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Singapore | Technology
Internet
21 April 2016
EQUITY RESEARCH GLOBAL
Internet
E-Commerce In ASEAN - Taking Off
Key Takeaway
The ASEAN market is expected to have 350mn internet users by 2018, the
third large block of users after China and India. E-tailing is by far the largest
opportunity for local players and is likely to be a US$30-40bn market by 2020.
There are already six private companies in this space that are estimated to be
valued at over US$1bn, but few in the listed space. We expect that to change
over the next few years.
Large Market, Significant Potential - Expect more listings. The Asean region
represents the third large block of internet users in Asia, after China and India, with 250mn
users currently and expected to rise to 350mn by 2018. The smartphone wave has been
pivotal to rising internet penetration and growth of e-commerce with more than 50% of
traffic and transactions in most segments now coming through mobile. Even though there
are currently only three listed players in the internet/e-commerce space valued above US
$100mn, there are at least six private companies that are reported to be valued over US
$1bn. Funding activity in private markets first picked up in 2013 but has seen an acceleration
in recent quarters with over US$1bn being raised in 2016 till date. We expect more listings
over the next few years. Two markets stand out – Singapore, a developed economy and a
good test market and Indonesia, which is potentially the largest market in the region.
E-tailing US$30-40bn opportunity by 2020; travel, gaming, classifieds the
other key segments. With Search and Social network segments being cornered by
global players like Google, Facebook, Whatsapp and WeChat, e-tailing is by far the biggest
opportunity for local players in the sector. It has also accounted for close to 70% of the fund
flow into the sector. We estimate that the regional e-tailing market, which is currently likely
to be close to US$10bn, will grow to US$30-40bn by 2020. There are a large number of local
players, with Lazada, Tokopedia, Bukalapak, Qoo10 and Lelong being some of the largest.
Amongst horizontal players, marketplace is the dominant model while many of the vertical
players do inventory based selling. Cash on delivery and manual banking are dominant
payment methods across most of the region. Logistics companies like SingPost are also
likely to be significant beneficiaries of the e-tailing boom. Travel, classified and gaming are
other key segments with notable local companies such as Grab, Traveloka, PropertyGuru,
JobStreet, Garena and VNG. Indonesia and Vietnam appear to be the best suited markets for
emergence of local players.
Challenges around divergence between countries, regulations and logistics. We
believe the key challenges to e-commerce/internet companies in the region are around
1) divergence in key areas across countries such as stage of development/income levels,
languages, data connectivity infrastructure and extent of regulatory oversight. As a result
unit economics can be different in different countries and it is often necessary to have
significant local presence 2) regulatory hurdles particularly in Indonesia, Philippines and
Vietnam, which rank low in the ease of doing business and 3) logistics related challenges,
particularly outside of Singapore and Malaysia.
Investment Ideas. Most of the listed e-commerce/internet players in the region are fairly
small - only three, Xurpas (X PM; Gaming company in Philippines), iCarAsia (ICQ AU;
Automobile classified) and Migme (MIG AU; Social networking app) are over US$100mn
in market-cap but even these are well below US$1bn. Amongst the larger stocks, SingPost
(SPPOST SP; 33% of revenues are related to e-commerce), Rocket Internet (RKET GR; Stakes in
Lazada, Zalora, Carmudi and ZenRooms, Singapore Press Holdings (SPH SP; Owns a number
of classified sites as well as stake in Qoo10) have material exposure to internet/e-commerce
in the region. In Singapore, we expect rising online spend to positively impact logistics
companies and telcos and negatively impact retailers.
Arya Sen *
Equity Analyst
+91 22 4224 6122 [email protected]
Abhijit Attavar §
Equity Analyst
+65 6551 3960 [email protected]
Ranjeet Jaiswal *
Equity Associate
+91 22 4224 6114 [email protected]
* Jefferies India Private Limited
§ Jefferies Singapore Limited
MCI (P) 084/07/2015
Jefferies does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that Jefferies may have a
conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment
decision. Please see analyst certifications, important disclosure information, and information regarding the status of non-US analysts on pages 46 to 49
of this report.
Technology
Internet
21 April 2016
Focus Charts
Exhibit 1: Smartphone wave has been pivotal to growth of Exhibit 2: Sharp increase in private market funding for the
e-commerce in the region – over 50% of tx through mobile sector from 2013 – 2016YTD has been particularly strong
Source: Rocket Internet
Source: Jefferies, media reports
Exhibit 3: E-tailing by far the largest opportunity for local
players – has accounted for 68% of the funding
Exhibit 4: Singapore, the favourite place to base the
company; Indonesia, potentially the largest market
Exhibit 5: The six “unicorns” so far in the region, as per
media reports
Exhibit 6: Singapore Press Holdings, Rocket Internet,
SingPost some of the large listed market plays
Source: Jefferies, Bloomberg
page 2 of 49
Please see important disclosure information on pages 46 - 49 of this report.
Arya Sen, Equity Analyst, +91 22 4224 6122, [email protected]
Technology
Internet
21 April 2016
Investment Ideas In Listed Market
Exhibit 7: Listed companies in internet/e-commerce space in South East Asia
S.No Company
B'berg
ticker
Exchange
Segment
Description
Mkt cap HQ
(US$mn)
Listing Countries
Yr.
1
2
3
Xurpas
iCarAsia
Migme
X PM
ICQ AU
MIG AU
Philippines
Australia
Australia
Philippines
Malaysia
Singapore
2014
2012
2001
Singapore, Philippines, Indonesia
Malaysia, Thailand, Indonesia
Singapore, Malaysia, Indonesia, Taiwan, Hong Kong, Australia
JobStreet
Ensogo
Asiatravel
MOL group
JOBS MK
E88 AU
AST SP
MOLG
US
Malaysia
Australia
Singapore
US
Gaming & Ent.
Automobile classified
Provides chat,
microblogging etc.
Recruitment classified
Deals & discounts
Online travel agent
Payment Gateway
708
169
163
4
5
6
7
Gaming
Classified
Social
Network
Classified
E-tailing
Travel
Payments
63
49
48
45
Malaysia
Thailand
Singapore
Malaysia
2005
2013
2001
2014
Singapore, Malaysia, Philippines, Indonesia, Vietnam
Singapore, Malaysia, Philippines, Indonesia, Thailand, Hong Kong, US
Singapore, Malaysia, Indonesia, Thailand, Philippines, Hong Kong, China, UAE
Singapore, Malaysia, Indonesia, Thailand, Philippines, India, Australia, NZ
8
9
Asiasoft Corp. AS TB
Netccentric
NCL AU
Thailand
Australia
Gaming
Advertising
28
28
Thailand
Singapore
2008
2015
SEA (6),Cambodia, Burma
Singapore, Malaysia, Australia, Philippines, Thailand, China, UK
10
Rev Asia
Malaysia
News & Ent.
Online Gaming
Digital Media
advertisement
Owns multiple news &
entertainment website
18
Malaysia
2011
SEA(6)
REV MK
Exhibit 8: Listed companies with some exposure to internet/e-commerce space in South East Asia
S.No Company
Ticker
Exchange
Mktcap
(US$bn)
Nature of exposure to ASEAN e-commerce
1
2
3
4
5
Singapore Press Holding
Rocket Internet
Matahari Department Store
Singpost
Mapletree Logistics
SPH SP
RKET GR
LPPF IJ
SPOST SP
MLT SP
Singapore
Germany
Indonesia
Singapore
Singapore
4.7
4.6
4.1
2.5
1.9
Acquired SgCarMart and owns many classified sites - ST Jobs, STProperty, STCars, STClassifieds etc. Stake in Qoo10
Investment in companies such as Lazada, Zalora, Foodpanda, Carmudi and Zen Rooms in South East Asia
Invested US$500mn in own e-commerce venture
Launched "SP ecommerce" as a full service end-to-end e-commerce logistic solution provider
Owns warehouses across Asia including 3 countries of SEA (SG, MA, VI)
6
7
8
9
GD Express
Thegiodidong
Pos Malaysia
WHA Warehouse
GDX MK
MWG VN
POSM MK
WHAPF TB
Malaysia
Vietnam
Malaysia
Thailand
0.6
0.5
0.4
0.3
Provides Logistic Services in Malaysia and Singapore. Plans to grow in e-commerce Logistics
Mobile retail chain operator with online channel
Launched e-Commerce Hub in Malaysia for providing logistic services to e-commerce companies
Owns various warehouse in ASEAN countries
Exhibit 9: Impact of rising online spend across sectors in Singapore
Company
B’berg ticker
Price (SGD)
KDCREIT SP
1.09
NC
718
MCT SP
1.47
Hold
2,336
CT SP
FCT SP
2.12
2.02
NC
NC
5,603
1,370
Industrial/ Logistics Space
AREIT
Mapletree Logistics
Aims AMP
AREIT SP
MLT SP
AAREIT SP
2.50
1.03
1.35
Buy
Buy
Hold
4,973
1,904
640
Logistics and distribution
Singapore Post
SPOST SP
1.65
NC
2,500
Mass-market retailing
Shen Siong
SSG SP
0.87
NC
970
Telcos
Singtel
Starhub
M1
ST SP
STH SP
M1 SP
3.95
3.34
2.48
Buy
Underperform
Hold
47,000
4,311
1,720
Data Center REITs
Keppel DC REIT
Retail Malls
Mapletree Commercial Trust
CapitaMall Trust
Fraser Centerpoint Trust
JEF Rating MCap (US$m)
Impact
Impact of E-commerce on industry/ sector
Increased demand for data center space
+ve
-ve
Higher online share of retail spend could adversely affect demand for store-fronts
+ve
Demand for modern warehousing/logistics assets could rise
+ve
Warehousing and last-mile delivery capability will become important
-ve
Increased competition from online marts
+ve
More data-traffic, mobile wallets could get more popular
Source: Jefferies estimates, Bloomberg
page 3 of 49
Technology
Internet
21 April 2016
Table of Contents
FOCUS CHARTS ............................................................................................................................ 2
INVESTMENT IDEAS IN LISTED MARKET ....................................................................................... 3
EXECUTIVE SUMMARY ................................................................................................................ 5
E-COMMERCE IN ASEAN – TAKING OFF........................................................................................ 6
ASEAN – Over 250mn internet users, likely to rise to 350mn by 2018 ......................................... 6
Smartphone wave a key driver of growth of internet adoption and e-commerce ....................... 7
Funding activity in private markets has picked up since 2013, expect strong 2016 ..................... 9
Few listed players for now – expect more listings going forward ............................................... 10
Singapore and Indonesian markets stand out ............................................................................ 12
E-TAILING THE BIG OPPORTUNITY; TRAVEL, CLASSIFIED, GAMING OTHER KEY SEGMENTS ......... 15
Search, Social network, messaging dominated by the global players ......................................... 15
E-tailing the big opportunity – potentially a US$30-40bn market by 2020 ................................. 16
Travel, classified, entertainment the other key segments with local players ............................. 19
CHALLENGES AROUND DIVERGENCE BETWEEN COUNTRIES ON REGULATIONS AND LOGISTICS . 22
1. Divergence across countries a key challenge .......................................................................... 22
2. Regulatory hurdles, particularly in Indonesia, Philippines and Vietnam ................................. 23
3. Logistics related challenges .................................................................................................... 23
COMPANY PROFILES.................................................................................................................. 25
Garena – Asean’s Budding Tencent ............................................................................................ 26
Grab - The Local Challenge to Uber ............................................................................................ 30
PropertyGuru – Focus and localisation ....................................................................................... 33
Lazada – Alibaba’s Proxy in South East Asia................................................................................ 37
Tokopedia – Indonesia’s Taobao ................................................................................................ 38
SingPost – E-commerce Logistics Driving Growth ....................................................................... 39
VNG – Leading Internet Company in Vietnam ............................................................................ 40
APPENDIX-1: PRIVATE MARKET FUNDING IN ASEAN INTERNET/E-COMMERCE .......................... 41
APPENDIX-2: SINGAPORE START-UP ECOSYSTEM ...................................................................... 43
page 4 of 49
Technology
Internet
21 April 2016
Executive Summary
E-commerce in ASEAN – Taking Off
ASEAN region is expected to have
350mn internet users by 2018 – few
large listed players now but there are
six “unicorns” in the private market
– we expect more listings going
forward
The ASEAN region represents the third large block of internet users in Asia, after China and
India, with 250mn users currently and expected to rise to 350mn by 2018. The
smartphone wave has been pivotal to rising internet penetration and growth of ecommerce in the region with more than 50% of traffic and transactions in most segments
now taking place through the mobile platform. Even though there are currently only three
listed players in the internet/e-commerce space valued above US$100mn, there are at
least six private companies reported to be valued over US$1bn. Funding activity in private
markets first picked up in 2013 but has seen an acceleration in recent quarters with over
US$1bn being raised in 2016 till date. We expect more listings over the next few years.
Two markets stand out – Singapore which is a developed economy and a good test
market for ideas and Indonesia which is potentially the largest market in the region.
E-tailing US$30-40bn opportunity by 2020; travel,
gaming, classifieds the other key segments
E-tailing is the largest opportunity for
local players and could be a US$3040bn market by 2020; Travel,
gaming, classified and gaming the
other segments with local players
With Search and Social network segments being cornered by global players like Google,
Facebook, Whatsapp and WeChat, e-tailing is by far the biggest opportunity for local
players in the sector. It has also accounted for close to 70% of the fund flow into the
sector. We estimate that the regional e-tailing market which is currently likely to be close
to US$10bn will grow to US$30-40bn by 2020. There are a large number of local players
with Lazada, Tokopedia, Bukalapak, Qoo10 and Lelong being some of the largest.
Amongst horizontal players, marketplace is the dominant model while many of the
vertical players do inventory based selling. Cash on delivery and manual banking are
dominant payment methods across most of the region. Logistics companies like SingPost
are also likely to be significant beneficiaries of the e-tailing boom. Travel, classified and
gaming are other key segments with notable local companies such as Grab, Traveloka,
PropertyGuru, JobStreet, Garena and VNG. Indonesia and Vietnam appear to be the best
suited markets for the emergence of local players.
Challenges around divergence between countries,
regulations and logistics
Key challenges are around
divergence across Asean countries, in
languages, regulatory hurdles and
logistic issues
We believe the key challenges to e-commerce/internet companies in the region are
around 1) divergence in key areas across countries such as stage of development/income
levels, languages, data connectivity infrastructure and extent of regulatory oversight. As a
result unit economics can be different in different countries and it is often necessary to
have a significant local presence 2) regulatory hurdles particularly in Indonesia,
Philippines and Vietnam which rank low in the ease of doing business and 3) logistics
related challenges, particularly outside of Singapore and Malaysia
Investment Ideas in listed market
Xurpas, ICarAsia and Migme are
direct listed market plays but all well
below US$1bn in market-cap;
SingPost, Rocket Internet and
Singapore Press Holdings are some
of the larger listed market plays with
exposure to this theme
Most of the listed e-commerce/internet players in the region are fairly small - only three,
Xurpas (X PM – Gaming company in Philippines), iCarAsia (ICQ AU – Automobile
classified) and Migme (MIG AU – Social networking app) are over US$100mn in marketcap but even these are well below US$1bn. Amongst the larger stocks, SingPost (SPPOST
SP - 33% of revenues are related to e-commerce), Rocket Internet (RKET GR – Stakes in
Lazada, Zalora, Carmudi and ZenRooms, Singapore Press Holdings (SPH SP – Owns a
number of classified sites as well as stake in Qoo10) have material exposure to internet/ecommerce in the region. In Singapore, we expect rising online spend to positively impact
logistics companies and telcos and negatively impact retailers.
page 5 of 49
Technology
Internet
21 April 2016
E-commerce in ASEAN – Taking Off
ASEAN region is expected to have
350mn internet users by 2018 – few
large listed players now but there are
six “unicorns” in the private market
– we expect more listings going
forward
The ASEAN region represents the third large block of internet users in Asia, after China and
India, with 250mn users currently and expected to rise to 350mn by 2018. The
smartphone wave has been pivotal to rising internet penetration and growth of ecommerce in the region with more than 50% of traffic and transactions in most segments
now taking place through the mobile platform. Even though there are currently only three
listed players in the internet/e-commerce space valued above US$100mn, there are at
least six private companies reported to be valued over US$1bn. Funding activity in private
markets first picked up in 2013 but has seen a sharp acceleration in recent quarters with
over US$1bn being raised in 2016 till date. We expect more listings over the next few
years. Two markets stand out – Singapore a developed economy and a good test market
for ideas and Indonesia which is potentially the largest market in the region.
