Advertisements

H.E.R.O.’s Journey in Tech (21 August 2018) – GlobalWafers, Wafer Works continue to enjoy strong silicon wafer demand + Why Honor Matters

H.E.R.O.’s Journey in Tech (21 August 2018) – GlobalWafers, Wafer Works continue to enjoy strong silicon wafer demand + Why Honor Matters

Companies

  • Trend Micro’s ‘virtual patching’ to protect firms against cyber attacks (Quint)
  • Fujifilm instant camera finds new life on social media; ‘Photo-in-a-photo’ craze inspires sales target of 10 million units (Nikkei)
  • China start-up’s US$300 million IPO risk disclosure: no licences, Ebola virus; Shanghai-based Qutoutiao, a company backed by Tencent, operates a mobile app that aggregates Chinese news and short videos (SCMP)
  • A unit of Universal Scientific Industrial will take a 60 percent stake in electronic manufacturing services firm Chung Hong Electronics Poland to gain a foothold in the EU market (Yicai)
  • Ping An Good Doctor to expand medical services platform in Southeast Asia this year; The company will give users in the region access to artificial intelligence-assisted online medical consultations, medicine delivery and appointment bookings (SCMP)
  • TouchPal keyboard developer CooTek files for a $100 million IPO (Technode, CMN)
  • GlobalWafers, Wafer Works continue to enjoy strong silicon wafer demand (Digitimes)
  • Atlassian’s head of product urges startups to ‘dig deeper’ (Age)

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

  • Ant Financial delays IPO plans again (Technode)
  • Alipay launches “shared parking” service in Hangzhou (Technode)
  • Tencent’s WeChat wallet is luring Malaysian users with free money (TIA)
  • Gaming the right way? Tencent’s overseas investment strategy (TIA)

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

  • In China, Google must go by any other name; Internet search company should use a different brand for censored results (Nikkei)
  • Nvidia Unveils New Chip Design for Gaming Machines Sending Shares Higher (Bloomberg); New Nvidia gaming chips aim to boost realism of graphics (Reuters)

Asia Tech & Innovation Trends

  • Chinese investors protest in Shanghai’s financial district over P2P woes (Reuters)
  • Some Techies Are Shunning Silicon Valley for the Japanese Dream (Bloomberg)
  • How Micromax, Intex, Lava and Karbonn-aka MILK-lost their dominant position (Forbes)

Global Tech & Innovation Trends

  • How Crowded Are Tech Stocks? (CFA)
  • Startup adviser Elad Gil is worried that we’re losing our ability to be optimistic about tech (Recode)
  • Farfetch is succeeding in luxury fashion where Amazon has failed (qz); Farfetch: clue is in the name: Luxury retailers are meant to be costly, but online aggregator is running at a loss (FT); The Crowded Market for Luxury Tech; Online luxury specialist Farfetch isn’t as unique as the first draft of its IPO prospectus would have investors believe (WSJ); Farfetch targets New York listing as luxury web sales thrive (Reuters)
  • Fitbit: As Smartwatches Boom, a New Tracker Arrives (Barron’s)
  • Tech stars have no reason not to be profitable: DocuSign’s Dan Springer. The chief executive of $12.5 billion e-signature company DocuSign, Dan Springer, has called out tech companies that aren’t profitable by the time they hit $500 million in revenue as “lazy”. “I don’t understand the concept of when you’re at scale, not running a profitable business. It’s a weird message to send to employees and it raises questions for investors” (AFR)
  • Videogame Developers Are Making It Harder to Stop Playing; Players are logging more hours as developers find new ways to keep them engaged (WSJ)
  • LinkedIn Will Allow Economics Researchers to Mine Its Data (Bloomberg)
  • Cloud Companies And 10x Revenue Multiples (Crunchbase)

Life

  • Why Honor Matters (Farnam Street)
  • The Akrasia Effect: Why We Don’t Follow Through on What We Set Out to Do and What to Do About It (James Clear)
Advertisements

H.E.R.O.’s Journey in Tech (20 August 2018) – Those Busy Fanuc Robots Are Taking a Breather: The Japanese company’s beaten-up stock belies underlying demand for automation.

H.E.R.O.’s Journey in Tech (20 August 2018) – Those Busy Fanuc Robots Are Taking a Breather: The Japanese company’s beaten-up stock belies underlying demand for automation.

