PT (ARTO IJ) will help it command a higher multiple on the listing of the combined entity. 


Gojek (1379371D IJ) - A Leg Up for Digital Finance?

DoorDash is one of our highest conviction shorts for 2021. It has a massively unprofitable business model with unstable market share that must be protected through unlimited spending. We think this is a $60-70 stock eventually.

DoorDash is one of our highest conviction shorts for 2021. It has a massively unprofitable business model with unstable market share that must be protected through unlimited spending. We think this is a $60-70 stock eventually.

Softbank Group shares fell 5% which seems like an outsize move relative to the overall markets (TOPIX -2%, NASDAQ -0.5%) but that does come off a record low discount (-16%). And whilst that has expanded to 20% it remains far better than the 27% discount when the company reported Q3 results on 8 Feb. One big difference is the Coupang IPO filing which implies at least $10bn in upside for Vision Fund based on aspirational pricing. If tech sentiment decidedly turns, the lost potential is probably as relevant for Softbank shares as today’s absolute downside for Vision Fund (-$1bn) and Alibaba (-2%, ~$2bn).

Softbank Group shares fell 5% which seems like an outsize move relative to the overall markets (TOPIX -2%, NASDAQ -0.5%) but that does come off a record low discount (-16%). And whilst that has expanded to 20% it remains far better than the 27% discount when the company reported Q3 results on 8 Feb. One big difference is the Coupang IPO filing which implies at least $10bn in upside for Vision Fund based on aspirational pricing. If tech sentiment decidedly turns, the lost potential is probably as relevant for Softbank shares as today’s absolute downside for Vision Fund (-$1bn) and Alibaba (-2%, ~$2bn).

Softbank Group: Jitters in a Frothy Market

United States

Uber Technologies Inc provides ride hailing services. The Company develops applications for road transportation, navigation, ride sharing, and payment processing solutions. Uber Technologies serves customers worldwide.

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Uber Technologies (UBER US)

Softbank Group - Vision Fund Ups and Downs: Coupang and Greensill

Vision Fund is having an interesting week: Coupang's IPO priced at a premium (+2.8bn in incremental gains) but portfolio company Greensill has...

Kirk Boodry

DoorDash 4Q20 Earnings: This Is a Business Worth $50B?

DoorDash's 4Q20 earnings confirmed our bearish thesis. The company is continuing to spend higher and higher amounts on customer acquisition due to...

Aaron Gabin

Gojek (1379371D IJ) - A Leg Up for Digital Finance?

The move by GIC to invest in Bank Jago represents a vote of confidence in Gojek's digital financial strategy and places it ahead of its competitors...

Angus Mackintosh

DoorDash: Run for the Exits

DoorDash is one of our top short picks for 2021. We think the earnings implosion is just the start as it fails to comp its outrageously fortunate...

Aaron Gabin

Softbank Group: Jitters in a Frothy Market

Tech jitters hit Softbank shares which dropped 5% v -1% for NASDAQ. We think the gap is partially explained by the Coupang IPO and low visibility...

Kirk Boodry

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