TMT/Internet

• A Bloomberg article today said Topcon Corp (7732 JP) is weighing takeover bids received from KKR and EQT. ValueAct has been pressuring the company for 18mos (5+% in May23)
• ValueAct has apparently been pushing the company to divest assets and concentrate on core ops, or go private (and have someone else do it). 
• This is further evidence of the METI-enabled “Bad Cop-Good Cop Routine” which could expand M&A and governance activity dramatically. 

• Talabat Holding (TALABAT UH) is expected to be listed on 10 December 2024, on the Dubai Financial Market at a valuation of ~$10.3bn.
• Fast-Entry is forecasted to be announced for the one Global Index at the close of 10 December and traded on 20 December in conjunction with the review.
• Uncertainty regarding the Fast-Entry arises due to lack of shareholder information in the Institutional Offering which can result in the float market cap being determined as invalid.

• According to our valuation analysis, it suggests a base case implied market cap of 7.9 trillion won for LG CNS, representing target price of 81,095 won per share.
• Therefore, our base case valuation target price of 81,095 won is 31% higher than the high end of the IPO price range.
• We estimate LG CNS to generate sales of 5.99 trillion won (up 6.8% YoY) and net profit of 356.1 billion won (up 7.1% YoY) in 2024.

• Consistent compounders, stocks with steady earnings growth and excess returns over a long period of time, are difficult to find. It’s even more difficult to find reasonably valued compounders.
• From the universe of large Asian companies, we screen those with steady profit growth (>10%) and excess returns in each of last 10 years and over next three forecast years.
• Our list of 20 inexpensive compounders comprises 10 from onshore China, 5 from HK, 3 from India and 1 each from Japan and the Philippines.

• The Semiconductor industry associations report re-accelerating Semi sales, and increase 2024-25 forecasts. This is due to higher AI / Accelerators, HBM Memory but the rest of the market remains sluggish
• TSMC remains on its high growth plateau at 34% YoY, driven by AI and 3nm. UMC remains on a sluggish recovery at 7% YoY.
• AMD, Nvidia, SK Hynix, TSMC: stocks are not expensive on PE relative to earnings growth. Non-Consensus: we think AMD and SK Hynix are worth a serious look.

• The Circuit podcast discusses the uncertainty surrounding Intel’s future leadership and strategic direction
• Ben and Jay analyze the board’s role in Intel’s challenges and debate the company’s path forward
• The podcast ends on a hopeful note, with Jay expressing optimism about Intel’s 14A technology and the potential for success in the future

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• TSMC’s November revenue decline was better than expected, poised for nearly 30% annual revenue growth.
• SK Hynix restructures CIS organization to replicate HBM success model, aiming for improved performance.
• TSMC founder sheds light on reasons behind Samsung and Intel’s setbacks, pointing out core issues. YMTC refutes backdoor listing rumors, facing industry scrutiny; while Samsung explores using discrete LPDDR for AI-driven iPhones and China investigates Nvidia amid US-China chip tensions.

• Gartner, Inc.’s financial performance in the third quarter of 2024 showed resilience amidst a complex economic landscape.
• The company’s contract value grew by 7% year-over-year and revenue figures exceeded expectations, with a total Q3 revenue of $1.5 billion representing a 6% increase on an FX-neutral basis.
• Gartner exhibited robust performance across its business segments, leading to raised guidance for revenue, EBITDA, EPS, and free cash flow for the year 2024.

• Qorvo, Inc. has reported its financial results for the second quarter of fiscal 2025, revealing a mixed performance across its various business segments.
• During the quarter, Qorvo achieved a revenue of $1.047 billion, marking an 18% sequential increase and exceeding their guided midpoint.
• This growth was driven by double-digit increases across all three operating segments: Advanced Connectivity and Sensors Group (ACG), High Performance Analog (HPA), and Connectivity Systems (CSG).

• Revenue grew 10.8% YoY to JPY37.3bn, driven by Overseas Solutions order growth and yen depreciation impact.
• Operating profit decreased 9.7% YoY to JPY634mn due to business liquidation expenses and additional game co-development costs.
• Revenue from animation production increased YoY, but Media Contents faced a loss due to joint game development costs.

• Constituent changes to the S&P 500 INDEX and capping changes will result in a round-trip trade of US$15.9bn across the Select Sector indices and the S&P500 Equal Weight Index.
• The Select Sector index trackers and S&P 500 Equal Weight trackers will need to buy Apollo Global Management and Workday, adding to the buying from S&P 500 INDEX trackers.
• The flows will change over the next week as stock prices move around and final capping is done after the close on 13 December.