Companies

  • Those Busy Fanuc Robots Are Taking a Breather: The Japanese company’s beaten-up stock belies underlying demand for automation. (Bloomberg)

  • Meituan Dianping rumored to list in Hong Kong in September (Technode)
  • JD looks to monetize logistics assets (China Daily)

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

  • Walmart wants to take on Amazon with virtual reality shopping (qz)

Asia Tech & Innovation Trends

  • Singapore Startup AirTrunk Raises $618 Million to Expand Datacenters (Bloomberg)

Global Tech & Innovation Trends

  • Spotify is falling behind on lyrics and voice (Techcrunch)
  • Fears About Tech-Stock Multiples Don’t Add Up, Bulls Say; Buoyant performance of U.S. tech stocks is driving some fund managers to dismiss longstanding valuation concerns as short-sighted (WSJ); Tech Firms Account For 60% Of Profit Margin Growth In The Past 20 Years (ZH)

Life

  • Does culture eat strategy for breakfast? The higher your position, the more likely you are to agree (qz)

“Our greatest strength is our ability to create networks using our TONIC IT infrastructure” – H.E.R.O. Innovation Insights from Park24’s Koichi Nishikawa | H.E.R.O. HeartWare | 20 August

“Our greatest strength is our ability to create networks using our TONIC IT infrastructure” – H.E.R.O. Innovation Insights from Park24’s Koichi Nishikawa | H.E.R.O. HeartWare | 20 August

“We still don’t know whether Uber is a real business. It has never had to live on the cash it generates,” wrote Bloomberg columnist Shira Ovide on 16 Aug 2018. Despite the ubiquity of the rideshare services and its aim to morph into an indispensable everyday app in new categories of growth such as food delivery, Uber continues to be loss-making and has burned through more than $11 billion in cash in its lifetime after taking in over $21.7 billion from stock sales and borrowings. French ride-sharing unicorn BlaBlaCar and Israeli-based hailing app Gett also had their valuations cut this week as the European ride-sharing market becomes increasingly competitive. Valuation is tricky, which skeptics like NYU Professor Aswath Damodaran find out when he asserted that Uber was overvalued at $17 billion after a 2014 investment round, based on data points from the global taxi and car-service market, concluding the real number should be $5.9 billion. Since the 2014 article which prominent VCs such as Bill Gurley criticized for a “faster horse” mentality, Uber has shot past his estimate to be valued at $62 billion.

Is it ever possible for sharing economy disruptive tech firms like Uber to achieve profitability with healthy cashflow generation given the ever increasing customer acquisition costs being capitalized and shifted into the balance sheet? After all, network effect, popularized by Carl Shapiro and Hal Varian in their 1998 seminal book Information Rules: A Strategic Guide to the Network Economy, posits that increasing returns to scale and profitability is supposed to be forthcoming once the network gains a critical mass of users, and that increasing value cannot continue indefinitely beyond the critical mass unless the system is enlarged. Or is this the better question: Are there sharing economy firms that generate healthy profits and cashflow and what can investors and entrepreneurs learn form them?

How CEO Koichi Nishikawa scale Park24 (TSE: 4666) into the world’s only profitable car-sharing company bears useful insights for value investors in understanding the dynamics of platform business models. Park24 is Japan’s largest car-sharing company commanding over 70% market share with 980k monthly subscription paying members for the “Times Car PLUS” services introduced since 2009 which has generated 13 billion yen in sales and 1.69 billion in operating profit as at April 2018 (FY15 Sales 6.45bn yen, OP 0.37bn yen). Times Car PLUS can be found near almost every train station in central Tokyo and 60% of shinkansen bullet train stations outside Tokyo. For a monthly fee of 1,030 yen, or about US$9.33, members who sign up online or with a smartphone receive a member card that functions as a car key. Vehicles are booked online or using Park24’s smartphone app. Subscribers are charged in 15-minute increments of 206 yen, and the tank need not be refilled before the vehicle is returned. By leveraging its core business as the largest parking company with an infrastructure of over 590k parking spaces in Japan under the Times brand and dynamically using Times parking sites to expand the scale of its fleet operations, Park24 has established a solid leadership position in Japan for car sharing services.

The core business of Park24 is parking lot management and it is the world’s largest parking company in the Asia/Oceania region with the world’s largest number of sites and the number of parking spaces managed reaching over one million (590k in Japan, 540k overseas), commanding over 54% domestic market share in parking with a network of around 18,000 parking facilities and supported by 6.5 million Times Club members. Despite increased development of parking facilities, there is a chronic shortage of parking spaces and only one-third of the demand in Japan is being met. There are also ample amounts of unused sites that are suitable for development. Through acquisitions of National Car Parks in Aug 2017 and Secure Parking in Jan 2017, Park24 is the number one leader in UK with 30% share in parking and in Australia with 38% share (vs 33% for Wilson Parking which is backed by HK billionaire Kwok family) respectively. Park24 also provides road services, which comprise onsite emergency handling and car-carrying services to automobiles and motorcycles.