ASEAN – Over 250mn internet users, likely to rise
to 350mn by 2018
ASEAN – 250mn internet users
currently, expected to rise to 350mn
by 2018
After China and India, the ASEAN region represents the next large opportunity for the
growth of e-commerce and internet companies in Asia. With a combined population of
630mn (which would put it at #3 in global population rank after China and India) and
combined nominal GDP of US$2.5tn (#5 in global GDP rank after EU, US, China and
Japan), the region has significant potential. In fact the average GDP per capita of the
ASEAN region at US$4k is 2.5x that of India at US$1.6k. The region is also more urbanized
with 47% of the population living in urban centres (vs. 31% for India) with nearly 45mn
people spread across the top 6 cities alone (which also rank within the top 50 cities by
population, globally).
Exhibit 10: ASEAN region
Population (mn)
Population rank
GDP per capita (US$)
GDP (US$bn)
Urbanization (%)
Internet penetration (%)
Internet users (mn)
Active social media users (%)
Singapore
Indonesia
Malaysia
Thailand
Philippines
Vietnam
Cambodia
Myanmar
Laos
5.5
113
56,286
308
100%
82%
5
65%
258.7
4
3,514
889
51%
34%
88
30%
30.9
45
10,829
327
73%
68%
21
60%
65.3
20
5,560
405
54%
56%
37
55%
103.0
12
2,843
285
49%
46%
47
45%
91.7
14
2,052
171
31%
50%
46
35%
15.6
71
1,084
15
21%
32%
5
n/a
54.4
26
1,204
64
34%
13%
7
n/a
6.5
107
1,707
11
38%
14%
1
n/a
Brunei
ASEAN
India
China
0.4
632
171
3
40,776 3,971
16 2,491
77% 47%
74% 41%
0.3
257
n/a 34%
1,286
2
1,582
2,067
31%
28%
360
10%
1,376
1
7,594
10,360
55%
49%
674
50%
Source: Jefferies, World Bank
Exhibit 11: Nearly 45mn people live in the top 6 cities of the region
S.No
City
Country
Population (mn)
Global population rank
1
2
3
4
5
6
Jakarta
Bangkok
Ho Chi Minh City
Hanoi
Singapore
Yangon
Total
Indonesia
Thailand
Vietnam
Vietnam
Singapore
Myanmar
n/a
10.1
8.3
8.2
7.2
5.5
5.2
44.6
14
24
25
34
47
49
n/a
Source: Jefferies, UN reports
We estimate the total number of internet users in the region to be over 250mn but at 41%
internet penetration, there is significant scope for growth in the user base itself. This is
particularly true of Indonesia which despite contributing the most number of users in
absolute terms has internet penetration of only 34%. In fact even the existing base is a
result of sharp acceleration in internet penetration in the last 2 years from 20-25% in
2011-13 to over 40% currently, helped undoubtedly by rising smartphone penetration.
We believe the number of internet users is likely to increase to over 350mn over the next
3-4 years implying an internet penetration of 55%. Indonesia, Philippines, Vietnam and
Myanmar are likely to be some of the biggest contributors to the rise in user base.
page 6 of 49
Technology
Internet
21 April 2016
Exhibit 12: Number of internet users (mn)
Exhibit 13: Internet penetration across countries
Source: Jefferies estimates, media reports
Exhibit 14: Internet penetration in ASEAN region has doubled in the last 5
years with acceleration in the last 2 years
Smartphone wave a key driver of growth of
internet adoption and e-commerce
Smartphone wave has been pivotal
to internet adoption and growth of
e-commerce in the region – over
50% of traffic and transactions now
happening over mobile
We believe rising smartphone sales and penetration are a key driver of acceleration in
internet penetration and growth of e-commerce in the region. With broadband
penetration below 10% in most countries, mobile internet is critical for internet usage. We
understand that in Indonesia, Thailand, Malaysia and Singapore, over 50% of web traffic is
already through mobiles. This is expected to rise further as smartphone penetration rises
from the current 35-45% in most of these countries. Poor data speed is an impediment
but there has been a marked improvement in internet connectivity over the last 12
months, particularly in Indonesia where average data speeds are reported to have
doubled.
page 7 of 49
Technology
Internet
21 April 2016
Exhibit 15: Smartphone sales in region has picked up sharply over last 3 years
Source: Jefferies estimates, IDC
Exhibit 16: Broadband penetration is low particularly in
Indonesia
Exhibit 17: Already 50% or more of web traffic is coming
through mobiles in most countries
Source: Jefferies, ITU
Exhibit 18: Internet speeds in the region are still poor with Exhibit 19: However there has been a marked improvement
the exception of Singapore & Thailand
in data speeds particularly in Indonesia over the last year
Source: Jefferies, Akamai’s Fourth Quarter, 2015 State of the
Internet Report: https://www.akamai.com/stateoftheinternet.
page 8 of 49
Source: Jefferies, Akamai’s Fourth Quarter, 2015 State of the
Internet Report: https://www.akamai.com/stateoftheinternet.
Technology
Internet
21 April 2016
The sharp acceleration in mobile internet and commerce is perhaps best evident in the
chart below that shows the proportion of Lazada’s GMV through mobile vs. desktop: from
less than 20% in March, 2014, sales though mobile platform has increased to close to
60% by September, 2015 i.e. in just 18 months.
Exhibit 20: 60% of Lazada’s sales are now through mobile platform, up from
20% only 2 years back
Source: Jefferies, Rocket Internet
Funding activity in private markets has picked up
since 2013, expect strong 2016
Private market funding in the space
has picked up since 2013; over
US$1bn raised already in 2016
Rocket Internet’s investments in Foodpanda (in March, 2012), Lazada (in November,
2012) and Zalora (in May 2013) were an inflection point for PE/VC fund flow into the
ASEAN internet/e-commerce sector in our view. Since then fund flow into the sector has
increased steadily with nearly US$1.6bn of PE/VC money being raised in 2015 and almost
US$3.5bn in the last 3 years. Yet, this is significantly lower than the US$10bn+ of PE/VC
money raised by Indian internet companies in the same period. As a result, we believe
these are still early days for e-commerce in the region. On the other hand, this may also
imply that valuations are still relatively reasonable in the region and growth has been
driven to a much lesser extent by discounting and freebies than has been the case in India.
Exhibit 21: PE/VC funding into the space has picked up
sharply since 2013
Exhibit 22: There have been over 100 deals since 2011 of
over US$2.5mn
Note: Only deals above US$2.5mn considered; Source: Jefferies,
media reports
Note: Only deals above US$2.5mn considered; Source: Jefferies,
media reports
page 9 of 49
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21 April 2016
Exhibit 23: Companies that have raised over US$50mn since 2011
S.No Company
Segment
Sub-segment
Amt raised (US$mn)
Founded in
Investors
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
E-tailing
Travel
E-tailing
E-com Logistics
E-tailing
E-tailing
Gaming
Classified
E-tailing
Entertainment
Travel
E-tailing
E-tailing
E-tailing
E-tailing
Horizontal e-tailing
Cab booking
E-commerce logistics
Fashion e-tailing
Gaming, e-tailing
Real estate classified
Online video-on-demand service
P2P car sharing
Fashion e-tailing
Online grocery
1,186
680
500
457
248
212
170
129
82
75
70
68
64
55
50
2,012
2,011
2,015
n/a
2,009
2,012
2,008
2,007
2,010
2,014
2,012
2,014
2,009
2,011
2,014
Alibaba, Rocket Internet, Temasek, Kinnevik, Tengelmann, Tesco, Summit Partners
SoftBank, Tiger Global, China Investment Corp, Coatue
Lippo Group
Alibaba
Softbank
Rocket Internet, Tengelmann Ventures, Kinnevik, Summit Partners, Access Industries
Khazanah Nasional Berhad
Emtek, Square Peg Capital, TPG
Singapore Press Holdings, eBay,Saban Capital Group, Brookside Capital, Oak Investment
Catcha Group, Emtek, Sky
Sequoia Capital, IDG
SK Planet, XL Axiata
GGV Capital, Intel Capital, MediaCorp Singapore, Matrix Capital, Infocomm Investments
Garena, Softbank, Visionnaire Ventures, Eduardo Saverin
Vingroup
Lazada
Grab
Matahari Mall
SingPost
Tokopedia
Zalora
Garena
PropertyGuru
Qoo10
iflix
iCarsClub
Elevenia
Reebonz
RedMart
vinEcom
Exhibit 24: Indian internet/e-commerce cos have raised over US$10bn in the
last 3 years
Amongst the global PE/VC firms, companies such as Softbank, Tiger, Sequoia, Temasek,
Kinnevik and Intel Capital have invested in the region in addition to Rocket. Grab and etailing companies such as Lazada, Tokopedia, Zalora seem to be some of the favourites.
The most obvious exceptions to the list of investors in the internet/e-commerce space in
the region include Naspers, DST Global and KPCB.
Exhibit 25: Many global PE/VC firms are present in the region; Naspers, DST Global, KPCB amongst those that do not
have exposure to the region
S.No PE/VC investor
Headquarters
Key investments in ASEAN region
Global investments in the sector
1
2
3
4
5
6
7
8
Germany
Japan
US
US
Germany
Sweden
Singapore
US
Lazada, Zalora, Foodpanda, Carmudi, ZenRooms
Grab, Tokopedia, Redmart
Carousell, AdNear, IcarsClub
Grab, Wego
Lazada, Zalora, Carmudi
Lazada, Zalora
Lazada
Reebonz
Dafiti, Jabong, Lamoda, Foodpanda
Alibaba, Sina, Didi Kuaidi, Yahoo Japan, SoFi, Snapdeal, Ola
Apple, Google, Youtube, Yahoo, Whatsapp
eLong, Flipkart, Zynga, Airbnb, Ola, Nextdoor
Lamudi, Delivery Hero, Lamoda, Linio
Millicom, Zalando
Paypal, Alibaba, Airbnb, Didi Kuaidi
Snapdeal, WebRadar, iZettle, Skyport Systems
Rocket Internet
Softbank
Sequoia Capital
Tiger Global
Tengelmann Ventures
Kinnevik
Temasek
Intel Capital
Few listed players for now – expect more listings
going forward
Very few direct plays in the listed
market, none above US$1bn marketcap; SingPost, Rocket Internet,
Singapore Press Holdings are large
listed companies having some
exposure to the space
Listed plays with exposure to internet/e-commerce
There are few sizeable listed players in the internet/e-commerce space in the region
currently. While we could find 10 such companies – Xurpas, iCarAsia, Migme, JobStreet,
Ensogo, Asiatravel, MOL group, Asiasoft Corporation, Netccentric and Rev Asia – only 3
are over US$100mn in market-cap. The total market-cap of all ten is only US$1.3bn. In
addition to these, one can play the sector indirectly through investment companies such
as Rocket Internet and logistics companies such as Singpost.
page 10 of 49
Technology
Internet
21 April 2016
Exhibit 26: Listed companies in internet/e-commerce space in South East Asia
S.No Company
B'berg
ticker
Exchange
Segment
Description
Mkt cap HQ
(US$mn)
Listing Countries
Yr.
1
2
3
Xurpas
iCarAsia
Migme
X PM
ICQ AU
MIG AU
Philippines
Australia
Australia
708
169
163
Philippines
Malaysia
Singapore
2014
2012
2001
Singapore, Philippines, Indonesia
Singapore, Malaysia, Indonesia, Taiwan, Hong Kong, Australia
4
5
6
7
JobStreet
Ensogo
Asiatravel
MOL group
Gaming & Ent.
Automobile classified
Provides chat,
microblogging etc.
Recruitment classified
Deals & discounts
Online travel agent
Payment Gateway
63
49
48
45
Malaysia
Thailand
Singapore
Malaysia
2005
2013
2001
2014
Singapore, Malaysia, Philippines, Indonesia, Vietnam
Singapore, Malaysia, Philippines, Indonesia, Thailand, Hong Kong, US
Singapore, Malaysia, Indonesia, Thailand, Philippines, Hong Kong, China, UAE
Singapore, Malaysia, Indonesia, Thailand, Philippines, India, Australia, NZ
Online Gaming
Digital Media
advertisement
Owns multiple news &
entertainment website
28
28
Thailand
Singapore
2008
2015
SEA (6),Cambodia, Burma
Singapore, Malaysia, Australia, Philippines, Thailand, China, UK
18
Malaysia
2011
SEA(6)
Malaysia
Australia
Singapore
US
8
9
JOBS MK
E88 AU
AST SP
MOLG
US
Asiasoft Corp. AS TB
Netccentric
NCL AU
Gaming
Classified
Social
Network
Classified
E-tailing
Travel
Payments
Thailand
Australia
Gaming
Advertising
10
Rev Asia
Malaysia
News & Ent.
REV MK
Exhibit 27: Listed companies with some exposure to internet/e-commerce space in South East Asia
S.No Company
Ticker
Exchange
Mktcap
(US$bn)
Nature of exposure to ASEAN e-commerce
1
2
3
4
5
6
7
8
9
SPH SP
RKET GR
LPPF IJ
SPOST SP
MLT SP
GDX MK
MWG VN
POSM MK
WHAPF TB
Singapore
Germany
Indonesia
Singapore
Singapore
Malaysia
Vietnam
Malaysia
Thailand
4.7
4.6
4.1
2.5
1.9
0.6
0.5
0.4
0.3
Acquired SgCarMart and owns many classified sites - ST Jobs, STProperty, STCars, STClassifieds etc. Stake in Qoo10
Investment in companies such as Lazada, Zalora, Foodpanda, Carmudi and Zen Rooms in South East Asia
Invested US$500mn in own e-commerce venture
Launched "SP ecommerce" as a full service end-to-end e-commerce logistic solution provider
Owns warehouses across Asia including 3 countries of SEA (SG, MA, VI)
Provides Logistic Services in Malaysia and Singapore. Plans to grow in e-commerce Logistics
Mobile retail chain operator with online channel
Launched e-Commerce Hub ub Malaysia for providing logistic services to e-commerce companies
Owns various warehouse in ASEAN countries
Singapore Press Holding
Rocket Internet
Matahari Department Store
Singpost
Mapletree Logistics
GD Express
Thegiodidong
Pos Malaysia
WHA Warehouse
Expect positive impact on data
centre and logistics companies and
negative impact on retailers
Online spend, impact on Singapore
Singapore’s online spend is estimated to be around US$2.4bn (~8% of total retail spend).
Proportion of online spending in SG still has room to grow considering developed
markets like US, UK currently average around 15%. This strong growth in online spend
could impact different sectors of the Singapore economy either positively or negatively.
The table below is a quick summary of how rising online spend could affect diverse
sectors of the SG economy. From a broad sector perspective, E-commerce will have a
positive impact on demand for 1) data centres, 2) last mile logistics, warehousing
operations, and 4) telcos due to increased data traffic. On the other hand, we expect a
negative impact on retail operations both mass-market and as well specialised formats like
shopping malls etc.
Exhibit 28: Impact of rising online spend across sectors in Singapore
Company
B’berg ticker
Price (SGD)
KDCREIT SP
1.09
NC
718
MCT SP
CT SP
FCT SP
1.47
2.12
2.02
Hold
NC
NC
2,336
5,603
1,370
Industrial/ Logistics Space
AREIT
Mapletree Logistics
Aims AMP
AREIT SP
MLT SP
AAREIT SP
2.50
1.03
1.35
Buy
Buy
Hold
4,973
1,904
640
Logistics and distribution
Singapore Post
SPOST SP
1.65
NC
2,500
Mass-market retailing
Shen Siong
SSG SP
0.87
NC
970
Telcos
Singtel
Starhub
M1
ST SP
STH SP
M1 SP
3.95
3.34
2.48
Buy
Underperform
Hold
47,000
4,311
1,720
Data Center REITs
Keppel DC REIT
Retail Malls
Mapletree Commercial Trust
CapitaMall Trust
Fraser Centerpoint Trust
JEF Rating MCap (US$m)
Impact
Impact of E-commerce on industry/ sector
Increased demand for data center space
+ve
-ve
Higher online share of retail spend could adversely affect demand for store-fronts
+ve
Demand for modern warehousing/logistics assets could rise
+ve
Warehousing and last-mile delivery capability will become important
-ve
Increased competition from online marts
+ve
More data-traffic, mobile wallets could get more popular
Source: Jefferies estimates, Bloomberg
page 11 of 49
Technology
Internet
21 April 2016
Based on media reports, there are at
least six companies that have been
valued at US$1bn or more in private
funding rounds – Garena, Lazada,
Grab lead the way
Six few private market “unicorns”
There are quite a few large companies in the private market though. In fact based on
media reports of valuations in private funding rounds there are already six “unicorns” or
companies valued above US$1bn in the region viz. Garena, Grab, Lazada, VNG group,
Traveloka and Tokopedia. In addition we expect PropertyGuru, Iproperty and Zalora to be
valued at over US$500mn. This would take the total private market valuation to over
US$10bn.
