Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<div class="content-highlight"><p>AppLovin announced its IPO price range of $75 to $85 per share. The company is selling 25 million shares and at the high end of the IPO price range, the company is aiming to raise $2.1 billion. At the high end of the IPO price range ($85 per share), AppLovin would be valued at $30.4 billion. </p></div><p>Our base case valuation of AppLovin is EV of $35.1 billion, implied market cap of $35.7 billion, and implied target price per share of $99.8. This represents 17% higher than the high end of the IPO price range of $85. We have a POSITIVE view of the AppLovin IPO. Our base case valuation of AppLovin is based on a 16x EV/S multiple (using 2021 sales estimate), which represents a 10% higher than the average EV/S multiple of the comps. It is also below the EV/S multiple of Unity Software and Roblox which trade at EV/S multiple of 26.8x and 19.2x, respectively. </p><p>We estimate AppLovin to generate sales of $2.2 billion (up 51% YoY) and an operating profit of $65.2 million in 2021. From 2020 to 2025, we have assumed the company's sales to grow at a CAGR of 28.6%.</p>

AppLovin announced its IPO price range of $75 to $85 per share. The company is selling 25 million shares and at the high end of the IPO price range, the company is aiming to raise $2.1 billion. At the high end of the IPO price range ($85 per share), AppLovin would be valued at $30.4 billion. Our base case valuation of AppLovin is EV of $35.1 billion, implied market cap of $35.7 billion, and implied target price per share of $99.8. This represents 17% higher than the high end of the IPO price range of $85. We have a POSITIVE view of the AppLovin IPO. Our base case valuation of AppLovin is based on a 16x EV/S multiple (using 2021 sales estimate), which represents a 10% higher than the average EV/S multiple of the comps. It is also below the EV/S multiple of Unity Software and Roblox which trade at EV/S multiple of 26.8x and 19.2x, respectively. We estimate AppLovin to generate sales of $2.2 billion (up 51% YoY) and an operating profit of $65.2 million in 2021. From 2020 to 2025, we have assumed the company's sales to grow at a CAGR of 28.6%.

<ul>
<li>Founded in 2011, <a href="https://www.smartkarma.com/entities/applovin-corp" target="_blank" data-smartkarma-citation="entities:32989:1" rel="noopener">AppLovin Corp (APP US)</a> is getting ready to complete its IPO in 2Q 2021. The company is aiming to raise about $1 billion in this IPO. KKR purchased a minority stake in the company in 2018 at about $2 billion valuation. The IPO valuation is likely to be much higher.</li>
<li>The <a href="https://www.cityindex.co.uk/market-analysis/applovin-ipo-background-guide/" target="_blank" rel="noopener">company</a> originally started its business helping customers to improve the smartphone customer experiences for all the users. In recent years, the company has become a much bigger player in the mobile gaming segment and it also helps developers to grow their users and improve monetization of their apps. </li>
<li>AppLovin's income statement shows strong sales growth in the past three years but declining profit margins. AppLovin generated sales of $1,451.1 million and an operating loss of $62.1 million in 2020. The company's sales have nearly tripled from 2018 to 2020. Despite the company's strong sales growth, one of the things that is not so clear in the prospectus is what percentage of the company's sales growth in the past three years has been driven by organic growth versus acquisitions.</li>
</ul>


Founded in 2011, AppLovin Corp (APP US) is getting ready to complete its IPO in 2Q 2021. The company is aiming to raise about $1 billion in this IPO. KKR purchased a minority stake in the company in 2018 at about $2 billion valuation. The IPO valuation is likely to be much higher.
The company originally started its business helping customers to improve the smartphone customer experiences for all the users. In recent years, the company has become a much bigger player in the mobile gaming segment and it also helps developers to grow their users and improve monetization of their apps. 
AppLovin's income statement shows strong sales growth in the past three years but declining profit margins. AppLovin generated sales of $1,451.1 million and an operating loss of $62.1 million in 2020. The company's sales have nearly tripled from 2018 to 2020. Despite the company's strong sales growth, one of the things that is not so clear in the prospectus is what percentage of the company's sales growth in the past three years has been driven by organic growth versus acquisitions.