Park24 also offers B-Times, a membership service launched in Aug 2016 that matches a landowner who wants to utilize idle land effectively with a driver who wants to park their car. “Drivers who are members of the Times Club administered by Park24 can book vacant parking spaces as small as one unit at sites registered by the owners or managers of houses, shops, commercial buildings or other properties. Owners can rent out their parking spaces with confidence, thanks to the track record of the Times brand parking systems. The use of online and credit card payments means capital investment for checkout machines or other infrastructure is unnecessary. Park24 will be able to operate parking spaces on small plots of land and in locations that are unsuitable for Times parking facilities is contributing to the expansion of the Group’s parking network. The introduction of the B-Times reserved parking service will allow us to establish a new mobility network by integrating various resources, including around 17,000 parking facilities, 43,000 Times Car vehicles, with the B-Times system. Through the aggressive development of B-Times, we believe that we can contribute to the creation of a city with no parking on the street that the Park24 Group is aiming for,” commented CEO Nishikawa.

Park24 was founded in 1971 by Kiyoshi Nishikawa originally selling “No Parking” signs, expanded into sales of parking facility equipment, and started to manage parking sites in 1991 after the opening of its first 24-hour unmanned under the Times brand. The founder passed away in July 2005 and was succeeded in 2004 by his son Koichi Nishikawa who joined the family business in 1993 and was instrumental in transforming the traditional business of parking management into an innovator centered on TONIC (Times Online Network & Information Center), his farsighted investments in the IT and big data analytics system introduced in 2003 which enabled Park24 to scale exponentially and create new categories of growth centered on the parking lot, changing city lifestyle, increasing operating profit, EBITDA and operating cashflow by over 350%, 550% and 940% to US$192.5m, US$431.3m and US$427.6m respectively, and compounding over 500% to a market value of US$4.49 billion.

“Our greatest strength is our ability to create networks using our TONIC (Times Online Network and Information Center) IT infrastructure. While expanding the scale of our existing management resources, such as members, vehicles and parking facilities, we will continue to deploy our Times Pay settlement system and capture driver destination information within communities as part of our customer sharing and business support activities for stores near Times parking facilities. We want Park24 to be a driving force in the new mobility society. We will work to achieve this vision by networking these management resources and using the big data that they generate to offer services that anticipate changes in the automobile society, including the provision of temporary parking for self-driving vehicles, new mobility services based on self-driving vehicles, and charging facilities for electric vehicles. Park24 is dedicated to the realization of its corporate philosophy of creating a comfortable automobile society,” Nishikawa exclaimed with a sense of greater purpose.

Elaborating on Park24’s exponential edge in its TONIC IT infrastructure, CEO Nishikawa said, “An IT system is essential in order to stably move parking lots of this size on a daily basis, providing the location of the Times parking lot and empty lots information instantaneously, reducing the driver’s difficulty of finding a parking lot. You can also use credit cards and electronic money settlement.  Times Club members can also collect and save loyalty program points on their Times Club Card. Without this system, it would not have been possible to expand at the current pace. Even if the parking lots in Japan doubled to 1 million now, the system itself can tolerate, and because of this system, innovative new services such as Times Car PLUS car sharing and B-Times parking reservation could be introduced and we can discover new possibilities, develop new businesses. By using this system, all parking lots, car sharing cars, car rental are connected online.”

“I tried to introduce this TONIC IT system at around 2000 when I presented at the board meeting that ‘we cannot survive unless IT systems are introduced in the future.’ At that time, Times parking lot had been rapidly increased, but it was in fact impossible to manage even what was broken. Since I could not get any data before the introduction of TONIC, I did not know whether the parking lot was working properly and how much profit it generated unless I went to the site. I envisioned the fear that management cannot be done when expanding in such a state. It was imperative to introduce the IT system quickly. When I started taking data from a certain time, I found that the loss due to cars not being charged accounted for 15% of the total. As the sales at that time were about 20 billion yen, there was a loss of 3 billion yen. If there is such a loss, if you make capital investment and reduce the loss, profits will be improved. However, the annual profit at the time was 2.5 billion yen. As we proposed an IT system investment of 4 billion yen, it was dismissed twice by the board of directors. But I did not give up. I tenaciously persuaded the founding generation who gave the go ahead the third time, saying ‘Do as much as possible’. Well, I had a hard time, there was no company to cooperate in making the system. We did it on our own and I checked the machines in the parking lot one by one, analyze the circuit, rush around with the staff.”

“With the introduction of TONIC in 2003, we connected all of the Times parking spots scattered all over Japan online so that we can grasp the operating situation at a glance and enhance customer service. Information on whether the parking lot is full, empty, crowded, etc. are delivered to web pages and mobile phone terminals, car navigation companies, map companies, content companies in real time. We are able to promptly share information by completing services such as parking lot cleaning, collecting money, maintenance of parking lot equipment and call center all within the group so that we can provide timely and speedy service. It is a big difference. By constructing a management system that utilized IT in this way to discover and recover equipment failures and malfunctions at an early stage and solve information distribution to increase occupancy rate, the gross profit margin improved significantly. The system we created has contributed to revenue bigger than expected. As all data was managed all at once, the range of business expanded widely.”

