Bamboo Innovator

CENTERED With H.E.R.O. Issue 9: Real-time A.I. Software Analysis for Breast Ultrasonography; Global Leader in Image/Video A.I. Processing Solution

Polarization = Multi-year investment advantage.

While stock markets always have winners and losers in good or bad times, the gap between them has reached historic levels. This structural polarization in markets and economies will continue to accelerate in the months and years ahead as global trade tensions remain unresolved and worsen, and actual rate cuts underwhelm expectations to result in greater market volatility. The polarization in stocks also reflects structural changes unleashed by disruptive innovation forces. A handful of high-quality stocks viewed as immune from the trade disputes are not “cheap”, and each time the market corrects, the stronger hands of longer-term farsighted investors will accumulate more and more of these quality innovators, while the weaker short-term opportunistic hands sell out, creating a resiliency “the-best-is-yet-to-be” effect in these stocks. On the other hand, you have “cheap” shares, but they keep getting cheaper, resulting in fewer long-term investors buying them, leading to greater illiquidity, and warping into tempting ”the-worst-is-yet-to-come” value traps.

Farsighted awakened investors skeptical of markets hitting near record highs, including the French Dassault family with over US$27 billion in fortune, are applying and transforming the storms of polarization to their multi-year investment advantage by making two decisive investment decisions:

(1) Investing with high conviction NOW and serenity in a selected group of listed liquid and transparent under-the-radar high-quality quiet exponential innovators with highly-profitable recurring-revenue business models and multi-year visibility and predictability in their recurring revenue streams – and knowing how to differentiate between the true innovators and the swarming imitators, between the devoted missionaries forging a greater purpose and the promotional arbitrage-based mercenaries worming into riches-recognition.

(2) Avoiding cheap-gets-cheaper value traps which may appear to have low expectations priced in their valuations. Also, many attempts to pick “turnaround plays” with “catalysts” often misjudge the “stall points”. In his book “Stall Points: Most Companies Stop Growing”, Olsen dissected how most stalling companies give little warning, and after stalling, which happens to 87% of the companies, there is a need for speed in recovering from stalls, and only 3.3% of the stalled companies manage to restart back to moderate to high growth. More importantly, in the age before disruption, turnaround plays get rewarded more easily from mean-reversion bounces. When there are more moving parts which did not exist previously to factor into the valuation appraisal process, especially the additional complex moving part of disruptive innovation forces weighing down on such bounces, a valuation discount is applied to adjust for the uncertainty. And compelling real alternatives in (1) simply suck the valuation oxygen out of these “turnarounds” to breathe any sustainable returns.

How to carry out calm investing in the anxious age of polarization? In Decision (1) for instance, Dassault Systèmes SE (EPA DSY), which sells 3D design, simulation and industrial data management software, announced in June 2019 that it is paying US$5.8bn in cash in the largest deal in its history for SMID cap exponential SaaS (software as a service) cloud innovators Medidata Solutions (NASDAQ MDSO), a specialist in analyzing data from clinical trials.

Consider a case in Asia: On 11 July 2019, a highly-profitable listed Asian innovator introduced Japan’s first real-time software analysis system for breast ultrasonography using artificial intelligence (A.I.). This unique A.I. technology differentiates from the conventional A.I. diagnostic assistance performing image recognition on the static medical image taken with CT and MRI. In the case of displaying a moving image in real time at a medical examination site like an ultrasonic inspection device, it is not possible to use the diagnostic assistance by conventional A.I. Therefore, this Asian innovator has developed an analysis system that detects a tumor in real-time for a moving image taken by an ultrasound system. Deep learning is used for image recognition in this analysis system, and the tumor is recognized rapidly and accurately to enable earlier detection and treatment of breast cancer. This new A.I. service is part of its “Genesis” business in A.I. system development platform serving developers of products that require advanced vision A.I.

On 14 May, this listed Asian innovator announced a healthy set of second quarter results (January – March 2019) for the fiscal year ended October with sales rising 55.8% yoy and operating profit increasing 75.1% yoy with an operating profit margin of 21.2%. As a mission-critical acceleration software solution partner company in high-speed processing for customer companies with multi-core processors, it has a track record of almost 100% repeat order rate. This Asian SaaS/AI innovator is highly profitable with ROE of 41.8%, ROA of 33.9%, and a healthy balance sheet in which net cash (zero debt) is 28.4% of total assets. It is up 27% since the trade war escalated from 6 May 2019, extending its YTD 2019 gains to 90%.

“In medical image diagnosis, as the resolution increases, the rate of disease detection increases, and processing that took one hour is completed immediately, which leads to reduction of burden on the medical site, improvement of efficiency, and in turn could save life. Even in drug discovery, accelerating the simulation results of active ingredients may accelerate the development of innovative new drugs. In the autonomous driving of cars, the probability of preventing accidents will increase if the brakes are applied earlier even if by 1 millisecond after the danger is detected. With the arrival of the IoT and A.I. era, there is an increasing problem of how to efficiently handle and process a rapidly growing amount of data and how to realize advanced analysis algorithms with limited computer resources and time. Therefore, the demand for high speed processing technology cultivated by our company has increased and plays an increasingly major role in the market in solving the high-value problem,” comments Dr. M, co-founder and CEO of this global leader in acceleration software services enabling mission-critical applications in this era where the amount of data used from A.I. to IoT to autonomous driving is increasing explosively and the demand for high-speed data processing is expanding exponentially.

Consider another case: A profitable listed Asian A.I. innovator that we have been monitoring in our broader watchlist of 200+ companies has launched a new powerful SaaS cloud video processing service on 30 Jan 2019 by bringing its video processing algorithm into a cloud platform, serving broadcasters, OTT media services, post-production works, dramatically reducing the time and workload normally required for video processing works. Customers include Japan Broadcasting Corporation (NHK) and Avex Entertainment who uses the cloud solution for virtual reality (VR) and other video production. The challenges in the B2B market for image conversion and editing software are aplenty: the need to have higher resolutions due to larger screens; conversion processing takes a long time; the requirement in conversion to 4K and 8K video, etc. Editing processes such as masking (fixing pixelated videos and swapping backgrounds) and wiping have traditionally  been done manually.

This global leader in image/video A.I. processing solution solves the high-value problems by using A.I. to support the automatic editing process such as identifying the positions of performers’ heads in videos. A.I. is also applied to remove brightness spikes caused by the flash band effect in frames of a press conference video to make editing at broadcast and production worksites more efficient, enabling video editing with virtually no impact on the background or people’s movements. There is also a unique “Glimpse” feature that allows the user to have 5-seconds preview before you start processing your video, and a real-time side-by-side preview during the processing. This allows you to have a “glimpse” at how user’s video will look without having to wait for the completed result. There is also a user interface-friendly workflow builder that allows the user to apply multiple video enhancement modules in a single continuous task, rather than having to process multiple times to achieve the desired result, translating to huge time and cost saving for the user.

On 14 June 2019, this listed Asian innovator announced a healthy set of second quarter results (February – April 2019) for the fiscal year ended October with sales rising 27.4% yoy and operating profit jumped 2.5X with an operating profit margin of 30.3%. This Asian SaaS/AI innovator is highly profitable with a healthy balance sheet and net cash (zero debt) is 73.5% of total assets. It is up over 35% since the trade war escalated from 6 May 2019, extending its YTD 2019 gains to 75%.

On 1 Nov 2018, this innovator announced the acquisition of a Finnish A.I. company which specializes in computer vision and deep learning, serving healthcare customers such as GE Healthcare and Novozymes in analyzing medical imaging data, such as histopathological cancer and prostrate cancer images, MRI and CT images. The Finnish company also applied its A.I. solution for Siemens to run on its open IoT platform MindSphere to read the data from sensors in the production lines to predict the product quality in advance, to simulate multiple outcomes, and to optimize the production process.

“The technique of generating an intermediate image by algorithm calculation, increasing the number of frames and making the image look smoother, is becoming common as a high image quality technology of modern flat-screen televisions. However, in flat-screen televisions, frame interpolation such as 60 fps to 120 fps (double speed interpolation) is performed using a dedicated hardware, whereas we carry out all of the processing in software. It was more difficult to realize this processing as an algorithm because If the frames are far apart (the number of frames is small), the movement of the objects reflected in the moving image or video becomes intense. We have cultivated the technique and know-how of how to smooth the movement efficiently.”

“As ‘seeing’ accounts for nearly 90% of the amount of information people obtain, image/video processing technology is important and represents very strong potential for business. I would like more people around the world to use our technology, which is not a sales goal, but a greater purpose. That we are widely recognized as a brand that creates world standard technology. Dolby is one of the references, and now Dolby is known to people all over the world. Many people imagine that it is probably a good sound just by watching the machine that contains that logo. Likewise, in the field of video, we aim our brand logo to be such an existence,” comments founder and CEO Dr. H.

Unlike many of the emerging tech companies in the US or China or ASEAN or most of everywhere else that are still loss-making and cash-burning, a selected group of Japan’s and Oceania’s listed under-the-radar exponential innovators have quietly built highly profitable recurring-revenue business models generating positive free cashflow. In addition, we noted that of the 46 US-listed SaaS companies with positive operating cashflow, the weighted average margin is 16.6%; weighted ROA is 9%; over half have a weighted net debt as % of total assets at 17.3%; and weighted valuation is over 200X. The focused portfolio of 40 H.E.R.O. innovators have an operating profit margin of 23.8%, weighted ROA of 21.6%, weighted net cash as % of total asset at 39.6%, and is trading at a steep discount of over 4-5X less expensive than the US peers despite commanding stronger fundamentals.

Our strategy remains: 0% in OEM/ODM + 0% in component makers + 0% in semiconductor & related sector + 0% in capital equipment, tech hardware & big-ticket items + 100% singular focus in a portfolio of highly-profitable listed Asia SMID-cap tech-focused exponential innovators = Higher probability of resiliency in both fundamentals and investment returns that are highly impervious to the US-China trade war risk and market volatility.

The portfolio of 40 H.E.R.O. innovators, which has an average market cap of US$1.32bn (median market cap of US$780m), delivered strong interim results growth amidst the US-China trade tensions: overall weighted sales rose 29.4% YoY and operating profit grew faster with increasing returns to scale at 56.7% YoY, supporting the portfolio returns. Weighted revenue of the portfolio companies increased by an absolute growth of 109% over the latest trailing three years, generating increasing returns to scale with an absolute growth of 179% in operating profit, with operating margin at 24.0%, return on equity (ROE = EBIT/Equity) of 32.7% and healthy balance sheet with net cash as a percentage of total assets at 39%.

An overwhelming majority (82.5%) of the 40 H.E.R.O. portfolio stocks are highly profitable “SaaS (software-as-a-service), information & data analytics/AI” companies and “platform business models”, a group which we believe is highly impervious to trade war risks. 10% are indispensable medtech innovators with high recurring-revenue high-profitability business models. EC, cybersecurity and IoT highly-profitable companies account for the remainder 7.5%.

Farsighted investors and our clients are experiencing first-hand and benefitting from the flight-to-quality effect in the market to quality listed innovators that are most relevant in this exponential world, because each time the market corrects, the stronger hands of longer-term farsighted investors will accumulate more and more of these quality innovators, while the weaker short-term opportunistic hands sell out, creating a resiliency effect in these stocks. Listed profitable SMID-cap tech innovators with non-linear exponential growth potential are the most relevant and mispriced multi-year investment trend and opportunity.

Inspiration for CENTERED with H.E.R.O.: Our clients, just like our H.E.R.O. innovators and business owners, understood the profoundness that it’s not about a Maslow-type pyramid that they need to scale upwards in profits and returns; the H.E.R.O. journey is not upwards, but a deeper journey inwards and towards the center, about the kind of person you want to become through the work you build and invest in to serve those you care about.

Deeper and inwards towards the center. As Einstein elucidates: “Strive not to be a success, but rather to be of value” – Amid all of life’s chaos and challenges, a restorative balm to all of us to be Centered in values with focus and purpose to be of value in serving an idea larger than ourselves and the people we care deeply for.

Thus far, of the 72 entrepreneurs and CEOs whom we had highlighted in our previous weekly research brief HeartWare, less than one-third are in our focused portfolio of 40 HERO Innovators, while the rest (50+) are in our broader watchlist of 200+ stocks.

If you are not moving forward in this exponential world, you are going backwards. If you want to join us at the leading edge of opportunity, if you identify yourself in the values and bigger sense of purpose in H.E.R.O., or you wish to tell from your heart to your most important person, son, daughter, wife, husband, or best friend that you are a farsighted and thoughtful explorer in the H.E.R.O.’s Journey participating in the long-term exponential growth of a selected group of outstanding entrepreneurs, standing up for the embracement of the human spirit, please contact us via email or WhatsApp at +65 9695 1860. Thank you very much for your patience and support and we look forward to growing exponentially with you as we explore the H.E.R.O.’s Journey together.

It started with rethinking a few questions. Question No. 1: Can the megacap tech elephants still dance? Or is this the better question: Is there an alternative and better way to capture long-term investment returns created by disruptive forces and innovation without chasing the highly popular megacap tech stocks, or falling for the “Next-Big-Thing” trap in overpaying for “growth”, or investing in the fads, me-too imitators, or even in seemingly cutting-edge technologies without the ability to monetize and generate recurring revenue with a sustainable and scalable business model? How can we distinguish between the true innovators and the swarming imitators?

Question No. 2: What if the “non-disruptive” group of reasonably decent quality companies with seemingly “cheap” valuations, a fertile hunting ground of value investors, all need to have their longer-term profitability and balance sheet asset value to be “reset” by deducting a substantial amount of deferred innovation-related expenses and investments every year, given that they are persistently behind the innovation cycle against the disruptors, just to stay “relevant” to survive and compete? Let’s say this invisible expense and deferred liability in the balance sheet that need to be charged amount to 20 to 30% of the revenue (or likely more), its inexactitude is hidden; its wildness lurks and lies in wait. Would you still think that they are still “cheap” in valuation?

Consider the déjà vu case of Kmart vs Walmart in 2000s and now Walmart vs Amazon. It is easy to forget that Kmart spent US$2 billion in 2000/01 in IT and uses the same supplier as Walmart – IBM. The tangible assets and investments are there in the balance sheet and valuations are “cheap”. Yet Kmart failed to replicate to compound value the way it did for Walmart. Now Walmart is investing billions to “catch up” and stay relevant. Key word is “relevancy” to garner valuation.

We now live in an exponential world, and as the Baupost chief and super value investor Seth Klarman warns, disruption is accelerating “exponentially” and value investing has evolved. The paradigm shift to avoid the cheap-gets-cheaper “value traps”, to keep staying curious & humble, and to keep learning & adapting, has never been more critical for value investors. We believe there is a structural break in data in the market’s multi-year appraisal (as opposed to “mean reversion” in valuation over a time period of 2-5 years) on the type of recurring-revenue profitable business models, the “exponential innovators”, that can survive, compete and thrive in this challenging exponential world we now live in. Tech-focused innovators with non-linear exponential growth potential are the most relevant multi-year investment trend and opportunity.  

During our value investing journey in the Asian capital jungles over the decade plus, we have observed that many entrepreneurs were successful at the beginning in growing their companies to a certain size, then growth seems to suddenly stall or even reverse, and they become misguided or even corrupted along the way in what they want out of their business and life, which led to a deteriorating tailspin, defeating the buy-and-hold strategy and giving currency to the practice of trading-in-and-out of stocks. On the other hand, there exists an exclusive, under-the-radar, group of innovators who are exceptional market leaders in their respective fields with unique scalable business models run by high-integrity, honorable and far-sighted entrepreneurs with a higher purpose in solving high-value problems for their customers and society whom we call H.E.R.O. – “Honorable. Exponential. Resilient. Organization.”

The H.E.R.O. are governed by a greater purpose in their pursuit to contribute to the welfare of people and guided by an inner compass in choosing and focusing on what they are willing to struggle for and what pains they are willing to endure, in continuing to do their quiet inner innovation work, persevering day in and day out. There’s a tendency for us to think that to be a disruptive innovator or to do anything grand, you have to have a special gift, be someone called for. We think ultimately what really matters is the resolve — to want to do it, bring the future forward by throwing yourself into it, to give your life to that which you consider important. We aim to penetrate into the deeper order that whispers beneath the surface of tech innovations and to stand on the firmer ground of experience hard won through hearing and distilling the essence of the stories of our H.E.R.O. in overcoming their struggles and in understanding the origin of their quiet life of purpose, who opened their hearts to us that resilience and innovation is an art that can be learned, which can embolden all of us with more emotional courage and wisdom to go about our own value investing journey and daily life.

Warm regards,
KB | kb@heroinnovator.com | WhatsApp +65 9695 1860
www.heroinnovator.com

CENTERED With H.E.R.O. Issue 8: A.I. for People In Need, Asian IoT-SaaS Partner of Amazon’s “AWS IoT Events” Worldwide Service

What is the visibility and future ahead when markets are shrouded in a destabilizing and lulling yellow light instilled by the “Yellow Lantern” of fear?

Akin to the “Yellow Lantern” antagonist in the American comic book who gain power by feeding on fear, the creature of unabating lower bond yields and near-record stock market indexes has been boosted by fears of a global economic slowdown pushing central banks’ pre-emptive action into expectations of aggressive rate cuts to avert a sharper slowdown.

Yet, underneath the strength in aggregate asset prices, while the S&P 500 has risen 11% since January 2018, among the broader universe of U.S. stocks worth more than US$50 million, just over half are still in the red over that time. The median stock is down 0.7% over 18 months. The picture around the world is even starker. About two-thirds of global stocks are lower, measured in U.S. dollars, than they were 18 months ago. The median decline is 14%.

However, many of these battered “cheaper” laggards are disrupted cheap-gets-cheaper value traps – and they remain the biggest risk in the markets for the cashed-up bargain hunters priding themselves on their abstinence who continue to have a fatal temptation for these stocks, reminiscing for the previously comfortable mean reversion bounce despite a growing painful realization that there is an uncomfortable structural break in the market’s multi-year appraisal of businesses that can survive and compete in the exponential world. Turning to the “cheap” value traps and “defensives” is akin to the ever-riskier investment action of fighting fear with fear itself. Eventually, the Yellow Lantern is defeated by the Green Lantern hero who embody the positive energy of willpower to protect the planet from harm.

The structural rise of a selected group of listed liquid and transparent under-the-radar high-quality quiet exponential innovators with highly-profitable recurring-revenue business models and strengthening fundamentals/ increasing returns-to-scale has been a Green Lantern-like force of positive energy protecting farsighted long-term investors. These investors include the French Dassault family with over US$27 billion fortune who continue to invest with conviction NOW (with emphasis) and serenity in these innovators quietly dedicating their lives to improving your own, guided by an inner compass and willpower in choosing and focusing on what they are willing to struggle for and what pains they are willing to endure. We like to briefly highlight two such listed profitable artificial intelligence (A.I.) innovators who also illuminated insights on the progress of A.I. applications.

What is the value of an A.I. that does not need a software programmer to tell them what to do? Traditional software is coded by an army of human programmers, which is expensive, fragile and difficult to maintain. Deep learning is software that’s not “written/coded” but rather, it “trained” itself using data under a learning framework, and it improves exponentially with more data and over time. Many AI algorithms and programs are custom developed for a specific company or an industry.

Consider the case of a listed profitable Asian SaaS (software-as-a-service) innovator who combines A.I. algorithm from seven areas: (1) image/video analysis module; (2) text understanding module; (3) dialogue & natural language processing module; (4) recommendation module according to user’s taste and preferences; (5) prediction module; (6) abnormality detection module; (7) reinforcement learning module – to create deep learning solutions for a wide range of customers who can immediately use in the business, including Toyota, NTT Docomo, Fanuc, Dentsu, Recruit Holdings, etc.

By incorporating the combined seven A.I. algorithms as a single system provided through the cloud into the software and hardware of the client, the accuracy improves more and more over time, and it becomes more indispensable with practically very little risk of cancellation of the subscription service, and sales will steady accumulate with high profit margin.

Advanced A.I. technology is a must for autonomous driving and connected cars, which demand rapid processing of massive volumes of data. After discovering its technical AI prowess in natural-language processing and image recognition, Toyota Motor took a strategic stake in the company and joined forces with the listed innovator in R&D in autonomous vehicles.

One of the uniqueness of the deep learning A.I. system of this innovator is that it can automatically recognize and track the behavior, emotions and expressions of “people in need” (such as looking around on the road, feeling unwell, etc) using the combined video/image recognition algorithm and abnormality detection module, thus differentiating from the general-purpose AI video analysis, and also going beyond the crime prevention and disaster prevention.

On 15 May 2019, this listed Asian innovator announced a healthy set of first half results (October 2018 – March 2019) for the fiscal year ended September with an operating profit margin of 35.8%, and management estimates its FY09/2019 (Oct 2018 – Sept 2019) sales to increase 66.3% yoy and operating profit to rise 51% yoy with an OP margin of 36%. This Asian SaaS/AI innovator is highly profitable with a healthy balance sheet and net cash (zero debt) is 65.6% of total assets. It is up over 9% since the trade war escalated from 6 May 2019, extending its YTD 2019 gains to 86%.

“Almost all (99.99%) of software have been deductively described by the engineer in a single code line, but it is now possible to embed the inductive reasoning ability to be added to software by deep learning technology, and that software is described by data, not humans. We believe that in the long run, most of the current software will be replaced by an intelligent embedded algorithm with inductive inference capability. In addition, the algorithm should promote better cooperation between software and human that enhances performance by learning knowledge and experience of people in each industry. We will continue to develop business to create value towards the post-digital information society of the near future in order to solve various social problems through our vision of ‘formulating software of the future’. We have developed several function-specific algorithm modules which can be used as core functions and sub functions of various software and hardware. By combining a plurality of algorithm modules, we can provide algorithms flexibly and quickly to meet diverse needs. We want A.I. to penetrate every corner of society,” comments founder and CEO Dr. U.

On 16 June 2019, this Asian innovator announced the 100% acquisition of a profitable MaaS (mobility-as-a-service) innovator who has deployed over 100,000 IoT devices throughout Japan with a stable recurring-revenue subscription service business model. The acquisition price of this MaaS company which generates over US$41.3m in sales is US$26m. Management view the acquisition as completing the last mile in the MaaS field since it can now better extend its AI software value chain to IoT terminals. It expects strong business synergies with its deep learning A.I. software combined with the smart IoT devices to create new solutions and “enable the development of various profit models”.

This acquisition reminds us of an earlier A.I. stock, which is the only listed pure-play profitable IoT-SaaS innovator in the world, that we had briefly discussed earlier in our Roundtable on 29 May 2019. Since the Roundtable discussion, it shot up 124%, extending its YTD 2019 gains to 197%. It has an operating profit margin 24.7% (1Q FY12/2019: 25.6%), ROE (= OP/Equity) 17.4%, ROA 13%, positive free cashflow margin 11.9%, net cash as % total assets is 32.3%.

IoT devices have long service life while unit prices are low, and the typical project-based OEM/ODM business model are vulnerable to the unpredictability in capex spending and orders from their customers. This listed Asian innovator’s A.I.-powered and multi cross-communication IoT platform supports continuous automatic IoT data control and monitoring and it has the largest AI-powered surveillance center in its country. The process of connecting sensors to the Internet is complicated. The innovator can complete complicated processes simply by installing a dedicated device, and users can easily and inexpensively introduce IoT utilization of various sensors (compatible with all sensors) into their business in a few days via recurring subscription service. It has very high customer retention rate of 98%.

Some specific application scenarios of its recurring-revenue subscription services include:
• Preventive maintenance of factory/robot equipment: Semiconductor giant Tokyo Electron’s equipment are equipped with sensors (vibration sensors, acceleration sensors etc) whose data are connected to Microsoft Azure cloud and this innovator’s AI/IoT cloud platform with its unique algorithm-cloud data-sensor connect service monitors abnormal vibrations and speed associated with equipment outages to prevent equipment malfunction in order to ensure the stable operation of plant facilities. Customers of Tokyo Electron equipment subscribe monthly for the monitoring services.
• Abnormality detection of commercial kitchen equipment (freezer/refrigerator): Temperature and humidity management is important for food companies. In addition to visual dashboard confirmation at regular intervals, there is real-time management and quick awareness and response to unexpected situations that will ensure safe hygiene management.
• Autonomous and operation control of construction equipment, forklift, etc: Sakai’s compact roller construction machine utilizes this innovator’s IoT/AI control & monitoring platform to realize joint human or full autonomous operation. The innovator’s automatic steering and emergency braking software technology improves efficiency and safety.

On 10 May 2019, this listed SaaS cloud innovator announced a healthy set of first-quarter results in which sales increased 28.3% and operating profit rose 40.3% with improving margin and record-high in monthly recurring subscription sales.

On 30 May 2019, this IoT-SaaS innovator was announced as one of the important partners in Amazon’s AWS new IoT-SaaS service for worldwide customers called “AWS IoT Events”, which is a fully managed IoT service that makes it easy to detect and respond to changes indicated by IoT sensors and applications. These event changes include malfunctioning machinery, a stuck conveyor belt, or a slowdown in production output – and automatically trigger actions or alerts in response. AWS IoT Events helps you gain visibility across your equipment, applications, and fleets of devices allowing you to do things like build a monitoring application that triggers customer support when assets fail.

Events are patterns of data that identify changes in equipment or facilities like a robotic arm being misaligned on the factory floor or a motion sensor detecting movement after business hours. Industrial companies such as manufacturers, energy utilities, and food processors want to be able to analyze their device data to detect and respond to events from many different IoT sensors and applications to drive faster and better-informed decisions.

Detecting events based on data from thousands of devices requires companies to write code to evaluate the data, deploy infrastructure to host the code, and secure the architecture from end-to-end, which is undifferentiated heavy lifting that customers want to avoid.

Using AWS IoT Events, customers can now easily detect events like this at scale by analyzing data from a single sensor or across thousands of IoT sensors and hundreds of equipment management applications in real time. With AWS IoT Events, you use a simple interface to create detectors that evaluate device data and trigger AWS Lambda functions or notifications via Amazon SNS in response to events. The detectors can evaluate tens of thousands of input messages from devices every second, identify events when they occur, and trigger actions. For example, when temperature changes indicate that a freezer door is not sealing properly, AWS IoT Events can automatically trigger a text message to a service technician to address the issue.

AWS IoT Events is priced per message evaluation. Message evaluations are metered each time the event detector logic evaluates an incoming message to determine whether an action or an alert should be triggered.

A pricing example: Over 30 days, a fleet of 500 trucks each has a single event detector which evaluates incoming messages every hour from the truck fuel gauge and every 15 minutes from a telematics application:
• Number of Messages Evaluated per truck: 30 days * (1 message / hour * 24 hour / day + 1 message / 15 minutes * 1440 minutes/day) = 3,600 message evaluations/truck
• Number of Messages Evaluated for all 500 trucks: 500 trucks * (3,600 message evaluations/truck) = 1,800,000 message evaluations
• Monthly Charges = 1,800,000 message evaluations in US East Region * $1.10/10,000 message evaluations = $198.00

Unlike many of the emerging tech companies in the US or China or ASEAN or most of everywhere else that are still loss-making and cash-burning, a selected group of Japan’s and Oceania’s listed under-the-radar exponential innovators have quietly built highly profitable recurring-revenue business models generating positive free cashflow. In addition, we noted that of the 46 US-listed SaaS companies with positive operating cashflow, the weighted average margin is 16.6%; weighted ROA is 9%; over half have a weighted net debt as % of total assets at 17.3%; and weighted valuation is over 200X. The focused portfolio of 40 H.E.R.O. innovators have an operating profit margin of 23.8%, weighted ROA of 21.6%, weighted net cash as % of total asset at 39.6%, and is trading at a steep discount of over 4-5X less expensive than the US peers despite commanding stronger fundamentals.

Our strategy remains: 0% in OEM/ODM + 0% in component makers + 0% in semiconductor & related sector + 0% in capital equipment, tech hardware & big-ticket items + 100% singular focus in a portfolio of highly-profitable listed Asia SMID-cap tech-focused exponential innovators = Higher probability of resiliency in both fundamentals and investment returns that are highly impervious to the US-China trade war risk and market volatility.

The portfolio of 40 H.E.R.O. innovators, which has an average market cap of US$1.41bn (median market cap of US$820m), delivered strong interim results growth amidst the US-China trade tensions: overall weighted sales rose 30.6% YoY and operating profit grew faster with increasing returns to scale at 59.2% YoY, supporting the portfolio returns.

An overwhelming majority (82.5%) of the 40 H.E.R.O. portfolio stocks are highly profitable “SaaS (software-as-a-service), information & data analytics/AI” companies and “platform business models”, a group which we believe is highly impervious to trade war risks. 10% are indispensable medtech innovators with high recurring-revenue high-profitability business models. EC, cybersecurity and IoT highly-profitable companies account for the remainder 7.5%.

Farsighted investors and our clients are experiencing first-hand and benefitting from the flight-to-quality effect in the market to quality listed innovators that are most relevant in this exponential world, because each time the market corrects, the stronger hands of longer-term farsighted investors will accumulate more and more of these quality innovators, while the weaker short-term opportunistic hands sell out, creating a resiliency effect in these stocks. Listed profitable SMID-cap tech innovators with non-linear exponential growth potential are the most relevant and mispriced multi-year investment trend and opportunity.

Inspiration for CENTERED with H.E.R.O.: Our clients, just like our H.E.R.O. innovators and business owners, understood the profoundness that it’s not about a Maslow-type pyramid that they need to scale upwards in profits and returns; the H.E.R.O. journey is not upwards, but a deeper journey inwards and towards the center, about the kind of person you want to become through the work you build and invest in to serve those you care about.

Deeper and inwards towards the center. As Einstein elucidates: “Strive not to be a success, but rather to be of value” – Amid all of life’s chaos and challenges, a restorative balm to all of us to be Centered in values with focus and purpose to be of value in serving an idea larger than ourselves and the people we care deeply for.

Thus far, of the 72 entrepreneurs and CEOs whom we had highlighted in our previous weekly research brief HeartWare, less than one-third are in our focused portfolio of 40 HERO Innovators, while the rest (50+) are in our broader watchlist of 200+ stocks.

If you are not moving forward in this exponential world, you are going backwards. If you want to join us at the leading edge of opportunity, if you identify yourself in the values and bigger sense of purpose in H.E.R.O., or you wish to tell from your heart to your most important person, son, daughter, wife, husband, or best friend that you are a farsighted and thoughtful explorer in the H.E.R.O.’s Journey participating in the long-term exponential growth of a selected group of outstanding entrepreneurs, standing up for the embracement of the human spirit, please contact us via email or WhatsApp at +65 9695 1860. Thank you very much for your patience and support and we look forward to growing exponentially with you as we explore the H.E.R.O.’s Journey together.

It started with rethinking a few questions. Question No. 1: Can the megacap tech elephants still dance? Or is this the better question: Is there an alternative and better way to capture long-term investment returns created by disruptive forces and innovation without chasing the highly popular megacap tech stocks, or falling for the “Next-Big-Thing” trap in overpaying for “growth”, or investing in the fads, me-too imitators, or even in seemingly cutting-edge technologies without the ability to monetize and generate recurring revenue with a sustainable and scalable business model? How can we distinguish between the true innovators and the swarming imitators?

Question No. 2: What if the “non-disruptive” group of reasonably decent quality companies with seemingly “cheap” valuations, a fertile hunting ground of value investors, all need to have their longer-term profitability and balance sheet asset value to be “reset” by deducting a substantial amount of deferred innovation-related expenses and investments every year, given that they are persistently behind the innovation cycle against the disruptors, just to stay “relevant” to survive and compete? Let’s say this invisible expense and deferred liability in the balance sheet that need to be charged amount to 20 to 30% of the revenue (or likely more), its inexactitude is hidden; its wildness lurks and lies in wait. Would you still think that they are still “cheap” in valuation?

Consider the déjà vu case of Kmart vs Walmart in 2000s and now Walmart vs Amazon. It is easy to forget that Kmart spent US$2 billion in 2000/01 in IT and uses the same supplier as Walmart – IBM. The tangible assets and investments are there in the balance sheet and valuations are “cheap”. Yet Kmart failed to replicate to compound value the way it did for Walmart. Now Walmart is investing billions to “catch up” and stay relevant. Key word is “relevancy” to garner valuation.

