Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Major US Merchant Deal: Tencent Holding’s (700.HK) [Tencent] Afterpay Touch's (APT.AU) [Afterpay] recently announced that it is further expanding its Buy Now, Pay Later (BNPL) model to several major high profile US merchants in order to boost sales and margins. Afterpay is now allowing all US users to shop at 13 retailers by October 2021 - ahead of the holiday shopping season; and*Tencent’s Midas Touch: Tencent continues to hit it out of the park with its Afterpay stake. In addition to its superb return on investment over the past ten months since the stake announcement - -even after giving back some of its gains, this alliance with Australia’s premier financial technology BNPL company is paying dividends to Tencent in numerous other ways.

*Major US Merchant Deal: Tencent Holding’s (700.HK) [Tencent] Afterpay Touch's (APT.AU) [Afterpay] recently announced that it is further expanding its Buy Now, Pay Later (BNPL) model to several major high profile US merchants in order to boost sales and margins. Afterpay is now allowing all US users to shop at 13 retailers by October 2021 - ahead of the holiday shopping season; and*Tencent’s Midas Touch: Tencent continues to hit it out of the park with its Afterpay stake. In addition to its superb return on investment over the past ten months since the stake announcement - -even after giving back some of its gains, this alliance with Australia’s premier financial technology BNPL company is paying dividends to Tencent in numerous other ways. 

Tencent Holdings – Digging In Their Heals

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Thematic (Sector/Industry)

Australian Financial stocks are a lightly held.  Just 17% of the global funds in our analysis hold a position, with managers running a net underweight for the last decade.  They remain the 5th largest country/sector underweight globally.However the decline has started to reverse.  Buying in stocks such as <a href="https://www.smartkarma.com/entities/australia-and-new-zealand-banking-group-anz" target="_blank" data-smartkarma-citation="entities:443:1" rel="noopener">Australia and New Zealand Banking Group (ANZ) (ANZ AU)</a> and <a href="https://www.smartkarma.com/entities/zip-co-ltd-3708706d-4978-4e29-acbc-d9702b971da9" target="_blank" data-smartkarma-citation="entities:29126:1" rel="noopener">Zip Co Ltd (Z1P AU)</a> has placed active fund ownership on an upward trajectory for the first time in 5-years.Compared to Financials positioning in other countries, Australian Financials are lightly held, especially compared to US and India Financials which saw a strong resurgence post COVID.  If we add in to the mix the relatively large underweight and the fact that there is a Value rotation underway, it wouldn't be out of the question to expect Australian Financials to capture further inflows.

Australian Financial stocks are a lightly held.  Just 17% of the global funds in our analysis hold a position, with managers running a net underweight for the last decade.  They remain the 5th largest country/sector underweight globally.However the decline has started to reverse.  Buying in stocks such as Australia and New Zealand Banking Group (ANZ) (ANZ AU) and Zip Co Ltd (Z1P AU) has placed active fund ownership on an upward trajectory for the first time in 5-years.Compared to Financials positioning in other countries, Australian Financials are lightly held, especially compared to US and India Financials which saw a strong resurgence post COVID.  If we add in to the mix the relatively large underweight and the fact that there is a Value rotation underway, it wouldn't be out of the question to expect Australian Financials to capture further inflows.

Australian Financials:  Big Underweight (Finally) Finding Some Love?