Exhibit 29: The “unicorns” - Six internet companies from the region are
estimated to have achieved valuation of over US$1bn in private rounds
We expect more listings in Singapore
over the next 2-3 years
Source: Jefferies, Media reports
We expect more listings in the Singapore market over the next 2-3 years as existing
investors look for exits or increasing funding requirements forces a shift to public markets.
Singapore and Indonesian markets stand out
Singapore being a developed
economy is a good test market for
new ideas; companies also find other
advantages of basing their HQ in
Singapore, thanks to a strong startup eco-system
Singapore – developed economy with many advantages. Singapore clearly stands
out amongst the ASEAN countries. It is a developed economy with very high spending
power (per capital GDP of US$56k), good internet connectivity and broadband
infrastructure (fixed broadband penetration is over 73%, whilst smartphone penetration
at over 90%), mature payment infrastructure (the average Singaporean holds over 2.7
credit cards vs. 2.2 for US) and relatively few logistical, regulatory and other challenges.
This makes it a good test/pilot market for ideas that can then be scaled up into the region.
Moreover, many companies prefer to base their headquarters out of Singapore due to
many advantages such as easier access to funding, availability of talent pool, lower tax
rates and active support from the Singapore government. (See Appendix 2 on
Singapore Start-up Eco system for more details)
Exhibit 30: Singapore headquartered companies dominate in fund flows into
the sector, followed by Indonesia
page 12 of 49
Technology
Internet
21 April 2016
Exhibit 31: 10 of the 15 companies that have raised US$50mn are headquartered in Singapore, 3 in Indonesia
S.No Company
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Lazada
Grab
Matahari Mall
SingPost
Zalora
PropertyGuru
Garena
Tokopedia
Qoo10
iflix
iCarsClub
Elevenia
Reebonz
RedMart
vinEcom
Segment
Headquarter
Founded in
Countries of operation
E-tailing
Travel
E-tailing
E-com logistics
E-tailing
Classified
Gaming
E-tailing
E-tailing
Entertainment
Travel
E-tailing
E-tailing
E-tailing
E-tailing
Singapore
Singapore
Indonesia
Singapore
Singapore
Singapore
Singapore
Indonesia
Singapore
Malaysia
Singapore
Indonesia
Singapore
Singapore
Vietnam
Singapore
Malaysia
Indonesia
Singapore
Singapore
Singapore
Singapore
Indonesia
Singapore
Malaysia
Singapore
Indonesia
Singapore
Singapore
Vietnam
Singapore, Indonesia, Malaysia, Thailand, Philippines, Vietnam
Indonesia
Singapore, Indonesia, Malaysia, Thailand, Philippines, Vietnam, HK, India, Australia
Singapore, Indonesia, Malaysia, Thailand, Philippines, Vietnam, Hong Kong, Taiwan, Australia, New Zealand, Brunei
Singapore, Indonesia, Malaysia, Thailand
Singapore, Malaysia, Philippines, Taiwan, Vietnam, Thailand, Indonesia
Indonesia
Singapore, Indonesia, Malaysia, China, Japan
Malaysia, Philippines, Thailand
Singapore
Indonesia
Singapore, Malaysia, Indonesia, Taiwan, Hong Kong, Thailand, Australia and South Korea
Singapore
Vietnam
Source: Jefferies, company data
Indonesia is potentially the largest
e-commerce market in the region
with estimated 150mn internet users
by 2020
Indonesia – potentially the largest market. While Indonesia lags countries like
Malaysia and Thailand in spending power and ease of doing business, we believe it still
stands out in the region as potentially its largest market. Its population of 260mn ranks it
4th globally after China, India and US. As a result, despite relatively low internet
penetration of 34%, it already accounts for nearly 90mn of the 250mn internet users in
the region. As internet penetration rises to over 60% over the next 4-5 years, Indonesia
alone could account for close to 150mn internet users. The fact that companies
headquartered in Indonesia have seen the most PE/VC fund flow in the region after
Singapore, also points towards its significance in the region.
Exhibit 32: Singapore ranks #1 in the ease of doing business globally;
Malaysia is #18 and Thailand is #49; others rank close to 100
Malaysia, Thailand - easier markets to scale up after Singapore. Malaysia and
Thailand rank after Singapore on many key metrics like GDP per capita, urbanization,
internet penetration and active e-commerce and social media users. Ease of doing
business and infrastructure are also better here than in the rest of the region. As a result, in
our conversations with various e-commerce players these ranked after Singapore as the
easier markets to scale up in the region.
Philippines, Vietnam – many operational challenges. Philippines and Vietnam,
each with a population of close to 100mn, rank after Indonesia in terms of long-term
opportunity size. However spending power is relatively low and operational challenges
relatively high due to logistics and infrastructure issues including poor mobile
connectivity/data speeds. Philippines with a large base of social media users and
popularity of English is clearly the more attractive market of the two.
Myanmar, Laos, Cambodia, Brunei – frontier markets. In addition to the six
markets discussed above, the ASEAN region includes smaller markets such as Cambodia,
Laos and Brunei with a combined population of 22mn. Myanmar with a population of
55mn is relatively larger but is still extremely under-developed after many years of
economic exclusion that has only just ended. As a result, we have excluded these markets
from the scope of this report.
page 13 of 49
Technology
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21 April 2016
E-tailing the big opportunity; Travel,
classified, gaming other key segments
E-tailing is the largest opportunity for
local players and could be a US$3040bn market by 2020; Travel,
gaming, classified and gaming the
other segments with local players
With Search and Social network segments being cornered by global players like Google,
Facebook, Whatsapp and WeChat, e-tailing is by far the biggest opportunity for local
players in the sector. It has also accounted for close to 70% of the fund flow into the
sector. We estimate that the regional e-tailing market which is currently likely to be close
to US$10bn will grow to US$30-40bn by 2020. There are a large number of local players
with Lazada, Tokopedia, Bukalapak, Qoo10 and Lelong being some of the largest.
Amongst horizontal players, marketplace is the dominant model while many of the
vertical players do inventory based selling. Cash on delivery and manual banking are
dominant payment methods across most of the region. Logistics companies like SingPost
are also likely to be significant beneficiaries of the e-tailing boom. Travel, classified and
gaming are other key segments with notable local companies such as Grab, Traveloka,
PropertyGuru, JobStreet, Garena and VNG. Indonesia and Vietnam appear to be best
suited for the emergence of local players.
Search, Social network, messaging dominated by
the global players
Search and Social network is
dominated by global players like
Google, Facebook, Whatsapp,
WeChat
Globally, the largest internet companies by market-cap are predominantly those
operating in Search, Social network or e-tailing as shown in the chart below. In South East
Asia, the search and social network segments are dominated by global players like
Google, Facebook, Yahoo, Msn and Bing. Even messaging apps are all primarily owned by
global players such as Whatsapp, Facebook messenger (both owned by Facebook),
WeChat (owned by Tencent group of China), Line, Blackberry Messenger and Viber
(owned by Naver Corp of South Korea, Blackberry Limited of Canada and Rakuten of
Japan respectively).
Exhibit 33: The top internet cos by market-cap globally are mostly in Search,
Social network and e-tailing
Exhibit 34: Google, Youtube, Facebook, Yahoo, Msn, Bing feature amongst top 10 sites in most of the SE Asian countries
Rank Singapore
Segment
Indonesia
Segment
Malaysia
Segment
Thailand
Segment
Philippines
Segment
Vietnam
Segment
1
2
3
Google
Youtube
Facebook
Search
Google
Entertainment Facebook
Social network Youtube
Search
Google
Social Network Youtube
Entertainment Facebook
Search
Google
Entertainment Youtube
Social network Facebook
Search
Facebook
Entertainment Youtube
Social network Google
Social network Coc coc
Entertainment Google
Search
Facebook
Search
Search
Social Network
4
5
6
7
8
9
10
Yahoo
Wikipedia
Amazon.com
Bing
Linkedin
Msn
qoo10.sg
Search
Information
E-tailing
Search
Social network
Search
E-tailing
News
Search
News
News
Social network
Entertainment
News
Search
Entertainment
Search
Finance
Information
E-tailing
Search
Social network
Entertainment
Search
Search
E-tailing
Search
E-tailing
Search
News
News
News
Search
Information
Social network
Entertainment
Entertainment
News
News
News
Classified
News
Detik
Yahoo
Tribunews
Liputan6
Kaskus
Kapanlagi
Kompas
Yahoo
Blogspot
Msn
Maybank
Wikipedia
Lazada
Bing
Pantip
Blogspot
Yahoo
Bing
Amazon.com
Msn
Ebay
Yahoo
abs-cbn
Inquirer
GMA N/w
Msn
Wikipedia
Twitter
Youtube
webtretho
Zing
daikynguyen
vnexpress
nhadatso
24h
Source: Jefferies, Alexa
page 14 of 49
Technology
Internet
21 April 2016
Exhibit 35: Top messaging/chat apps across the South East Asian countries
Rank
1
2
3
Singapore
Indonesia
Malaysia
Thailand
Philippines
Vietnam
Whatsapp
Facebook messenger
WeChat
Blackberry messenger
Whatsapp
Facebook messenger/Line
Whatsapp
Facebook messenger
WeChat
Line
Facebook messenger
Whatsapp/Wechat
Facebook messenger
Viber
Line
Zalo
Facebook messenger
Viber
Exhibit 36: Most top messaging/chat apps owned by global corporates; VNG’s
Zalo is the only local player
S.No
Messaging app
Owning group
Country of origin
1
2
3
Whatsapp
Facebook messenger
WeChat
Facebook
Facebook
Tencent Group
US
US
China
4
5
6
7
Line
Blackberry messenger
Viber
Zalo
Naver Corp
Blackberry Limited
Rakuten
VNG
South Korea
Canada
Japan
Vietnam
There are a few local players though – Coc coc is a browser cum search engine that
specializes in search in Vietnamese – the company raised US$14mn of funding in
February, 2015 and often ranks above Google as the #1 site in Vietnam. Zalo, a messaging
service launched by the VNG group in 2012 ranks as the top messaging app in Vietnam.
The VNG group also launched a social network site Zine Me in 2009. Pantip of Thailand
and Kaskus of Indonesia are discussion forums that have attracted a large local
community.
Coc coc, Zalo, Kaskus, Pantip are
some of the local players in this
space
Exhibit 37: Key local companies in search, social network and messaging
S.No Company
Founded in
HQ
Countries of
operation
Description
Investors
Funds raised
(US$mn)
Founders/CEO
1
2
3
4
2010
2004
1997
1999
Vietnam
Vietnam
Thailand
Indonesia
Vietnam
Vietnam
Thailand
Indonesia
Search Engine customized for Vietnamese
Gaming, social n/w, messaging
Discussion forum
Discussion forum and classified
Hubert Burda Media
CyberAgent Ventures
n/a
GDP Ventures
14
n/a
n/a
n/a
Nguyen Binh, Le Thanh
Hong Minh le & Bryan Pelz
Wanchat Padungrat
Andrew Darwis
Coc coc
Zing Me & Zalo (VNG group)
Pantip
Kaskus
E-tailing the big opportunity – potentially a US$3040bn market by 2020
E-tailing – potentially a US$30-40bn market by 2020
E-tailing is by far the largest opportunity for local companies in our view. Based on the
retail market of the respective countries, we estimate that e-tailing could be a US$30-40bn
market (in GMV terms) in the six major South East Asian countries by 2020. This would
imply ~3.5-4.5% of the total retail sales being transacted online, which is in line with other
emerging markets and significantly lower than what has been the case in China. The large
opportunity in e-tailing is also reflected in the fund flow pattern - e-tailing (including ecommerce logistics) companies have absorbed close to 70% of investments into
internet/e-commerce sector in the region.
We estimate that e-tailing will be a
US$30-40bn market in the region by
2020 vs. US$10bn currently
Exhibit 38: We estimate the e-tailing market in the region to grow to US$30-40bn by 2020 from US$10bn currently
2,015
Country
Indonesia
Singapore
Malaysia
Thailand
Philippines
Vietnam
2,020
Retail market E-tailing market
size (US$bn)
(US$bn)
320
3.0
30
2.4
70
1.4
100
1.5
80
0.6
70
0.6
% of retail
market
0.9
8.0
2.0
1.5
0.8
0.8
Scenario 1 (Base case)
Retail market E-tailing market
size (US$bn)
(US$bn)
428
12.8
33
6.6
89
4.5
116
4.6
107
3.2
94
2.8
Scenario 2 (Bear case)
Scenario 3 (Bull case)
% of retail Cagr E-tailing market % of retail E-tailing market % of retail
market (%)
(US$bn)
market
(US$bn)
market
3.0
34
10.7
2.5
15.0
3.5
20.0
23
6.0
18.0
7.3
22.0
5.0
26
4.0
4.5
5.4
6.0
4.0
25
4.1
3.5
5.8
5.0
3.0
38
2.7
2.5
3.7
3.5
3.0
38
2.3
2.5
3.3
3.5
Total
670
9.5
1.4
867
34.6
4.0
29
29.8
3.4
40.5
4.7
Total ex SG
640
7.1
1.1
834
28.0
3.4
32
23.8
2.9
33.2
4.0
Source: Jefferies estimates
page 15 of 49
Technology
Internet
21 April 2016
E-tailing companies have attracted
nearly 70% of the private market
funding into the sector
Lazada, Tokopedia, Bukalapak,
Qoo10 some of the top local
companies
Exhibit 39: E-tailing (including logistics) has accounted for over US$3bn of
the US$4.5bn funds flowing into internet/e-commerce sector since 2011
Local companies like Lazada, Tokopedia, Bukalapak and Qoo10 (see table below) have
taken the early leadership in the e-tailing market in the region. The near absence of
Amazon from the region has been a significant positive from a competitive landscape
point of view. Ebay and Alibaba (through Taobao and Aliexpress) are the key global
players in the region. However Alibaba’s recent investment of US$1bn into Lazada for a
controlling stake in the company seems to suggest that Lazada will be key to the former’s
growth plans in the region going forward.
Exhibit 40: Top e-tailing sites by traffic in the different countries
Rank Singapore
1
2
3
4
5
Qoo10
Taobao
Ebay
Lazada
Zalora
Indonesia
Malaysia
Thailand
Philippines
Vietnam
Bukalapak
Tokopedia
Lazada
Elevenia
Blibli
Lazada
Lelong
Taobao
11street
Qoo10
Ebay
Lazada
Aliexpress
weloveshopping
Tarad
Lazada
Metrodeal
Ebay
Zalora
Ensogo
Lazada
Thegiodidong
Sendo
Tiki
Cdiscount
As expected most of the top e-tailing players are horizontal players selling across multiple
categories with mobile & electronics and fashion & accessories being the top two
categories. Amongst the vertical e-tailers, fashion & accessories is by the far the most
popular category with many players like Zalora, Reebonz and FashionValet; electronics,
home furnishing and grocery are some of the other verticals.
Exhibit 41: Horizontal players in Asean e-tailing
S.No Site/Company HQ
Countries operating in
Founded in
Investment
(US$mn)
Investors
Founder/CEO
1
Qoo10/Giosis Singapore
2,010
82
Singapore Press Holdings, Ebay, Brookside Capital, Oak IP
Ku Young Bae
2
3
4
Lazada
Bukalapak
Tokopedia
Singapore
Indonesia
Indonesia
Singapore, Indonesia, Malaysia,
China, HK, Japan
SEA (6)
Indonesia
Indonesia
2,012
2,011
2,009
680
n/a
248
Rocket, Temasek, Tesco, Tengelmann, Summit Partners
Emtek, Queensbridge VP
Softbank
5
6
7
8
9
Elevenia
Blibli
Lelong
11street
Ensogo
Indonesia
Indonesia
Malaysia
Malaysia
Thailand
2,013
2,010
1,998
2,015
2,009
68
n/a
n/a
n/a
42
XL Axiata, SK planet
Djarum Group, Bank Central Asia
MIH
Celcom Axiata, SK Planet
Vipshop, Ward Ferry
10
11
12
13
Tarad
Metrodeal
Vatgia
Sendo
Thailand
Philippines
Vietnam
Vietnam
Indonesia
Indonesia
Malaysia
Malaysia
Thailand, Philippines, HK, US
Thailand
Philippines
Vietnam
Vietnam
1,999
2,011
2,006
n/a
n/a
n/a
n/a
n/a
Rakuten
Transcosmos
CyberAgent Ventures
FPT Corp
Maximilian Bittner
Nugroho Herucahyono, Achmad Zaky
William Tanuwijaya, Leontinus Alpha
Edison
James Lee
Kusumo Martanto
Kwok Wei, Richard Tan
Hoseok Kim
Paul Srivorakul, John Srivorakul, Tom
Srivorakul
Pawoot Pongvitayapanu
Ralph Wunsch
Nguyen Ngoc Diep
Tran Hai Linh
14
Tiki
Vietnam
Vietnam
2,010
1
CyberAgent Ventures, Sumitomo Corp
Trần Ngọc Thái Sơn
page 16 of 49
Technology
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21 April 2016
Exhibit 42: Vertical players in Asean e-tailing
S.No Site/Company
HQ
1
Zalora
2
Reebonz
3
4
Founded in
Segment
Investment
(US$mn)
2012
Fashion & accessories 212
2009
FashionValet
Thegiodidong
Singapore SEA (6), HK, Taiwan,
Australia, New Zealand
Singapore SG, MA,TH, ID, Asia
Pacific
Malaysia Malaysia
Vietnam
Vietnam
2010
2004
Mobile, electronics
n/a
5
6
Hermo
HipVan
Malaysia MA
Singapore SG,PH,VI
2012
2013
Beauty products
Home furnishing
2
5
7
Redmart
Singapore Singapore
2011
Grocery
55
Investors
Founder/CEO
Rocket Internet, Access Industries, Tengelmann, Michael Ferrario, Harry Markl
Summit Partners, Kinnevik
GGV Capital, Intel Capital, Matrix, MediaCorp Samuel Lim, Daniel Lim,
Benjamin Han
Elixir Capital, Start Today
Vivy Yusof, Fadzarudin Anuar
Robert Alan Willett, CDH Electric Bee Limited,
Nguyen Duc Tai
Mekong Capital
Gobi Partners
Ian Chua
Golden Gate Ventures, East Ventures, LionRock Danny Tan
Capital, Toivo Annus
Garena, Softbank Ventures Korea, Visionnaire
Roger Egan, Vikram Rupani,
Ventures, Eduardo Saverin
Rajesh Lingappa
Market place is the dominant model
amongst the horizontal players;
Inventory is more popular amongst
vertical players
Marketplace the dominant model in the region, especially amongst
horizontal players
Market place rather than inventory based selling is by far the dominant model in the
region with most of the key players running either pure market places (qoo10, Tokopedia,
Bukalapak, Elevenia, Lelong) or a mix of inventory and market place (Lazada, Zalora).