“Park24’s move towards IT is not limited to this. In the smartphone application ‘Times Parking Lot Search’, users get real time empty car information, parking lot position information, fee structure etc. Without TONIC, it would have been impossible to scale to and feel the size of the current Park24. In the car sharing service, as the center grasps the operating status of all cars through the system, for example, you can see the spots where there are many people who demand the services, and you can provide data that they need. With the ability to collect and manage data, the range of services that can be offered is expanding. Park24 is also advancing tie-ups with other transportation agencies, such as for those who ride on a transportation IC card using the Times parking lot or car sharing, they can receive preferential treatment for usage fees. By utilizing not only parking lot and checkout machine but also customer information of membership organization Times Club, driving route and driving information can be collected from onboard equipment mounted on car sharing vehicles, the company can offer various services. For example, in the parking lot business, it is important to establish a good relationship with shops near the facility. Therefore, the company delivers neighborhood store information, campaign information, etc. to members who frequently use a specific parking lot. In the case of managing a parking lot of a commercial facility, it also supports promotional activities by providing attributes and usage status of customers visiting parking lots. In addition, in car sharing, points are gathered when cherishing the car carefully for other members, and a program is offered that gives benefits according to the number of points. One of the items is ‘rapid acceleration / Eco driving without sudden deceleration’. It is a mechanism realized by utilizing the information of the onboard device. It provides favorable service to corporate members by providing a service that visualizes the driving situation of sales representatives who use cars and helping to promote safe driving. The reason we were able to create such unprecedented new services is because we had an environment where we could analyze and utilize information of parking facility, on-board equipment, members etc. cross-sectionally. For many years since constructing TONIC, the culture of data utilization that has been rooted in the company greatly contributes to the company’s current competitiveness.”

Above all, CEO Nishikawa shared the critical values system of Park24 imprinted by the founder: “We do not have inventory, do not deal with corrupting things, do not follow fashionable trends in business. If there is stock inventory, there is worry of stock bankruptcy; if you deal with what corrupts, you will collapse as soon as possible when you need to deal with it; and if you follow a fashionable trend, you will be responsible for the response after the epidemic leaves. For example, in 1991, the Road Traffic Act and the Garage Law was revised, so self-propelled multistage prefabricated parking lot became popular and companies were able to sell quite a bit. There was a discussion whether it should also be sold in Park24, but the founder says ‘Do not do this because this is a transient boom’. The fashion really ended in one year.”

CEO Nishikawa shared emphatically on Park24’s vision and its exponential journey ahead: “With cars becoming indispensable in everyday life, the role of the parking facility is changing rapidly from a mere place where vehicles are parked to a center of urban activity. The Park24 Group aims to help achieve a comfortable automobile society by developing and offering mobility services, including parking, car sharing, and car rentals, and expanding our membership network. I would like to pursue whether there is anything we can do as a ‘transport infrastructure company’ in a way that makes use of the acquired knowledge as we develop these businesses. We will continue to fulfill our social mission as a transportation infrastructure company by taking advantage of the resources of the Park24 group. We aim to create new mobility services by utilizing the network, know-how and various data that our group has built up and accumulated. The Park 24 group will make every effort to remember the challenge that is the DNA from our foundation and continue to take the customer’s voice firmly, in order to become a transportation infrastructure service company to contribute to the development of the mobility society of the future and to meet the needs of the times. We aim to make Park24 indispensable to the automobile society, and to all of our stakeholders, by expanding our operations in Japan and developing overseas businesses to drive our future growth, and by creating new forms of mobility.”

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. Inspired by Brandon Stanton’s photo-journalistic project Humans of New York which collects and highlights the street portraits and moving stories of people on the streets around us who were doing things that changed lives and made a difference in the city but often went unnoticed, we have curated a collection of Hear the Heart of the H.E.R.O. stories on our website which we aim to update with refreshing and uplifting new stories weekly. Please check them out and give us your valuable feedback so that we can improve to make them better for you. In this issue, we have:

  • Koichi Nishikawa 西川光一, CEO of Park24 Co パーク24 (TSE: 4666, market cap US$4,490m), the world’s largest parking company in the Asia/Oceania region with the world’s largest number of sites and the number of parking spaces managed reaching over one million (590k in Japan, 540k overseas), commanding over 54% domestic market share in parking with a network of around 18,000 paring facilities and supported by 6.5 million Times Club members. Despite increased development of parking facilities, there is a chronic shortage of parking spaces and only one-third of the demand in Japan is being met. There are also ample amounts of unused sites that are suitable for development. Park24 is also Japan’s largest car-sharing company commanding over 70% market share with 980k monthly subscription paying members for the “Times Car PLUS” services introduced since 2009 and is likely the only company In the world to achieve profitability. Times Car PLUS can be found near almost every train station in central Tokyo and 60% of shinkansen bullet train stations outside Tokyo. Rental costs are calculated in 15-minute increments, and the tank need not be refilled before the vehicle is returned. By dynamically using Times parking sites to expand the scale of its fleet operations, Park24 has established a solid leadership position in Japan for car sharing services. Park24 also offers rent-a-car service under the Times Car RENTAL brand that provides use of a vehicle for business and leisure purposes. Park24 also offers B-Times, a membership service that matches a landowner who wants to utilize idle land effectively with a driver who wants to park their car. Park24 also provides road services, which comprise onsite emergency handling and car-carrying services to automobiles and motorcycles. Through acquisitions of National Car Parks in Aug 2017 and Secure Parking in Jan 2017, Park24 is the number one leader in UK with 30% share in parking and in Australia with 38% share (vs 33% for Wilson Parking which is backed by HK billionaire Kwok family) respectively. The company was founded in 1971 by Kiyoshi Nishikawa originally selling “No Parking” signs, expanded into sales of parking facility equipment, and started to manage parking sites in 1991 after the opening of its first 24-hour unmanned under the Times brand. The founder passed away in July 2005 and was succeeded in 2004 by his son Koichi Nishikawa who joined the family business in 1993 and was instrumental in transforming the traditional business of parking management into an innovator centered on TONIC (Times Online Network & Information Center), his farsighted investments in the IT and big data analytics system introduced in 2003 which enabled Park24 to scale exponentially and create new categories of growth centered on the parking lot, changing city lifestyle. Park24 is headquartered in Tokyo.

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 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 inspiration behind the H.E.R.O Innovators Fund, (surprisingly) the only Asian SMID-cap tech-focused fund in the industry.

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.

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.

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. 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

H.E.R.O.’s Journey in Tech (18 August 2018) – Does Tencent Music Deserve a Spotify-Like Valuation?

H.E.R.O.’s Journey in Tech (18 August 2018) – Does Tencent Music Deserve a Spotify-Like Valuation?

Companies

  • Does Tencent Music Deserve a Spotify-Like Valuation? Tencent Music this year could generate revenue less than half of Spotify’s projected $6 billion. Tencent Music is profitable, which is rare in music-streaming. The firm pulled in roughly two billion yuan ($290 million) in net income last year. Spotify, in contrast, reported a net loss of about $1.4 billion last year, although nearly $1 billion of that was due to a one-time financing charge. In terms of users, Tencent Music is way bigger than Spotify. Tencent Music operates streaming service QQ Music as well as karaoke and live-streaming music apps Kugou and Kuwo. The three services had a combined 700 million monthly users in China as of September 2017, according to Tencent Music. Tencent Music operates a fourth service, the karaoke app WeSing, which at the end of last year had more than 460 million registered users. By comparison, Spotify had 180 million monthly users and 83 million paid subscribers as of June, the company has said. But Spotify’s ratio of paid versus free users is higher than at Tencent Music, where only a fraction of its Chinese users pay for music. The secret of Tencent Music’s profitability is virtual goods and cheap music rights. Most of its revenue comes from non-subscription services including karaoke and live-streaming services, where users can pay to send virtual gifts to performers (The Info)
  • Apple supplier Luxshare plans camera module IPO as next leap; Chinese company’s growth threatens rivals in Taiwan and South Korea (Nikkei)
  • China’s online pharmacy 1Yaowang seeks $200m NYSE IPO (KRA)
  • On-demand app Grab, which operates across Southeast Asia, is moving into healthcare, through a joint venture with Ping An Good Doctor (KRA)
  • Foxconn Pursues Chip Ambitions With Plans for China Plant (WSJ)
  • Kakao Bank gives regional lenders a run for their money (Investor)

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

  • Chinese internet stock sell-off may shake faith in FANGs (Reuters)
  • Samsung’s Galaxy empire in crisis; Amid strong competition from Chinese rivals, smartphone leader looks for innovation; semiconductor business is the largest contributor to its earnings, posting 35.2 trillion won in operating profit, or 65.6% of Samsung’s total operating profit (Nikkei)

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

  • Why Amazon Picked Taiwan For Its Latest Innovation Center (Forbes)
  • Tivo drops on report that Amazon is considering live TV recorder (FT)
  • Amazon’s Dominance in Ecommerce (Visual)

  • Google always watching, even when location tracking turned off (AFR)