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

<div>S&amp;P Dow Jones Indices will announce changes to the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> as part of the March index review on 12 March and the changes will be effective after the close of trading on 19 March.</div><div>
The data cutoff for the March review was 26 February.
We see <a href="https://www.smartkarma.com/entities/nuix-limited" target="_blank" data-smartkarma-citation="entities:31040:1" rel="noopener">Nuix Limited (NXL AU)</a>, <a href="https://www.smartkarma.com/entities/codan-ltd-australia" target="_blank" data-smartkarma-citation="entities:6189:1" rel="noopener">Codan Ltd (CDA AU)</a> and <a href="https://www.smartkarma.com/entities/pilbara-minerals-ltd" target="_blank" data-smartkarma-citation="entities:7460:1" rel="noopener">Pilbara Minerals (PLS AU)</a> as potential inclusions to the index, while we see <a href="https://www.smartkarma.com/entities/service-stream-ltd" target="_blank" data-smartkarma-citation="entities:18493:1" rel="noopener">Service Stream (SSM AU)</a>, <a href="https://www.smartkarma.com/entities/tassal-group-ltd" target="_blank" data-smartkarma-citation="entities:16234:1" rel="noopener">Tassal (TGR AU)</a> and <a href="https://www.smartkarma.com/entities/bravura-solutions-ltd" target="_blank" data-smartkarma-citation="entities:23648:1" rel="noopener">Bravura Solutions (BVS AU)</a> as potential exclusions from the index.
<a href="https://www.smartkarma.com/entities/champion-iron-ltd" target="_blank" data-smartkarma-citation="entities:19734:1" rel="noopener">Champion Iron (CIA AU)</a> and <a href="https://www.smartkarma.com/entities/de-grey-mining-ltd" target="_blank" data-smartkarma-citation="entities:6192:1" rel="noopener">De Grey Mining (DEG AU)</a> are close adds while <a href="https://www.smartkarma.com/entities/gwa-group-ltd" target="_blank" data-smartkarma-citation="entities:663:1" rel="noopener">Gwa Group Ltd (GWA AU)</a> and <a href="https://www.smartkarma.com/entities/smartgroup-corp-ltd" target="_blank" data-smartkarma-citation="entities:19954:1" rel="noopener">Smartgroup Corp (SIQ AU)</a> are close deletes.
Short interest on the potential inclusions has been decreasing and is currently near the lows while short interest on the potential deletions has been steadily increasing and is at the highs.
Since the last index review in December, <a href="https://www.smartkarma.com/entities/pointsbet-holdings-pty-ltd" target="_blank" data-smartkarma-citation="entities:29102:1" rel="noopener">PointsBet Holdings Pty Ltd (PBH AU)</a> was included in the index replacing <a href="https://www.smartkarma.com/entities/saracen-mineral-holdings-limited" target="_blank" data-smartkarma-citation="entities:2415:1" rel="noopener">Saracen Mineral Holdings (SAR AU)</a> following its merger of equals with <a href="https://www.smartkarma.com/entities/northern-star-resources-ltd" target="_blank" data-smartkarma-citation="entities:4243:1" rel="noopener">Northern Star Resources (NST AU)</a>.
</div>

S&amp;P Dow Jones Indices will announce changes to the S&amp;P/ASX 200 (AS51 INDEX) as part of the March index review on 12 March and the changes will be effective after the close of trading on 19 March.
The data cutoff for the March review was 26 February.
We see Nuix Limited (NXL AU), Codan Ltd (CDA AU) and Pilbara Minerals (PLS AU) as potential inclusions to the index, while we see Service Stream (SSM AU), Tassal (TGR AU) and Bravura Solutions (BVS AU) as potential exclusions from the index.
Champion Iron (CIA AU) and De Grey Mining (DEG AU) are close adds while Gwa Group Ltd (GWA AU) and Smartgroup Corp (SIQ AU) are close deletes.
Short interest on the potential inclusions has been decreasing and is currently near the lows while short interest on the potential deletions has been steadily increasing and is at the highs.
Since the last index review in December, PointsBet Holdings Pty Ltd (PBH AU) was included in the index replacing Saracen Mineral Holdings (SAR AU) following its merger of equals with Northern Star Resources (NST AU).


ASX200 Index Rebalance Preview: Three Potential Changes & Some Close Names

Global equities research in innovation & tech

Vishal Hargovan

An innovation focussed investment company

Granite Bay Capital

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.

