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1、A Way of Life:E-commerce inAsiaResearchReinventedSmartkarma is a globalinvestment research networkthat brings togetherindependent Insight Providers,institutional investors,andcorporate investor relationsprofessionals and management.At Smartkarma,We Do Things DifferentlyWe leverage the online economy
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3、.In 2019,we launched CorporateSolutions,which allows company executives and investor relations personnelto connect seamlessly to investors and analysts,all within a single network.In this effort,we work closely with global exchanges such as SingaporeExchange,which became our investor,to provide such
4、 services to listedcompanies worldwide.Our model ensures that the research on our platform is objective andunbiased,independent and free from conGicts of interest.The platformdetermines appropriate pricing according to the quality and value of eachresearch piece.This helps independent Insight Provid
5、ers monetise theirresearch and incentivises them to produce truly quality,differentiated workthat stands out from the rest of the market.A commitment to quality is alsowhy we carefully vet and select our Insight Providers.Less than 10 percent ofthe independent analysts who apply are approved as Insi
6、ght Providers onSmartkarma.We currently have over 100 such curated Insight Providerspublishing on the platform,ranging from one-person operations to teams ofmultiple members around the world.In the following pages,you will be able to see for yourself the result of ourefforts.In the meantime,we will
7、be busy bringing you more excitingdevelopments over the course of the year!2Table of Contents1.Weimob(2013 HK):Strategic Patience Will Be Rewarded(Part 2).42.2023 High Conviction:JD.com to BeneFt from Discretionary Spend Recovery,Margin Progress on Track.93.Daifuku(6383)|Attractive Valuation Drivers
8、 Despite near Term Risks.194.Trading Sea Ltd in 2023:It Is Still The Same Beast.245.Adi Sarana Armada(ASSA IJ)-Harnessing Logistics and Autos.283Eric ChenGreater China Equity Long/ShortAnalystWeimob Inc.|Equity Bottom-UpWeimob(2013 HK):Strategic Patience WillBe Rewarded(Part 2)By Eric Chen|20 Nov 20
9、22EXECUTIVE SUMMARYWeimob has emerged from the pandemic stronger and leaner,furtherconsolidating its leadership in Chinas e-commerce SaaS market.Drawing insights into the supply side(merchants/brands)on Alibabaplatform,our bottom-up analysis suggests that Weimob potentially hasa US$600mn revenue opp
10、ortunity by 2025.We value Weimob at US$3bn assigning 5xPS on its US$600mn revenueby 2025,implying 25%CAGR over 3-year period.Patience needed tonavigate high-inUation environment which pressures growth assets.DETAILIn the Trst piece of the insight,we compared the US and China SaaS marketstructures fr
11、om high-level perspectives and highlighted differences in laborcosts and the composition of service sector as two deep-seated industrydrivers.We use a bottom-up framework for sizing the total addressablemarket(TAM)for Weimob in this part.Sizing the TAM for WeimobWeimob helps merchants(primarily SMEs
12、 but key accounts beingincreasingly a focus)make digital commerce transformation throughprovision of SaaS products and online marketing services.Obviously,theTAM is a function of its user base and ARPU.We believe it should be mainlydriven by the user base in the medium to long term instead of ARPU w
13、hich,other things being equal,is expected to be stable or even decline.SaaSplayers relentlessly lower prices to attract more enterprises,and a largersubscription base leads to further pricing cut,which helps recruit moremerchants.Scale begets scale.This is evident in most SaaS or cloudcompanies.For
14、example,Shopify Shopify Inc(SHOP US),the Canadiancloud-based commerce platform,grew its subscription business through 4xincrease in user base over last Tve years,with ARPU staying pretty muchunchanged.Weimob(2013 HK):Strategic Patience Will Be Rewarded(Part 2)Eric Chen4Since Chinas leading e-commerc
15、e players like Alibaba Alibaba(ADR)(BABAUS)and Meituan Meituan(3690 HK)all have very competitively priced(orfree)SaaS offerings as platform services,Weimobs products are moresuitable for 1)merchants with omni channel,full chain and public/privatetrafTc domain commerce operations in retail,catering a
16、nd other local lifebusinesses,and 2)merchants in the Tencent ecosystem given it hashistorically been backed by Tencent.Our channel checks suggest that thekey accounts(KAs)among the Trst category merchants typically generaterevenue ranging from multi hundred million Rmb up to a couple of billionRmb,o
17、perate hundreds of ofUine stores in addition to online presence andpay Rmb300-500k per year for SaaS services(e.g.Rmb1-1.5 million over 3year contract life).These KAs dont have sufTcient budget to maintaindedicated in-house IT or R&D team,while the entry-level standard SaaSproduct suites priced at$1
18、000-2000 level are far from meeting their demand.This is we believe why Weimob launched the“moving-up”strategy in 2021to sharpen focus on large brands and merchants.KA segmentTo think about the potential size of the KA pool,Alibaba provides very usefulinsights.Although Alibabas Rmb8000bn GMV for 202
19、1 accounted for lessthan 20%of Chinas total retail sales,we estimate the combined turnover(online and ofUine)of all the merchants and brands on Taobao and Tmall isresponsible for somewhere between 2/3 to 3/4 of Chinas total retail sales.Ifexcluding local service businesses such as the Rmb5trillion r
20、estaurant andcatering sectors,Taobao and Tmall have pretty much captured the entiretyof Chinas consumer-facing companies,big and small,of which Weimobsexisting and potential clients should represent a subset.The below table illustrates the segmentation of Alibaba merchants by GMV,which allows us to
21、better quantify the size of Weimob user base.It is clearthat the 20/80 rule applies.Less than 20%of total merchants contributedalmost 3/4 of Alibabas total GMV.250k Tmall merchants generate roughlythe same amount of GMV(Rmb4 trillion)as over 8 million TaobaoWeimob(2013 HK):Strategic Patience Will Be
22、 Rewarded(Part 2)Eric Chen5merchants do.Within Tmall,over 1000 merchants/brands reportedly eachgenerated above Rmb100mn GMV.We estimate they combined contributedto at least Rmb500 billion GMV in FY22,meaning less than 0.5%of Tmallmerchants is responsible for 12.5%of Tmall GMV.GMV rangeNumber ofmerch
