TMT/Internet

• When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider. 
• 12wks ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 5wks ago, reco’d trimming.
• Shinko had outperformed Ibiden, and gross spreads had come in 5+% on JSR’s approval. Spreads are now 3% wider than their narrowest, but gap risk has widened as Shinko outperforms.

• On the 8th February 2024, 85% of Hollysys Automation (HOLI US) shareholders present and via proxy, voted for Ascendent Capital’s Offer. After three-plus years, the end was finally in sight.
• Then crickets. The merger was to complete in the 1Q. On the 15th April, HOLI released an accountant resignation notice. No word on dissenters or regulatory approvals. Shares sold off. 
• The accountant resignation is a nothing burger. HOLI should lift their game and provide more transparency on the outstanding merger conditions. Still, the spread is attractive. This is a buy. 

• In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run-up to the June 2024 index rebal event.
• There are up to two intra-review changes possible between now and the June 2024 review which could triggered by the Silver Lake (SLR AU) and Boral (BLD AU) deals.
• Separately, I see one ASX 20 change and two ASX 100 changes for the regular rebalance in June 2024.

• Nexon is a leader in the video game virtual worlds industry with an enterprise value of $11.4 billion
• The company has consistently high EBIT margins and a robust portfolio of popular franchises that have generated billions in revenue
• Despite being undervalued by the market compared to its peers, Nexon is poised for significant growth and offers potential for future success for investors

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Cloudchain (CC CH) is looking to raise up to US$200m in its upcoming HK IPO. 
• Cloudchain is an independent industry digital finance platform in China, serving anchor enterprises, chain-related enterprises, and financial institutions.
• In this note, we will talk about the not-so-positive aspects of the deal.

• Lumen Technologies’ Fourth Quarter 2023 Earnings revealed significant progress in the company’s business transformation.
• Led by the efforts of the new executive team under CEO Kathleen Johnson, Lumen indicated that it had met its 2023 EBITDA and free cash flow guidance and had made material progress in its strategic priorities.
• To strengthen its balance sheet, Lumen entered into an agreement with a majority of its creditors that extends most debt maturities to 2029.

• Pegasystems Inc. has noted robust cash flow growth and value delivered to its clients in Q4 of 2023.
• The company has adopted a new go-to-market strategy that has been received well by the team, leading to strong customer relationships.
• The company has focused on AI utilization to introduce industry-changing technologies, which has resulted in increased growth and cash flow.

• SolarEdge deemed its Q4 2023 and full-year results as clouded by adverse market dynamics and high inventory levels.
• For Q4, SolarEdge reported revenues of about $316 million, split between $282 million in their solar business and $33 million in non-solar activities.
• The company shipped 2.2 million power optimizers and 74,000 inverters during the quarter, along with 133-megawatt hours of batteries.

Next 15 Group’s net revenues grew 2.5% in the year to January, despite difficult markets. Adjusted operating margin rose from 20.2% to 21.0%, helped by head office cost savings. In common with much of the sector, spending by tech clients was soft, down 17% like-for-like. The group did well, though, in growing spend from non-tech clients, up 11%, making for a strong overall performance in a market beset by ongoing macro uncertainty. Next 15 has been building its AI capabilities for some time and this is now starting to show in efficiency and margin. It has the balance sheet strength to keep investing here, internally and through M&A, which should stand it in good stead as client confidence improves.

• Paychex, in its third quarter, reported a total revenue growth of 4%, which was dampened by a lower contribution from its Employee Retention Tax Credit (ERTC) service, compared to the previous year.
• However, the company stated that by eliminating this impact, the total revenue grew by 7% during the quarter.
• Factors such as the winding down of the ERTC program, moderated employment growth within Paychex’s client base, and marginally lower realized rates resulted in stronger headwinds during this quarter than the company had anticipated.

• Last autumn, Kokusai Electric (6525 JP) was IPOed by KKR. The lockup expires next week, on 21 April 2024 (a Sunday). That frees up about 70% of the stock.
• KKR’s own stake is worth about US$2.8bn. It is not clear that Applied Materials, Qatar, or the Koch Strategic Platforms stakes would be for sale (now, or near-term).
• There is an interesting schedule of events between here and a likely offering date. It pays to pay attention to the details. 