Asia Tech & Innovation Trends

  • China’s ride-hailing resurgence is just another step into the future of mobility (Technode)
  • Online health care service puts Grab and Go-Jek on collision course; Ride-hailing rivals fight it out in Indonesia with mostly mirror-image services (Nikkei)

Global Tech & Innovation Trends

  • Farmers Business Network: Data farming; FBN has built a network of more than 6,500 farms to which it offers information, an online store and marketing help—all with the goal of making farmers more profitable (Forbes)
  • Late to the Driverless Revolution: America’s car industry dismissed the potential of autonomous driving for years as tech companies plunged ahead. Now Detroit is racing to catch up. (WSJ)

H.E.R.O.’s Journey in Tech (17 August 2018) – Corporate Japan rakes in record quarterly profit + The Ultimate List Of Books To Base Your Life On

H.E.R.O.’s Journey in Tech (17 August 2018) – Corporate Japan rakes in record quarterly profit + The Ultimate List Of Books To Base Your Life On

Companies

  • Corporate Japan rakes in record quarterly profit; Led by manufacturers, one in four companies posted all-time highs. Tokyo Electron booked another record profit as sales of semiconductor manufacturing equipment grew. Nidec also posted a record thanks to steady sales of motor used in electric vehicles and robots. (Nikkei)
  • Japan’s Start Today gives clothes retailers a glimpse of the future: A million or so Japanese are using the firm’s “Zozosuit” (Economist)
  • Japanese regulators are investigating Apple Inc over allegations it unfairly pressured Yahoo Japan Corp to slow the expansion of its online games platform, which competes with Apple’s App Store (Reuters)
  • China’s leading online parenting firm Babytree Group, backed by Alibaba, plans to raise up to $1 billion in a HK IPO in Oct (ISH)
  • Apple supplier Luxshare plans camera module IPO as next leap; Chinese company’s growth threatens rivals in Taiwan and South Korea (Nikkei)
  • com losses surge on soaring spending and investment (SCMP); China’s JD.com looks to warehousing assets to help revive profits (Reuters)
  • Google to debut display-equipped AI speaker before holidays; Taiwan suppliers told to prepare for hardware blitz to challenge Amazon. Most of the Google Home lineup is produced by Quanta Computer, a key builder of Apple’s MacBooks.(Nikkei)
  • The Makers of iPhones and Laptops Are Prepping for a Trade War. Taiwan’s six largest contract electronics makers — Compal Electronics, Foxconn flagship Hon Hai Precision, Inventec, Pegatron, Quanta Computer, and Wistron — raked in NT$9.11 trillion ($296 billion) of revenue in 2017 (Bloomberg)
  • VGI spearheads regional growth of BTS with modern approach in advertising; VGI boasts of in-building advertisement billing worth about HK$78 million yearly from a total of about 175 buildings (SCMP)

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

  • Alibaba tweaks a controversial legal structure; Jack Ma’s role in the firm’s “variable interest entities” will be reduced (Economist)
  • Tencent Slump Shows What Happens When Beijing Flips the Switch (Bloomberg)
  • SoftBank and Thai telecom firm to launch cheap, fast internet exchange service (JT)

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

  • Amazon could be the next great disruptor in cinema (qz)
  • Nvidia Clears Its Crypto Cloud: A volatile crypto market has been a distraction for the chip maker-and its investors (WSJ1, WSJ2); As Nvidia expands in artificial intelligence, Intel defends turf (Reuters); Nvidia’s Turing Makes Graphics Dreams Come True (EETimes)

Asia Tech & Innovation Trends

  • Redcore CEO admits ‘100pc China-developed browser’ is built on Google’s Chrome, says writing code from scratch would ‘take many years’ (SCMP)
  • China regulator orders bailout of peer-to-peer lenders by managers of distressed assets (SCMP)
  • Digital payment firms fight for Hong Kong market (Reuters)
  • Indian streaming firm Hotstar sees blended revenues as winning strategy (Reuters)
  • Nazara Tech invests in VR gaming firm InstaSportz; With the acquisition, Nazara enters the offline gaming space with interactive entertainment through VR lounges in Tier-1 and Tier-2 cities across India (Livemint)
  • How This Google-Backed Startup Cracked The Code To Hyper Convenience In India (Forbes)

Global Tech & Innovation Trends

  • The race is on to dominate quantum computing (Economist)
  • The cautionary tale of Blue Apron’s growth strategy (qz)
  • DoorDash Valuation Nearly Triples to $4 Billion in Six Months (Bloomberg)
  • Why Can’t Europe Do Tech? This is the best moment in decades for the continent to battle its way back to relevance. Its startups need to act like it. (Bloomberg)
  • Battery technologies seen as new class of ‘stranded assets’ as innovation rushes ahead (JT)
  • Monzo poised to join ranks of Europe’s fintech ‘unicorns’; UK digital bank lines up $150m fundraising as it eyes $1.5bn valuation (FT)