23、antsAs%of AlibabamerchantsSegmentGMV(Rmb tn)As%of AlibabaGMVAboveRmb100mn1000+negligible(0.5%of Tmallmerchants)0.56%(12.5%of TmallGMV)Rmb10-100mnLess than 100k1.2%2.531%Rmb1-10mn1mn+13%337%Less thanRmb1mn7mn+86%226%Source:company,news run,estimatesWhat is the take for Weimob?The group of merchants c
24、overed by Weimobsmoving-up strategy should largely correspond to those generating aboveRmb30mn GMV from Tmall,which may translate into total sales up to multihundred million Rmb,in line with our channel checks.Our conversation with industry experts also points to 8000-10000 KAs in themoving-up marke
25、t segment.Given there are 1000 plus Tmall merchants withover Rmb100mn GMV,we think the experts guesstimates are largelysupported,as lower GMV threshold(from Rmb100mn to Rmb30mn)willdisproportionately expand the merchant base.If each of the 10,000 KA willpotentially sign up for a 3-5 year SaaS contra
26、ct for Rmb1mn,the ARR(annual recurring revenue)amounts to Rmb2-2.5bn(US$300-350mn).SME segmentMoving from KAs to the SME client base,at current ARPU of Rmb11,000(US$1500),there are only a very small portion out of millions of China SMEmerchants that may Tt into Weimobs client proTle-operating across
27、 e-commerce platforms,across online and ofUine and with meaningful scale.Note the average GMV of the 8 million Taobao merchants is just Rmb500k,and we calculated that up to 7 million of these merchants may generate lessthan Rmb1 million GMV.In fact,even a Rmb1 million GMV merchant,withsingle-digit n
28、et margin,may think twice before committing Rmb11,000 tosign up for Weimobs SaaS products.Weimob had over 2 million registeredmembers years ago,but the paying subscribers have been hovering around100k after rapid growth from 2017 to 2020.This highlights the point weargued that low labor costs associ
29、ated with low-skill service sectors such asretail and catering leave limited near-term room for efTciency improvementfor SaaS players whose own cost structure is driven by well-paid knowledgeworkers.That said,rising labor costs are structural trend in China,soWeimob stands to beneTt in the long term
30、.Assuming Weimob can grow its SME subscribers by two-fold(i.e.,from 100kto 300k)by lowering ARPU from$1500 to$1000 in the long term,it willgenerate an ARR of US$300mn from this segment.Adding back theWeimob(2013 HK):Strategic Patience Will Be Rewarded(Part 2)Eric Chen6US$300mn ARR from the KA segmen
31、t,Weimob can expect to tap into aUS$600mn business opportunity,which is approximately the size ofShopifys North America SaaS subscription revenue.Path to breakeven and long termpro=tability1H22 results suggested that Weimob had doubled down on its“moving-up”strategy.The proportion of subscription re
32、venue from smart retail sector(primarily KAs)increased from 33%in 1H21 to 41%in 1H22.The companyexpects that KAs will contribute over 50%of revenue beyond 2023 andpossibly 70%by 2025.Weimob also disclosed that 1,155 brands from thesmart retail business had an average contract value of Rmb200k.Both t
33、henumber of KAs and ARPU make us feel comfortable with the assumptionsused in calculating Weimobs KA revenue pool.The management was clearly aware of the efTciency issue and rolled outaggressive cost cutting measures which shrank workforce by 20%from endof last year.Weimob expects to break even by 2
34、H23 on the condition that itstopline grows by above 20%for 2023,as positive operating leverage kicks inon stable cost base.Source:company.Light blue column denotes revenue and yoy growth rate for2022H2 and beyond.Deep blue,yellow and grey columns denote R&D,otherlabor costs and other expenses as%of
35、revenueAs far as its long term proTtability is concerned,we believe it to a largeextent depends on how the“moving-up”strategy is unfolding and carriedout.While KAs bring along big-ticket contracts,the Uip side is they couldweigh on margins because of their stronger bargaining power and morecomplex o
36、r tailored demands than SMEs.Investors in China ADR space maywell remember how Baozun Baozun Inc.(BZUN US),a China ecommercesolution provider serving predominantly global or national brands,wentfrom a market darling in 2017 to an ignored penny stock today.Even asBaozun generated over Rmb70bn GMV per
37、 year,it has yet made proTt as ithas to confront the pricing pressure exerted by big brands and rising laborand trafTc acquisition costs at the same time.Although Weimob operates adifferent business model,it is not insulated from the challenges in our view.Weimob(2013 HK):Strategic Patience Will Be
38、Rewarded(Part 2)Eric Chen7This is why we believe investors should not have rosy expectations onWeimobs long term margin and a net margin of low double-digit looksrealistic to us,which means Weimob may generate around US$100mn netproTt.Valuation and riskThe valuation of global SaaS sector looks fair
39、after rounds of tech selloff thisyear.The sector is trading at 5x PS,below 40th percentile since 2015.Afterits share price peaked early in 2021 along with the broad China tech sector,Weimob saw more than 90%of its market cap wiped out by October.Even asthe stock has rallied over last couple of weeks
40、,Weimob is still trading ataround 5x PS on forward basis.We believe Weimob is a US$3bn company by 2025,assuming 5x PS onUS$600mn revenue,which means 25%CAGR over a 3-year investmenthorizon.Key risks include whether the company can further consolidate itsmarket leadership and ensure proTtability for
41、KA contracts.In addition,asustained high inUation environment will pressure valuation of growthassets such as Weimob,given its loss-making status in particular.Disclosure&Certi=cationI/We have no position(s)in the any of securities referenced in this insightViews expressed in this insight accurately
42、 reUects my/our personal opinion(s)about the referenced securities and issuers and/orother subject matter as appropriate.This insight does not contain and is not based on any non-public,material information.To the best of my/our knowledge,the views expressed in this insight comply with Singapore law
43、 as well as applicable law in thecountry from which it is postedI/We have not been commissioned to write this insight or hold any speciTc opinion on the securities referenced thereinI/We have signed the Insight Provider Agreement and this insight does not violate any of the terms speciTed therein.Er