Lazada for instance started off as an inventory based e-tailer but has transitioned to a
hybrid model in 2014 – currently marketplace accounts for 75-80% of its total GMV. In
fact the Inventory model seems more popular amongst vertical players
(thegiodidong.com, Hipvan, FashionValet, Redmart).
Exhibit 43: Most horizontal players follow the marketplace model, vertical
players often follow inventory model
E-tailer
Marketplace
Inventory
Hybrid
√√√
X
√√√
√√√
√√√
√√√
√√√
√√√
√√√
√√√
√√√
√√√
√√√
X
X
X
X
X
X
X
X
X
X
X
X
X
X
√√√
X
√√√
X
X
X
X
X
X
X
X
X
X
X
X
Horizontal players
Qoo10
Lazada
Bukalapak
Tokopedia
Elevenia
Blibli
Lelong
11street
Ensogo
Tarad
Metrodeal
Vatgia
Sendo
Tiki
Vertical players
Zalora
Cash on delivery/manual banking
are the dominant payment modes
outside of Singapore and Malaysia
X
X
√√√
Reebonz
FashionValet
X
X
X
√√√
√√√
X
thegiodidong
HipVan
Redmart
X
X
X
√√√
√√√
√√√
X
X
X
Cash on delivery and manual banking, the dominant payment methods
Cash on delivery and manual banking are dominant payment methods for e-tailing across
the region. E-payment is the #1 payment method only in relatively developed economies
like Singapore and Malaysia but even in Singapore, cash on delivery ranks #2. We believe
this is likely to remain unchanged for some time given the nascent stage of the e-tailing
market in the region and relatively low credit/debit card penetration outside of Singapore
and Malaysia.
Exhibit 44: Cash on delivery or manual banking are dominant payment
methods in many of the countries
Singapore
Top 2 payment
modes on Lazada
e-Payment
CoD
Indonesia
Malaysia
Thailand
Manual Banking
e-Payment Cash on Delivery
e-Payment Online Banking
e-Payment
Philippines
Vietnam
Cash on Delivery Cash on Delivery
e-Payment
e-Payment
Source: Jefferies, Lazada
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Exhibit 45: Credit card penetration is low outside of Singapore and Malaysia
Social networking sites drive a lot of
e-commerce traffic particularly in
Philippines and Thailand
Three models for logistics: 1) existing
3P logistics/courier companies 2) 3P
companies dedicated to e-commerce
3) In-house by e-tailers such as Lazada
Express
Social networking sites play a key role in lead generation
Another trend for e-tailing in South East Asia is the key role played by social networking
sites in driving e-commerce traffic. Across the region, social networking sites like Facebook
and Twitter as well as chat platforms such as Line and Blackberry Messenger play a key
role in the online buyer’s decision making process. As a result a strong social commerce
strategy is key to success in many of the South East Asian markets. At the same time, this is
also a risk for large incumbent e-tailers as new entrants and smaller players can use social
networking sites to capture traffic share and leads to higher online marketing costs.
Logistics companies, beneficiaries of the e-commerce boom
Growth of e-tailing will also require significant investment in logistics, as has been the
case in other markets. There are three models in which this can evolve: 1) Existing logistics
companies investing in e-commerce focused logistics – this is already happening across
the region with companies like SingPost, Pos Malaysia and GD express. In fact Alibaba has
invested close to US$500mn in Sing Post to develop e-commerce logistics in the region 2)
emergence of e-commerce focussed logistics companies – we found a number of such
companies (see table below) with aCommerce being the largest 3) e-tailers developing
their own in-house logistics arm – Lazada Express is an example of this in the Asean region
and is likely to be the largest e-commerce logistics company in the region.
Exhibit 46: E-commerce focused logistics companies
S.No Company
Founded in
HQ
Fund Raised
(USD million)
Investors
Founder/CEO
1
aCommerce
2013
Thailand
19
Ninja Logistics
Zyllem
Anchanto
2014
2013
2011
Singapore
Singapore
Singapore
5
8Commrece
2015
Indonesia
Indonesia
n/a
Ardent Capital, Inspire Venture, Sinar Mas, DKSH,
Cyber Agent Ventures, NTT Docomo Ventures
Monk's Hill Ventures
n/a
Trans Cosmos, Innosight Ventures, Cub Capital,
Singapore Angel Network
Linc group
Paul Srivorakul
2
3
4
Thailand, Indonesia, Philippines,
Singapore
Singapore, Malaysia
Singapore, Malaysia, Philippines
SEA (6), India, Australia
3
0
n/a
Chang Lai, Shaun Chong, Tan Boxian
Noam Berda
Vaibhav Dabhade, Shafique Muhammad,
Abhimanyu Kashikar
Ronny Ritongadi
Travel, classified, entertainment the other key
segments with local players
Travel, classified and entertainment are the other major categories of internet/e-commerce
which have seen the emergence of local companies in South East Asia.
Grab is one of the key travel
companies in the region and is
locked in competition with Uber
In travel, the major local player is Grab which is present in 28 cities across the six major
South East Asian countries and competes with Uber across the region. It is part of the
global alliance that includes Didi Chuxing (China), Lyft (US) and Ola (India). Grab has
multiple offerings encompassing metered & licensed taxis (Grab Taxi), private car services
(Grab Car), bike services (Grab bike), car-pooling (Grab Hitch) and last mile delivery
service (Grab express). According to management, Singapore is its largest market by
revenue but Indonesia is the biggest growth driver. Majority of transactions happen in
cash, but the share of credit card transactions has been rising.
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Icarsclub, which has raised US$70mn from Sequoia Capital, amongst others, is a P2P car
rental service that has emerged to take advantage of the large opportunity in Singapore,
due to government regulations making private car ownership prohibitively expensive
(private car ownership in SG is less than 20% despite high income levels).
OTAs are mostly dominated by
global players – Traveloka and
Tiket.com in Indonesia are some
exceptions
The OTA space in South East Asia (see table below) is dominated by global players such as
Tripadvisor, Expedia, booking.com, agoda.com and Airbnb. The major local players are
Traveloka and Tiket.com, both in Indonesia. While both these OTAs operate across the
spectrum, the key traffic driver for these is flight ticketing.
Exhibit 47: Top travel websites in South East Asia
Rank Singapore
We found budget hotel aggregation
to be an emerging new area
Indonesia
Malaysia
Thailand
Philippines
Vietnam
1
2
3
Tripadvisor
Singapore air
Agoda
Traveloka
Agoda
Booking.com
Air Asia
Agoda
Tripadvisor
Agoda
Booking.com
Airasia.com
Cebupacificair
Tripadvisor
Agoda
Vietjetair
Jetstar
Agoda
4
5
Booking.com
Expedia
Airasia.com
Tiket
Malaysia airlines
Airbnb
Tripadvisor
Airbnb
Air Asia
Philippine airlines
n/a
n/a
Online budget hotel/accommodation aggregation is also emerging as an exciting new
segment within the travel space. We came across two such companies, viz. Zen Rooms,
funded by Rocket Internet, and Red Doorz. Both these companies are focused on the
budget category – Zen Rooms operates across Indonesia, Thailand, Philippines, Sri Lanka
and Indonesia while Red Doorz is focused only on Indonesia at the moment. While Zen
Rooms is aggregating budget hotel rooms, Red Doorz is working on alternate
accommodation like B&B, guest houses etc.
Exhibit 48: Key local travel companies
S.No Company
Founded HQ
in
Description
1
Grab
2011
Singapore
SEA (6)
Services - Taxi
2
Traveloka
2012
Indonesia
3
iCarsclub
2012
Singapore
4
Tiket.com
2011
Indonesia
5
Zen Rooms
2015
Singapore
Investors
SoftBank, Tiger Global, GGV
Capital, Vertex Ventures and CIC
SEA (6)
Online travel agent, with Global Founders Capital, East
focus on air & hotels
Ventures
Singapore
Peer-to-peer Car rental
Sequoia Capital, IDG Capital,
Morningside Group
Indonesia
Online travel agent, with Global Innovation through Science
focus on air & hotels
and Technology
Indonesia, Thailand, Singapore, Budget hotel booking
Rocket Internet
Philippines, Sri Lanka, Brazil
Funds raised
(US$mn)
Founders/CEO
680
Anthony Tan, Tan Hooi Ling
n/a
Derianto Kusuma, Albert Zhang, Ferry
Unardi
Jamie Jiaming, Chengkun Xue, Eddy
Zhang
Wenas Agusetiawan, Mikhael Gaery,
Natali Ardianto, Dimas Surya Yaputra
Nathan Boublil, Kiren Tanna
70
0
n/a
Many local players in classifieds,
particularly property and
recruitment classified
Classifieds segment of e-commerce has a large number of local players in South East Asia.
The key classifieds segments are 1) property and 2) recruitment. PropertyGuru and
Iproperty are the dominant players in the region in real estate classified. PropertyGuru is
the #1 player in Singapore and Indonesia (through its acquisition of Rumah) while
Iproperty is the #1 player in Malaysia with operations across the region. In recruitment
classified, JobStreet, headquartered in Malaysia, is the dominant portal and is #1 across
Singapore, Indonesia, Malaysia and Philippines. Other local classified players include
SgCarMart, iCarAsia, 2banh (all car & bikes classified), Carousell, Jualo (both C2C market
place like Olx), HungryGoWhere (restaurant classified, now acquired by Singtel).
Exhibit 49: Key local classifieds companies
S.No Company
Founded HQ
in
Description
Investors
Funds raised
(US$mn)
Founders/CEO
1
2006
Singapore
Square Peg Capital, TPG, Emtek
129
Steve Melhuish, Jani Rautiainen
2007
Malaysia
Property Classified
REA Group, Comdisco Ventures
129
Patrick Grove, Joshua Wong
3
4
Nhadatso
JobStreet
n/a
1997
Vietnam
Malaysia
Property Classified
Recruitment Classified
n/a
n/a
n/a
n/a
n/a
Mark Chang Mun Kee
5
6
VietnamWorks
SgCarMart
2002
2004
Vietnam
Singapore
Thailand
Malaysia, Thailand, Singapore,
Indonesia, HK
Vietnam
Malaysia, Singapore, Indonesia,
Philippines, Vietnam
Vietnam
Singapore
Property Classified
2
PropertyGuru/
Rumah
Iproperty
Recruitment Classified
Cars Classified
n/a
n/a
n/a
n/a
7
8
9
iCarAsia
2banh
Carousell
2008
n/a
2012
Malaysia
Vietnam
Singapore
Cars Classified
Bikes classified
Classified Marketplace
Jualo
2014
HungryGoWhere 2006
Indonesia
Singapore
carsales.com.au
n/a
Rakuten, Darius Cheung, Sequoia,
Golden Gate Ventures, 500 Startups, etc.
NSI Ventures, Alpha JWC Ventures
n/a
7
n/a
7
10
12
Vietnam
Singapore, Malaysia, Indonesia,
Taiwan, Australia, HK, US
Indonesia
Singapore, Malaysia
Jonah Levey (Founder)
Henry Seah, Tan Jing Lun,
Vincent Tan
Patrick Grove
Anh Tung Ho
Quek Siu Rui, Marcus Tan Yi
Wei, Lucas Ngoo
Chaim Fetter
Dennis Goh, Wong Hoong
Classified
Restaurant classified
n/a
n/a
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Number of gaming companies in the
region, with Garena and VNG being
two of the largest
The entertainment category comprises 1) gaming companies 2) music/video streaming
sites and 3) new sites. The biggest gaming company in the region is Garena which is an
online gaming platform operating across the region and in Taiwan. As discussed in our
company profile section in greater detail, Garena has also diversified into e-tailing through
its mobile-centric social platform Shopee and also has a payments platform AirPay. The
other large gaming company in the region is VNG – like Garena, VNG also started off as a
gaming company (under the name “VinaGame”) but has since diversified into social
network & messaging (through Zing Me and Zalo) and payments (through 123Pay).
Other gaming companies in the region include game publishers such as Asiasoft (based
out of Thailand) and developers cum publishers such as Touchten Games (Indonesia) and
PlayLab (Thailand). In music/video streaming, Iflix the Malaysian equivalent of Netflix
emerges as the most interesting player – it has already raised US$75mn from investors.
While many news sites emerged amongst the top 25 sites by traffic in each of the
countries, we largely exclude such content creators from the purview of this report.
Exhibit 50: Key local gaming and entertainment companies
S.No Company
Founded HQ
in
Description
Investors
Funds raised Founders/CEO
(US$mn)
1
2
3
4
Garena
VNG
Asiasoft Corp.
Touchten Games
2009
2004
2001
2009
Singapore
Vietnam
Thailand
Indonesia
SEA (6), Taiwan
Vietnam
SEA (6), Cambodia, Burma
Indonesia
Gaming, e-tailing
Game Publisher
Game developer, publisher
CyberAgent Ventures
n/a
Gree, 500 Stratups, Ideosource
172
n/a
n/a
n/a
Forrest Li
Sherman Tan
Anton Soeharyo, Dede
Indrapurna, Rokimas Putra
5
PlayLab
2012
Thailand
SEA (6)
Game developer, publisher
Monk's Hill Ventures
5
6
Iflix
2014
Malaysia
Malaysia, Thailand, Philippines Online shows & movies like Netflix
Emtek Group, Sky & Catcha
75
Thomas Andreessen, Jakob
Lykkegaard Pedersen
Mark Britt, Patrick Grove
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Challenges around divergence between
countries on regulations and logistics
Key challenges are around
divergence across Asean countries, in
languages, regulatory hurdles and
logistic issues
We believe the key challenges to e-commerce/internet companies in the region are
around 1) divergence in key areas across countries such as stage of development/income
levels, languages, data connectivity infrastructure and extent of regulatory oversight. As a
result unit economics can be different in different countries and it is often necessary to
have significant local presence 2) regulatory hurdles particularly in Indonesia, Philippines
and Vietnam which rank low in the ease of doing business and 3) logistics related
challenges, particularly outside of Singapore and Malaysia.
1. Divergence across countries a key challenge
Divergence in discretionary spend,
ticket size, user habits, wage cost:
unit economics can be very different
in different countries of Asean
While we have looked at ASEAN region as a single block in many parts of this report, and
many of the e-commerce companies also operate across the region, divergence in key
parameters across countries or lack of homogeneity is a key challenge. These take the
form of:
1) Significant divergence in stage of development/income levels leading to
diversity in discretionary spend, ticket size, user habits etc. – as a result, the unit
economics can be very different in different parts of the ASEAN region and a model that is
profitable in one country need not necessarily work in another
Local language is an important factor
in Vietnam and Indonesia
2) Diversity of languages – English works well in Singapore and Philippines but to a
lesser extent in Malaysia and Thailand; operating in the local language is key in Indonesia
and Vietnam
3) Broadband/telecom penetration/infrastructure varies widely across these
countries leading to significant differences in data speeds which may require
customization of the website/app based on location
4) Extent of regulatory oversight and ease of doing business – While all the
ASEAN countries are signatories to a free trade agreement, local regulations that need to
be complied with by businesses vary significantly. As discussed earlier, it is much easier to
conduct business in Singapore and Malaysia as compared to Indonesia, Vietnam and
Philippines – which we will discuss in detail in the next section.
