Professional Documents
Culture Documents
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$1bn being raised in 2016 till date. We expect more listings
over the next few years. Two markets stand out – Singapore, a developed economy and a
good test market and Indonesia, which is potentially the largest market in the region.
Jefferies does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that Jefferies may have a
conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment
decision. Please see analyst certifications, important disclosure information, and information regarding the status of non-US analysts on pages 46 to 49
of this report.
Technology
Internet
21 April 2016
Focus Charts
Exhibit 1: Smartphone wave has been pivotal to growth of Exhibit 2: Sharp increase in private market funding for the
e-commerce in the region – over 50% of tx through mobile sector from 2013 – 2016YTD has been particularly strong
Exhibit 3: E-tailing by far the largest opportunity for local Exhibit 4: Singapore, the favourite place to base the
players – has accounted for 68% of the funding company; Indonesia, potentially the largest market
Exhibit 5: The six “unicorns” so far in the region, as per Exhibit 6: Singapore Press Holdings, Rocket Internet,
media reports SingPost some of the large listed market plays
21 April 2016
Exhibit 8: Listed companies with some exposure to internet/e-commerce space in South East Asia
S.No Company Ticker Exchange Mktcap Nature of exposure to ASEAN e-commerce
(US$bn)
1 Singapore Press Holding SPH SP Singapore 4.7 Acquired SgCarMart and owns many classified sites - ST Jobs, STProperty, STCars, STClassifieds etc. Stake in Qoo10
2 Rocket Internet RKET GR Germany 4.6 Investment in companies such as Lazada, Zalora, Foodpanda, Carmudi and Zen Rooms in South East Asia
3 Matahari Department Store LPPF IJ Indonesia 4.1 Invested US$500mn in own e-commerce venture
4 Singpost SPOST SP Singapore 2.5 Launched "SP ecommerce" as a full service end-to-end e-commerce logistic solution provider
5 Mapletree Logistics MLT SP Singapore 1.9 Owns warehouses across Asia including 3 countries of SEA (SG, MA, VI)
6 GD Express GDX MK Malaysia 0.6 Provides Logistic Services in Malaysia and Singapore. Plans to grow in e-commerce Logistics
7 Thegiodidong MWG VN Vietnam 0.5 Mobile retail chain operator with online channel
8 Pos Malaysia POSM MK Malaysia 0.4 Launched e-Commerce Hub in Malaysia for providing logistic services to e-commerce companies
9 WHA Warehouse WHAPF TB Thailand 0.3 Owns various warehouse in ASEAN countries
Source: Jefferies, Bloomberg
Retail Malls -ve Higher online share of retail spend could adversely affect demand for store-fronts
Mapletree Commercial Trust MCT SP 1.47 Hold 2,336
CapitaMall Trust CT SP 2.12 NC 5,603
Fraser Centerpoint Trust FCT SP 2.02 NC 1,370
Industrial/ Logistics Space +ve Demand for modern warehousing/logistics assets could rise
AREIT AREIT SP 2.50 Buy 4,973
Mapletree Logistics MLT SP 1.03 Buy 1,904
Aims AMP AAREIT SP 1.35 Hold 640
Logistics and distribution +ve Warehousing and last-mile delivery capability will become important
Singapore Post SPOST SP 1.65 NC 2,500
Telcos +ve More data-traffic, mobile wallets could get more popular
Singtel ST SP 3.95 Buy 47,000
Starhub STH SP 3.34 Underperform 4,311
M1 M1 SP 2.48 Hold 1,720
Source: Jefferies estimates, Bloomberg
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
21 April 2016
Executive Summary
E-commerce in ASEAN – Taking Off
ASEAN region is expected to have The ASEAN region represents the third large block of internet users in Asia, after China and
350mn internet users by 2018 – few India, with 250mn users currently and expected to rise to 350mn by 2018. The
large listed players now but there are smartphone wave has been pivotal to rising internet penetration and growth of e-
six “unicorns” in the private market commerce in the region with more than 50% of traffic and transactions in most segments
– we expect more listings going now taking place through the mobile platform. Even though there are currently only three
forward 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.