44、ic Chen(19 Nov 2022)Weimob(2013 HK):Strategic Patience Will Be Rewarded(Part 2)Eric Chen8Wium Malan,CFAGlobal Emerging MarketEquitiesJD.com Inc.|Equity Bottom-Up2023 High Conviction:JD.com to Bene=t fromDiscretionary SpendRecovery,MarginProgress on TrackBy Wium Malan,CFA|24 Nov 2022EXECUTIVE SUMMARY
45、JD.com should have an outsized beneTt from a recovery in Chineseretail sales as further macro stimulus and a gradual easing of Chinascovid-zero policy stimulates demand throughout 2023.Following a return to margin expansion this year,due to economies ofscale and curbing operating expenses during a c
46、hallenging macroenvironment,the longer-term margin expansion trend remains ontrack.JD.com Inc.(9618 HK)trades on extremely attractive valuationmultiples(PE,PEG,FCF yield)with net cash on its balance sheet equalto 32%of its market cap.DETAILInvestment thesisAs Chinas leading direct retailer of physic
47、al goods,with a largecontribution from discretionary retail product sales,JD.com Inc.(9618 HK)should have an outsized beneTt from a recovery in overallChinese retail sales as the Tscal and monetary stimulus,coupled witha gradual easing of Chinas covid-zero policy,stimulates demandthroughout 2023.Fol
48、lowing a return to margin expansion this year,due to further economies of scale and signiTcant efforts on curbingoperating expenses during a challenging macro environment,thelonger-term margin expansion trend remains on track.From a PEratio perspective,JD.com trades at a discount to its historical a
49、veragetrading range and its global peer group(on a growth-adjusted basis).It has a net cash position on its balance sheet of RMB186.6bn2023 High Conviction:JD.com to BeneFt from Discretionary Spend Recovery,Margin Progress on TrackWium Malan,CFA9($26bn),equal to 32%of its current market cap.JD.com a
50、lsocurrently trades on an extremely attractive 13.4%NTM FCF yield(4.5%LTM FCF yield),which is at a signiTcant discount to its historicaverage trading range and its global peer group.Company OverviewJD.com is the largest retailer in China.Initially focused on a 1P online retailmodel,it has since open
51、ed its industry-leading retail infrastructure andtechnology to partners,brands,and other sectors,as part of its Retail as aService offering.It now describes itself as a leading supply chain-basedtechnology and service provider.Source:Company reports2023 High Conviction:JD.com to BeneFt from Discreti
52、onary Spend Recovery,Margin Progress on TrackWium Malan,CFA10More speciTcally,it now splits its revenue-generating activities between JDRetail,JD Logistics,Dada,and New Business.JD Retail mainly consists of itsonline retail(1P),online marketplace(3P),and marketing services in China.JD Logistics incl
53、udes both internal and external logistics businesses whichare also separately listed as JD Logistics(2618 HK).JD.com has retained aroughly 63.5%stake,Tnancially consolidating these operations.Dada is alocal on-demand delivery and retail platform in China.New businessesmainly include JD Property,Jing
54、xi,its overseas businesses,and technologyinitiatives.JD Property owns,develops,and manages its logistics facilitiesand other real estate properties.Jingxi is an online marketplace channelcatering to the demand of customers in lower-tier cities.Industry OverviewOnline retail sales of physical goods p
55、enetration seem to havestarted to plateau at roughly 30%over the past 2 years,with thegross merchandise value(GMV)and revenue generation from theleading industry players such as Alibaba Group(9988 HK),andJD.com Inc.(9618 HK)being heavily impacted by typical economiccycles and the cyclical impact of
56、external forces such as covid-lockdown and regulatory pressure.2023 High Conviction:JD.com to BeneFt from Discretionary Spend Recovery,Margin Progress on TrackWium Malan,CFA11JD.com has consistently outperformed overall Chinese retail sales ofgoods growth,taking market share from not only the brick-
57、and-mortar operators but also Alibabas market-leading online platforms,TMall and Taobao.Following negative retail sales growth reportedfor March to May 2022,we have witnessed a rebound to growth inJune to September 2022.Whilst China reported just+0.5%growth inretail sales of goods(excluding catering
58、 services)in October 2022,growth in online retail sales of physical goods grew by 22%y/y.Themajor catalyst for a sustained recovery in Chinese retail sales shouldbe a gradual easing of Chinas covid-zero policy,expectedthroughout mid-2023.JD.com has sustained a prolonged period of market share gains
59、in theonline retail industry up to 2Q22 when its growth was stiUed by acyclical downturn in the economy,impacted by covid-relatedlockdowns,and we witnessed a resurgence in growth from industrydisruptors Pinduoduo(PDD US)and Kuaishou Technology(1024 HK).As Chinas leading direct retailer of physical g
60、oods,JD.com should2023 High Conviction:JD.com to BeneFt from Discretionary Spend Recovery,Margin Progress on TrackWium Malan,CFA12have an outsized beneTt from a recovery in overall retail sales as theTscal and monetary stimulus,coupled with a gradual easing ofChinas covid-zero policy,stimulates dema
61、nd throughout 2023.Key controversy:Revenue growthrecoveryFollowing 4 years of sustaining top-line growth at roughly 30%p.a.,netrevenue growth has slowed down signiTcantly during 2022(11%y/y for9M2022)and is expected to recover in 2023 and 2024F to mid-teens levels.Net product revenues(1P)still repre
62、sent 81%of group revenue,with legacyelectronics and home appliance products contributing 49%and generalmerchandise having grown to contribute 32%.Net service revenues(3P)nowcontribute almost 20%to group revenue due to fast growth from its logisticsservices and its marketplace and advertising busines
63、s.2023 High Conviction:JD.com to BeneFt from Discretionary Spend Recovery,Margin Progress on TrackWium Malan,CFA13Over the past year,it has been the electronics and home appliance productssales that have suffered the worst during the macro downturn,highlightingthe still signiTcant cyclical nature of
64、 its consumer discretionary offerings.General merchandise,which includes more consumer staple products,hasheld up reasonably well.Group revenue growth has been saved by its morenascent logistics operations,which are near-breakeven at the operatingproTt line,at best.This has dragged group margins,whi