As a result of these and other differences, we found most companies that operate across
the region operate through sizeable local teams.
Exhibit 51: Wide divergence in income across the region
leads to differences in ticket size, wage cost, user habits
Exhibit 52: Local language is an important factor in
Indonesia and Vietnam
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2. Regulatory hurdles, particularly in Indonesia,
Philippines and Vietnam
Regulatory hurdles particularly in
Indonesia, Philippines and Vietnam
Regulations present a significant hurdle to e-commerce companies in the region,
particularly outside of Singapore and Malaysia. As shown in the charts below, Indonesia,
Philippines and Vietnam rank low when it comes to parameters such as ease of starting a
business, ease of trading across borders and enforcing contracts, a sentiment echoed by
most of the industry players we interacted with.
Exhibit 53: Only Singapore and
Malaysia stand out
Exhibit 54: Issues in most of the ASEAN Exhibit 55: Major issues in enforcing
countries in trading across borders
contracts in Indonesia & Philippines
None of the major South East Asian countries currently have restrictions on FDI in ecommerce. Even in Indonesia, where e-commerce was on the negative list till recently, the
government announced a revised negative list in February, 2016 which has allowed 100%
FDI in e-commerce provided the investment is over Rp100bn (US$7.5mn). However
bureaucratic procedures remain an impediment – in Thailand for instance a Board of
Investment approval is required for any foreign investment, which takes time. On the
logistics side, Indonesia seems to have a 33% FDI limit on distribution and warehousing.
Exhibit 56: FDI restrictions in South East Asian countries – no major
restrictions in e-commerce, restriction on logistics in Indonesia
Country
Comments on FDI restrictions in e-commerce & logistics
Singapore
No restriction on foreign investment in e-commerce or logistics
Malaysia
Indonesia
Removed e-commerce from the negative list for foreign investments for investments above Rp100bn (US$7.3mn)
in Feb, 2016. 33% FDI allowed in distribution and warehousing
No restriction on FDI in e-commerce or logistics but BoI (Board of Investment) approval required which takes time
Philippines
Thailand
Vietnam
3. Logistics related challenges
Logistics is another major challenge
particularly in Indonesia and
Philippines which are archipelagos
Logistics is another key challenge for growth of e-commerce in the region. There are many
issues that companies face in logistics: 1) Geographic issues – Indonesia and Philippines
being archipelagos have special challenges in logistics as road transport is not possible to
many areas 2) Poor infrastructure particularly outside of Singapore and Malaysia 3) Severe
traffic issues in some of the major cities such as Bangkok and Jakarta affecting last mile
delivery 4) Handling cash on delivery – many of the existing logistics players are not
equipped to handle cash on delivery which is a major payment method in the region 5)
Returns – Given the nascent nature of the sector most of the e-tailers have liberal return
policies. This is especially true for apparel and accessories where customers like to try
multiple options before making a purchase decision. In addition cash on delivery
significantly raises chances of return because the person is not there to collect the parcel.
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6) Regulatory – As pointed out in the previous section, only 33% foreign investment is
allowed in distribution and warehousing in Indonesia
Exhibit 57: Logistics challenges particularly high in Indonesia and Philippines
which are archipelagos
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Company Profiles
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Garena – Asean’s Budding Tencent
Exhibit 58: Garena - Snapshot
Founded
Funding (US$mn)
Segment
HQ
Key Competitor(s)
2009
Founder/CEO Forrest Li
172
Key Investors Khazanah Nasional Berhad
Gaming
Description Gaming, e-tailing
Singapore
Regions SEA (6), Taiwan
Asiasoft Corp. Touchten Games, PlayLab
Company Background
Garena was founded in early 2009 primarily as an online gaming platform by Mr. Forrest
Li and his friends. In 2014, Nick Nash (Group President) joined Garena. Nick first joined
GA in 2002 in New York and moved to Singapore in 2011 to co-found the firm’s ASEAN
office. Since then, Garena has evolved from a pure gaming platform to an integrated Ecommerce marketplace and payments platform. It currently has over 4,600 employees
across Asean with the headquarters being in Singapore.
Exhibit 59: Garena – development timeline
2008
2009
2010
2013
2014
2014
2015
2015
US$2m angel funding round to create a gaming platform
Garena founded by Forrest Li and friends as a gaming platform
Garena+, an online gaming platform for gamers to meet, chat and play games
Launched Beetalk, mobile social network
Investment by General Atlantic and Tencent
Launched Airpay, payment network for users with no credit card/ bank account
Launched Shopee, mobile-centric E-commerce marketplace
Investment round led by Ontario Teachers’ Pension Fund
Source: Jefferies, Company Data
Financing rounds
The initial launch of the gaming platform in 2009 was facilitated by angel funding
(US$2m). Since then, newspapers reports indicate that Tencent and General Atlantic have
invested in Garena in 2014. In March 2015, Ontario Teacher Pension Plan (OTPP) made an
investment (amount undisclosed, but newspaper reports indicate it gave Garena an
implied valuation of over US$2.5bn). In a more recent Series D funding round in March
2016, Garena raised US$170m from a consortium led by Khazanah, the strategic
investment fund of the Malaysian government (with press reports implying a valuation of
over US$3.75bn for Garena). Garena has thus raised over US$500m in four funding
rounds, which gives it a sizeable war chest for future investments according to
management.
Business Model
In its present form, Garena has three main business lines/ revenue streams:
Digital Content (Gaming/ Entertainment): Garena is a leading online gaming
portal in the Asean region. It started off as Garena+ which is an online gaming and social
platform for gamers. It has published several popular game titles in Asean like Point Blank,
Path of Exile, FIFA Online, Mstar Online, League of Legends etc. It also has a mobile
application which has other popular titles like Blade, Dragon Quest Monsters Super Light,
Headshot, House of Heroes, Thunder Strike and Journey to the West. Garena
complements its publishing business by supporting ESports through online and offline
platforms. Garena has an ESports studio that regularly produces and streams online
tournaments on Youtube and other channels. It also hosts flagship gaming tournaments,
sponsors leading game players and plays an important role in nurturing the Esports
ecosystem in Asean. This is a cash-cow business for Garena, with revenues reaching over
US$300m in 2015 (having grown at a CAGR of over 95% since 2011). As a publisher of
games, Garena has a much more stable revenue stream than the “hit n miss” risks
associated with a game developer or developer-cum-publisher.
Social and Ecommerce: Garena first entered the social platform in 2013 through the
launch of BeeTalk, its mobile social network which aims to connect people across similar
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interest groups in Asean. Garena then launched Shopee in 2015, a mobile-centric, social
marketplace where buyers and sellers can come online to transact goods. Shopee also has
an integrated payment and logistical support to support its online marketplace. Shopee
has made rapid progress in developing its users to over 4m and its GMV has hit over
USD350m in just 10 months from launch. Shopee has over 650k SMEs across Asean who
are using Shopee to bring their businesses online in a quick way, while taking advantage
of Shopee’s integrated payment and logistics options for order fulfilment. While a
relatively late entrant into the online E-commerce space in Asean, Shopee has shown
rapid progress in developing its platform metrics so far and it would be interesting to
watch if it can continue to execute in the same vein over the next few years.
Payments Platform: Garena launched AirPay as a secure payments platform for online
payments on its network. AirPay attempts to bring the over 420m Asean population, a
vast majority of which does not have easy access to banking/ credit card facilities, into the
fold of online Ecommerce. AirPay uses a reverse-ATM concept whereby users can convert
cash into digital currency at various retail points, which include gaming outlets
(cybercafes). Once they have currency in their digital wallet, users can then use it to pay
bills online, buy gaming credits or even for Ecommerce transactions, thereby creating a
truly parallel payment network independent of banking channels.
AirPay currently has over 100k retail points across Asean today and continues to grow its
access network at a rapid clip. In countries like Vietnam where ATM network penetration
is still low, this is a key advantage for online Ecommerce players and holds great potential.
AirPay is currently handling transactions with an annualised gross transaction value (GTV)
of US$330m), which is creditable since it started operations only in 2014.
Market Potential
According to Newzoo, a full service market researcher focused on the gaming industry,
Asean is one of the fastest growing online gaming markets in the world with industry
revenues expected to grow from US$1bn in 2013 to as high as US$2.2bn in 2017, a CAGR
of over 22%. Garena reported gaming revenues of about $300mn in 2015, implying an
overall market share of about 15-20% of the overall Asean gaming pie, across both PC and
Mobile games. For PC games specifically, Garena management estimates that it has a
dominant market share of over 30% of the addressable pie in ASEAN and Taiwan
(primarily includes PC/MMO and casual web games)
Exhibit 60: Asean gaming market split (2013A)
Philipines
9%
Thailand
21%
Vietnam
14%
Exhibit 61: Asean – fastest growing gaming market globally
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
Malaysia
20%
Indonesia
17%
0.0%
L America
E Europe
Asean
Online connectivity CAGR (2013-17)
Singapore
19%
Gaming revenue CAGR (2013-17)
Source: Jefferies, Industry data
Source: Jefferies, Newzoo website, industry data
The online E-commerce market in Asean has similar growth potential. Frost and Sullivan
estimates that Asean e-commerce spend will rise from US$7bn in 2013 to US$35bn in
2018 (nearly 5x in 5 years). Even so, it will be less than 1-2% of the total retail spend in
Asean, indicating tremendous opportunity for future growth.
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Similarly, online payment solutions have great potential in Asean as the region is
considerably under-banked and also there are cultural issues with using credit cards
online (security issues etc.). Platforms like AirPay will compete with other digital wallet
providers like the telcos for providing solutions to these markets.
So in our view, both Shopee and AirPay have tremendous scalability potential. It will be
the execution on their strategies that will decide if they emerge amongst the winners in
their space and capture the market potential.
Competitive landscape and other challenges
Garena was a relatively early entrant into the gaming (interactive digital content) space for
the Asean region and has been able to build a strong customer base for its gaming
platform. Garena management indicates that it has over 45m active users across its
gaming platform (estimated to be one in four internet users in Asean space) generating
gross revenues of over US$300m (about 30pct of the addressable gaming revenue pie in
Asean as per management).
Nearly 20pct of gaming revenue now comes from the mobile platform and this portion
has been growing more rapidly. Garena’s management claims it is the leading gaming
platform in Thailand, Malaysia, Singapore, Indonesia, Philippines and Taiwan and has
recently attained that position in Vietnam as well. According to industry experts, the key
challenge in this space for companies like Garena would be to continue to convert its PCbased platform users as they transition into the mobile space. It would also need to
continue to create a community feeling amongst its users to create stickiness and
maintain the relevance of its aggregator (game publisher) platform as we move on to the
mobile internet phase.
Garena’s current strategy is to leverage its strengths in the gaming space in
Asean to other adjacencies which can be localised. Hence starting 2013,
management has focussed on developing its presence in the E-commerce and Payments
space in Asean through Shopee and AirPay.
The Asean E-commerce space, while still very much in its infancy, has quite a few players
trying to build up their business models, some of which started before Shopee. Hence
unlike gaming, where Garena had a natural first-mover advantage, Shopee will have to
rely on better strategy and execution to outlast and out-manoeuvre the competition.
Garena management indicated that its Shopee strategy will be based on the following key
points:
Superior Product Platform with integrated chat and payments/ logistics
capabilities: Shopee was designed to be mobile-centric from the start, which makes it
easier to integrate a chat function into the buyer-seller interactions. Management believes
this social component is the key to make E-commerce successfully work in Asia. A sense of
community which allows buyers the ability to interact directly with the seller, rate/
comment on their product experience and also share their comments is an important
success feature. Also, since most sellers are SME players, offering them an integrated
payment/ logistics capability to complete the transaction seamlessly is important for an
online platform to become successful.
Deep localisation for each individual market: Shopee was launched as 7 different
apps across 7 countries in Asean with localisation for language preferences, content
presentation and payment preferences. Shopee also customises payment and delivery
options across each of their operating countries.
Creating a community feel; generating the platform effect: Shopee has made it
easier for SME sellers who have a large fan following to bring their business online by
offering them integrated logistics and payment facilities. This in turn has created a
network effect which has brought more buyers on to the platform at reasonably low
acquisition cost. From a standing start in 2013, Shopee has currently grown to a
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community of 4m buyers and over 650k sellers with latest GMV hitting an annualised runrate of US$350m p.a. after growing at a 68% monthly CAGR since inception. In fact,
according to Garena management, Shopee GMV run-rate after the 2nd year of operations
is higher than what leading players like Ebay, Alibaba etc. achieved at that stage of
growth.
Exhibit 62: Shopee's annualised GMV after 2 years compared to market
leaders
400.0
350.0
300.0
250.0
200.0
150.0
100.0
50.0
0.0
MercadoLibre
MercadoLibre
Ebay
Lazada
Ebay
Lazada
Alibaba
Alibaba
Shopee - current
Shopee - current
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Grab - The Local Challenge to Uber
Exhibit 63: Grab - Snapshot
Founded
Funding (US$mn)
Segment
HQ
Key Competitor(s)
2012
680
Travel
Singapore
Uber
Founder/CEO
Key Investors
Description
Regions
Anthony Tan, Tan Hooi Ling
SoftBank, Tiger Global, GGV Capital, Vertex Ventures and CIC
Services - Taxi
SEA (6)
Company Background
Grab was originally launched in 2012 in Kuala Lumpur by Harvard Business School
graduates Mr. Anthony Tan and Ms. Tan Hooi Ling. Mr. Anthony Tan is the youngest
among three sons in a prominent Malaysian business family which owns Tan Chong
Motors, the largest car dealership in Malaysia.
Perceiving the difficulty of hailing a cab in KL, Anthony Tan drew up a business plan for a
cab-hailing service which was presented to the panel of the 2011 Harvard Business Plan
Competition. This then attracted a set of angel investors which led to the official launch of
Grab service in KL in June 2012.
The company has since grown rapidly, as seen in the table below, to include more than
250,000 drivers over 28 cities across 6 countries (Singapore, Malaysia, Thailand,
Indonesia, Vietnam and Philippines). As of 2015, Grab management claims it has 50%
market share in the private-car hailing market in SEAsia, 95% market share in third-party
taxi-hailing market and a rapidly growing presence in the motor-bike hailing app space.
The Grab app receives over 1.5m app bookings per day across its services and usage was
still growing at over 35% monthly in the car booking segment and 75% monthly rate in
the bike segment (as of early 2016).
Exhibit 64: Grab timeline of development (2011 – 2016)
2011
Sep 2011
June 2012
April 2014
May 2014
Oct 2014
Nov 2014
Dec 2014
May 2015
Aug 2015
Dec 2015
Jan 2016
Pitches idea to Harvard Business Plan Competition
Creates Grab brand in KL, Malaysia
Grab officially launches in Malaysia, (UBER and Easy Taxi already there)
Series A funding of US$10m from Vertex (Temasek)
Series B - US$15m from GGV Capital
Series C of US$65m from Tiger Global, GGV, Vertex, Qunar, Hillhouse Capital
GrabBike launched in Ho Chi Minh
Series D, US$250m from Softbank
GrabBike in Jakarta
Series E of more than US$350m from Coatue, CICC and Didi Kuaidi
Partnership with Didi Kuaidi (China), Ola (India) and Lyft (USA)
Rebranded from Grabtaxi to Grab, (incl. GrabTaxi, GrabCar, GrabBike GrabHitch, GrabExpress)
More recently (in January 2016), Grab undertook a brand restructuring exercise
rebranding the company from GrabTaxi (MyTeksi in Malaysia) to Grab to reflect the
increased breadth of services the company now provides as a one-stop transportation
solutions provider. This includes GrabTaxi/MyTeksi (taxi-hailing), GrabCar (private car
booking), GrabBike (for bikes, especially in Jakarta, Bangkok), GrabHitch (social
carpooling), GrabExpress (last-mile delivery).
Another important development in Dec 2015 was the inking of a global alliance between
Didi Kuaidi (China), Ola (India), Lyft (USA) and Grab (S.E. Asia) to take on UBER by
providing seamless inter-linked services for their subscribers when they travel to different
geographies through their alliance partners. Grab thus becomes part of a global alliance
which provides an alternative to UBER.
Financing Rounds
Grab was initially launched on the back of angel funding received following Anthony
Tan’s team winning the 2011 Harvard Business Plan Challenge. It then executed three
series of VC funding between April and Oct 2014 which raised US$90m from Temasek,
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GGV Capital, Tiger Global, Qunar and Hillhouse Capital. Later in Dec 2014, it attracted a
massive US$250m investment from Softbank which was one of the largest start-up
funding deals in S.E.Asia. More recently in 2015, Grab raised the largest-ever funding
round in S.E.Asia with over US$350m raised from Coatue, CICC and Didi Kuaidi.
