Daily BriefsTMT/Internet

TMT: Cartrade, Ethereum, Affirm Holdings, Beijing Huafeng Test & Control Technology-A and more

In today’s briefing:

  • CarTrade Tech IPO- A Patchy Drive
  • The Potential of DApps to Disrupt Ownership Rights for Digital Assets and Content
  • ESG and BNPL: Whether It’s “Buy Now, Pay Later” Or “Buy, Not Pay Later” Makes All the Difference
  • Index Rebalance & ETF Flow Recap: MSCI, LQ45, STAR50, Li Auto, Intouch, Krafton, Kakao Bank

CarTrade Tech IPO- A Patchy Drive

By Nitin Mangal

Internet IPOs are turning out to be the theme of the year in India so far. In yet another instance, Cartrade (0056989Z IN), operator of Carwale, and Bikewale lately received SEBI’s nod of floating the public issue.

Cartrade, along with its subsidiaries, operates an automotive digital ecosystem which connects automobile customers, OEMs, dealers, banks, insurance companies and other stakeholders. The Group owns and operates under several brands: CarTrade, CarWale, Shriram Automall, BikeWale, etc. Through these platforms, the group enables new and used automobile customers, vehicle dealerships, automotive manufacturers and other businesses to buy and sell their vehicles.

While the auto tech platforms have several players in the Industry, CarTrade is the first one in the line to get listed. The company also reported in the DRHP that it is the only competitor to boast a positive net income, while also ranking number one on relative online search popularity when compared to their key competitors over the period from April 2020 to March 2021. 

However, on the flip side CarTrade also undergoes several shortfalls on the balance sheet end. A simple forensic check of DRHP reveal issues like aggressive revenue recognition, worrying cash yield, fragile earnings, etc.

The Potential of DApps to Disrupt Ownership Rights for Digital Assets and Content

By Mio Kato

The Ethereum Blockchain: First Mover That Transformed the Blockchain

The Ethereum blockchain was launched in 2015 and is built on the decentralised and distributed architecture present in Bitcoin. Ethereum uses smart contracts which can be interconnected to interact with each other and hence create an operational platform.

The significance of the Ethereum platform is that it allows users to build applications running on the blockchain, similar to software running on a computer. Through running smart contracts on Ethereum Virtual Machine (EVM), mass consumption of decentralised apps is made possible.

Given that Ethereum is a decentralised network, clients will have the benefit of control over their data, with no central governing authority. Ethereum is a permission-free, public blockchain platform whereby all transactions recorded on it are visible and accessible by everyone. The blockchain uses a Proof of Work (PoW) consensus mechanism according to which all nodes need to agree on a ledger to access the entries recorded in the network.

The key benefit of Ethereum when compared with other blockchains is that it has a large network which has been tested through years of operation and billions of trading value. For instance, in the early part of 2020, the total value of cryptocurrencies invested in Ethereum smart contracts exceeded US$ 10bn.

However, on the other hand, due to this growing popularity, Ethereum transaction (gas) fees reached a record US$ 23 per transaction in February 2021. Previously, for most of 2020, gas fees were around US$ 2. Although gas fees hit a high of US$ 61.74 in May 2021, transaction fees had declined to reasonable levels in the subsequent month of June 2021 at an average of around US$ 2.15. However, the decline in gas prices is indicative of the decline in demand for Ethereum (the cryptocurrency).

Ethereum Average Transaction Fee
Source: ycharts

Another key issue is that the growing demand has caused slower processing times whereby processing times are much slower than those of newer blockchains.

Ethereum’s open-ended and open-source nature has led to the creation of numerous dApps on the blockchain. In this report, we will be discussing some dApps which run on the Ethereum blockchain and how each of these have responded to the issues of high transaction fees and slow processing times on the blockchain.

These dApps and the sidechains that have evolved to support greater functionality for them create interesting new possibilities which we believe are currently underappreciated. In particular, we believe investor attention is too focused on what blockchains can currently enable rather than the overall direction in which blockchain technology is evolving. This is because despite the massive media attention on crypto and blockchain, the technology itself remains at the early stages of its development and deployment and thus many of the critical limitations it faces could be solved in time. It is thus more pertinent, we feel, to examine what some of these early dApps are trying to accomplish and some of the future possibilities that they hint at.

ESG and BNPL: Whether It’s “Buy Now, Pay Later” Or “Buy, Not Pay Later” Makes All the Difference

By Kyle Rudden

On 23 July, Jason Yap publised an excellent Insight titled BNPL Industry Through an ESG Lens. His knowledge of the “Buy Now, Pay Later” (BNPL) industry per se is well beyond mine, so I defer to his report for fundamentals on the industry and its companies.

I do, however, have a few thoughts to add regarding ESG. Whilst Jason is spot-on for ESG issues he covered, I want to: 1) point out a potential ESG positive related to inclusive finance and sustainable development, and 2) expand on a major ESG negative associated with advertising and marketing.

This is a deep dive into a few specific ESG issues, and hopefully complementary to Jason’s work.

Index Rebalance & ETF Flow Recap: MSCI, LQ45, STAR50, Li Auto, Intouch, Krafton, Kakao Bank

By Brian Freitas

In this weeks recap, we look at:

Inflows to KraneShares CSI China Internet Fund (KWEB US) ETF continue even as the constituent stocks sell-off. There have also been large inflows to the Tracker Fund of Hong Kong Ltd (2800 HK) and Hang Seng H Share Index ETF (2828 HK) ETFs.

Events This Week

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6 Aug

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