21 April 2016
Exhibit 11: Nearly 45mn people live in the top 6 cities of the region
S.No City Country Population (mn) Global population rank
1 Jakarta Indonesia 10.1 14
2 Bangkok Thailand 8.3 24
3 Ho Chi Minh City Vietnam 8.2 25
4 Hanoi Vietnam 7.2 34
5 Singapore Singapore 5.5 47
6 Yangon Myanmar 5.2 49
Total n/a 44.6 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.
21 April 2016
Exhibit 12: Number of internet users (mn) Exhibit 13: Internet penetration across countries
Source: Jefferies estimates, media reports 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
21 April 2016
Exhibit 15: Smartphone sales in region has picked up sharply over last 3 years
Exhibit 16: Broadband penetration is low particularly in Exhibit 17: Already 50% or more of web traffic is coming
Indonesia through mobiles in most countries
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 Source: Jefferies, Akamai’s Fourth Quarter, 2015 State of the
Internet Report: https://www.akamai.com/stateoftheinternet. Internet Report: https://www.akamai.com/stateoftheinternet.
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
Exhibit 21: PE/VC funding into the space has picked up Exhibit 22: There have been over 100 deals since 2011 of
sharply since 2013 over US$2.5mn
Note: Only deals above US$2.5mn considered; Source: Jefferies, Note: Only deals above US$2.5mn considered; Source: Jefferies,
media reports media reports
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 Lazada E-tailing Horizontal e-tailing 1,186 2,012 Alibaba, Rocket Internet, Temasek, Kinnevik, Tengelmann, Tesco, Summit Partners
2 Grab Travel Cab booking 680 2,011 SoftBank, Tiger Global, China Investment Corp, Coatue
3 Matahari Mall E-tailing Horizontal e-tailing 500 2,015 Lippo Group
4 SingPost E-com Logistics E-commerce logistics 457 n/a Alibaba
5 Tokopedia E-tailing Horizontal e-tailing 248 2,009 Softbank
6 Zalora E-tailing Fashion e-tailing 212 2,012 Rocket Internet, Tengelmann Ventures, Kinnevik, Summit Partners, Access Industries
7 Garena Gaming Gaming, e-tailing 170 2,008 Khazanah Nasional Berhad
8 PropertyGuru Classified Real estate classified 129 2,007 Emtek, Square Peg Capital, TPG
9 Qoo10 E-tailing Horizontal e-tailing 82 2,010 Singapore Press Holdings, eBay,Saban Capital Group, Brookside Capital, Oak Investment
10 iflix Entertainment Online video-on-demand service 75 2,014 Catcha Group, Emtek, Sky
11 iCarsClub Travel P2P car sharing 70 2,012 Sequoia Capital, IDG
12 Elevenia E-tailing Horizontal e-tailing 68 2,014 SK Planet, XL Axiata
13 Reebonz E-tailing Fashion e-tailing 64 2,009 GGV Capital, Intel Capital, MediaCorp Singapore, Matrix Capital, Infocomm Investments
14 RedMart E-tailing Online grocery 55 2,011 Garena, Softbank, Visionnaire Ventures, Eduardo Saverin
15 vinEcom E-tailing Horizontal e-tailing 50 2,014 Vingroup
Source: Jefferies, media reports
Exhibit 24: Indian internet/e-commerce cos have raised over US$10bn in the
last 3 years
Exhibit 25: Many global PE/VC firms are present in the region; Naspers, DST Global, KPCB amongst those that do not
have exposure to the region
S.No PE/VC investor Headquarters Key investments in ASEAN region Global investments in the sector
1 Rocket Internet Germany Lazada, Zalora, Foodpanda, Carmudi, ZenRooms Dafiti, Jabong, Lamoda, Foodpanda
2 Softbank Japan Grab, Tokopedia, Redmart Alibaba, Sina, Didi Kuaidi, Yahoo Japan, SoFi, Snapdeal, Ola
3 Sequoia Capital US Carousell, AdNear, IcarsClub Apple, Google, Youtube, Yahoo, Whatsapp
4 Tiger Global US Grab, Wego eLong, Flipkart, Zynga, Airbnb, Ola, Nextdoor
5 Tengelmann Ventures Germany Lazada, Zalora, Carmudi Lamudi, Delivery Hero, Lamoda, Linio