Business Model
Like Uber, Grab operates a simple marketplace business model for personal transportation
services. Grab collects a fee for its service of optimally connecting demand and supply for
personal transport. In case of taxis, Grab charges a fixed absolute commission per ride
whereas in case of private car, bike and delivery services, it charges a percentage
commission on the total ride value. It benefits users by broadcasting their request to a
larger group of fleet drivers, and benefits the drivers by cutting down on idle cruising
times and improving route scheduling. Grab is able to use dynamic pricing to influence
supply i.e. by allowing users to pay a premium for urgent bookings, giving drivers a
greater incentive to offer services during peak-periods etc.
Whilst the economic rationale for online taxi services seems fairly clear, implementing a
successful start-up strategy to meet this need requires solid execution on 1) managing the
regulatory eco-system, 2) being able to scale-up and reach critical mass in terms of both
users and drivers to shut out competition. Most geographies start out as fragmented
markets with operators offering aggressive incentives to lure both drivers and users to
their platforms. Consolidation can take place over a fairly long period. In this context,
Grab management believes it has four clear advantages to ride out a long period of
industry consolidation and emerge as winner:
1) Localisation: In comparison to Uber, Grab sees better localisation capabilities as a key
advantage. Grab’s origin as a taxi-booking app in Malaysia/Singapore has helped. First, it
has allowed better liaison with regulatory environment as taxi services/ fares are regulated
in most countries. Also, by enticing taxi drivers to first sign up to its platform, it has
ensured that users booking on to the Grab platform have a critical mass of drivers to meet
their demand. Satisfying the requirements of the early users in terms of availability and
response times can set in motion a positive word-of-mouth cycle which gets in more users
to try out the platform. Secondly, Grab has large local teams across 6 countries which
collectively speak the 30 major dialects of the Southeast Asian region. This enables Grab
to better assist passengers in local markets and to acquire local drivers, many of whom
cannot converse in English or other major languages of the region. Thirdly, Grab’s large
physical presence in the region enables it to acquire drivers more easily in a region where
online acquisition of drivers is less effective than other markets globally.
2) One-stop transportation network: In comparison to its competitors, Grab
provides a full suite of transportation and delivery solutions tailored to the differentiated
markets of Southeast Asia. It provides taxi and private car services across all 6 countries, as
well as bike and express courier and food delivery services across Indonesia, Vietnam,
Thailand and the Philippines, where bikes are a complementary mode of transportation
and delivery. For example, more than a quarter of all Grab users use multiple services on
the platform, a feature which no other competitor provides in Southeast Asia.
3) Flexibility in payment options: Uber relies on credit cards as the primary payment
option for their services. This works well in developed countries where credit cards
penetration/ usage is high. However, in S.E.Asia region where credit card penetration is
low and where users culturally prefer to pay cash even when they have credit cards, Grab
has allowed for cash as a payment option in addition to credit cards.
4) Funding: Grab has raised nearly US$700mn in private funding already and therefore
has strong financial backing relative to its smaller local competitors to ride out a long
consolidation period in the industry during which most players might be generating cash
losses on account of driver incentives and user acquisition costs.
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Market potential for personal transportation apps
Since Singapore provides good data on its transportation metrics, we have done some
back-of-the-envelope calculations to estimate that the total amount spent on taxi services
in Singapore per annum is just over S$6bn (see Table 2 below).
If we estimate that potentially a third of these users would move to booking private car
services through online booking apps and if app providers like Grab/ Uber charge about
5-10% of transportation fees as service charges, then the potential pie for online service
charges is around S$100-200m p.a. in just Singapore alone. (Note that Grab operates in
28 cities across S.E.Asia currently.)
It should be noted that the ultimate target of transportation apps like Uber/Grab is not to
just target the taxi services spending pie for personal transportation but also potentially
the much larger private car ownership space by making transportation services a pay-asyou-use model rather than as an ownership based model as it is at present. It is therefore
evident that the scalability of a personal transportation app like Grab/Uber has a long way
to go and the key to being successful remains the ability/ resilience to survive the
inevitable consolidation phase in the industry and manage its cash burn till the market
matures.
Exhibit 65: Back-of-the-envelope estimate of annual taxi spend in SG
Total number of taxis in SG
Estimated no. of trips per day
Total trips per day
28,000
25
700,000
Average mileage per trip (km)
Cumulative taxi mileage per day (kms)
Average tariff (S$ per km)
Estimated taxi tariff collection per day ($M)
on an annual basis (S$m)
10
7,000,000
2.5
17.5
6,300
Source: Jefferies estimates, LTA website
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PropertyGuru – Focus and localisation
Company Background
PropertyGuru was founded in May 2007 and the online platform was formally launched
in Dec 2007 by Steve Melhuish and co-founder Jani Rautiainen. Steve thought of
launching PropertyGuru out of his personal frustrations in trying to find a new home as an
expat in Singapore in 2006. Prior to founding PropertyGuru, Steve worked for 12 years in
telecoms and over 5 years in start-up/ VC outfits including an investment bank (Ariadne
Capital), his own digital consultancy and also an online platform to share comics.
Today, PropertyGuru is the leading online property group in South East Asia used by over
16 million property seekers and having over 34,000 property advertisers every month. It
generates over 130m page views and 0.5m sales enquiries per month for its advertisers
and management estimates it is responsible for about S$17bn of property transactions
per month.
Exhibit 66: PropertyGuru; Timeline of key events
May 2007
Dec 2007
2008
2010
2011
2011
2013
2013
2014
2015
Co-founded by Steve Melhuish and Jani Rautiainen
Property portal launched in SG
Raised S$2m round A funding from angel inv
Reached 10k paying agents in SG, clear market leaders
S$5m round B from VCs
Expansion into Asean by acquisition
Acquired Fullhouse (Malaysia), Rumah.com (Indo), Ddproperty.com (Thai)
Hit 1bn page views, 1m app downloads
S$60m investment by Inmobilien 24 (Deustche Tel)
1m property listings, 30k paying agents
S$175m investment from TPG, Emtek, Square Peg Capital
Source: Company Data
Funding programme
After its founding in May 2007, PropertyGuru ran on the founder’s own funds for the first
18 months or so. The first angel round raised S$2m in 2008 and then S$5m in 2011,
followed by a larger investment of S$60m by European property portal (Immobilien
Scout24 of the Deustche Telekom group) in 2013. The most recent round was in June
2015 when it raised S$175m from an investment consortium comprising TPG, Indonesia’s
largest media group – Emtek and Square Peg Capital. Part of this capital raised has been
deployed in three acquisitions that PropertyGuru has done over the last six month – 1)
ePropertyTrack – a leading marketing company working for Asean developers, 2)
RumahDijual – a leading property portal in Indonesia and a complementary fit for
PropertyGuru’s existing operations, 3) Ensign Media – a luxury property investment
magazine and leading property awards platform across 9 countries.
Business Model
PropertyGuru has 2 key customer groups – 1) Property agents, 2) Corporate clients (real
estate developers and banks). As an online property portal, PropertyGuru makes money
primarily in three ways:
1. Agents’ fee or listing fee: It charges agents a monthly fee to use its platform for
advertising their property listings. The current listing fees charged on a monthly basis
to agents are shown below.
Exhibit 67: Listing fee by tiers charged to agents by PropertyGuru
Tier
Annual fee (S$)
Concurrent Listings
New / Re-Listings Credits
Basic
630
10
480
Specialist
980
50
3,000
Elite
2240
100
7,200
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Here the main objective is to capture the shift from offline (print) advertising to online.
According to the management, PropertyGuru’s agent subscription packages equate to a
maximum price of S$0.35/listing per day – this is one-hundredth of the cost of advertising
in newspapers, which cost S$35 (US$27) for three lines of print. Seven years ago, almost
100 percent of all advertising was in newspaper with agents typically spending S$5,000
(US$3,860) per annum there whereas agents pay PropertyGuru as low as S$630 (US$486)
a year to advertise.
Management also believes that in markets like SG, the focus has now shifted to increasing
the average revenue per agent (“ARPA”). Basic tier annual fees have risen from early teaser
rates of S$50p.a. at the early stage (2009-09) to S$630 per annum currently as agents
realise that online ads are a more cost effective way of generating sales lead than
traditional media. Agents are also increasingly spending on “discretionary” or depth
services which are optional add-on services to give agents or their listings a better
exposure. Bulk of PropertyGuru’s revenue (~70-80%) currently comes from agent listing
fees.
2.
Online Advertising: PropertyGuru also earns revenues by selling ad spots on its
online property and printed newsletter. With a dominant share of page views in SG
and increasingly in the ASEAN region, PropertyGuru is well-placed to monetise its
page views through targeted online advertising. It also has a printed newsletter to
supplement its online proposition to advertisers on its platform.
3.
Property developers’ marketing – integrated sales campaigns:
PropertyGuru team plans to support the entire campaign for property developers
from advertising to sales of new property launches. This is currently a small portion
of revenues for PropertyGuru, but is an important target market to grow income
streams in the future. As seen in table below, ad spend by developers to market new
property launches make up a much larger portion of the total property industry ad
spend (particularly in less developed markets like Indonesia, Thailand). As such, the
developer marketing/ advertising pie is much bigger than the agents listing space
that PropertyGuru has thus far targeted.
Exhibit 68: Property developers dominate ad spend in Asean
Real estate ad spend (S$m)
Singapore
Indonesia
Malaysia
Thailand
200
200
270
140
Agents vs
developers
30:70
10:90
30:70
10:90
Management believes that providing developers a bespoke, integrated and targeted
marketing strategy for new launches is likely to drive PropertyGuru’s next leg of growth.
This would enable to target the much bigger developer spend pie. It is therefore
allocating considerable resources to big data analytics of its user base, its browsing
patterns and getting more demographic data.
PropertyGuru acquired ePropertyTrack (EPT) in July 2015. EPT is a leading new project
sales and marketing company in Asean which has an information sharing platform to
facilitate real-time sharing of information between developers and its sales/ marketing
teams. This information could involve multi-media promotional material, real-time
booking and inventory updates as well as real-time incentive changes.
Management believes one of its key challenges going forward is finding and retaining the
right talent to scale up its operations at the pace required. PropertyGuru has over 350
employees currently, with its HQ hubbed out of Singapore, but significant presence
allocated to local offices across Asean. PropertyGuru is also looking to de-risk its
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operations by moving some support functions to Thailand/ Malaysia and having a 2 nd
data center in Bangkok.
According to Oct 2015 to March 2016 data from ComScore, a leading cross-platform
measurement company which tracks average time on site engagement for portals,
PropertyGuru claims to be the No.1 property portal across the 4 key markets it operates in
– Singapore, Thailand, Indonesia and Malaysia.
In Singapore, PropertyGuru claims to be by far the dominant real estate website based on
the following statistics:

4x the number of daily visits compared to the next best portal

Captures 85% of time spent on all property portals combined

18x more time spent on PropertyGuru compared to next best

Property seekers visit 11 pages per visit on PropertyGuru, 1.5x the next best

77% share of all property page views in SG
In Indonesia, the group recently acquired rumahdijual (“house for sale”), which
combined with its existing portal rumah.com, is estimated to give the group a market
share of 45% of all time spent on property portals as per company estimates, nearly 2x
the next largest competitor. Together, the two Indonesian portals have over 5.5m
property seekers viewing over 30m pages per month.
As per ComScore data cited by management, PropertyGuru also has a leading
engagement market share in Thailand (59%), nearly 3x the No.2 player and has just
edged out its nearest competitor Iproperty to reach the top spot in Malaysia with 43%
market share.
In addition to the above, PropertyGuru has marketing partnerships with the leading
property portals in Australia, HK, China, India, Vietnam and Cambodia where they cross
sell and share listings to increase overseas buyer leads for their clients from these countries
as well as bringing properties from these countries to buyers in their 4 markets
The company is also investing heavily in data analytics to develop its user base profile,
analyse browsing patterns. It has invested in services which allow users to compare the
mortgage packages offered by different banks, works out their annual mortgage
payments and DSCR ratios. It also provides property research data to property agents,
consumers and as well real estate developers.
Market Opportunity
PropertyGuru currently estimates its platform has 1.3m property listings, 34k paying
agents, over 16m users, 3m app downloads. It estimates property transactions of S$17bn
per annum made through the sales leads generated on its portals. Industry estimates peg
the total value of property transactions in Asean at around S$140bn p.a. Ad spend on this
is estimated to be around S$800m p.a. across Asean (~0.5-0.6% of total transaction
value). Of this, only 10% currently is spent on online channels with over 90% done
through traditional channels like print, television hoardings etc. In more developed
markets like Australia, over 50% of the ad spend is targeted at online channels.
This implies that online spend for the property space in the Asean market could hit S$300350m p.a .if it manages to catch up with the Australian market dynamics over the next 4-5
years. Eventually, management expects a leading portal which survives the inevitable
industry consolidation to capture 70-80% market share of spend in any market.
Management estimates this could conservatively lead to potential top line of S$200-250m
for a portal like PropertyGuru in the Asean space. In mature markets, once the initial setup and development costs are completed, EBITDA margins in this space can be as high as
50-75% (as seen in the financial performance of REA AU, the leading property portal in
Australia and RightMove, UK). Based on this, management estimates PropertyGuru could
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easily hit EBITDA run-rates of S$100-130mp.a. as Asean property markets start shifting
more towards online advertising.
One of Asean’s other leading property portals Iproperty group was recently bought by
the REA group (realestate.com.au, the largest online portal in Australia and part of the
NewsCorp group). REA bought out the 87% stake it did not own in iproperty for A$580m
(S$600m) implicitly valuing iproperty at over A$750m. Iproperty group as per its ASX
filing expected to generate A$32m of revenue and A$2.5m of EBITDA in 2015. This
implies an EV/sales multiple of 24x.
Exhibit 69: Online ad spend in Asean vs developed markets like Australia
Source: Company Data, REA website
The analysis above has largely focussed on targeting property advertising costs and how a
switch to online forum could benefit leading property portals like PropertyGuru. Note that
in addition to the S$800m p.a. (0.5-0.6% of transaction value) spent on advertising, sales
commission is another major marketing cost for real estate. Sales commissions are
estimated at nearly S$2bn p.a. (~1.2-1.5%) of total value of property transactions. This is a
much larger pie to target for online property portals particularly in the developer sales
(primary sales) market.
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Lazada – Alibaba’s Proxy in South East Asia
Exhibit 70: Lazada - Snapshot
Founded
Funding ($ MM)
Segment
HQ
Key Competitor(s)
2012
Founder/CEO Maximilian Bittner
1,186
Key Investors
Rocket Internet, Temasek, Kinnevik, Tengelmann, Tesco, Summit
E-tailing
Description
Singapore Areas of ops
Qoo10, Taobao, Ebay, Tokopedia
Company background & Funding
In April 2016, Alibaba invested US$1bn in Lazada including US$500mn of fresh infusion,
the rest being stake sales by existing investors. Post completion of the transaction, Alibaba
will become the controlling shareholder of Lazada.
Lazada was founded in 2012 by Rocket Internet. It operates across the Asean region with
operations in all six major countries. Lazada has raised US$1.2bn in funding till date and is
reported to be valued at US$2bn. It has raised multiple rounds of funding over the years,
the most significant being US$250mn in November 2014, led by Temasek, US$250mn in
December, 2013 led by Tesco and US$100mn in June 2013.
Business model & Financials
Lazada is a horizontal e-tailer, selling items across multiple categories. It started as an
inventory based model but started expanding its marketplace in 2014 – currently 75-80%
of its GMV comes from its marketplace. As of September, 2015 it had over 30k active
sellers on its platform, 10mn SKUs and 8mn customers. Its GMV run-rate is now over
US$1bn and it claims to be the #1 e-tailer in the Asean region. Lazada has witnessed a
significant transition from desktops to mobiles in the last 2 years with 60% of its GMV
now coming from mobile vs. 20% at the beginning of 2014. Lazada’s mobile app has had
over 30mn downloads.
Lazada has an in-house logistics arm known as Lazada Express. It covers over 250 cities
and districts with 6 sortation centres, 84 last mile distribution hubs and a fleet of 2000
vehicles. However it also uses a large number of third party logistics companies. For sellers
on its market place, Lazada encourages the “Fulfilment by Lazada” model wherein sellers
pre-stock their inventory at Lazada’s warehouse and once an order is placed by a
customer, Lazada takes care of picking, packing, invoicing and shipping the order. This
gives Lazada better control over quality and customer experience.
