Asia Long-Short PM/Analyst

Curtis Lehnert

Equity Bottom-Up

Taiwan Semiconductor (TSMC) / Equity Bottom-Up

Smaller, Faster, Cheaper, Denser has become the motto of the foundry industry. I think Daft Punk and the TSMC wafer fab technicians would agree.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/068/922/original/pjimage%20%281%29.jpg?1541520619" class="editor-image img-responsive" data-smartkarma-image-id="68922"></figure>
<div class="content-caption">Source: Internet (theartistsunion.com) / Taiwan Semiconductor Manufacturing Co., Ltd. </div>
 Make it Smaller, Work it Faster, Do it Denser, Makes it Cheaper. OK, maybe we just stick with the original lyrics.
<a href="https://www.smartkarma.com/entities/11230" target="_blank" data-smartkarma-citation="entities:11230:1">Taiwan Semiconductor Mfg Co. Ltd. (2330 TT)</a> has established itself as the global leader in semiconductor chip manufacturing and is widely seen as a bellwether for the semiconductor industry and dare I say, the entire tech sector. The company commands a USD 200 billion dollar market cap, is one of Asia's largest and most liquid stocks and trades nearly USD 550 million/day between its local Taiwan listing and the US-listed ADR. Anyone looking at tech and anyone looking at Asia will want to be familiar with TSMC. 
Maybe you don't cover the tech sector or Taiwan specifically, but you still would like to know what TSMC does. I would argue that learning about the business of TSMC is one of the best "bang-for-the-buck" ways to gain a good understanding of the entire tech hardware sector. If you need a one-stop read to understand the business of one of Asia's largest listed companies, this is the insight for you.  All of the facts, none of the fluff.
Table of Contents
I. Introduction
II. Semiconductor Industry Background
<ul>
<li>some relevant background information on the semiconductor industry</li>
</ul>
III. Moore's Law - Theory vs. Actually
IV. TSMC Business Overview
V. TSMC Technology
<ul>
<li>TSMC's technology and how it has changed over time</li>
<li>a few fun, nerdy tech facts</li>
</ul>
VI. Customers &amp; Competition
<ul>
<li>how TSMC competes and what drives its growth</li>
</ul>
VII. Financials
<ul>
<li>financial performance over the past five years, in a snapshot</li>
</ul>

Smaller, Faster, Cheaper, Denser has become the motto of the foundry industry. I think Daft Punk and the TSMC wafer fab technicians would agree.

Source: Internet (theartistsunion.com) / Taiwan Semiconductor Manufacturing Co., Ltd. 
 Make it Smaller, Work it Faster, Do it Denser, Makes it Cheaper. OK, maybe we just stick with the original lyrics.
Taiwan Semiconductor Mfg Co. Ltd. (2330 TT) has established itself as the global leader in semiconductor chip manufacturing and is widely seen as a bellwether for the semiconductor industry and dare I say, the entire tech sector. The company commands a USD 200 billion dollar market cap, is one of Asia's largest and most liquid stocks and trades nearly USD 550 million/day between its local Taiwan listing and the US-listed ADR. Anyone looking at tech and anyone looking at Asia will want to be familiar with TSMC. 
Maybe you don't cover the tech sector or Taiwan specifically, but you still would like to know what TSMC does. I would argue that learning about the business of TSMC is one of the best "bang-for-the-buck" ways to gain a good understanding of the entire tech hardware sector. If you need a one-stop read to understand the business of one of Asia's largest listed companies, this is the insight for you.  All of the facts, none of the fluff.
Table of Contents
I. Introduction
II. Semiconductor Industry Background