We now live in an exponential world, and as the Baupost chief and super value investor Seth Klarman warns, disruption is accelerating “exponentially” and value investing has evolved. The paradigm shift to avoid the cheap-gets-cheaper “value traps”, to keep staying curious & humble, and to keep learning & adapting, has never been more critical for value investors. We believe there is a structural break in data in the market’s multi-year appraisal (as opposed to “mean reversion” in valuation over a time period of 2-5 years) on the type of recurring-revenue profitable business models, the “exponential innovators”, that can survive, compete and thrive in this challenging exponential world we now live in. Tech-focused innovators with non-linear exponential growth potential are the most relevant multi-year investment trend and opportunity.  

During our value investing journey in the Asian capital jungles over the decade plus, we have observed that many entrepreneurs were successful at the beginning in growing their companies to a certain size, then growth seems to suddenly stall or even reverse, and they become misguided or even corrupted along the way in what they want out of their business and life, which led to a deteriorating tailspin, defeating the buy-and-hold strategy and giving currency to the practice of trading-in-and-out of stocks. On the other hand, there exists an exclusive, under-the-radar, group of innovators who are exceptional market leaders in their respective fields with unique scalable business models run by high-integrity, honorable and far-sighted entrepreneurs with a higher purpose in solving high-value problems for their customers and society whom we call H.E.R.O. – “Honorable. Exponential. Resilient. Organization.”

The H.E.R.O. are governed by a greater purpose in their pursuit to contribute to the welfare of people and guided by an inner compass in choosing and focusing on what they are willing to struggle for and what pains they are willing to endure, in continuing to do their quiet inner innovation work, persevering day in and day out. There’s a tendency for us to think that to be a disruptive innovator or to do anything grand, you have to have a special gift, be someone called for. We think ultimately what really matters is the resolve — to want to do it, bring the future forward by throwing yourself into it, to give your life to that which you consider important. We aim to penetrate into the deeper order that whispers beneath the surface of tech innovations and to stand on the firmer ground of experience hard won through hearing and distilling the essence of the stories of our H.E.R.O. in overcoming their struggles and in understanding the origin of their quiet life of purpose, who opened their hearts to us that resilience and innovation is an art that can be learned, which can embolden all of us with more emotional courage and wisdom to go about our own value investing journey and daily life.

Warm regards,
KB | kb@heroinnovator.com | WhatsApp +65 9695 1860
www.heroinnovator.com

CENTERED With H.E.R.O. Issue 7: Collaboration & Office Automation Software/AI, Asia’s Leading Online Marketplace in Local Experience Tours & Activities 

Restart (trade talks) minus Reboot (rate cut expectations) = Greater market volatility?

Would pressing the “Restart” button in US-China trade talks, with no guarantee of a final agreement any time soon because fundamental differences still persist, reboot the aggressive rate cut expectations already impounded into the capital market pricing mechanism, and result in greater market volatility over a prolonged period of time despite a short-term relief rally? Due to a material worsening in economic outlook with the buckling of the China-US axis that has been the backbone of the world economy since the 1990s, markets are already expecting four rate cuts by the Fed over the coming year, starting with an aggressive cut of 50 basis points by end July.

The destabilizing force of easy money from the bet on central-bank easing had propped up the stock markets this year and pushed opportunistic traders into an ever-riskier frenzied grope for yields and into exotic investments. There is a long queue to buy the Austria’s 100-year bond with a 1.17% interest rate at 154% of face value – which means investors in the long-duration bond get back two-third of their money after interest in 2117. 40% of the world’s government bonds and US$13 trillion in fixed income bond yield less than zero, and a significant part are illiquid and with troubling underlying asset quality. So much debt has been sold at low yields that even a modest bump in yields near record lows could result in traders and banks to record mark-to-market losses on their bond portfolios. And the seemingly short-term favorable outcome from the G20 meeting could possibly send long-end yields rising to result in a possible VaR shock.

Perhaps it’s akin to the protagonist “Siddhartha” in the eponymous-titled profound book written by the German-Swiss author and Nobel laureate Hermann Hesse in 1922, the busy lostness experienced by Siddhartha before he attained enlightenment: “Whenever he awoke from this hateful spell, he fled further, seeking to escape in more exotic pleasures, seeking to numb himself back into the grind of hoarding and acquisition. For a long time he sought sleep in vain, his heart full of misery he felt he could no longer endure, full of a nausea that coursed through him like the vile, insipid taste of the wine, like the dreary all-too-sweet music, the all-too-soft smiles of the dancers, the all-too-sweet perfume of their hair. He felt nausea at his perfumed hair, the smell of wine on this breath, the wary slackness and reluctance of his skin. Just as someone who has eaten or drunk too much vomits it up again in agony and yet is glad for the relief, sleepless Siddhartha yearned for a monstrous wave of nausea that would rid him of these pleasures, these habits, this whole meaningless existence and himself along with it.”

Farsighted long-term investors such as the French Dassault family with over US$27 billion fortune are able to penetrate beyond the fog to continue to invest with conviction NOW (with emphasis) and serenity in the structural trend of a selected group of listed liquid and transparent under-the-radar high-quality quiet exponential innovators with highly-profitable recurring-revenue business models and strengthening fundamentals/ increasing returns-to-scale. Last week, it was reported that the US enterprise SaaS (software-as-a-service) revenue have passed the US$100 billion run rate this quarter, led by Microsoft, Salesforce and Adobe, and that SaaS revenue still accounts for just 20% of the overall enterprise software market despite the rapid overall CAGR growth of 30%, indicating buoyant growth for many years to come.

Unlike many of the emerging tech companies in the US or China or ASEAN or most of everywhere else that are still loss-making and cash-burning, a selected group of Japan’s and Oceania’s listed under-the-radar exponential innovators have quietly built highly profitable recurring-revenue business models generating positive free cashflow.

Consider the case of a listed Asian collaboration management and office automation (OA) software H.E.R.O. Innovator commanding the highest positive free cashflow margin (15.7%) and fastest total receivables period (34 days) in the entire software industry in its home country. Its “Rule of 40” — recurring revenue growth plus free cashflow margins should exceed 40% — also ranks as the best in the entire software industry in its home country.

This Asian SaaS/AI innovator is highly profitable with a healthy balance sheet and net cash (zero debt) in balance sheet is 49.5% of total assets. It is up over 14% since the trade war escalated from 6 May 2019, extending its YTD 2019 gains to 52%. On 26 April 2019, it announced a healthy set of results: sales grew 31% and profit rose 37.8%.

There is an increasing market demand for collaborative management software across industries and organizational size because the demand to complete work through multi-person, cross-department and multi-organization collaboration has increased. As organizations become more and more complex, information and systems are dispersed, resulting in more and more fragmented daily work. The daily work of employees needs to be switched between different platforms and systems. Many employees spend most of their daily work on different system data checks, administrative transactions, and various ineffective communication, while the effective time to create productive work is greatly reduced. There is an increasing need to coordinate resources and data in an orderly manner on a daily basis for increasingly knowledge-intensive work and establish a real-time, dynamic, and open collaborative operation system to streamline business processes, improve project workflow and management efficiency, and facilitate strategic and tactical business decisions to improve profitability.

Coupled with high employee coverage, frequency of use on a daily basis, and strong mobility attributes, collaborative management software is increasingly becoming the unified “gateway” platform for integration with multiple heterogeneous enterprise information applications (ERP/CRM/HRM/PM) through which worker interact with other business applications to improve workflow, and are increasingly having the same indispensable impact at work as a core fundamental platform that the FAANGs (Facebook, Amazon, Apple, Netflix and Google) had at home. Collaborative OA software has evolved from an app tool into a platform designed to capture and draw data from the different “silos” inside a business about how workers interact with corporate information, with different business apps, and with each other, combining and learning from them to give managers a new level of insight to make them more productive.

“Through our OA artificial intelligence voice assistant users can carry out instant completion of transactions that may take one or two days to complete in the past, such as travel application/booking/approval, expense reimbursement, voucher processing; quickly search related documents; quickly build approval processes without IT involvement etc, realizing automation in the daily processing of daily trivial work to make full use of the fragmentation in time to deal with administrative affairs and improve the efficiency in the daily management process,” comments Mr. W, founder and Chairman of this listed Asian innovator.

Chairman W adds: “If you encounter technical or product problems that you don’t understand at work, the AI voice assistant will give answers based on the relevant knowledge and experience accumulated by the system, and recommend which colleagues in the company are most suitable for such problems. When you are promoted or tasked to take over a new department and begin to formulate a new work plan, you can ask the AI voice assistant to give you a sales and operational performance overview, comparison of performance over the years, and other analysis report. The AI voice assistant will also tell you which sales employees have good performance in winning customers, which employees you need to be concerned with their performance. The AI voice assistant will also tell you the diligence, the learning ability and innovation ability of each person, how they spend their work time in office, and the possible risks of each item. At the end of the meeting, the AI voice assistant will quickly sort out the meeting minutes and automatically assign each person’s tasks.”

“If you tell the AI voice assistant that you want to visit the customer on a business trip in Beijing on Monday afternoon, the AI will automatically set up the day’s schedule, and whether there is a conflict, and remind the matter at the appropriate time. During the customer visit, the AI will automatically identify the path and identify other customers whom you can visit along the way. When you tell the AI voice assistant about your specific business trip to visit a customer or supplier and the return time, and tell the AI to book a flight ticket and hotel, the AI immediately registered you for business trips in the OA system, inquire about the best time and most cost-effective ticket, as well as the best location and the best value-for-money hotel, and recommend to you, and automatically handles all the backend travel expense and reimbursement and integration with the finance and accounting department in invoices, payments, reconciliations, audits and other matters with intelligent financial management and control services. The cost control system integrated with the OA system will carry out the pre-existing cost control throughout the whole process. After the activity is over, the name of the activity can be directly viewed in the system to visually check various budget usages and achieve accurate financial accounting.”

Consider another example in Asia’s leading online booking service specializing in local experience tours and activities which is up 150% YTD in 2019 amidst trade war uncertainties. On 14 May 2019, this listed Asian innovator announced a healthy and better-than-expected set of first quarter results for the fiscal year ended December with an operating profit margin of 25.8%, and it also revised upwards its first-half operating profit by 3.4X (OP margin 16%) from the previous forecast, while maintaining its previously conservative FY2019 estimate of operating profit to increase 43.9% with an OP margin of 14.8%, even as third quarter (July – September) is the peak period given the summer vacation period when it is more common for travelers to take longer vacations.

Unlike the typical low-margin business model of most OTA (online travel agency) marketplaces which have inventory of flight and hotel accommodation and hence very weak working capital dynamics and poor operating cashflow, this listed Asian innovator has an inventory-free business model. More than 13,000 experience tours and activities in 150 countries can be booked at the local price before travel, and it has a partnership agreement with more than 6,000 highly trained, professional tour guides & instructors who are active worldwide. Over 90% of its revenue are from outbound overseas travel services while the rest are the growing inbound sales of foreign tourists. The company’s value is enhanced by the posting of experiences only for customers who participated in the company’s service. As of the end of March 2019, the participation experiences reached a total of 410,000, and the posting rate is high. The content of the experience story is overwhelmingly many messages of appreciation to the local guide. Users are often repeaters, including hardcore loyal fans who use the online marketplace four to five times a year, and the number of members have been rising steadily every year. As at end March 2019, this Asian innovator had attracted 3.8 million monthly visitors and 2.9 million registered members, up from 2 million monthly visitors and 950,000 registered members in 2013. This Asian innovator has also been selected as the best company in the “Great Place to Work” survey for three consecutive years in 2017, 2018 and 2019.

“The memories of the journey are made by what you do there, rather than where and how to go. Tours and activities are the main travel experience and products. The majority of products currently require reservations before departure, but about 80% of the local tour market has been booked through offline procedures such as the concierge and free pamphlets at the destination hotel. There is high potential for growth by increasing the proportion of on-site tours that can be booked online. By providing overseas local activities, we maximize the experience and excitement of overseas travel that may last a lifetime of memories. That is the value that we pursue,” comments co-founder and CEO Mr. N.

Interestingly, this listed Asian innovator has also attracted the founder of Viator, the world’s first online marketplace in local experience tour activities, to join as an independent board director. After founder Rodney Cuthbert sold the then loss-making Viator to TripAdvisor (NASDAQ: TRIP) in 2014 for US$200m, Viator went on to compound its revenue multi-fold to over US$1 billion. We see good potential in this listed profitable Asian innovator to grow exponentially in the many years ahead.

Notably, this listed profitable Asian innovator, with its pure and singular focus in only local experience tours and activities and no flight ticket or hotel accommodation reservation or package tour, is generating around similar revenue to Indonesia’s loss-making unlisted online travel platform Traveloka, which generated a substantial part of its revenue from the generic flight and hotel accommodation reservations – and Traveloka is valued at US$4 billion, over 10X more than the highly profitable Asian innovator. HK-based unlisted loss-making travel activities marketplace Klook, which had quite similar revenue scale, command a valuation of over US$1 billion. Berlin-based unlisted loss-making tour booker GetYourGuide.com also had a valuation of over US$1 billion.

Our strategy remains: 0% in OEM/ODM + 0% in component makers + 0% in semiconductor & related sector + 0% in capital equipment, tech hardware & big-ticket items + 100% singular focus in a portfolio of highly-profitable listed Asia SMID-cap tech-focused exponential innovators = Higher probability of resiliency in both fundamentals and investment returns that are highly impervious to the US-China trade war risk and market volatility which have escalated since 6 May 2019.

The portfolio of 40 H.E.R.O. innovators, which has an average market cap of US$1.36bn (median market cap of US$868m), delivered strong interim results growth amidst the US-China trade tensions: overall weighted sales rose 30.6% YoY and operating profit grew faster with increasing returns to scale at 59.2% YoY, supporting the portfolio returns.

An overwhelming majority (82.5%) of the 40 H.E.R.O. portfolio stocks are highly profitable “SaaS (software-as-a-service), information & data analytics/AI” companies and “platform business models”, a group which we believe is highly impervious to trade war risks. 10% are indispensable medtech innovators with high recurring-revenue high-profitability business models. EC, cybersecurity and IoT highly-profitable companies account for the remainder 7.5%.

One of our focused portfolio stocks, the Korean SMID-cap tech innovator NICE Information Services (KOSDAQ: 030190) with a dominant 75% domestic market leadership in the recurring information & big data services in personal credit information, is up over 25% since the trade war escalated from 6 May 2019, extending its YTD 2019 gains to 66.7%.

With the impending “MY DATA” industry deregulation in Korea on big data business by revising currently the world’s most restrictive personal information protection law and a strengthening in loan reviews, market leader NICE is set to expand its decision analytics and big data marketing services revenue contribution from the current 8% to a potential 24% that its London-listed peer Experian is producing. NICE is also developing new artificial intelligence (AI) solutions with the convergence of financial and non-financial information to support loan decision-making, intelligent fraud bureau services and financial risk management.

Since we highlighted this Korean innovator about four months ago to one of our advisory clients, a business owner/CIO of an established Asia ex-Japan value fund management company in Singapore who manages sovereign wealth and pension/endowment money, the stock is up over 80% to a market value of US$930m. We are grateful to be able to deliver our recently operationalized bespoke investment solution for family offices, UNHW, corporates and long-term institutional investors with satisfactory results to this wise business owner/CIO client whom we like and respect and care for.

Farsighted investors and our clients are experiencing first-hand and benefitting from the flight-to-quality effect in the market to quality listed innovators that are most relevant in this exponential world, because each time the market corrects, the stronger hands of longer-term farsighted investors will accumulate more and more of these quality innovators, while the weaker short-term opportunistic hands sell out, creating a resiliency effect in these stocks. Listed profitable SMID-cap tech innovators with non-linear exponential growth potential are the most relevant and mispriced multi-year investment trend and opportunity.

Inspiration for CENTERED with H.E.R.O.: Our clients, just like our H.E.R.O. innovators and business owners, understood the profoundness that it’s not about a Maslow-type pyramid that they need to scale upwards in profits and returns; the H.E.R.O. journey is not upwards, but a deeper journey inwards and towards the center, about the kind of person you want to become through the work you build and invest in to serve those you care about.

Deeper and inwards towards the center. As Einstein elucidates: “Strive not to be a success, but rather to be of value” – Amid all of life’s chaos and challenges, a restorative balm to all of us to be Centered in values with focus and purpose to be of value in serving an idea larger than ourselves and the people we care deeply for..

Thus far, of the 72 entrepreneurs and CEOs whom we had highlighted in our previous weekly research brief HeartWare, less than one-third are in our focused portfolio of 40 HERO Innovators, while the rest (50+) are in our broader watchlist of 200+ stocks.

If you are not moving forward in this exponential world, you are going backwards. If you want to join us at the leading edge of opportunity, if you identify yourself in the values and bigger sense of purpose in H.E.R.O., or you wish to tell from your heart to your most important person, son, daughter, wife, husband, or best friend that you are a farsighted and thoughtful explorer in the H.E.R.O.’s Journey participating in the long-term exponential growth of a selected group of outstanding entrepreneurs, standing up for the embracement of the human spirit, please contact us via email or WhatsApp at +65 9695 1860. Thank you very much for your patience and support and we look forward to growing exponentially with you as we explore the H.E.R.O.’s Journey together.

It started with rethinking a few questions. Question No. 1: Can the megacap tech elephants still dance? Or is this the better question: Is there an alternative and better way to capture long-term investment returns created by disruptive forces and innovation without chasing the highly popular megacap tech stocks, or falling for the “Next-Big-Thing” trap in overpaying for “growth”, or investing in the fads, me-too imitators, or even in seemingly cutting-edge technologies without the ability to monetize and generate recurring revenue with a sustainable and scalable business model? How can we distinguish between the true innovators and the swarming imitators?

Question No. 2: What if the “non-disruptive” group of reasonably decent quality companies with seemingly “cheap” valuations, a fertile hunting ground of value investors, all need to have their longer-term profitability and balance sheet asset value to be “reset” by deducting a substantial amount of deferred innovation-related expenses and investments every year, given that they are persistently behind the innovation cycle against the disruptors, just to stay “relevant” to survive and compete? Let’s say this invisible expense and deferred liability in the balance sheet that need to be charged amount to 20 to 30% of the revenue (or likely more), its inexactitude is hidden; its wildness lurks and lies in wait. Would you still think that they are still “cheap” in valuation?

Consider the déjà vu case of Kmart vs Walmart in 2000s and now Walmart vs Amazon. It is easy to forget that Kmart spent US$2 billion in 2000/01 in IT and uses the same supplier as Walmart – IBM. The tangible assets and investments are there in the balance sheet and valuations are “cheap”. Yet Kmart failed to replicate to compound value the way it did for Walmart. Now Walmart is investing billions to “catch up” and stay relevant. Key word is “relevancy” to garner valuation.

We now live in an exponential world, and as the Baupost chief and super value investor Seth Klarman warns, disruption is accelerating “exponentially” and value investing has evolved. The paradigm shift to avoid the cheap-gets-cheaper “value traps”, to keep staying curious & humble, and to keep learning & adapting, has never been more critical for value investors. We believe there is a structural break in data in the market’s multi-year appraisal (as opposed to “mean reversion” in valuation over a time period of 2-5 years) on the type of recurring-revenue profitable business models, the “exponential innovators”, that can survive, compete and thrive in this challenging exponential world we now live in. Tech-focused innovators with non-linear exponential growth potential are the most relevant multi-year investment trend and opportunity.  

During our value investing journey in the Asian capital jungles over the decade plus, we have observed that many entrepreneurs were successful at the beginning in growing their companies to a certain size, then growth seems to suddenly stall or even reverse, and they become misguided or even corrupted along the way in what they want out of their business and life, which led to a deteriorating tailspin, defeating the buy-and-hold strategy and giving currency to the practice of trading-in-and-out of stocks. On the other hand, there exists an exclusive, under-the-radar, group of innovators who are exceptional market leaders in their respective fields with unique scalable business models run by high-integrity, honorable and far-sighted entrepreneurs with a higher purpose in solving high-value problems for their customers and society whom we call H.E.R.O. – “Honorable. Exponential. Resilient. Organization.”

The H.E.R.O. are governed by a greater purpose in their pursuit to contribute to the welfare of people and guided by an inner compass in choosing and focusing on what they are willing to struggle for and what pains they are willing to endure, in continuing to do their quiet inner innovation work, persevering day in and day out. There’s a tendency for us to think that to be a disruptive innovator or to do anything grand, you have to have a special gift, be someone called for. We think ultimately what really matters is the resolve — to want to do it, bring the future forward by throwing yourself into it, to give your life to that which you consider important. We aim to penetrate into the deeper order that whispers beneath the surface of tech innovations and to stand on the firmer ground of experience hard won through hearing and distilling the essence of the stories of our H.E.R.O. in overcoming their struggles and in understanding the origin of their quiet life of purpose, who opened their hearts to us that resilience and innovation is an art that can be learned, which can embolden all of us with more emotional courage and wisdom to go about our own value investing journey and daily life.

Warm regards,
KB | kb@heroinnovator.com | WhatsApp +65 9695 1860
www.heroinnovator.com

CENTERED With H.E.R.O. Issue 6: Dassault-Medidata; Asian SaaS-AI Medical Imaging Software; “100X: Exponential Innovators in the H.E.R.O.’s Journey to Navigate the Volatile Uncertain World”

The destabilizing force of easy money from growing rate-cut expectations and additional stimulus already impounded into the capital pricing mechanism has split the overall volatile market atom into three polarizing asset particles growing further apart:

(1) Ever-riskier and unstable “flight-to-junk” and interest rate & sentiment-sensitive yield-type scorching and crowded assets fed by the opportunistic grope for yield in passing from one hand to another, from over US$13 trillion worth of negative-yield global bonds (which doubled in the last six months) to property to alternative currencies in bitcoin and gold; and to alternative assets in illiquid loss-making cash-burning tech startups dependent on subsidies/promotions to acquire fleet-footed fickle customers.

(2) Ever-riskier growing chilling dark void of cheap-gets-cheaper disrupted value traps and conventional “defensives” which VALUE 2.0 investors and cashed-up bargain hunters priding themselves on their abstinence continue to have a fatal temptation for and shoot themselves in the foot, reminiscing for the previously comfortable mean-reversion bounce despite a growing painful realization that there is an uncomfortable structural break in the market’s multi-year appraisal of businesses that can survive and compete in the exponential world.

(3) Structural serenity and resilience in “flight-to-quality” assets held firm and added with growing conviction by farsighted long-term investors, especially in a selected group of listed liquid and transparent under-the-radar quiet exponential innovators with highly-profitable recurring-revenue business models and strengthening fundamentals/ increasing returns-to-scale who are exponentially widening their competitiveness gap with most corporates who continue to struggle in adjusting and adapting themselves to stay relevant in an exponential world.

Assets in Category (1) also remind us of this quote by Professor Dr. Andrei Shleifer: “When noise traders are optimistic about particular securities, it pays arbitrageurs to create more of them. These securities might be new share issues, penny oil stocks, or junk bonds anything that is overpriced at the moment. Just as entrepreneurs spend resources to build casinos to take advantage of gamblers, arbitrageurs build investment banks and brokerage firms to predict and feed noise trader demand.”

Thus, lurking beneath the aggregate market data statistics and sentiments – analogous to that of the Picture of Dorian Gray in the novel by Oscar Wilde (1890) in which the face of Dorian Gray showed no signs of aging as time passed, whereas the sins of his worldly existence are vivid in the portrait of himself that he kept hidden in the attic – its wildness lie in wait. Analyzing the Dorian Gray-aggregate market data for risk on-risk off decision to scurry in and out of assets might increasingly prove less reliable.

Farsighted long-term investors in Category (3) assets include the fabled French Dassault family with over US$27bn fortune. Dassault Systèmes SE (EPA: DSY), which sells 3D design, simulation and industrial data management software, announced in June 2019 that it is paying US$5.8bn in cash in the largest deal in its history for SMID-cap exponential SaaS (software-as-a-service) cloud innovators Medidata Solutions (NASDAQ: MDSO), a specialist in analyzing data from clinical trials with over 1,300 clients, including 18 out of the top 25 pharma firms and nine out of 10 of the top contract research organisations, and generates over 14% in operating cashflow (OCF) margin in the fast-growing life sciences sector. Earlier in the week, Salesforce.com (NYSE: CRM) had announced the acquisition of big data visualization SMID-cap SaaS innovator Tableau Software (NYSE: DATA) for US$15.3bn. Both Medidata and Tableau are part of a group of 46 US-listed SaaS companies with positive OCF and a combined market value of over US$680 billion, and have stayed resiliently positive amidst the US-China trade war tensions.

Similarly, there is a selected under-the-radar group of highly-profitable Asian SMID cap exponential innovators which are also attractive acquisition targets for the tech giants to expand into new categories of growth or/and deepen their footprints in Asian markets, which provides long term downside protection in terminal value and supports their long term valuation.

Consider the case of a listed Asian AI medical diagnostics imaging software SaaS H.E.R.O. Innovator which lets radiologists and doctors view and manipulate the increasingly large and complex medical images. 90% of all Electronic Health Record (EHR) is imaging data (by volume) and growing exponentially. Nearly all other diagnostics imaging software take an image and compress so it can be transmitted, the Asian-listed medtech technology can stream images in such a way that no quality is lost.

This Asian SaaS/AI innovator is highly profitable with healthy balance sheet: OP Margin 46.9%, ROE 37%, ROA 30%. net cash (zero debt) in balance sheet is 35.7% of total assets. It is up over 32% since the trade war escalated from 6 May 2019, extending its YTD 2019 gains to 139%. On 2 April 2019, it announced a new round of share buyback to acquire up to 10% of the shares issued; it had recently completed a previous round of share buyback announced last year.

There are many clinical cases with proven ROI that include a publicized case of a child with severe headache in CT scan showing aneurysms requiring emergency intervention. There is no time to wait for tech or 3D lab post-processing. MRA/VRA (magnetic resonance arthrography) is performed on-the-fly with this innovative software. It had expanded to US with prestigious hospital groups including Mayo, Mercy, Yale New Haven, Duke Health and Partners Healthcare, and doctors graduating from Harvard and Yale will have been trained on the software.

The resilient H.E.R.O. Innovators are at the inflection point of their exponential growth trajectory to generate potential higher multi year gains ahead. Besides the breakthrough AI tech, an even more powerful new product is released: a single viewer for ALL images in the medical record (EMR).

“There’s a lot more image processing, a lot more looking at the body in different angles rather than just one, and clearly you can reconstruct in 3D. We don’t know of anyone at this point that has been able to match the functionality or the speed or the scalability of what we do. We’re a little unusual for an IT company because we make money, pay dividends and don’t have any debt. We’re the 37-year overnight success story,” comments CEO Dr. H, a medical doctor who co-founded the SaaS-AI firm in 1983 with fellow tech expert and wine buddy.

For a Southeast Asian UNHW/family office client who owns a hospital operator as a key asset in his business portfolio, we have advised a portfolio of Asian-listed SMID-cap medtech innovators to multiply his investment returns and business profit by becoming the distributor of this transformative diagnostic imaging software-as-a-service with his hospital operator, while benefiting the society/health of his home country.

Markets are also getting more discerning of the different quality of the SaaS companies. For recent outperformers Slack Technologies (NYSE: WORK) and Zoom Video Communications (NASDAQ: ZM), both had high net dollar retention rates (NDRR) — a commonly used SaaS metric that measures the percent of revenue from current customers retained from the prior year, after accounting for upgrades, downgrades, and churn. Slack’s NDRR was 143%—a figure above 100% is often called “negative churn”—and Zoom’s was 140%. Zoom had highly efficient customer acquisition costs: every dollar that Zoom spent in sales and marketing generated $1.80 in profit in the next year.

In contrast to the Uber or loss-making cash-burning marketplaces peddling undifferentiated cheap rides or goods with subsidies/promotions to millions of fickle individuals, the likes of Medidata and Zoom sell higher-margin subscriptions to tens of thousands of business customers. Like the SAAS – Salesforce.com, Adobe, Atlassian and ServiceNow – a selected group of emerging SaaS innovators like Zoom had cracked the code of distribution and adopted freemium pricing models that lowered barriers to initial adoption.

Enterprise software did not feature prominently in the original dotcom mania. Before the advent of cloud computing, selling and installing such on-premise software programs was tedious and labor-intensive. Big firms like Oracle and SAP dominated the market with bundled products which had to be customized to meet a customer’s needs. Today cloud-based SaaS innovators can lure clients with free trials that is near costless, since adding an extra customer requires little more than a tweak to a database.

And in an important industry trend which we highlighted in a previous issue as “The Power of One”, struggling SaaS firm Dropbox announced in June 2019 that it is revamping its user experience across all its platforms in its biggest redesign in 12 years to create a new integrated workspace with Slack, Zoom and Atlassian, so that workers can send Slack messages or set up Zoom meetings right from Dropbox and don’t have to keep switching between different apps.

Dropbox seems to have realized that file storage by itself is a dying business. With storage prices dropping and any app being able to add their own storage system, it needed to move up the enterprise stack and become a portal that opens and organizes your other tools. The question is whether files are always the central unit of work that comments and tasks should be pegged to, or whether it should be the task and project at the center of attention with files attached, or if it can become the identity and collaboration layer that connects the fragmented enterprise software, so that it could outlive file storage and stay relevant as new cloud office tools emerge.

Having the inner compass of the H.E.R.O. in our hearts can help us not lose our way in difficult and uncertain times as we journey together in the treacherous capital jungles.

Our strategy remains: 0% in OEM/ODM + 0% in component makers + 0% in semiconductor & related sector + 0% in capital equipment, tech hardware & big-ticket items + 100% singular focus in a portfolio of highly-profitable listed Asia SMID-cap tech-focused exponential innovators = Higher probability of resiliency in both fundamentals and investment returns that are highly impervious to the US-China trade war risk and market volatility which have escalated since 6 May 2019.

The portfolio of 40 H.E.R.O. innovators, which has an average market cap of US$1.36bn (median market cap of US$868m), delivered strong interim results growth amidst the US-China trade tensions: overall weighted sales rose 30.6% YoY and operating profit grew faster with increasing returns to scale at 59.2% YoY, supporting the portfolio returns.

An overwhelming majority (82.5%) of the 40 HERO portfolio stocks are highly profitable “SaaS (software-as-a-service), information & data analytics/AI” companies and “platform business models”, a group which we believe is highly impervious to trade war risks.

One of our focused portfolio stocks, the Korean SMID-cap tech innovator NICE Information Services (KOSDAQ: 030190) with a dominant 75% domestic market leadership in the recurring information & big data services in personal credit information, is up over 25% since the trade war escalated from 6 May 2019, extending its YTD 2019 gains to 66.7%.

With the impending “MY DATA” industry deregulation in Korea on big data business by revising currently the world’s most restrictive personal information protection law and a strengthening in loan reviews, market leader NICE is set to expand its decision analytics and big data marketing services revenue contribution from the current 8% to a potential 24% that its London-listed peer Experian is producing. NICE is also developing new artificial intelligence (AI) solutions with the convergence of financial and non-financial information to support loan decision-making, intelligent fraud bureau services and financial risk management.

Since we highlighted this Korean innovator about four months ago to one of our advisory clients, a business owner/CIO of an established Asia ex-Japan value fund management company in Singapore who manages sovereign wealth and pension/endowment money, the stock is up over 80% to a market value of US$930m. We are grateful to be able to deliver our recently operationalized bespoke investment solution for family offices, UNHW, corporates and long-term institutional investors with satisfactory results to this wise business owner/CIO client whom we like and respect and care for.

Farsighted investors and our clients are experiencing first-hand and benefitting from the flight-to-quality effect in the market to quality listed innovators that are most relevant in this exponential world, because each time the market corrects, the stronger hands of longer-term farsighted investors will accumulate more and more of these quality innovators, while the weaker short-term opportunistic hands sell out, creating a resiliency effect in these stocks. Listed profitable SMID-cap tech innovators with non-linear exponential growth potential are the most relevant and mispriced multi-year investment trend and opportunity.

