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Beyond Moat: CATAPULT Your Business to Exponential Value Creation | From Economic Moat to Catapult Analysis of Business Model Quality to Discover Tech Innovators 

Beyond Moat: CATAPULT Your Business to Exponential Value Creation | From Economic Moat to Catapult Analysis of Business Model Quality to Discover Tech Innovators

The Catapult is our analytical framework within the 4-step H.E.R.O. investment process to complement and rejuvenate the economic moat analysis to view the value creation process afresh and continually discover innovators creating, enabling and capturing new demand (vs exploiting existing demand) with exponential non-linear growth potential and value creation. The Catapult exponential projectile of the 4Cs are systematic observations and leading-indicator questions you can ask to analyze and assess the business models of exponential innovators. H.E.R.O. stands for “Honorable. Exponential. Resilient. Organization.” and is operationalized into a unique, systematic 4-step investment process to separate the winners and losers.

(1) “Curiosity” Edge

Does the company create or generate curiosity and discovery amongst the users and customers for its products and services? Is there a riveting effect that leads to engagement?

  • User-centric customized recommendations, engagement depth in time invested, etc
  • Examples: Amazon Prime, Netflix, Tencent Music, Kakao M (KOSDAQ: 016170), Syuppin (TSE: 3179), etc

(2) “Community” Edge

Does the company build a community/platform/environment where customers/users/members can connect and interact repeatedly with one another to forge longer-term relationship and emotional connections Vs mere transactions-based exchange?

  • User-generated content (UGC) in reviews; ratings to foster trust, credibility, collaboration and celebration in the many-to-many interaction; feedback loop to improve; brand advocates/ raving fans/ whale curve; is there social capital capacity to expand into complementary products and services to serve the community
  • Watch out for unusual capitalization of customer acquisition costs (CAC), goodwill in balance sheet
  • Examples: Apple iOS, Benefit One (TSE: 2412), Itokuro (TSE: 6049), Bandai Namco (TSE: 7832), CyberAgent (TSE: 4751), etc

(3) “Compellingness-Craftsmanship” Edge

Does the company create and deliver products, services or solutions with compellingness and craftsmanship?

  • Process IP, intangible know-how/system and mastery to bring about comfort, convenience, “customized” pain-killing solutions to customers
  • Compellingness (external) combined with Craftsmanship (internal)
  • Craftsmanship: Think Steve Jobs shared the story of how he was inspired by his dad who taught the young Jobs that it was important to craft the back of cabinets and fences properly, even though they were hidden. “He loved doing things right. He even cared about the look of the parts you couldn’t see.”
  • Examples: Amazon, Microsoft, MISUMI Group (TSE: 9962), MonotaRO (TSE: 3064), Synchro Food (TSE: 3963), Koh Young Technology (KOSDAQ: 098460), etc

(4) “Circumspection” Edge

Does the company deliver/enable circumspection and acumen/insights/intelligence for the customers with usable framework of knowledge, tools and analytics to bring useful insights to help them think better and make better decisions?

  • Examples: Google, M3 (TSE: 2413), e-Guardian (TSE: 6050), MonotaRO (TSE: 3064), Appen (ASX: APX), Vista Group (NZSE: VGL), Supermap (SZSE: 300036), etc

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” investment mistakes, to keep staying curious & humble, and to keep learning & adapting, has never been more critical for value investors.

We believe tech-focused innovators with non-linear exponential growth potential are the most relevant multi-year investment trend and opportunity. There is a structural break in data in the market’s multi-year appraisal of “exponential innovators”, the type of business models that can compete and thrive in an exponential world.

Yet we do not want to chase the highly popular megacap tech stocks, or fall for the “Next-Big-Thing” trap by overpaying for “growth”, or by chasing to invest in 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, and we want to know how to distinguish between the true innovators and the swarming imitators. We see a distinct opportunity in under-the-radar Asian SMID-cap tech stocks with unique scalable business models run by high-integrity entrepreneurs with a higher purpose in solving high-value problems.

As the only Asian SMID-cap tech-focused listed equities fund in the industry, we believe we are uniquely positioned as a distinctive and alternative investment strategy for both institutional and individual investors who seek to capture long-term investment returns created by disruptive forces and innovation without herding or crowding to invest in the highly popular megacap tech stocks, and also provide capital allocation benefit to investors in building optionality in their overall investment portfolio.

Warm regards,

KB | kb@heroinnovator.com | WhatsApp +65 9695 1860

www.heroinnovator.com

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The Circumspection Edge to Exponential Value Creation: Innovation Insights from H.E.R.O. Innovators MonotaRO (TSE: 3064) and oRo (TSE: 3983)

The Circumspection Edge to Exponential Value Creation: Innovation Insights from H.E.R.O. Innovators MonotaRO (TSE: 3064) and oRo (TSE: 3983)

“Our logo is like the Momotaro in Japanese folk tale. Like Momotaro, we fight against unfair – the old distribution system,” said emphatically by Masaya Suzuki, CEO of MonotaRO (TSE: 3064), who shared how its Purpose of helping “under-served customers who are not treated well by conventional retailers and dealers” in supplying MRO (maintenance, repair & operations) items and its circumspection edge in data analytics have catapulted the company to exponential value creation, compounding over 2,800% since its 2007 listing to US$5.9 billion in market cap. Momotarō (桃太郎, “Peach Boy”) is a popular hero of Japanese folklore and one of the most famous characters in Japan as an ideal model for young kids for his kind-heartedness, bravery, power, and care for his parents.

Today, MonotaRO is Japan’s largest B2B ecommerce platform handling 15 million MRO items and used by over 2.8 million cost and time-conscious loyal members making regular purchases who are mostly SMEs in the manufacturing, automobile maintenance and construction industries. Private label products contribute over 20% of sales. MonotaRO achieved sales of around 100 billion yen with an operating margin of 13.2% and a ROE of 50.9%, and still has a large fragmented domestic total addressable market in indirect materials purchase of 5 to 10 trillion yen to keep serving and growing. Yet, before MonotaRO entered into the business in 2000, SME customers are not treated well by conventional MRO suppliers who provide unclear prices, limited product availability, uncertain time delivery of much-needed items. Customers must spend a lot of time selecting products, comparing estimated prices, placing orders.