some relevant background information on the semiconductor industry

III. Moore's Law - Theory vs. Actually
IV. TSMC Business Overview
V. TSMC Technology

TSMC's technology and how it has changed over time
a few fun, nerdy tech facts

VI. Customers &amp; Competition

how TSMC competes and what drives its growth

VII. Financials

financial performance over the past five years, in a snapshot


Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

Qualtrics International / Equity Capital Markets

<ul>
<li>Our base case EV for Qualtrics is US$5.2 billion. This is derived from our estimated sales of US$401.4 million in 2018 using an EV/Sales multiple of 12.9x, which is 30% premium to the average EV/Sales multiple of its peers. Our base case implied market cap for the company is US$5.7 billion adjusting for net cash. Our base case implied IPO price is US$26.50, which is 26% higher than the high end of the IPO price range of US$21. Therefore, we are positive on the Qualtrics IPO and we believe it provides an attractive upside. </li>
<li>We forecast Qualtrics to generate sales of US$401.4 million in 2018 (up 38.5% YoY) and US$541.8 million in 2019 (up 35% YoY). We expect the company's strong sales growth to be led by its subscription services. In 2018, we estimate that the subscription services represent 74.3% of total sales, followed by research on demand (17.5%), and professional services &amp; others (8.3%). </li>
<li>Qualtrics is expected to start trading next week in the US. Similar to other recent IT stocks in the US such as <a href="https://www.smartkarma.com/entities/27427" target="_blank" data-smartkarma-citation="entities:27427:1">Eventbrite Inc (EB US)</a>, <a href="https://www.smartkarma.com/entities/27526" target="_blank" data-smartkarma-citation="entities:27526:1">Elastic NV (ESTC US)</a>, and <a href="https://www.smartkarma.com/entities/27465" target="_blank" data-smartkarma-citation="entities:27465:1">Upwork (UPWK US)</a>, we expect a nice pop to Qualtrics' share price in the first day of trading.</li>
</ul>


Our base case EV for Qualtrics is US$5.2 billion. This is derived from our estimated sales of US$401.4 million in 2018 using an EV/Sales multiple of 12.9x, which is 30% premium to the average EV/Sales multiple of its peers. Our base case implied market cap for the company is US$5.7 billion adjusting for net cash. Our base case implied IPO price is US$26.50, which is 26% higher than the high end of the IPO price range of US$21. Therefore, we are positive on the Qualtrics IPO and we believe it provides an attractive upside. 
We forecast Qualtrics to generate sales of US$401.4 million in 2018 (up 38.5% YoY) and US$541.8 million in 2019 (up 35% YoY). We expect the company's strong sales growth to be led by its subscription services. In 2018, we estimate that the subscription services represent 74.3% of total sales, followed by research on demand (17.5%), and professional services &amp; others (8.3%). 
Qualtrics is expected to start trading next week in the US. Similar to other recent IT stocks in the US such as Eventbrite Inc (EB US), Elastic NV (ESTC US), and Upwork (UPWK US), we expect a nice pop to Qualtrics' share price in the first day of trading.