Inspiration for CENTERED with H.E.R.O.: Our clients, just like our H.E.R.O. innovators and business owners, understood the profoundness that it’s not about a Maslow-type pyramid that they need to scale upwards in profits and returns; the H.E.R.O. journey is not upwards, but a deeper journey inwards and towards the center, about the kind of person you want to become through the work you build and invest in to serve those you care about.

Deeper and inwards towards the center. As Einstein elucidates: “Strive not to be a success, but rather to be of value” – Amid all of life’s chaos and challenges, a restorative balm to all of us to be Centered in values with focus and purpose to be of value in serving an idea larger than ourselves and the people we care deeply for.

Amidst escalating trade war, 29 May 2019 was the eventful inaugural roundtable of the Singapore’s Super H.E.R.O.s who come together to brainstorm about “Re-Imagining Value Investing in an Exponential World: VALUE 3.0 With Ever More Value Trap Losers & A Selected Under-the-Radar Group of Winners With Exponential Edge”. The Singapore Super H.E.R.O.s in the Roundtable are:

• François Badelon, business owner/CIO of French-headquartered Amiral Gestion Group who manages over 4bn euros in AUM
• Raymond Goh, business owner/CIO of New Silk Road Investment who manages over US$2bn AUM in Asia ex-Japan equities; Raymond was the former MD in equities at GIC
• Benjamin Ng, business owner/CIO of Whitefield Capital who manages money for sovereign wealth fund and pension/endowment fund in Asia ex-Japan equities
• Hemant Amin, business owner/CIO of Asiamin Capital, a highly successful single-family office and one of the early major investors in Indian-listed Bajaj Finance/Bajaj Finserv which compounded >100X to a market value of US$24bn/US$17bn

We are grateful to also have two great friends of H.E.R.O. joining the Roundtable: Jacqueline Too, senior advisor and award-winning veteran banker at multi-generational wealth management & IAM group Crossinvest; and Anton Chua, one of the branch business owners of Finexis which is one of the largest independent financial advisor firms in Singapore.

Thus far, of the 72 entrepreneurs and CEOs whom we had highlighted in our previous weekly research brief HeartWare, less than one-third are in our focused portfolio of 40 HERO Innovators, while the rest (50+) are in our broader watchlist of 200+ stocks.

If you are not moving forward in this exponential world, you are going backwards. If you want to join us at the leading edge of opportunity, if you identify yourself in the values and bigger sense of purpose in H.E.R.O., or you wish to tell from your heart to your most important person, son, daughter, wife, husband, or best friend that you are a farsighted and thoughtful explorer in the H.E.R.O.’s Journey participating in the long-term exponential growth of a selected group of outstanding entrepreneurs, standing up for the embracement of the human spirit, please contact us via email or WhatsApp at +65 9695 1860. Thank you very much for your patience and support and we look forward to growing exponentially with you as we explore the H.E.R.O.’s Journey together.

It started with rethinking a few questions. Question No. 1: Can the megacap tech elephants still dance? Or is this the better question: Is there an alternative and better way to capture long-term investment returns created by disruptive forces and innovation without chasing the highly popular megacap tech stocks, or falling for the “Next-Big-Thing” trap in overpaying for “growth”, or investing in the fads, me-too imitators, or even in seemingly cutting-edge technologies without the ability to monetize and generate recurring revenue with a sustainable and scalable business model? How can we distinguish between the true innovators and the swarming imitators?

Question No. 2: What if the “non-disruptive” group of reasonably decent quality companies with seemingly “cheap” valuations, a fertile hunting ground of value investors, all need to have their longer-term profitability and balance sheet asset value to be “reset” by deducting a substantial amount of deferred innovation-related expenses and investments every year, given that they are persistently behind the innovation cycle against the disruptors, just to stay “relevant” to survive and compete? Let’s say this invisible expense and deferred liability in the balance sheet that need to be charged amount to 20 to 30% of the revenue (or likely more), its inexactitude is hidden; its wildness lurks and lies in wait. Would you still think that they are still “cheap” in valuation?

Consider the déjà vu case of Kmart vs Walmart in 2000s and now Walmart vs Amazon. It is easy to forget that Kmart spent US$2 billion in 2000/01 in IT and uses the same supplier as Walmart – IBM. The tangible assets and investments are there in the balance sheet and valuations are “cheap”. Yet Kmart failed to replicate to compound value the way it did for Walmart. Now Walmart is investing billions to “catch up” and stay relevant. Key word is “relevancy” to garner valuation.

We now live in an exponential world, and as the Baupost chief and super value investor Seth Klarman warns, disruption is accelerating “exponentially” and value investing has evolved. The paradigm shift to avoid the cheap-gets-cheaper “value traps”, to keep staying curious & humble, and to keep learning & adapting, has never been more critical for value investors. We believe there is a structural break in data in the market’s multi-year appraisal (as opposed to “mean reversion” in valuation over a time period of 2-5 years) on the type of recurring-revenue profitable business models, the “exponential innovators”, that can survive, compete and thrive in this challenging exponential world we now live in. Tech-focused innovators with non-linear exponential growth potential are the most relevant multi-year investment trend and opportunity.  

During our value investing journey in the Asian capital jungles over the decade plus, we have observed that many entrepreneurs were successful at the beginning in growing their companies to a certain size, then growth seems to suddenly stall or even reverse, and they become misguided or even corrupted along the way in what they want out of their business and life, which led to a deteriorating tailspin, defeating the buy-and-hold strategy and giving currency to the practice of trading-in-and-out of stocks. On the other hand, there exists an exclusive, under-the-radar, group of innovators who are exceptional market leaders in their respective fields with unique scalable business models run by high-integrity, honorable and far-sighted entrepreneurs with a higher purpose in solving high-value problems for their customers and society whom we call H.E.R.O. – “Honorable. Exponential. Resilient. Organization.”

The H.E.R.O. are governed by a greater purpose in their pursuit to contribute to the welfare of people and guided by an inner compass in choosing and focusing on what they are willing to struggle for and what pains they are willing to endure, in continuing to do their quiet inner innovation work, persevering day in and day out. There’s a tendency for us to think that to be a disruptive innovator or to do anything grand, you have to have a special gift, be someone called for. We think ultimately what really matters is the resolve — to want to do it, bring the future forward by throwing yourself into it, to give your life to that which you consider important. We aim to penetrate into the deeper order that whispers beneath the surface of tech innovations and to stand on the firmer ground of experience hard won through hearing and distilling the essence of the stories of our H.E.R.O. in overcoming their struggles and in understanding the origin of their quiet life of purpose, who opened their hearts to us that resilience and innovation is an art that can be learned, which can embolden all of us with more emotional courage and wisdom to go about our own value investing journey and daily life.

Warm regards,
KB | kb@heroinnovator.com | WhatsApp +65 9695 1860
www.heroinnovator.com

CENTERED With H.E.R.O. Issue 5: Flourishing Highly-Profitable Exponential Innovators, Japan’s DeepMind, Anti-Fraud AI

Floundering and fragile macro left the overall markets splashing in whipsawed water. Unprecedented violence between the police and protesters following the mass demonstrations in Hong Kong over the controversial extradition bill, and the stunning reversal in suspending the bill, has been likened to a knife that has been plunged into the city’s heart, a knife that won’t be pushed further but also won’t be pulled out. Protests look to continue to demand the city’s leader to step down and to permanently scrap the bill. A quieter violence had taken place in the first government seizure of a bank in more than two decades in China. Baoshang Bank, which had assets of 576 billion yuan (US$84 billion), is a microcosm of the confounding challenges of China’s fragile financial foundation with banks using products such as trust beneficiary rights and directional asset-management plans to hide the true state of their bad loans and circumvent lending restrictions. Notably, one small lender in Baoshang Bank dwarves the US$12.8 billion bankruptcy of India’s NBFC (non-banking financial company) infrastructure lender IL&FS which left India Inc still reeling from the aftermath and on hold for another round of NBFC Crisis 2.0. In essence, 内忧外患 encapsulates the state of Asian markets: internal woes in social unrest and fragile financial foundation, and external troubles in trade war.

Flourishing and firm progress in fundamentals continue to be made by the selected group of under-the-radar highly-profitable exponential innovators with recurring-revenue SaaS (software-as-a-service) business models powered by artificial intelligence (AI). VALUE 3.0 investing is about protecting AND growing the assets of our clients in good and bad times, for the H.E.R.O. Innovator is born every day, even under the most austere of conditions and environment, solving high-value problems for their customers and society to compound exponentially.

“Japan’s DeepMind” AI platform and SaaS innovator (OP margin 30.5%, ROE 21.2%, ROA 19.5%, net cash at 69.2% of total asset) is up over 50% since the US-China trade war escalated from 6 May 2019, extending its YTD 2019 gains to over 160%. On 12 June 2019, “Japan’s DeepMind” announced a healthy set of results: FY04/2019 sales increased 19.2% and operating profit rose 18.6% and it expects stronger growth ahead after developing a new investment information service “AI stock portfolio diagnosis” jointly with SMBC Nikko Securities that is provided for its customers from 29 March 2019 and that it will be launching the “AI stock monitoring service” later this year.

On 5 June 2019, “Japan’s DeepMind” announced that Takenaka Corporation, one of the largest architecture, engineering and construction firms in Japan with sales of over US$9 billion, is using its AI-as-a-service in the structural design of buildings to reduce the routine work associated with designing building structures by some 70% and to propose to the architects different ideas, as well as in space control and building facility management to automatically and intelligently optimize operating conditions (schedule, aircon, lighting, room temperature, humidity) and realize energy and labor savings by using big data acquired from sensors. By continuously learning feedback data such as tenant preferences and comfort, tenants can be automatically provided with a customized indoor environment. Takenaka built some of the most important buildings in Japan, including the Tokyo Tower, the Tokyo Dome (the first large-scale stadium with air-supported membrane roof in Japan), the Fukuoka Dome (Japan’s first large-scale stadium with retractable roof), the Abeno Harukas (the tallest building in Osaka and Japan). Takenaka also has the largest construction R&D laboratory in the world with over 1,000 architects in its design department.

“Japan’s DeepMind” MLaaS (Machine Learning-as-a-Service) business model establishes an infrastructure which allows it to provide comprehensive AI services efficiently to solve various challenges in various industries just by changing input data, while achieving stable, sustained earnings with initial setup fee and recurring ongoing subscription fees and high switching costs since output precision increases through repeated machine learning. Client’s input data are sent to its AI engine and the output generated after machine learning through deep learning are applied in business settings. Results are measured and used for further machine learning. In addition to fixed recurring ongoing fees, ongoing fees in the form of revenue sharing will be introduced in FY04/2019.

“Japan’s DeepMind” founder and CEO emphasized the importance of having a bigger purpose and a nurturing corporate culture for engineers to immerse themselves in exploring innovations: “We aims to be a tech group where excellent AI engineers gather. An environment in which competent human resources can fully demonstrate their 100% ability and can enjoy the work, and ‘impurities’ such as titles and hierarchical relationships are not mixed. We believe that every person has the potential to become a ‘hero’ of a certain kind. We have been and will continue to build on our philosophy of ‘heart filled with amazement’ which represents our fundamental thought to provide services that would bring excitement and amazement to everyone rather than simply introducing and applying information technologies. I think that it is still an endless journey. I want to grow while cherishing the thought that ‘I want to impact society’ and ‘I want to create a service that surprises the world.’”

What is the value of an AI that analyzes databases of over 700 million telephone number information collected from public organizations such as national police organizations and local governments and users to provide security services to detect, prevent and block fraudulent and unwanted calls and messages?

According to an investigation by the National Police Agency, one in five calls are fraudulent & spam calls, and the number of fraudulent phone crimes since 2000 is over 165,000, and the damage amount has reached over US$328 million annually. The clever and frightening special fraud by phone calls is repeatedly taken up in the media as a massive social problem.

The rate of detection of malicious and nuisance calls by this AI service is about 99%, wit the incoming call screen displaying the name of the caller even if the number is not registered, discriminating it with a ‘beware’ warning image, and the false positive rate is less than 0.2%. Because the AI detection service has such high quality effectiveness, this listed Asian innovator has obtained trust from the police organization and a strategic alliance agreement was signed with the National Police Agency in March 2015 to establish a system to obtain nuisance call information from all over the country.

This anti-fraud/spam AI-SaaS innovator (OP margin 40%, ROE 60.2%, ROA 42.2%, net cash at 67.8% of total asset) is up over 41% in the recent month since the US-China trade war escalated, extending its YTD 2019 gains to 90%. On 12 June 2019, it announced a healthy set of 1st half interim results with 2.718 million monthly users subscribing to its services (+44.5% YoY) and revised upwards its full-year forecast by an additional 15.4% such that FY11/2019 profit growth is +65.3% YoY.

This anti-fraud/spam SaaS business model with virtually no competition also enjoys low customer acquisition costs since its services is included in the option pack of the major telecommunications carriers who carry out a series of sales activities such as promotion for acquiring new users. Therefore, resources can be concentrated on R&D innovation, product development and quality improvement, and high profitability can be achieved, compared to companies that need to acquire customers in-house.

The founder and CEO of this anti-fraud AI-SaaS innovator shared the story that his grandfather was a victim of junk phone fraud which had motivated him to develop this business: “It has been reported that the amount of fraudulent crime carried out over the phone is more than 30 billion yen annually, and that more than 65% of households have experienced receiving nuisance calls. My grandfather was also a victim of junk phone fraud, and from there I decided to somehow solve this longstanding social problem in nuisance calls. We developed a proprietary algorithm system and obtained a patent four years ago.”

The CEO also shared that he was positively influenced by his father who was a car mechanic: “Because of my father, I like machines since I was a kid, taking apart and reassembling radio, and I got an amateur radio license in my sixth grade of elementary school and I studied Basic programming from the first year of junior high school. I learned the technology by putting in three times the effort of people and later I was able to become an independent engineer who can contract directly with NTT.” The CEO adds: “As technology and criminals evolve, new clever tricks spread. We want our service to be used by everyone. The greater purpose is to help realize a society where everyone can live a peaceful, convenient and efficient life”.

When Bill Gates was asked in an interview “what it takes to build a Microsoft”, his reply was unequivocal: “I think the world’s best companies are built by fanatics.” When pressed “what does fanatical mean?”, Gates said poignantly, “Work day and night. Sort of don’t worry about the possibility of failure. Every setback is just something to work a little bit harder at doing. We live in an age when people want a quick fix, a shortcut to exceptional results. But there is no such easy path. There is only an intense, long-term, sustained effort. And the only way to build that kind of enterprise is to be fanatic. Such obsessed people do not become the most popular people, as they often intimidate others, but when fanatics come together with other fanatics, the multiplicative effect is unstoppable.”

By having a goal that is larger than themselves, H.E.R.O. Innovators are tireless because the goal and sense of duty to others pull them forward to build and scale their businesses so that they can give more. Only when we have the desire to give, then can we want to persevere in building something meaningful. This urge to build in order to give is the magnetic north to scale.

Above all in our H.E.R.O. Innovator, she is a fanatic who may not be a popular organization person with an EQ of 100, but definitely has PQ (Purpose Quotient), remaining unwavering in her commitment to an idea larger than oneself in service of others, and OQ (Obsession Quotient), the focus, intensity, conscientiousness and discipline towards her craftsmanship.

Our strategy remains: 0% in OEM/ODM + 0% in component makers + 0% in semiconductor & related sector + 0% in capital equipment, tech hardware & big-ticket items + 100% singular focus in a portfolio of highly-profitable listed Asia SMID-cap tech-focused exponential innovators = Higher probability of resiliency in both fundamentals and investment returns that are highly impervious to the US-China trade war risk and market volatility which have escalated since 6 May 2019.

The portfolio of 40 H.E.R.O. innovators, which has an average market cap of US$1.36bn (median market cap of US$868m), delivered strong interim results growth amidst the US-China trade tensions: overall weighted sales rose 30.6% YoY and operating profit grew faster with increasing returns to scale at 59.2% YoY, supporting the portfolio returns.

An overwhelming majority (82.5%) of the 40 HERO portfolio stocks are highly profitable “SaaS (software-as-a-service), information & data analytics/AI” companies and “platform business models”, a group which we believe is highly impervious to trade war risks.

One of our focused portfolio stocks, the Korean SMID-cap tech innovator NICE Information Services (KOSDAQ: 030190) with a dominant 75% domestic market leadership in the recurring information & big data services in personal credit information, is up over 25% since the trade war escalated from 6 May 2019, extending its YTD 2019 gains to 66.7%.

With the impending “MY DATA” industry deregulation in Korea on big data business by revising currently the world’s most restrictive personal information protection law and a strengthening in loan reviews, market leader NICE is set to expand its decision analytics and big data marketing services revenue contribution from the current 8% to a potential 24% that its London-listed peer Experian is producing. NICE is also developing new artificial intelligence (AI) solutions with the convergence of financial and non-financial information to support loan decision-making, intelligent fraud bureau services and financial risk management.

Since we highlighted this Korean innovator about four months ago to one of our advisory clients, a business owner/CIO of an established Asia ex-Japan value fund management company in Singapore who manages sovereign wealth and pension/endowment money, the stock is up over 80% to a market value of US$930m. We are grateful to be able to deliver our recently operationalized bespoke investment solution for family offices, UNHW, corporates and long-term institutional investors with satisfactory results to this wise business owner/CIO client whom we like and respect and care for.

Farsighted investors and our clients are experiencing first-hand and benefitting from the flight-to-quality effect in the market to quality listed innovators that are most relevant in this exponential world, because each time the market corrects, the stronger hands of longer-term farsighted investors will accumulate more and more of these quality innovators, while the weaker short-term opportunistic hands sell out, creating a resiliency effect in these stocks. Listed profitable SMID-cap tech innovators with non-linear exponential growth potential are the most relevant and mispriced multi-year investment trend and opportunity.

Inspired by the Singapore’s Super H.E.R.O. Roundtable meaningful discussions, we are planning to organize a series of workshops on “100X: Exponential Innovators in the H.E.R.O.’s Journey to Navigate the Volatile World”, starting with our first weekly session likely on the last week of June till July. Do watch out for more updates on this and we look forward to having you join us as a founding member and farsighted explorer in the H.E.R.O.’s Journey participating in the long-term exponential growth of a selected group of outstanding entrepreneurs.

Inspiration for CENTERED with H.E.R.O.: Our clients, just like our H.E.R.O. innovators and business owners, understood the profoundness that it’s not about a Maslow-type pyramid that they need to scale upwards in profits and returns; the H.E.R.O. journey is not upwards, but a deeper journey inwards and towards the center, about the kind of person you want to become through the work you build and invest in to serve those you care about.

Deeper and inwards towards the center. As Einstein elucidates: “Strive not to be a success, but rather to be of value” – Amid all of life’s chaos and challenges, a restorative balm to all of us to be Centered in values with focus and purpose to be of value in serving an idea larger than ourselves and the people we care deeply for.

Amidst escalating trade war, 29 May 2019 was the eventful inaugural roundtable of the Singapore’s Super H.E.R.O.s who come together to brainstorm about “Re-Imagining Value Investing in an Exponential World: VALUE 3.0 With Ever More Value Trap Losers & A Selected Under-the-Radar Group of Winners With Exponential Edge”. The Singapore Super H.E.R.O.s in the Roundtable are:

• François Badelon, business owner/CIO of French-headquartered Amiral Gestion Group who manages over 4bn euros in AUM
• Raymond Goh, business owner/CIO of New Silk Road Investment who manages over US$2bn AUM in Asia ex-Japan equities; Raymond was the former MD in equities at GIC
• Benjamin Ng, business owner/CIO of Whitefield Capital who manages money for sovereign wealth fund and pension/endowment fund in Asia ex-Japan equities
• Hemant Amin, business owner/CIO of Asiamin Capital, a highly successful single-family office and one of the early major investors in Indian-listed Bajaj Finance/Bajaj Finserv which compounded >100X to a market value of US$24bn/US$17bn

We are grateful to also have two great friends of H.E.R.O. joining the Roundtable: Jacqueline Too, senior advisor and award-winning veteran banker at multi-generational wealth management & IAM group Crossinvest; and Anton Chua, one of the branch business owners of Finexis which is one of the largest independent financial advisor firms in Singapore.

Thus far, of the 72 entrepreneurs and CEOs whom we had highlighted in our previous weekly research brief HeartWare, less than one-third are in our focused portfolio of 40 HERO Innovators, while the rest (50+) are in our broader watchlist of 200+ stocks.

If you are not moving forward in this exponential world, you are going backwards. If you want to join us at the leading edge of opportunity, if you identify yourself in the values and bigger sense of purpose in H.E.R.O., or you wish to tell from your heart to your most important person, son, daughter, wife, husband, or best friend that you are a farsighted and thoughtful explorer in the H.E.R.O.’s Journey participating in the long-term exponential growth of a selected group of outstanding entrepreneurs, standing up for the embracement of the human spirit, please contact us via email or WhatsApp at +65 9695 1860. Thank you very much for your patience and support and we look forward to growing exponentially with you as we explore the H.E.R.O.’s Journey together.

It started with rethinking a few questions. Question No. 1: Can the megacap tech elephants still dance? Or is this the better question: Is there an alternative and better way to capture long-term investment returns created by disruptive forces and innovation without chasing the highly popular megacap tech stocks, or falling for the “Next-Big-Thing” trap in overpaying for “growth”, or investing in the fads, me-too imitators, or even in seemingly cutting-edge technologies without the ability to monetize and generate recurring revenue with a sustainable and scalable business model? How can we distinguish between the true innovators and the swarming imitators?

Question No. 2: What if the “non-disruptive” group of reasonably decent quality companies with seemingly “cheap” valuations, a fertile hunting ground of value investors, all need to have their longer-term profitability and balance sheet asset value to be “reset” by deducting a substantial amount of deferred innovation-related expenses and investments every year, given that they are persistently behind the innovation cycle against the disruptors, just to stay “relevant” to survive and compete? Let’s say this invisible expense and deferred liability in the balance sheet that need to be charged amount to 20 to 30% of the revenue (or likely more), its inexactitude is hidden; its wildness lurks and lies in wait. Would you still think that they are still “cheap” in valuation?

Consider the déjà vu case of Kmart vs Walmart in 2000s and now Walmart vs Amazon. It is easy to forget that Kmart spent US$2 billion in 2000/01 in IT and uses the same supplier as Walmart – IBM. The tangible assets and investments are there in the balance sheet and valuations are “cheap”. Yet Kmart failed to replicate to compound value the way it did for Walmart. Now Walmart is investing billions to “catch up” and stay relevant. Key word is “relevancy” to garner valuation.

We now live in an exponential world, and as the Baupost chief and super value investor Seth Klarman warns, disruption is accelerating “exponentially” and value investing has evolved. The paradigm shift to avoid the cheap-gets-cheaper “value traps”, to keep staying curious & humble, and to keep learning & adapting, has never been more critical for value investors. We believe there is a structural break in data in the market’s multi-year appraisal (as opposed to “mean reversion” in valuation over a time period of 2-5 years) on the type of recurring-revenue profitable business models, the “exponential innovators”, that can survive, compete and thrive in this challenging exponential world we now live in. Tech-focused innovators with non-linear exponential growth potential are the most relevant multi-year investment trend and opportunity.  

During our value investing journey in the Asian capital jungles over the decade plus, we have observed that many entrepreneurs were successful at the beginning in growing their companies to a certain size, then growth seems to suddenly stall or even reverse, and they become misguided or even corrupted along the way in what they want out of their business and life, which led to a deteriorating tailspin, defeating the buy-and-hold strategy and giving currency to the practice of trading-in-and-out of stocks. On the other hand, there exists an exclusive, under-the-radar, group of innovators who are exceptional market leaders in their respective fields with unique scalable business models run by high-integrity, honorable and far-sighted entrepreneurs with a higher purpose in solving high-value problems for their customers and society whom we call H.E.R.O. – “Honorable. Exponential. Resilient. Organization.”

The H.E.R.O. are governed by a greater purpose in their pursuit to contribute to the welfare of people and guided by an inner compass in choosing and focusing on what they are willing to struggle for and what pains they are willing to endure, in continuing to do their quiet inner innovation work, persevering day in and day out. There’s a tendency for us to think that to be a disruptive innovator or to do anything grand, you have to have a special gift, be someone called for. We think ultimately what really matters is the resolve — to want to do it, bring the future forward by throwing yourself into it, to give your life to that which you consider important. We aim to penetrate into the deeper order that whispers beneath the surface of tech innovations and to stand on the firmer ground of experience hard won through hearing and distilling the essence of the stories of our H.E.R.O. in overcoming their struggles and in understanding the origin of their quiet life of purpose, who opened their hearts to us that resilience and innovation is an art that can be learned, which can embolden all of us with more emotional courage and wisdom to go about our own value investing journey and daily life.

Warm regards,
KB | kb@heroinnovator.com | WhatsApp +65 9695 1860
www.heroinnovator.com

CENTERED With H.E.R.O. Issue 4: Internal Rhythm to Create Value Amid Trade War, NICE, SettleBank, the “Power of One”

When the forces of rate cuts and trade war and regulatory techlash of tech giants collide, the blinding flash light produced a bear-squeeze relief rally that whipsawed market-timing traders – and left behind unresolved dark ruptures. Foreign direct investments into emerging markets in 2018 totaled 1.8% of GDP, the lowest since 1996 before the 1997/98 Asian Financial Crisis, and portfolio flows into emerging markets turned negative in May 2019 with likely continued weakness ahead as VALUE 2.0 corporates and linear business models struggle to adjust to the disruptions in supply chain and an elevated cost structure. S&P 500, NASDAQ and DAX are down 2.5%, 5.2%, and 3% respectively since the trade war escalated from 6 May 2019.

Rising up through the fog of macro noise with their internal rhythm to create value are the VALUE 3.0 exponential non-linear innovators who continued to demonstrate their resiliency and strength to power ahead through the volatility and uncertainties.

One of our focused portfolio stocks, the Korean SMID-cap tech innovator NICE Information Services (KOSDAQ: 030190) with a dominant 75% domestic market leadership in the recurring information & big data services in personal credit information, is up 16.2% since the trade war escalated from 6 May 2019, extending its YTD 2019 gains to 53.9%.

With the impending “MY DATA” industry deregulation in Korea on big data business by revising currently the world’s most restrictive personal information protection law and a strengthening in loan reviews, market leader NICE is set to expand its decision analytics and big data marketing services revenue contribution from the current 8% to a potential 24% that its London-listed peer Experian is producing. NICE is also developing new artificial intelligence (AI) solutions with the convergence of financial and non-financial information to support loan decision-making, intelligent fraud bureau services and financial risk management.

We see an analogous situation of a flourishing in NICE’s big data business through the ascent of India’s HDFC Bank and Bajaj Finance/Finserv. Just as NICE dominates Korea, CIBIL [Credit Information Bureau (India) Limited] is the quiet monopoly who maintains credit records of over 600 million Indians and 32 million businesses and is the go-to-place for HDFC and Bajaj Finance/Finserv who are big data analytical tech innovators in leveraging upon the CIBIL database to keep their NPA (non-performing asset) risk substantially lower than nearly all of their value-trap peers who are blowing up.

After HDFC implemented the CIBIL Consumer Connect solution in Aug 2016 through which its customers can purchase their CIBIL Score and Report directly on its website within seconds, this innovation has enabled HDFC to nearly doubled its market cap. Similarly, Sanjiv Bajaj transformed Bajaj Finserv into a 100X fintech compounding machine by focusing on and serving customers with the best CIBIL score of 750 and above, sifting the good from the bad, identifying cross-selling opportunities, which allowed them to add new products from consumer electronics to furniture to mobile phones seamlessly. As CEO Sanjiv comments, “Our customer base is all mapped, data cleaned, segmented, put into analytics and credit stamped.”

Since we highlighted this Korean innovator about four months ago to one of our advisory clients, a business owner/CIO of an established Asia ex-Japan value fund management company in Singapore who manages sovereign wealth and pension/endowment money, the stock is up over 60% to a market value of US$860m. We are grateful to be able to deliver our recently operationalized bespoke investment solution for family offices, UNHW, corporates and long-term institutional investors with satisfactory results to this wise business owner/CIO client whom we like and respect and care for.

Another Korean H.E.R.O. that has remained positively resilient since 6 May 2019 is Minwise (KOSDAQ: 214180) which extended its YTD 2019 gains to 40.6%. Minwise had announced this week that its 43%-owned subsidiary SettleBank will be listed on KOSDAQ in July 2019.

Through SettleBank which it acquired in Oct 2016 for 46.4bn won, Minwise commands an overwhelming 97% domestic share in cash settlement market, which is the second most widely used means of electronic transactions in Korea following credit/debt cards (over 14% of the settlement market in 2017 vs 78% for cards). ZeroPay, a government-led project as part of the cash activation policy, is also run by SettleBank. SettleBank is also the number one player in the virtual account settlement business for all 21 banks in Korea, which is used for the payment from utility bills to online shopping malls, and its market share is 67.5%.

SettleBank is expected to list with a market value of 400-450bn won and Minwise’s 43% stake in SettleBank is estimated to be worth 172-194bn won, or 59-66% of Minwise’s current market cap of 292bn won (US$247m), while the core business of Minwise as the #1 mobile security authentication services innovator with a 90% share remains strong. SettleBank is highly profitable, having achieved a FY2018 sales of 57.1bn won and operating profit of 13.2bn won (2017 sales 39.3bn won, operating profit 9.4bn won; 2015 sales 21.9bn won and operating profit 5.8bn won).

SettleBank enjoys stable growth in its mainstay services of virtual account, firm banking, electronic settlement/payment gate (PG), and new opportunities in the fast-growing secure easy account settlement services increasingly used by simple/micro payment companies such as Kakao Pay, Viva Republica’s Toss, Coupang’s Rocket Pay, Gmarket’s Smile Pay, NHN Entertainment’s Payco, online-only banks Kakao Bank and K Bank, etc.

The mainstay stable revenue contributor in virtual account is an e-banking service that enables real-time or collective confirmation of customer’s deposits through virtual accounts or code numbers uniquely assigned to customers, members, and distributors in order to facilitate the efficiency of depositing and collecting of funds for business institution customers, ecommerce companies (Coupang, Gmarket, etc), insurance companies, telcos, and over 190 government agencies (National Tax Service, Korea Customs Service, Supreme Court, KEPCO, KT etc) having a large number of customers such as for national and local taxes, utility bills, penalties/fines etc. A separate deposit confirmation process and manpower are unnecessary for the deposit-only virtual account. SettleBank’s virtual account is the only private account registered with and recognized by the National Tax Service in Korea.

The fast-growth easy account settlement service is a bank account transfer service in which a customer withdraws money from a financial institution account and deposits the money into a payment merchant. Cash can be settled by one-time password registration after account registration through self-authentication. Growth is driven by teenagers and young adults without a card and, more importantly, by the fact that it has lower payment fees (1%) than credit cards (3-3.5%). High credit card fees is one of the reasons why profitability of ecommerce companies is poor.

According to Korea’s financial regulator FSS, mobile payment has grown exponentially in Korea from 2.44tr won in 2016 to 11.95tr won in 2017 and an estimated over 27.87tr won in 2018. Over 9 million people use mobile payment apps. Mobile payments are popular in Korea thanks to Minwise, because a customer doesn’t have to go through complicated security authentication systems, including the one-time passwords (OTP) required in other online payments. FSS reported said that despite its rapid growth, the mobile payment industry is structured in a way that creates more losses as the size of transactions grow. Currently, almost all of the simple payment companies such as Kakao Pay transfer money with no charge to customers, but they have to pay banks between 150 won and 450 won for each transaction. The companies are forced to find profits in connecting customers with other financial services, such as fund investments, real estate investments and P2P payments. Besides the convenient one-time registration, buyers receive an Income deduction of 30% compared to 15% for credit cards.

Minwise’s founder Lee Kyung-min comments that SettleBank plans to use its IPO proceeds to advance overseas cash settlement services. “We are preparing services for Koreans visiting Japan and Japanese visiting Korea by working with a simple payment provider in Japan. We are also looking into expanding into Taiwan and Southeast Asian countries with similar infrastructure such as Thailand,” adds CEO Lee who established Minwise in March 2009. Founder Lee started his career as one of the early employees (employee #31) in 1999 at NHN Corp/Naver which is “Korea’s Google” (KOSDAQ, 035420) where he was in charge of marketing and financial services while working on securities, real estate, loan services, and credit card contents. The curiosity about the IT-financial convergence service that Lee had accumulated in Naver became the foundation for Minwise and SettleBank.