65、ch we discuss in thenext section.For a meaningful re-acceleration in top-line growth,JD.com is dependent ona recovery in the overall macro environment,and consumer sentiment,inChina.This,in turn,would depend on continued monetary and Tscalstimulus from the Chinese government,alongside a gradual easi
66、ng of itscovid-zero policy,which we expect throughout mid-2023.Any positive newsUow and developments on these fronts should be a positive catalyst for theshare price during 2023.2023 High Conviction:JD.com to BeneFt from Discretionary Spend Recovery,Margin Progress on TrackWium Malan,CFA14Key contro
67、versy:MarginprogressionFollowing margin pressure experienced during 2021,which castdoubts on JD.coms ability to sustain continued margin progression,we have seen a recovery in margins during 2022YTD,and the longer-term margin expansion trend remains intact.Focussing on the JD Retail segment,we can s
68、ee the impact ofrevenue mix changes toward faster-growing supermarket productcategories and the 3P operations on operating margins in 2021.Thisyear,we have seen a signiTcant margin expansion again due tofurther economies of scale and signiTcant efforts on curbingoperating expenses during a challengi
69、ng macro environment.Looking at the rest of the business,JD logistics more-or-less runs onan operating proTt breakeven level,which is expected to continue asmanagement remains conTdent that the utilisation of capacity canbe further optimised,which should offset continued investment toscale the busin
70、ess.Dada and New Business should continue to be adrain on group margins going forward.3Q2022 group operatingmargins were also boosted by a short-term proTt of RMB237m in theNew Business segment due to a gain from the Trst tranche closing ofJD Propertys third property core fund and a narrowing of the
71、 lossfrom the Jingxi business.2023 High Conviction:JD.com to BeneFt from Discretionary Spend Recovery,Margin Progress on TrackWium Malan,CFA15“I want to emphasize that our long-term margin target hasnt changed,which is based on the industry-level margin and the operatinge#ciency we can generate thro
72、ugh technology and the scale of ourbusiness operation.If consumer condence is largely recovered,wewill add more investments to drive growth in users and the marketshare.However,at the same time,we will also gain additionaloperating e#ciency due to scale.,due to technology,and due to theincreased con
73、tribution of our service income.”Sandy Ran Xu,ChiefFinancial Ocer,JD.comWithout repeating the full analysis here,it is worthwhile referring tothe deep-dive analysis,performed in 2021,on JD.coms potential forlong-term margin expansion(JD.com:A Detailed Look at Long-TermMargins and Valuation),and foll
74、ow-up work in March this year(JD.com:Can Sustained Market Share Gains Be Transferred intoSustained Margin Progression?),where we concluded that JD.comcould long-term sustainably generate above 5.0%NOPAT margins,which is a signiTcant expansion from the roughly 1.5%reportedduring 2022YTD.“2023 High Co
75、nviction:JD.com to BeneFt from Discretionary Spend Recovery,Margin Progress on TrackWium Malan,CFA16ValuationJD.com currently trades on an 18.2x NTM PE ratio,which is one standarddeviation below its 5-year historical average trading range(using the US-listed JD.com Inc(ADR)(JD US).Source:FactSet 5na
76、ncial data and analyticsOn a growth-adjusted basis,JD.com also trades at a signiTcant discount toits peer group,at only 0.7x 2022 PEG ratio.When looking at the valuation for a company like JD.com(and Amazon,etc.)it is vitally important to recognise the free cash Uow generation ability of thebusiness
77、 model given the signiTcant negative working capital cycle(receivables days are a fraction of payables days).JD.com has also seen itscapital intensity reduce from around 3-4%of revenue to only around 2%asits most signiTcant infrastructure investments have already been made.Thishas allowed JD.com to
78、generate Free Cash Flow(Operating cash Uow lessCapex)of roughly RMB27bn a year,on average over the past 3 years,andRMB25bn so far this year(9M2022),at an average free cash Uow margin ofaround 3.4%.Since the company does not pay any dividends and has not hadany share buybacks since 2020,JD.com has a
79、net cash position on its balance2023 High Conviction:JD.com to BeneFt from Discretionary Spend Recovery,Margin Progress on TrackWium Malan,CFA17sheet of RMB186.6bn($26bn)as of 30 September 2022.This is equal to 32%of its current market cap.JD.com also currently trades on an extremelyattractive 13.3%
80、NTM FCF yield(4.5%LTM FCF yield),which is at asigniTcant discount to its historic average trading range and its global peergroup.Source:FactSet 5nancial data and analyticsDisclosure&Certi=cationI/We have position(s)in one or more of the securities referenced in this insightViews expressed in this in
81、sight accurately reUects my/our personal opinion(s)about the referenced securities and issuers and/orother subject matter as appropriate.This insight does not contain and is not based on any non-public,material information.To the best of my/our knowledge,the views expressed in this insight comply wi
82、th Singapore law as well as applicable law in thecountry from which it is postedI/We have not been commissioned to write this insight or hold any speciTc opinion on the securities referenced thereinI/We have signed the Insight Provider Agreement and this insight does not violate any of the terms spe
83、ciTed therein.Wium Malan,CFA(23 Nov 2022)2023 High Conviction:JD.com to BeneFt from Discretionary Spend Recovery,Margin Progress on TrackWium Malan,CFA18Mark ChadwickJapan SpecialistDaifuku Co Ltd|Equity Bottom-UpDaifuku(6383)|Attractive ValuationDrivers Despite nearTerm RisksBy Mark Chadwick|05 Dec
84、 2022EXECUTIVE SUMMARYDaifuku is a growth stock that has fallen by 26%YTD reUecting nearterm risks to growth and marginsWe believe that Daifuku is a major beneTciary of continued investmentin automation,especially in e-commerce and logisticsWe analyse Daifukus core valuation drivers and see around 1
85、6%upsidefor the stockDETAILRevenue GrowthDaifuku operates in the global Materials Handling Equipment market.It is alarge market valued at$206b by Fortune Business Insights.The top twentyTrms account for around 15%of the total market($32 billion in annualsales).Daifuku has been ranked No.1 in Modern