• Pat Gelsinger took to X to invite us to join him in 24 hours of “praying and fasting” for Intel’s 100k employees to help them navigate “this difficult period”
• This is an unprecedented move never before seen in the semiconductor world, albeit we suspect that IBM may have dabbled in something similar to resurrect their 2nm process prowess
• This coming Thursday is the proposed date. Don’t expect miracles, this could take until the following Monday for the full impact to manifest itself in terms of share price appreciation

• Strong price action across the market this week coupled with implied vols having caught down to historic vols has put a floor on implied vols.
• Tencent sees strong call buying in December 410 and 420 Calls with month end 400 strike Put buying for December and January.
• Cathay Pacific, +21% over past 3 weeks, HSBC, at 52-week high plus up 38% on the year and BABA, down 21% from Oct 02 high all active names.

• Although vols have stabilized this week both HSI and HSCEI are still trading about 3-4 vol above where they were pre-stimulus and are still not monetizing.
• Strong price action this wek helped keep a floor under implied vols. 
• Positions were added in both HSI and HSCEI with demand tilted towards up-strike Calls given the rally on the week.

• LGES takes over GM battery plant in response to Trump’s win, expanding its presence in the US market.
• India establishes a sovereign AI ecosystem, driving ambitions forward for technological advancements in the country.
• Samsung’s One UI 7 Beta introduces AI enhancements and improved security features in anticipation of the Galaxy S25 release.

• In this edition: • ASM International / ASML Holding / BE Semiconductor Industries | brightened outlook for semiconductor equipment sales • Black Friday/Sinterklaas update | fewer debit card payments during Sinterklaas week

• QuantumPharm (2228 HK) listed in Hong Kong after raising US$126m towards the bottom end of its IPO price range. Its six-month lockup will expire on 12th Dec 2024.
• QuantumPharm is a R&D platform, utilizing quantum physics-based first-principles calculation, advanced AI, high-performance cloud computing, and scalable and standardized robotic automation to provide drug and material science R&D solutions.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• ServiceTitan, a founder-led market leader for trades businesses in the United States and Canada, is expected to IPO this week.
• The company’s amended S-1 puts the initial price range per share at $52.00 to $57.00, implying a market cap of roughly $5B at the midpoint.  
• I have a positive view of upcoming ServiceTitan IPO and expect an attractive first trading-day return. The stock will begin trading on the Nasdaq on Thursday.  

• Highwire Capital’s $2.50/share offer for SGRP is 60% higher than previous bids, raising concerns about financing.
• Founders William Bartels and Robert Brown sold significant SGRP shares below offer price, undermining confidence in the transaction.
• SGRP’s stagnant business faces challenges with declining EBITDA margins and volatile free cash flow, impacting valuation.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: Lifestyle China (2136 HK), Arcadium Lithium (ALTM US), Shanghai Henlius Biotech (2696 HK), ESR Group (1821 HK), Get Nice Financial Group Ltd (1469 HK), Canvest.
• Lowest spreads: Renewable Japan (9522 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Nec Networks & System Integr (1973 JP), Capitol Health (CAJ AU), Elematec Corp (2715 JP). 

• The Sep24 Nikkei 225 Rebal was odd. They could have done 3. They did 2. For now, I still see 2 IN and 2 OUT for the Mar25 Nikkei225 Rebal.
• There is also a DOUBLE-capping event for Fast Retailing which on 8% outperformance could become a TRIPLE-capping event. For now, the trade is shaping up to be US$7bn a side.
• There is still a tech bent to potential ADDs. Some Consumer Goods stocks need stock splits to get in. Longer-term, the TOPIX Methodology Rejig is an interesting problem set.

• TSMC’s N2 Progress Sparks Buzz Amid Yield Improvement Rumors; If True Then 2nm Will Become Even More Successful Than 3nm
• Hon Hai & TASA Showcase Homegrown Space Technologies Including an Alternative to Starlink
• Himax: Buyback Program Lifts Shares; Auto Display Controllers, AR Displays & WLO for AI Progressing 

• SOUTHBOUND gross trading activity rebounded about 20% this week vs the previous week. Net buying was a little lower but still strong. Market volumes overall in HK remain weak.
• Alibaba Group Holding (9988 HK) was again the top buy and EV names XPeng (9868 HK) and BYD (1211 HK) were bought, but tech as a whole was sold.
• I continue to expect HK-listed tech to see ongoing buying. Alibaba, Tencent, Xiaomi, etc are safe havens against Trump tariffs as they don’t compete in the US. 