In the marketplace model, Lazada earns revenues in three ways: 1) Commissions – this is
usually a % of the selling price of the item and varies by category – it varies in the range of
1-10% for electronics items, 3-10% for lifestyle items and 10-12% for fashion &
accessories. 2) Payment gateway charges – this is usually ~2% of the selling price 3)
fulfilment and shipping fees – these are charged if Lazada takes care of shipping and
fulfilment as described above.
Lazada recorded 167% YoY growth in its GMV in its recently reported 2015 results. Full
year average GMV crossed US$1bn. Net revenues grew at 78% YoY in 2015 and it
recorded an EBITDA loss of US$300mn.
Exhibit 71: Financials of Lazada
US$mn
GMV
% YoY
Revenues
% YoY
Adjusted EBITDA
Cash position
2,013
2,014
2,015
95
n/a
384
304
1,025
167
76
n/a
(59)
252
154
104
(143)
198
275
78
(297)
75
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Tokopedia – Indonesia’s Taobao
Exhibit 72: Tokopedia - Snapshot
Founded
Funding (US$mn)
Segment
HQ
Key Competitor(s)
2009 Founder/CEO William Tanuwijaya, Leontinus Alpha Edison
248 Key Investors Sequoia Capital, SoftBank
E-tailing
Description Horizontal e-tailing
Indonesia
Regions Indonesia
Lazada, Bukalapak, Elevenia, Blibli
Company background & Funding
Tokopedia was founded in 2009 and was named after the Indonesian word for shop,
‘toko’. The company was founded by Victor Fungkong, William Tanuwijaya and Leontinus
Alpha Edison and is headquartered in Jakarta. It sells across all key categories including
mobiles & electronics and fashion & accessories. It has raised multiple rounds of funding,
the most recent being US$147mn in April, 2016. Softbank and Sequoia invested in the
company in October, 2014. Other investors include East Ventures, NetPrice and
Cyberagent Ventures.
Business model
Tokopedia is primarily a C2C marketplace similar to Taobao of Alibaba. We understand
that Tokopedia does not charge a commission for listing or selling items through its
platform. It monetizes sales mainly through its ‘Gold Merchant’ and ‘TopAds’ schemes.
The Gold Merchant scheme allows merchants greater flexibility to manage their store on
the platform while TopAds offers better visibility amongst buyers. To facilitate the
transaction, Tokopedia operates an escrow system wherein the payment is forwarded to
the seller only after the buyer receives the goods.
According to media reports, Tokopedia currently has 300k merchants and processes
7.5mn transactions per month. We also understand that majority of the transactions
happen through mobile. It has over 100k app downloads on the Android platform.
Logistics, competition the key challenges
Logistics is a key challenge for Tokopedia especially given that Indonesia is an archipelago
and relatively under-developed infrastructure compared to Singapore and Malaysia. JNE is
a preferred logistics partner for Tokopedia on which it offers a 2% cashback on the price of
postage for each shipment. However Tokopedia deals with a number of other logistics
partners as well.
Competitive intensity has been rising in the e-tailing space in Indonesia with a number of
local and regional e-tailers such as Bukalapak, Lazada, Elevenia, Blibli as well as discussion
forums like Kaskus where a lot of C2C commerce happens.
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SingPost – E-commerce Logistics Driving Growth
Exhibit 73: SingPost - Snapshot
Funding (US$mn)
Segment
HQ
Key Competitor(s)
457
Key investors
Logistic
Description
Singapore
Regions
aCommerce, DHL, Pos Malaysia
Alibaba
E-commerce logistics, postal mails
Asia Pacific
Significance of e-commerce for SingPost
E-commerce related revenue now contributes a third of SingPost’s revenues and is a key
growth driver for the company. In 9MFY16 for instance e-commerce revenue grew 53%
YoY (with some inorganic contribution as well) vs. 14% growth for non-ecommerce
revenue. E-commerce has also helped SingPost significantly expand its regional reach with
overseas business now accounting for over 40% of its revenues.
Exhibit 74: E-commerce related revenues accounted for a
third of SingPost’s revenues in 9MFY16
Exhibit 75: E-commerce related revenues have been
growing much faster for SingPost
Initiatives in e-commerce logistics
SingPost has identified e-commerce as a key transformational initiative for the company. It
has been investing across the value chain. Two key subsidiaries in SingPost’s e-commerce
business are Quantium Solutions which works across warehousing, fulfilment and last
mile delivery and SP eCommerce which provides enterprise solutions.
In the mail segment, SingPost has developed an envelope called SmartPac Lite for ecommerce items of up to 1kg. In the logistics segment, SingPost has made a number of
acquisitions and invested in logistics infrastructure and last mile capabilities to strengthen
its end-to-end integrated ecommerce logistics value chain. These include freight, customs
and regulations management; warehousing and fulfilment capabilities; last mile delivery
and returns; and ecommerce web services. In the retail & e-commerce segment, it has
rolled out a fully integrated end to end ecommerce fulfilment solution to help SMEs sell
online, scale and enhance productivity called ezyCommerce.
SingPost has also tied up with Alibaba, with the latter investing over US$450mn in
SingPost to help develop an e-commerce related logistics network in the region. SingPost
is also collaborating with Alibaba in various markets for last mile delivery resulting in
strong volume growth.
page 38 of 49
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21 April 2016
VNG – Leading Internet Company in Vietnam
Exhibit 76: VNG - Snapshot
Founded
Funding (US$mn)
Segment
HQ
Key Competitor(s)
2004 Founder/CEO
n/a Key Investors
Entertainment
Description
Vietnam
Regions
Garena, Asiasoft Corp, PlayLab
CyberAgent Ventures
Vietnam
Company background
VNG was founded in September, 2004, primarily as a gaming company under the name
VinaGame. In June 2005 it signed its first contract with Kingsoft to bring “Vo Lam Truyen
Ky” to Vietnam. In 2006, the company entered e-commerce through 123mua.vn. During
2006-08, it also developed a number of web products such as Zing Play, Zing Chat, Zing
Mp3 and Zing News all under the Zing brand. In 2009 it launched “Zing Me” a social
networking site. In 2H2012, VNG introduced its messaging app Zalo, which reached 2mn
users within 5 months of launch and 10mn users by March, 2014. In 2014, media reports
indicated that VNG sold its e-commerce site to FPT for a nominal amount. CyberAgent
Ventures is reported to have invested in VNG in a round in September, 2010.
Offerings across multiple segments
VNG is present across a wide spectrum of segments within the internet/e-commerce
space in Vietnam. We highlight some of its key offerings below.
1) Games & entertainment. VNG is one of the four main game publishers in the
Vietnamese market with online games like Vo Lam Truyen Ky, Kiem The, Phong Than as
well as casual games like Zing Speed, Zing Play, Boom Online and Gunny. Zing also offers
music streaming services (Zing mp3), provides news updates (Zing News) and TV shows
online (Zing TV).
2) Social networking & messaging. In this segment, VNG’s key offerings are Zalo, its
mobile messaging app and Zing Me, its social network which is focused on the games
offered by VNG
3) Software & applications. VNG has been developing a number of software
solutions applications mainly targeted at the Vietnamese market, since its early days. Key
amongst these are: 1) Cyber Station Manager (CSM) which is a free software for
managing Internet agencies. CSM is now the most popular managing software for
internet shops in Vietnam with over 60% of market share and over 2 million downloads
every day 2) Laban Key, a Vietnamese keyboard for mobile devices
4) E-commerce. VNG’s key offerings in e-commerce are its online payment platform
123Pay and movie ticket booking app.
page 39 of 49
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21 April 2016
Appendix-1: Private market funding in
ASEAN internet/e-commerce
Exhibit 77: Private market fund raisings in ASEAN internet/e-commerce
Date
Company
Segment
HQ
Amt raised
(US$mn)
Investors
Apr-16
Apr-16
Mar-16
Mar-16
Mar-16
Mar-16
Lazada
Tokopedia
Garena
EZBUY
Medical Departures
U-Hop
E-tailing
E-tailing
Gaming
E-tailing
Classified
Travel
SG
ID
SG
SG
TH
PH
500
148
170
20
3
7
Alibaba
n/a
CGC Capital, IDG Ventures, Vision Knight Capital
OPT SEA, Hubert Burda Media, CyberAgent Ventures, DMP VC
Asian Alliance Investment Corporation, Philippine Corporation
Mar-16
Mar-16
Mar-16
Mar-16
Feb-16
Feb-16
Feb-16
Jan-16
Jan-16
Dec-15
Dec-15
Servicehero
Momo
Kurio
iflix
Orami
Tiki
Elevenia
Eyeota
Xfers
Vanitee
Burpple
Services
Payments
Entertainment
Entertainment
E-tailing
E-tailing
E-tailing
Digital advertising
Payments
Classified
Classified
MA
VI
ID
MA
ID
VI
ID
SG
SG
SG
SG
3
28
5
45
15
10
50
7
3
4
6
Golden Gate Ventures, Cradle seed Ventures
Goldman Sachs, Standard Chartered Private Equity
Gunosy
Sky, Emtek Group
Velos Partners, Ardent Capital, Gobi Partners, SMDV
VNG Corporation
Global Brain, Infinity e.Ventures and Project A Ventures
BWB Ventures, Partech Ventures, Convergence Ventures +5
Cosme, Garena, Ivan Lee, Luxasua, Robert Yap
SPH Media Fund, Tembusu Partners, Triumph Capital
Nov-15
Nov-15
Oct-15
Oct-15
Oct-15
Oct-15
kaodim
Bhinneka
Qraved
Honestbee
PlayLab
Hipvan
Services
E-tailing
Classified
Online grocery
Gaming
E-tailing
MA
ID
ID
SG
TH
SG
4
22
8
15
5
3
East Ventures,500 Startups, BEENEXT, Venturra Capital
Ideosource
GWC,M & Y Growth Partners, Toivo Annus,500 Startups, Convergence Ventures, Gobi Partners, Richmond Global
Formation 8, Gideon Yu, Steve Chen, Owen Van Natta, Pejman Mar Ventures
Monk’s Hill Ventures
Golden Gate Ventures, East Ventures, LionRock Capital, Toivo Annus and Wavemaker Partners
Sep-15
Happyfresh
Online grocery
ID
12
Sep-15
Aug-15
Aug-15
Aug-15
Aug-15
Jul-15
Migme
RedMart
Grab
Yogrt
Numoni
Qoo10
Social network
Online grocery
Travel
Social network
Payments
E-tailing
SG
SG
SG
SG
SG
SG
10
27
350
3
5
82
Jul-15
Jul-15
Jul-15
Jul-15
Jul-15
Jun-15
Jun-15
Jun-15
May-15
Fastacash
Paktor
Singapore Post
GlassesGroupGlobal
Bizzy
Chope
PropertyGuru
ralai
aCommerce
Payments
Social network
Logistic
E-tailing
Digital advertising
Classified
Classified
E-tailing
E-commerce Logistics
SG
SG
SG
MA
ID
SG
SG
ID
TH
15
8
207
3
3
8
129
3
5
Vertex Ventures, Sinar Mas Digital Ventures , Asia Venture Group, Beenext, Ardent Capital, 500 Startups, and Cherry
Ventures
Investor List not available
Garena, Softbank Ventures Korea, Visionnaire Ventures, and Eduardo Saverin
Coatue, SoftBank, Tiger Global, China Investment Corp.
Linear Venture, Centurian
OWW Capital Partners, Robert Yap
Singapore Press Holdings, eBay, Saban Capital Group, UVM 2 Venture Investments, Brookside Capital, Oak Investment
Partners
Rising Dragon, UVM 2 Venture, Life.SREDA
convergence Ventures, Majuven and Vertex Ventures
Alibaba
Nova Founders Capital, Caixa Capital, Toivo Annus, Siegfried Drueker, Uwe Kolb, Vectr Ventures
Ardent Capital
F&H Investor, NSI Venture, DSG Consumer Partners, Frontier Ventures, John Wu, Singapore Press Holdings
Emtek, Square Peg Capital, TPG
Beenos Plaza, CyberAgent Ventures & East Ventures
Ardent Capital, Indonesian conglomerate Sinarmas, Inspire Ventures
Apr-15
Apr-15
Apr-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Feb-15
Feb-15
Feb-15
Jan-15
Dec-14
Nov-14
Nov-14
Nov-14
Oct-14
DocDoc
iflix
Ensogo
Duriana
Zipmatch
Elevenia
Ensogo
Ninja Logistics
Matahari Mall
Carmudi
Coc Coc
Tickled Media
Grab
Lazada
Carousell
iCarsClub
Grab
Classified
Entertainment
E-tailing
E-tailing
Classified
E-tailing
E-tailing
E-tailing
Classified
Search
Social network
Travel
E-tailing
Classified
Travel
Travel
SG
MA
TH
SG
PH
ID
TH
SG
ID
PH
VI
SG
SG
SG
SG
SG
SG
9
30
27
3
3
18
13
3
500
25
14
3
250
250
6
60
65
Hong Leong Financial Group, SparkLabs Global Ventures
Catcha group
Vipshop
econtext Asia and Beenos Asia
Monk’s Hill Ventures,500 Startups
Ward Ferry Management, Vipshop
Monk’s Hill Ventures, Insas Berhad
Lippo Group
Tengelmann Ventures, HV Holtzbrinck Ventures, Asia Pacific Internet Group
Hubert Burda Media
Hellmut Schutte, Tigris Capital, Vertes Ventures
SoftBank
Temasek, Kinnevik, Rocket Internet, Verlinvest
Sequoia Capital, Rakuten Ventures, Golden Gate Ventures, 500 Startups, Darius Cheung
IDG Capital Partners and MorningSide Ventures
Tiger Global
Oct-14
Oct-14
Oct-14
Sep-14
Sep-14
Aug-14
Aug-14
Jul-14
Gnum
Tokopedia
AdNear
iMoney
bellabox
Urban Remedy
NONSTOP games
RedMart
Social network
E-tailing
Digital advertising
Classified
E-tailing
E-tailing
Gaming
Online grocery
SG
ID
SG
MA
SG
SG
SG
SG
6
100
19
4
3
5
3
23
Tembusu Partners
SoftBank
Canaan Partners, Sequoia Capital, Telstra Ventures (AVG), Global Brain Corporation
iSelect
Allure Media, Fairfax Digital Ventures
venture51,science,slow ventures
Creandum, Lifeline Ventures
Garena, Softbank Ventures Korea, Visionnaire Ventures, and Eduardo Saverin
page 40 of 49
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21 April 2016
Exhibit 77: Private market fund raisings in ASEAN internet/e-commerce
Date
Company
Segment
HQ
Amt raised
(US$mn)
Investors
Jun-14
aCommerce
E-commerce Logistics TH
11
Jun-14
Jun-14
May-14
May-14
Apr-14
Apr-14
Apr-14
Feb-14
Feb-14
Feb-14
Jan-14
Dec-13
Fastacash
iCarsClub
Grab
Singapore Post
IN2NITE
Carmudi
Ookbee
ViSENZE
vinEcom
JetRadar
RedMart
aCommerce
Payments
Travel
Travel
Logistic
E-tailing
Classified
E-tailing
Search
E-tailing
Travel
Online grocery
SG
SG
SG
SG
SG
PH
TH
SG
VI
TH
SG
TH
4
10
15
250
3
10
7
4
50
10
5
3
Ardent Capital, Inspire Ventures, NTT DoCoMo, Sumitomo Corporation Equity Asia, Asia Pacific Capital, CyberAgent
Ventures, JL Capital, Sinar Mas Indonesia
Kewalram Chanrai Group and Golden Orile Investments, Jungle Ventures, Spring SEEDS Capital, Funding the Future.
