Finweek English Edition - - COVER STORY -

There is a mul­ti­tude of other in­vest­ments in the tech sec­tor, with new listings are com­ing on stream all the time. But as­sess­ing the longer term growth prospects and val­u­a­tions of these listings is not al­ways a sim­ple task. Tesla, for ex­am­ple, which is in­vest­ing in the elec­tric car, lifted rev­enue 73% to $7bn in 2016 and re­ported a net loss. Its share price tra­jec­tory in­di­cates huge ex­pec­ta­tions, but an­a­lysts are di­vided on whether these will be re­alised. “From a val­u­a­tion per­spec­tive, it is hard to get your head around it,” says Marc Talpert, global emerg­ing mar­kets an­a­lyst at Coro­na­tion Fund Man­agers. “It has changed the tra­jec­tory of the mo­tor in­dus­try glob­ally, but all the global com­pa­nies are fol­low­ing suit.” There are also still se­ri­ous lim­i­ta­tions, like bat­tery life and in­fra­struc­ture bot­tle­necks, which have to be over­come. “A lot of op­ti­mism is built into the price – a lot of ex­pec­ta­tions, and if these are not met, there will be po­ten­tial down­side.” Snapchat, sim­i­larly, is dif­fi­cult to value, says Talpert. While it is a rapidly grow­ing busi­ness, “the core un­der­ly­ing util­ity for Snapchat is a lit­tle more un­clear”. Talpert says Face­book is repli­cat­ing a large por­tion of its func­tion­al­ity. “While this is a huge vin­di­ca­tion of Snapchat’s strat­egy and de­sign, its util­ity can be copied on other plat­forms with far greater scale, thus im­pact­ing their plat­form's long term growth.” Sean Ash­ton, chief in­vest­ment of­fi­cer at An­chor Cap­i­tal, says An­chor likes Price­line, a global on­line travel book­ing com­pany that owns book­ing.com and agoda.com, as it ex­pects on­line travel book­ings to con­tinue to take a share of the mar­ket away from tra­di­tional travel agen­cies. “This busi­ness gen­er­ates amaz­ing re­turns on cap­i­tal (35% ROE), high mar­gins (30%) and we ex­pect it to grow its prof­its by 15% an­nu­ally,” he says, adding that it trades at a rea­son­able 23 for­ward P/E. An­chor is also in­vested in Ac­tivi­sion Bliz­zard, which has some of the best on­line gaming fran­chises like Call of Duty and World of War­craft. The com­pany has a sig­nif­i­cant on­line user base which pro­vides the op­por­tu­nity to gen­er­ate ad­ver­tis­ing rev­enues. Ac­tivi­sion is likely to be­gin com­mer­cial­is­ing me­dia rights to its eS­ports com­pet­i­tive gaming leagues. Talpert says Shopify pro­vides a blue­print to e-com­merce busi­nesses, al­low­ing users to par­tic­i­pate in the on­line econ­omy with­out the big up­front costs. Ama­zon has iden­ti­fied Shopify as a favoured part­ner in its mar­ket­place busi­ness.

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