6 Kinnevik Sweden Lazada, Zalora Millicom, Zalando
7 Temasek Singapore Lazada Paypal, Alibaba, Airbnb, Didi Kuaidi
8 Intel Capital US Reebonz Snapdeal, WebRadar, iZettle, Skyport Systems
Source: Jefferies, media reports
21 April 2016
Exhibit 27: Listed companies with some exposure to internet/e-commerce space in South East Asia
S.No Company Ticker Exchange Mktcap Nature of exposure to ASEAN e-commerce
(US$bn)
1 Singapore Press Holding SPH SP Singapore 4.7 Acquired SgCarMart and owns many classified sites - ST Jobs, STProperty, STCars, STClassifieds etc. Stake in Qoo10
2 Rocket Internet RKET GR Germany 4.6 Investment in companies such as Lazada, Zalora, Foodpanda, Carmudi and Zen Rooms in South East Asia
3 Matahari Department Store LPPF IJ Indonesia 4.1 Invested US$500mn in own e-commerce venture
4 Singpost SPOST SP Singapore 2.5 Launched "SP ecommerce" as a full service end-to-end e-commerce logistic solution provider
5 Mapletree Logistics MLT SP Singapore 1.9 Owns warehouses across Asia including 3 countries of SEA (SG, MA, VI)
6 GD Express GDX MK Malaysia 0.6 Provides Logistic Services in Malaysia and Singapore. Plans to grow in e-commerce Logistics
7 Thegiodidong MWG VN Vietnam 0.5 Mobile retail chain operator with online channel
8 Pos Malaysia POSM MK Malaysia 0.4 Launched e-Commerce Hub ub Malaysia for providing logistic services to e-commerce companies
9 WHA Warehouse WHAPF TB Thailand 0.3 Owns various warehouse in ASEAN countries
Source: Jefferies, Bloomberg
Online spend, impact on Singapore
Singapore’s online spend is estimated to be around US$2.4bn (~8% of total retail spend).
Expect positive impact on data Proportion of online spending in SG still has room to grow considering developed
centre and logistics companies and markets like US, UK currently average around 15%. This strong growth in online spend
negative impact on retailers 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.
Retail Malls -ve Higher online share of retail spend could adversely affect demand for store-fronts
Mapletree Commercial Trust MCT SP 1.47 Hold 2,336
CapitaMall Trust CT SP 2.12 NC 5,603
Fraser Centerpoint Trust FCT SP 2.02 NC 1,370
Industrial/ Logistics Space +ve Demand for modern warehousing/logistics assets could rise
AREIT AREIT SP 2.50 Buy 4,973
Mapletree Logistics MLT SP 1.03 Buy 1,904
Aims AMP AAREIT SP 1.35 Hold 640
Logistics and distribution +ve Warehousing and last-mile delivery capability will become important
Singapore Post SPOST SP 1.65 NC 2,500
Telcos +ve More data-traffic, mobile wallets could get more popular
Singtel ST SP 3.95 Buy 47,000
Starhub STH SP 3.34 Underperform 4,311
M1 M1 SP 2.48 Hold 1,720
Source: Jefferies estimates, Bloomberg
21 April 2016
Exhibit 29: The “unicorns” - Six internet companies from the region are
estimated to have achieved valuation of over US$1bn in private rounds
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 Segment Headquarter Founded in Countries of operation
1 Lazada E-tailing Singapore Singapore Singapore, Indonesia, Malaysia, Thailand, Philippines, Vietnam
2 Grab Travel Singapore Malaysia Singapore, Indonesia, Malaysia, Thailand, Philippines, Vietnam
3 Matahari Mall E-tailing Indonesia Indonesia Indonesia
4 SingPost E-com logistics Singapore Singapore Singapore, Indonesia, Malaysia, Thailand, Philippines, Vietnam, HK, India, Australia
5 Zalora E-tailing Singapore Singapore Singapore, Indonesia, Malaysia, Thailand, Philippines, Vietnam, Hong Kong, Taiwan, Australia, New Zealand, Brunei
6 PropertyGuru Classified Singapore Singapore Singapore, Indonesia, Malaysia, Thailand