MonotaRO’s edge is in its expertise in using sophisticated data analytics to understand customer buying behaviors which help drive its growth. After a customer has identified a product for purchase, data analytics can introduce a private label or lower priced option. Eventually, repeat customers are offered complementary products based on aggregated purchase behaviors. CEO Masaya commented: “Of course there is a reason for continued good performance so far. Database marketing is one of the biggest factors supporting strong performance. Through data mining from the user’s purchase history and browsing history and analyzing them, the analysis result is reflected in the search algorithm which enhances the search accuracy so that the product can be presented effectively from the range of over 15 million items. We are also doing effective recommendation such as ‘The person who bought the item A is also likely to buy item B. Analysis results are reflected not only in search algorithms, but also in mail magazine distribution and catalog layout, customer listing to ship, increasing the purchase rate. We are trying to personalize the site by personalizing the behavior of each user and by incorporating it into the program. We build a one-to-one relationship with the customer so that each product desired by the customer is appropriately shown. Because our business is B2B, your first priority is a more precise time than price. You can search for what you want in a short time, you can purchase immediately, and your ‘one stop’ purchase arrives quickly. This allows customers to spend time on their original work. This is the reason why it is supported by over 2.8 million customers. Functional development and data analysis are extremely important for that, so I can buy things I am looking for. For our advanced one-to-one marketing, we look into Network-Detection Technologies to find customer communities that share common purchasing patterns and to detect self-forming product sets to market to those communities. We use predictive modeling to assign new customers to communities. We accelerate customer growth by promoting products that more mature customers in their respective communities have bought. For our campaign management, we report effectiveness of each campaign against control groups to allow finer and effective promotions.”

CEO Masaya also shared the interesting insight about how they get stronger over time, particularly in “longtail products”: “As the number of customers increased, a phenomenon was born. Longtail products that we rarely sold till now can be sold little by little. If it is found that it can sell at a certain frequency, it will be prepared as inventory next time. It takes a few days for orders, but you can ship immediately if it is an inventory item. The lead time will change from 3 days later to the same day. And sales of that product will typically increase by 50% within two months. For customers, delivery is an important factor more than anything else. Because online prices are easy to compare, the ‘lowest price’ is likely to attract attention. However, we are not necessarily aimed at the lowest price. We will never make a profit if we aim only at the low price. It is our company’s way of appealing to the sense of security that the goods will arrive the next day with abundant inventory than just a cheap price.”

The Catapult is our analytical framework within the 4-step H.E.R.O. investment process to complement and rejuvenate the economic moat analysis to view the value creation process afresh and continually discover innovators creating, enabling and capturing new demand (vs exploiting existing demand) with exponential non-linear growth potential and value creation. The Catapult exponential projectile of the 4Cs are systematic observations and leading-indicator questions you can ask to analyze and assess the business models of exponential innovators. One of the 4Cs is the Circumspection edge: “Does the company deliver/enable circumspection and acumen/insights/intelligence for the customers with usable framework of knowledge, tools and analytics to bring useful insights to help them think better and make better decisions?” MonotaRO’s analytical prowess is an example of its circumspection edge in bringing more relevant and accurate product searches and purchases to its customers. Examples include Google, and besides MonotaRO, other Asian H.E.R.O. innovators that we have highlighted earlier, such as M3 (TSE: 2413), e-Guardian (TSE: 6050), Appen (ASX: APX), Vista Group (NZSE: VGL), etc.

oRo Co is another example of a H.E.R.O. Innovator with the Circumspection edge, its specialized cloud ERP system ZAC helping its target customers to “visualize” resources and profitability by projects to make better planning and predictions, in turn enabling oRo to achieve 19 consecutive years of increase in revenue and profit since its founding in 1999. There are numerous ERP software companies and oRo edges ahead by designing, developing and focusing its cloud solutions on corporates who are mainly in the project-based white-collar services industries of software and IT services, consulting, advertising, PR, and content production (web/video, mobile game developers), in which highly-skilled personnel expenses account for a high percentage of cost and the resource allocation of such skilled employees are critical in determining the profitability of the projects and the firms, yet there lacks a compelling real-time ERP system for this underserved group of companies. ZAC has already been used by over 500 corporates (more than 130,000 licenses). oRo CEO Atsushi Kawada shared,

“ZAC has supported numerous growth companies. Growth companies are likely to fall into problems when the internal management system cannot catch up with the growth speed of the company. Many growth companies continue to increase sales by using product strength as a weapon and neglect profit management. For instance, when sudden depression comes, the growth companies do not know what they are making is profitable and what they are losing. We have not been able to grasp the profit of each department or project. That’s why we cannot make detailed verifications and improvements when our business performance deteriorates… It is important to build a system in the company that can unify all data such as estimates and invoices, information on customers and business partners, employee’s working hours, and so on. Doing so eliminates the time and effort of double entry and improves data accuracy and operational efficiency. Also, in order to maximize profits, it is important to accurately manage ‘operating profit’ for each project. In this case too, you can calculate the operating profit for each project unit, employee unit, hour unit from these unified data, and verify it, so you can improve your business more efficiently. Furthermore, by sharing these data results with all employees, it will be possible to switch from a ‘sales focused’ to ‘profit oriented’ organization. ZAC is a system that can realize all these things. Profit management on the basis of opportunities becomes possible in real time. So, we will be able to know the numbers that management wants to know anytime. I do not need to ask the manager every time ‘I did not get any profit last month, but what went wrong?’ And the speed and precision of management decisions will increase and you will be able to create profits systematically. Besides, the operational risk of the administrative department will decline. Unnecessary invoices, uncollected accounts receivable, unpaid accounts payable, and other administrative department errors are drastically reduced. Since the operational efficiency of the management department improves, it also leads to reduction of personnel expenses. In the future, we will continue to improve ZAC and support client continued growth.”

Intrigued and want to read more? Download this week’s H.E.R.O. HeartWare: Weekly Asia Tech News with brief highlights of the inspiring entrepreneurial stories of tech leaders in Asia whom we have been monitoring over the past decade in our broader watchlist of over 200 listed Asian tech companies and our focused portfolio of 40 HERO Innovators who reveal their problems and successes behind building the company. In Issue 9, we have:

(1) Masaya Suzuki 鈴木雅哉, CEO of MonotaRO Co モノタロウ (TSE: 3064, market cap US$5,922m), Japan’s largest B2B ecommerce platform handling 15 million MRO (maintenance, repair, operations) items and indirect materials and used by over 2.8 million cost and time-conscious members making regular purchases who are mostly SMEs in the manufacturing, automobile maintenance and construction industries “which are not treated well by conventional retailers“. Private label products contribute over 20% of sales. MonotaRO achieved sales of around 100 billion yen as compared to the fragmented domestic total addressable market in indirect materials purchase of 5 to 10 trillion yen. MonotaRO was founded as a joint venture between WW Grainger (NYSE: GWW) and Sumitomo in Oct 2000 by Seto Kinya and Masaya Suzuki who were both from Sumitomo Corp Steel. Kinya later passed on the leadership baton to Masaya Suzuki in Mar 2012 and remains as chairman. MonotaRO was listed on the TSE Mothers in 2006, and moved to the TSE in 2009. MonotaRO is headquartered in Amagasaki, Hyōgo Prefecture and part of the Hanshin Industrial Zone where many companies and manufacturers have factories and logistics bases. MontaRO currently has three automated distribution centers in Amagasaki, Kasama (Ibaraki) and Sapporo (Hokkaido). NYSE-listed WW Grainger owns 50.36% of MonotaRO, having first invested $12m in 2000, $4m in 2006 and another $4m in 2009, and the $20m investment is valued at over $2.98bn, including inspiring Grainger to replicate MonotaRO’s business model in US called Zoro to compete with Amazon Supply, taking only 6-7 months to become profitable in the US;