• This morning’s HPSP (403870 KS) situation began with Maekyung’s report, indicating Crescendo PE contacted local bankers for the controlling stake sale.
• The surge in HPSP’s stock price after Maekyung’s report suggests Crescendo PE’s tacit approval, implying their involvement in the news’s emergence.
• Despite the likely confirmed sale of Crescendo PE’s stake, timing remains uncertain due to disclosure rules. Continued monitoring is vital, considering potential market reactions later.

• On 15 April, Hollysys Automation Technologies (HOLI US) issued a 6-K filing stating that Ascendent remains in the process of obtaining regulatory approvals. 
• The gross spread has widened to 8% as the closing date has slipped from the end of March guidance, and an updated timeline is lacking. 
• A delay in securing regulatory approvals is not uncommon. However, regulatory approvals should be forthcoming as the transaction involves Chinese entities (including a SASAC entity) acquiring a Chinese-focused company. 

• In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, and 200 Indices in the June 2024 index rebal event.
• Wipro Ltd (WPRO IN)‘s deletion from Sensex is imminent but there are question marks over the top replacement names as this involves some subjectivity.  
• For BSE 100, Jio Financial Services (JIOFIN IN) is a new potential ADD and that has caused major changes to the index change expectations I had previously.

• Apple supply chain names are falling due concerns about weak iPhone shipments. Global PC shipments returned to growth as per IDC data.
• TSMC and ASML results this week and will be cruical for the market. Can TSMC rally again to achieve new highs or will it continue trading lower?
• Nanya Technology sees DRAM Industry pricing rising through 2024E; but is underperforming financially.

• On 16 April, Megastudyedu Co, Ltd. (215200 KS) announced a major shareholder return plan, driving up its share price by 14.2% to 60,400 won. 
• Driven by this attractive shareholder return plan combined with improving fundamentals, we believe that Megastudy Education’s shares could continue to outperform the market in the next several months. 
• The total shareholder returns including share buybacks/cancellation and dividends are 60% of the company’s non-consolidated net profit from 2024 to 2026.

• A few weeks ago, Alibaba announced it would not seek IPO for CaiNiao
• The change of plans could force BABA/CaiNiao to re-focus on profitability
• BABA will reportedly buy rest of CaiNiao at US$10.2 bn valuation — cheap!

• Novatek Microelectronics Corp (3034 TT)‘s sales in 1Q24 showed a 6.2% YoY growth, implying a positive growth outlook for 2024F compared to 2023.
• Looking ahead to 2Q24F forecasts, the anticipated orders from United Microelectronics Corp (2303 TT) could have a positive impact on Novatek’s 1Q24 sales.
• A significant growth is expected after 2Q24, particularly following Novatek’s qualification for the Apple (AAPL US) iPhone 16.

• During Q3, DXC Technology was observed to have solid performance with the company’s organic revenue growth falling within the guidance range.
• The free cash flow saw an increase of 26% compared to the prior year, amounting to an impressive $585 million.
• However, the report points to declines in various areas such as organic revenue growth, a 4.5% year-over-year decrease, mainly due to the decline in resale revenues.

• InterActiveCorp (IAC) has undergone changes throughout 2023 that resulted in substantial earnings growth in the fourth quarter, which is an encouraging indication of the company’s overall strategic direction.
• Among the company’s accomplishments are a solid level of service professional retention, better targeting of service professionals, and improvements in its paid marketing, resulting in higher margins.
• Notably, IAC’s European segment showed strong growth, demonstrating the effectiveness of its strategies when applied in different markets.

• Rorze exceeds expectations in FY2/24 with a 6% revenue beat and an 11% surpass in operating profit, setting a record-high revenue of 28 billion yen in 4Q FY2/24.
• FY2/25 revenue guidance of 120 billion yen marks a 12% beat against analyst estimates, with operating profit expected to hit 32 billion yen, outperforming expectations by 10%.
• Rorze’s stock, though no longer deeply undervalued, remains reasonably priced at 16.5x NTM EBIT, indicating strong potential for earnings growth-driven future upside.