• Rubrik, cybersecurity company and leader in the segment of enterprise backup and recovery software solutions, delivered a high quality beat and raise in 3QFY25.
• Stock indicated up 20%+ during regular trading session on heavy volume. Rubrik raised guidance for FY25 total revenue to $861M at the midpoint, implying ~37% growth.
• Moreover, the company generated positive FCF, achieved strong growth at scale and surpassed $1B+ in subscription ARR, a big milestone.

• WSTS is revising up Semiconductor demand for 2024 and 2025, AI demand higher than expected. Taiwan AI Server ODM revenues are still booming, impressive numbers.
• Samsung and SK Hynix expediting new LPDDR “In Memory Processing” for Nvidia in 2026. TSMC forecast AI demand 3x increase to 2026.
• Intel 18A low yield and low density brings new light on management reshuffle. TSMC N2 is ~20% ahead. Apple trying its own 5G modem, again.

• Private Equity Interest: Worldline has attracted early-stage interest from private equity firms, including Bain Capital, driven by its discounted valuation and extensive market presence in Europe.
• Market Challenges: Worldline’s stock declined over 50% in 2024, with Q3 revenues dropping 1.1% organically, reflecting struggles in Merchant and Financial Services and the need to stabilize growth.
• Valuation and Takeover Potential: Worldline’s current valuation at 4.61x EV/EBITDA offers upside potential, with a €9.00/share target implying an 18.4% return, though profitability recovery remains uncertain.

• Intapp, Inc. concluded its fiscal first quarter of 2025 on a strong note, showcasing substantial growth in cloud annual recurring revenue (ARR) and laying a strong foundation for future expansion.
• A key highlight was the 27% year-over-year growth in cloud ARR, reaching $309 million, which now comprises 74% of the company’s total ARR of $417 million.
• SaaS revenue also increased by 30% year-over-year to $77 million, driving total revenue up by 17% to $119 million.

• TSMC: +23.5% Premium; Decent Level to Short Relative to Historical Trading Range
• UMC: +0.1% Premium; Middle of the Historical Trading Range; Short Interest Rises Again
• ASE: +3.5% Premium; Near Middle of Recent Range, Wait for Better Levels

• DigitalOcean, a cloud infrastructure provider aimed at developers, startups, and SMBs, achieved steady progress in its third quarter of 2024.
• The company reported revenue growth of 12% year-over-year, propelled by the success of its core cloud offerings and substantial gains in its AI/ML platform.
• Despite facing challenges from earlier price adjustments and acquisitions, DigitalOcean demonstrated robust growth in annual run rate revenue of $798.3 million, marking a consistent 12% increase year-over-year.

• The ADDs/DELs for the ASX index family for the December 2024 index rebal event were announced after market close on Friday 6th December 2024.
• There will be one ADD/DEL for both ASX 50 and ASX 200. All of these are perfectly in line with our final expectations.
• In this insight, we take a final look at the flow expectations for each of these index changes.

• Marvell Technology Inc. reported its third quarter of fiscal year 2025 earnings, indicating a mix of positive growth and strategic shifts.
• The company’s revenues reached $1.516 billion, exceeding guidance by $66 million and showing a 19% sequential increase, driven by heightened demand in the AI sector and strong execution.
• On a year-over-year basis, revenue grew by 7%, marking a return to growth, with data center applications, notably in AI, accounting for 73% of total revenues.

• Descartes Systems Group reported solid third-quarter financial performance, showcasing significant growth in revenue and adjusted EBITDA, while expanding its portfolio through strategic acquisitions.
• The company registered a 17% increase in total revenues compared to the same period last year, driven by a combination of organic growth and successful incorporation of newly acquired businesses.
• Organic revenue growth stood at approximately 10%, reinforcing the company’s ability to enhance its offering within existing operations.

• Last week, the Hang Seng Index (HSI INDEX) gained 2.3% an increase while volatility slightly declined by 0.2%. The volatility surface provides the context for last week’s most popular strategies, 
• Low implied volatility and a flat term structure support long volatility strategies and Calendar Spreads. In a bullish sentiment shift, almost half the strategies reflect a bullish view.
• The largest volume trade, an Iron Condor, is a rare example of a strategy generating premium income. This insight provides both aggregate data analysis and drill-down into individual trade parameters.

• nCino, a cloud-based software provider for the financial services industry, reported its third-quarter fiscal 2025 financial results, highlighting both achievements and challenges.
• The company’s revenue grew by 14% year-over year, reaching $138.8 million, with subscription revenue contributing $119.9 million, also a 14% increase.
• Driving this growth was strong sales performance in the U.S. market, particularly within community and regional banks, as well as the enterprise segment.

