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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

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“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 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

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