86、Materials HandlingMagazines“Top 20 Material Handling Systems Suppliers 2022”survey.Withsales of$4.4 billion in 2021,Daifuku accounts for around 2%of the overallmarket.It is a highly competitive market and every vendor in the Top 10 had revenuein excess of$1 billion.The companies are geographically d
87、iversiTed acrossJapan,EU and the U.S.Apart from Daifuku,most are privately held or part oflarger industrial conglomerates.The market is growing quickly,with sales among those top 20 growing by23%in 2021 in dollar terms.The key driver is e-commerce,where warehouseautomation systems are vital to fulTl
88、 online orders and minimize labourrequirements.Daifuku is diversiTed,providing solutions to a wide range of industries suchas semiconductor sector,airports and e-commerce.In the TTM,Daifukurecorded revenue of Y546 billion(+12%YoY).This is broadly consistent withthe CAGR over the past 10 years of 10%
89、per annum.Daifuku(6383)|Attractive Valuation Drivers Despite near Term RisksMark Chadwick19Chart:Daifuku sales breakdown 1H22Fortune Business Insights forecasts that the global material handlingequipment market will grow at an annual rate of 6%over the coming decade.For the Daifuku valuation model,w
90、e have assumed a growth rate of 12%paover the next 5 years,before fading over the Tnal Tve years.This results in aCAGR over the forecast period of 8.4%.We believe that Daifuku can outgrowthe broader industry given higher exposure to the rapidly growing e-commerce and logistics industries.Chart:Histo
91、rical revenueOperating MarginDaifuku(6383)|Attractive Valuation Drivers Despite near Term RisksMark Chadwick20Over the past 20 years,Daifukus operating margin has averaged 6.2%.Froma low of 0%post-GFC,margins topped out at 11.9%and the past 5-yearaverage has been more consistently around 10%.It is a
92、 bit difTcult to know which companies to compare with Daifuku givenall peers are unlisted.Given that gross margins average around 19%it isdifTcult to imagine that Daifuku will be able to push up its operating tomore than 10%on average.We will use that as our benchmark forvaluations.However,given the
93、 current inUationary environment,near termmargins could be lower than that if Daifuku has to eat higher costs for labourand materials.That is certainly a risk factor.ReinvestmentOne simple measure of reinvestment needed to scale up revenue is the salesto invested capital ratio,measuring how much rev
94、enue a dollar in investedcapital generates.Looking at this ratio across global businesses,the averagenon-Tnancial company generates$1.1 in sales and the average machinerycompany generates$1.5 for each dollar of IC.As can be seen from the chartbelow,Daifuku is far less capital intensive than the aver
95、age business,generating$2.2 of sales for each dollar of invested capital.Given thestability in this ratio,our valuation model assumes a stable level of 2.2x.Daifuku(6383)|Attractive Valuation Drivers Despite near Term RisksMark Chadwick21RiskThe cost of capital reUects the operating risk of the comp
96、any.As a supplierof materials handling equipment around the globe,we use a weightedaverage Equity Risk Premium for key markets.Also,we estimate a beta basedon the multiple sector averages given Daifukus diversiTed client base.Wecalculate that the WACC amounts to 7.3%.Bottom linePutting all of these
97、things together,our model suggests a fair value forDaifuku of Y8,045 per share,16%higher than the last close of Y6,950.Overthe long-term,we are most conTdent about the sales outlook givencontinued growth in the EC market globally.Moreover,we remain conTdentthat semiconductor-related capex will accel
98、erate again,especially givengovernment support for onshoring important technologies.The Cash FlowsYearRevenuesOperating MarginEBITEBIT(1-t)ReinvestmentFCFF1612,2239.96%60,97945,26829,81615,4522685,6909.97%68,36450,75133,39417,3573767,9739.98%76,64556,89737,40119,4964860,1309.99%85,92763,78941,88921,
99、8995963,34510.00%96,33571,51446,91624,59861,056,30810.00%105,63177,52142,25635,26571,133,41910.00%113,34282,22035,05047,16981,189,52310.00%118,95285,28225,50259,78091,220,45010.00%122,04586,46514,05872,407101,223,50210.00%122,35085,6451,38784,258Terminal year1,226,56010.00%122,65685,8593,43482,425Th
100、e ValueTerminal value1,373,748PV(Terminal value)699,412Daifuku(6383)|Attractive Valuation Drivers Despite near Term RisksMark Chadwick22PV(CF over next 10 years)247,697Value of operating assets=947,109Adjustment for distress0-Debt&Minority Interests17,499+Cash&Other Non-operating assets84,229Value o
101、f equity1,013,839-Value of equity options0Number of shares126.016Value per share8,045There are certainly near-term risks,not least a manufacturing capexslowdown if the global economy slips into recession.The inUationaryheadwinds could be a headache for Daifuku leading to project delays andcost overr
102、uns.We have assumed an average operating margin of 10%in our valuation,butat 8%the fair value would fall by 21%to Y6,330/shr.All in all,we will take a bullish stance,but given near term risks,this isreally only an attractive stock for investors that are prepared to look throughthe near-term cyclical
103、 risks.Disclosure&Certi=cationI/We have no position(s)in the any of securities referenced in this insightViews expressed in this insight accurately reUects my/our personal opinion(s)about the referenced securities and issuers and/orother subject matter as appropriate.This insight does not contain an
104、d is not based on any non-public,material information.To the best of my/our knowledge,the views expressed in this insight comply with Singapore law as well as applicable law in thecountry from which it is postedI/We have not been commissioned to write this insight or hold any speciTc opinion on the
105、securities referenced thereinI/We have signed the Insight Provider Agreement and this insight does not violate any of the terms speciTed therein.Mark Chadwick(05 Dec 2022)Daifuku(6383)|Attractive Valuation Drivers Despite near Term RisksMark Chadwick23Oshadhi KumarasiriEquity AnalystSea Ltd|Equity B
106、ottom-UpTrading Sea Ltd in2023:It Is Still TheSame BeastBy Oshadhi Kumarasiri|23 Dec 2022EXECUTIVE SUMMARYTrading Sea Ltd(SE US)shares this year may not be as straightforwardas the previous year.With the share price at pre-COVID levels,swing highs could be difTcultto swallow for those of us who woul