• Okta Inc.’s recent financial results indicate a nuanced position in the market, marked by both strong performance and ongoing challenges.
• In Q3 of fiscal year 2025, Okta demonstrated robust engagement with large customers, evident from top 10 deals each exceeding $1 million in annual contract value, significantly involving partner ecosystems, which contributed approximately $20 million in annual contract value (ACV).
• A notable portion of this success can be attributed to Okta’s deepening relationships within the U.S. federal vertical, highlighting the public sector as an area of substantial growth potential.

• Salesforce posted a notable third-quarter performance for fiscal 2025, showcasing both strengths and emerging opportunities, albeit facing certain challenges in its transition to newer markets and technologies.
• Revenue for the quarter reached $9.44 billion, marking an 8% increase year-over-year in both nominal and constant currency terms.
• This growth was primarily propelled by robust performance in core segments like the Sales and Service Clouds, which saw double-digit growth.

• SentinelOne’s Q3 FY2025 earnings report highlights a period marked by notable achievements as well as persisting challenges, suggesting both areas of strength and potential risks in the company’s business landscape.
• On the positive side, SentinelOne showed encouraging top-line growth, exceeding their revenue expectations with a yearly increase of 28% to $211 million.
• Notably, the company’s Annual Recurring Revenue (ARR) grew by 29% to $860 million, marking a significant rebound in their net new ARR which increased by 22% sequentially and positively year-over-year by 4%.

• Box, Inc.’s earnings for the third quarter of fiscal 2025 showcased the company’s strategic moves and operational gains, though certain challenges and market conditions were not overlooked.
• In terms of financial performance, Box reported revenue growth of 5% year-over-year, reaching $276 million, a positive indicator given the prevailing economic conditions.
• The company displayed notable operational efficiency with record gross margins of 82% and operating margins of 29%, reflecting solid discipline in managing expenses even as they invested in strategic growth initiatives.

• Zscaler, a leading cybersecurity company specializing in cloud-based security solutions, reported solid financial performance in its first quarter of fiscal year 2025.
• The company’s revenue increased by 26% year-over-year to $628 million, reflecting robust demand for its Zero Trust Exchange platform and AI solutions.
• Bookings growth also accelerated, surpassing 30%, indicating increased customer commitments to its offerings.

• Steady loss of market share to AMD in x86 PC and Server. Single design win for the GPU Max, overall no AI or Accelerator roadmap.  
• Steady deterioration of the financials. Collapse in NON-GAAP Operating Profits, leading to negative Free Cash Flow, leading to increasing Net Debt. 
• Most damaging, IMO was during 3Q24 conference call (1st Nov 2024) when the CFO David Zinsner said: don’t expect a recovery before 2026. CEO Gelsinger was gone 1 month later. 

• If you haven’t heard the news, Pat Gelsinger is “retiring.” The reality is this was not a retirement but a firing of Pat.
• His brief stint of 1386 days was surprising because not only was he the most technically competent CEO of the last few bad apples at Intel, but he was also among the shortest.
• Pat has by no means been perfect, and the conference at UBS kind of showed the frustrations that the board likely had with Pat.

• Apple’s Intelligence service is working towards a launch in China, but is facing challenges with integrating Baidu.
• NXP may be investing a significant amount of money in Karnataka, India.
• Intel’s interim leadership team is bringing together new ideas and industry experience for a promising future, while South Korea and Japan work to mitigate US export controls on HBM.

• Two hours before China Mobile’s pre-conditional voluntary Offer announcement on the 2 December, HKBN Ltd (1310 HK)  flagged a possible separate Offer from I Squared Asia-backed HGC Global Communication (HGC). 
• No price was mentioned, although HKBN and I Squared “are in discussions on the terms of the proposal (including the price).” The media is reporting a HK$5-HK$6/share price range.
• Apart from anti-competition concerns via a HKBN/HGC tie-in; would HGC even get approval from the powers that be to proceed with a merger?

• The KRW 5T-6T valuation and 13x-16x PER look solid compared to local peers like SDS and Hyundai AutoEver, with CNS possibly getting a premium due to its smaller captive stake.
• Instos probably won’t push hard for lock-ups but will aggressively target pricing to secure larger allotments, knowing the company is likely to stick with a market-friendly price.
• On a separate note, I wouldn’t expect much of a NAV discount reduction for LG Corp, as LG CNS’s stake isn’t significant enough to move the needle.