On the industry dynamics of the mobile payment and simple settlement services, founder Lee shares his thoughts, including the services provided by SettleBank: “Our simple settlement payment service is very important for business activities and contributed to supporting the rapid growth of the mobile payment market. It does not need to be interlocked with commercial banks, and it only needs to be linked with credit card companies, credit card PGs, and online shopping malls. Online and mobile cash payment services that do not require a credit card are growing rapidly worldwide.”

“SettleBank’s virtual account service gives a virtual account to a consumer when he or she is paying for e-commerce and then immediately notifies the company’s parent account when the customer deposits money for the transaction. Why is this service powerful?”

“Consider that there are thousands of people who deposit money In the account at the same time, how do you identify and confirm who made the deposit and reflect it in each customer’s account? Realistically speaking, the handling and payment confirmation of this large-scale transaction on a real-time basis is too much and too slow. So we connect each virtual account to each customer and check the account through the network and automatically reflect it in the customer’s account. This is the power of virtual account services. So that people do not have trouble. SettleBank receives fees from financial institutions such as banks, card companies, e-commerce companies, the National Tax Service, and local governments in the process. It is cheaper than virtual payment methods and can be collected on the same day. In addition, it can receive the storage specification in real time, and it can realize the automation of the storage. It is possible to set various storage conditions such as deposit period, amount, and name.”

“For our firm banking and simple account settlement services, automatic transfer request and transfer of results and fund collection on the sane day increase profitability of fund management and automatic accounting processing can be done by linking the results of the deposit processing to the bank’s internal computer system. Real-time automatic transfer can be used on holidays, so you can prevent delinquencies, late payments, and termination of your contracts in advance.”

Founder Lee went on to emphasize his confidence that the simple cash settlement account will grow exponentially from the current 15% to 45% in the near future, led by the growth of Kakao Pay which has plans to expand its network of 190,000 stores and vendors to 1 million nationwide within the next two to three years: “Although the cash settlement account for around 15% of the total settlement market, it will grow to 45% in the near future once you increase the convenience of the services that consumers use.”

Thus, Minwise’s SettleBank business is an infrastructure platform and axis of electronic finance that has very high entry barriers, demanding extremely stable system operation ability and specialized financial technology for emergency disaster response and know-how such as risk monitoring, and is a profitable beneficiary with recurring revenue even as the mobile payment industry changes rapidly and bleeds in losses.

Minwise’s core business in secondary authentication service centered on personal information security allowed smartphone users of all three Korean telecom firms to sign into websites free of security threats and prevent illegal logins from personal information leakage (user ID and password) and mobile phone identification theft. Minwise’s business model generates stable and recurring monthly revenue with subscribers paying a very affordable 1,000 won (US$0.89) a month that is generally economic insensitive and Minwise recognized 700 won per month as its revenue after deducting the 30% share due to all three telco operators. Minwise’s mobile authentication services is particularly popular amongst ecommerce shoppers and gamers seeking to make secure purchase transactions of high-value gaming items and prevent mobile phone identification theft.

Our strategy remains: 0% in OEM/ODM + 0% in component makers + 0% in semiconductor & related sector + 0% in capital equipment, tech hardware & big-ticket items + 100% singular focus in a portfolio of highly-profitable listed Asia SMID-cap tech-focused exponential innovators = Higher probability of resiliency in both fundamentals and investment returns that are highly impervious to the US-China trade war risk and market volatility which have escalated since 6 May 2019.

The portfolio of 40 H.E.R.O. innovators, which has an average market cap of US$1.35bn (median market cap of US$843m), delivered strong interim results growth amidst the US-China trade tensions: overall weighted sales rose 30.6% YoY and operating profit grew faster with increasing returns to scale at 59.2% YoY, supporting the portfolio returns.

An overwhelming majority (82.5%) of the 40 HERO portfolio stocks are highly profitable “SaaS (software-as-a-service), information & data analytics/AI” companies and “platform business models”, a group which we believe is highly impervious to trade war risks.

Farsighted investors and our clients are experiencing first-hand and benefitting from the flight-to-quality effect in the market to quality listed innovators that are most relevant in this exponential world, because each time the market corrects, the stronger hands of longer-term farsighted investors will accumulate more and more of these quality innovators, while the weaker short-term opportunistic hands sell out, creating a resiliency effect in these stocks. Listed profitable SMID-cap tech innovators with non-linear exponential growth potential are the most relevant and mispriced multi-year investment trend and opportunity.

Following last week’s inaugural Roundtable discussion with Singapore’s Super H.E.R.O.s who come together to brainstorm about “Re-Imagining Value Investing in an Exponential World: VALUE 3.0 With Ever More Value Trap Losers & A Selected Under-the-Radar Group of Winners With Exponential Edge”, we discussed briefly about the seductions of seeking a VALUE 3.0 quality exponential innovator with highly-profitability business model at VALUE 1.0 price, especially when there are accounting irregularities concerns, and the important distinction that not all “recurring revenue” businesses are cloud, and not all “cloud” are SaaS innovators.

An ASEAN-listed HR/payroll “software” company and a reseller of a European MNC’s software who claims 84.6% of its revenue are “recurring”, but with unusual cashflow from investing activities and unusual “other long-term investments” in the balance sheet – and whose price has fallen 30% since 15 May 2019 to a more “attractive” valuation, which later rebounded 24% – appears to fit that criteria.

For instance, the exponential edge of SaaS (software-as-a-service) cloud innovator Workday (NASDAQ: WDAY) and ServiceNow (NYSE: NOW) is apparent in comparison to the ASEAN-listed HR/payroll “software” company (emphasis: it’s more a professional services firm!) and reseller of SAP software through an open-minded learning of Workday’s strengths highlighted in its Financial Analyst Day slides from 2016-2018:
• 2016 Financial Analyst Day Slides (Link)
• 2017 Financial Analyst Day Slides (Link)
• 2018 Financial Analyst Day Slides (Link)

As pointed out by Workday in its 2016 Analyst Day (slides #41-69), not all “recurring revenue” businesses are cloud, and not all “cloud” are SaaS innovators. For instance, we would outsource our payroll matters to a local CPA firm whom we pay a “recurring” fee for their “professional services”, and the work task is updated manually by their staff on their “software system”, but it’s far off from the cloud-based innovation like Workday’s “Power of One” which we will briefly discuss shortly.

Workday highlighted this as the “current state of the problem” of on-premise/legacy cloud companies in providing a service to clients at a cost ratio 10X compared to Workday, like the ASEAN-listed HR & payroll outsourcing “software” firm whose software business (under 30% of their revenue) is largely that of reselling the European MNC’s on-premise licensed software & related system maintenance service, and some cloud software (likely under 5% of revenue), but claims 84.6% of its revenue are “recurring”, as reported in its annual report and footnotes. The word “cloud” is also mentioned only once in its annual report and in relation to the training of their employees in learning about the industry when they attend public seminars.

Notably, the ASEAN-listed HR/payroll “software” company had disclosed in its Footnote 9 under receivables that it had written off accrued service income of losses on terminated agreements because customers terminated agreements to install legacy on-premise systems.

On Footnote 31 under contingent liabilities, it also disclosed an unusual related-party transaction (“separation agreement”) in which it disposed an associate for S$1 to a subsidiary, and the associate transfers a group of customers to another subsidiary, and these receivables under the “separation agreement” are classified as “other receivables – unrelated parties”. Footnote 12 disclosed that it acquired an “accounting and tax advisory” business” at 10.5X the net asset value (nearly all asset comprises of trade and other receivables) with the cash paid for acquisition in excess over NAV classified as “unallocated cost of business acquisition”.

The unusual “other current & long-term investments, intangible assets, goodwill, unallocated costs of business acquisitions” account for an overwhelming 72.4%(!) of total asset in the balance sheet (US$28.4m). The cumulative positive operating cashflow for 2017-2018 (US$10.4m), when adjusted for these what seems possibly to be “working capital items classified under investing activities”, would turn negative to a cash outflow amount (-US$12.5m) that, when combined with the cumulative total cash dividend paid out (-US$8m) and the cumulative profit for 2017-2018 (US$7m), that is the total cash outflow, is uncannily proportional to the total cash inflow raised externally during the IPO (US$27.5m) in Dec 2017, raising further questions and concerns on whether the underlying business is really producing any real and sustainable internal cash inflow.

On unusual and confusing cashflow statement and balance sheet, we are reminded of an excellent empirical research paper “Incentives to Inflate Reported Cash from Operations Using Classification and Timing” which was published in the top-tier journal The Accounting Review. The empirical research evidence examines that unlike the manipulation of earnings through accruals, firms manage CFO (cashflow from operation) via classification and timing, shifting items between the statement of cash flows categories both within and outside the boundaries of generally accepted accounting principles.

Workday’s strength lies in what it calls the “Power of One” – one code line, one security model, one mobile app, one data model, one user experience (UX), one version, and one platform.

By switching from the legacy on-premise software to cloud-based SaaS, not only are the upfront investment and maintenance fees associated with on-premise solutions that this ASEAN-based professional services firm has been booking its clients will be eliminated (and such “software” business produced 30% of its revenue), but more importantly, a whole new level of cloud-based analytics capabilities, including artificial intelligence x robotic processing automation (AI x RPA) to intelligently automate transaction processing, are embedded to provide users with powerful real-time insights, intelligence and predictive analytics from the integrated human resource management and financial accounting data that can be used to facilitate planning, budgeting, forecasting and day-to-day operations.

In addition, since Workday launched the Workday Cloud Platform in 2016 to open up to third-party developers and its own customers to build applications that run on and integrate with Workday with a single API (Application Programming Interface) point of integration, the PaaS (Platform-as-a-Service) has supercharged Workday into an even more powerful collaborative platform for users. Workday’s enhanced open innovation PaaS business model is similar to how Salesforce.com scaled since the 2006 tipping point moment when it built AppExchange, an open API marketplace of third-party software applications developed by external partners.

For instance, consider the powerful integration of ServiceNow with Workday to create an exponentially better user experience that is possible due to the open API Workday Cloud Platform. Initially designed for IT departments, ServiceNow has evolved to cater to nearly every aspect of the corporate chain – human resources, finance, marketing, and field operations – with a unified portal allowing the various teams to interact and deliver a seamless employee experience consistent across all interactions. This cloud-based collaborative service management solution provides employees a single platform where they can update their information, submit questions and time-off requests, and access common forms. Through ServiceNow, HR departments can have an efficient system of tracking and responding to employee questions.

Workday focuses on human resources and financial management, combining functions such as benefits, talent management, payroll, time and attendance, as well as recruitment. Workday’s Human Capital Management solution manages all of the employee information and critical organizational data in one place. Workday then uses the data to create sophisticated metrics that can guide HR departments toward more informed, strategic decision-making. Workday acts more as the service center for all of HR’s data. ServiceNow, on the other hand, provides a channel for employees to instantly connect with other departments, such as HR, and delivers a consumer-like experience where they can access necessary information.

With the integration, inefficiencies and gaps created by using disparate systems are eliminated. For instance, after Workday collected the necessary data about new hires, it routed the info on to ServiceNow, which automatically went to work setting up new employee accounts and notifying different departments about what the new hires need to get started. Employees and managers get visibility into workflows and can engage without having to send an email or make a phone call that gets lost in the shuffle. Resolutions to everyday tasks are simple and fast. Workday is leveraged for backend HR tasks, and persists as the System of Record & Analytics. ServiceNow, the System of Engagement, becomes the method of delivery for a standard experience across departments.

This single interface for users becomes the “Power of One” Employee Experience that is 10X, or even 100X, superior to the legacy on-premise software systems which the ASEAN-listed HR/payroll “software” company had disclosed in its footnote under receivables that it had written off accrued service income of losses on terminated agreements because customers terminated agreements to install legacy on-premise systems, a multi-year disruption trend that is likely to persist and accelerate.

Inspired by the Singapore’s Super H.E.R.O. Roundtable meaningful discussions, we are planning to organize a series of workshops on “100X: Exponential Innovators in the H.E.R.O.’s Journey to Navigate the Volatile World”, starting with our first session likely on 26 June (Wednesday) till July. Do watch out for more updates on this and we look forward to having you join us as a founding member and farsighted explorer in the H.E.R.O.’s Journey participating in the long-term exponential growth of a selected group of outstanding entrepreneurs.

Inspiration for CENTERED with H.E.R.O.: Our clients, just like our H.E.R.O. innovators and business owners, understood the profoundness that it’s not about a Maslow-type pyramid that they need to scale upwards in profits and returns; the H.E.R.O. journey is not upwards, but a deeper journey inwards and towards the center, about the kind of person you want to become through the work you build and invest in to serve those you care about.

Deeper and inwards towards the center. As Einstein elucidates: “Strive not to be a success, but rather to be of value” – Amid all of life’s chaos and challenges, a restorative balm to all of us to be Centered in values with focus and purpose to be of value in serving an idea larger than ourselves and the people we care deeply for.

Thus far, of the 72 entrepreneurs and CEOs whom we had highlighted in our previous weekly research brief HeartWare, less than one-third are in our focused portfolio of 40 HERO Innovators, while the rest (50+) are in our broader watchlist of 200+ stocks.

If you are not moving forward in this exponential world, you are going backwards. If you want to join us at the leading edge of opportunity, if you identify yourself in the values and bigger sense of purpose in H.E.R.O., or you wish to tell from your heart to your most important person, son, daughter, wife, husband, or best friend that you are a farsighted and thoughtful explorer in the H.E.R.O.’s Journey participating in the long-term exponential growth of a selected group of outstanding entrepreneurs, standing up for the embracement of the human spirit, please contact us via email or WhatsApp at +65 9695 1860. Thank you very much for your patience and support and we look forward to growing exponentially with you as we explore the H.E.R.O.’s Journey together.

It started with rethinking a few questions. Question No. 1: Can the megacap tech elephants still dance? Or is this the better question: Is there an alternative and better way to capture long-term investment returns created by disruptive forces and innovation without chasing the highly popular megacap tech stocks, or falling for the “Next-Big-Thing” trap in overpaying for “growth”, or investing in the fads, me-too imitators, or even in seemingly cutting-edge technologies without the ability to monetize and generate recurring revenue with a sustainable and scalable business model? How can we distinguish between the true innovators and the swarming imitators?

Question No. 2: What if the “non-disruptive” group of reasonably decent quality companies with seemingly “cheap” valuations, a fertile hunting ground of value investors, all need to have their longer-term profitability and balance sheet asset value to be “reset” by deducting a substantial amount of deferred innovation-related expenses and investments every year, given that they are persistently behind the innovation cycle against the disruptors, just to stay “relevant” to survive and compete? Let’s say this invisible expense and deferred liability in the balance sheet that need to be charged amount to 20 to 30% of the revenue (or likely more), its inexactitude is hidden; its wildness lurks and lies in wait. Would you still think that they are still “cheap” in valuation?

Consider the déjà vu case of Kmart vs Walmart in 2000s and now Walmart vs Amazon. It is easy to forget that Kmart spent US$2 billion in 2000/01 in IT and uses the same supplier as Walmart – IBM. The tangible assets and investments are there in the balance sheet and valuations are “cheap”. Yet Kmart failed to replicate to compound value the way it did for Walmart. Now Walmart is investing billions to “catch up” and stay relevant. Key word is “relevancy” to garner valuation.

We now live in an exponential world, and as the Baupost chief and super value investor Seth Klarman warns, disruption is accelerating “exponentially” and value investing has evolved. The paradigm shift to avoid the cheap-gets-cheaper “value traps”, to keep staying curious & humble, and to keep learning & adapting, has never been more critical for value investors. We believe there is a structural break in data in the market’s multi-year appraisal (as opposed to “mean reversion” in valuation over a time period of 2-5 years) on the type of recurring-revenue profitable business models, the “exponential innovators”, that can survive, compete and thrive in this challenging exponential world we now live in. Tech-focused innovators with non-linear exponential growth potential are the most relevant multi-year investment trend and opportunity.  

During our value investing journey in the Asian capital jungles over the decade plus, we have observed that many entrepreneurs were successful at the beginning in growing their companies to a certain size, then growth seems to suddenly stall or even reverse, and they become misguided or even corrupted along the way in what they want out of their business and life, which led to a deteriorating tailspin, defeating the buy-and-hold strategy and giving currency to the practice of trading-in-and-out of stocks. On the other hand, there exists an exclusive, under-the-radar, group of innovators who are exceptional market leaders in their respective fields with unique scalable business models run by high-integrity, honorable and far-sighted entrepreneurs with a higher purpose in solving high-value problems for their customers and society whom we call H.E.R.O. – “Honorable. Exponential. Resilient. Organization.”

The H.E.R.O. are governed by a greater purpose in their pursuit to contribute to the welfare of people and guided by an inner compass in choosing and focusing on what they are willing to struggle for and what pains they are willing to endure, in continuing to do their quiet inner innovation work, persevering day in and day out. There’s a tendency for us to think that to be a disruptive innovator or to do anything grand, you have to have a special gift, be someone called for. We think ultimately what really matters is the resolve — to want to do it, bring the future forward by throwing yourself into it, to give your life to that which you consider important. We aim to penetrate into the deeper order that whispers beneath the surface of tech innovations and to stand on the firmer ground of experience hard won through hearing and distilling the essence of the stories of our H.E.R.O. in overcoming their struggles and in understanding the origin of their quiet life of purpose, who opened their hearts to us that resilience and innovation is an art that can be learned, which can embolden all of us with more emotional courage and wisdom to go about our own value investing journey and daily life.

Warm regards,
KB | kb@heroinnovator.com | WhatsApp +65 9695 1860
www.heroinnovator.com

Singapore’s Super H.E.R.O. Roundtable: Re-imagining Value Investing in an Exponential World – VALUE 3.0 With Ever More “Value Trap” Losers & A Selected Under-the-Radar Group of Winners with Exponential Edge

Amidst escalating trade war, 29 May 2019 was the eventful inaugural roundtable of the Singapore’s Super H.E.R.O.s who come together to brainstorm about “Re-Imagining Value Investing in an Exponential World: VALUE 3.0 With Ever More Value Trap Losers & A Selected Under-the-Radar Group of Winners With Exponential Edge”.

The Singapore Super H.E.R.O.s in the Roundtable are:

• François Badelon, business owner/CIO of French-headquartered Amiral Gestion Group who manages over 4bn euros in AUM
• Raymond Goh, business owner/CIO of New Silk Road Investment who manages over US$2bn AUM in Asia ex-Japan equities; Raymond was the former MD in equities at GIC
• Benjamin Ng, business owner/CIO of Whitefield Capital who manages money for sovereign wealth fund and pension/endowment fund in Asia ex-Japan equities
• Hemant Amin, business owner/CIO of Asiamin Capital, a highly successful single-family office and one of the early major investors in Indian-listed Bajaj Finance/Bajaj Finserv which compounded >100X to a market value of US$24bn/US$17bn

We are grateful to also have two great friends of H.E.R.O. joining the Roundtable: Jacqueline Too, senior advisor and award-winning veteran banker at multi-generational wealth management & IAM group Crossinvest; and Anton Chua, one of the branch business owners of Finexis which is one of the largest independent financial advisor firms in Singapore.

As Adam Seessel elucidated of the profound structural shift towards “Value 3.0” on 21 Nov 2018 in his Fortune article titled: “An Evolve-or-Die Moment for the World’s Great Investors: The dominance of tech stocks has forced some of the best investing minds—including Warren Buffett himself—to re-examine their thinking. Who will adapt and survive?”:

“As these platform companies create billions in value, they are simultaneously undermining the post-war ecosystem that Buffett has understood and profited from. Entire swaths of the economy are now at risk, and investors would do well not only to consider Value 3.0 prospectively but also to give some thought to what might be vulnerable in their Value 2.0 portfolios.”

Benjamin was the kind affable host where we gathered at his heartwarming office to collectively think, dream, argue, heal, envision, trust and connect; and to find investment-business-life principles and axioms that are stable and consistent that in times of joy and toil, we can still depend on them to grow together in the H.E.R.O.’s Journey together.

Long-term investing works because there is less competition for really valuable bits of information. The real advantage comes from asking more valuable questions. The short-term investor asks questions in the hope of gleaning clues to near-term outcomes: relating typically to operating margins, earnings per share and revenue trends over the next quarter.

The longer one owns the shares, however, the more important the firm’s underlying economics will be to performance results. Long-term investors therefore seek answers with long shelf life. What is relevant today may be relevant in ten years’ time if the investor is to continue owning the shares. Information with a long shelf life is far more valuable than advance knowledge of next quarter’s earnings. We seek insights consistent with our holding period.

With the escalating trade war wiping out US$4 trillion off the US market in its second-worst May since 1960s, US$515 billion in the overall tech sector, and trillions off the emerging markets, including melting away the traditional “safe-haven” sentiment-driven tactical trades such as dividend stocks, the risk-off environment has positively fueled a selected group of winners who are benefitting in a structural way due to improving fundamentals.

The group of 45 SaaS (software-as-a-service) companies with positive operating cashflow (OCF), with a combined market value of US$640 billion, have stayed resiliently positive while the NASDAQ index fell 6% in the month of May, extending their YTD average gains in 2019 to 43.1%. Amongst the biggest winners in May 2019/YTD 2019 are SaaS innovators with high OCF margin and they include Atlassian +16.2%/+41.9% (OCF margin 35.6%), Veeva +11.5%/+72.8% (OCF margin 36.1%) and Zscaler +10.3%/+86.2% (OCF margin 20.1%).

Raymond, who is very well-read, wisely asked a question which he also answered himself – are there any listed SaaS companies in Asia, to which he added himself, nearly all of them are in Japan and Oceania. Asia ex-Japan & ex-Oceania fund managers and analysts are not exposed to SaaS innovators in their scope of work experience, and might not have the world view and wisdom of Raymond to appreciate both the compounding potential and resiliency of these recurring-revenue business models in volatile markets.

We briefly discussed one of the 40 H.E.R.O. portfolio companies, the only listed profitable IoT-SaaS innovator in the world which is up 21% in the month of May, extending its gains to 54.2% YTD in 2019. It has an operating profit margin 24.7% (1Q FY12/2019: 25.6%), ROE (= OP/Equity) 17.4%, ROA 13%, positive free cashflow margin 11.9%, net cash as % market value of 4.3% (net cash as % of book equity is 43%).

IoT devices have long service life while unit prices are low, and the typical project-based OEM/ODM business model are vulnerable to the unpredictability in capex spending and orders from their customers. This listed Asian innovator’s AI-powered and multi cross-communication IoT platform supports continuous automatic IoT data control and monitoring and it has the largest AI-powered surveillance center in its country. The process of connecting sensors to the Internet is complicated. The innovator can complete complicated processes simply by installing a dedicated device, and users can easily and inexpensively introduce IoT utilization of various sensors (compatible with all sensors) into their business in a few days via recurring subscription service. It has very high customer retention rate of 98%.

On 10 May 2019, this listed SaaS cloud innovator announced a healthy set of first-quarter results in which sales increased 28.3% and operating profit rose 40.3% with improving margin and record-high in monthly recurring subscription sales.

Some specific application scenarios of its recurring-revenue subscription services include:
• Preventive maintenance of factory/robot equipment: Semiconductor giant Tokyo Electron’s equipment are equipped with sensors (vibration sensors, acceleration sensors etc) whose data are connected to Microsoft Azure cloud and this innovator’s AI/IoT cloud platform with its unique algorithm-cloud data-sensor connect service monitors abnormal vibrations and speed associated with equipment outages to prevent equipment malfunction in order to ensure the stable operation of plant facilities. Customers of Tokyo Electron equipment subscribe monthly for the monitoring services.
• Abnormality detection of commercial kitchen equipment (freezer/refrigerator): Temperature and humidity management is important for food companies. In addition to visual dashboard confirmation at regular intervals, there is real-time management and quick awareness and response to unexpected situations that will ensure safe hygiene management.
• Autonomous and operation control of construction equipment, forklift, etc: Sakai’s compact roller construction machine utilizes this innovator’s IoT/AI control & monitoring platform to realize joint human or full autonomous operation. The innovator’s automatic steering and emergency braking software technology improves efficiency and safety.

Our strategy remains: 0% in OEM/ODM + 0% in component makers + 0% in semiconductor & related sector + 0% in capital equipment, tech hardware & big-ticket items + 100% singular focus in a portfolio of highly-profitable listed Asia SMID-cap tech-focused exponential innovators = Higher probability of resiliency in both fundamentals and investment returns that are highly impervious to the US-China trade war risk and market volatility which have escalated since 6 May 2019.

The portfolio of 40 H.E.R.O. innovators, which has an average market cap of US$1.39bn (median market cap of US$858m), delivered strong interim results growth amidst the US-China trade tensions: overall weighted sales rose 30.5% YoY and operating profit grew faster with increasing returns to scale at 58.7% YoY, supporting the portfolio returns.

An overwhelming majority (82.5%) of the 40 HERO portfolio stocks are highly profitable “SaaS (software-as-a-service), information & data analytics/AI” companies and “platform business models”, a group which we believe is highly impervious to trade war risks.

We briefly debated about the challenging question of whether “Are ‘cheap stocks’ risky ‘value traps’?” with a series of examples and the crucial need for VALUE 3.0 investors to stay curious, open-minded, vigilant and diligent to a bigger context of the disruption at play impacting individual stocks in the portfolio.

The wise Hemant made the striking point that when there is the compelling alternative to invest in the superior exceptional highly-profitable businesses that increase their competitive leadership and widen the gap with the Value 2.0 businesses exponentially over time, it will be increasingly very difficult to justify high-conviction investing with a meaningful position size for the long-term in the disrupted Value 2.0 stocks and the masqueraders of Value 3.0 stocks, although it may be possible to earn some opportunistic transitory returns in such stocks.

Amongst various long-range thought-provoking questions, we also discussed the dangers of superficial thematic/ macro-based investing without a deep understanding and analysis on the quality of the business model and management, including that of investing in supposed “disruptors” (or companies in general) in the sexy popular Vietnam stock market which is increasingly an investor’s favorite due to its supposed young demographics tailwind.

But the market microstructure, with its block trading cornered by a few market participants, stock illiquidity and market prices that may not fully reflect the underlying true market conditions, can be treacherous for investors lured by the attractive headline-grabbing macros.

A disruptor-pretender that we had earlier cautioned back in Nov 2018 was Vietnam-listed Yeah1 which has since collapsed 60% in under six months after Google’s YouTube terminated their business relationship with Yeah1 indefinitely starting 22 May 2019 due to its violation in business conduct and dealings. We shared this consistent message about the pitfalls of investing in the Asian capital jungles illustrating Yeah1 as an example with a US investment organization, who invests US$9.5bn on behalf of endowment and foundations, who had connected with us then.

While Yeah1 fell over 60% to VND 91,100 in the sexy “safe-haven” Vietnam market, UUUM (TSE: 3990) rose 26% over the same period in the unloved, disliked and overlooked Japan market since we shared our thoughts in the earlier HeartWare weekly tech series on 23 Nov 2018. UUUM had announced on 12 April 2019 a robust set of results: 9M FY05/2019 sales rose 69.4% and operating profit jumped 2.2X, while generating healthy positive free cashflow and valuable original content. Excerpts from our HeartWare back in 23 Nov 2018 below:

“The recent listing of Vietnam’s largest MCN and digital media company Yeah1 Group (HOSE: YEG) in Jun 2018, which is valued at over US$400m at IPO at VND 300,000 per share (now VND 230,000), has brought about a comparison with UUUM in the business model quality and growth potential, further highlighting the distinctive exponential edge of UUUM. Despite both companies having a roughly similar profile in monthly views (over 4bn views) and subscribers (~160m), due to a difference in engagement, interaction, video watch time and playbacks, UUUM produces twice the revenue (US$107.9m vs Yeah1’s US$52.5m) and generates 3.4X more in ad revenue from YouTube when compared to Yeah1 (US$61.4m vs Yeah1’s US$18.1m). In addition, we are cautious of Yeah1’s balance sheet, working capital dynamics and bargaining strength in the ecosystem when compared to UUUM, which led to a much lower operating cashflow…”

One of our focused portfolio stocks, a Korean-listed SMID-cap tech innovator with dominant 80% domestic market leadership in recurring information & big data services, remains resiliently positive since 6 May 2019. Since we highlighted this Korean firm about three months ago to one of our advisory clients, a business owner/CIO of an established Asia ex-Japan value fund management company in Singapore who manages sovereign wealth and pension/endowment money, the stock is up over 40% to a market value of US$740m. We are grateful to be able to deliver our recently operationalized bespoke investment solution for family offices, UNHW, corporates and long-term institutional investors with satisfactory results to this wise business owner/CIhttp://www.heroinnovator.com/wp-content/uploads/2019/06/Super-HERO-Roundtable_29-May-2019.pdfO client whom we like and respect and care for.

Farsighted investors and our clients are experiencing first-hand and benefitting from the flight-to-quality effect in the market to quality listed innovators that are most relevant in this exponential world, because each time the market corrects, the stronger hands of longer-term farsighted investors will accumulate more and more of these quality innovators, while the weaker short-term opportunistic hands sell out, creating a resiliency effect in these stocks. Listed profitable SMID-cap tech innovators with non-linear exponential growth potential are the most relevant and mispriced multi-year investment trend and opportunity.

Inspired by the Singapore’s Super H.E.R.O. Roundtable meaningful discussions, we are planning to organize a series of workshops on “100X: Be Exponential, Be Exceptional in the H.E.R.O.’s Journey – VALUE 3.0 Investment Insights to Navigate the Volatile World”, starting in the third week of June till July. Do watch out for more updates on this and we look forward to having you join us as a founding member and farsighted explorer in the H.E.R.O.’s Journey participating in the long-term exponential growth of a selected group of outstanding entrepreneurs.

Download the Singapore’s Super H.E.R.O. Roundtable discussion slides:
http://www.heroinnovator.com/wp-content/uploads/2019/06/Super-HERO-Roundtable_29-May-2019.pdf

Inspiration for CENTERED With H.E.R.O.: Our clients, just like our H.E.R.O. innovators and business owners, understood the profoundness that it’s not about a Maslow-type pyramid that they need to scale upwards in profits and returns; the H.E.R.O. journey is not upwards, but a deeper journey inwards and towards the center, about the kind of person you want to become through the work you build and invest in to serve those you care about.

Deeper and inwards towards the center. As Einstein elucidates: “Strive not to be a success, but rather to be of value” – Amid all of life’s chaos and challenges, a restorative balm to all of us to be Centered in values with focus and purpose to be of value in serving an idea larger than ourselves and the people we care deeply for.

Thus far, of the 72 entrepreneurs and CEOs whom we had highlighted in our previous weekly research brief HeartWare, less than one-third are in our focused portfolio of 40 HERO Innovators, while the rest (50+) are in our broader watchlist of 200+ stocks.

If you are not moving forward in this exponential world, you are going backwards. If you want to join us at the leading edge of opportunity, if you identify yourself in the values and bigger sense of purpose in H.E.R.O., or you wish to tell from your heart to your most important person, son, daughter, wife, husband, or best friend that you are a farsighted and thoughtful explorer in the H.E.R.O.’s Journey participating in the long-term exponential growth of a selected group of outstanding entrepreneurs, standing up for the embracement of the human spirit, please contact us via email or WhatsApp at +65 9695 1860. Thank you very much for your patience and support and we look forward to growing exponentially with you as we explore the H.E.R.O.’s Journey together.

It started with rethinking a few questions. Question No. 1: Can the megacap tech elephants still dance? Or is this the better question: Is there an alternative and better way to capture long-term investment returns created by disruptive forces and innovation without chasing the highly popular megacap tech stocks, or falling for the “Next-Big-Thing” trap in overpaying for “growth”, or investing in the fads, me-too imitators, or even in seemingly cutting-edge technologies without the ability to monetize and generate recurring revenue with a sustainable and scalable business model? How can we distinguish between the true innovators and the swarming imitators?