107、d like to remain short Sea Ltd in2023.Nonetheless,we would be short Sea-Ltd at the turn of the year as wethink valuation multiples could fall to a new all-time low with allsegments facing stiff challenges.DETAILA Little Bit of HistoryWe are short Sea Ltd for about 14 months now.The share price is do
108、wnby around 80%in 2022 to make it one of our best calls of the year.We Trst said Seas valuation is getting insanely expensive in early 2021when the share price was around$280 per ADR.Since then,we wereeagerly waiting for opportunities to short Sea Ltd.However,shares continued to rise another 30%over
109、 the next 8 monthsto$374 per ADR before they began to tank in October 2021.We anticipated that$370 would be the last leap for Sea Ltd shares,asour data showed that Free Fire was starting to lose monthly activeplayers pretty fast.Trading Sea Ltd in 2023Trading Sea Ltd shares this year may not be as s
110、traightforward as theprevious year.Trading Sea Ltd in 2023:It Is Still The Same BeastOshadhi Kumarasiri24Since the share price has returned to the pre-COVID level and the factthat there are plenty of investors still believing in Seas dream for thefuture,swing highs could be difTcult to swallow for t
111、hose of us whowould like to remain short Sea Ltd for the following reasons.Gaming is DyingHaving already lost close to 25%of monthly active players,Free Fire is on its last legs after its major success during theCOVID pandemic.Looking at how Free Fire has lost active players in recentmonths,the acti
112、ve player count should get back to the levelwhere it was before the pandemic in the next four quarters.Deferred revenue could keep Seas Gaming revenue artiTciallyinUated in the Trst few quarters of 2023(similarly to 3Q22).However,as deferred revenue depletes,we expect SeasGaming revenue and proTtabi
113、lity to return to pre-COVIDlevels alongside falling active users.E-Commerce Woes Are Far From OverTrading Sea Ltd in 2023:It Is Still The Same BeastOshadhi Kumarasiri25If you are thinking that aggressive cost-cutting and masslayoffs should turn Shopees fortunes around,you need to beready for big dis
114、appointments throughout the next year.Shopees Uawed business model which is based ondiscounting and aggressive sales and marketing spendingneed more changes than simple cost-cutting to becomesuccessful over the long term.With Shopees OP margin at over-30%after cost-cutting,wedont see a quick ending
115、to Seas cash burn.Meanwhile,the aggressive consensus growth estimatesshould see signiTcant downgrades over the next few quarterswith Shopee giving up expansion hopes in many markets toreduce the strain on the cash position.Shopee has already given up expansion hopes in Europe andIndia.But we think w
116、hats more important and yet to affectthe share price is that the company could be scaling back inits key markets such as Indonesia,Vietnam,Philippines andBrazil.Fintech is Not Having a Great Time EitherFintech includes Sea Money which offers Tnancial servicessuch as mobile wallets,payment processing
117、,and a widevariety of other Tnancial products and services such as buynow pay later.All these businesses have seen their valuationstank in the past year.In a Worse Shape Than It Was At TheStart Of the PandemicSeas share price has returned to the pre-COVID state with sharescurrently trading at around
118、 87%below the peak at$50.2 per ADR.Trading Sea Ltd in 2023:It Is Still The Same BeastOshadhi Kumarasiri26However,at that time both Free Fire and Shopee were having their bestdays with Digital Entertainment and E-Commerce revenues expected tocompound at rates of 150%and 200%respectively.The EV/Sales
119、range that Sea Ltd traded at that time was 2.0-4.0 xconsensus FY+2 revenue.With growth days well and truly behind Sea Ltd,we think thecompanys revenue could fall 20%over the next couple of years toaround$9.5-10.0bn.This would put Sea Ltd on 2.8x FY+2 revenue,which is close to its pre-COVID median.Wi
120、th the grim outlook we are foreseeing,it is possible that Seas EV/Sales could fall to a new all-time low next year.Even if the multiple drops to the previous low of 2.0 x there is still ahealthy return of 25%from a short position.Disclosure&Certi=cationI/We have position(s)in one or more of the secu
121、rities referenced in this insightViews expressed in this insight accurately reUects my/our personal opinion(s)about the referenced securities and issuers and/orother subject matter as appropriate.This insight does not contain and is not based on any non-public,material information.To the best of my/
122、our knowledge,the views expressed in this insight comply with Singapore law as well as applicable law in thecountry from which it is postedI/We have not been commissioned to write this insight or hold any speciTc opinion on the securities referenced thereinI/We have signed the Insight Provider Agree
123、ment and this insight does not violate any of the terms speciTed therein.Oshadhi Kumarasiri(23 Dec 2022)Trading Sea Ltd in 2023:It Is Still The Same BeastOshadhi Kumarasiri27Angus MackintoshASEAN Insight ProviderAdi Sarana Armada|Equity Bottom-UpAdi Sarana Armada(ASSA IJ)-HarnessingLogistics and Aut
124、osBy Angus Mackintosh|29 Dec 2022EXECUTIVE SUMMARYAdi Sarana Armada(ASSA IJ)continues to represent a unique proxy toplay both transport and logistics in Indonesia through its auto businessplus logistics including last-mile player Anteraja.ASSA Rent is the largest car leasing leader in Indonesia,with
125、 Autopedialeading auto auctions and a leader in used car sales through Caroline,which is expanding its presence fast.Anteraja has seen rapid growth and may see some slowdown from e-commerce but continues to gain share and ASSA logistics continue todiversify.Valuations are attractive on 10 x FY2023E
126、PER.DETAILBackgroundAdi Sarana Armada(ASSA IJ)has three pillars across its businesses,spanning transport,online and ofUine used auto sales plus increasinglyimportant end-to-end logistics,with last-mile operator Anteraja now thelargest revenue contributor to the companys revenues.At the core of theco
127、mpanys business in terms of proTt contribution is ASSA Rent,which isthe largest car-leasing company in Indonesia.This provides the companywith a consistent supply of used cars for both its auction business JBABidWin and its used car dealership Caroline.These other auto-relatedbusinesses now sit unde