Sequoia Capital, Crystal STream , Xing Wang + 2
GGV Capital, Vertex Ventures, Qunar.com
Alibaba
IDG Ventures + undisclosed investors
Tengelmann Ventures
Transcosmos, InVent
Rakuten Ventures, UOB Venture, Walden International
Vingroup
iTech Capital
Eduardo Saverin, Steve Melhuish, Jani Rautiainen, Meng Weng Wong, LionRock Capital (Hong Kong), Teng Wen Wee
CyberAgent Ventures,NTT DOCOMO Ventures
Dec-13
Dec-13
Nov-13
Nov-13
Nov-13
Oct-13
Oct-13
Jun-13
Jun-13
May-13
May-13
Mar-13
Mar-13
Jan-13
Jan-13
Dec-12
Nov-12
Lazada
Zalora
ROKT
Clozette
Berrybenka
M-DAQ
Fastacash
Wego
Lazada
Zalora
Reebonz
Chope
CtrlShift
Lazada
Momo
Lazada
AdNear
E-tailing
E-tailing
Digital advertising
Social Network
E-tailing
Finance
Payments
Travel
E-tailing
E-tailing
E-tailing
Classified
Digital advertising
E-tailing
Payments
E-tailing
Digital advertising
SG
SG
SG
SG
ID
SG
SG
SG
SG
SG
SG
SG
SG
SG
VI
SG
SG
250
112
8
3
5
12
3
17
100
100
40
3
3
20
6
26
6
Tesco, Verlinvest, Kinnevik, Access Industries
Access Industries, Scopia Capital, Rocket Internet, Len Blavatnik
Lachlan Murdoch, Square Peg Capital, John Ho, Greg Roebuck
Seed Ventures IV, Philip Private Equity
Transcosmos, GRE Ventures
Citi Ventures, GSR Ventures
Spring SEEDS Capital, Jungle Ventures, Spring Singapore
Crescent Group, Square Peg Capital, Tiger Global Management
Tengelmann Ventures, Summit Partners, HV Holtzbrinck Ventures, Investment AB Kinnevik, Verlinvest
Rocket Internet, Tengelmann Ventures, Investment AB Kinnevik, Summit Partners
MediaCorp Singapore, GGV Capital, Matrix Capital, Intel Capital, Infocomm Investments
Singapore Press Holdings
Electric Sheep Capital and Digital Media Partners
Tengelmann Ventures
Goldman Sachs
Summit Partners
Canaan Partners, Sequoia Capital
Nov-12
Sep-12
Jul-12
Lazada
iCarsAsia
UpToPromo
E-tailing
Classified
Digital advertising
SG
MA
TH
40
10
Rocket Internet
LISTED IN AUSTRALIA STOCK EXCHANGE
iTech Capital
Jan-12
Nov-11
Oct-11
Oct-11
Jan-11
MNC Shop
Payoo
Nubee
Affle
Reebonz
E-tailing
Payments
Gaming
Digital advertising
E-tailing
ID
VI
SG
SG
SG
6
3
13
10
14
GS Shop, PT Media Nusantara Citra Tbk
NTT Data
JAFCO
D2 Communication
GGV Capital, Intel Capital
page 41 of 49
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21 April 2016
Appendix-2: Singapore Start-up
Ecosystem
Compass, a leading solution for automated management reports, recently did a ranking
of the best start-up eco-systems around the world. Singapore ranked 10th globally (top 3
being Silicon valley, New York and Los Angeles) and the first in Asia (ahead of Bangalore
at 15th position). Singapore secured strong ratings for eco-system performance (11th),
funding (9th), market reach (9th) and start-up experience (9th), while it slipped
considerably on ability to get engineering talent (20th).
Exhibit 78: Singapore start-up ecosystem ranks top 10 globally
Rank
Location
Rank
Location
1
2
3
Silicon Valley
New York
Los Angeles
11
12
13
Paris
Sao Paulo
Moscow
4
5
6
7
8
9
10
Boston
Tel Aviv
London
Chicago
Seattle
Berlin
Singapore
14
15
16
17
18
19
20
Austin
Bangalore
Sydney
Toronto
Vancouver
Amsterdam
Montreal
Source: Jefferies, Compass online survey
Overall though, Singapore is seen as a vibrant start-up ecosystem in Asia, with most
players targeting the Asean market having their HQ here. Over the years, Singapore has
developed a strong ecosystem of investment entities including accelerators, early stage
angel investors and VCs (series A and above). We have shown some of them in the chart
below, but there are many more who have set up bases in SG for start-up investments.
The government has also played an active role in incubating and seeding new start-ups
through industry regulators (IDA/ MDA), research agencies like AStar, private sector
industry bodies like ACE (Action Community for Entrepreneurship). Also GLCs like Singtel,
MediaCorp, DBS etc. have set-up venture capital funds to seed start-ups in their respective
sphere of influence.
Exhibit 79: Singapore start-up eco-system - some key players
VC (Early stage)
VC (Series A and Above)
Jungle Ventures
Sequoia Capital
Wavemaker Partners
Intel Capital
GMO Venture Partners
Singtel Innov8
Spring Seeds
SPH Media Fund
Red Dot Ventures etc .
Global Brain etc..
Accelerator
Co- Working Space
JFDI
BASH
Muru Digital
The CO.
SPH Plug and Play
Mettle Work
Startupbootcamp
Smart Space
Rockstart etc.
Woolf Works etc …
Source: Jefferies, industry data
page 42 of 49
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21 April 2016
JTC Corp which is Singapore’s lead agency for developing industrial land and
infrastructure has identified One-North near Bueno Vista as the area for developing
knowledge-based industries in Singapore. Within this cluster, JTC Launchpad @OneNorth
has been identified as a cluster for developing new start-ups. JTC website shows that it
will eventually have over 300K sq.ft of space for start-ups with rents ranging within a
reasonable S$1.6-2.0psf. There are other private entities that are developing co-working
spaces for start-ups as seen in the chart above.
In December 2015, Singapore announced the setting up of a 30-member committee
called the Committee on the Future Economy (CFE) to position Singapore well for the
future – to be a vibrant and resilient economy with sustainable growth that creates value
and opportunities for all. The CFE will be helmed by Minister for Finance Mr Heng Swee
Keat and his deputy chairman, Minister for Trade and Industry (Industry) Mr S Iswaran.
They will lead a 30-member Steering Committee. The members come from different
industries, operating in both global and domestic markets and enterprises both large and
small and the committee recommendations are expected to be submitted by end of 2016.
Singapore functions as a testing bed, launch pad for Asean start-ups
With a strong support eco-system for funding and tax/other incentives in place, it’s no
surprise that many start-ups targeting the Asean market look at Singapore as their base/
HQ. Singapore itself is a very good test market for launching an online business due to its
1) High level of disposable income, 2) High internet/ smartphone penetration, 3)
Population density which makes fulfilment logistics easier, 4) Good payment networks
including high credit card penetration and propensity to use it for online purchases.
Exhibit 80: Singapore is an ideal test market for online platforms
Total population (m)
Disposable income per hh (USD)
Credit cards per adult
Internet penetration
Smartphone penetration
Average internet speed (MBps)
Retail ecommerce (USDbn)
Percentage of Ecommerce on mobile
5.4
97,000
2.7
87%
82%
8.4
4.4
50%
high population density, logistics easier
One of the highest globally
higher than US
up nearly 4x since 2012, rapid growth
shift to mobile already taking place
Source: Jefferies, IDA
Many of the start-ups we have spoken to see Singapore as an ideal testing bed for an
online business, with successful business models then going on to launch across Asean
using local language/ customised interfaces for each country. This allows the start-ups to
achieve scale by tapping into the larger addressable markets of the broader Asean region.
Smart Nation, an initiative that will boost growing e-commerce business
The Singapore Government has already started building the world’s first Smart Nation by
harnessing technology to create an ecosystem which will not only provide better living
standards to individuals but also provide businesses to use this infrastructure for better
growth prospects. The Smart Nation initiative adopts a people-centric approach by
rallying citizens, industries, research institutions, and the government to co-create
innovative solutions. The Government is responsible for laying the foundation, including
building the infrastructure, facilitating innovation and creating the framework for
contribution. Government agencies will also share extensive real-time data in the public
domain.
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21 April 2016
Exhibit 81: Smart Nation Initiatives proposed
Key initiative
Smart Nation PMO Office
Smart Nation Fellowship Programme
Mobile Application
Hackathons
Infocomm Investment
Smart Mobility
Smart Living
Objective
Bring citizens, the government and industry players together to identify issues, co-develop solutions, prototype
ideas and deploy them effectively
This program invites top data scientists, technologists and engineers to help the Singapore government deliver
meaningful digital and data solutions to improve the lives of citizens.
As part of efforts to improve public services, a number of Apps have been developed to facilitate communication
between the public and the providers of public service
This program offers opportunity to budding technologists to ideate and develop solutions to tackle real-world
challenges
Works with corporations, universities and professional accelerators to bring promising tech start-ups to accelerator
programmes
Provide greater access to real-time transport information so that citizens can better plan their journeys
A Smart HDB Town Framework has been developed to guide the development of Smart HDB Towns across 4 key
dimensions; Smart Planning, Smart Environment, Smart Estate and Smart Living
Source: Jefferies, IDA
SG govt acting to facilitate cross border E-commerce activities
Of late, the Singapore Government has entered into agreements with different
international organizations to facilitate cross border trade and increase the reach of
regional players:
•
In Feb 2016, the Trans Pacific Partnership was signed among twelve Pacific Rim
countries - Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico,
New Zealand, Peru, Singapore, the United States and Vietnam.
•
In Nov 2015, Singapore agency IE (International Enterprise) entered into an
agreement with the International and Commercial Bank of China to promote crossborder B2B and B2C trades.
•
In July 2015, IE announced a partnership with US based Amazon, China based T-mall
and Malaysia based Lelong, to provide local SMEs with easier access to global and
regional online platforms.
Singapore has a relatively open labour market and many incentives for new
start-ups
Singapore Government has taken several initiatives on the start-up front to attract foreign
individuals to incorporate their companies here. Below are some of the programs offered
by the Government:
Singapore Entre Pass: Singapore is one of the first countries to launch special visa
application for entrepreneurs. The program was launched way back in 2004 and offers
express entry to individuals who are keen to set up their companies here. However, there
was a revision to this program in September 2013 whereby the eligibility created was
made tougher to prevent illegal immigration via this route.
Government-aided equity financing schemes: The government co-sponsors
funding requirements at various stages, from seed funding to growth, for start-ups based
in Singapore.
Exhibit 82: Government-sponsored equity financing schemes for start-ups
Government Program
SPRING Startup Enterprise Development Scheme
Business Angels Scheme
Early-Stage Venture Funding Scheme
Scheme
Co-invests in commercially viable Singapore-based start-ups, along with independent third-party
investor(s), matching dollar-for-dollar up to a maximum of S$1 million
Co-invests in growth-oriented, innovative Singapore-based start-ups along with pre-approved business
angels matching dollar-for-dollar up to a maximum of S$1.5 million
Co-funding scheme where selected venture capital firms who raise at least S$10 million from third-party
investors will receive dollar-for-dollar matching from the NRF up-to a maximum of S$10 million
Source: Jefferies
Cash grants: The government offers cash grants to start-ups based in Singapore
through various sponsored programs such as ACE Start-ups Scheme; Technology
Enterprise Commercialization Scheme; iSTART:ACE Scheme; iSPRINT; ComCare Enterprise
Fund. The cash grants offered through each of these schemes range from S$50K - S$500K.
page 44 of 49
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21 April 2016
Business incubator schemes: The incubator schemes offered by Singapore
Government help start-ups with guidance to launch their businesses apart from offering
initial funding. There are currently five incubation programs either directly sponsored or
co-sponsored by the Government - i.Jam Micro Funding Scheme; NRF Technology
Incubation Scheme; Incubator Development Program; Incubator for Disruptive
Enterprises and Start-ups (IDEAS) Fund; Fast-Track Environmental and Water Technologies
Incubator Scheme (Fast-Tech)
Tax Incentive Scheme: The government offers tax benefits for start-ups as well as other
businesses. Any new company incorporated in Singapore is offered these tax benefits:
•
Initial 3 years: No tax on S$100,000 of taxable income; 8.5% (partial exemption) tax
rate on the next S$200,000 of taxable income. The taxable income above S$300,000
is charged at the normal headline corporate tax rate of 17%.
•
4th year onwards: 8.5% tax rate on taxable income of up to S$300,000 per annum.
The taxable income above S$300,000 will be charged at the normal headline
corporate tax rate of 17%.
Apart from the above tax incentives, the government also offers other tax benefits for
corporates who want to expand their business - Development and Expansion Incentive;
Investment Allowance, Pioneer Incentive Scheme, Productivity and Innovation Credit
(PIC) Scheme.
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Analyst Certification:
I, Arya Sen, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and subject
company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views
expressed in this research report.
I, Abhijit Attavar, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and
subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations
or views expressed in this research report.
I, Ranjeet Jaiswal, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and
subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations
or views expressed in this research report.
Registration of non-US analysts: Arya Sen is employed by Jefferies India Private Limited, a non-US affiliate of Jefferies LLC and is not registered/
qualified as a research analyst with FINRA. This analyst(s) may not be an associated person of Jefferies LLC, a FINRA member firm, and therefore may
not be subject to the NASD Rule 2241 and Incorporated NYSE Rule 472 restrictions on communications with a subject company, public appearances
and trading securities held by a research analyst.
Registration of non-US analysts: Abhijit Attavar is employed by Jefferies Singapore Limited, a non-US affiliate of Jefferies LLC and is not registered/
Registration of non-US analysts: Ranjeet Jaiswal is employed by Jefferies India Private Limited, a non-US affiliate of Jefferies LLC and is not registered/
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period.
The expected total return (price appreciation plus yield) for Buy rated securities with an average security price consistently below $10 is 20% or more
within a 12-month period as these companies are typically more volatile than the overall stock market. For Hold rated securities with an average
security price consistently below $10, the expected total return (price appreciation plus yield) is plus or minus 20% within a 12-month period. For
Underperform rated securities with an average security price consistently below $10, the expected total return (price appreciation plus yield) is minus
20% or less within a 12-month period.
NR - The investment rating and price target have been temporarily suspended. Such suspensions are in compliance with applicable regulations and/
or Jefferies policies.
CS - Coverage Suspended. Jefferies has suspended coverage of this company.
NC - Not covered. Jefferies does not cover this company.
Restricted - Describes issuers where, in conjunction with Jefferies engagement in certain transactions, company policy or applicable securities
regulations prohibit certain types of communications, including investment recommendations.
Monitor - Describes securities whose company fundamentals and financials are being monitored, and for which no financial projections or opinions
on the investment merits of the company are provided.
Valuation Methodology
Jefferies' methodology for assigning ratings may include the following: market capitalization, maturity, growth/value, volatility and expected total
return over the next 12 months. The price targets are based on several methodologies, which may include, but are not restricted to, analyses of market
risk, growth rate, revenue stream, discounted cash flow (DCF), EBITDA, EPS, cash flow (CF), free cash flow (FCF), EV/EBITDA, P/E, PE/growth, P/CF,
P/FCF, premium (discount)/average group EV/EBITDA, premium (discount)/average group P/E, sum of the parts, net asset value, dividend returns,
and return on equity (ROE) over the next 12 months.
Jefferies Franchise Picks
Jefferies Franchise Picks include stock selections from among the best stock ideas from our equity analysts over a 12 month period. Stock selection
is based on fundamental analysis and may take into account other factors such as analyst conviction, differentiated analysis, a favorable risk/reward
ratio and investment themes that Jefferies analysts are recommending. Jefferies Franchise Picks will include only Buy rated stocks and the number
can vary depending on analyst recommendations for inclusion. Stocks will be added as new opportunities arise and removed when the reason for
inclusion changes, the stock has met its desired return, if it is no longer rated Buy and/or if it triggers a stop loss. Stocks having 120 day volatility in
the bottom quartile of S&P stocks will continue to have a 15% stop loss, and the remainder will have a 20% stop. Franchise Picks are not intended
to represent a recommended portfolio of stocks and is not sector based, but we may note where we believe a Pick falls within an investment style
such as growth or value.
Risks which may impede the achievement of our Price Target
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This report was prepared for general circulation and does not provide investment recommendations specific to individual investors. As such, the
financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions based
upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Past performance of
the financial instruments recommended in this report should not be taken as an indication or guarantee of future results. The price, value of, and
income from, any of the financial instruments mentioned in this report can rise as well as fall and may be affected by changes in economic, financial
and political factors. If a financial instrument is denominated in a currency other than the investor's home currency, a change in exchange rates may
adversely affect the price of, value of, or income derived from the financial instrument described in this report. In addition, investors in securities such
as ADRs, whose values are affected by the currency of the underlying security, effectively assume currency risk.
Other Companies Mentioned in This Report
• AIMS AMP Capital Industrial REIT (AAREIT SP: SGD1.35, HOLD)
• Ascendas Real Estate Investment Trust (AREIT SP: SGD2.50, BUY)
• Mapletree Commercial Trust (MCT SP: SGD1.47, HOLD)
• Mapletree Logistics Trust (MLT SP: SGD1.03, BUY)
• MobileOne (M1 SP: SGD2.48, HOLD)
• Singapore Telecom (ST SP: SGD3.95, BUY)
• Starhub (STH SP: SGD3.34, UNDERPERFORM)
Distribution of Ratings
IB Serv./Past 12 Mos.
Rating
BUY
HOLD
UNDERPERFORM
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Count
Percent
Count
Percent
1169
848
160
53.70%
38.95%
7.35%
327
163
17
27.97%
19.22%
10.62%
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Other Important Disclosures
Jefferies Equity Research refers to research reports produced by analysts employed by one of the following Jefferies Group LLC (“Jefferies”) group
companies:
United States: Jefferies LLC which is an SEC registered firm and a member of FINRA.
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This report is not an offer or solicitation of an offer to buy or sell any security or derivative instrument, or to make any investment. Any opinion or
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