• The long awaited IPO of LG CNS is finally getting ready to be completed in February 2025. The IPO price range is 53,700 won to 61,900 won.
• Expected market cap is between 5.2 trillion won to 6.0 trillion won. At the high end of the IPO price range, the total IPO offering would involve 1.2 trillion won.
• The bankers used three companies including Samsung Sds, Hyundai Autoever, and NTT Data Corp as comps. This is expected to be one of the largest IPOs in Korea in 2025

• Coinbase Global (COIN US) can be the unexpected addition by transition because of a high liquidity score and a close distance below the estimated transition threshold.
• Lennox International (LII US) is the main candidate for addition by migration due to having the highest average mcap score and passing eligibility metrics.
• Illumina Inc (ILMN US) has a muted conviction for addition because of ineligible earnings and a recent deletion from the index.

• Super Micro Computer (SMCI) has been in the spotlight recently, with its stock experiencing wild swings amid developments that have left investors divided.
• On one hand, a special committee investigation concluded there was no evidence of fraud or misconduct, a finding that alleviated fears sparked by Ernst & Young’s resignation as its auditor.
• This positive news was coupled with robust growth in AI-driven revenues, innovative liquid-cooled server solutions, and ambitious manufacturing expansion plans.

• Unisoc secures US$448M in funding to improve development of 5G chips, highlighting the growing importance of 5G technology in the tech industry.
• India aims to attract more electric vehicle manufacturers by expanding incentives, signaling a push towards sustainable transportation solutions.
• Nvidia collaborates with Thailand on AI despite challenges in the data center ecosystem, showing commitment to advancing AI technology globally.

• Waystar Holding,  American provider of mission-critical cloud software to healthcare organizations, completed its IPO in June and raised ~$968M to repay outstanding indebtedness.
• Waystar Holding shares have outperformed the Nasdaq Composite Index (+31.5%) in 2024 with shares up ~44% year-to-date. IPO investors are also up ~44%.  
• I expect downward pressure on the stock as IPO lock-up period ends on December 6th, 2024, and all ~176M Waystar Holding shares will be eligible for trading.  

• Earlier this week, at the UBS Global Technology Conference, Intel CFO and co-interim CEO David Zinsner declared that the company’s “core strategy remains intact”
• Recently onboarded GM of IFS Dr. Naga Chandrasekaran, explained that while 18A remains on track, there are still “many milestones” to be met before it ramps in H225
• He also admitted that 18A is more geared towards HPC, is skewed in favour of Intel Products and that 14A will likely be more suitable for the broader semiconductor ecosystem

• Microchip Technology reported its second-quarter fiscal year 2025 financial results amidst a challenging macroeconomic environment.
• The company faced a sequential net sales decline of 6.2% to $1.164 billion.
• Excluding a $13.3 million benefit from the settlement of a legal matter with a licensee, net sales declined by7.3%.

• Greenidge announced today that it has entered into a definitive agreement to sell its 152-acre Spartanburg, SC property Data Journey for $12.1 million in cash and an 8% profit participation interest in the property’s planned data center.
• Greenidge will provide support to Data Journey in the site development and buildout.
• Greenidge CEO Jordan Kovler said, “Today marks an exciting step forward for Greenidge as our South Carolina property sale to Data Journey represents our first large- scale entrance into the data center space.”

• The key point is Saturday—watch if eight ruling party lawmakers defect. Hahn Dong-hoon may push for an early election, with 15 loyalists backing him, so it’s definitely possible.
• I’d bet on the ruling party leader pivoting, accepting impeachment, and pushing for an early election. Time to scout beneficiaries and set up an aggressive trading play.
• Short-Term, I’m eyeing Kakao affiliates, under-the-radar IT stocks, and those likely to benefit from corporate governance changes. Low birth rate-related sectors are also set for strong upside.

• Kioxia has announced the terms for its IPO, and plans to raise $730m through issuing new shares as well as offer by existing shareholders, at a market capitalisation of $819bn.
• Kioxia Holdings (285A JP) ‘s earnings have been volatile and margins have trailed compared to peers Micron and SK Hynix. Earnings are approaching a new peak.
• Kioxia’s implied valuation multiples are at a deep discount to peer multiples, suggesting there is significant upside to the indicative IPO price range.

• Robosense Technology (2498 HK) has seen its sales of LiDAR solution systems grow substantially as it achieved the ability to mass produce for its customers.
• The company integrates proprietary hardware and software, creating a barrier to entry for most LiDAR competitors, who produce only the hardware system.
• Robosense announced a strong set of results for 3Q24 and expects to be profitable at some time in 2025.  The company has been actively buying back shares.
  

• Kioxia is planning to offer its IPO on 18 December 2024.  This Insight profiles Kioxia and its market.
• NAND flash, Kioxia’s product, is a commodity, and that results in dramatic price, revenue, and margin swings.
• Kioxia is in a joint venture that provides excellent scale economies which are offset by a supply agreement that amplifies troubles caused by oversupplies

• Artificial intelligence granted sovereign status, with autonomous decision-making capabilities, gaining power and authority.
• Fujifilm Taiwan expands by building a new plant in Hsinchu, while ASM grows in proximity to TSMC and suppliers in Taiwan.
• China issues a warning to Biden and Trump with an export ban on gallium and germanium, impacting US industries; Marvell sees strong 3Q24 results boosted by high demand for AI silicon.

• Gelsinger’s IDM 2.0 strategy will be up for debate by Intel’s BoD. Most likely it will be largely scaled back 
• The new CEO’s options will be limited by the legal agreements in place with Brookfield & Apollo, along with the restrictions imposed by the US DOC 
• Possible CEO candidates are the current Globalfoundries CEO, Tom Caulfield, former Intel board member Lip-Bu Tan and former Intel executive Stacy Smith, who recently joined Intel’s BoD

• Shenzhen Yuejiang Technology, more commonly known as just Dobot, updated its PHIP and plans to raise fresh capital for technology development for intelligent cobots.
• The company did not disclose the proposed size and price range for the offering. Guotai Junan international and ABC International are leading the IPO.
• I believe cobot industry can grow faster than third-party forecasts while the integration of AI into cobots will drive the development of smart cobots.

• Geniee demonstrated high double-digit growth in sales (+36.3% YoY) and reported OP (+77.2% YoY) for Q1-2 FY3/25 results.
• The acquisitive impact from the consolidation of Socialwire (3929) in July 2024 was positive, with a one-time ¥0.07bn gain related to disposing of a shared office operation.
• Other income also benefitted by ¥0.32bn from the transition of JAPAN AI Co. from a consolidated subsidiary to an affiliate company due to capital-raising activities. 

• RaaS has published an update report on online marketplace Airtasker (ASX:ART) following its recent announcement of three additional media deals in the UK and US.
• Additional deals in the US have been announced with Sinclair Media ($9.2m) and Mercurius Media ($9.2m), together with an extension of the Chanel 4 deal in the UK ($7.8m).
• This brings the total of recent media deals to $51.6m which is likely to supercharge international growth in the medium term.

• In this edition: • ASM International | reiterates 4Q24 and FY25 guidance despite new export regulations • Black Friday update | a strong start of the week with a somewhat disappointing finish

• An additional 24 Equipment are added to the restriction list (negative to AMAT, KLA, LAM). No explicit restrictions on ASML or Tokyo Electron, but that’s done indirectly.
• HBM Memory sales to China restricted (directly negative to Samsung), but restriction of DRAM Manufacturing Equipment sales is long-term positive to Micron, Samsung, SK Hynix. 
• 140 Chinese firms added to the Entity List, including all China’s Semi Production Equipment makers (Naura, AMEC, Piotech, SiCarrier). 

• A case against ASML being brought by the Hollywood Firefighters Pension Fund (HFPF) is now opening up into a class action lawsuit
• Claims that ASML withheld crucial information from investors in the Jan-Oct 2024 time period, e.g. impact of US sanctions, strength of the semi recovery, order backlog etc. 
• In reality, ASML warned in October 2023 that 2024 would be a zero growth year. Did the HFPF think they were kidding?

• Hong Kong market breadth stays strong despite market pullback in November.  Mainland investors continue to increase exposure to HK market through Southbound Connect platform.
• Baidu (9888 HK) , Baidu (BIDU US) , the global leader in Robotaxis, was granted a license to start operating its autonomous cars in Hong Kong.
• Vitasoy Intl Holdings (345 HK) shares surged on takeover rumours after Yeo Hiap Seng (YHS SP) increased its stake to more than 12% allowing them to call a Board meeting.

• Baidu’s third-quarter 2024 financial performance presents a complex picture, showcasing both opportunities and challenges that shape the company’s investment thesis.
• The company reported total revenues of RMB 33.6 billion, reflecting a 3% decline year-over-year.
• However, Baidu Core’s revenue remained stable at RMB 26.5 billion.

• Dell Technologies Inc. reported solid results for the fiscal year 2025 third quarter, demonstrating both strengths and challenges across its various segments.
• The company achieved a revenue of $24.4 billion, marking a 10% increase year-over-year, driven by strong growth in its Infrastructure Solutions Group (ISG) thanks to robust demand for AI servers and traditional servers.
• Diluted earnings per share (EPS) reached $2.15, reflecting a 14% rise, while cash flow from operations was $1.6 billion.