128、r separately listed Autopedia Sukses Lestari(ASLCIJ).Adi Sarana Armada(ASSA IJ)has three distinctpillars to its businessFirst Pillar:TransportationCorporate Car rentalCar rental platform for corporationsDriver servicesDriver Rental services as a compliment to the rental businessAdi Sarana Armada(ASS
129、A IJ)-Harnessing Logistics and AutosAngus Mackintosh28Online car sharingOnline keyless car rental application for various needsSecond Pillar:Sales of used vehiclesWholesale business(JBS BidWin Auction)Auction service platform,available oEine and onlineRetail business(Caroline)O2O used car dealerThir
130、d Pillar:End-to-end logisticsASSA LogisticsServing corporate customersAnterajaTechnology and app-based express deliveryTitiPajaE-fulDlment service by AnterajaBisnisajaBusiness management and operational servicesSource:Adi Sarana Armada(ASSA IJ)ASSA Rent provides a foundationOne of Adi Sarana Armadas
131、 core businesses is ASSA Rent which providesannual vehicle rentals for corporate customers with a network of 45 outletsacross Indonesia and a total Ueet of 28,464 vehicles.It caters to a wide rangeof customers across different sectors including FMCG at 25%of customers,Logistics and express deliverie
132、s at 17%,government at 8%,and banking at6%,with others making up the remaining 43%.55%of rentals are cars,27%at commercial cars,8%are motorcycles,8%are trucks and 1%are 4X4.Buy,rent,sell repeatASSA Rent buys new cars and rents and depreciates over four years with amarket value greater than the book
133、value.In 2021,it sold a total of 4,022cars.The company also has an online car-sharing service called Share Car,which booked 8,910 trips for 9M2022.Given that it sells over 4,000 used carsevery year,it provides a supply of used cars for both its used car andultimately auction business.Omnichannel ope
134、ratorAdi Sarana Armada(ASSA IJ)has restructured its used car business andauction business under Autopedia Sukses Lestari(ASLC IJ),which is in effectan omnichannel automotive marketplace operator operating in an inefTcientmarket where 99.8%of sales are through small bricks and mortar dealers butit is
135、 a sizable market at over US$95bn(2020).Sellers into the wholesalemarket include leasing companies,used car dealers,and corporates,whichwill sell through JBA Auction,with retailers likely to sell through Caroline.Caroline may then sell to individuals or through JBA Auction.JBA Auctionmostly sells mo
136、stly to small to medium-sized dealers.Autopedia Sukses Lestari(ASLC IJ)spans the whole used car ecosystem inIndonesiaAdi Sarana Armada(ASSA IJ)-Harnessing Logistics and AutosAngus Mackintosh29Source:Adi Sarana Armada(ASSA IJ)Leading the auction spaceJBA BidWin auction sells various types of vehicles
137、 across major cities inIndonesia and is the largest wholesale auto marketplace in Indonesia,witharound 41%market share.It has a nationwide distribution network,with 37outlets and the largest dealer participation at 29%.It operates using a real-time dashboard for sellers to provide visibility on thei
138、r vehicles.It also runsa web-based stock management system called Stoku,which keeps sellers intouch on stock levels.Caroline growth fastCaroline is the companys O2O used car dealer platform,which targetsC2B2C and C2B2A sales of used cars,with A being auction.The platformhas two businesses,one being
139、Caroline Purchase,and the other CarolineSelection.The strategy behind the platform is to change the way that buyingand selling of used cars take place,providing transparent pricing and reliablequality.Caroline already has 22 ofUine touchpoints across the country andhas sold a total of 1,739 vehicles
140、 as of 10M2022.Autopedia is optimisticAutopedia Sukses Lestari(ASLC IJ),is optimistic that it will be able to bookgrowth in used car sales of around+100%YoY or 4,000 units in 2023.Thisoptimism is backed up by the opening of 22 service point branches(online toofUine)in 2022.Management recently reveal
141、ed that the company hasopened 22 O2O(OfUine to Online)service points for used car dealers underthe Caroline.id brand this year.This exceeds the companys target in 2022 toopen as many as 20 service points.For next year,the company will have atleast add two new service points,both of which are already
142、 underconstruction.Adi Sarana Armada(ASSA IJ)-Harnessing Logistics and AutosAngus Mackintosh30Looking at 20%growth in auction numbersMeanwhile,through its subsidiary,PT JBA Indonesia,Autopedia SuksesLestari(ASLC IJ)targets 40,000 four-wheeled vehicles to be sold throughauction next year,an increase
143、of more than+20%compared to this year.Currently,JBA has 15 branches,and 22 hubs and has auctioned more thanone million used vehicles since 2011.JBA Auction has more than 70,000registered bidders and partners with more than 400 used vehicle dealers.From the 4rst to the last mileAdi Sarana Armadas thi
144、rd pillar and now its largest revenue contributor isthe companys end-to-end logistics business,which includes the Trst milefrom the sellers warehouse to the retailers distribution centre,the middlemile,where items are taken from the distribution centre and sent to theindividuals store locations,and
145、Tnally,the last-mile,which involvesshipping from the retail stores or shipping warehouse to the end customers.Additionally,ASSA logistics also provides Ueet management,tripmanagement,and delivery systems for corporate customers on a B2B basis.Anteraja leading the logistics packThe largest contributo
146、r to revenues is Anteraja,which uses a pick-up modelto give a different customer experience and keep costs low.The platformsoperation is app-based which provides real-time tracking for customers aswell as allows for cashless payment.The key focus business segmentsinclude e-commerce parcel deliveries
147、,B2B document deliveries,C2CVdeliveries,and social commerce.Anteraja works with major e-commerceplayers including Tokopedia(GoTo(GOTO IJ),Shopee(Sea Ltd(SE US),Bukalapak(BUKA IJ),JD.id,Blibli(BELI IJ),and Lazada Group(LAZADA SP).The company has SF Express as a 20%-shareholder,which is one of the mos
148、tproTtable express logistics companies in China,providing signiTcantamounts of technical assistance.Some slippage in growth from e-commerceAnteraja has also broken even and is estimated to deliver around 700,000parcels per day on average for 4Q2022.This number has come down from thepeak of 1.3m in A