• Horizon Robotics, a consumer-centric and fast-growing provider of integrated ADAS and AD solutions for passenger vehicles, filed for an IPO and plans to raise up to $500M in Hong Kong.
• Horizon Robotics was founded in 2015 by Dr. Yu Kai, Dr. Chang Huang, Ms. Feiwen Tao, and a group of scientists and tech entrepreneurs. 
• I have a positive view of an upcoming IPO and believe Horizon Robotics is in a great position to capitalize on rapidly growing smart vehicles market in China and worldwide.

• NIFTY 50 represents the 50 largest stocks listed in the National Stock Exchange (NSE) of India and the NIFTY Next 50 index tracks the next 50 largest names.
• In this insight, we take a look at the names leading the race to become ADDs/DELs for the NIFTY 50 and NIFTY Next 50 indices in the September 2024 rebalance.
• There could be at least one change for NIFTY 50 and separately, there could be up to five changes for NIFTY Next 50.

• NetEase will be Activision Blizzard’s agency in China again after a divorce more than a year ago.
• Alibaba’s cloud service plans to reduce its overseas price offers by 23% on average.
• Infant formula companies, such as Feihe and Ausnutria, suffered from revenue shrinkage in 2023.

• Sea Limited is a gaming and e-commerce company in Southeast Asia that has experienced fluctuations in its stock price but has strong underlying business performance.
• Founded in 2009 as Garena by CEO Forrest Li, the company rebranded to Sea Ltd in 2017 and gained access to a wide range of games through Tencent’s investment in 2010.
• After achieving profitability in 2023, Sea Ltd is now focused on accelerating growth and drawing comparisons to Amazon’s early years.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• KKR raised around US$730m via selling some stake in Kokusai Electric (6525 JP) Japan IPO in Sep 2023. Its remaining stake will be released from its IPO linked lockup soon.
• KE main business activities consist of the manufacturing, sales and maintenance service of semiconductor manufacturing equipment.
• In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

• Travelsky Technology Ltd H (696 HK) Jan-Feb operational data strong, volume processed by domestic +45% YoY and international by +52% YoY; much higher than the consensus 2024 forecast of 15%  
• Traffic among the Big 3 Chinese airlines was up 46% YoY (-9% MoM) in March to +8% vs 2019. Domestic traffic rose 19% YoY (-11% MoM) to +24% vs 2019
• TP of HKD9.92 (+8% UPSIDE) is based on 2024 PE 14.8x (1SD below mean). The upside is uncompelling, but we advocate a HOLD as traffic growth is stronger than consensus   

• 5GN sold hosting business and 2/3 of domains business, resulting in over $100 million net gain
• Company left with $84 million in cash after full debt repayment and transaction costs
• Expected to generate $5 million in net income post-sale, plans to use cash for acquisitions, share buyback, and dividend, stock expected to rerate positively if targets met.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Douyu, a Chinese gaming livestreaming platform with Tencent as a major stakeholder, is facing challenges from competition and a stagnant market growth.
• The company has cut costs and is now operating at breakeven, with a significant amount of cash in US dollars available for distribution or capital allocation.
• Despite the risks associated with the stock and sector, Douyu presents a potentially attractive investment opportunity as its stock is trading at only 28% of its net cash value.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Money Forward reported Q1 results. Net sales rose 40% YoY to 9.5 billion yen
• Money Forward saw a big jump in profitability, which puts the company on track to meet full year guidance
• The stock has risen around 30% since January. We still see around 7% upside to our target valuation 

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net SELL RMB 11.5bn of A-shares on low-ish volume. A-shares underperformed H-shares quite dramatically, giving back gains from two weeks ago.
• This week saw considerable net buying of semiconductor technology names. I expect that to continue.