• NetApp’s recent earnings for the second quarter of fiscal year 2025 reflects a strong performance with both opportunities and challenges evident in the company’s results.
• Key aspects of the company’s current position and future outlook can be synthesized as follows: NetApp demonstrated significant growth in its all-flash storage segment, showing a 19% year-over-year increase, and enjoyed solid momentum in cloud storage services, which helped drive revenue beyond expectations.
• The reported revenues reached $1.66 billion, showing a 6% increase compared to the previous year.

• Intel has been making headlines recently with a series of significant developments that underscore the company’s tumultuous state.
• On December 1, 2024, CEO Pat Gelsinger stepped down after a tenure that saw the company’s stock price plunge by 61%.
• The leadership vacuum was filled by interim co-CEOs, David Zinsner and Michelle Johnston Holthaus, with Intel initiating a global search for a permanent successor.

• iQIYI recently divulged its financial and operational results for the second quarter of 2024, revealing several intriguing aspects about its current business trajectory.
• This analysis aims to distill the substantial information provided during the earnings call and form an even-handed view on iQIYI’s performance and future prospects.
• iQIYI remains a significant player in the long-form video sector in China, holding a competitive edge in the drama and film categories.

• Under its mission of “Creating a new view of the world with the AViC Team as the business driver,” AViC (hereafter, the Company) provides a full range of services related to digital marketing, from strategy development to execution.
• In addition, the Company strives for and ensures “quality growth” by maintaining and improving profitability while pursuing sustainable business growth.
• One of the Company’s distinguishing characteristics is its high productivity compared to competitors. 

• In this edition: • ASM International / ASML Holding | US to implement additional export controls to China • InPost | step-up in deployment APMs in the UK and extension of cross-border proposition • Dutch retail sales | up 2.0% YoY in value and up 0.6% YoY in volume in October • Black Friday update | Sunday’s iDEAL transaction data showed a modest YoY increase

• HKBN Ltd (1310 HK)‘s preconditional voluntary conditional offer from China Mobile (941 HK) is HK$5.23. Including the HK$0.165 dividend, the total offer is HK$5.395, an 11.0% premium to last close.
• The offer seems rushed and a reaction to a potential competing offer from I Squared. The lack of privatisation through a scheme and MBK’s irrevocable suggest the offer is light.   
• An unattractive offer, a lengthy precondition long-stop date and the irrevocable competing offer clause invite I Squared to enter the fray. 

• A Bloomberg article mid-day suggested Japan’s Ministry of Health, Labour and Welfare proposed a new “wage growth +1.9%” (vs 1.7% now) return bogey for the US$1.7trln Government Pension Investment Fund. 
• The GPIF is conducting its quinquennial review to assess markets, long-term prospects, correlations, etc, to set a CAPM asset allocation mix to meet the bogey.
• The combination of higher USDJPY, Japan inflation, wider valuation spreads, and the prospect of higher yen rates suggests the review might result in lower yen bond allocs, higher equity allocs.

• There are 7 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index at the December rebalance.
• We correctly forecast 4/7 and 7/7 for the Chinext Index adds/deletes and were 3/5 and 5/5 for the Chinext50 Index adds/deletes.
• Based on the estimated passive tracking AUM, the round-trip trade across both indices is estimated to be CNY 12.24bn (US$1.69bn).

• Kioxia Holdings (285A JP) is a leading player in the NAND flash memory market. It will list on 18 December and seek to raise up to US$727 million.
• We previously discussed the IPO in Kioxia (285A JP) IPO: The Bull Case and Kioxia (285A JP) IPO: The Bear Case.
• Our valuation analysis suggests that the IPO price range of JPY1,390-1,520 per share is attractive. Therefore, we would participate in the IPO.

• There is 1 change for the CNI Semiconductor Chips Index that will be implemented at the close on 13 December.
• Passive trackers are estimated to buy 0.9x ADV in Hwatsing Technology (688120 CH) and sell 0.5x ADV in StarPower Semiconductor (603290 CH). 
• The add has outperformed the delete, but not by a lot. There could be more outperformance over the next couple of weeks.

• Kioxia Holdings (285A JP) is aiming to raise around US$840m (including over-allocation) in its Japan IPO.
• It was the world’s largest pure-play NAND flash memory supplier, in terms of both revenue and unit shipments in 2023, according to TechInsights.
• We have looked at the company’s past performance in our previous notes. In this note, we will talk about the IPO valuations.

• Kioxia Holdings (285A JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 18 December.
• At the mid-point of the IPO price range of JPY 1390-1520/share, Kioxia Holdings (285A JP) will be valued at JPY 784bn (US$5.24bn).
• TOPIX inclusion will take place in January while inclusion in global indices is likely to take place in May and June. Selling stock to increase float will be an overhang.

