Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/mediatek-inc" target="_blank" data-smartkarma-citation="entities:772:1" rel="noopener">Mediatek Inc (2454 TT)</a> is the world’s 4th largest global fabless semiconductor company and powers more than 2 billion devices a year. Global smartphone shipments are expected to grow at a 6.9% cagr to 1.7 billion units in 2025. With MediaTek’s leading market share in 5G SoC, they are likely to experience an outsized benefit from the replacement trend brought by technology upgrades to 5G and Wi-Fi 6, Bluetooth, and ARM-based SoCs that integrate wireless communication. 
This is a high-quality global technology company that is expected to expand its ROE to above 20% driven by increased asset turns and margin expansion whilst the net cash on the balance sheet has nearly doubled to roughly $5.9bn over the past 2 years. 
Given the lack of meaningful acquisitive growth opportunities over the past 5 years, MediaTek has allocated nearly half of its Free Cash Flow generated toward dividend payments. Following their 1Q21 results, the company’s board of directors approved raising the dividend payout ratio to 80-85%, up from 60-70%, with the policy to take effect next year. On top of that, MediaTek has budgeted NT$100 billion over the next four years for special cash dividends. MediaTek currently trades on a forward dividend yield of 5.2%, which should continue to provide share price support, especially considering a continued low-interest-rate environment. 
This insight is also a natural follow up from an idea generated through our, machine learning-driven, proprietary GEM screening model, which takes a three-pronged approach to find the best medium-term long ideas within the top100 largest stocks in the MSCI GEM Index: <a href="https://www.smartkarma.com/insights/screening-for-gems-june-2021" target="_blank" data-smartkarma-citation="insights:52406" rel="noopener">Screening for GEMs: June 2021</a>.

Mediatek Inc (2454 TT) is the world’s 4th largest global fabless semiconductor company and powers more than 2 billion devices a year. Global smartphone shipments are expected to grow at a 6.9% cagr to 1.7 billion units in 2025. With MediaTek’s leading market share in 5G SoC, they are likely to experience an outsized benefit from the replacement trend brought by technology upgrades to 5G and Wi-Fi 6, Bluetooth, and ARM-based SoCs that integrate wireless communication. 
This is a high-quality global technology company that is expected to expand its ROE to above 20% driven by increased asset turns and margin expansion whilst the net cash on the balance sheet has nearly doubled to roughly $5.9bn over the past 2 years. 
Given the lack of meaningful acquisitive growth opportunities over the past 5 years, MediaTek has allocated nearly half of its Free Cash Flow generated toward dividend payments. Following their 1Q21 results, the company’s board of directors approved raising the dividend payout ratio to 80-85%, up from 60-70%, with the policy to take effect next year. On top of that, MediaTek has budgeted NT$100 billion over the next four years for special cash dividends. MediaTek currently trades on a forward dividend yield of 5.2%, which should continue to provide share price support, especially considering a continued low-interest-rate environment. 
This insight is also a natural follow up from an idea generated through our, machine learning-driven, proprietary GEM screening model, which takes a three-pronged approach to find the best medium-term long ideas within the top100 largest stocks in the MSCI GEM Index: Screening for GEMs: June 2021.

MediaTek: High-Quality 5G Beneficiary with a Tremendously Attractive Dividend Yield

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<a href="https://www.smartkarma.com/entities/renesas-electronics-corp" target="_blank" data-smartkarma-citation="entities:15933:1" rel="noopener">Renesas Electronics (6723 JP)</a> on 8 February 2021 announced that they had signed an agreement to acquire <a href="https://www.smartkarma.com/entities/dialog-semiconductor-plc-664a1f83-2a21-4690-a91f-fb971832e7ad" target="_blank" data-smartkarma-citation="entities:21607:1" rel="noopener">Dialog Semiconductor (DLG GR)</a> for an equity value of €4.9bn. The company on the same day <a href="https://www.renesas.com/eu/en/about/press-room/notice-concerning-filing-shelf-registration-statement-issuance-new-shares" target="_blank" rel="noopener">announced</a> a shelf registration to issue up to ¥270bn of shares to pay for the deal.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/211/854/original/Screenshot+2021-06-08+at+10.38.41+AM.png?1623120032" class="editor-image img-responsive" data-smartkarma-image-id="211854"></figure></section>Renesas shares fell on the news, bounced, then fell, and have traded in a range of ¥1,100-1,300/share since then. In the interim (it will take until the end of 2021 to get the Dialog deal past foreign review boards and anti-trust regulators), the company experienced <a href="https://www.renesas.com/eu/en/node/1509341" target="_blank" rel="noopener">a fire at its Naka Factory</a> which will cost a ¥24bn impact in H1, there is an ongoing global chip shortage affecting both semiconductor makers and their customers, and the end of May saw the company finally <a href="https://www.renesas.com/eu/en/about/press-room/renesas-announces-issuance-new-shares-and-secondary-offering-shares" target="_blank" rel="noopener">announce</a> its equity offering - large at nearly US$4bn. This seemed like an overhang, but has ended up not being so much of one.The interim period, while showing a sideways trend for Renesas, saw its Peers outperform dramatically. The announcement of the equity offering and its size looked like it would present significant overhang. It has not turned out to be the case. There has been a "buy the news" reaction. It is a big offering. There are a bunch of moving parts. And lots of index flow.

