4 November 2019 Asia Insights Q3 2019 Important disclosures appear at the back of this report GP Bullhound LLP is authorised and regulated by the Financial Conduct Authority GP Bullhound Inc is a member of FINRA GP Bullhound Hong Kong Ltd is authorized and regulated by the Hong Kong Securities and Futures Commission2 Europe continues to gain traction Another QoQ increase in number of deals with Asian money into European tech sector The number of acquired European tech targets surpassed that of US for the first time since Q1 2018 Difference in funds raised between European and US tech startups continues to narrow since Q1 2018 Moving to earlier stage with confidence: average deal size becomes smaller Software and fintech rise to the top of target sector charts Fintech sector in Europe remains popular among Asian investors, contributing to about 50% of total funds flow into this region Tencent strengthens its presence in Europe with three deals, two gaming and one software Inbound activities heat up Inbound deal value beats outbound deal value for the first time in 2019 India and emerging markets in Southeast Asia are of higher preference compared to other more developed markets like Japan Apart from software, fintech and marketplaces, US investors favour transport-tech while Europeans tap into digital service Chinese investors deepening ties with UK tech community China beats Japan for the first time since Q1 2019 to become the top investor for US and European tech Strong momentum with UK tech targets: seven deals make UK popular destination in Europe and globally for Chinese investors Sector wise, Chinese investors concentrate on fintech and digital media Outbound tech investment unchanged despite uncertainty THE VIEW FROM GP BULLHOUND Elsa Hu Executive Director Vincent Wei Analyst Jack Chan Director3 Asian technology transactions into Europe and the US ASIAN TECH OUTBOUND Q3 2019 Source: GP Bullhounds proprietary deal database; CapIQ; Mergermarket; News run as of 30 Sep 2019. Deals include all announced in Q3 2019. Sectors include internet, software, electronics, digital services, entertainment, media CapIQ; Mergermarket; News run as of 30 Sep 2019. Deals include all announced in Q3 2019. Sectors include internet, software, electronics, digital services, entertainment, media CapIQ; Mergermarket; News run as of 30 Sep 2019. Deals include all announced in Q3 2019. Sectors include internet, software, electronics, digital services, entertainment, media CapIQ; Mergermarket; News run as of 30 Sep 2019. Deals include all announced in Q3 2019. Sectors include internet, software, electronics, digital services, entertainment, media CapIQ; Mergermarket; News run as of 30 Sep 2019. Deals include all announced in Q3 2019. Sectors include internet, software, electronics, digital services, entertainment, media CapIQ; Mergermarket; News run as of 30 Sep 2019. Deals include all announced in Q3 2019. Sectors include internet, software, electronics, digital services, entertainment, media CapIQ; Mergermarket; News run as of 30 Sep 2019. Deals include all announced in Q3 2019. Sectors include internet, software, electronics, digital services, entertainment, media & publishing and healthcare-tech. Note: Deal value only includes deals with disclosed transaction value. Breakdown by target country Breakdown by target sector Target Chinese investor(s) Investment type Sector Transaction value (US$m) Klarna IPV Capital Private Placement Fintech 460 Healthy.io Ltd Joy Capital Private Placement Software 60 Curve 1 Limited CreditEase Private Placement Fintech 55 Funcom SE Tencent M&A Digital media - entertainment 39 Everledger Tencent Private Placement Software/Fintech 20 Germany 6 United Kingdom 6 Israel 1 Netherlands 1 Sweden 1 United Kingdom 95 Germany 63 Israel 60 Netherlands 39 Sweden 460 Fintech 7 Digital media - content 1 Digital media - entertainment 3 Software 1 Industrial-tech 1 Marketplace 1 Transport-tech 1 15 deals US$772m 15 deals US$772m Deal