7 Garena Gaming Singapore Singapore Singapore, Malaysia, Philippines, Taiwan, Vietnam, Thailand, Indonesia
8 Tokopedia E-tailing Indonesia Indonesia Indonesia
9 Qoo10 E-tailing Singapore Singapore Singapore, Indonesia, Malaysia, China, Japan
10 iflix Entertainment Malaysia Malaysia Malaysia, Philippines, Thailand
11 iCarsClub Travel Singapore Singapore Singapore
12 Elevenia E-tailing Indonesia Indonesia Indonesia
13 Reebonz E-tailing Singapore Singapore Singapore, Malaysia, Indonesia, Taiwan, Hong Kong, Thailand, Australia and South Korea
14 RedMart E-tailing Singapore Singapore Singapore
15 vinEcom E-tailing Vietnam Vietnam Vietnam
Source: Jefferies, company data
Indonesia – potentially the largest market. While Indonesia lags countries like
Indonesia is potentially the largest
Malaysia and Thailand in spending power and ease of doing business, we believe it still
e-commerce market in the region
stands out in the region as potentially its largest market. Its population of 260mn ranks it
with estimated 150mn internet users
4th globally after China, India and US. As a result, despite relatively low internet
by 2020
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.
21 April 2016
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 Google Search Google Search Google Search Google Search Facebook Social network Coc coc Search
2 Youtube Entertainment Facebook Social Network Youtube Entertainment Youtube Entertainment Youtube Entertainment Google Search
3 Facebook Social network Youtube Entertainment Facebook Social network Facebook Social network Google Search Facebook Social Network
4 Yahoo Search Detik News Yahoo Search Pantip Social network Yahoo Search Youtube Entertainment
5 Wikipedia Information Yahoo Search Blogspot Entertainment Blogspot Entertainment abs-cbn News webtretho Entertainment
6 Amazon.com E-tailing Tribunews News Msn Search Yahoo Search Inquirer News Zing News
7 Bing Search Liputan6 News Maybank Finance Bing Search GMA N/w News daikynguyen News
8 Linkedin Social network Kaskus Social network Wikipedia Information Amazon.com E-tailing Msn Search vnexpress News
9 Msn Search Kapanlagi Entertainment Lazada E-tailing Msn Search Wikipedia Information nhadatso Classified
10 qoo10.sg E-tailing Kompas News Bing Search Ebay E-tailing Twitter Social network 24h News
Source: Jefferies, Alexa
21 April 2016
Exhibit 35: Top messaging/chat apps across the South East Asian countries
Rank Singapore Indonesia Malaysia Thailand Philippines Vietnam
1 Whatsapp Blackberry messenger Whatsapp Line Facebook messenger Zalo
2 Facebook messenger Whatsapp Facebook messenger Facebook messenger Viber Facebook messenger
3 WeChat Facebook messenger/Line WeChat Whatsapp/Wechat Line Viber
Source: Jefferies, Media reports
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 Whatsapp Facebook US
2 Facebook messenger Facebook US
3 WeChat Tencent Group China
4 Line Naver Corp South Korea
5 Blackberry messenger Blackberry Limited Canada
6 Viber Rakuten Japan
7 Zalo VNG Vietnam
Source: Jefferies, company data
Coc coc, Zalo, Kaskus, Pantip are There are a few local players though – Coc coc is a browser cum search engine that
some of the local players in this specializes in search in Vietnamese – the company raised US$14mn of funding in
space February, 2015 and often ranks above Google as the #1 site in Vietnam. Zalo, a messaging
service launched by the VNG group in 2012 ranks as the top messaging app in Vietnam.
The VNG group also launched a social network site Zine Me in 2009. Pantip of Thailand
and Kaskus of Indonesia are discussion forums that have attracted a large local
community.