Renesas Electronics (6723 JP) on 8 February 2021 announced that they had signed an agreement to acquire Dialog Semiconductor (DLG GR) for an equity value of €4.9bn. The company on the same day announced a shelf registration to issue up to ¥270bn of shares to pay for the deal.Renesas shares fell on the news, bounced, then fell, and have traded in a range of ¥1,100-1,300/share since then. In the interim (it will take until the end of 2021 to get the Dialog deal past foreign review boards and anti-trust regulators), the company experienced a fire at its Naka Factory which will cost a ¥24bn impact in H1, there is an ongoing global chip shortage affecting both semiconductor makers and their customers, and the end of May saw the company finally announce its equity offering - large at nearly US$4bn. This seemed like an overhang, but has ended up not being so much of one.The interim period, while showing a sideways trend for Renesas, saw its Peers outperform dramatically. The announcement of the equity offering and its size looked like it would present significant overhang. It has not turned out to be the case. There has been a "buy the news" reaction. It is a big offering. There are a bunch of moving parts. And lots of index flow.

Renesas Equity Offering - Priced To Go With Index Demand Now and Later

TMT & Consumer Independent Equity Research Analyst, Obex Capital Research

Aaron Gabin

TMT & Consumer Independent Equity Research Analyst

TMT & Consumer Independent Equity Research

Obex Capital Research

“Obex” is Latin for Barriers to Entry. Obex Capital Management’s investment philosophy is driven by an intense focus on which business model’s Barriers to Entry are able to withstand the ever increasing competitive disruption in the TMT and Consumer Sectors.

Kind of a mediocre underwhelming analyst presentation by one of our favorite software companies, but the larger long term picture remains intact: a huge pool of legacy incumbent endpoint providers that Crowdstrike will feast on for years to come.<div class="content-highlight">Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity. </div>

Kind of a mediocre underwhelming analyst presentation by one of our favorite software companies, but the larger long term picture remains intact: a huge pool of legacy incumbent endpoint providers that Crowdstrike will feast on for years to come.Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity. 

Crowdstrike Analyst Day: Really, Just $3B in ARR?

Semiconductors, Memory and SSDs Specialist, Objective Analysis

Jim Handy

Semiconductors, Memory and SSDs Specialist

Objective Analysis

Objective Analysis offers third-party independent market research and data for the semiconductor industry and investors in the semiconductor industry.

Semiconductors, Memory and SSDs

Thematic (Sector/Industry)

For the third month in a row semiconductor revenues have been 14% or more above trend, to set historic records.  This Smartkarma Insight explores this phenomenon and the price dynamic that is driving it.

For the third month in a row semiconductor revenues have been 14% or more above trend, to set historic records.  This Smartkarma Insight explores this phenomenon and the price dynamic that is driving it.

February Semiconductor Revenues Remain Impressively Above Trend

Crowdstrike continues to put up impressive quarterly results and guidance that blows away even heightened expectations. The two high profile cyber hacks in the past few months have given a major tailwind to FY2022...and despite guiding 1000bps ahead of consensus revenue growth, we expect 50% growth to be conservative. We remain long. <div class="content-highlight">Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.  </div>

Crowdstrike continues to put up impressive quarterly results and guidance that blows away even heightened expectations. The two high profile cyber hacks in the past few months have given a major tailwind to FY2022...and despite guiding 1000bps ahead of consensus revenue growth, we expect 50% growth to be conservative. We remain long. Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.  

United States

Broadcom Inc. designs, develops, and supplies semiconductor and infrastructure software solutions. The Company offers storage adapters, controllers, networking processors, motion control encoders, and optical sensors, as well as infrastructure and security software to modernize, optimize, and secure the most complex hybrid environments. Broadcom serves customers worldwide.

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Broadcom (AVGO US)

MediaTek: High-Quality 5G Beneficiary with a Tremendously Attractive Dividend Yield

MediaTek, the world’s 4th largest global fabless semiconductor company with a leading market share, should benefit from technology upgrades to 5G,...

Wium Malan, CFA

Renesas Equity Offering - Priced To Go With Index Demand Now and Later

Renesas will offer up to 373mm shares or what should be ~$4bn of new and used stock. Pricing (with pushing and shoving before) should be 9 June....

Travis Lundy

Crowdstrike Analyst Day: Really, Just $3B in ARR?

Crowdstrike Analyst Day was underwhelming with easily reached ARR and Operating Model Targets introduced. We like the stock anyway, especially with...

Aaron Gabin

February Semiconductor Revenues Remain Impressively Above Trend

What is driving the current boom in semiconductors? An ongoing shortage, which is driving striking price increases, leading to record revenues. ...

Jim Handy

Crowdstrike 4Q21: Scaling the Heights

Crowdstrike retains its place as the highest quality high valuation software company, once again beating and raising by a wide margin.

Aaron Gabin

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