Life

  • The Ultimate List Of Books To Base Your Life On (Medium)
  • Innovation renaissance depends on releasing our inner Medicis (AFR)
  • Knowing When Your Investment Process Has Failed (Validea)
  • The Half-Life of Investment Strategies (Ben Carlson)
  • Top Insights from Twilio CMO Sara Varni: Five Tips on Marketing and Life (Medium)

H.E.R.O.’s Journey in Tech (16 August 2018) – Japan still has the edge in solid-state batteries, with its companies holding nearly half the patents in the world for related technologies + Lessons From Da Vinci on Work and Life

H.E.R.O.’s Journey in Tech (16 August 2018) – Japan still has the edge in solid-state batteries, with its companies holding nearly half the patents in the world for related technologies + Lessons From Da Vinci on Work and Life

Companies

  • Trend Micro Launches Product to Protect Telecom Networks Serving Business and Home Users; New security solution mitigates risks in high volume, dynamic network architecture environments (BW)
  • In race for better batteries, Japan hopes to extend its lead; TDK began shipping samples of CeraCharge, a solid-state battery measuring just 4.5mm by 3.2mm by 1.1mm — smaller than a grain of rice. CeraCharge cells use a lithium-based ceramic oxide as the electrolyte, which is layered into a battery pack. TDK says the product maintains its performance in high- and low-temperature environments. Similar products designed for use in internet-of-things devices are also being developed by other Japanese companies, including Murata Manufacturing and Taiyo Yuden. Japan still has the edge in solid-state batteries, with its companies holding nearly half the patents in the world for related technologies. Japanese companies with key technologies include Toho Titanium, which has developed a high-output solid electrolyte that combines titanium and lanthanum, a rare-earth metal. It recently started shipping samples of the product. Optical glass maker Ohara has developed a glass-based electrolyte. It that could have wide commercial applications (Nikkei)
  • Sony’s catch-up plan to break into pro camera market (JT)
  • Chinese Online Drugstore 111 Inc. Files For $200M US IPO (CMN)
  • Lenovo’s Sharp Knife Is Behind Those Meaty Profits; Cost savings are welcome. They’re also hard to repeat. (Bloomberg)

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

  • Alibaba offers cloud computing for Southeast Asia’s retailers to embrace digitisation and big data (SCMP)
  • Tencent’s first profit drop since 2005 blamed on wait for Chinese regulators to approve new games (SCMP); Tencent posts first profit decline since 2005 on lower gaming revenue, investment gains (SCMP)
  • Tencent Slumps After First Profit Drop in at Least a Decade (Bloomberg); Regulatory limbo hits Tencent with first profit fall in nearly 13 years (Reuters); China Makes WeChat’s 1 Billion Users a Tempting Target for Tencent; With growth from games slowing, tapping the social network looks increasingly attractive. (Bloomberg)
  • How WeChat became China’s everyday mobile app (SCMP)
  • Tencent Is Participating In More Tech IPOs Than Anyone Else; Tencent was an investor in a whopping 12 tech companies that have gone public since the start of 2017. (CBI)

  • SoftBank Ventures leads W10b investment in Bepro11 (Investor)

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

  • Amazon Has a New Rival in India, and It Isn’t Walmart; A draft e-commerce law threatens the core of the company’s business model. (Bloomberg)
  • Amazon Has YouTube Envy; It wants to turn its Twitch online hangout for avid gamers into a broader video service. (Bloomberg)
  • 5 Reasons to Buy Nvidia Stock Now (Barron’s)

Asia Tech & Innovation Trends

  • An Uber for Trucks Is Hitting Obstacles in China; The industry is ripe for disruption, but it’s a lot tougher than ride-hailing. (Bloomberg)
  • SynchroLife, blockchain-based restaurant discovery app from Japan, raises $720K (Bridge)
  • Hospitals in Japan turn to high-tech to treat language barriers; Multilingual AI service among new offerings to help staff deal with foreigners (Nikkei)
  • Visual recognition tech to drive O2O interactions in future: AIQ; VRT Technology in different vertical (KRA)
  • Silicon Valley’s land-grab capitalism comes to the ASX (AFR)
  • Bennett Coleman, India’s largest media conglomerate, is making rapid progress in building equity partnerships with foreign digital businesses, including arrangements with America’s Uber, Airbnb and Vice Media (Nikkei)
  • Vietnam e-commerce leader draws $51m pan-Asian investment; SBI, Daiwa and SoftBank participate in Sendo Technology funding (Nikkei)