• The TIP Taiwan Select High Dividend ETF (00919 TW) tracks the TIP Customized Taiwan Select High Dividend Index and has an AUM of TWD 285bn (US$8.75bn).
• We forecast 8 changes a side at the December rebalance with an estimated one-way turnover of around 16% and a round-trip trade of around US$2.8bn.
• An equal weighted basket of potential inclusions has outperformed an equal weighted basket of potential deletions since the start of July with most of the outperformance coming from September.

• There could be 19 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 30 December. There are some stocks from the new F&O inclusions.
• If all changes are on expected lines, one-way turnover is estimated at 65.2% and that will result in a one-way trade of INR 71bn (US$837m).
• The potential inclusions have outperformed the potential deletions since the start of July. The pace picked up over the last month as we neared the end of the review period.

• The December 2024 index review results for the ChiNext and ChiNext 50 indices were announced yesterday.
• There will be seven changes for the ChiNext index and five changes for the ChiNext 50 index. Some of these names surprised us.
• In this insight, we take a look at our final flow expectations for the confirmed index changes.

• Kioxia Holdings (285A JP) is a leading player in the NAND flash memory market. It will list on 18 December and seek to raise up to US$740 million.
• In Kioxia (285A JP) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The bear case rests on unrealistic long-term financial model assumptions, market share losses, high customer concentration risk, volatile gross margin due to JV and weak FCF profile.

• CSI announced the changes for the December rebalance after market close on 29 November and the changes will be effective after the close of trading on 13 December.
• There are 3 changes for the index and we estimate passive buying of 0.3-0.65x ADV in the adds and selling of between 0.4-0.6x ADV in the deletes.
• On average, the adds to the index have outperformed the deletes over the last 5 weeks with the adds moving higher and the deletes trending lows.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: WealthNavi (7342 JP), Shanghai Henlius Biotech (2696 HK), Shinko Electric Industries (6967 JP), Get Nice Financial Group Ltd (1469 HK), Arcadium Lithium (LTM AU), Canvest.
• Lowest spreads: Renewable Japan (9522 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Nec Networks & System Integr (1973 JP), Elematec Corp (2715 JP), I-PEX (6640 JP). 

• CSI announced the changes for the December rebalance after market close on 29 November and the changes will be effective after the close of trading on 13 December.
• There are 3 changes for the index, and we estimate one-way turnover of 1.7% resulting in a round-trip trade of CNY 570m (US$79m).
• Nexchip Semiconductor (688249 CH) and United Nova Technology (688469 CH) are adds to other indices as well and the impact on the stocks will be a lot higher.

• The December 2024 index review results for the STAR 50 and STAR 100 indices were announced after market close on Friday 29th November 2024.
• There will be zero changes for the STAR 50 index and four changes for the STAR 100 index.
• We expect one-way flows of approximately US$793mn and US$136mn for the STAR 50 and STAR 100 index rebal events respectively.

• Following a methodology change in mid-November for the CSI All Share Semiconductor Index, there are 7 adds and 29 deletes for the index in December.
• Estimated one-way turnover at the rebalance is 6% leading to a round-trip trade of CNY 3.15bn (US$435m).
• The adds outperformed the deletes bigly in the first 2 weeks of November. Some of those gains have been given back but a new uptrend seems to be taking shape.

• For the month of November 2024, 14 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$15bn.
• The average premium for the new transactions announced (or first discussed) in November was ~44%. The average premium YTD is ~43%.
• This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.

• Hong Kong Alpha portfolio lost 2.9% in November, but has outperformed its benchmark by 4.9% since inception on October 1st.  It has outperformed HSI, HSCI and HSCEI by 9%.
• Hong Kong Alpha has generated idiosyncratic returns during the market correction.  The portfolio has no exposure to energy, healthcare and property sectors. 
• We exit 4 positions at the end of the month and add positions in software, tech components, travel and restaurant sectors.

• Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
• On the IPOs front, listing in the past week didn’t do much, while a number of comapnies are still looking to beat the year end deadline.
• On the placements front, there were a number of secondary selldowns in Japan.

• Samsung Semiconductor re-org, new reporting lines, top management promotions and demotions, but the same people. That’s going to solve problems? Qualcomm gives up on buying Intel – good idea. 
• Xiaomi to launch its smartphone chip, but what for? Intel launching a PC GPU again . Apple delays or abandons 2nm for M5 chip (too expensive). TSMC increasing CoWoS again. 
• China – US worsening relations, side effect is over buying, over stocking of semiconductors? is there a bunch of inventories in China that we can’t see?