Question No. 2: What if the “non-disruptive” group of reasonably decent quality companies with seemingly “cheap” valuations, a fertile hunting ground of value investors, all need to have their longer-term profitability and balance sheet asset value to be “reset” by deducting a substantial amount of deferred innovation-related expenses and investments every year, given that they are persistently behind the innovation cycle against the disruptors, just to stay “relevant” to survive and compete? Let’s say this invisible expense and deferred liability in the balance sheet that need to be charged amount to 20 to 30% of the revenue (or likely more), its inexactitude is hidden; its wildness lurks and lies in wait. Would you still think that they are still “cheap” in valuation?

Consider the déjà vu case of Kmart vs Walmart in 2000s and now Walmart vs Amazon. It is easy to forget that Kmart spent US$2 billion in 2000/01 in IT and uses the same supplier as Walmart – IBM. The tangible assets and investments are there in the balance sheet and valuations are “cheap”. Yet Kmart failed to replicate to compound value the way it did for Walmart. Now Walmart is investing billions to “catch up” and stay relevant. Key word is “relevancy” to garner valuation.

We now live in an exponential world, and as the Baupost chief and super value investor Seth Klarman warns, disruption is accelerating “exponentially” and value investing has evolved. The paradigm shift to avoid the cheap-gets-cheaper “value traps”, to keep staying curious & humble, and to keep learning & adapting, has never been more critical for value investors. We believe there is a structural break in data in the market’s multi-year appraisal (as opposed to “mean reversion” in valuation over a time period of 2-5 years) on the type of recurring-revenue profitable business models, the “exponential innovators”, that can survive, compete and thrive in this challenging exponential world we now live in. Tech-focused innovators with non-linear exponential growth potential are the most relevant multi-year investment trend and opportunity.  

During our value investing journey in the Asian capital jungles over the decade plus, we have observed that many entrepreneurs were successful at the beginning in growing their companies to a certain size, then growth seems to suddenly stall or even reverse, and they become misguided or even corrupted along the way in what they want out of their business and life, which led to a deteriorating tailspin, defeating the buy-and-hold strategy and giving currency to the practice of trading-in-and-out of stocks. On the other hand, there exists an exclusive, under-the-radar, group of innovators who are exceptional market leaders in their respective fields with unique scalable business models run by high-integrity, honorable and far-sighted entrepreneurs with a higher purpose in solving high-value problems for their customers and society whom we call H.E.R.O. – “Honorable. Exponential. Resilient. Organization.”.

The H.E.R.O. are governed by a greater purpose in their pursuit to contribute to the welfare of people and guided by an inner compass in choosing and focusing on what they are willing to struggle for and what pains they are willing to endure, in continuing to do their quiet inner innovation work, persevering day in and day out. There’s a tendency for us to think that to be a disruptive innovator or to do anything grand, you have to have a special gift, be someone called for. We think ultimately what really matters is the resolve — to want to do it, bring the future forward by throwing yourself into it, to give your life to that which you consider important. We aim to penetrate into the deeper order that whispers beneath the surface of tech innovations and to stand on the firmer ground of experience hard won through hearing and distilling the essence of the stories of our H.E.R.O. in overcoming their struggles and in understanding the origin of their quiet life of purpose, who opened their hearts to us that resilience and innovation is an art that can be learned, which can embolden all of us with more emotional courage and wisdom to go about our own value investing journey and daily life.

Warm regards,
KB | kb@heroinnovator.com | WhatsApp +65 9695 1860
www.heroinnovator.com

CENTERED With H.E.R.O. Issue 2: Resilient Amidst Trade War – Japan’s AS ONE AI X RPA, Exponential Innovators Highly Impervious to Trade War Risks | 27 May

0% in OEM/ODM + 0% in component makers + 0% in semiconductor & related sector + 0% in capital equipment, tech hardware & big-ticket items + 100% singular focus in a portfolio of highly-profitable listed Asia SMID-cap tech-focused exponential innovators = Higher probability of resiliency in both fundamentals and investment returns that are highly impervious to the US-China trade war risk and market volatility which have escalated since 6 May 2019.

For instance, AS ONE (TSE: 7476), Japan’s #1 specialist B2B platform business model that carved out a profitable niche selling through catalogs and its ecommerce (EC) site AXEL a vast array of over 3 million items of laboratory & healthcare instruments and consumables & disposables, is up 7.6% since 6 May 2019 to a market value of over US$1.69 billion, extending its YTD gains to 23%. AS ONE had announced on 13 May 2019 a strong set of FY03/2019 results with earnings at a record high and 10 consecutive years of sales increase.

Contributing to EC sales were increased customers of the EC single-source purchasing system (158 companies compared with 135 at end–FY03/2018), where products and services are sold through an electronic catalog directly incorporated into the customer’s purchasing system, and increased sales to online retailers, such as MonotaRO, Misumi, Askul and Amazon, whose end users are small companies. Its new state-of-the-art automated Kanto Distribution Center (DC), more than twice as large as the current largest base, the Osaka DC, will start operation in May 2020, a strategic expansion that will lead to the achievement of their goal of 100bn yen in sales from the current 66.7bn yen.

AS ONE has also adopted artificial intelligence X robotic process automation (AI x RPA) to increase its efficiency and margins as it scales up. Medical institutions, hospitals and researchers “have various specialized needs, such as they want a tool and equipment that can make the experiment in a vacuum state or under zero gravity. Our strength is to deliver these products seamlessly and speedily”, commented CEO Takuji Iuchi, the third-generation business leader. Because the product is low volume-high-mix in nature, or small in quantity and many types, customer interface, inventory & logistics management and business process integration are the critical backbone systems of the company. The intelligent automation of this backbone through AI X RPA has given AS ONE an exponential edge to improve the quality and speed in responsiveness to their customers.

Including AS ONE, the portfolio of 40 H.E.R.O. innovators, which has an average market cap of US$1.41bn (median market cap of US$810m), delivered strong interim results growth amidst the US-China trade tensions: overall weighted sales rose 30.5% YoY and operating profit grew faster with increasing returns to scale at 58.7% YoY, supporting the portfolio returns.

An overwhelming majority (82.5%) of the 40 HERO portfolio stocks are highly profitable “SaaS (software-as-a-service), information & data analytics/AI” companies and “platform business models”, a group which we believe is highly impervious to trade war risks. 10% are indispensable medtech innovators with high recurring-revenue high-profitability business models. EC, cybersecurity and IoT highly-profitable companies account for the remainder 7.5%.

The recurring and predictability nature of the revenue model in growing monthly or annual paying subscribers have made SaaS companies a bedrock of investment resilience in a volatile market environment with growing regulatory and trade-war risks rattling across industries. SaaS recurring-revenue business model with high profitability, positive free cashflow and low customer churn rate account for 55% of portfolio stocks.

And unlike many of the SaaS companies in the US or China or most of everywhere else that are still loss-making and cash-burning, a selected group of Japan’s listed under-the-radar exponential innovators have quietly built highly profitable business models generating positive free cashflow.

John Somorjai, EVP of Corporate Development and Salesforce Venture at CRM giant Salesforce.com (NYSE: CRM) commented on 4 Dec 2018 that having investing in over 280 SaaS companies in 18 countries since 2009, “Our highest returns to date have been from the U.S. and Japan markets.” Long overlooked by investors, Japan is still regarded by the superficial macro investors as the land of the aging dinosaur-like companies such as Toshiba with weak population demographics. Farsighted investors are now seeing strong growth of Japan’s tech industry as Japan’s public cloud services market, the fourth biggest in the world, is projected to more than double from the 2017 level to $13 billion in 2022, according to IDC forecasts.

We are grateful to have the investment interest and positive feedback about the quality of our research ideas by farsighted professional investors. These include the super investor in Singapore who’s the former managing director at one of the world’s largest sovereign wealth fund and the founder of a successful billion-dollar boutique hedge fund in Asia ex-Japan equities, who commented that most Asian funds invest in the typical “old-tech” companies who are component makers or OEM/Apple-suppliers exposed to unpredictable capex spending cycles, and that he likes that no other funds are like us in having a pure and singular focus on exponential innovators with recurring-revenue business models who are forging their own categories of growth to solve high-value problems for their customers.

One of our focused portfolio stocks, a Korean-listed SMID-cap tech innovator with dominant 80% domestic market leadership in recurring information & big data services, remains resiliently positive since 6 May 2019. Since we highlighted this Korean firm about three months ago to one of our advisory clients, a business owner/CIO of an established Asia ex-Japan value fund management company in Singapore who manages sovereign wealth and pension/endowment money, the stock is up over 40% to a market value of over US$750m. We are grateful to be able to deliver our recently operationalized bespoke investment solution for family offices, UNHW, corporates and long-term institutional investors with satisfactory results to this wise business owner/CIO client whom we like and respect and care for.

Farsighted investors are experiencing first-hand and benefitting from the flight-to-quality effect in the market to quality listed innovators that are most relevant in this exponential world, because each time the market corrects, the stronger hands of longer-term farsighted investors will accumulate more and more of these quality innovators, while the weaker short-term opportunistic hands sell out, creating a resiliency effect in these stocks. Listed profitable SMID-cap tech innovators with non-linear exponential growth potential are the most relevant and mispriced multi-year investment trend and opportunity.

Inspiration for CENTERED With H.E.R.O.: Our clients, just like our H.E.R.O. innovators and business owners, understood the profoundness that it’s not about a Maslow-type pyramid that they need to scale upwards in profits and returns; the H.E.R.O. journey is not upwards, but a deeper journey inwards and towards the center, about the kind of person you want to become through the work you build and invest in to serve those you care about.

CEO Takuji-san has a grander purpose to make AS ONE into “a company that employees can tell from your heart to your most important person, son, daughter, wife, husband, best friend that ‘It is such a nice company, there is no one else!’”

Deeper and inwards towards the center. As Einstein elucidates: “Strive not to be a success, but rather to be of value” – Amid all of life’s chaos and challenges, a restorative balm to all of us to be Centered in values with focus and purpose to be of value in serving an idea larger than ourselves and the people we care deeply for.

Thus far, of the 72 entrepreneurs and CEOs whom we had highlighted in our previous weekly research brief HeartWare, less than one-third are in our focused portfolio of 40 HERO Innovators, while the rest (50+) are in our broader watchlist of 200+ stocks.

If you are not moving forward in this exponential world, you are going backwards. If you want to join us at the leading edge of opportunity, if you identify yourself in the values and bigger sense of purpose in H.E.R.O., or you wish to tell from your heart to your most important person, son, daughter, wife, husband, or best friend that you are a farsighted and thoughtful explorer in the H.E.R.O.’s Journey participating in the long-term exponential growth of a selected group of outstanding entrepreneurs, standing up for the embracement of the human spirit, please contact us via email or WhatsApp at +65 9695 1860. Thank you very much for your patience and support and we look forward to growing exponentially with you as we explore the H.E.R.O.’s Journey together.

It started with rethinking a few questions. Question No. 1: Can the megacap tech elephants still dance? Or is this the better question: Is there an alternative and better way to capture long-term investment returns created by disruptive forces and innovation without chasing the highly popular megacap tech stocks, or falling for the “Next-Big-Thing” trap in overpaying for “growth”, or investing in the fads, me-too imitators, or even in seemingly cutting-edge technologies without the ability to monetize and generate recurring revenue with a sustainable and scalable business model? How can we distinguish between the true innovators and the swarming imitators?

Question No. 2: What if the “non-disruptive” group of reasonably decent quality companies with seemingly “cheap” valuations, a fertile hunting ground of value investors, all need to have their longer-term profitability and balance sheet asset value to be “reset” by deducting a substantial amount of deferred innovation-related expenses and investments every year, given that they are persistently behind the innovation cycle against the disruptors, just to stay “relevant” to survive and compete? Let’s say this invisible expense and deferred liability in the balance sheet that need to be charged amount to 20 to 30% of the revenue (or likely more), its inexactitude is hidden; its wildness lurks and lies in wait. Would you still think that they are still “cheap” in valuation?

Consider the déjà vu case of Kmart vs Walmart in 2000s and now Walmart vs Amazon. It is easy to forget that Kmart spent US$2 billion in 2000/01 in IT and uses the same supplier as Walmart – IBM. The tangible assets and investments are there in the balance sheet and valuations are “cheap”. Yet Kmart failed to replicate to compound value the way it did for Walmart. Now Walmart is investing billions to “catch up” and stay relevant. Key word is “relevancy” to garner valuation.

We now live in an exponential world, and as the Baupost chief and super value investor Seth Klarman warns, disruption is accelerating “exponentially” and value investing has evolved. The paradigm shift to avoid the cheap-gets-cheaper “value traps”, to keep staying curious & humble, and to keep learning & adapting, has never been more critical for value investors. We believe there is a structural break in data in the market’s multi-year appraisal (as opposed to “mean reversion” in valuation over a time period of 2-5 years) on the type of recurring-revenue profitable business models, the “exponential innovators”, that can survive, compete and thrive in this challenging exponential world we now live in. Tech-focused innovators with non-linear exponential growth potential are the most relevant multi-year investment trend and opportunity.  

During our value investing journey in the Asian capital jungles over the decade plus, we have observed that many entrepreneurs were successful at the beginning in growing their companies to a certain size, then growth seems to suddenly stall or even reverse, and they become misguided or even corrupted along the way in what they want out of their business and life, which led to a deteriorating tailspin, defeating the buy-and-hold strategy and giving currency to the practice of trading-in-and-out of stocks. On the other hand, there exists an exclusive, under-the-radar, group of innovators who are exceptional market leaders in their respective fields with unique scalable business models run by high-integrity, honorable and far-sighted entrepreneurs with a higher purpose in solving high-value problems for their customers and society whom we call H.E.R.O. – “Honorable. Exponential. Resilient. Organization.”

The H.E.R.O. are governed by a greater purpose in their pursuit to contribute to the welfare of people and guided by an inner compass in choosing and focusing on what they are willing to struggle for and what pains they are willing to endure, in continuing to do their quiet inner innovation work, persevering day in and day out. There’s a tendency for us to think that to be a disruptive innovator or to do anything grand, you have to have a special gift, be someone called for. We think ultimately what really matters is the resolve — to want to do it, bring the future forward by throwing yourself into it, to give your life to that which you consider important. We aim to penetrate into the deeper order that whispers beneath the surface of tech innovations and to stand on the firmer ground of experience hard won through hearing and distilling the essence of the stories of our H.E.R.O. in overcoming their struggles and in understanding the origin of their quiet life of purpose, who opened their hearts to us that resilience and innovation is an art that can be learned, which can embolden all of us with more emotional courage and wisdom to go about our own value investing journey and daily life.

Warm regards,
KB | kb@heroinnovator.com | WhatsApp +65 9695 1860
www.heroinnovator.com

CENTERED With H.E.R.O. Issue 1: Resilient Amidst Trade War – Japan’s BrainPad +AI, Korea Data Leader, Oceania MedTech Disruptor | 20 May

Farsighted investors are cognizant that exponential innovators are resilient both in fundamentals and investment returns amidst the overall market volatility arising from the escalating US-China trade tensions since 6 May 2019.

For instance, BrainPad (TSE: 3655), Japan’s leading big data/artificial intelligence and data management platform SaaS (software-as-a-service) cloud innovator, is up 46% since 6 May 2019 to a market value of over US$550 million after it announced on 10 May 2019 a strong set of cumulative third-quarter results in which sales increased 30% YoY and operating profit jumped 2.1 times YoY on expanding margin from 18.2% to 26.5%, while revising upwards its full-year forecast by 25-50%.

Business leaders who appreciate the profound impact of exponential H.E.R.O. innovators include one of the world’s most influential international management thinkers, author and German co-founder of one of the world’s most profitable and successful global management consulting group, who commented on 6 Nov 2018, “Dear KB, Many thanks for the article on BrainPad, really interesting. It’s a very good text. I showed the article on BrainPad to the head of our A.I. unit. I find BrainPad intriguing.” BrianPad is up 79% during a turbulent market since the prescient comments by this leading global business management thought leader and entrepreneur.

One of our focused portfolio stocks, a Korean-listed SMID-cap tech innovator with dominant 80% domestic market leadership in recurring information & big data services is up 5.5% since 6 May 2019. Since we highlighted this Korean firm about three months ago to one of our advisory clients, a business owner/CIO of an established boutique fund management company in Singapore who manages sovereign wealth and pension/endowment money, the stock is up over 40% to a market value of over US$750m. We are grateful to be able to deliver our recently operationalized bespoke investment solution for family offices, UNHW, corporates and long-term institutional investors with satisfactory results to this wise business owner/CIO client whom we like and respect and care for.

Rattled by trade war concerns, investors are getting out of major US tech stocks and funds are flowing into Australia and New Zealand SMID-cap tech stocks which are increasingly on the radar of fund managers, joining the local superannuation funds who have been increasing their allocation to local tech stocks in their portfolio. 30% of the focused portfolio of 40 H.E.R.O. innovators are Oceania-listed tech stocks with recurring-revenue business models which include SaaS (software-as-a-service) cloud and medtech innovators.

For a Southeast Asian UNHW/family office client who owns a hospital operator as a key asset in his business portfolio, we have advised a portfolio of Asian-listed SMID-cap medtech innovators to multiply his investment returns and business profit by becoming the distributor for both equipment and consumables with his hospital operator, while benefiting the society/health of his home country. These include an Australia-listed medtech innovator who developed a fully automated medical equipment with unique ultrasound technology that produces water-based super-oxidizer ultra-fine mist into the air to kill off super-bacteria, fungi, viruses (including the highly-resistant HPV virus) and cross-infection risks in the hospital environment, even in shadowed areas created by crevices, grooves and imperfections on the probe surface.

It’s a recurring-revenue low-risk business model: Recurring consumables >58% of revenue with replacement/upgrade of capital equipment after 5-7 years. It has a global installed base over 17,000 units (>15,000 in US, >700 in EMEA, >1,390 in Asia/ME). Penetration rate: US (39%), UK (12%), Europe/ME (2%), Asia (3%). It has a 10-year IP runway from now till 2029: Covered by 14 patent families, active to 2025, including patents relating to consumables to 2029. Governments around the world are also issuing guidelines to adopt this innovation: The French Ministry of Health recently issued in April 2019 a new guidance requiring high-level automated disinfection (bacteria, mycobacterial, virucidal and fungicidal) to protect patients and staff in hospitals/clinics, in line with international guidelines for high-level disinfection.

This medtech innovator has remained resiliently positive since 6 May 2019 with a market value of ~US$1bn, operating profit margin 27%, ROE (= OP/Equity) 21.6%, ROA 18.8%, and a healthy balance sheet with net cash as % market value at 4.9% (US$48.6m).

Including BrainPad, the Korean-listed data leader, and the Oceania-listed medtech innovator, the portfolio of 40 H.E.R.O. innovators, which has an average market cap of US$1.46bn, delivered strong interim results growth amidst the US-China trade tensions: overall weighted sales rose 29.9% YoY and operating profit grew faster at 58.3% YoY, supporting the portfolio returns.

Farsighted investors are experiencing first-hand and benefitting from the flight-to-quality effect in the market to quality listed innovators that are most relevant in this exponential world, because each time the market corrects, the stronger hands of longer-term farsighted investors will accumulate more and more of these quality innovators, while the weaker short-term opportunistic hands sell out, creating a resiliency effect in these stocks. Listed profitable SMID-cap tech-focused innovators with non-linear exponential growth potential are the most relevant and mispriced multi-year investment trend and opportunity.

Heartwarming conversations are energizing amidst the market volatility and I appreciate very much the personal dialogue on VALUE 3.0-era value investing with Arko Kadajane, who’s in charge of equities and external funds at the European family office of the Skype founders, when he was in Singapore visiting us this week. I have great respect for Arko’s 15-years-leadership in creating value at the family office, which speaks volume about both the firm’s culture and his values. One of our acid tests is “Are you proud and happy if your children were to work in the company that you are investing in” – to identify compounders with a greater sense of Purpose to create value and serve their customers/community.

Above all, we shared with Arko that our clients, just like our H.E.R.O. innovators and business owners, understood the profoundness that it’s not about a Maslow-type pyramid that they need to scale upwards in profits and returns; the H.E.R.O. journey is not upwards, but a deeper journey inwards and towards the center, about the kind of person you want to become through the work you build and invest in to serve those you care about.

Deeper and inwards towards the center. As Einstein elucidates: “Strive not to be a success, but rather to be of value” – Amid all of life’s chaos and challenges, a restorative balm to all of us to be Centered in values with focus and purpose to be of value in serving an idea larger than ourselves and the people we care deeply for.

Thus far, of the 72 entrepreneurs and CEOs whom we had highlighted in our previous weekly research brief HeartWare, less than one-third are in our focused portfolio of 40 HERO Innovators, while the rest (50+) are in our broader watchlist of 200+ stocks.

If you are not moving forward in this exponential world, you are going backwards. If you want to join us at the leading edge of opportunity, if you identify yourself in the values and bigger sense of purpose in H.E.R.O., or you wish to tell from your heart to your most important person, son, daughter, wife, husband, or best friend that you are a farsighted and thoughtful explorer in the H.E.R.O.’s Journey participating in the long-term exponential growth of a selected group of outstanding entrepreneurs, standing up for the embracement of the human spirit, please contact us via email or WhatsApp at +65 9695 1860. Thank you very much for your patience and support and we look forward to growing exponentially with you as we explore the H.E.R.O.’s Journey together.

It started with rethinking a few questions. Question No. 1: Can the megacap tech elephants still dance? Or is this the better question: Is there an alternative and better way to capture long-term investment returns created by disruptive forces and innovation without chasing the highly popular megacap tech stocks, or falling for the “Next-Big-Thing” trap in overpaying for “growth”, or investing in the fads, me-too imitators, or even in seemingly cutting-edge technologies without the ability to monetize and generate recurring revenue with a sustainable and scalable business model? How can we distinguish between the true innovators and the swarming imitators?

Question No. 2: What if the “non-disruptive” group of reasonably decent quality companies with seemingly “cheap” valuations, a fertile hunting ground of value investors, all need to have their longer-term profitability and balance sheet asset value to be “reset” by deducting a substantial amount of deferred innovation-related expenses and investments every year, given that they are persistently behind the innovation cycle against the disruptors, just to stay “relevant” to survive and compete? Let’s say this invisible expense and deferred liability in the balance sheet that need to be charged amount to 20 to 30% of the revenue (or likely more), its inexactitude is hidden; its wildness lurks and lies in wait. Would you still think that they are still “cheap” in valuation?

Consider the déjà vu case of Kmart vs Walmart in 2000s and now Walmart vs Amazon. It is easy to forget that Kmart spent US$2 billion in 2000/01 in IT and uses the same supplier as Walmart – IBM. The tangible assets and investments are there in the balance sheet and valuations are “cheap”. Yet Kmart failed to replicate to compound value the way it did for Walmart. Now Walmart is investing billions to “catch up” and stay relevant. Key word is “relevancy” to garner valuation.

We now live in an exponential world, and as the Baupost chief and super value investor Seth Klarman warns, disruption is accelerating “exponentially” and value investing has evolved. The paradigm shift to avoid the cheap-gets-cheaper “value traps”, to keep staying curious & humble, and to keep learning & adapting, has never been more critical for value investors. We believe there is a structural break in data in the market’s multi-year appraisal (as opposed to “mean reversion” in valuation over a time period of 2-5 years) on the type of recurring-revenue profitable business models, the “exponential innovators”, that can survive, compete and thrive in this challenging exponential world we now live in. Tech-focused innovators with non-linear exponential growth potential are the most relevant multi-year investment trend and opportunity.  

During our value investing journey in the Asian capital jungles over the decade plus, we have observed that many entrepreneurs were successful at the beginning in growing their companies to a certain size, then growth seems to suddenly stall or even reverse, and they become misguided or even corrupted along the way in what they want out of their business and life, which led to a deteriorating tailspin, defeating the buy-and-hold strategy and giving currency to the practice of trading-in-and-out of stocks. On the other hand, there exists an exclusive, under-the-radar, group of innovators who are exceptional market leaders in their respective fields with unique scalable business models run by high-integrity, honorable and far-sighted entrepreneurs with a higher purpose in solving high-value problems for their customers and society whom we call H.E.R.O. – “Honorable. Exponential. Resilient. Organization.”

The H.E.R.O. are governed by a greater purpose in their pursuit to contribute to the welfare of people and guided by an inner compass in choosing and focusing on what they are willing to struggle for and what pains they are willing to endure, in continuing to do their quiet inner innovation work, persevering day in and day out. There’s a tendency for us to think that to be a disruptive innovator or to do anything grand, you have to have a special gift, be someone called for. We think ultimately what really matters is the resolve — to want to do it, bring the future forward by throwing yourself into it, to give your life to that which you consider important. We aim to penetrate into the deeper order that whispers beneath the surface of tech innovations and to stand on the firmer ground of experience hard won through hearing and distilling the essence of the stories of our H.E.R.O. in overcoming their struggles and in understanding the origin of their quiet life of purpose, who opened their hearts to us that resilience and innovation is an art that can be learned, which can embolden all of us with more emotional courage and wisdom to go about our own value investing journey and daily life.

Warm regards,
KB | kb@heroinnovator.com | WhatsApp +65 9695 1860
www.heroinnovator.com

H.E.R.O.’s Journey in Tech (15 May 2019) – The Spectacular Implosion of Dr. Cho’s ‘Nefarious Network’: Hong Kong’s markets are plagued by stock manipulation, share pledging, cross-ownership and margin lending. Regulators say they’re going to take action.

H.E.R.O.’s Journey in Tech (15 May 2019) – The Spectacular Implosion of Dr. Cho’s ‘Nefarious Network’: Hong Kong’s markets are plagued by stock manipulation, share pledging, cross-ownership and margin lending. Regulators say they’re going to take action.

Companies

• Ctrip CEO says trade war is putting Chinese tourists off US, with many opting for ‘more welcoming’ nations (SCMP)
• Cloud provider Xunlei discards dubious past, reveals partnership with Youku (TN)
• Yunji raises $121 million in IPO-but is the company a pyramid scheme? (TN)
• Bilibili Stock Tumbled Despite the Chinese Anime Site’s 1st-Quarter Revenue Growth (Barron’s)
• Trend Micro Delivers the Industry’s Most Complete Security Across Cloud and Container Workloads (SB)
• Toei Releases Impressive Dragon Ball Profits for 2019’s First Quarter (CB); ‘Dragon Ball’ anime powers Toei back to profit growth; Mobile game based on franchise also contributes to turnaround (Nikkei); Bandai Namco sales and profits up last year, led by gaming segment (GI)
• SK Innovation to invest US$490 million to build a second assembly in China to supply batteries for electric vehicles (SCMP)
• Key Apple suppliers suffer big profit drop as iPhone woes bite; Foxconn and Pegatron see major drop as tariff challenge looms (Nikkei)
• Quanta warns shifting out of China may be ‘no cheaper’ than tariffs (Nikkei)
• Investment platform operators such as Netwealth and HUB24 stand to reap a share in $35 billion in new fund flow as a direct result of the opposition’s plan to abolish franking credit refunds. (AFR)
• Global investors eye ASX tech darlings as investors, rattled by trade war concerns, get out of the major US technology names (AFR)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• Baidu’s education business shifts from consumer-facing to enterprise (TN)
• After Jack: Alibaba searches for new growth in the post-Ma era; Challenge to Amazon and Microsoft in cloud services could bring conflict with Washington (Nikkei); When the guru steps down: tech companies face the succession question; Jack Ma has been gradually handing power to Daniel Zhang for years (Nikkei)
• Alipay extends mobile payment services to 300,000 retailers in Japan; The number of merchants supporting Alipay in Japan has surged to more than 300,000 from about 50,000 in early 2018 (SCMP)
• Tencent Music Stock Gets It Right the Second Time (MF)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• Facebook Takes Step to Police Content on Its Live Service (NYT)
• Apple’s newest iPhone game-only the second the company has ever developed for its own App Store-appears to be targeted at a very small and specific demographic: Omaha-area billionaires aged 85 and up. (qz)
• Amazon rolls out Alexa Guard, to help protect your home while you’re out (TC)
• Attention, Amazon Shoppers: Google Wants Some of Your Spending Money (NYT)
• Google’s latest app, Rivet, uses speech processing to help kids learn to read (TC)
• Google Express becomes an all-new Google Shopping in big revamp (TC)
• Google Makes New Push to Bolster Travel-Related Searches (Bloomberg)
• Google Unveils Slew of New Digital Ad Formats in Amazon Battle (Bloomberg)

Asia Tech & Innovation Trends

• Content emerges as new driver of Chinese e-commerce (TN)
• Huawei launches AI-backed database to target enterprise customers (TC)
• Ant Financial-backed Hello Chuxing seeks hefty financing that would take valuation to USD 4 billion (KRA)
• Chinese developers elbow into Japan’s mobile game market (Nikkei)
• Ten-second menu app “Taberly” adds an online ordering function to buy ingredients with just a few taps, and announces procurement of 250 million yen (TC)
• Taiwan Helping Tech Firms That Choose Southeast Asia Over China (Bloomberg)
• In India election, a $14 software tool helps overcome WhatsApp controls (Reuters)
• India’s largest mobile wallet company Paytm now offers a credit card (TC)
• Big Upsurge In E-Commerce Drives Southeast Asia’s Online Economy (Forbes)
• Ecommerce: What the past 10 years mean for the future; The past decade has seen the emergence of ecommerce unicorns, big-ticket acquisitions, and deep-pocketed global investors. The final draft of the ecommerce policy will determine who holds the edge in the next decade (Forbes)
• Paytm CEO suddenly has no problem with “the most evil” company’s WhatsApp Pay (qz)
• Uber’s IPO flop bodes ill for Grab and Go-Jek; Southeast Asian ‘decacorns’ must show path to profitability, say experts (Nikkei)

Global Tech & Innovation Trends

• AI at the Barbican: in the realm of mind games; A wide-ranging new exhibition in London explores developments in artificial intelligence (FT)
• Driverless electric truck starts deliveries on Swedish public road (Reuters)
• Adobe brings new Amazon and Google integrations to Magento (TC)
• Disney to Buy Comcast’s Hulu Stake and Take Full Control of Streaming Service (NYT)
• Match now offers dating coaches who help its members with profiles, dating challenges (TC)
• Intel’s new boss wants to teach the chipmaker new tricks; When fear of missing out meets financial ruthlessness (Economist)
• Questions Persist About Uber’s Profits-And Its Stock Falls Further (Forbes); Uber and Lyft Might Never Be Profitable. Investors Are Waking Up to That. (Barron’s); Uber Eats Needs to Deliver More Than Ever; Its explosive growth is crucial at a time when Uber’s largest business, ride hailing, is slowing. (Bloomberg); Uber’s IPO Debacle Raises Hairy Questions for WeWork (Bloomberg)
• San Francisco just banned facial-recognition technology (CNN)
• CrowdStrike IPO: 5 things to know about the cybersecurity unicorn (MW)
• Ken Fisher: Subscription Advice a “Stupid Model” (Barron’s)
• EDA Vendors Spread Wings as Market Softens (EET)

Life

• The Spectacular Implosion of Dr. Cho’s ‘Nefarious Network’: Hong Kong’s markets are plagued by stock manipulation, share pledging, cross-ownership and margin lending. Regulators say they’re going to take action. (Bloomberg)

H.E.R.O.’s Journey in Tech (14 May 2019) – How to Increase Your Personal Agency

H.E.R.O.’s Journey in Tech (14 May 2019) – How to Increase Your Personal Agency

Companies

• Tencent Music profit beats as paid subscribers grow (Reuters)
• Zoom Video Analysts Like Its Growth But Caution on Valuation (Bloomberg)
• Taiwan’s Foxconn readies chip boss to succeed Gou as chairman – sources (Reuters)
• Greatech Technology Bhd, an industrial automation solutions provider, aims to raise RM73.05mil from its initial public offering (IPO (Star)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• Alipay now serves over 300,000 merchants in Japan (KRA)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• Microsoft’s Cloud Business Is Closing In on Amazon Web Services, Analyst Says (Barron’s)
• Apple revamps its TV app ahead of streaming service launch (Reuters)
• Netflix Bull Says ‘Bulletproof’ Service Can Handle Disney+ Challenge (Bloomberg)