Global Tech & Innovation Trends

  • We Still Don’t Know Whether Uber Is a Real Business: It has never had to live on the cash it generates. (Bloomberg) Is Uber Really Worth $62 Billion? (Barron’s)
  • Why Two of Europe’s $1 Billion Startups Just Had Their Valuations Cut (Bloomberg)
  • From blue lipstick to Facebook Live, home shopping networks refine their pitch (Reuters)
  • Meet the man who’s building Sonos’ audio internet (Wired)
  • A Decentralized Reputation System: How Blockchain Can Restore Trust In Online Markets (Forbes)
  • The Trade Desk is a global tech company that enables ad buyers to purchase and manage data-driven digital advertising campaigns through a self-service omnichannel software platform. (Barron’s)
  • Making Music Social: What Drives Streaming Revenues (Medium)

Life

  • Lessons From Da Vinci on Work and Life. (Medium)
  • The Trajectory of Great Ideas (Morgan Housel)
  • How Companies Thrive by Making You Obsessed: Customer service is still king (Medium)
  • Claude Shannon: How a Genius Solves Problems (Medium)

H.E.R.O.’s Journey in Tech (15 August 2018) – Growth IQ: Get Smarter About the Choices that Will Make or Break Your Business

H.E.R.O.’s Journey in Tech (15 August 2018) – Growth IQ: Get Smarter About the Choices that Will Make or Break Your Business

Companies

  • Start Today’s Zozosuit brings customized fashion to the masses (JN)
  • New defense bill bans the U.S. government from using Huawei and ZTE tech; ban also covers video surveillance and telecommunications hardware produced by Hytera Communications, Hangzhou Hikvision and Dahua Tech (Techcrunch)
  • China’s NIO heads opposite way to ‘rival’ Tesla with New York listing (Nikkei)
  • AirPod maker Inventec has alternatives to China production, executive says; Taiwanese supplier touts Shanghai location as advantage over inland rival (Nikkei)
  • Strong growth in share registry company Computershare’s US operations has led the company to a record profit and its highest earnings growth since 2009. (AFR)
  • SEEK chief executive Andrew Bassat says investment in technology in its core businesses and early stage ventures, which mean profit growth will be flat this year, will pay off for in five to 10 years and deliver investors greater growth and sustainability (AFR)

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

  • Toutiao launches ad network Pangolin to compete with Baidu/Tencent for ad money (KRA)
  • Alibaba Bought Stake In Turkish E-commerce Platform Trendyol At $750M Valuation (CMN)
  • Battered Tencent looks for bottom after $208b wipeout (AFR, SCMP); Tencent rejection adds woes to China’s slowing game industry; Squeezed at home, mainland developers look to US, Japan and Europe for demand (Nikkei); China Freezes Game Approvals Amid Agency Shakeup. The halt has shaken Tencent as smaller players struggle; Regulatory administrations are said to be under restructuring (Bloomberg)

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

  • Facebook is turning matchmaker. Is this a good thing? Do we really want Silicon Valley coders to predict who we may or may not like? (FT)
  • Facebook’s Story Problem – and Opportunity (Stratechery)
  • Amazon and Twitter Want to Bring You More Sports (Bloomberg)
  • Microsoft’s Cortana Mistake: Relying on Windows: The software giant’s digital assistant debuted before Amazon’s Alexa, but is still struggling to find an audience (WSJ)

Asia Tech & Innovation Trends

  • Why Western Digital Firms Have Failed in China (HBR)
  • Japanese startup cultivates e-money platform for Asian farmers; Cashless transactions planned to boost growers’ annual earnings by $1,000 (Nikkei)
  • Expedia to focus on Korean market for its mobile innovation (Investor)
  • Investors who backed online retailer Shoes of Prey have had the value of their investment written down to less than 13¢ in the dollar as the company faces a last-ditch bid to secure a funding lifeline. (AFR)

Global Tech & Innovation Trends

  • Square Shares Hit Record High on Cash App Report (Barron’s)
  • Spotify’s $8 Billion Rally Is Attracting Loads of Hedge Funds (Bloomberg)
  • Reddit is the best social media site because it gets community right (qz)
  • Twitter’s Stock Is Flying High After an Analyst Said It Has ‘No Direct Competitor’ (Barron’s)
  • Match Group: Facebook Might Not ‘Hurt Its Mojo’ (Barron’s)

Life

  • Growth IQ: Get Smarter About the Choices that Will Make or Break Your Business Hardcover – August 14, 2018 (Amazon)
  • How To Read More Books — A Lot More (Ryan Holiday)
  • Would you have found Berkshire Hathaway in 1975? John Rekenthaler, vice president of research for Morningstar, gives perspective when one feels they have missed out on a multibagger. (Morningstar)
%d bloggers like this: