Daily BriefsTMT/Internet

TMT: Serverworks, Roblox, Beijing Kuaishou Technology Co Ltd and more

In today’s briefing:

  • TOPIX Inclusion: Serverworks (4434 JP):  Clouds in a BLUE Sky
  • Roblox DPO. Going Public Through A Direct Listing Instead Of A Traditional IPO
  • Kuaishou Technology Pre-IPO – Peer Comparison and Thoughts on Valuation

TOPIX Inclusion: Serverworks (4434 JP):  Clouds in a BLUE Sky

By Janaghan Jeyakumar, CFA

On Friday after market-close, Tokyo-based cloud integration company Serverworks (4434 JP) announced (J-only) they had received approval to move from the MOTHERS Section to the First Section of the Tokyo Stock Exchange as of 15th January 2021.

TSE1 reassignment triggers inclusion into the TOPIX Index and the Inclusion Event can be expected to be at the close of trading 25th February 2021.

Serverworks provides Amazon Web Services (AWS) based cloud integration services to corporate clients in Japan. They help companies transition from conventional on-premise information systems where companies own and operate their own information equipment and software to cloud-based solutions where a third party service provider (Amazon.com Inc (AMZN US) in the case of AWS) invests in equipment and software and charges users typically on a pay-as-you-go basis depending on the level of usage.  

In this insight, we take a look at the Index Inclusion Parameters and the Fundamentals of the company to evaluate the upside potential of the TOPIX Inclusion Event. 


Roblox DPO. Going Public Through A Direct Listing Instead Of A Traditional IPO

By Andrei Zakharov

The online gaming and entertainment technology decacorn Roblox intends to sell of up to ~197 million shares of Class A common stock through a direct listing in February. The opening public price of common stock on the NYSE will be determined by buy and sell orders collected by the NYSE from broker-dealers. Roblox has the largest global online gaming community with more than 150 million MAUs and ~75% of all American children ages 9-12 play Roblox. In 2019 Roblox entered into a JV agreement with Songhua, an affiliate of Tencent Holdings to pursue opportunities of expanding business in China.

Goldman Sachs and Morgan Stanley are lead financial advisors on the upcoming DPO. Roblox raised ~$856 million in funding over 9 rounds, according to Crunchbase. Their latest $520 million Series H round was led by Altimeter Capital and Dragoneer Investment Group.

Altos Ventures, Tiger Global Management, Andreessen Horowitz, Investment Group of Santa Barbara and Warner Music Group also participated in this funding round. The Series H round valued Roblox at ~$29 billion, assuming a purchase price of $45 per share. 


Kuaishou Technology Pre-IPO – Peer Comparison and Thoughts on Valuation

By Sumeet Singh

Kuaishou Technology (KT) is a content community and social platform that is looking to raise around US$5bn in its Hong Kong IPO. The company is backed by Tencent, Sequoia China, Baidu, DST Global, Boyu Capital, Temasek and others.

As of six months ended Jun 2020, it had 302m daily active users (DAUs), who spent 85 mins on average on the app every day. It also had 776m monthly active users (MAUs) and total e-commerce GMV of RMB109.6bn. On an average 1.1bn short videos were uploaded on its app during 1H20.

As per iResearch, Kuaishou was globally the largest live streaming platform by gross billings from virtual gifting and average live streaming MPUs, the second largest short video platform by average DAUs, and the second largest live streaming e-commerce platform by GMV, over six months ended June 30, 2020.

I have covered various aspects of the company’s performance in my previous notes: 

In this note, I’ll undertake a peer comparison, provide earnings forecasts and talk about valuations. 


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