Qualtrics IPO Preview: Valuation Analysis

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Quantitative Analysis

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/068/507/original/2018-11-02_10-20-29.png?1541121653" class="editor-image img-responsive" data-smartkarma-image-id="68507"></figure>Source: Japan Analytics
NB: companies are colour-coded by sector
</div>28 YEARS OF NON-FINANCIAL MARKET LEADERSHIP - To offer some light relief from the current market, we have compiled a graphic illustrating the evolution in the ranking of the leading non-financial Japanese companies by market capitalisation measured at the end of each of the last 28 years.METHODOLOGY - Our comments follow in the detail below, but first a few notes:-<ul>
<li>In the interests of clarity (/sanity?), financials have been omitted. Twelve of the Top 20-ranked companies in 1990 were financials. However, only <a href="https://www.smartkarma.com/entities/742" target="_blank" data-smartkarma-citation="entities:742:1">Nomura (8604 JP)</a>, <a href="https://www.smartkarma.com/entities/6483" target="_blank" data-smartkarma-citation="entities:6483:1">Aozora (8304 JP)</a> and <a href="https://www.smartkarma.com/entities/16897" target="_blank" data-smartkarma-citation="entities:16897:1">Shinsei (8303 JP)</a> have survived in their original corporate structure and have the same ticker code. Our chart would have otherwise have included the now-merged IBJ, Fuji Bank, Dai-Ichi Kangyo Bank, Mitsubishi Bank, Sakura Bank, Sumitomo Bank, Tokai Bank, Sanwa Bank and Mitsubishi Trust Bank.  Excluded from the present-day Top 20 are <a href="https://www.smartkarma.com/entities/218" target="_blank" data-smartkarma-citation="entities:218:1">Mitsubishi UFJ (8306 JP)</a>, <a href="https://www.smartkarma.com/entities/217" target="_blank" data-smartkarma-citation="entities:217:1">Sumitomo Mitsui Financial (8316 JP)</a>, <a href="https://www.smartkarma.com/entities/838" target="_blank" data-smartkarma-citation="entities:838:1">Japan Post Bank (7182 JP)</a>, <a href="https://www.smartkarma.com/entities/359" target="_blank" data-smartkarma-citation="entities:359:1">Japan Post Holdings (6178 JP)</a> and <a href="https://www.smartkarma.com/entities/219" target="_blank" data-smartkarma-citation="entities:219:1">Mizuho Financial (8411 JP)</a> from the present day.</li>
<li>Only companies that were in the Top 20 in 1990 or 2018, as well as those companies that have been in the Top 10 for at least three of the last 28 years, have been included. </li>
<li>Two companies from 1990's Top 20 - Seibu Railway and Japan Airlines - have since been delisted. Although they have relisted as <a href="https://www.smartkarma.com/entities/458" target="_blank" data-smartkarma-citation="entities:458:1">Seibu Holdings (9024 JP)</a> and <a href="https://www.smartkarma.com/entities/1184" target="_blank" data-smartkarma-citation="entities:1184:1">Japan Airlines (9201 JP)</a>, they are no longer highly-ranked.</li>
<li>Seven current Top 20 companies - (<a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank (9984 JP)</a>, <a href="https://www.smartkarma.com/entities/1089" target="_blank" data-smartkarma-citation="entities:1089:1">NTT Docomo (9437 JP)</a>, <a href="https://www.smartkarma.com/entities/639" target="_blank" data-smartkarma-citation="entities:639:1">KDDI (9433 JP)</a>, <a href="https://www.smartkarma.com/entities/13498" target="_blank" data-smartkarma-citation="entities:13498:1">Japan Tobacco (2914 JP)</a>, <a href="https://www.smartkarma.com/entities/13520" target="_blank" data-smartkarma-citation="entities:13520:1">Central Japan Railway (9022 JP)</a>, <a href="https://www.smartkarma.com/entities/751" target="_blank" data-smartkarma-citation="entities:751:1">Fast Retailing (9983 JP)</a> and <a href="https://www.smartkarma.com/entities/15070" target="_blank" data-smartkarma-citation="entities:15070:1">Recruit (6098 JP)</a>)  - have listed during the last 28 years. </li>
</ul>THE 2050 RANKING?- Which of the current market leaders will still be in the Top 20 in 2050 in their current guise? For those still around to read this in 32 year's time, we would wager on just three - <a href="https://www.smartkarma.com/entities/3077" target="_blank" data-smartkarma-citation="entities:3077:1">Keyence (6861 JP)</a>, <a href="https://www.smartkarma.com/entities/73" target="_blank" data-smartkarma-citation="entities:73:1">Toyota Motor (7203 JP)</a> and <a href="https://www.smartkarma.com/entities/563" target="_blank" data-smartkarma-citation="entities:563:1">Sony (6758 JP)</a>.


Source: Japan Analytics
NB: companies are colour-coded by sector
28 YEARS OF NON-FINANCIAL MARKET LEADERSHIP - To offer some light relief from the current market, we have compiled a graphic illustrating the evolution in the ranking of the leading non-financial Japanese companies by market capitalisation measured at the end of each of the last 28 years.METHODOLOGY - Our comments follow in the detail below, but first a few notes:-
In the interests of clarity (/sanity?), financials have been omitted. Twelve of the Top 20-ranked companies in 1990 were financials. However, only Nomura (8604 JP), Aozora (8304 JP) and Shinsei (8303 JP) have survived in their original corporate structure and have the same ticker code. Our chart would have otherwise have included the now-merged IBJ, Fuji Bank, Dai-Ichi Kangyo Bank, Mitsubishi Bank, Sakura Bank, Sumitomo Bank, Tokai Bank, Sanwa Bank and Mitsubishi Trust Bank.  Excluded from the present-day Top 20 are Mitsubishi UFJ (8306 JP), Sumitomo Mitsui Financial (8316 JP), Japan Post Bank (7182 JP), Japan Post Holdings (6178 JP) and Mizuho Financial (8411 JP) from the present day.
Only companies that were in the Top 20 in 1990 or 2018, as well as those companies that have been in the Top 10 for at least three of the last 28 years, have been included. 
Two companies from 1990's Top 20 - Seibu Railway and Japan Airlines - have since been delisted. Although they have relisted as Seibu Holdings (9024 JP) and Japan Airlines (9201 JP), they are no longer highly-ranked.
Seven current Top 20 companies - (Softbank (9984 JP), NTT Docomo (9437 JP), KDDI (9433 JP), Japan Tobacco (2914 JP), Central Japan Railway (9022 JP), Fast Retailing (9983 JP) and Recruit (6098 JP))  - have listed during the last 28 years. 
THE 2050 RANKING?- Which of the current market leaders will still be in the Top 20 in 2050 in their current guise? For those still around to read this in 32 year's time, we would wager on just three - Keyence (6861 JP), Toyota Motor (7203 JP) and Sony (6758 JP). 