<ul>
<li>Affirm is a leading North American based BNPL provider that is well placed to grow aggressively over the next decade</li>
<li>Their advantages are threefold:</li>
</ul><ol>
<li>Excellence at technology and data which enables Affirm to win enterprise scale platforms</li>
<li>The ability to address transactions across the average order value scale hence address a larger proportion of credit card displacement TAM</li>
<li>Transparency and fairness with a commitment to never charge late fees appeals to merchants who share this value set / brand ethos</li>
</ol><ul><li>There will be multiple winners in the BNPL space and while Afterpay is our preferred pick, we believe Affirm’s strengths cannot be ignored and warrants strong consideration in a long portfolio</li></ul>


Affirm is a leading North American based BNPL provider that is well placed to grow aggressively over the next decade
Their advantages are threefold:

Excellence at technology and data which enables Affirm to win enterprise scale platforms
The ability to address transactions across the average order value scale hence address a larger proportion of credit card displacement TAM
Transparency and fairness with a commitment to never charge late fees appeals to merchants who share this value set / brand ethos
There will be multiple winners in the BNPL space and while Afterpay is our preferred pick, we believe Affirm’s strengths cannot be ignored and warrants strong consideration in a long portfolio

Affirm (AFRM) – The Rise of the Financial Super App

Key points
<ul>
<li>Afterpay is well on its way to becoming an "Internet Scale" company facilitating viral customer growth in multiple markets.</li>
<li>AfterPay’s flywheel results in aggregation of demand and supply with exceptionally low marginal cost of acquisition.</li>
<li>Afterpay is exposed to two winning trends - growth in eCommerce and migration away from credit cards.</li>
<li>Afterpay is Global - low-cost acquisitions in Europe and Asia will enable it to scale in new geographies quickly and attract global retailers.</li>
<li>It brings retailers new customers, higher conversion, hard to reach millennials and higher AOVs.</li>
<li>It drives repeat purchases with each new cohort increasing frequency of use over the previous cohort.</li>
<li>We still see further upside, despite Afterpay being up almost 5X since the beginning of 2020 (valuation article to follow).</li>
</ul>

Key points

Afterpay is well on its way to becoming an "Internet Scale" company facilitating viral customer growth in multiple markets.
AfterPay’s flywheel results in aggregation of demand and supply with exceptionally low marginal cost of acquisition.
Afterpay is exposed to two winning trends - growth in eCommerce and migration away from credit cards.
Afterpay is Global - low-cost acquisitions in Europe and Asia will enable it to scale in new geographies quickly and attract global retailers.
It brings retailers new customers, higher conversion, hard to reach millennials and higher AOVs.
It drives repeat purchases with each new cohort increasing frequency of use over the previous cohort.
We still see further upside, despite Afterpay being up almost 5X since the beginning of 2020 (valuation article to follow).


Australia

Zip Co Limited provides point-of-sale credit and digital payment services. The Company offers retail finance solutions to small, medium, and enterprise businesses. Zip Co serves retail, education, health, and travel industries in Australia.

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Zip (ZIP AU)

Tencent Holdings – Digging In Their Heals

TENCENT HOLDINGS: Tencent' s Afterpay recently announced a further expansion of its BNPL model to several major US merchants in order to boost...

Thomas J. Monaco

Australian Financials: Big Underweight (Finally) Finding Some Love?

Australian Financial stocks are the 5th largest country/sector underweight globally. But is their decade long decline starting to reverse?

Steven Holden

ASX200 Index Rebalance Preview: Three Potential Changes & Some Close Names

We see three potential changes to the ASX200 in the March review while there are another two close adds/deletes. High short interest on the...

Brian Freitas

Affirm (AFRM) – The Rise of the Financial Super App

Affirm has a strong technology focus and a mission driven CEO who believes in bringing fairness to financial products. Investors should not...

Vishal Hargovan

Afterpay - An Internet Scale Company

Afterpay is on its way to becoming an "Internet Scale" company. We still see further upside driven by two winning trends - growth in eCommerce and...

Vishal Hargovan

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