volume Deal volume Deal value (US$m) Deal value (US$m) 10 Public comps by sector Large cap consolidators Source: CapIQ as of Sep 30 2019 (1) Highlighted names indicate newly listed firms in Q3 2019. Market Cap EV L3M Share LTM Share CAGR 2017A-19E Gross Margin EBITDA margin EV / Revenue EV / EBITDA Company HQ Listing venue (US$m) (US$m) Perf. Perf. Revenue EBITDA CY2018 CY2018 CY2018 CY2019 CY2018 CY2019 Alibaba China NYSE 435,395 440,594 (4.7%) 8.1% 45.7% 30.4% 60.7% 25.8% 9.0x 6.5x 34.9x 20.5x Tencent China SEHK 399,949 408,896 (9.3%) 8.2% 26.4% 21.6% 49.2% 48.1% 12.3x 7.6x 25.6x 20.2x Baidu China NasdaqGS 35,816 28,553 (13.9%) (50.0%) 10.8% (30.6%) 55.8% 40.7% 2.5x 1.9x 6.1x 14.3x Median (9.3%) 8.1% 26.4% 21.6% 55.8% 40.7% 9.0x 6.5x 25.6x 20.2x Mean (9.3%) (11.2%) 27.6% 7.1% 55.2% 38.2% 7.9x 5.3x 22.2x 18.3x11 Digital media Public comps by sector Source: CapIQ as of Sep 30 2019 (1) Highlighted names indicate newly listed firms in Q3 2019. Market Cap EV L3M Share LTM Share CAGR 2017A-19E Gross Margin EBITDA margin EV / Revenue EV / EBITDA Company HQ Listing venue (US$m) (US$m) Perf. Perf. Revenue EBITDA CY2018 CY2018 CY2018 CY2019 CY2018 CY2019 Tencent China SEHK 399,949 408,896 (9.3%) 8.2% 26.4% 21.6% 49.2% 48.1% 12.3x 7.6x 25.6x 20.2x Recruit Holdings Japan TSE 50,792 50,747 (9.4%) (6.5%) 5.6% 5.7% 46.4% 12.7% 2.4x 2.3x 19.0x 17.3x Nintendo Japan TSE 44,104 35,718 (0.3%) 2.2% 8.0% 35.3% 37.2% 21.0% 3.2x 3.2x 15.5x 12.7x NetEase China NasdaqGS 34,061 29,006 1.7% 23.5% 14.1% 6.3% 47.9% 14.9% 3.1x 2.9x 20.6x 14.0x Tencent Music China NYSE 20,881 18,013 (15.7%) n.a 51.9% 65.8% 34.7% 18.9% 6.7x 5.0x 35.4x 27.7x TAL Education China NYSE 20,261 19,461 (13.4%) 46.4% 44.9% 41.6% 48.0% 15.9% 8.3x 6.1x 52.3x 42.2x NAVER South Korea KOSE 19,050 18,212 32.7% 5.1% 18.5% (11.6%) 100.0% 21.5% 3.8x 3.3x 17.8x 19.8x Sea Limited Singapore NYSE 13,772 12,110 (11.9%) 139.6% 156.0% (61.7%) 21.1% (109.4%) 14.6x 4.5x n.a. n.a. BANDAI NAMCO Japan TSE 13,684 11,713 26.7% 70.1% 7.7% 19.5% 34.5% 15.9% 1.8x 1.7x 11.0x 11.4x Yahoo Japan Japan TSE 13,478 13,290 (3.5%) (20.1%) 5.9% (8.5%) 57.4% 21.2% 1.5x 1.5x 7.2x 7.3x iQIYI China NasdaqGS 11,696 12,120 (23.9%) (36.7%) 28.8% 31.7% 2.2% 30.6% 3.9x 3.0x 12.7x 9.6x NEXON Japan TSE 10,883 6,188 (19.9%) (4.9%) 4.2% (2.0%) 75.9% 44.7% 2.6x 2.6x 5.9x 6.5x Weibo China NasdaqGS 10,070 9,409 1.1% (30.4%) 25.5% 24.1% 79.9% 37.2% 5.5x 5.2x 14.7x 14.5x Kakao Corp. South Korea KOSE 9,473 8,406 0.2% 17.2% 24.4% 10.5% 93.2% 8.5% 4.1x 3.2x 48.3x 27.5x Ncsoft South Korea KOSE 8,957 8,010 10.3% 17.8% (1.5%) (5.8%) 99.1% 37.3% 5.5x 5.5x 14.7x 17.2x LINE Corporation Japan TSE 8,558 8,576 23.4% (5.0%) 18.9% n.a. 37.4% (0.2%) 4.5x 3.9x n.a. n.a. Zhejiang Century Huatong Group China SZSE 7,389 7,004 (22.3%) (32.1%) n.a. (100.0%) 29.5% 13.2% 6.2x n.a. 46.7x n.a. Netmarble South Korea KOSE 6,611 4,979 (9.5%) (24.2%) (3.4%) (23.6%) 100.0% 15.9% 2.9x 2.6x 18.2x 17.9x Konami Japan TSE 6,531 5,357 2.7% 24.1% 4.6% 6.4% 40.4% 78.4% 7.6x 2.2x 9.7x 8.8x Momo China NasdaqGS 6,432 5,351 (15.7%) (20.8%) 36.6% 19.6% 50.8% 26.2% 2.8x 2.3x 10.8x 10.5x Square Enix Japan TSE 5,790 4,742 47.2% 26.6% 4.4% (12.0%) 49.7% 9.0% 2.1x 1.9x 23.6x 13.4x 37Games China SZSE 5,272 5,039 23.8% 60.9% 34.9% 23.4% 68.5% 22.7% 4.7x 3.2x 20.6x 14.0x Giant Network China SZSE 5,221 4,446 (0.7%) (4.3%) n.a. (100.0%) 76.0% 40.7% 11.8x n.a. 29.1x n.a. HUYA China NYSE 5,157 3,846 (8.9%) 8.6% 92.9% n.a. 11.7% 1.3% 5.8x 3.3x 440.7x 54.2x Perfect World China SZSE 5,009 4,740 (2.4%) 10.2% 3.9% 14.2% 57.4% 20.3% 4.5x 3.9x 21.9x 13.4x YY China NasdaqGS 4,546 2,477 (20.8%) (23.4%) 46.8% (10.0%) 39.8% 19.2% 1.2x 0.7x 6.1x 7.4x GSX Techedu China NYSE 3,597 3,374 50.8% n.a 334.2% n.a. 74.4% 5.9% 60.0x 13.0x 1,020.6x 105.0x Capcom Japan TSE 2,827 2,385 27.4% 7.3% 13.9% 9.7% 41.3% 24.2% 2.4x 2.5x 9.9x 10.4x Koei Tecmo Japan TSE 2,746 2,707 13.3% 25.5% 7.3% 8.2% 51.6% 32.6% 7.0x 6.9x 21.6x 21.3x SINA China NasdaqGS 2,726 3,049 (10.7%) (39.0%) 17.2% 16.0% 73.9% 25.2% 1.4x 1.4x 5.7x 5.4x