Japan: The Evolution Of (Non-Financial) Market Leadership

<ul class="">
<li>
Headquartered in Austin, Texas, <a href="https://www.smartkarma.com/entities/15648" target="_blank" data-smartkarma-citation="entities:15648:1">Solarwinds Inc (SWI US)</a> is a leading global provider of IT infrastructure management software systems. The company is getting ready for an IPO in the NASDAQ exchange this week with a price of US$17 to US$19 per share. At the mid-point of the IPO price range (US$18 per share), the company's market cap would be US$5.4 billion, and would raise about US$756 million. </li>
<li>SolarWinds first went public in 2009. In February 2016, the company was acquired by private equity firms Silver Lake and Thoma Bravo for US$4.5 billion in a leveraged buyout. Both Silver Lake and Thomas Bravo are highly reputable private equity firms and these stakeholders should be mostly positive for the SolarWinds IPO.</li>
<li>One of the company's key strategies is to target focus on the technology professionals. According to the company, "it does not have an outside sales force or professional services organization. It does not wine and dine the C-suite. It does not sponsor golf tournaments or buy Super Bowl ads." Rather, the company markets and sells its products directly to the IT professionals, including network and systems engineers, database administrators, and managed service providers (MSPs).  </li>
<li>The company's major competitors include <a href="https://www.smartkarma.com/entities/15269" target="_blank" data-smartkarma-citation="entities:15269:1">Netscout Systems (NTCT US)</a>, <a href="https://www.smartkarma.com/entities/1064" target="_blank" data-smartkarma-citation="entities:1064:1">Intl Business Machines (IBM US)</a>, MicroFocus (MFGP US), CA Technologies (CA US), BMC Software, Nagios, Manage Engine, ConnectWise, Continuum, Datto, and Kaseya. This remains a fragmented industry ripe for consolidation. In terms of comparable companies, <a href="https://www.smartkarma.com/entities/15269" target="_blank" data-smartkarma-citation="entities:15269:1">Netscout Systems (NTCT US)</a> and CA Technologies (CA US) appear to be most comparable. Investors are also likely to take into consideration the recent acquisition of BMC Software by KKR. In addition, the recent software IPOs in 2018 including <a href="https://www.smartkarma.com/entities/27117" target="_blank" data-smartkarma-citation="entities:27117:1">Zuora Inc (ZUO US)</a>, <a href="https://www.smartkarma.com/entities/27060" target="_blank" data-smartkarma-citation="entities:27060:1">DocuSign Inc (DOCU US)</a>, and <a href="https://www.smartkarma.com/entities/27115" target="_blank" data-smartkarma-citation="entities:27115:1">Smartsheet Inc (SMAR US)</a> are likely be used as comparable companies for SolarWinds. </li>
</ul>