Exhibit 37: Key local companies in search, social network and messaging
S.No Company Founded in HQ Countries of Description Investors Funds raised Founders/CEO
operation (US$mn)
1 Coc coc 2010 Vietnam Vietnam Search Engine customized for Vietnamese Hubert Burda Media 14 Nguyen Binh, Le Thanh
2 Zing Me & Zalo (VNG group) 2004 Vietnam Vietnam Gaming, social n/w, messaging CyberAgent Ventures n/a Hong Minh le & Bryan Pelz
3 Pantip 1997 Thailand Thailand Discussion forum n/a n/a Wanchat Padungrat
4 Kaskus 1999 Indonesia Indonesia Discussion forum and classified GDP Ventures n/a Andrew Darwis
Source: Jefferies, company data
Exhibit 38: We estimate the e-tailing market in the region to grow to US$30-40bn by 2020 from US$10bn currently
2,015 2,020 Scenario 1 (Base case) Scenario 2 (Bear case) Scenario 3 (Bull case)
Country Retail market E-tailing market % of retail Retail market E-tailing market % of retail Cagr E-tailing market % of retail E-tailing market % of retail
size (US$bn) (US$bn) market size (US$bn) (US$bn) market (%) (US$bn) market (US$bn) market
Indonesia 320 3.0 0.9 428 12.8 3.0 34 10.7 2.5 15.0 3.5
Singapore 30 2.4 8.0 33 6.6 20.0 23 6.0 18.0 7.3 22.0
Malaysia 70 1.4 2.0 89 4.5 5.0 26 4.0 4.5 5.4 6.0
Thailand 100 1.5 1.5 116 4.6 4.0 25 4.1 3.5 5.8 5.0
Philippines 80 0.6 0.8 107 3.2 3.0 38 2.7 2.5 3.7 3.5
Vietnam 70 0.6 0.8 94 2.8 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
21 April 2016
Exhibit 39: E-tailing (including logistics) has accounted for over US$3bn of
E-tailing companies have attracted the US$4.5bn funds flowing into internet/e-commerce sector since 2011
nearly 70% of the private market
funding into the sector
21 April 2016
Exhibit 43: Most horizontal players follow the marketplace model, vertical
players often follow inventory model
E-tailer Marketplace Inventory Hybrid
Horizontal players
Qoo10 √√√ X X
Lazada X X √√√
Bukalapak √√√ X X
Tokopedia √√√ X X
Elevenia √√√ X X
Blibli √√√ X X
Lelong √√√ X X
11street √√√ X X
Ensogo √√√ X X
Tarad √√√ X X
Metrodeal √√√ X X
Vatgia √√√ X X
Sendo √√√ X X
Tiki X √√√ X
Vertical players
Zalora X X √√√
Reebonz X X √√√
FashionValet X √√√ X
thegiodidong X √√√ X
HipVan X √√√ X
Redmart X √√√ X
Source: Jefferies, company data
Cash on delivery and manual banking, the dominant payment methods
Cash on delivery/manual banking Cash on delivery and manual banking are dominant payment methods for e-tailing across
are the dominant payment modes the region. E-payment is the #1 payment method only in relatively developed economies
outside of Singapore and Malaysia 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.
21 April 2016
Exhibit 45: Credit card penetration is low outside of Singapore and Malaysia
Grab is one of the key travel In travel, the major local player is Grab which is present in 28 cities across the six major
companies in the region and is South East Asian countries and competes with Uber across the region. It is part of the
locked in competition with Uber 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.
21 April 2016
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 The OTA space in South East Asia (see table below) is dominated by global players such as
global players – Traveloka and Tripadvisor, Expedia, booking.com, agoda.com and Airbnb. The major local players are
Tiket.com in Indonesia are some Traveloka and Tiket.com, both in Indonesia. While both these OTAs operate across the
exceptions spectrum, the key traffic driver for these is flight ticketing.