149、pril 2022,and the numbers are softer given the lowerpromotions being provided but e-commerce players since 3Q2022.To offsetthis Anteraja has been increasing prices and has almost Tnished switchingfrom Txed courier costs to variable costs as it changed from contractemployees to a partnership basis th
150、is year.Anteraja also increased the priceper parcel in October,which is positive for proTtability.Anteraja is expectedto deliver 750,000-850,000 for FY2022 versus 2021 at around 650,000 parcelsper day.Adi Sarana Armada(ASSA IJ)-Harnessing Logistics and AutosAngus Mackintosh31Multiple services across
151、 the countryAnteraja can provide a wide range of delivery options from regular delivery,which is 1-2 days within Greater Jakarta or 2-9 days nationwide or next-dayservices within major cities in Java.It can also provide a same-day servicewithin a select number of cities including Jakarta,Bandung,Sur
152、abaya,Jogya,Solo,Semarang,Palembang,Makassar,and Medan.Anteraja also has asame-day inter-city service between Jakarta-Bandung,Jogya-Solo-Semarang,and Surabaya-Malang.It has opened a robotic sorting facility,which has increased sorter productivity by 200%with more than 99%accuracy and is twice as fas
153、t.Broadening logistics servicesASSA also has other logistics business initiatives including Bisnisaja whichprovides shipping management services,Travylite,which is a service to helpthose with excess baggage,Titipaja which is an e-fulTlment service byAnteraja that offers shared warehousing services,i
154、nventory management,order management,order handling and inventory return.It currently has sixwarehouses in Tve cities including Jakarta,Bandung,Surabaya,Palembang,and Medan.It also has international operations cross-border under SuryaFajar Indonesia.More recent initiatives in this space also include
155、 cold chainlogistics,and Anteraja drop-off,which has 300 new drop-off points and atotal of 1,500 across the country.It has also added payment on delivery andinsurance to the services offered.Adi Sarana Armada(ASSA IJ)booked a strong set of 9M2022 as Anterajabecame proTtableAdi Sarana Armada(ASSA IJ)
156、-Harnessing Logistics and AutosAngus Mackintosh32Source:Adi Sarana Armada(ASSA IJ)Revenue growth is increasingly driven byAnterajaAdi Sarana Armada(ASSA IJ)recorded a strong set of 9M2022 results withsales growth of+32.2%IDR4,630bn,and gross proTt growth of+27.1%toIDR858bn,with EBITDA up by+8.2%YoY
157、and net proTt rising by+63.7%YoYto IDR 131bn.The key growth driver for revenue came from Anteraja,whichsaw YoY growth of+46.8%for 9M2022 to IDR2,630bn,with the leasingbusiness seeing+6.3%growth to IDRlogistics booking+91.5%growth toIDR503bn,as the used car market picked up substantially.Anteraja now
158、 makes up 57%of Adi Sarana Armadas revenuesSource:Adi Sarana Armada(ASSA IJ)Adi Sarana Armada(ASSA IJ)-Harnessing Logistics and AutosAngus Mackintosh33Diversifying more broadly into logisticsAdi Sarana Armada(ASSA IJ)is moving directionally towards being anintegrated logistic company even though Ant
159、eraja as the last mile businessstill contributes the largest revenue.The company is preparing moreinitiatives towards mid-mile as well as aiming at other segments of logisticssuch as B2B and social commerce.The Uuctuation from e-commerceplatforms should impact proTtability as other areas grow but sh
160、ort-termthere has been a slowdown.Autopedia continues to expand aggressivelyAutopedia Sukses Lestari(ASLC IJ)still has a lot of cash from its IPO and isexpanding quite aggressively both for auction by establishing more beneTtsto attract car dealers by creating Bursa Mobil.It has been expandingCaroli
161、ne,the B2C and C2C O2O car dealer while other competitors such asCarro,Carsome and OLX,have started to slow down and scale down theirbusiness given the tightening funding environment.We will keep a close eyeon Astra International(ASII IJ)s latest venture into the space under Mobbibut given the fragm
162、ented state of the market,there is room for a number ofplayers.Interesting proxies to autos and logisticsAdi Sarana Armada(ASSA IJ)remains a well-rounded proxy to the autoindustry through both ASSA Rent,which provides recurrent revenues plus asteady supply of used cars both for sale through Caroline
163、 and for auctionthrough JBA Auction.Anteraja is a leading last-mile delivery player withvery strong connections to the whole Indonesian digital economy.Serving e-commerce but a lot more besidesAnteraja now makes up more than 57%of Adi Sarana Armadas(ASSA IJ)revenues and is already proTtable.It serve
164、s Indonesias e-commerce industryand is also plugged into both Grab(GRAB US)and GoTo(GOTO IJ),providingthose platforms with courier services.Adi Sarana Armada(ASSA IJ)lookattractive,trading on 10.4x FY2023E PER and 6.7x FY2024E PER,withforecast EPS growth of+42.7%and+55.0%for FY2023E and FY2024Erespe
165、ctively.Earnings EstimatesFY2021AFY2022EFY2023EFY2024ESales IDR BN5,088.16,332.97,474.28,832.6Growth+67.5%+24.5%+18.0%+18.2%EPS IDR36.653.175.8117.6Growth+42.7+45.2%+42.7%+55.0%PER21.6x14.9x10.4x6.7xAdi Sarana Armada(ASSA IJ)-Harnessing Logistics and AutosAngus Mackintosh34EV/EBITDA6.5x7.0 x5.9x5.0
166、xDividend0.008.012.018.7Yield0.001.0%1.5%2.3%ROE10.2%10.5%13.0%30.7%PBV1.8x1.6x1.3x1.1xSource:TIKRDisclosure&Certi=cationI/We have no position(s)in the any of securities referenced in this insightViews expressed in this insight accurately reUects my/our personal opinion(s)about the referenced securi
167、ties and issuers and/orother subject matter as appropriate.This insight does not contain and is not based on any non-public,material information.To the best of my/our knowledge,the views expressed in this insight comply with Singapore law as well as applicable law in thecountry from which it is post
168、edI/We have not been commissioned to write this insight or hold any speciTc opinion on the securities referenced thereinI/We have signed the Insight Provider Agreement and this insight does not violate any of the terms speciTed therein.Angus Mackintosh(21 Dec 2022)Adi Sarana Armada(ASSA IJ)-Harnessi
169、ng Logistics and AutosAngus Mackintosh35SMARTKARMA RESEARCH:This publication is published by Smartkarma Innovations Pte Ltd(Smartkarma),the operator of online investment research .The Publication contains content authored by Smartkarma and by selected third party Insight Providers,which has been rep
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