Asia Tech & Innovation Trends

• China AI cancer diagnosis start-ups face capital shortage; Stricter licensing regime makes it tougher to commercialise medical tech (FT)
• China’s regulator urges brokerages to monitor investors’ funding needs to trade on Nasdaq-style market; Retail investors must meet minimum investment threshold of US$72,900 to trade stocks on the new board, which is likely to debut in the middle of this year (SCMP)
• TikTok’s overseas issues (TN)
• China’s Leshi on verge of delisting as debts pile up (Nikkei)
• US reveals tariffs on $300bn of Chinese goods, including phones; Asian tech companies prepare to initiate contingency plans (Nikkei)
• KDDI rolls out new ‘price down’ smartphone plans for Japan amid government push for lower rates (JT)

Global Tech & Innovation Trends

• ServiceNow acqui-hires mobile analytics startup Appsee (TC)
• Mailchimp expands from email to full marketing platform, says it will make $700M in 2019 (TC)
• Slack aims to be the most important software company in the world, says CEO (TC)
• ADT Stock Tanks Because Google Is Helping People Manage Their Own Home Security (Barron’s)
• The Web’s All-Seeing Eye: This Startup Is Getting In On Google’s Game By Searching A Trillion Facts (Forbes)
• A senator wants to ban video games like Candy Crush from offering ‘loot boxes’ in-app purchases (CNN)
• Shopify Stock Is Falling After an Analyst Said Bullish Targets Are Already Priced In (Barron’s)
• Uber Is a Market Bellwether for All the Wrong Reasons; The point when investors start demanding profits from money-losing tech companies would mark the end of low inflation. (Bloomberg)
• Pinterest’s Surge Triggers Cautious Reviews From Wall Street (Bloomberg)

Life

• Podcast #507: How to Increase Your Personal Agency (AOM)
• How I Built This with Guy Raz: Belkin International: Chet Pipkin (NPR)

H.E.R.O.’s Journey in Tech (13 May 2019) – Gates’s Law: How Progress Compounds and Why It Matter

H.E.R.O.’s Journey in Tech (13 May 2019) – Gates’s Law: How Progress Compounds and Why It Matter

Companies

• Pinduoduo wants you to buy a product together with 9,999 strangers; Pinduoduo is spending big bucks hoping to kickstart a new social shopping frenzy (KRA)
• Chinese social apps Momo, Tantan and DingTalk suspend user posts amid government crackdown; Tantan is China’s biggest dating platform, with 90 million registered users and six million daily active users (SCMP)
• So Young, More Beautiful – The Allure of China’s Plastic Surgery Market (PD)
• Fanuc to build new plant to harness 5G and self-driving demand; Robot maker to invest $28m to mass-produce equipment for high-end lenses (Nikkei)
• Delta to invest up to NT$13bn in Taiwan (TT)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• Lazada extends e-commerce edge in Southeast Asia despite lull in overall visits to site; The Alibaba-backed e-commerce company scored the highest average monthly active users in Malaysia, Philippines, Thailand and Singapore (SCMP)
• Tencent links up with the State Grid of China to build industrial internet infrastructure for the power sector (KRA)
• Despite propaganda concerns, Tencent launches subscription-based video streaming app in Taiwan (KRA)
• Masa’s $100 Billion Fund Plays a Game of Hot Potato; The trick in venture capital is finding someone to buy your stake for more than you paid. A listing would grant new sources of cash. (Bloomberg); SoftBank’s Market Value Slides $9 Billion as Uber IPO Flops (Bloomberg)
• Apple Partner TSMC Starts Building Chips for the Next Generation of iPhones (Bloomberg)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• Facebook files lawsuit against South Korea data analytics group; Social network says case against Rankwave relates to misuse of ad and marketing services (FT)
• TV networks emerge as obstacles on YouTube’s hunt for ads (Reuters)
• Amazon rolls out machines that pack orders and replace jobs (Reuters)

Asia Tech & Innovation Trends

• Douyin competitor Kuaishou targets USD 4 billion in revenue and profitability in 2019 (KRA)
• Fashion platform Mogu connects livestreamers and brands (TN)
• China’s ‘data doors’ scoop up information straight from your phone; The security screeners scan more than your face, picking up MAC addresses and IMEI numbers (SCMP)
• METI and JETRO to boost e-commerce support for Japanese firms via Japan Mall websites (JT)
• Hotstar, Disney’s Indian streaming service, sets new global record for live viewership (TC)
• India’s most popular services are becoming super apps; Companies like Paytm and Amazon bundle other services to give users an all-in-one experience (TC)

Global Tech & Innovation Trends

• Markets Are 10X Bigger Than Ever (EG)
• Bosch goes for platinum-light fuel cells (Reuters)
• What’s next for the Marvel Cinematic Universe? Avengers: Endgame is not really the end. Spider-Man, Black Panther, Guardians and more-here’s a comprehensive list-and possibilities-of what’s coming at you from the superhero stables (Forbes)
• MuleSoft chases Aussie transformation mania (AFR)
• The investor who turned down Uber at a $5m valuation; ‘Aargh’ says Mark Suster, who went to Open Angel Forum in 2010 (FT)
• As TV Industry’s $20 Billion Week Starts, Signs That Streaming Isn’t King Yet; The so-called upfronts are traditional television’s annual hype-fest, and a way locking advertisers into lucrative deals. They’re also a reminder of the medium’s continuing relevance (NYT)
• AI arms race risks rise of uncontrollable killer robots; US, China and Russia poised to field unmanned weapons before global rules take shape (Nikkei)
• Uber Is Too Mature and Immature; It has the hallmarks of a slowing, established company and the unprofitable economics of an upstart, making it hard for investors to love. (Bloomberg); Morgan Stanley Got Rich Clients Into Uber. Then the IPO Stumbled (Bloomberg)
• French start-up targets hi-tech anti-pollution mask at Asia’s health-conscious consumers; Founder says US$220 price tag should not deter consumers who value their health above all else. (SCMP)

Life

• Gates’s Law: How Progress Compounds and Why It Matters (FS)
• Police arrest Kangde Xin’s major shareholder in a show of force to support regulator’s crackdown on corporate malfeasance; Police arrested Zhong Yu, the major shareholder and former chairman of Kangde Xin, after its auditor refused to sign off on the listed company’s cash position (SCMP)
• Best World confirms allegations that CEO’s brother-in-law owns main customer in China (ST)
• Degrees of Confidence (MH)
• What Does It Mean to Be Great? Not What You Think. (ZR)

H.E.R.O.’s Journey in Tech (11 May 2019) – Secret of sensor giant Keyence’s super-high margin + Japan’s Google-backed AI pioneer plots a quantum leap; Analyzing retail data only scratches the surface of Abeja’s ambitions

H.E.R.O.’s Journey in Tech (11 May 2019) – Secret of sensor giant Keyence’s super-high margin + Japan’s Google-backed AI pioneer plots a quantum leap; Analyzing retail data only scratches the surface of Abeja’s ambitions

Companies

• Zoom and Its Profits Face Analyst Scrutiny After 121% Rally (Bloomberg)
• Momo will temporarily suspend the ability of users to post social newsfeeds on its platform between May 11, 2019 and June 11, 2019 and undertake other self-inspection measures pursuant to directives of relevant government authority (PRNW)
• Secret of sensor giant Keyence’s super-high margin (Nikkei)
• Delta Electronics plans to hire 7,000 employees over next 3-5 years (FT)
• Meet The Asian E-Commerce Head Who’s Expanding Globally, But Not In China (Forbes)
• Life360 passes first day of ASX litmus test (AFR)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• SoftBank hedges bet on mobile with Yahoo deal (Nikkei); SoftBank/Vision Fund: Uberoptimistic Group remains reliant on the mature and fiercely competitive telecoms industry (FT)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• In the World of Dating, All-Powerful Facebook Is Now the Underdog (Barron’s)
• Nest, the company, died at Google I/O 2019 (ARST)
• Netflix Signs Deal With Alibaba to Add Chinese-Language TV Show (Bloomberg)

Asia Tech & Innovation Trends

• China’s Electric-Car Mania Draws Parallels to the Dot-Com Bubble (Bloomberg)
• TikTok Is the New Music Kingmaker, and Labels Want to Get Paid; They’re seeking a better deal after they missed the rise of the social video platform and sold music rights for a flat fee. (Bloomberg)
• In China, Even Healthcare for All Isn’t Enough; As the country tries to expand private insurance, its tech companies should lead the way. (Bloomberg)
• Social selling startup Beidian raises RMB 860 million, challenges Pinduoduo (TN)
• Shakeout looms for China’s electric car market, as 80 per cent of start-ups predicted to go under; Only 20 to 30 electric vehicle makers may survive, says Beijing Electric Vehicle Co senior executive (SCMP)
• Japan’s Google-backed AI pioneer plots a quantum leap; Analyzing retail data only scratches the surface of Abeja’s ambitions (Nikkei)
• Japan’s ‘information banks’ to let users cash in on personal data (Nikkei)
• Panasonic sets $9bn sales target at new China-focused segment; Electronics maker eyes innovation hub for connected appliances (Nikkei)
• JG Summit to pump $50m into Southeast Asian startups (Nikkei)
• Ovo, Grab’s mobile wallet in Indonesia, introduces ‘pay later’ feature (KRA)

Global Tech & Innovation Trends

• Zillow’s future vision ramping up fast, and it’s good news for homebuyers & sellers (TBP)
• Silicon Valley will soon get its own stock exchange (qz)
• Lyft’s revenues double, losses quintuple-and prospects darken; The same is likely to be true of Uber when it lists. Only more so (Economist); Uber IPO: the long ride to profitability; The billions raised from the listing will help its strategy, but how much longer can it continue without making a profit? (FT); As Uber goes public, the fight against its broken business model continues (ET); Uber’s dull thud may startle unicorn herd (Reuters)
• American pay-television is in decline; This will have far-reaching consequences for the industry (Economist)
• How real-estate barons have ridden the tech boom; Digitisation has created unlikely winners: real-estate barons (Economist)
• WeWork’s starry valuation dazzles landlords, reaffirms doubters (Reuters)
• Jumia falls sharply after Citron claims fraud; Africa-focused ecommerce site targeted by short seller (FT); Wall Street’s Silence Is Deafening as Citron Takes Aim at the Amazon of Africa (Bloomberg)
• Marvell Doubles Down on Automotive Ethernet (EET)
• Artificial Intelligence Detects IEDs at Military X-Ray Checkpoints (EET)
• After Delivering 5,000% Share Jump, Ambu CEO Makes a Sudden Exit (Bloomberg)
• Game Development Platform Unity Raising Funding at $6 Billion Valuation (Bloomberg)

Life

• ‘Relentless focus kept me going’: Achal Bakeri, Chairman and MD of Symphony (HBL)
• The Empty Promise of Data Moats (a16z)

H.E.R.O.’s Journey in Tech (9-10 May 2019) – The Company Behind Gore-Tex Is Coming for Your Eyeballs; W.L. Gore, the classic American innovator, is building artificial corneas, and reinventing itself in the process.

H.E.R.O.’s Journey in Tech (9-10 May 2019) – The Company Behind Gore-Tex Is Coming for Your Eyeballs; W.L. Gore, the classic American innovator, is building artificial corneas, and reinventing itself in the process.

Companies

• Online lesson platform GSX Techedu plans US IPO (KRA, Nikkei)
• China’s CAR Rental raises USD 200m via bond sales to repay old debt (KRA)
• Recruit invests in Indian AI chatbot platform Techbins (SI)
• Daifuku’s visualisation and simulation approach to baggage handling (IAR)
• Sony’s market value stays discounted even as profits pick up; Investors balk at array of businesses with capitalization at half of peak (Nikkei)
• Trend Micro Reports Solid First Quarter 2019 Results (BW)
• Recruit invests in Indian AI chatbot platform Techbins (SI)
• Terry Gou’s right-hand woman tipped to become next Foxconn chief; ‘Money Mama’ Huang seen maintaining mogul’s ties to group (Nikkei); Foxconn to shift some output from Shenzhen to Taiwan (Nikkei)
• Innodisk Displaying IoT-Ready Solutions and Resolution at IoT World 2019 (PRNW)
• Shopee beats Lazada in terms of number of visits across Southeast Asia in Q1 2019 (KRA)
• Afterpay forced to change name for UK launch by Dutch rival (Age)
• Atlassian shares hit a record after Goldman analysts recommend buying the stock (CNBC)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• How Garena became extremely important for Tencent’s future (e27)
• Tencent and Ant Financial win Hong Kong virtual bank licenses; Xiaomi- and Ping An-backed ventures also gain approval from monetary authority (Nikkei)
• Tencent, Alibaba, Xiaomi units win Hong Kong online banking license (Reuters)
• WeChat users can now add songs to the videos they post (M(
• Alipay’s mutual aid platform Xiang Hu Bao now covers senior citizens in China (KRA)
• Masayoshi Son claims Vision Fund LPs are already up 45% – but that’s mostly paper gains (TC); SoftBank profit grows 36% relying heavily on investment stakes; Vision Fund generates returns but debt and thin cash flow cast shadow (Nikkei); SoftBank’s Son declares second $100bn tech fund will launch soon (Nikkei); Son’s $100 Billion Mammoth Can Still Move Fast; The SoftBank Vision Fund just had its busiest and most profitable quarter, and it still has the Uber IPO to come. (Bloomberg); SoftBank’s Big Bets Start to Pay Off With $3.8 Billion Uber Gain (Bloomberg); What Uber’s IPO Tells Us About SoftBank’s Big Ride-Hailing Bet (Bloomberg); Son’s $100 Billion Mammoth Can Still Move Fast; The SoftBank Vision Fund just had its busiest and most profitable quarter, and it still has the Uber IPO to come. (Bloomberg)
• Samsung unveils world’s highest-resolution image sensor (Investor)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• Break up Facebook, Mark Zuckerberg is too strong, says company’s co-founder (JT)
• Amazon upgrades its Blink outdoor security camera with better battery, two-way talk (TC)
• Amazon Hit by Extensive Fraud With Hackers Siphoning Merchant Funds (Bloomberg)
• Google and Qualcomm launch a dev kit for building Assistant-enabled headphones (TC)
• Google Maps’ AR navigation makes walking directions foolproof (Age); Assistant thinks on the fly, and other Android updates coming soon (Age)
• Google Fights Back (BT)
• Waymo at 1,000 Riders: The Self-Driving Frontrunner Inches Forward (Bloomberg)
• Microsoft is building a virtual assistant for work. Google is building one for everything else (qz)
• The $1 trillion miracle of Microsoft; Microsoft CEO Satya Nadella has a completely different style to that of his predecessors, Bill Gates and Steve Ballmer. It’s helped turn the tech giant from a market laggard into the world’s most valuable company (AFR)
• Netflix acquires kids’ educational content co. StoryBots (TC)
• Services are the new battleground for Apple (AFR)

Asia Tech & Innovation Trends

• WeChat challenger Toilet pivots to e-commerce, rebrands as Haoji (TN)
• Chinese mom-focused social commerce platform Beidian raises USD 126 million; Anyone can open a shop on Beidian to sell and share products, and receive commissions from sales. (KRA)
• Co-chiefs of China’s top chipmaker SMIC fighting over strategy; Pair battle over whether to pursue profits or state demands for cutting-edge technology (FT)
• Chinese fintech firms cosy up to banks as collaborators instead of disrupters they shift towards retail banking (SCMP)
• Slump in China Stocks Threatens to Spoil Tech Board Plan (Bloomberg)
• China’s Robocars Are Being Lapped By Their U.S. Competitors (Bloomberg)
• Chinese AI unicorn Megvii raises US$750 million ahead of planned IPO (SCMP)
• China now has 202 unicorns, says report (KRA)
• Three shifts in Chinese clean tech recast climate villain as savior; Solar is finally cheaper than fossil fuels; wind and EVs are not far behind (Nikkei)
• Douyin set to add “Products” category to its search bar (KRA)
• China’s Microsoft challenger Kingsoft files for Shanghai tech board listing (TN)
• Toyota, Panasonic to set up company for ‘connected’ homes (Reuters)
• Taiwanese solid-state battery maker ProLogium seeing adoption in electric vehicles (TN)
• Seoul to spend W240b for next-generation chip tech (Investor)
• How HaloDoc aims to open greater access to healthcare for all Indonesians; Medical facilities in Indonesia are not evenly distributed. HaloDoc wants to help tackle this challenge (e27)
• RIP Indian Handsets: Micromax, Intex, Lava and Karbonn hold only 3 percent market share (Forbes)
• BigBasket gets funds from Alibaba, Mirae as investors bet on Indian startups; Online grocery retailer receives $150 million (Nikkei)

Global Tech & Innovation Trends

• How Artificial Intelligence could help with early detection of breast cancer (MW)
• SaaS startups are changing the founder/investor dynamic (TNW)
• com to bolster caregivers’ screening checks (MW)
• Uber’s global ‘alliances’ create frenemies that cloud long-term prospects (TN); Data and delivery: how Uber aims to move things around the world (Age); Uber Is Going Public: How Today’s Tech; I.P.O.s Differ From the Dot-Com Boom (NYT); The answer to Uber’s profit challenge? It may lie in its trove of data (Reuters); Uber has recipes to avoid delivery indigestion (Reuters); Uber’s losses are nothing like young Amazon’s (Reuters)
• Lyft stops providing key data after IPO, then insults investors’ intelligence (MW); How Lyft disguises its losses (qz); Lyft takes some gas out of Uber’s IPO (Reuters)
• Square teams up with Postmates for delivery partnership (MW)
• Roku stock surge adds another $100 million to short sellers’ paper losses this year (MW)
• IBM Could Struggle in the Cloud, Analyst Says – and Watch Out for Activist Investors (Barron’s)
• Citron Research’s Andrew Left slams Jumia as a ‘fraud’ and ‘worthless’ (MW)
• With new Fit technology, Nike calls itself a tech company (TC); Sick of Getting Returned Sneakers, Nike Tries a New Sizing App (Bloomberg)
• Symantec CEO to step down in abrupt departure as company warns on profit (Reuters)
• Rent the Runway just opened its largest brick-and-mortar store yet (TC)
• Pandora expands its music-and-podcasts product Pandora Stories with help from SiriusXM’s guests (TC)
• Pearl, the healthcare spinout from LA-based AI startup, GumGum, raises $11 million (TC)
• Robotics startups won’t win without also incorporating AI, as Karakuri’s fundraise shows (TC)
• Printify raises $3M to expand its marketplace for custom printing (TC)
• Slack: Why your company needs to find its hedgehog (TNW)
• How 5G will transform the way we use computers (Age)
• Live music streaming pioneer Boiler Room touches down in China (KRA)
• Disruptions of the last decade: How technology has changed the way we live, work and socialise (Forbes)
• TripAdvisor Stock Tumbles Because Investors Don’t Like the Look of the Road Ahead (Barron’s)
• “ServiceNow’s differentiated technology in automation and process management positions them well to build a strong ecosystem connecting all major portions of the company’s IT and business operations” (Barron’s)
• WeWork: leaser of last resort (FT)
• How Intel found itself ‘in a little bit of a bathtub’; Chief Bob Swan cautions chipmaker faces anaemic revenue growth and slipping margins; Intel’s stock is down almost 20 per cent in the past two weeks alone (FT)
• BrainBox AI has announced the launch of a new product that combines deep learning, cloud-based computing and algorithms to support a self-sustaining commercial building (BK)
• Managing data as an asset: An interview with the CEO of Informatica (MK)
• Disney Writes Off Its Vice Stake in Latest Sign of Trouble (Bloomberg)
• New York Times Company Continues to Add Online Subscribers as Digital Advertising Grows (NYT)
• Real Estate’s Latest Bid: Zillow Wants to Buy Your House (NYT)

Life

• The Company Behind Gore-Tex Is Coming for Your Eyeballs; W.L. Gore, the classic American innovator, is building artificial corneas, and reinventing itself in the process. (Bloomberg)
• Asia is home to 50% of world’s fastest growing companies; Tencent leads 1,679 ‘ten baggers’ and India emerges as top incubator, data show (Nikkei)
• How toxic company culture is derailing billion-dollar M&As (TNW)
• SGX to Best World: Is main customer in China a related party? Firm had declared Changsha Best an independent party in offensive against short-seller; separate report says Dora Hoan’s brother-in-law is behind it (BT)
• Berkshire Takes Tax Hit as Victim of ‘Ponzi-Type’ Solar Scheme (Bloomberg)

H.E.R.O.’s Journey in Tech (8 May 2019) – This Little-Known Stock Nearmap Rallies 149% to Take Australia’s No. 1 Spot + Robert Browning on Artistic Integrity, Withstanding Criticism, and the Courage to Create Rather Than Cater

H.E.R.O.’s Journey in Tech (8 May 2019) – This Little-Known Stock Nearmap Rallies 149% to Take Australia’s No. 1 Spot + Robert Browning on Artistic Integrity, Withstanding Criticism, and the Courage to Create Rather Than Cater

Companies

• Zoom Video shares rise following clearance for federal use (MW)
• China’s Meituan Dianping pushes its short delivery service to more customers in search for profit; The Beijing-based company’s delivery system currently has more than 600,000 active daily couriers, and serves over 3.6 million merchants in China (SCMP)
• SeaTown Invests $3.17 Million in Tencent Music (FID)
• China Is Losing Its Grip on Companies Due to Trump’s Trade War; Delta Electronics is expanding in India, Taiwan and elsewhere (Bloomberg)
• Afterpay rival Flexigroup inks deals with Myer, IKEA, health groups (AFR)
• Shares in Nearmap., which provides aerial images and location data that allow businesses to conduct virtual site visits, have surged 149 percent this year, making it the biggest gainer on the benchmark index. (Bloomberg)
• TCS set to become world’s third-largest IT services company (LM)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• Baidu founder Robin Li says his firm shipped more smart screens than speakers in February; Smart speakers with display screen are gaining traction. (KRA)
• Tencent aims to digitize Beijing Tourism Group’s 7,000 offline businesses (KRA)
• Tencent trials AI diagnosis program for Parkinson’s in London (FT)
• Smart appliances slow to pick up Samsung’s recipe for recovery (Nikkei)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• A Tax That Could Fix Big Tech: Putting a levy on targeted ad revenue would give Facebook and Google a real incentive to change their dangerous business models. (NYT)
• Google unveils new privacy tools, smarter AI assistant, cheaper phones (MW); Google brings augmented reality to Search (TC); Google Search will offer better news coverage, and soon, support for podcast search (TC); Google is bringing AI assistant Duplex to the web (TC); Google Assistant gets driving mode (TC); Google Lens can translate foreign language text in photos and read it back to you (TC); Google Assistant gets more personalized through a new ‘Picks for You’ feature (TC); Google’s I/O developer conference is no longer just about tech (qz)
• Google Face Match brings privacy debate into the home; New ‘smart display’ pushes boundaries of acceptance for recognition systems Google at-home device (FT)
• Google Will Give Users More Control Over Who Tracks Them Online (Bloomberg)
• Google Debuts Cheaper Pixel Phones After Premium Handsets Flop (Bloomberg)
• YouTube TV (AVC)
• How the Apple Store Lost Its Luster; In interviews, current and former employees say brand building became more important than serving shoppers. (Bloomberg)
• Apple teams up with SAP to help clients develop iPhone business apps (Reuters)
• Microsoft’s Newest Offerings Aim at Cloud-Computing Market (Barron’s)

Asia Tech & Innovation Trends

• Online education platform Hujiang’s Hong Kong IPO application expired: report; company had been running with increasing deficits from 2015 to 2017, with respective net losses of RMB 280 million, RMB 422 million, and RMB 537 million (TN)
• Shanghai district installs comprehensive surveillance system; City Brain’s 1,100 security cameras are a test case for constant monitoring (Nikkei)
• Japan Inc. will defy its critics and innovate once more; Faced with an aging society, companies can overcome conservatism and embrace a digital world (Nikkei)
• NTT to launch AI-based genome screening for preventive medicine (Nikkei)
• Brankas wants to bring Southeast Asia’s banks and e-commerce into the digital era (TC)
• After Indonesia introduced minimum tariffs for online motorcycle taxi rides, platforms are already seeing a dip in demand (KRA)
• Big Basket raises $150 million to expand its operations (Forbes)
• The Rise of India’s New Billionaires (And the Fall of the Old); New entrepreneurs are growing wealthy in areas like technology (Bloomberg)

Global Tech & Innovation Trends

• Match Group Stock Is Jumping Because Facebook Hasn’t Killed Tinder (Barron’s); Match Group Beats Estimates as Tinder’s Popularity Grows Abroad (Bloomberg); Match Group adds more Tinder subscribers, shares surge (Reuters)
• Square acquires conversational AI startup Eloquent Labs (TC)
• Bubble-driven boom in M&As hides steep costs long-term (TC)
• This tablet on a stick isn’t RoboCop, but it’s a smart solution to risky traffic stops (TNW)
• LinkedIn wants Indians to spend more time on its platform. But how far can colourful emojis go? (qz)
• The Farm Automation Breakthrough Bringing The High-Tech West Coast And Rural Rust Belt Together (Forbes)
• Casper, With Competition Growing, Wants To Be More Than A Mattress Company (Forbes)
• A Vision of the Dark Future of Advertising; Companies will know more about you than you can even imagine (Medium)
• Why Tech Giants Are So Desperate to Provide Your Voice Assistant (HBR)
• Lyft unveils Waymo partnership as loss widens to $1.1 billion (JT)
• NCR Weighs a Sale After Receiving Takeover Interest (Bloomberg)
• Spotify Turns the Anti-Apple Volume Up to 11 (Bloomberg)
• Americans Have So Many Subscriptions They Need Apps to Track and Cancel Them (Bloomberg)
• As IPO looms, Uber clings to hard-knuckled tactics in pursuit of growth (Reuters)

Life

• Chinese gaming company Kingnet confirms its boss has been arrested for market manipulation (KRA)
• Robert Browning on Artistic Integrity, Withstanding Criticism, and the Courage to Create Rather Than Cater (BP)
• Seneca: Curbing Anger: The Stoic’s Cure for the Most Destructive Emotion (Medium)
• Make Friends With the Monster Chewing on Your Leg, and Other Tips for Surviving Startups (FR)
• Will You Choose Alive Time or Dead Time? Not having control over our circumstances is frustrating, but it doesn’t mean we’re helpless (RH)

H.E.R.O.’s Journey in Tech (7 May 2019) – Word’s new AI editor will improve your writing

H.E.R.O.’s Journey in Tech (7 May 2019) – Word’s new AI editor will improve your writing

Companies

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• Alibaba re-evaluates India strategy, may focus on smaller deals; The potential shift in strategy follows Alibaba’s disappointments at some of its large e-commerce bets in India (LM)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• Facebook is pivoting (TC)
• Facebook’s contract workers are looking at your private posts to train AI (Verge)
• Word’s new AI editor will improve your writing (TC); Microsoft wants you to work less (TC); Microsoft wants to reinvent documents and collaboration with its new Fluid Framework (TC); Microsoft and GitHub grow closer (TC); Microsoft and Red Hat launch a new event-driven Kubernetes autoscaling tool (TC); Microsoft’s IntelliCode for AI-assisted coding comes out of preview (TC); Microsoft open-sources its quantum computing development tools (TC); Microsoft launches a new platform for building autonomous robots (TC); Microsoft aims to modernize and secure voting with ElectionGuard (TC, JT); Microsoft is building Word into a serious Google Docs competitor (qz)
• Microsoft Forms Pact With VMware to Keep Up With Amazon (Bloomberg)
• It’s Microsoft vs. Comcast in infrastructure push to expand rural broadband (MW)
• Google Maps Could Point the Way to Alphabet Stock Gains (Barron’s)
• Apple has bought around two dozen companies in the past 6 months, Tim Cook says (MW)
• Apple’s New Video Service Is Unlikely to ‘Move the Needle’ on Profit, Analyst Says (Barron’s)
• Apple to Reveal New Home-Grown Apps, Software Features at WWDC; Tech giant will woo developers with new tools, but also compete with them through its own software. (Bloomberg)
• Ford Partners With Amazon to Enable Package Deliveries to Trunks (Bloomberg)
• Amazon squares up to local ecommerce groups in India; Online retail is booming in smaller cities as data prices fall and more people get web access (FT)

Asia Tech & Innovation Trends

• Jiangsu Hengshun Vinegar attributes some of its increase in profit to the AI taste-testing machines which increased productivity, improved product quality and stability, reduced production costs and provided technical support to promote traditional cuisine outside the country (SCMP)
• DeepGlint: the Chinese AI firm that helped police catch a criminal who had been on the run for 20 years (SCMP)
• Chinese Startup DouYu Delays U.S. IPO Launch on Trade Jitters (Bloomberg)
• Trump’s Tariffs on Chinese Electric Cars Seen as Likely to Last (Bloomberg)
• Tencent-backed health care giant DXY expands to cosmetic medicine (TN)
• Chinese video platform Kuai says its users in smaller cities love instructional videos (KRA)
• Failed anonymous chat app pivots to social shopping (TIA)
• Future standard to democratize image analysis AI raises 400 million yen (TC)
• South Korea’s booming ‘webtoons’ put Japan’s print manga on notice (JT)
• SendBird, a startup that enables developers to add messaging to their apps with a couple of lines of code, snags additional $50M for messaging API tool, as it extends Series B to $102M (TC)
• Grocery startup BigBasket becomes India’s newest unicorn with new $150M investment (TC)
• The world won’t take China’s money-and India’s online travel firms are benefiting (qz)
• Medlife acquires Myra Medicines for express delivery and data science capabilities; The e-pharmacy platform plans to invest $100 million to expand its operations, build additional services and gain greater market share (Forbes)
• Power Thieves Drain India’s Electric-Car Hopes; Widespread theft of electricity and a lack of charging stations render the country’s green-vehicle targets unrealistic. (Bloomberg)
• Uber Eats targets business customers in Australia ahead of IPO (Age)

Global Tech & Innovation Trends

• ServiceNow Unveils Google Pact on Path to $10 Billion Sales Goal (Bloomberg)
• Dropbox adds cold storage layer to reduce cost of storing less-frequently accessed files (TC)
• Carta, formerly known as eShares, had moved beyond replacing paper records and into selling as a monthly service appraisals of the fair market value of private companies’ common stock in order to determine their strike price (TC)
• Thunes raises $10M to make financial services more accessible in emerging markets (TC)
• VisaDB tells you all about your next destination – weather, paperwork, and plugs to bring (TNW)
• SaaS startup Black Lake raises RMB 150 million as factories shift to the cloud (TN)
• PagerDuty offers a subscription service that allows businesses to improve the constant interplay between software developers and operators – so-called DevOps – within their organization and lets them use real-time data to address incidents that occur (MW)
• Chewy Inc., the rapidly growing online seller feeding on the “pet humanization” trend, is going public. (MW)
• Stock Picks From Space; Investors are using real-time satellite images to predict retailers’ sales. Is that cheating? (Atlantic)
• What Pinterest is hiding, and why it may get in the way of a higher stock price (MW)
• Roku Stock Has Doubled and Will Keep Rising on Strong Ad Sales, Analyst Says (Barron’s)
• Forgers Are Forcing a $9 Trillion Business Into Digital Age (Bloomberg)
• The Sports TV Bubble Shows Signs of Weakness; Sinclair’s deal to buy the former Fox regional sports networks values them at less than expected. (Bloomberg)
• Lyft Shares Sell Off as Driver Strike Highlights Regulatory Risk (Bloomberg)
• Flexera’s Owners Pursue Sale for Up to $3 Billion; Flexera helps companies with IT services including software security, cloud management and software-as-a-service management (Bloomberg)

Life

• Buffett Confronts Tech-Driven Change Amid Investor Questions; “We just sat there sucking our thumbs,” Munger said of failing to invest in Google. “Maybe Apple was atonement.” (Bloomberg)
• To Master Your Work, Work to Master Your Mind (NW)

H.E.R.O.’s Journey in Tech (6 May 2019) – ‘We screwed up’ not buying Google shares, Berkshire’s Munger says

H.E.R.O.’s Journey in Tech (6 May 2019) – ‘We screwed up’ not buying Google shares, Berkshire’s Munger says

Companies

• So-Young plastic surgery: wrinkle twinkle; So-Young accounts for a third of all plastic surgery procedures booked by Chinese people online by sales (BT)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• Tencent aims to blend internet and industry in bid for new growth; Push to expand beyond consumer services comes as gaming segment faces headwinds (Nikkei)
• SoftBank mulls IPO of $100 billion Vision Fund: source (Reuters)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• How Apple News+ could be the forbidden fruit for publishers (Age)
• The making of Amazon Prime, the internet’s most successful and devastating membership program; An oral history of the subscription service that changed online shopping forever. (Vox)
• Netflix Isn’t Being Reckless, It’s Just Playing a Game No One Else Dares (Netflix Misunderstandings, Pt. 3) (Redef)

Asia Tech & Innovation Trends

• Chinese AR start-up develops smart glasses to help police catch suspects (SCMP)
• China’s largest satellite operator feels heat from 5G competition; Threat to TV pushes China Satcom toward maritime Wi-Fi and ‘smart shipping’ (Nikkei)
• Q&A with Taiwan’s ‘Startup Minister’ Chen; After TSMC and UMC, Taiwan Needs a New Model (EET)

Global Tech & Innovation Trends

• How exactly Stitch Fix’s “Tinder for clothes” learns your style (qz)
• Jumia’s rise exposes challenges of online shopping in Africa; Pan-African start-up wrestles with issues of logistics, traffic and customer trust (FT)
• Forgers Are Forcing a $9 Trillion Business Into the Digital Age (Bloomberg)
• MercadoLibre Soars to Record as Payments Growth Impresses Street (Bloomberg)
• Spotify Stock Is Risky Because the Music Industry Isn’t Changing Fast Enough (Barron’s)
• Apps Take Center Stage in Chipotle’s Food Fight; Digital ordering and food delivery have moved beyond talking points and pilot programs to become big money-makers. (Bloomberg)
• Visualizing the Unicorn Landscape in 2019 (VC)
• Using Smart Speakers to Engage with Your Customers (HBR)
• Robots Edge Closer to Unloading Trucks in Amazon-Era Milestone; New Siemens, Honeywell devices work at least as fast as people. ‘The job is miserable inside that trailer.’ (Bloomberg)
• Fifty Years of AMD, a Tech Leader (EET)
• How Audioburst Makes Talk Radio And Podcasts More Digestible (Pulse)
• Distracted by Tech While Driving? The Answer May Be More Tech (NYT)

Life

• ‘We screwed up’ not buying Google shares, Berkshire’s Munger says (Reuters); Buffett leans in to fintech and Asia in search of gems; Paytm and Amazon stakes mark departure from Oracle of Omaha’s tech aversion (Nikkei); Buffett says Amazon stock purchase doesn’t deviate from value-investing principles (MW); Here’s How Warren Buffett Answered a 9-Year-Old’s Question About Investing in Tech (Barron’s)
• The future of stroke patients may depend on the part-time job of a Canadian surgeon (qz)
• Visionary Photographer Edward Weston on Creativity and the Importance of Cross-Disciplinary Curiosity (BP)

H.E.R.O.’s Journey in Tech (4 May 2019) – Reversion to the Mean Is Dead. Investors Beware.