• Latest Nanya Tech results showed weak margin rebound. Gross margin rebounded but remained below zero.
• Nanya expects DRAM pricing improvement through 2024E; due to demand for AI related memory products reducing capacity for other DRAM products rather than improvement for Nanya’s main Consumer segment.
• Micron is reportedly increasing prices post Taiwan earthquake and this is positive, but we see Nanya’s 2024E consensus margin expectations set at a high bar and the stock isn’t cheap.

• Vodafone Idea (IDEA IN) plans to raise around US$2.2bn via a follow-on public offering.
• The deal has been in the works for years and proceeds will be used for capex and short-term debt repayment.
• In this note, we will run the deal through our ECM framework and talk about the deal dynamics.

• Taiyo Pacific’s Tender Offer for Roland DG Corp (6789 JP) was to end Friday, but it was extended 10 days. 
• Roland DG provided an update regarding the status of the Brother overbid. It did not show as much strategic-mindedness as it might have.
• Shares are now trading at a post-overbid high. Strategic missteps up the risk but Brother can pay more.

• The Ansarada Group Ltd (AND AU) IE considers Datasite’s A$2.50 scheme offer fair and reasonable. However, the inter-conditional carve-out transaction is NOT fair but reasonable. 
• ACCC clearance (findings on 6 June) is a prerequisite for FIRB approval (scheme condition). As Datasite has a limited Australian presence, ACCC approval should be forthcoming. 
• The offer is attractive, with no vocal shareholder opposition. At the last close and for the 1 July payment, the gross/annualised spread was 2.5%/12.2%.

• Nanya’s quarterly revenue was NT$ 9.5 billion, up 9.2% QoQ & up 47.9% YoY
• Nanya still had a net loss of NT$1.2 billion, its sixth loss making quarter in a row
• Larger peers doubling down on HBM, structural reduction in memory wafer capacity & shortages likely triggered by Taiwan earthquake are all mounting tailwinds for Nanya

• Government of India raised around US$513m via selling some of its stake in Bharti Hexacom’s IPO.
• Bharti Hexacom (BH) is a communications solutions provider offering consumer mobile services, fixed-line telephone and broadband services to customers in the Rajasthan and the North East telecommunication circles in India.
• We have covered various aspects of the deal in our previous note. In this note, we will talk about the demand and trading dynamics.

• Our base case valuation of ICTK is target price of 28,694 won, which is 79% higher than the high end of the IPO price range. 
• Our base case valuation is based on P/S multiple of 20.8x using our estimated sales of 18.1 billion won in 2025. 
• ICTK’s operating margin improved from -129.9% in 2022 to -38.2% in 2023. We estimate its operating margin to improve further to -12.4% in 2024 and 17.7% in 2025.

• STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
• In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the June 2024 index rebal event.
• I currently expect three changes resulting in a one-way flow of around US$531mn but there is still room for the expectations to change.

• ICTK is getting ready to complete its IPO in KOSDAQ in May. The IPO price range is from 13,000 won to 16,000 won. 
• According to the bankers’ valuation, the expected market cap of the company after the listing is 171 billion won to 210 billion won. 
• ICTK is a security company specializing in Internet of Things (IoT) based on physical copy prevention technology. 

• TSMC snags $6.6 billion in US CHIPS Act funding, along with loans up to $5 billion and tax credits up to 25% on eligible capital expenditures
• TSMC has committed to building a third fab in Arizona, scheduled to begin operations around 2030
• TSMC’s reiteration of their world class CAGR, Gross Margin & ROE numbers shines a light on Intel’s vastly inferior performance outlook.

• Telecommunications Consultants India Limited (TCIL) raised US$513m by selling 15% of the shares outstanding in Bharti Hexacom (6597372Z IN). Post the sale, they still hold 15% of the company.
• Bharti Hexacom (6597372Z IN) will start trading on 12 April and the grey market indicates the stock will open at INR 664/share, 16.5% higher than the IPO price.
• Bharti Hexacom should be added to one smallcap index in August and another smallcap index in December. A move above INR 700/share could result in midcap inclusion in December.

