[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.

• For those who have missed the live webinar, you can watch the replay here: https://www.brighttalk.com/webcast/1570/328091
• Download the presentation slides: http://www.heroinnovator.com/wp-content/uploads/2018/07/BrightTALK-HERO_Finding-Value-In-Asia_12-July-2018.pdf.

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