H.E.R.O.’s Journey in Tech (4 May 2019) – Reversion to the Mean Is Dead. Investors Beware.

Companies

• E-commerce upstart Yunji shines in downsized Nasdaq IPO; Yunji’s aggressive expansion in its earlier years drew the attention of Chinese authorities, who slapped the company with the equivalent of a $1.4 million fine in 2017 for violating pyramid (Nikkei)
• Persistent Systems extends partnership with Trend Micro from endpoint security to virtual server security (CRN, NB)
• Daikin to spend $900m on polymer output for chip equipment (Nikkei)
• We’re very focused on the Australian market: ReadyTech (AFR)
• GBST provides update on Bravura Solutions takeover proposal (MF)
• ViTrox Sets Up German Subsidiary (iconnect)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• SoftBank Has a Bigger, Weirder Vision (Bloomberg)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• Facebook’s quest is to find new ways to make money; Mark Zuckerberg’s next act will be a mass experiment (FT)
• Old Facebook finally wants you to ‘Meet New Friends’ (TC)
• Machine Learning Challenges at Facebook Scale (EET)
• Amazon prepares to battle with Alibaba in Asia’s cloud (Nikkei)
• Amazon’s One-Day Shipping Is a Perk Few Retailers Can Match (Bloomberg)
• Warren Buffett Buys Into a Different Amazon; A less growth-charged, more profitable profile may have attracted Berkshire Hathaway stock pickers to the e-commerce giant. (Bloomberg)
• Huawei Overtakes Apple to Become Second Biggest Smartphone Maker (Bloomberg)
• SEC hits failed Apple sapphire glass manufacturer with fraud charges (TC)
• Google spends hundreds of millions of dollars on content review: letter (Reuters)
• Microsoft launches a fully managed blockchain service (TC)
• Microsoft brings Azure SQL Database to the edge (and Arm) (TC)

Asia Tech & Innovation Trends

• How Chinese Unicorn Mobvoi Regained Its Original AI Vision After Ticwatch Detour (Forbes)
• QR code scams strike China, from merchants to traffic tickets; Scammers rip off people trying to pay parking tickets (Nikkei)
• Shenzhen AI start-up Intellifusion helps city police identify jaywalkers and banned drivers (SCMP)
• We Should Worry About How China Uses Apps Like TikTok; Illiberal innovations created for China’s vast surveilled and censored domestic market are increasingly popular overseas. (NYT)
• 20x the market opportunity of ride-hailing: Ankur Mehrotra on Grab Financial’s strategy and products (KRA)

Global Tech & Innovation Trends

• Spotify’s leanback instant listening app Stations hits iOS (TC)
• DAZN vs. ESPN: Loaded With A-List Athletes-Canelo, Ronaldo, LeBron-The Billionaire-Backed Streaming Site Wants To Be The Worldwide Leader In Sports (Forbes)
• The flood of tech IPOs risks worsening inequality; When the bull run ends, it will drag down valuations of everything considered ‘growth’ (FT)
• The low-key smart tech that works for cities; Eye-catching data services do not always improve citizens’ lives. The most innovative are the least obvious (FT)
• Nasdaq chief doubles down on data as NYSE fight intensifies; Adena Friedman tries to position New York exchange group as hub for technology (FT)
• The trade war rumbles on – but US chip makers are cautiously optimistic despite lingering soft demand (SCMP)
• Zoom Video Surges Past Lyft and Pinterest as Value Tops $20 Billion (Bloomberg)
• Elon Musk Makes $500 Billion Autonomy Pitch to Investors (Bloomberg); Tesla’s $2 bln capital raise repeats sins of past (Reuters)
• If This Is a Tech Bubble in Stocks, It’s the Expansionary Phase (Bloomberg)
• Uber’s First Wall Street Buy Rating Endorses Comparisons to Amazon (Bloomberg); Uber’s IPO Disclosures Leave One Big Unanswered Question (Bloomberg)
• Ocado’s Warehouse Robots Are Three Times Faster Than Amazon’s (Bloomberg)
• MercadoLibre Soars to Record as Payments Growth Impresses Street (Bloomberg)
• Expedia Shares Fall as Home-Rental Business Vrbo Goes Slow (Bloomberg)

Life

• How Warren Buffett’s longtime business partner enlightened the Oracle of Omaha (MW)
• Reversion to the Mean Is Dead. Investors Beware. (Barron’s)

H.E.R.O.’s Journey in Tech (3 May 2019) – Buffett says Berkshire Hathaway, finally, has invested in Amazon.com, says he has been an ‘idiot’ not to buy into Amazon.com

H.E.R.O.’s Journey in Tech (3 May 2019) – Buffett says Berkshire Hathaway, finally, has invested in Amazon.com, says he has been an ‘idiot’ not to buy into Amazon.com

Companies

• Chinese cosmetic surgery app So-Young has pretty debut on Nasdaq (Nikkei)
• YY’s Like is now among the top ten apps in Indonesia (KRA)
• Delta Electronics to expand China production for EV market (Digitimes)
• Resmed back on track after better-than-expected third quarter (Age)
• Volt bank to build mortgage platform with IRESS (ITN)
• Nanosonics to Showcase Innovative trophon2 at ACOG 2019 Annual Meeting; HLD solution proven to reduce risk of ultrasound probe cross-infection without harm to environment (BW)
• Bravura announces $165m raising to aid GBST acquisition (ID)
• India’s Kajaria Ceramics rises; Jefferies starts coverage with ‘buy’; poised to benefit the most from a fillip to organised volumes, courtesy tightening compliance and the recent ban on coal gasifiers in Gujarat, which should shrink the price diff (Reuters)
• This one stats shows how Nearmap is growing exponentially faster; LTV has grown from $480 million as at December 30 2017 to $1.07 billion as at December 30 2018 to what it revealed today as over $1.4 billion as at March 31 2019 (MF); NEA Showcases Strong Growth In 1H19; Customer Lifetime Value Exceeds $1B (KKM)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• Samsung’s chip and smartphone segments face falling profits (Nikkei)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• Facebook open-sources Ax and BoTorch to simplify AI model optimization (TC)
• Mark Zuckerberg unveils plans for Facebook’s future; Social network warns integrating its messaging apps will take years; Facebook is encouraging its users to communicate in groups, rather than via individual public posts (FT)
• Instagram Is the New Mall; The platform is allowing influencers to sell things to users directly through their posts. (Atlantic)
• How Facebook and Google are using algorithms to predict your next thought (TNW)
• Google launches CallJoy, a virtual customer service phone agent for small businesses (TC)
• Google Strategy Teardown: Google Is Turning Itself Into An AI Company As It Seeks To Win New Markets Like Cloud And Transportation (CBI)
• YouTube touts first new original programme under free strategy (Reuters)
• Want to Predict Apple’s Stock Price? Watch Its Suppliers. (Barron’s)
• iPhone hard hit as global smartphone shipments continue nosedive (TC)
• Why Amazon didn’t make the cut in China (TIA)
• Alexa in-skill purchasing, which lets developers make money from voice apps, launches internationally (TC)
• Amazon Can’t Duck Williams-Sonoma Suit Over Furniture Sales (Bloomberg)
• The Most Valuable Company (for Now) Is Having a Nadellaissance; Under Satya Nadella, Microsoft has more subscribers than Netflix, more cloud computing revenue than Google, and a near-trillion-dollar market cap. (Bloomberg); The Most Valuable Company (for Now) Is Having a Nadellaissance; Under Satya Nadella, Microsoft has more subscribers than Netflix, more cloud computing revenue than Google, and a near-trillion-dollar market cap. (Bloomberg)
• Microsoft makes a push to simplify machine learning (TC)
• Microsoft rolls out new cloud services for AI and blockchain, partnering with JP Morgan; Microsoft is also releasing tools to let users make AI models without having to write the underlying code (SCMP)
• Microsoft Is About to Show Off for Software Developers. Watch What It Says About the Cloud. (Barron’s)

Asia Tech & Innovation Trends

• We Should Worry About How China Uses Apps Like TikTok; Illiberal innovations created for China’s vast surveilled and censored domestic market are increasingly popular overseas. (NYT)
• Chinese tech companies revel in convertible-bond boom; Cash-hungry businesses have tapped investors for a record $4.6bn this year (FT)
• China in pole position for 5G era with a third of key patents; US and Japan lose market share, as Huawei and ZTE bulk up (Nikkei); How 5G will unlock the industrial internet, driving another dimension of mobile connectivity (SCMP)
• ‘Ghost restaurants’ ride Asia’s food delivery boom; With no storefronts, takeout-only eateries offer less risk for would-be owners (Nikkei)
• BrainCo CEO says his ‘mind-reading’ tech is here to improve concentration, not surveillance (SCMP)
• Huawei said to introduce world’s first 5G TV amid increased security scrutiny of its products (SCMP)
• Money’s too tight to mention for China’s outsized electric vehicle industry (Technode)
• Toyota AI Ventures launches $100M fund to invest in robotics and autonomous tech (TC)
• Supermicro Asks Suppliers Not to Provide Chinese-Made Motherboards (TET)
• AI learns to read Korean, so you don’t have to; Artificial intelligence solved a problem reading character-based scripts in the search for key documents (FT)
• Indonesia brings regulations for on-demand motorcycle taxis into effect (KRA)
• Go-Pay aims to simplify mutual funds investments in Indonesia through a partnership with Bibit (KRA)
• Behind the scenes of InMobi’s journey to unicorn (TIA)
• Malaysia’s GHL enables GrabPay QR payments (TIA)
• Deskera reportedly raises US$100M+ in extended Series A funding round at US$500 valuation (e27)
• How Paytm killed its e-commerce dream in India; Paytm Mall’s losses mounted and in the financial year 2018. It posted a loss of nearly Rs 1,800 cr. (ET)

Global Tech & Innovation Trends

• FanDuel is now charging inactive users $3 per month for not playing (TC)
• FreightHub, the European digital freight forwarder, collects $30M Series B (TC)
• Flume Health is an insurance administrator cutting costs by pre-approving prices and paying on-demand (TC)
• Adtech veteran Quantcast is latest tech giant to face GDPR privacy probe (TC)
• Inspection robots are climbing the walls to monitor safety conditions in hazardous locations (TC)
• Tinder launches ‘Festival Mode’ to connect music festival goers with profile badges (TC)
• Spotify launches voice-enabled ads on mobile devices in a limited US test (TC)
• Palantir’s software was used for deportations, documents show (TC)
• Verizon reportedly seeking to sell Tumblr (TC)
• How streaming services are changing the way music is made (qz)
• This US mayor joked cops should “mount .50-caliber” guns where AI predicts crime (qz)
• Checkout.com raises record $230m in Series A funding; London-based payments start-up that competes with Adyen secures valuation close to $2bn (FT)
• Making a killing: The Uber IPO is a moral stain on Silicon Valley (Age)
• One SaaS metric we monitor closely is net dollar retention. Net dollar retention tells you what percent of revenue from current customers you retained from the prior year, after accounting for upgrades, downgrades, and churn. (CB)
• Expedia Shares Fall as Home-Rental Business Vrbo Goes Slow (Bloomberg)
• Zynga Soars as Analysts Rave About `Compelling Investment’ (Bloomberg)
• Square Slides as Street Wonders If It’s ‘Running Out of Steam’ (Bloomberg)

Life

• How i built this with Guy Raz: Live Episode! Peloton: John Foley (NPR)
• Buffett says Berkshire Hathaway, finally, has invested in Amazon.com: CNBC (Reuters); Billionaire Buffett says he has been an ‘idiot’ not to buy into Amazon.com (Reuters)
• The quest to find companies that have a lasting competitive edge: Finding companies protected by what Warren Buffett calls a “moat” is easy to talk about, but hard to do (Economist)
• “The idea that rewards promote focus and skill is only true to a point; when the rewards get high enough it spins the other direction, because mental bandwidth that would otherwise go toward strategy and reason is overwhelmed by dreaming about the reward” (MH)
• Adam Savage on Great Tools, Great Projects, and Great Lessons (#370) (TF)
• China’s biggest online health care platform Ping An Healthcare and Technology fires back at short-seller report that labelled the firm ‘Ponzi scheme’ (SCMP)

H.E.R.O.’s Journey in Tech (2 May 2019) – AI is already changing how cancer is diagnosed

H.E.R.O.’s Journey in Tech (2 May 2019) – AI is already changing how cancer is diagnosed

Companies

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• Samsung Bets It Can Sell Smart-Home Tech by Building the Homes (Bloomberg)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• Facebook won’t tell you one critical detail about its first major redesign since 2004; Unveiling the social network’s redesign, Mark Zuckerberg talked up online groups or digital ‘living rooms’ where people can have more intimate convers (MW)
• Facebook is doubling down on AI to clean up the social network (CNN); Facebook Wants AI to Screen Content, But Fairness Issues Remain (Bloomberg)
• Facebook wants to bring your entire body into virtual reality (CNN)
• iPhone hard hit as global smartphone shipments continue nosedive (TC)
• Apple’s future comes down to four crucial questions (Age)
• Alexa in-skill purchasing, which lets developers make money from voice apps, launches internationally (TC)

Asia Tech & Innovation Trends

• China’s Mass Surveillance More Sophisticated Than Thought (Bloomberg)
• Huawei to challenge Samsung, Apple electronics lead with 5G TV; Chinese tech company also aims to be a top PC maker in three years (Nikkei)
• Calsonic lines up key public-private funding for $7bn Magneti deal; Calsonic aims to combine its expertise in electronic parts for self-driving systems with Magneti’s skill in electronic control units to compete with such global rivals as Bosch (Nikkei)
• Tour package recommendation platform Tripstore operator raises W7.1b (Investor)
• Rent my wheels: India’s Drivezy brings driver and owner together; Peer-to-peer vehicle-sharing service eyes expansion in US and Southeast Asia (Nikkei)

Global Tech & Innovation Trends

• AI is already changing how cancer is diagnosed (TNW)
• Walmart’s Vudu teases original streaming programming, ‘shoppable’ content (MW)
• GrubHub Soars 10% as CEO Buys Nearly $1 Million in Shares (Bloomberg)
• Creepy Billboards Track Consumers With AI Cameras That Target Ads Based On Mood (ZH)
• “Organized Crime Scheme” Ad-Click Fraud Is Costing Companies $50 Billion A Year (ZH)
• Shopify Bulls Pile on With Even Higher Stock Price Expectations (Bloomberg)
• Square Sees Revenue Falling Short of Estimates as its cash-register and payments-processing businesses see increasing competition (Bloomberg)
• Airbnb Spawned an Ecosystem of Startups That Sweat the Details so Owners Don’t Have to; Money has been pouring into digital travel startups that help keep the noise low and the sheets crisp (Bloomberg)
• TE Connectivity: An Industrial Company You’ve Never Heard of Has a Lot to Say About the Market (Barron’s)
• When manipulation is the digital business model; Ever looked for an online cancel button and struggled to find it? ‘Dark patterns’ may be to blame (FT)
• India’s Oyo hotel chain buys @Leisure for €369m; Acquisition of Amsterdam-based group aimed at boosting presence in short-term property rental; Oyo founder Ritesh Agarwal says the acquisition reflects holidaymakers’ increasing preference (FT)
• Bosch Makes Another Bet on Fuel Cell Technology (Bloomberg)

Life

H.E.R.O.’s Journey in Tech (1 May 2019) – Microsoft, Slack, Zoom, and the SaaS Opportunity + A $4.4 Billion Accounting Error Burns Investors in China; One of China’s largest listed drugmakers Kangmei Pharmaceuticals said it overstated cash holdings by $4.4 billion

H.E.R.O.’s Journey in Tech (1 May 2019) – Microsoft, Slack, Zoom, and the SaaS Opportunity + A $4.4 Billion Accounting Error Burns Investors in China; One of China’s largest listed drugmakers Kangmei Pharmaceuticals said it overstated cash holdings by $4.4 billion

Companies

• Momo Announces a Recent Development about Tantan (PRNW); Pomerantz Law Firm Investigates Claims On Behalf of Investors of Momo Inc (Yahoo)
• Subsidies gas up turnaround at Buffett-backed BYD (Reuters)
• Smartphone maker Xiaomi sets up technical committee to build an engineering culture as it pushes into artificial intelligence (SCMP)
• MakeMyTrip acquires corporate travel firm Quest2Travel; India’s largest online travel aggregator enters the corporate travel business with the buyout of the Mumbai-based firm (Forbes)
• Afterpay reveals quick-off-the-mark UK strategy (AFR)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• Alibaba’s grand strategy to feed China’s middle class (Technode)
• Ant Financial sells out its stake in micro-lender Qudian (KRA)
• Tencent may enter ride-hailing business, its trademark registration information shows (KRA)
• Long freeze between Tencent and Alibaba thaws; Chinese tech giants have been following each other into the same investments (FT)
• Taiwan economy stumbles as global tech downturn worsens; Minister hopes wave of companies returning from China will spur growth; The slowdown in global demand for electronics gadgets triggered the steepest slide in net earnings at Taiwan Semiconductor Manufacturing Company in more than seven years (FT)
• Samsung may stay true to its bleak words (Reuters)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• Facebook Unveils Major App Redesign With Focus on Groups (Bloomberg); Facebook overhauls design as it pivots to private messaging (Reuters)
• Instagram will now let creators and influencers sell items directly (TC)
• Amazon targets $5 billion in Indian exports on its global marketplace by 2023 (Forbes)
• Services really are becoming a bigger part of Apple’s business (TC); Apple Stock Is Up Because the Shift to Services Seems to Be Working (Barron’s); Apple’s old age beats Google’s adolescence (Reuters); In streaming wars, Apple says it can coexist with Netflix (Reuters)
• Microsoft, Slack, Zoom, and the SaaS Opportunity (BT)
• Alphabet’s revenue breakdown? You can’t Google that (AFR); The cost of being woke, Google edition; Demonetisation of questionable content is principled but costly. (FT); Google’s Ad Revenue Mystery: Five Possible Theories (Bloomberg); FAANG Stocks Drop $100 Billion as Alphabet Loss Bites Hard (Bloomberg)
• Netflix and rivals have to up their user-experience game to compete with traditional TV for ad dollars, says new report (MW)

Asia Tech & Innovation Trends

• Food delivery platforms push into lower-tier cities, new retail for growth: report (Technode)
• Bytedance acquires database company Terark; Terark develops algorithms that speed up databases by compressing the data, and enables direct searches on the highly compressed data (Technode)
• ByteDance faces global learning curve as TikTok runs afoul of local regulators; TikTok’s rapid expansion has been marred by regulatory problems in India, the United States and Indonesia (SCMP)
• Tencent-Backed Waterdrop Seeks Valuation of More Than $1 Billion (Bloomberg)
• Chinese sneaker-trading platform becomes unicorn with latest funding round (TIA)
• Vlogs may be hot in China but investors remain cool (Technode)
• More than 1,500 Chinese apps found to be collecting excessive personal information (KRA)
• Server maker Super Micro to ditch ‘made-in-China’ parts on spy fears (Nikkei); Supermicro breaks ground for new plant in Taiwan (Digitimes)
• Go-Jek investment arm makes first deal and it is an Indian e-sports startup (e27); Go-Jek collaborates with Tiket.com to launch Go-Travel (KRA)
• Sofian Hadiwijaya of Warung Pintar, Transforming traditional kiosks: Startup Stories (KRA)
• India’s Data Localization Remains A Key Challenge For Foreign Companies (Forbes)
• Mobileground India: The Chinese invasion; The first wave of internet businesses may have belonged to America, but China’s startups and investors are now leading the wave to dominate the mobile internet in developing markets. What does this mean for India? (Forbes)
• For Airbnb, India is the next China: Nathan Blecharczyk (Forbes)

Global Tech & Innovation Trends

• The WeWork IPO Is Still Confidential. Here’s What We Know So Far. (MW)
• Golden unveils a Wikipedia alternative focused on emerging tech and startups (TC)
• IM raises $25M to help publishers engage with readers (TC)
• Online pet-food retailer Chewy.com files to go public (CHWY) (BI)
• Industrial-Technology Stocks Zebra Tech and Cognex Both Tumbled. That’s Great for Savvy Investors (Barron’s)
• Shopify’s Latest Earnings Keep the Hot E-Commerce Stock Climbing (Barron’s)
• I.P., Anki: yet another home robotics company powers down (Wired)
• AI-Powered UiPath Scores $568M At $7B Valuation (CB)
• This is why Spotify isn’t just talking the talk about podcasts (SR); Spotify Reaches 100 Million Paid Subscribers Ahead Of Apple Music (Forbes)
• Uber’s enormous, vague IPO prospectus is an outrage; The 431-page document highlights what is wrong with the US public markets (FT)
• The questionable economics of autonomous taxi fleets (FT)
• The Terrifying Potential of the 5G Network; The future of wireless technology holds the promise of total connectivity. But it will also be especially susceptible to cyberattacks and surveillance. (NY)
• Lesson of Disney’s ‘Endgame’: Go big or go home (Reuters)
• Akamai beats, raises forecast on cybersecurity, content delivery demand (Reuters)

Life

• 6 Questions for Warren Buffett at Berkshire Hathaway’s Annual Meeting (Barron’s); Frothy markets turn dealmaker Warren Buffett into a bankroller (Reuters)
• A $4.4 Billion Accounting Error Burns Investors in China; One of China’s largest listed drugmakers Kangmei Pharmaceuticals said it overstated cash holdings by $4.4 billion (Bloomberg)
• Hong Kong traded shares in Chinese peer-to-peer lending platform Gold-Finance tank after founder put in police custody; Shares in Gold-Finance tumble by as much as 70 per cent in the city on Tuesday (SCMP)
• Australia’s largest construction comapny CIMIC has inflated profits by around 100% in the last two years through aggressive revenue recognition, acquisition accounting and avoidance of JV losses (GMT)

H.E.R.O.’s Journey in Tech (30 April 2019) – Meet Matt Calkins: Billionaire, Board Game God And Tech’s Hidden Disruptor; he runs Appian which sells software to help businesses build apps more quickly; What Buddhism Taught Me About Product Management

H.E.R.O.’s Journey in Tech (30 April 2019) – Meet Matt Calkins: Billionaire, Board Game God And Tech’s Hidden Disruptor; he runs Appian which sells software to help businesses build apps more quickly; What Buddhism Taught Me About Product Management

Companies

• Tantan, owned by Beijing-based Momo, was suspended from multiple app stores in the country (SCMP, Technode)
• Most Loved China Drug Stock Sells Hormones to Make Kids Taller; Changchun Technology will not be affected by the Chinese government’s ongoing move to drive down generic drug prices through a centralized bulk procurement program as its products are not on the list of the national medical insurance reimbursement list (Bloomberg)
• Xiaomi’s Lei Jun gives Lakala founder a 1kg gold bar to celebrate successful IPO; Lakala, a Beijing-based company that offers online and offline payment channels, remittances, and credit rating services, went public at the Shenzhen Stock Exchange after a failed previous attempt in 2017 (KRA)
• China’s Sohu Stock Sees a Win as Its Game Subsidiary Returned a Fat Dividend (Barron’s)
• China’s latest tech export: an Arabic-speaking, AI-powered news anchor from Sogou; Deal marks first time Sogou’s AI news anchor technology is being adopted by an international media organisation (SCMP)
• China’s electric car boom doubles BYD’s quarterly sales; Automaker faces profit squeeze with Beijing slashing green-vehicle subsidies (Nikkei)
• Trend Micro boosts channel partners’ business through its new channel program in India (CRN)
• Meet Senzar: The Moto Blind Spot Detection System that comes from Cub ElecParts which has branched out into aftermarket blind spot detection for RVs, trailers, and motorcycles (RA)
• China’s Trade War Is Taiwan’s Opportunity to Bring Cash Home; Delta Electronics has applied to invest $1.8 billion in production, research and design in Taiwan (Bloomberg)
• Webcash: Bookkeeping leaps into the 21st century; Entrepreneur connects accounts with banks for small companies (JA)
• WiseTech Global wants its acquisitions to be leaner (AFR)
• Pentamaster could benefit from rising Vertical Cavity Surface Emitting Laser (VCSEL) adoption in smartphones, which is projected to drive global VCSEL sales volume by 5x over 2017-23F (Edge)
• Shopee Indonesia adds flight ticket feature in partnership with Traveloka (KRA)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• Google purges Baidu-affiliated app developer from Play Store after ad fraud accusations (KRA)
• Taobao testing social e-commerce platform Taoxiaopu (Technode)
• Alibaba to pay $250 million to settle lawsuit over concealing pre-IPO warning on counterfeiting (Reuters)
• Alipay app ends menu translation mystery for Chinese (Age)
• Samsung profit tumbles 57% amid Galaxy Fold woes (MW)
• SoftBank’s cash has poured out — it’s starting to come back; Shares up 41% since December as ‘conglomerate discount’ finally begins to narrow (FT); SoftBank-backed WeWork to go public; Money-losing shared-office provider joins pool of tech startups preparing IPO (Nikkei, Bloomberg)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• Google Reminds Investors Rapid Growth Isn’t Guaranteed (Bloomberg); Alphabet’s Other Bets shows the cost of starting three businesses (qz); Google parent’s shares dive as YouTube changes, competition hurt revenue (Reuters); Alphabet revenue dented by cooling Google ad business (FT)
• Why the Apple card is the gleaming future of money (Wired)
• Amazon’s One-Day Shipping Is Hitting Trucking Stocks. It Shouldn’t. (Barron’s)
• Microsoft Forms Pact With VMware to Keep Up With Amazon (Bloomberg)
• How Microsoft learned from the past to redesign its future (Verge)

Asia Tech & Innovation Trends

• Startup set to launch China’s first commercial autonomous taxi; Beijing backing means vehicles can build safety record on open roads (Nikkei)
• China’s rocket start-ups go small in age of ‘shoebox’ satellites (Reuters)
• Swingvy looks to automate manual and cumbersome HR practices for small and mid-sized businesses by connecting HR, payroll, and employee benefits on a mobile-first online platform (KRA)
• Grocery delivery startup Honestbee hits cash crunch, eyes sale (TIA)
• Tiger Global has invested in NinjaCart, as well as Facilio, Fyle and CleverTap, all of which are B2B startups (LM)

Global Tech & Innovation Trends

• ‘Avengers: Endgame’ Makes Disney Invincible in 2019. Then What? The blockbuster film and other highly anticipated releases will make this year difficult to repeat, especially in the age of streaming. (Bloomberg); Disney’s stock rockets toward best month in 30 years as ‘Avengers’ adds to buying frenzy (MW); ‘Avengers’ Can’t Power Movie Theater Stocks Because We’re Living in a Streaming World (Barron’s); The ‘Endgame’ for Disney Stock Is a Netflix-Like Valuation (Barron’s)
• Uber Pitches Expansions While Investors Question Losses (Bloomberg)
• Autonomous vehicles make congestion pricing even more critical (TC)
• Here’s what investors need to know about how unicorn IPOs are really priced (MW)
• Toy-robot startup Anki, maker of Cozmo, shutting down (MW)
• PayPal and 3 Other Stocks to Play the Growing Mobile Commerce Trend (Barron’s)
• Adobe Stock Will Soar as Earnings Grow, Morgan Stanley Says (Barron’s)
• Roku Stock Slips and Recovers Ahead of a ‘Mixed Bag’ of Competitive Launches (Barron’s)
• Big Tech’s health fixation spreads into private areas; Recent years have seen problematic revelations about usage of data; Surveillance of healthcare data is big business (FT)
• Spotify has reached 100m paying subscribers faster than Wall Street expected, while diversifying from music into podcasts as it searches for a path to long-term profitability (FT, Reuters)
• Marriott to expand further into luxury home-sharing, hoping to vie with Airbnb (JT)
• Walmart’s AI-powered store of the future is nothing like Amazon Go; There are cameras. There is AI. And the similarities end there. (FastCo)
• EDA Finds a Common Framework for AI (EET)
• Bosch signs pact with Sweden’s Powercell to mass produce fuel cells (Reuters)
• Which Tech Company Is Uber Most Like? Its Answer May Surprise You (NYT)

Life

• Meet Matt Calkins: Billionaire, Board Game God And Tech’s Hidden Disruptor; he runs Appian which sells software to help businesses build apps more quickly (Forbes)
• What Buddhism Taught Me About Product Management (Medium)
• Marcus Aurelius: 3 Rules For Life (DF)
• The $13 Billion Lesson from Salesforce That Any Business Can Apply (Medium)
• Why We Believe in Magic (BC)
• Everyone’s Worried About a Bear Market. Here’s How to Spot One. (Barron’s)
• Emotional Fitness: 3 Essential Habits for Better Mental Health (NW)
• The Lies We Tell: We make up stories in our minds and then against all evidence, defend them tooth and nail. Understanding why we do this is the key to discovering truth and making wiser decisions. (FS)
• Decoding Difficult Conversations: My Interview with Negotiation Expert, Sheila Heen [The Knowledge Project Ep. #57] (FS)
• Has Warren Buffett got too big? For 30 years the billionaire investor outpaced the market but that all changed in the past decade. (AFR)
• Interview: The Qualitative Genius of Sean Stannard-Stockton (MF)
• Deloitte seen facing ban over IL&FS accounting fraud (DB)

H.E.R.O.’s Journey in Tech (29 April 2019) – On the need for hardship and the longing to grow; How to reduce digital distractions: advice from medieval monks