(2) Atsushi Kawata 川田篤, co-founder and CEO of oRo Co オロ (TSE: 3983, market cap US$318m), which provides a specialized cloud enterprise resource planning system ZAC Enterprise focusing on corporates who are mainly in the project-based white-collar services industries of software and IT services, consulting, advertising, PR, and content production (web/video), in which personnel expenses account for a high percentage of cost. ZAC has already been used by over 500 customers (more than 130,000 licenses), including JAL Information Technology, IMJ Corporation (digital marketing), NISSEN INC. (TSE: 6543), Mirai Consulting, KAYAC Inc (TSE: 3904, social game and app development), and Vector Inc. (TSE: 2656, game and software sales). oRo also offers the Reforma PSA, a cloud based professional service automation solution that automates back office operations for the intellectual service industry, as well as offers system solutions, IT infrastructure, business process outsourcing services. For its Communication Design division, it provides communication strategy planning for companies and their stakeholders; promotion campaigning, event planning, and hosting services; and market research, analysis, effect measurement services for customers that include Aeon Group, Nissan Motor, Kobayashi Pharmaceutical. oRo was founded in 1999 by Atsushi Kawata and Yasuhisa Hino and is headquartered in Tokyo.

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” investment mistakes, to keep staying curious & humble, and to keep learning & adapting, has never been more critical for value investors. We believe tech-focused innovators with non-linear exponential growth potential are the most relevant multi-year investment trend and opportunity. There is a structural break in data in the market’s multi-year appraisal of “exponential innovators”, the type of business models that can compete and thrive in an exponential world.

Yet we do not want to chase the highly popular megacap tech stocks, or fall for the “Next-Big-Thing” trap by overpaying for “growth”, or by chasing to invest in 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, and we want to know how to distinguish between the true innovators and the swarming imitators. We see a distinct opportunity in under-the-radar Asian SMID-cap tech stocks with unique scalable business models run by high-integrity entrepreneurs with a higher purpose in solving high-value problems.

As the only Asian SMID-cap tech-focused listed equities fund in the industry, we believe we are uniquely positioned as a distinctive and alternative investment strategy for both institutional and individual investors who seek to capture long-term investment returns created by disruptive forces and innovation without herding or crowding to invest in the highly popular megacap tech stocks, and also provide capital allocation benefit to investors in building optionality in their overall investment portfolio.

H.E.R.O. stands for “Honorable. Exponential. Resilient. Organization.” and is operationalized into a unique, systematic 4-step investment process to separate the winners and losers. The H.E.R.O. HeartWare Weekly highlights interesting tech news and listed Asian emerging tech innovators with unique and scalable wide-moat business models to keep yourself well-informed about disruptive forces and innovation, new technologies and new business models coming up, and the companies that ride on and benefit from them in some of the most promising areas of the economy in Asia as part of our thought leadership for our ARCHEA Asia HERO Innovators Fund to add value to our clients and the community.

Some of the HERO Innovators in the focused portfolio include the largest online-to-offline pet insurance company in Japan with over 60% domestic share of the growing pet insurance market with over 636,000 policies in force generating over 98% sticky recurring revenue income & cashflow (Japanese households own 20m pets and only 1.3m or 6.3% were insured vs 22% of the 15m pets were insured in UK), and is a tech innovator with services that include allowing insurance claims to be made via LINE in just three minutes, an industry first, enabled by its powerful database & analytical prowess of more than 10 million insurance claims tied to illnesses and accident that allow the company to propose preventive measures by examining how animals become sick and how accidents occur. This highly profitable online pet insurance with a healthy net-cash balance sheet founded by an inspiring and down-to-earth entrepreneur with an agricultural economics background who started his career at a top insurance company is an archetypal H.E.R.O. Innovator.

Beyond Moat: Catapult Your Business to Exponential Value Creation | From Economic Moat to Catapult Analysis of Business Model Quality to Discover Tech Innovators

The Catapult is our analytical framework within the 4-step H.E.R.O. investment process to complement and rejuvenate the economic moat analysis to view the value creation process afresh and continually discover innovators creating, enabling and capturing new demand (vs exploiting existing demand) with exponential non-linear growth potential and value creation. The Catapult exponential projectile of the 4Cs are systematic observations and leading-indicator questions you can ask to analyze and assess the business models of exponential innovators.

(1) “Curiosity” Edge

Does the company create or generate curiosity and discovery amongst the users and customers for its products and services? Is there a riveting effect that leads to engagement?

  • User-centric customized recommendations, engagement depth in time invested, etc
  • Examples: Amazon Prime, Netflix, Tencent Music, Kakao M (KOSDAQ: 016170), Syuppin (TSE: 3179), etc

(2) “Community” Edge

Does the company build a community/platform/environment where customers/users/members can connect and interact repeatedly with one another to forge longer-term relationship and emotional connections Vs mere transactions-based exchange?

  • User-generated content (UGC) in reviews; ratings to foster trust, credibility, collaboration and celebration in the many-to-many interaction; feedback loop to improve; brand advocates/ raving fans/ whale curve; is there social capital capacity to expand into complementary products and services to serve the community
  • Watch out for unusual capitalization of customer acquisition costs (CAC), goodwill in balance sheet
  • Examples: Apple iOS, Benefit One (TSE: 2412), Itokuro (TSE: 6049), Bandai Namco (TSE: 7832), CyberAgent (TSE: 4751), etc

(3) “Compellingness-Craftsmanship” Edge

Does the company create and deliver products, services or solutions with compellingness and craftsmanship?

  • Process IP, intangible know-how/system and mastery to bring about comfort, convenience, “customized” pain-killing solutions to customers
  • Compellingness (external) combined with Craftsmanship (internal)
  • Craftsmanship: Think Steve Jobs shared the story of how he was inspired by his dad who taught the young Jobs that it was important to craft the back of cabinets and fences properly, even though they were hidden. “He loved doing things right. He even cared about the look of the parts you couldn’t see.”
  • Examples: Amazon, Microsoft, MISUMI Group (TSE: 9962), MonotaRO (TSE: 3064), Synchro Food (TSE: 3963), Koh Young Technology (KOSDAQ: 098460), etc

(4) “Circumspection” Edge

Does the company deliver/enable circumspection and acumen/insights/intelligence for the customers with usable framework of knowledge, tools and analytics to bring useful insights to help them think better and make better decisions?

  • Examples: Google, M3 (TSE: 2413), e-Guardian (TSE: 6050), MonotaRO (TSE: 3064), Appen (ASX: APX), Vista Group (NZSE: VGL), Supermap (SZSE: 300036), etc

Hope you find the weekly report to be useful and insightful. Please give us your candid feedback and harshest criticisms so that we can improve further to serve you better. Besides the BATTSS (Baidu, Alibaba, Tencent, TSMC, Softbank, Samsung), do also tell us which Asian tech entrepreneurs & CEOs whom you admire and respect and why – we will endeavor to do up profiles of them for sharing with the community. Thank you very much and have a beautiful week ahead.

Warm regards,

KB | kb@heroinnovator.com | WhatsApp +65 9695 1860

www.heroinnovator.com

[Replay+Slides] Finding Value in Asia: Discovering Tech Innovators in an Exponential World | BrightTALK (12 July 2018)

Finding Value in Asia: Discovering Tech Innovators in an Exponential World | BrightTALK (12 July 2018)

Thank you so much to everyone who had participated in our presentation at the BrightTALK webinar “Finding Value in Asia: Discovering Tech Innovators in an Exponential World” on 12 July.

We had received positive feedback from the participants who include institutional investors, professional & individual investors and lifelong learners in value investing, including our Catapult analytical framework to complement and rejuvenate the economic moat analysis to view the value creation process afresh and continually discover innovators creating, enabling and capturing new demand (vs exploiting existing demand) with exponential non-linear growth potential and value creation. The Catapult exponential projectile of the 4Cs are systematic observations and leading-indicator questions you can ask to analyze and assess the business models of exponential innovators. We are encouraged to persevere in our efforts to build a warm community of resilience, learning and exponential growth where entrepreneurs and investors support and encourage one another to navigate and thrive in this challenging exponential world and we are grateful to have your support.

We look forward to open up a meaningful conversation with you to explore the H.E.R.O.’s journey together.

Beyond Moat: CATAPULT Your Business to Exponential Value Creation | From Economic Moat to Catapult Analysis of Business Model Quality to Discover Tech Innovators

The Catapult is our analytical framework within the 4-step H.E.R.O. investment process to complement and rejuvenate the economic moat analysis to view the value creation process afresh and continually discover innovators creating, enabling and capturing new demand (vs exploiting existing demand) with exponential non-linear growth potential and value creation. The Catapult exponential projectile of the 4Cs are systematic observations and leading-indicator questions you can ask to analyze and assess the business models of exponential innovators. H.E.R.O. stands for “Honorable. Exponential. Resilient. Organization.” and is operationalized into a unique, systematic 4-step investment process to separate the winners and losers.

(1) “Curiosity” Edge

Does the company create or generate curiosity and discovery amongst the users and customers for its products and services? Is there a riveting effect that leads to engagement?

  • User-centric customized recommendations, engagement depth in time invested, etc
  • Examples: Amazon Prime, Netflix, Tencent Music, Kakao M (KOSDAQ: 016170), Syuppin (TSE: 3179), etc

(2) “Community” Edge

Does the company build a community/platform/environment where customers/users/members can connect and interact repeatedly with one another to forge longer-term relationship and emotional connections Vs mere transactions-based exchange?

  • User-generated content (UGC) in reviews; ratings to foster trust, credibility, collaboration and celebration in the many-to-many interaction; feedback loop to improve; brand advocates/ raving fans/ whale curve; is there social capital capacity to expand into complementary products and services to serve the community
  • Watch out for unusual capitalization of customer acquisition costs (CAC), goodwill in balance sheet
  • Examples: Apple iOS, Benefit One (TSE: 2412), Itokuro (TSE: 6049), Bandai Namco (TSE: 7832), CyberAgent (TSE: 4751), etc

(3) “Compellingness-Craftsmanship” Edge

Does the company create and deliver products, services or solutions with compellingness and craftsmanship?

  • Process IP, intangible know-how/system and mastery to bring about comfort, convenience, “customized” pain-killing solutions to customers
  • Compellingness (external) combined with Craftsmanship (internal)
  • Craftsmanship: Think Steve Jobs shared the story of how he was inspired by his dad who taught the young Jobs that it was important to craft the back of cabinets and fences properly, even though they were hidden. “He loved doing things right. He even cared about the look of the parts you couldn’t see.”
  • Examples: Amazon, Microsoft, MISUMI Group (TSE: 9962), MonotaRO (TSE: 3064), Synchro Food (TSE: 3963), Koh Young Technology (KOSDAQ: 098460), etc

(4) “Circumspection” Edge

Does the company deliver/enable circumspection and acumen/insights/intelligence for the customers with usable framework of knowledge, tools and analytics to bring useful insights to help them think better and make better decisions?

  • Examples: Google, M3 (TSE: 2413), e-Guardian (TSE: 6050), MonotaRO (TSE: 3064), Appen (ASX: APX), Vista Group (NZSE: VGL), Supermap (SZSE: 300036), etc

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” investment mistakes, to keep staying curious & humble, and to keep learning & adapting, has never been more critical for value investors.

We believe tech-focused innovators with non-linear exponential growth potential are the most relevant multi-year investment trend and opportunity. There is a structural break in data in the market’s multi-year appraisal of “exponential innovators”, the type of business models that can compete and thrive in an exponential world.

Yet we do not want to chase the highly popular megacap tech stocks, or fall for the “Next-Big-Thing” trap by overpaying for “growth”, or by chasing to invest in 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, and we want to know how to distinguish between the true innovators and the swarming imitators. We see a distinct opportunity in under-the-radar Asian SMID-cap tech stocks with unique scalable business models run by high-integrity entrepreneurs with a higher purpose in solving high-value problems.

As the only Asian SMID-cap tech-focused listed equities fund in the industry, we believe we are uniquely positioned as a distinctive and alternative investment strategy for both institutional and individual investors who seek to capture long-term investment returns created by disruptive forces and innovation without herding or crowding to invest in the highly popular megacap tech stocks, and also provide capital allocation benefit to investors in building optionality in their overall investment portfolio.

Warm regards,

KB | kb@heroinnovator.com | WhatsApp +65 9695 1860

www.heroinnovator.com

Finding Value in Asia: Discovering Tech Innovators in an Exponential World | Webinar Invite To BrightTALK Investing in Asia Summit 2018 (12 July 2018)

Finding Value in Asia: Discovering Tech Innovators in an Exponential World | Webinar Invite To BrightTALK Investing in Asia Summit 2018 (12 July 2018)

We like to invite lifelong learners in value investing and business model innovations to the BrightTALK webinar Investing in Asia Summit 2018 | Finding Value in Asia: Discovering Tech Innovators in an Exponential World on 12 July 2018 (Thursday) at 9am UK time (10am Swiss time or 4pm Singapore time). There will be a live Q&A session at the end of the webinar, please feel free to ask any tough questions which we will do our best to address them. We look forward to learn from your great questions and to open up a meaningful conversation with you to explore the journey together. We hope to build a warm community of resilience, learning and exponential growth where entrepreneurs and investors support and encourage one another to navigate and thrive in this challenging world and we are grateful to have your support. Thank you so much!

Abstract:
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 fall for the “Next-Big-Thing” trap in overpaying for “growth”, or invest 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?

We see a distinct value opportunity in an exclusive group of under-the-radar Asian SMID-cap tech stocks 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.”.

  • Investing in exponential innovators = The most relevant language in value investing?
  • Why are these exponential & exceptional innovators overlooked and mispriced winners and the most relevant multi-year investment trend and opportunity?
  • The analytical framework to identify under-the-radar winners, including rejuvenating the defensive economic “moat” analysis by complementing with the more offensive “catapult” analysis, using this new lens to view the value creation process afresh and continually discover innovators creating, enabling and capturing new demand with exponential non-linear growth potential.
  • Remaining skeptical and grounded in the Asian capital jungles and avoiding the investing pitfalls and traps of Asian-style accounting fraud and misgovernance which western-based fraud detection tools and techniques have not been adequately adapted to the Asian context.
  • Selected case studies.

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

“The Internet Costco In Services”: Innovation Insights from a 10X H.E.R.O. – H.E.R.O. HeartWare | 9 July 2018 (Issue 9)

“The Internet Costco In Services”: Innovation Insights from a 10X H.E.R.O. – H.E.R.O. HeartWare | 9 July 2018 (Issue 9)
“’Creating distribution of services.’ This is our company’s vision consistent from the foundation. If Costco is the leader in distributing goods at warehouse stores with the membership system, our company strive to be the innovator in distributing services through a membership Internet mall,”said Norio Shiraishi, founder and CEO of Benefit One (TSE: 2412), who had built the company into Japan’s leading online matching platform operator for employee welfare services with over 7.4 million paying corporate and individual members as the foundation for stable earnings & recurring cashflow and targets 9 million members by April 2019.

Inspired by the membership business model of Costco during his trip to America after graduation, CEO Norio had the vision of an Internet business that matches all kinds of employee benefit services at a discount for members with the paid membership system and founded Benefit One in 1996. The initial years were tough, recalled Norio: “I had a hard time comparable to decades in the first two years when I established the company.” Benefit One went on to generate consecutive years of growth in profit and its market cap compounded over 1,000% since listing in 2004 to US$2.1 billion now.

Having made the non-linear 10X jump to forge an exceptional and unique business model, what lies ahead? What is the future exponential growth opportunities that Norio is envisioning for Benefit One? As David Evans and Schmalensee articulated in their insightful book “Matchmakers: The New Economics of Multi-sided Platforms”, “Don’t let the flashy successes fool you, though. Starting a matchmaker is one of the toughest business challenges, and almost everyone who tries to build one, fails.” Yet, those exceptional matchmakers who persisted often went on to positively surprise skeptics and experts as they had hit a tipping-point in their business model innovation and critical mass of users to continue to generate exponential growth by adding new offerings and markets to multiply value creation for their members and create growth optionality value in their market cap creation.

Norio shed his insights: “Our goal is to provide all services to people all over the world at a fixed fee. We are planning to expand overseas as well and offer services such as hair salon, tavern, restaurant, movie theatre, medical service through the Internet. In addition to the outsourcing of benefits and welfare which is the current main business, we are currently developing eight divisions including CRM business for corporate customer service and personal business targeted at individuals. In the future, I would like to expand the business to financial services and to proceed with creating a mechanism for further distribution of services. At the same time, we will expand the number of members, and will also focus on added value such as convenience improvement and ease of comparative review. For example, we are currently preparing a service rating system like Michelin‘s ‘star’ or a word-of-mouth review so that we can select and compare various services such as eating, drinking, medical care, child rearing etc. In addition, we are planning to develop a system of distribution services cultivated in Japan overseas, with a view to global expansion.”

Intrigued and want to read more? Download this week’s H.E.R.O. HeartWare: Weekly Asia Tech News with brief highlights of the inspiring entrepreneurial stories of tech leaders in Asia whom we have been monitoring over the past decade in our broader watchlist of over 200 listed Asian tech companies and our focused portfolio of 40 HERO Innovators who reveal their problems and successes behind building the company. In Issue 9, we have:

(1) Norio Shiraishi 白石徳生, founder and CEO of Benefit One ベネフィット・ワン (TSE: 2412, market cap US$2,162m), Japan’s leading online matching platform operator for employee welfare services with over 7.4 million paying corporate and individual members as the foundation for stable earnings & recurring cashflow and targets 9 million members by Apr 2019. Benefit One has the corporate vision of “creating distribution of services” and to be the “Costco in services” with its paid membership business model;
(2) Mark Brayan, CEO of Appen (ASX: APX, market cap US$1,012m), specialist provider of data solutions and services for machine learning and artificial intelligence applications for technology companies, auto manufacturers, and government agencies primarily in Australia and the United States.

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” investment mistakes, to keep staying curious & humble, and to keep learning & adapting, has never been more critical for value investors. We believe tech-focused innovators with non-linear exponential growth potential are the most relevant multi-year investment trend and opportunity. Yet we do not want to chase the highly popular megacap tech stocks, or fall for the “Next-Big-Thing” trap by overpaying for “growth”, or by chasing to invest in 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, and we want to know how to distinguish between the true innovators and the swarming imitators. We see a distinct opportunity in under-the-radar Asian SMID-cap tech stocks with unique scalable business models run by high-integrity entrepreneurs with a higher purpose in solving high-value problems.

As the only Asian SMID-cap tech-focused listed equities fund in the industry, we believe we are uniquely positioned as a distinctive and alternative investment strategy for both institutional and individual investors who seek to capture long-term investment returns created by disruptive forces and innovation without herding or crowding to invest in the highly popular megacap tech stocks, and also provide capital allocation benefit to investors in building optionality in their overall investment portfolio.

H.E.R.O. stands for “Honorable. Exponential. Resilient. Organization.” and is operationalized into a unique, systematic 4-step investment process to separate the winners and losers. The H.E.R.O. HeartWare Weekly highlights interesting tech news and listed Asian emerging tech innovators with unique and scalable wide-moat business models to keep yourself well-informed about disruptive forces and innovation, new technologies and new business models coming up, and the companies that ride on and benefit from them in some of the most promising areas of the economy in Asia as part of our thought leadership for our ARCHEA Asia HERO Innovators Fund to add value to our clients and the community.

Some of the HERO Innovators in the focused portfolio include the largest online-to-offline pet insurance company in Japan with over 60% domestic share of the growing pet insurance market with over 636,000 policies in force generating over 98% sticky recurring revenue income & cashflow (Japanese households own 20m pets and only 1.3m or 6.3% were insured vs 22% of the 15m pets were insured in UK), and is a tech innovator with services that include allowing insurance claims to be made via LINE in just three minutes, an industry first, enabled by its powerful database & analytical prowess of more than 10 million insurance claims tied to illnesses and accident that allow the company to propose preventive measures by examining how animals become sick and how accidents occur. This highly profitable online pet insurance with a healthy net-cash balance sheet founded by an inspiring and down-to-earth entrepreneur with an agricultural economics background who started his career at a top insurance company is an archetypal H.E.R.O. Innovator.

Hope you find the weekly report to be useful and insightful. Please give us your candid feedback and harshest criticisms so that we can improve further to serve you better. Besides the BATTSS (Baidu, Alibaba, Tencent, TSMC, Softbank, Samsung), do also tell us which Asian tech entrepreneurs & CEOs whom you admire and respect and why – we will endeavor to do up profiles of them for sharing with the community. Thank you very much and have a beautiful week ahead.

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

Creating “Compellingness” for Exponential Growth: H.E.R.O. Innovators Synchro Food, AS ONE, Prestige International & Corporate Travel Management

H.E.R.O. HeartWare | 25 June (Issue 7) | Creating “Compellingness” for Exponential Growth

At that time, I really thought I am challenging what no one else is challenging,” recalled Shinichi Fujishiro, the founder & CEO of Synchro Food (TSE: 3963), an operator of online matching platforms for establishments in the the restaurant industry which has grown sales and profits for 15 consecutive years since its founding and now blossomed into a listed company with US$277 million in market value and the No. 1 online platform where nearly one out of every four restaurant operator is registered with Synchro Food which has over 129,000 registered users. “Since it is highly likely that the restaurant business will succeed if it can know the information of a good restaurant location before rivals, the property information was highly confidential… when the website is opened, only two to three companies registered the property. The business did not grow at all. It was harder than I thought to ‘earn money’ at the beginning, it felt depressing. There were days when I could not sleep,” said Shinichi-san on his difficult early days.

How did you keep your spirits up during this difficult period, we ask. Shinichi’s reply was inspiring: “The challenge itself is courageous and wonderful, and if it fails, the trace will remain, so someone may be able to return it to society. After thinking so, my feelings have become brighter. I felt inspired by the pride that ‘I am contributing to society’. I did not start from the ambition to enlarge the company, I wanted to do something that no one was doing and want to provide new value added to the people involved in the restaurant establishments of the world. When people gather around for me, it is strange and my feelings get brighter,” Shinichi said animatedly. “Looking at the web services provided by Synchro Food, it is easy to see the compelling convenience provided to our customers. To open and operate a restaurant in the conventional manner, you need to first of all look for a specialized property that is suitable, you need to visit a real estate agent, you then need to find the interior designers, you need to buy kitchen equipment, select ingredients suppliers, find the right people to take on the jobs. Even after the opening of the store, you need to attract customers, do promotion, handle accounting, do attendance management etc, which are all work waiting for you to solve. If you have a website that will provide compelling convenience in supporting them all at once, you will want to jump into it.”

Is the company creating “compellingness” in the products, services or solutions so that customers “want to jump into it”? – This is one of the questions that we like to ask, observe and analyze in our journey to discover and invest into a selected group of exceptional innovators with non-linear exponential growth potential whom we whom we call the H.E.R.O., the Honorable, Exponential, Resilient Organization. Offering something “compelling” indicates that the “alternative” solution solves an acute pain point for customers as compared to what was normally and currently done and pushes us to drive towards a course of action. Understanding the Purpose behind creating this “compellingness” and the “craftsmanship” involved in delivering this are critical in assessing the staying power of this “compellingness”. Shinichi shared how he was motivated to start Synchro Food as a result of his childhood experience of helping out his parents who were vegetable wholesalers selling to restaurants and he felt that many of the problems faced by the restaurant businesses were due to the lack of information gathering tools. After graduation and having acquired IT skills at an IT management consultancy firm, he resolved to change the restaurant industry by making use of his knowledge. There is also a certain craftsmanship in their in-house design and development of the websites from improving upon customers’ feedback.

“Compellingness” in “resolving customers’ troublesome times” is also the secret ingredient powering the success of AS ONE (TSE: 7476), as shared by Takuji Iuchi, the third-generation business leader of the specialist B2B platform business model that carved out a profitable niche and a market value of over US$1.3 billion selling through catalogs and its ecommerce site AXEL a vast array of laboratory and healthcare instruments. Takuji-san shared how their customers “are people who aim to overcome various problems at the work site, including researchers. They 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 not only deliver these products seamlessly and speedily, but also to listen to such voices and respond to the needs.” By pursuing their work with craftsmanship, AS ONE expanded into consulting for their customers: “Instruments and analyzers used for research are required to be accurate. Once a year, it is necessary to perform calibration work to check the accuracy of the machine, but it is a difficult task to put out one by one to the manufacturer. Therefore, we are also developing services such as contracting entire calibration services for the factory and lab customer while they are on holiday. Because the burden on the site is reduced at once, we delighted the busy researchers. In this way, I think that there are more things we can do if we think from the viewpoint of resolving customers’ troublesome times.” Takuji 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!’ It is easy for employees to be feeling that even though the company is stable and there is no big dissatisfaction, there is no sense of fulfillment either. I want employees to feel that their time in the company, where they spend most of their life, is meaningful.”

Shinichi Tamagami, the founder and CEO of Prestige International (TSE: 4290), also shared the compellingness of Prestige’s unique BPO solutions in resolving roadside-assistance problems for car insurance subscribers, home-assistance services for condo developers and home owners (from water leakage to lost of keys, house cleaning, parking assistance etc): “Our job and management philosophy of the Group is to listen to the inconvenience, troubles and embarrassing things of end users and guide solutions. Since our founding, the Group has always created new services and has continued to grow under this management philosophy. Today, we are developing businesses to solve each problem of customers in various genres such as automobiles, real estate, insurance and guarantee. Regardless of how the times change, we continue our efforts day and night to become the one and only existence that can solve every of these inconvenience, troubles and problems that occur daily for people before anyone else.”

This week in H.E.R.O. HeartWare: Weekly Asia Tech News with brief highlights of the inspiring entrepreneurial stories of tech leaders in Asia whom we have been monitoring over the past decade in our broader watchlist of around 200 listed Asian tech companies and our focused portfolio of 40 HERO Innovators who reveal their problems and successes behind building the company, we have:

(1) Shinichi Fujishiro 藤代真一, founder and CEO of Synchro Food シンクロ・フード (TSE: 3963, market cap US$277m), the No. 1 online platform operator for restaurants industry where nearly one out of every four restaurant operator is registered with Synchro Food which has over 129,000 registered users;

(2) Takuji Iuchi 井内卓嗣, President of AS One アズワン (TSE: 7476, market cap US$1,360m), a specialist B2B platform business model that carved out a profitable niche selling through catalogs and its ecommerce site AXEL a vast array of laboratory and healthcare instruments;

(3) Shinichi Tamagami 玉上進一, founder and CEO of Prestige International プレステージ・インターナショナル (TSE: 4290, market cap US$890m), a unique platform business model that provides business process outsourcing (BPO) services in Japan and internationally. It offers (1) road assistance services for nonlife insurance companies and auto industry, as well as accident response and support; (2) property assistance services, such as home assistance for condominium developers, and real estate management and agency companies, as well as parking assistance for parking lot operators; (3) insurance BPO services, including claims handling services and health care programs; (4) extended warranties for automobiles, rent guarantees, household equipment warranties, and nursing care and healthcare expense guarantees; and (5) supply-chain management (SCM), IT, and mobile solutions; CRM services;

(4) Jamie Pherous, founder and CEO of Corporate Travel Management Limited (ASX: CTD, market cap US$2,151m), which manages the purchase and delivery of travel services for the corporate market worldwide with its technological solutions platform.

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” investment mistakes, to keep staying curious & humble, and to keep learning & adapting, has never been more critical for value investors. We believe tech-focused innovators with non-linear exponential growth potential are the most relevant multi-year investment trend and opportunity. Yet we do not want to chase the highly popular megacap tech stocks, overpay for “growth”, or fall for the “Next-Big-Thing” trap by chasing to invest in 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, and we want to know how to distinguish between the true innovators and the swarming imitators. We see a distinct opportunity in under-the-radar underappreciated Asian SMID-cap tech stocks with unique scalable business models run by high-integrity entrepreneurs with a higher purpose in solving high-value problems.

H.E.R.O. stands for “Honorable. Exponential. Resilient. Organization.” and is operationalized into a unique, systematic 4-step investment process to identify the winners at the ARCHEA Asia H.E.R.O. Innovators Fund, the only Asian SMID-cap tech-focused fund in the industry. The H.E.R.O. HeartWare Weekly highlights interesting tech news and listed Asian emerging tech innovators with unique and scalable wide-moat business models to keep yourself well-informed about disruptive forces and innovation, new technologies and new business models coming up, and the companies that ride on and benefit from them in some of the most promising areas of the economy in Asia as part of our thought leadership for our ARCHEA Asia HERO Innovators Fund to add value to our clients and the community.

Some of the HERO Innovators in the focused portfolio include the largest online-to-offline pet insurance company in Japan with over 60% domestic share of the growing pet insurance market with over 636,000 policies in force generating over 98% sticky recurring revenue income & cashflow (Japanese households own 20m pets and only 1.3m or 6.3% were insured vs 22% of the 15m pets were insured in UK), and is a tech innovator with services that include allowing insurance claims to be made via LINE in just three minutes, an industry first, enabled by its powerful database & analytical prowess of more than 10 million insurance claims tied to illnesses and accident that allow the company to propose preventive measures by examining how animals become sick and how accidents occur. This highly profitable online pet insurance with a healthy net-cash balance sheet founded by an inspiring and down-to-earth entrepreneur with an agricultural economics background who started his career at a top insurance company is an archetypal H.E.R.O. Innovator.

Hope you find the weekly report to be useful and insightful. Please give us your candid feedback and harshest criticisms so that we can improve further to serve you better. Besides the BATTSS (Baidu, Alibaba, Tencent, TSMC, Softbank, Samsung), do also tell us which Asian tech entrepreneurs & CEOs whom you admire and respect and why – we will endeavor to do up profiles of them for sharing with the community. Please email kb@heroinnovator.com on your thoughts, thank you very much. Have a beautiful week ahead.

PS: We are grateful to be invited to speak at the upcoming SharingAlpha-BrightTALK’s Investing In Asia Summit 2018 (July 12) – Finding Value in Asia: Discovering Tech Innovators in an Exponential World. There will be a live Q&A session at the end of the webinar. In the webinar, we will be sharing our framework and systematic process to identify winners, including rethinking the economic “moat” analysis which is a more defensive mindset and lagging-indicator framework to protect against competitors by complementing it with the more offensive “Catapult” 4Cs leading-indicator analysis (the Exponential Edge in “Curiosity”, “Community”, “Compellingness-Craftsmanship”, “Circumspection”) to discover innovators creating, enabling and capturing new demand with exponential non-linear growth potential. You can find more details on our abstract of the webinar below. We look forward to seeing you at the webinar on July 12, 9am British Standard Time (10am Swiss Time or 4pm Singapore Time), thank you so much.

Warm regards,

KB

The ARCHEA Asia H.E.R.O. Innovators Fund (www.heroinnovator.com) is the only Asian SMID-cap tech-focused fund in the industry. H.E.R.O. stands for “Honorable. Exponential. Resilient. Organization.” and is operationalized into a unique, systematic 4-step investment process to identify the winners. The investment objective seeks to capture long-term investment returns created by disruptive forces and innovation by focusing on high-quality and liquid listed equities in the Asia-Pacific region that ride on and benefit from them. Through our cross-sector and in-depth fundamental research process, the Fund aim to provide access to companies whom we believe are run by high-integrity, honorable and far-sighted owner-operators with a higher sense of purpose in solving High-Value Problems for their target customers and society, and have unique, scalable and wide-moat business models with sustainable competitive advantages and innovative products, services, and processes to create, expand and service their total addressable market, including the resiliency and balance sheet strength to maintain or grow profitability, pricing power and market positions through up/downturns in the economy.

The ARCHEA H.E.R.O. Innovators Tech Fund is a UCITS V fund domiciled in Luxembourg, and is available to both retail and accredited investors in Europe (including Switzerland, Germany, France, Denmark, Belgium, Luxembourg) and qualified offshore investors worldwide. The ARCHEA Asia HERO Innovators Fund is now in the pre-launch stage, subject to regulatory approval. We will also be registering the funds under MAS CISNET for distribution in Singapore. Our target fund launch date for the Founders’ Series is in September 2018.

We have secured capital commitments from several institutional and high net-worth investors. Once we have gotten our ticker code and approval from the regulator for our UCITS fund, interested long-term partners can simply buy or sell units in the fund, just like the buying or selling of listed shares, by approaching any bank of your choice with the ticker code and wire the funds into an independent custodian bank. As a strictly regulated UCITS fund that is also audited by PwC, there is daily liquidity to buy or sell, and we have zero exit fees. If you are interested to participate in the exponential growth journey of the H.E.R.O. Innovators who are solving real-world high-value problems and have helped create what the world around you looks like today and tomorrow, please contact KB by email kb@heroinnovator.com or whatsapp +65 9695 1860.

How to Know If We are Right for Each Other? 

You are an intelligent and thoughtful high net-worth investor, business owner, family office, institutional investor, allocator, or financial advisor who want to:

  • You want to learn and be well-informed about disruptive forces and innovation, new technologies and new business models coming up, and the companies that ride on and benefit from them in some of the most promising areas of the economy, and feel more confident in your knowledge in how these innovators are indispensable in the well-being of your daily life.
  • Yet, you do not wish to follow the crowd like everyone else to herd in the highly popular mega-cap tech stocks.
  • And you definitely do not want to fall for the Next-Big-Thing trap by investing in 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, and you want to know how to distinguish between the true innovators and the swarming imitators.
  • You want to be proud of the entrepreneurs and owner-operators running the companies whom you invest in to generate sustainable returns, that they are honorable, high-integrity, far-sighted, and have a higher sense of purpose in solving High-Value Problems for their target customers and society, and have unique, scalable and wide-moat business models with sustainable competitive advantages and innovative products, services, and processes to grow profitably through up/downturns in the economy.

[Upcoming] Speaking at SharingAlpha-BrightTALK’s Investing in Asia Summit 2018 (July 11-12) – Finding Value in Asia: Discovering Tech Innovators in an Exponential World

We are grateful to be invited to speak at the upcoming SharingAlpha-BrightTALK’s Investing In Asia Summit 2018 (July 12) – Finding Value in Asia: Discovering Tech Innovators in an Exponential World. There will be a live Q&A session at the end of the webinar. Below is our abstract. You can register for free to participate in the webinar. We look forward to seeing you at the webinar on July 12, 9am British Standard Time (10am Swiss Time or 4pm Singapore Time), thank you so much.

Abstract

From imitators to innovators, a selected group of Asian tech companies have evolved and transformed to lead business model innovations that even influence and inspire the world, as led by the hugely popular megacap tech giants BATTSS (Baidu, Alibaba, Tencent, TSMC, Samsung, Softbank) who had produced strong earnings growth and returns. Their immense popularity and valuation premium resulted in just these five tech giants (not including Softbank with its $100 billion Vision Fund) to account for over half of the Asian tech index weightage, with the other half comprises mostly of the usual contract manufacturers and commoditized hardware “tech-nosaurs” as some would say.

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 falling for the “Next-Big-Thing” trap by chasing to invest in the countless 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?

We see a distinct value opportunity in selective lesser-known underappreciated Asian SMID-cap tech stocks 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.”.

  • Why are these selective exponential & exceptional innovators overlooked, under-researched and mispriced winners and the most relevant multi-year investment trend and opportunity?
  • The framework and systematic process to identify these winners, including rethinking the economic “moat” analysis which is a more defensive mindset and lagging-indicator framework to protect against competitors by complementing with the more offensive “Catapult” 4Cs leading-indicator analysis (the Exponential Edge in “Curiosity”, “Community”, “Compellingness-Craftsmanship”, “Circumspection”) to discover innovators creating, enabling and capturing new demand with exponential non-linear growth potential.
  • How to avoid the investing pitfalls and traps of Asian-style accounting fraud and misgovernance which western-based fraud detection tools and techniques have not been adequately adapted to the Asian context.
  • Selected case studies.

About KB:

Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized investment management, investment advisory & research services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian equity fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Detecting Accounting Fraud in Asia as an official module at SMU. KB remains grateful to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community.

Selected media archives:

Scouring Accounting Footnotes to Prevent Tunneling Fraud, Business Times, 19 Aug 2015 (PDF)

Reforming Corporate Governance, Business Times, 25 Nov 2000 (PDF)

The Secret to Business Resilience: Be Like the Bamboo, Not the Oak, TODAY, 8 April 2013 (PDF)

Creating Bamboo Innovators in Singapore, Straits Times, 1 April 2013 (PDF)

管理狮城的狮子企业家 The Power of Vision, Business Times, 15 May 2000 & Lianhe Zaobao, 9 Aug 2010 (PDF)

Why ‘Democracy’ and ‘Drifter’ Firms Can Have Abnormal Returns: The Joint Importance of Corporate Governance and Accounting Quality in Separating Winners from Losers, Review of Social, Economic and Administrative Studies, Vol. 25 no. 1 (2011): 3-55. (PDF)

Mini Workshop | 100X: Be Exponential, Be Exceptional Like a H.E.R.O.! Business Model Innovation & Investment Insights to Transform SMEs Into Exponential Enterprises from $10 Million to $1 Billion

Mini Workshop | 100X: Be Exponential, Be Exceptional Like a H.E.R.O.! Business Model Innovation & Investment Insights to Transform SMEs Into Exponential Enterprises from $10 Million to $1 Billion

We are planning mini-workshops in partnership with a quality audit & consultancy firm for their clientele base of SME business owners to share about H.E.R.O. – below is a brief synopsis. If there is available space, we will open up the workshop to interested qualified investors who are lifelong learners. More details on the dates and venue to be shared at a later date. If you are interested to find out more or reserve a seat, please contact KB, thank you.

Synopsis:

Disruptive innovation is accelerating exponentially across many industries, upending passive companies and benefiting selective innovators whom we call H.E.R.O., which stands for “Honorable. Exponential. Resilient. Organization.”

Always feel that the insights from the usual case studies of big giants from Apple to Alibaba may not be relevant and applicable to your SME? H.E.R.O. Innovators are not your usual SMEs – they are exceptional market leaders in their respective fields and are 10X exponential compounders in profits and market value. What does it take to be exponential and exceptional like a H.E.R.O. and scale a SME 10 times or even 100X from $10 million to $1 billion in market value?

What are the business model innovation and investment insights that business owners, CEOs, managers and investors can learn and discover from the real-world case studies of H.E.R.O. Innovators that can be transformed into growth and positive change for yourselves?

Are we willing to commit ourselves and our companies to a process of mobilization, learning and discovery that progressively unlocked more of the company’s and personal full potential?

Part 1: Be Exponential! 天时

  • Stay ahead of the curve and keep your head when all others are losing theirs in an exponential world by acquiring the ability to tap on the technological insights of H.E.R.O. Innovators as a source of endless innovation for you and your team.

Part 2: Be Exceptional! Business Model Innovation Insights 地利

  • Discover why Asian H.E.R.O. Innovators outperform to create value regardless of macroeconomic potholes and bumps and the innovations they introduce to make the bumps work for them – and how you can acquire the ability to adapt them to work for you and your team.
  • Learn why do two companies in similar industry with each earning the same absolute profit size differ vastly in their market value in the stock market.
  • Understand the surprising insight why sales, profit and tangible asset growth may not translate to market cap growth and the secrets to unlocking business valuation.

Part 3: Be a H.E.R.O.! CEO 2.0 人和

  • Master lessons in overcoming challenges, hardships and adversities from the leaders helming Asian H.E.R.O. Innovators who propelled some of today’s innovative next-generation companies to success. Avoid business mistakes of the decisions of H.E.R.O. Innovators.

Participants Profile:

JOIN US in this thriving community of serious entrepreneurs and value investors where we come together and profit from sharing ideas.

  • Business Owners, CEOsCFOs and company executives aspiring to scale new heights for their businesses and last the distance to lead a meaningful and successful life;
  • Finance professionalsaccountants, and non-financial professionals who are keen to enhance their understanding of business building and value investing principles for professional and personal use;
  • Scions of business owners who desire to sharpen their business and investment acumen, manage challenges in family business, wealth preservation and creation, and network with other entrepreneurs and senior managers.

About KB:

Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized investment management, investment advisory & research services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian equity fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Detecting Accounting Fraud in Asia as an official module at SMU. KB remains grateful to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community.

Selected media archives:

Scouring Accounting Footnotes to Prevent Tunneling Fraud, Business Times, 19 Aug 2015 (PDF)

Reforming Corporate Governance, Business Times, 25 Nov 2000 (PDF)

The Secret to Business Resilience: Be Like the Bamboo, Not the Oak, TODAY, 8 April 2013 (PDF)

Creating Bamboo Innovators in Singapore, Straits Times, 1 April 2013 (PDF)

管理狮城的狮子企业家 The Power of Vision, Business Times, 15 May 2000 & Lianhe Zaobao, 9 Aug 2010 (PDF)

Why ‘Democracy’ and ‘Drifter’ Firms Can Have Abnormal Returns: The Joint Importance of Corporate Governance and Accounting Quality in Separating Winners from Losers, Review of Social, Economic and Administrative Studies, Vol. 25 no. 1 (2011): 3-55. (PDF)

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