Max Hu of ZZ Capital international presented his in-depth investment thesis on GMO Internet (Japan: 9449) at Asian Investing Summit 2020.

Prior to delving into GMO Internet, Max provided his macro perspective on investing in Asia during the coronavirus crisis.

Thesis summary:

GMO Internet is a diversified internet company, mainly engaged in the internet infrastructure business. It is a market leader for domain names and web hosting services in Japan. It also runs online advertising and media, internet financial services, mobile entertainment, and cryptocurrency.

The company has a $2 billion market capitalization, and the shares recently traded at a 2020 forward P/S of 1x, EV/EBIT of 9x, and P/E of 20x. Revenue and earnings should grow by 10% and 20% annually, respectively, over the next three years. While the stock is under the radar of global investors, the internet infrastructure business should benefit from the COVID-19 crisis and digital transformation.

The company is also entering the bitcoin mining and stable coin businesses. The stock is unique because, at the recent quotation, it provides a free option on the bitcoin and cryptocurrency ecosystem. This option could provide significant upside on a five- to ten-year time horizon.

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About the instructor:

Max Hu serves as the executive director for ZZ Capital international. ZZ Capital International is the Hong Kong-based oversea investing platform for the ZEG, a leading Chinese privately-owned investment group with an AUM over 150 billion USD.

Previously, Max was Head of Asset Management for JT Asset Management. He was also the co-founder and fund manager of Tyee Capital Group. He managed Tyee Capital’s global opportunity fund, an equity-based, long-biased multi-strategy fund with a focus on extraordinary businesses. Max’s investment approach is contrarian, long-term, and concentrated. His investments have been focused on easy to understand, wide-moat companies with solid long-term growth prospects. He has worked at Deutsche Asset Management and is a CFA Charterholder. Max graduated from Tsinghua University in China with a degree in physics and mathematics. He has done Ph.D. research in Financial Economics at ETH Zurich and holds a Masters’s degree from University Heidelberg.