H.E.R.O.’s Journey in Tech (29 April 2019) – On the need for hardship and the longing to grow; How to reduce digital distractions: advice from medieval monks

Companies

• Xiaomi chief’s fund hunts for next big Indian-language app; With $1.2bn, venture investor eyes country’s unconnected rural population (Nikkei)
• Bandai Namco brings interactive gaming event as it taps Chinese market (Shine)
• Technopro Holdings sees revenue and profits surge (SI)
• Docomo profit warning marks end of an era for Japan telecoms (Nikkei)
• Seek takes equity stakes in FutureLearn and Coursera (AFR)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• Why Wechat mini-programs are the cutting edge of e-commerce (Technode)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• The rise and fall of Facebook’s memory economy (Wired)
• About 14.5% of Netflix subscribers say they are considering dropping the service in favor of Disney’s $6.99-a-month offering (MW)

Asia Tech & Innovation Trends

• Toyota abandons plan to install U.S connected vehicle tech by 2021 (Reuters)
• The ASEAN e-commerce paradox; there are doubts that e-commerce marketplaces, which rely heavily on perks such as providing subsidies on deliveries and free listing for sellers to draw in customers, can be a long term sustainable business model. (Star)
• Singapore’s Bet on Tech Startups Gains Ground With 150 VC Funds (Bloomberg)

Global Tech & Innovation Trends

• Burned by bitcoin — Son’s misadventure tells wider story; Japanese billionaire’s loss shows urgent need for regulation in nascent market (Nikkei)
• Luxury Ride-Sharing Platform Says 20% Of Teslas Faulty; Takes Out Ad In Times Square To Complain (ZH, GT)
• Lyft and Uber lure people with low fares, but how long will cheap ride-sharing last? (MW)
• SAP’s finances show it is growing into the cloud era (AFR)
• Intel puts modem business up for sale, held talks with Apple: WSJ (Reuters)
• Walmart Bets on TV Shows for Families, Date Night in Media Push (Bloomberg)

Life

• On the need for hardship and the longing to grow (Ascent)
• How to reduce digital distractions: advice from medieval monks (Aeon)
• Warren Buffett: ‘I’m having more fun than any 88-year-old in the world’; The legendary investor on luck, expectations and finding value in an overheated market (FT)

H.E.R.O.’s Journey in Tech (27 April 2019) – Amazon is reportedly building a high-fidelity music streaming service to rival Tidal

H.E.R.O.’s Journey in Tech (27 April 2019) – Amazon is reportedly building a high-fidelity music streaming service to rival Tidal

Companies

• China’s Ctrip now owns half of India’s MakeMyTrip following share swap with Naspers (TC)
• US slams Alibaba and its challenger Pinduoduo for selling fakes (TC)
• NetEase Kaola to open first factory store as it pushes further offline (Technode)
• Mario Kart Tour could be Nintendo’s biggest smartphone win (TNW); Nintendo’s Guidance Seen as a `Mockery,’ Sending Shares Lower (Bloomberg)
• Custom fit fashion retailer Zozo pulls out of overseas markets; CEO’s global ambitions shredded as German and US losses pile up (Nikkei)
• Nidec to add plant in China’s Dalian for electric-car motors; Japanese manufacturer plans $500m investment to build up new growth engine (Nikkei)
• Sony secures record profit as digital platforms thrive (Nikkei)
• Singapore Wealth Firm iFast’s Pre-Tax Profit Declines by 38% (Bloomberg)
• Wellington Airport goes live on Gentrack’s Veovo software (Reseller)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• Wirecard Still Raises Plenty of Questions; SoftBank offered financial backing this week to the German fintech darling. But does it really merit such a racy market valuation? (Bloomberg)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• Amazon is reportedly building a high-fidelity music streaming service to rival Tidal (TNW)
• Both Amazon, and the business models that assess the veracity of its reviews (which tend to sell advertising on their websites), rely heavily on algorithms. (FT)
• Save the Netflix Bears. The Market Needs Them. (Bloomberg)

Asia Tech & Innovation Trends

• Short video app Douyin campaign signals the arrival of vlogs in China (Technode)
• Kuaishou brings 3D cartoon characters to livestreaming with new AR feature (Technode)
• Chinese brands rule Indian smartphone market with 2/3rds of share: report (Reuters)
• Bill Gates is backing this Hong Kong biotech start-up that can screen for cancer through a sample of urine or blood. Here’s why (SCMP)
• Southeast Asia’s Grab cuts a familiar path with partnerships in logistics and travel; The new features will be rolled out across Grab’s Southeast Asian markets by the end of June (SCMP)

Global Tech & Innovation Trends

• Why Isn’t Hulu Better? (HBR)
• Slack’s complicated relationship with email, according to its IPO filing (qz); Slack Reveals Losses Amid Rapid Growth in Plan to Go Public (Bloomberg); Slack Pitches Would-Be Investors on a Few Big-Spending Customers (Bloomberg)
• How Uber changed Silicon Valley; Ride-hailing app inspired generation of tech companies to tackle real world challenges (FT); Uber Is a Growth Business That Has Trouble Growing (Bloomberg); Uber sets terms for IPO, posts $1 billion first-quarter loss (Reuters)
• Major Tech Firms Come Out Against Police Use of AI Algorithms (Bloomberg)
• Intel Tumbles, Setting Up Worst Day Since 2008 (Bloomberg)
• Tradeweb’s 50% Rally Sets Stage for Questions About Debt Market (Bloomberg)
• Yara, IBM to offer digital services to farmers (Reuters)

Life

• On Professional Failure (TSOL)

H.E.R.O.’s Journey in Tech (26 April 2019) – Microsoft Surpasses $1 Trillion Valuation

H.E.R.O.’s Journey in Tech (26 April 2019) – Microsoft Surpasses $1 Trillion Valuation

Companies

• US adds Pinduoduo to list of counterfeit facilitators (Nikkei); Pinduoduo founder calls for openness in e-commerce as battle with Alibaba and JD.com escalates (SCMP); Pinduoduo’s struggles are like ‘Yao Ming in elementary school’: CEO (Technode)
• Meituan unites with small ride-hailing players to take on Didi (KRA)
• Live streaming app Inke turns on parental controls (KRA)
• Terumo has grown rapidly in the Chinese market in recent years, selling guidewires, catheters and other interventional products, but not coronary stents (MTI)
• Nintendo Tie-Up Hints At Tencent’s New Strategy For Gaming In China (Forbes); Nintendo: flipping out; Obstacles ahead even with a rumoured cheaper version of Switch to come (FT); Nintendo Moves Toward Highly Anticipated Mario Kart Tour Release (Bloomberg); Nintendo Disappoints With Tepid Outlook, No Date for New Switch (Bloomberg)
• Innodisk with Uncompromising AIoT Solution for the Medical Field (PRNW)
• Vitrox 1Q profit up 16%, declares 4 sen dividend (Edge)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• Alibaba’s B2C platform Tmall aims to double sales volume by 2021 (KRA)
• Samsung looks to diversify with $116bn bet on logic chips (Nikkei)
• SoftBank and Google parent tie up on flying 5G stations for phone services using balloons and drones (JT)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• Amazon’s best weapons are sprawl and usefulness (Reuters)
• Amazon raises stakes for rivals with one-day delivery goal after profit surge (Reuters)
• Amazon’s Supercharged Growth Is Gone (Bloomberg)
• Microsoft Surpasses $1 Trillion Valuation (Bloomberg)

Asia Tech & Innovation Trends

• China’s dating apps are experimenting with livestreamed matchmaking (TNW)
• China’s New Nasdaq-Style Exchange Is Almost Ready, But Where Are The Unicorns? (Forbes)
• China’s e-commerce start-ups lose favour with private equity funds as Beijing-backed chip makers steal their thunder, study finds (SCMP)
• Founder Ren Zhengfei says Huawei should learn from Apple – and set higher prices (SCMP)
• Indonesian live auction platform WowBid raises USD 5 million (KRA)
• Grocery delivery startup Honestbee is running out of money and trying to sell (TC)
• AI-powered NeuroTags helps businesses eliminate counterfeits of their products from the market (e27)

Global Tech & Innovation Trends

• SalesLoft nabs $70M at around $600M valuation for its sales engagement platform (TC)
• Online learning startup Coursera picks up $103M, now valued at $1B+ (TC)
• Walmart unveils an AI-powered store of the future, now open to the public (TC)
• Disney Stock Is Rising Because It Might Buy Comcast’s Hulu Stake (MW)
• Government innovation in cloud drives another strong quarter for ServiceNow (Diginomica)
• Visualization Startup Hover Just Raised Another $25 Million To Digitize Home Renovation Planning (Forbes)
• Can Uber ever make money? A ride back through history offers sobering lessons (Economist)
• Grubhub profit better than expected, shares soar (Reuters)
• Slack Finds New Ways to Fit In at the Office, Ahead of Stock Debut (Bloomberg)
• Uber Aims for an IPO Valuation of as Much as $90 Billion (Bloomberg)

Life

H.E.R.O.’s Journey in Tech (25 April 2019) – Scientists develop an AI that can turn brainwaves into speech + Why Bill and Melinda Gates wash dishes together every night

H.E.R.O.’s Journey in Tech (25 April 2019) – Scientists develop an AI that can turn brainwaves into speech + Why Bill and Melinda Gates wash dishes together every night

Companies

• Salesforce nearly doubled its money in Zoom IPO, but company says it’s in for the long term (CNBC)
• Tencent-backed real estate platform Beike announces ambitious growth plans amid legal row with rival; Can newcomer Beike dethrone Fang.com as China’s top online property portal? (KRA)
• China’s digital music market expands with rising subscriptions; TME has a strong grip on the market, claiming 800 million users, three times more than Spotify, but less than four percent of those users pay for subscription compares with 45 percent (CGTN)
• In Japan, busy singles are turning to apps to find love; Linkbal Inc., an operator of an e-commerce portal website for matchmaking events, has offered the CoupLink online dating app since July 2016. (JT)
• Japanese team aims to test 3D-printed blood vessel transplants on kidney patients; 3D bioprinter developed by Shibuya Corp. (Mainichi)
• Robot king Fanuc risks missing out on 5G boom; After forecasting 60% profit drop, company faces new challenges as clients ditch metal casing (Nikkei)
• Pro Medicus share price hits an all-time high on seven-year contract with Duke Health worth $14 million (Yahoo)
• VGI and iClick Interactive Announce Marketing Technology Joint Venture to Address Thailand’s Booming Digital Marketing Space and Connect Brands in Southeast Asia with China Opportunities (Yahoo); VGI links with iClick to smooth the way for SE Asia brands in China (Nation)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• Tencent Trusted Doctors raises USD 250 million, bringing valuation past USD 1 billion (KRA)
• Tencent eyes silver generation with investment in video app for dancing grannies (SCMP)
• Alibaba Cloud takes 19.6% in Asia Pacific market, beats Amazon and Microsoft combined (KRA); Alibaba Pushes Its Cloud Unit Globally As It Trounces Amazon in Asia (Bloomberg)
• Samsung Plans $116 Billion Splurge on Chips to Take On Intel (Bloomberg)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• Facebook Says Settling FTC Probe Could Cost Up to $5 Billion (Bloomberg)
• Instagram is becoming Facebook’s sugar daddy (Reuters)
• Audible now offers live customer service through Alexa devices (TC); Amazon Launches Free Music Streaming to Juice Alexa-Device Sales (Bloomberg); Amazon’s Alexa Team Can Access Users’ Home Addresses (Bloomberg)
• Apple Stock Will Gain Because iPhone Users Spend More on Apps, Analyst Says; iPhone owners spend 10 times more than Android users on mobile apps (Barron’s)
• Amazon goes into luxury beauty (AFR)
• Microsoft tops $1 trillion as it predicts more cloud growth (Reuters); Microsoft is closing in on becoming a $10 billion-a-quarter cloud company (qz)’ Tech Trio Races Toward $1 Trillion Valuation on Cusp of Earnings (Bloomberg); Microsoft Sales Top Estimates Amid Flurry of Cloud Wins; Software maker’s 73% Azure revenue gain ‘blew away’ Street (Bloomberg)
• Will Netflix eventually monetize its user data? (Conversation); Here’s how new streaming services could really hurt Netflix; WarnerMedia, NBCUniversal, Disney shows make up 40% of Netflix’s viewing minutes (MW); Nobody Watches Netflix’s Original Shows, And That’s A Huge Problem (ZH)

Asia Tech & Innovation Trends

• Why China’s unicorns may not trot happily to market (FT); China tech groups delay IPOs as US tensions bite; Companies are also accepting lower valuations amid dwindling investor appetite (FT)
• Chinese companies face surging write-offs; After a global investment spree, impairments weigh on tech and energy companies (Nikkei)
• Didi reveals it is still making losses on many fares charged in China as it discloses costs breakdown (SCMP)
• The Chinese state-owned tech company supplying signal-boosting laser amplifiers to the world’s largest financial centres; Report reveals that Wuhan-based Accelink’s gear has been used in West for a decade (SCMP)
• Chinese regulator hints at better access for foreign cloud computing companies (SCMP)
• Made in China, Exported to the World: The Surveillance State (NYT)
• The Future of Shopping Is Already Happening in China; Traditional retail and e-commerce hold little interest for consumers who are wedded to smartphones and take their cues from influencers. (Bloomberg)
• China’s unchecked expansion of data-powered AI raises civic concerns; Local industry is growing fast but there are signs of a pushback (FT)
• Taiwan’s Top Stock Investor Sees Tech Frenzy Getting Extreme (Bloomberg)
• Cashless payments in Fukuoka accelerate, and large-scale commercial facilities introduce Melpay and Origami Pay (TC)
• Japan Has a New Emperor. Now It Needs a Software Update. (NYT)
• Japan lays bare the limitations of robots in unpredictable work; Forerunner in automation worried about progress being too slow rather than too fast (FT)
• AI becoming a viable way to bridge the gap in the doctor-patient ratio: mfine CEO Prasad Kompalli; mfine, which uses AI to enable users to link with doctors through live chat or video under a minute, has just bagged (e27)
• Indonesian social commerce platform TokoTalk raises US$3.2M; TokoTalk is a chat-based e-commerce platform built specifically for online sellers on social media such as Instagram (e27)
• AI-based visual training platform Chooch AI secures US$2.8M (e27)
• ai raises $17M to equip online retailers with AI smarts (TC)
• Go-Jek and Grab’s competing visions play out; Funding gap between the competitors reflects big philosophical differences between their investors; Go-Jek’s directors think too much capital is a drug; it enables founders to become profliga (FT)

Global Tech & Innovation Trends

• Scientists develop an AI that can turn brainwaves into speech (Age)
• Behind Airbnb’s bet on show business to hook travellers (Reuters)
• MongoDB to acquire open-source mobile database Realm for $39 million (TC)
• Securing the 5G future – what’s the issue? (Reuters)
• SAP shares hit high on Elliott’s $1.3b investment; SAP reported an adjusted operating margin of 24 per cent for the first quarter as it grapples with a catch-up transition to cloud computing (AFR); SAP/cloud services: mist opportunity; German group needs to integrate its acquisitions flawlessly to remain in the race (FT)
• iRobot Stock Takes a Hit Because There Are Too Many Robots (Barron’s)
• Sirius XM profit dented by Pandora acquisition (MW)
• This In-Ear Translator Can Interpret A Bilingual Conversation On The Fly (Forbes)
• Start-up makes robots small manufacturers can afford; Collaborative robots market expected to snowball to $12.3bn by 2025 (FT)
• PayPal’s Venmo Isn’t Enough to Drive Payment Volume Growth (Bloomberg)
• Apollo, Cerberus Consider Shutterfly Bids, Lifting Stock (Bloomberg)
• Explosions Threatening Lithium-Ion’s Edge in a Battery Race (Bloomberg)
• Slack Finds New Ways to Fit In at the Office, Ahead of Stock Debut (Bloomberg, Reuters)
• A $603 Million Deal Sheds Light on Cybersecurity Space (Bloomberg)

Life

• Why Bill and Melinda Gates wash dishes together every night (AFR)
• This Question Will Change Your (Reading) Life; What should you read next? Whatever books shaped the people you most admire and respect. (RH)
• How to train your brain to be resilient to failure (FastCo)

H.E.R.O.’s Journey in Tech (24 April 2019) – Nearmap Partners with HNTB to Use 3-D Aerial Imagery to Win More Business Against Larger Competitors

H.E.R.O.’s Journey in Tech (24 April 2019) – Nearmap Partners with HNTB to Use 3-D Aerial Imagery to Win More Business Against Larger Competitors

Companies

• Douyu files for US IPO: How China’s answer to Twitch is really not like the US game-streaming service at all (SCMP)
• Nintendo’s surge on China entry prospects has not deterred short bets by hedge funds (SCMP)
• Terry Gou’s replacement at Foxconn faces difficult path ahead; Big question is where the Taiwanese group’s growth will come from in future (FT)
• Atlassian Acquires From its PaaS Marketplace (SM)
• Nearmap Partners with HNTB to Use 3-D Aerial Imagery to Win More Business Against Larger Competitors (BW)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• Defective Galaxy Fold is another dent for brand Samsung; Delayed launch of foldable smartphone a bigger hit for company’s reputation than finances (FT); Samsung’s Reputation Founders on Rush for Lead in Folding Phones (Bloomberg)
• Didi-SoftBank taxi-hailing JV expands to 13 cities across Japan (Reuters); SoftBank to Consider Acquiring 5% Stake in Wirecard (Bloomberg)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• Facebook’s flood of languages leaves it struggling to monitor content (Reuters)
• JCPenney explains why it dropped Apple Pay (TC)
• Will Netflix Junk Bonds Wilt Amid the Content Wars? (Bloomberg)

Asia Tech & Innovation Trends

• China’s game makers face a shapeshifting boss (Reuters)
• Bytedance’s tutoring platform Gogokid laying off employees (Technode)
• China’s Bytedance says India TikTok ban causing $500,000 daily loss, risks jobs (Reuters)
• Mobile ad fraud spooking marketers: MMA; 22% of the mobile ad spends in India are subject to fraud, says survey (Forbes)

Global Tech & Innovation Trends

• AI is helping regulators keep tabs on new industrial farms and their waste discharging habits (TNW)
• Voiceflow, which allows anyone to make voice apps without coding, raises $3.5 million (TC)
• Salesforce.com acquisition of related company mixes complex transactions with a big writeoff (MW)
• Umicore: “Demand patterns for cathode materials have deteriorated in the past couple of months, in China and Korea in particular. In China, the demand for EVs has considerably decreased from the levels of the second half of 2018” (Barron’s)
• Roku Stock Will Keep Soaring Because People Will Keep Cutting the Cord, Analyst Says (Barron’s)
• How patients can turn their medical data into money; Wave of start-ups offer to aggregate information for research opportunities (FT)
• Why Spotify Stock Is Worth the Risk, According to a Top Shareholder (Barron’s)
• Audioburst raises $10M to build AI-powered infotainment systems for cars, ad solutions (TC)
• Porsche CEO Eyes Cooperation With Chinese Technology Giants (Bloomberg)
• Dassault Eyes U.S. Acquisitions Including Medidata (Bloomberg)
• Snap Enters Its Rorschach Phase: You See What You Want (Bloomberg)
• Elon Musk’s Chipmaking Claims Don’t Match the Reality (Bloomberg)

Life

• Short Seller Bonitas Targets Singapore’s Best World, Sending Shares Lower (Bloomberg)

H.E.R.O.’s Journey in Tech (23 April 2019) – Nearmap doubles valuation to $1.5b in three months; Every company Disney owns: a map of Disney’s worldwide assets

H.E.R.O.’s Journey in Tech (23 April 2019) – Nearmap doubles valuation to $1.5b in three months; Every company Disney owns: a map of Disney’s worldwide assets

Companies

• Chinese e-sports platform DouYu files for U.S. IPO (MW)
• Chinese Surveillance Camera Maker Hikvision Sees Growth Slow in 2018 and 1Q2019 (Caixin)
• TETCO, Trend Micro sign MOU to boost digital security solutions in Saudi schools (SG)
• istyle China Opens @cosme Official Online Store on China’s Largest General Trade E-commerce Website Tmall (NK)
• Netmarble stock price jumps as BTS hits another Billboard No. 1 (Investor)
• Nearmap doubles valuation to $1.5b in three months (AFR)
• Australians embracing robo-advisers; In October 2018, IRESS launched its first automated advice platform for WA Super. (AFR)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• Ant Financial’s money market fund Yu’e Bao shrinks to new low (Technode)
• Tencent pilots new anti-game addiction program that will lock out young gamers (KRA)
• Samsung delays foldable phone launch after display troubles (Nikkei)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• Your iCloud is actually AmazonCloud (qz)
• Bezos Disputes Amazon’s Market Power. But His Merchants Feel the Pinch; In recent years, third-party sellers have found it harder to compete and are paying Amazon a bigger chunk of their take. (Bloomberg)
• Amazon Launches Free Music Streaming to Juice Alexa-Device Sales (Bloomberg)
• Microsoft delves deeper into IoT with Express Logic acquisition (TC)

Asia Tech & Innovation Trends

• China’s AV edge? It’s the infrastructure (Technode)
• Chinese start-ups join rush to launch IPOs on Shanghai exchange’s new tech board (SCMP)
• Toyota to tie up with major Chinese automaker on fuel cell vehicles (JT)
• Panasonic cuts Tesla risk to stem further bleeding (Nikkei); Tesla and Panasonic freeze spending on $4.5bn Gigafactory (Nikkei); Panasonic shares surge in stark contrast to Tesla’s (Nikkei)
• How AI can make the world a safer place (TIA)
• Resurgent HappyFresh raises $20M for its online grocery service in Southeast Asia (TC)
• Go-Jek introduces e-commerce feature Go-Mall in partnership with JD; Go-Jek users can browse for goods ranging from electronics to fresh groceries. (KRA)
• Tokopedia introduces innovative social e-commerce feature (KRA)
• Singapore talking with more electric car companies after Dyson, but Tesla apparently not among them (JT)

Global Tech & Innovation Trends

• Dassault Eyes U.S. Acquisitions Including Medidata (Bloomberg)
• Porsche CEO Eyes Cooperation With Chinese Technology Giants (Bloomberg)
• Big Data Won’t Build a Better Robot (Bloomberg)
• Audioburst raises $10M to build AI-powered infotainment systems for cars, ad solutions (TC)
• Spotify, Universal Music Group, and the Question of Tech vs. Content (Barron’s)
• America’s Biggest Supermarket Company Struggles With Online Grocery Upheaval (WSJ)
• Nvidia says Tesla ‘inaccurate’ in self-driving comparison (MW)
• ‘People will die’: Sceptics doubt Elon Musk’s promise that self-driving Tesla robo-taxis will be on the road by 2020 (Age)
• This new US airport screening camera would see too much (qz)
• Uber Questions (Stratechery)
• Every company Disney owns: a map of Disney’s worldwide assets (TM)
• What Are Lyft, Uber, and Other Tech Startups’ IPOs Worth? It’s Anyone’s Guess. (Barron’s)
• Qorvo Stock Will Rally Because It Will Thrive in a 5G World, JPMorgan Says (Barron’s)
• Take-Two Is the Videogame Stock to Beat and Has Huge Upside, Analyst Says (Barron’s)
• ‘Persuasive technologies’ prompt child health fears; Companies need to get ahead of the issue before regulators do (FT)
• Move over TikTok: Bits is the new app that wants to launch comedy stars (FastCo)
• In the cloud: Why project planning unicorn Asana is watching Australia closely (Age)
• Tech Platforms Love Moving Fast — Except When Their Users Are in Trouble (Medium)
• Career-focused startup Zippia raises $8.5 million in Series A to use artificial Intelligence to help job seekers (PRNW, TS)

Life

• The Intangibles of Assessing Management Quality (SN)

H.E.R.O.’s Journey in Tech (22 April 2019) – Catalyzing Success: My Interview with Pioneer Founder Daniel Gross [The Knowledge Project Ep. #56]

H.E.R.O.’s Journey in Tech (22 April 2019) – Catalyzing Success: My Interview with Pioneer Founder Daniel Gross [The Knowledge Project Ep. #56]

Companies

• Zoom’s IPO Surges, But Company Still Has ‘a Channel Problem’ (CF)
• Subsidized Chinese makers squeeze Asia’s LCD industry; BOE helps push 65-inch panel price below $220, down 30% over past year (Nikkei)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• Why Tencent Shouldn’t Launch a Gaming Smartphone (MF)
• Samsung Stumble Risks Killing Foldable Phones at Birth; A botched launch could see the technology go the same way as Google Glass. (Bloomberg)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• Amazon and Google End Boycott of Each Others’ Video Services (Bloomberg)
• 3 fixes for Netflix’s “What to watch?” problem; How streaming apps can solve discovery (TC)

Asia Tech & Innovation Trends

• Chinese Airbnb rival Tujia aims for profitability in 2019 as it prepares for IPO; Tujia controls nearly half of China’s home-sharing market along with Alibaba-backed rival Xiaozhu. (KRA)
• About 80% of smart wearables are made in Shenzhen; And more than 92% of China’s smartphones are made in Dongguan. (KRA)
• To survive trade battles, China manufacturers deploy every weapon they can (Reuters)
• Who’s afraid of Huawei? Where Asia stands on China’s 5G tech giant (SCMP)
• The Kids Use TikTok Now Because Data-Mined Videos Are So Much Fun (Bloomberg)
• NTT to launch trial of farming support service with drones and AI tech in Fukushima (JT)
• Japan plans periodic reviews of tech giants to protect vendors (Nikkei)
• Aussie airport self-service tech firm raises $15m (AFR)
• Grab to integrate public transport data in Southeast Asian mega cities; Ride-hailer eyes train and bus fare payments (Nikkei)
• How Ola is ‘self-driving’ its way from just cab booking service to mobility giant (FE)

Global Tech & Innovation Trends

• The Future of Wearable Tech Is Called a Hearing Aid; Even if your ears are fine, you might want a device that translates 27 languages, tracks fitness, and monitors vital signs. (Bloomberg)
• Silicon Valley’s Grow-or-Die Culture Is Costing Us (Medium)
• The wave of unicorn IPOs reveals Silicon Valley’s groupthink (Economist)
• Don’t Worry, Be H(AI)ppy (EET)
• AI bots are creating mood music to get you through the day (AFR)
• AVs Need New Compute Platforms (EET)
• If your image is online, it might be training facial-recognition AI (CNN); Who’s using your face? The ugly truth about facial recognition (FT)
• Pinterest more like Box than Square (AFR)
• The Uber lord giveth but drivers pay price (AFR)
• Online start-ups target $120bn travel activities market; Newcomers backed by SoftBank, Sequoia and others take on Airbnb, TripAdvisor and TUI (FT)
• Booming e-commerce helped parcel delivery giant DHL Express weather the US-China trade war, says chief executive; Online orders made up for what ‘would otherwise be a subdued trading’ environment between China and the US, says CEO John Pearson (SCMP)
• Stackla to IPO as Bailador eyes start-up exits (AFR)
• Intel wastes no time in quitting rocky foray into 5G mobile (Nikkei)
• ‘Bar Is Higher’ as Tech Shares Soar, Singapore Wealth Fund Says (Bloomberg)
• With Driverless Cars Running Late, a Startup Tries Remote-Control Trucks (Bloomberg)
• What Does Uber Love More: Restaurants or Investors? Eateries are getting squeezed by delivery apps. Uber could give up profit to keep them happy, but that’s not what IPO investors want to hear. (Bloomberg)

Life

• The Most Powerful Lessons People Learn Much Too Late in Life (Medium)
• Keep Going: 10 Ways to Stay Creative in Good Times and Bad Paperback – April 2, 2019 (Amazon)
• The Meaning Paradox: Is Life About You or Other People? (DL)
• The Snow Leopard (Penguin Classics) Paperback – September 30, 2008 (Amazon)
• Amanda Palmer on Creativity, Pain, and Art (#368) (Tim Ferris)
• Catalyzing Success: My Interview with Pioneer Founder Daniel Gross [The Knowledge Project Ep. #56] (FS)

H.E.R.O.’s Journey in Tech (20 April 2019) – All shook up: Behind the rise of Atlassian, Australia’s $35b tech giant; Zoom, Zoom, Zoom! The Exclusive Inside Story Of The New Billionaire Behind Tech’s Hottest IPO + Memento Contendere: The Benefits of Intentionally Anticipating Our Struggles

H.E.R.O.’s Journey in Tech (20 April 2019) – All shook up: Behind the rise of Atlassian, Australia’s $35b tech giant; Zoom, Zoom, Zoom! The Exclusive Inside Story Of The New Billionaire Behind Tech’s Hottest IPO + Memento Contendere: The Benefits of Intentionally Anticipating Our Struggles

Companies

• Zoom, Zoom, Zoom! The Exclusive Inside Story Of The New Billionaire Behind Tech’s Hottest IPO (Forbes)
• iFlytek’s expenses swell in the first quarter of 2019 (Technode)
• Following $43 Million in Losses in 2018, NetEase Cloud Music Partners with Japan’s Nippon Columbia (DMN)
• Rakuten LIFULL STAY Offers Japanese Vacation Rental Inventories to trivago (WW)
• Nintendo picks Tencent for third shot at China game market (Nikkei)
• What To Expect If Taiwan’s iPhone Billionaire Wins The Presidential Election (Forbes)
• Power supply maker and energy management solution provider Delta Electronics has disclosed it has acquired a factory located in northern Taiwan at NT$2.568 billion (US$83.3 million). (Digitimes)
• All shook up: Behind the rise of Atlassian, Australia’s $35b tech giant (SMH); Atlassian’s Expanding Collaboration Product Portfolio Is Driving Strong Growth (Forbes)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank

• Baidu is reportedly incubating a music app to defend itself against ByteDance (KRA); Baidu reportedly seeks to revive music business with a music app, talent shows (Technode)
• Tencent’s document collaboration tool gained 30 million users within one year of launch (KRA)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

• Google is a leader in artificial intelligence and machine learning, both areas that have huge untapped commercial opportunity. (AFR)
• Amazon and Google Are Playing Nice in Streaming Because They Have To (Barron’s)
• Google’s advanced tech director wants everything to be a computer; At TED, Ivan Poupyrev showed off a tiny new device for linking sensors to the cloud, part of his vision of embedding computing in everything we touch. (FastCo)
• Apple’s 5G move to spark Asian investment ‘boom’; Next iPhone launch will drive spending on network infrastructure, say Huawei and others (Nikkei)

Asia Tech & Innovation Trends

• Chinese Airbnb rival Tujia aims for profitability in 2019 as it prepares for IPO; Tujia controls nearly half of China’s home-sharing market along with Alibaba-backed rival Xiaozhu. (KRA)
• ByteDance’s Douyin teams up with big name film production companies (KRA); Douyin is slowing down, but China’s short-video stars are here to stay (Technode)
• Coming soon to China: the car of the future — hyper-connected, autonomous and shared (JT)
• With the power to change the world, here’s why the US and China are fighting over our 5G future (SCMP)
• The Bengaluru tech centre that’s powering Walmart (Forbes)

Global Tech & Innovation Trends

• Live streaming is overdue for an overhaul. Here’s why. (TNW)
• com’s CEO on diversity in tech and the future of tourism (TNW)
• A Q&A with Roland CEO Jun-ichi Miki on innovation, Waku Waku, and ‘sleeping musicians’ (TNW)
• Jumia’s successful billion-dollar IPO is a landmark-but it won’t gloss over lingering operational issues (qz)
• Consumer-Staples Stocks Are the Newest Dinosaurs as Shoppers Change; online shopping has gone from just 16% of core sales (excluding categories like gasoline and autos) to 23% today (Barron’s)
• How Podcasting Became a Big Business (Barron’s)
• Spotify’s Stock Is Risky Because the Music Industry Is Not Changing Fast Enough (Barron’s)
• GPUs Holding Back AI Innovation (EET)
• First Look At The Fastly IPO Filing (CB)

Life

• Barefoot billionaire: Sridhar Vembu built a tech giant you’ve never heard of (Age)
• When You’ll Believe Anything (MH)
• Memento Contendere: The Benefits of Intentionally Anticipating Our Struggles (NW)
• How to Cultivate Peace of Mind: 15 Pieces of Stoic Wisdom for Inner Peace (Medium)