21 April 2016
21 April 2016
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 Exhibit 52: Local language is an important factor in
leads to differences in ticket size, wage cost, user habits Indonesia and Vietnam
21 April 2016
Exhibit 53: Only Singapore and Exhibit 54: Issues in most of the ASEAN Exhibit 55: Major issues in enforcing
Malaysia stand out countries in trading across borders contracts in Indonesia & Philippines
Source: Jefferies, World Bank Source: Jefferies, World Bank Source: Jefferies, World Bank
None of the major South East Asian countries currently have restrictions on FDI in e-
commerce. 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.
21 April 2016
6) Regulatory – As pointed out in the previous section, only 33% foreign investment is
allowed in distribution and warehousing in Indonesia
21 April 2016
Company Profiles
21 April 2016
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:
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
21 April 2016
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) Exhibit 61: Asean – fastest growing gaming market globally
Philipines 35.0%
9% Thailand
21% 30.0%
Vietnam 25.0%
14%
20.0%
15.0%
10.0%
5.0%
Indonesia Malaysia
0.0%
17% 20%
L America E Europe Asean
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.
21 April 2016
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.
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 PC-
based 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.
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:
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
21 April 2016
community of 4m buyers and over 650k sellers with latest GMV hitting an annualised run-
rate 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.
350.0
300.0
250.0
200.0
150.0
100.0
50.0
0.0
MercadoLibre Ebay Lazada Alibaba Shopee - current
21 April 2016
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).
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,
21 April 2016
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.
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.
21 April 2016
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-as-
you-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.
21 April 2016
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.
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.
21 April 2016
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.
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
21 April 2016
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.
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$300-
350m 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 set-
up 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
21 April 2016
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.
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.
21 April 2016
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.
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.
21 April 2016
Business model
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 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.
21 April 2016
Exhibit 74: E-commerce related revenues accounted for a Exhibit 75: E-commerce related revenues have been
third of SingPost’s revenues in 9MFY16 growing much faster for SingPost
In the mail segment, SingPost has developed an envelope called SmartPac Lite for e-
commerce 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.
21 April 2016
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.
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
4) E-commerce. VNG’s key offerings in e-commerce are its online payment platform
123Pay and movie ticket booking app.
21 April 2016
21 April 2016
21 April 2016
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.
JFDI BASH
Muru Digital The CO.
SPH Plug and Play Mettle Work
Startupbootcamp Smart Space
Rockstart etc. Woolf Works etc …
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.
21 April 2016
• 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 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.
21 April 2016
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.
21 April 2016
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/
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: Ranjeet Jaiswal 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.
As is the case with all Jefferies employees, the analyst(s) responsible for the coverage of the financial instruments discussed in this report receives
compensation based in part on the overall performance of the firm, including investment banking income. We seek to update our research as
appropriate, but various regulations may prevent us from doing so. Aside from certain industry reports published on a periodic basis, the large majority
of reports are published at irregular intervals as appropriate in the analyst's judgement.
For Important Disclosure information on companies recommended in this report, please visit our website at https://javatar.bluematrix.com/sellside/
Disclosures.action or call 212.284.2300.
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.
21 April 2016
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 Count Percent Count Percent
BUY 1169 53.70% 327 27.97%
HOLD 848 38.95% 163 19.22%
UNDERPERFORM 160 7.35% 17 10.62%
21 April 2016
21 April 2016
any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such content. Third party content
providers give no express or implied warranties, including, but not limited to, any warranties of merchantability or fitness for a particular purpose or
use. Third party content providers shall not be liable for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential
damages, costs, expenses, legal fees, or losses (including lost income or profits and opportunity costs) in connection with any use of their content,
including ratings. Credit ratings are statements of opinions and are not statements of fact or recommendations to purchase, hold or sell securities. They
do not address the suitability of securities or the suitability of securities for investment purposes, and should not be relied on as investment advice.
Jefferies research reports are disseminated and available primarily electronically, and, in some cases, in printed form. Electronic research is
simultaneously available to all clients. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of
Jefferies. Neither Jefferies nor any officer nor employee of Jefferies accepts any liability whatsoever for any direct, indirect or consequential damages
or losses arising from any use of this report or its contents.
For Important Disclosure information, please visit our website at https://javatar.bluematrix.com/sellside/Disclosures.action or call 1.888.JEFFERIES
© 2016 Jefferies Group LLC