Headquartered in Austin, Texas, Solarwinds Inc (SWI US) is a leading global provider of IT infrastructure management software systems. The company is getting ready for an IPO in the NASDAQ exchange this week with a price of US$17 to US$19 per share. At the mid-point of the IPO price range (US$18 per share), the company's market cap would be US$5.4 billion, and would raise about US$756 million. 
SolarWinds first went public in 2009. In February 2016, the company was acquired by private equity firms Silver Lake and Thoma Bravo for US$4.5 billion in a leveraged buyout. Both Silver Lake and Thomas Bravo are highly reputable private equity firms and these stakeholders should be mostly positive for the SolarWinds IPO.
One of the company's key strategies is to target focus on the technology professionals. According to the company, "it does not have an outside sales force or professional services organization. It does not wine and dine the C-suite. It does not sponsor golf tournaments or buy Super Bowl ads." Rather, the company markets and sells its products directly to the IT professionals, including network and systems engineers, database administrators, and managed service providers (MSPs).  
The company's major competitors include Netscout Systems (NTCT US), Intl Business Machines (IBM US), MicroFocus (MFGP US), CA Technologies (CA US), BMC Software, Nagios, Manage Engine, ConnectWise, Continuum, Datto, and Kaseya. This remains a fragmented industry ripe for consolidation. In terms of comparable companies, Netscout Systems (NTCT US) and CA Technologies (CA US) appear to be most comparable. Investors are also likely to take into consideration the recent acquisition of BMC Software by KKR. In addition, the recent software IPOs in 2018 including Zuora Inc (ZUO US), DocuSign Inc (DOCU US), and Smartsheet Inc (SMAR US) are likely be used as comparable companies for SolarWinds. 


SolarWinds Corp IPO Preview (Part 1) - "Make IT Look Easy"

Do the letters PUBG mean anything to you? Have mini-programs changed the way you use WeChat? Do you like Mao Buyi's song 'Xiao Chou' or did you not think he deserved to be picked in The Coming One? Did you answer 'no' to any of these questions?  Are you wondering what any of this has to do with Tencent?  If so, you have come to the right place.  
This insight is for those who do not cover Tencent, or perhaps have not taken a close look at Tencent in a while.  This insight is for those who want to understand:
<ul>
<li>the structure of Tencent's business units</li>
<li>what are the various platforms and services under the massive Tencent umbrella</li>
<li>financial performance over the past five years, in a snapshot</li>
<li>three fun facts about the company </li>
</ul>
If you need a one-stop read to understand the business of Asia's largest listed company, this is the insight for you.  All of the facts, none of the fluff.

Do the letters PUBG mean anything to you? Have mini-programs changed the way you use WeChat? Do you like Mao Buyi's song 'Xiao Chou' or did you not think he deserved to be picked in The Coming One? Did you answer 'no' to any of these questions?  Are you wondering what any of this has to do with Tencent?  If so, you have come to the right place.  
This insight is for those who do not cover Tencent, or perhaps have not taken a close look at Tencent in a while.  This insight is for those who want to understand:

the structure of Tencent's business units
what are the various platforms and services under the massive Tencent umbrella
financial performance over the past five years, in a snapshot
three fun facts about the company 

If you need a one-stop read to understand the business of Asia's largest listed company, this is the insight for you.  All of the facts, none of the fluff.

United States

International Business Machines Corporation (IBM) provides computer solutions through the use of advanced information technology. The Company's solutions include technologies, systems, products, services, software, and financing. IBM offers its products through its global sales and distribution organization, as well as through a variety of third party distributors and resellers.

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International Business Machines (IBM US)

TSMC (2330 TT): A Generalist's Guide

Smaller, Faster, Cheaper, Denser has become the motto of the foundry industry. I think Daft Punk and the TSMC wafer fab technicians would...

Curtis Lehnert

Qualtrics IPO Preview: Valuation Analysis

Our base case EV for Qualtrics is US$5.2 billion. This is derived from our estimated sales of US$401.4 million in 2018 using an EV/Sales multiple...

Douglas Kim

Japan: The Evolution Of (Non-Financial) Market Leadership

28 YEARS OF NON-FINANCIAL MARKET LEADERSHIP - To offer some light relief from the current market, we have compiled a graphic illustrating the...

Campbell Gunn

SolarWinds Corp IPO Preview (Part 1) - "Make IT Look Easy"

Headquartered in Austin, Texas, Solarwinds Inc (SWI US) is a leading global provider of IT infrastructure management software systems. The...

Douglas Kim

Tencent (700 HK): A Generalist's Guide

Do the letters PUBG mean anything to you? Have mini-programs changed the way you use WeChat? Do you like Mao Buyi's song 'Xiao Chou' or did you not...

Curtis Lehnert

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