<p>In this insight, we provide an updated valuation analysis on the <a href="https://www.smartkarma.com/entities/roblox-corp" target="_blank" data-smartkarma-citation="entities:29697:1" rel="noopener">ROBLOX Corp (RBLX US)</a> direct public listing. The company has provided a guidance that it plans to complete its direct listing on or near March 10th. The company has also provided the full year results in 2020. Roblox plans to sell 198,917,280 shares in this direct listing. In January 2021, the company sold about 12 million shares of convertible preferred stock in a private placement at $45 per share, valuing the company at<a href="https://www.barrons.com/articles/roblox-sets-date-to-go-public-through-a-direct-listing-51614036401" target="_blank" rel="noopener"> $29.5 billion. </a></p><div class="content-highlight"><p>Our revised valuation of Roblox is an implied market cap of $49.4 billion and implied price of $75.3 per share. Our valuation of the company has been slightly lowered by 1.2% versus our previous estimate. <strong>At a valuation of $49.4 billion, this would represent 67% higher levels than the last private market value of $29.5 billion.</strong></p></div>

In this insight, we provide an updated valuation analysis on the ROBLOX Corp (RBLX US) direct public listing. The company has provided a guidance that it plans to complete its direct listing on or near March 10th. The company has also provided the full year results in 2020. Roblox plans to sell 198,917,280 shares in this direct listing. In January 2021, the company sold about 12 million shares of convertible preferred stock in a private placement at $45 per share, valuing the company at $29.5 billion. Our revised valuation of Roblox is an implied market cap of $49.4 billion and implied price of $75.3 per share. Our valuation of the company has been slightly lowered by 1.2% versus our previous estimate. At a valuation of $49.4 billion, this would represent 67% higher levels than the last private market value of $29.5 billion.

Roblox Direct Public Listing Valuation Update

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<p>We have theorised previously that the upgraded Switch that everyone expects from Nintendo could utilise graphics partner, Nvidia’s DLSS technology. This could help the company close the gap with Sony and Microsoft and could have a variety of other implications which we discuss below.</p>

We have theorised previously that the upgraded Switch that everyone expects from Nintendo could utilise graphics partner, Nvidia’s DLSS technology. This could help the company close the gap with Sony and Microsoft and could have a variety of other implications which we discuss below.

Nintendo – DLSS Developments Have Implications for Switch “Pro”

<p>Roblox, one of the leading global game platforms, announced on Friday (8 January) that it plans to go public through a Direct Public Listing (DPL), instead of the traditional IPO. Ahead of this direct public listing, <a href="https://www.cnbc.com/2021/01/08/roblox-expects-direct-listing-on-nyse-in-february.html" target="_blank" rel="noopener">Roblox</a> raised $520 million in private financing, valuing the company at $29.5 billion or $45 per share.</p><div class="content-highlight"><p><strong>Our valuation analysis suggests a base case implied market cap of $50 billion and a target price of $76.20 per share for Roblox. This would represent 69% higher level than its most recent private capital raise of $520 million, valuing the company at $29.5 billion or $45 per share. The direct listing valuation range is from $40.5 billion to $60.5 billion, according to our valuation sensitivity analysis. </strong></p></div>

Roblox, one of the leading global game platforms, announced on Friday (8 January) that it plans to go public through a Direct Public Listing (DPL), instead of the traditional IPO. Ahead of this direct public listing, Roblox raised $520 million in private financing, valuing the company at $29.5 billion or $45 per share.Our valuation analysis suggests a base case implied market cap of $50 billion and a target price of $76.20 per share for Roblox. This would represent 69% higher level than its most recent private capital raise of $520 million, valuing the company at $29.5 billion or $45 per share. The direct listing valuation range is from $40.5 billion to $60.5 billion, according to our valuation sensitivity analysis. 

United States

Unity Software Inc. provides software solutions. The Company offers graphic tools to create, run, and monetize real-time 2D and 3D content for mobile phones, tablets, PCs, consoles, and augmented and virtual reality devices. Unity Software serves customers worldwide.

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Unity Software (U US)

AppLovin IPO Valuation Analysis

Our base case valuation of AppLovin is implied market cap of $35.7 billion and target price per share of $99.8. This represents 17% higher than the...

Douglas Kim

AppLovin IPO Preview

AppLovin Corp (APP US) is getting ready to complete its IPO in 2Q 2021. The company is aiming to raise about $1 billion in this IPO.

Douglas Kim

Roblox Direct Public Listing Valuation Update

Our revised valuation of Roblox is a market cap of $49.4 billion and implied price of $75.3 per share which would represent 67% higher levels than...

Douglas Kim

Nintendo – DLSS Developments Have Implications for Switch “Pro”

We examine recent developments for Nvidia's DLSS technology and consider the implications for the expected Switch "Pro", including for third party...

Mio Kato

Roblox Valuation Analysis

Our base case valuation for Roblox is $50 billion and a target price of $76.20 per share. This would represent 69% higher than its most recent...

Douglas Kim

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