• The first quarter is seasonally the softest for selling wireless routers. The expectations for NTGR are for the firm to generate positive free cash flow while revenue declines sequentially. 
• We are anticipating NTGR’s cash per share to reach approximately $12 for the March quarter and maintain a forecast of $14 per share by the end of 2024
• The price competition at the lower end remains unchanged and dependent on NTGR clearing out inventory ahead of the peak selling period in the second half of the year

• WT Microelectronics (3036 TT) is looking to raise US$341m in its GDR offering. The proceeds will be used to purchase raw materials overseas.
• The deal is a very well flagged one, and will be a relatively small one to digest at just 4.8 days of the stock’s three month ADV.
• In this note, we run the deal through our ECM framework and comment on the deal dynamics.

• KT’s foreign ownership declined since January, below 7.5% by last month. If it remains, the adjustment factor halves to 0.25, impacting KT’s Global Index weight.
• With the May review screening date estimated for April 17th, swift reversal of foreign inflows seems improbable. Thus, KT’s adjustment factor dropping to 0.25 is likely.
• This could lead to an outflow of 1.6M shares, approximately 3x ADTV. Given the prolonged price impact on telcos, exploring a long-short setup with SKT might be prudent.

• TSMC (2330.TT; TSM.US): US$6.6bn from US CHIPS Act; the Earthquake Impact and the 2nd Japanese Fab. 
• Memory Monitor: Nanya’s Results to Provide Latest Color on DRAM Post Earthquake; Short Int Rising 
• UMC (2303.TT; UMC.US): Some Rush Orders Coming in and 2Q24F Could Post Positive QoQ. 

• Approval of bitcoin ETFs by the SEC causing volatility in MSTR shares and bitcoin prices
• Opportunity for a trade pairing short sale of MSTR shares with purchase of bitcoin ETF
• Fluctuating premium of MSTR’s enterprise value over SOTP value, expected to dissipate with approval of bitcoin ETFs

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• After the market close on 8 April, it was reported that Lee Boo-Jin will sell 5,247,140 shares of Samsung Electronics in a block deal (up to 443 billion won).
• The expected block deal sale price is 83,700 to 84,500 won per share, which represents a discount rate of up to 0.95% compared to the closing price on 8 April. 
• We are positive on this block deal sale and on Samsung Electronics. We would take the deal. 

• KEB Hana Bank, on behalf of Lee Boo-Jin, is looking to raise up to US$325m via selling 0.1% of  Samsung Electronics (005930 KS).
• The deal appears to be somewhat well flagged and the company recently reported better operating numbers for 1Q24.
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• Today, the U.S. Department of Commerce and TSMC Arizona have signed a non-binding preliminary memorandum of terms for US$6.6 billion in direct funding under the CHIPS and Science Act.
• We estimate the impact of the earthquake on April 3rd should result in a loss of within 0.5% in 2Q24F, which means it should not affect our 2Q24F revenue expectations.
• TSMC’s 1st Japan Fab is expected to commence pilot production in February, and the 2nd Fab is projected to begin production of N6/N7 in 2027F.

• Maxlinear has probably been among this semiconductor cycle’s worst companies, if not the worst.
• I think that it might be time to give them a fresh look.
• Maxlinear was founded in 2003 in Carlsbad, California, by eight engineers. Today, Kishore Seendripu (CEO/Chairmen) and Curtis Ling (CTO) are still founders and work at the company. Maxlinear is a fabless company focused on mixed-signal products in the semiconductor industry.

• DRAM producer Nanya Tech will report its 1Q24E results on April 10th.
• While Micron has said it is evaluating the impact of the Taiwan earthquake on its operations and has halted price discussions with clients, Nanya could provide latest DRAM outlook color.
• Short interest has spiked ahead of Nanya’s results; We note that the company has a large revenue and margin rebound it needs to deliver on to meet 2024E consensus.

• Naspers and Prosus outperformed the benchmark by a large margin, ending the quarter up 7.3% and 6.7%, respectively. The Capped SWIX finished the quarter down 2.3%.
• Tencent was up 3.5% in HKD and 6.5% in ZAR.
• Tencent currently makes up 74% of Prosus’ NAV, down 1 percentage point from 75% at the start of the year.

• MultiChoice Group (MCG SJ) and Canal+ announced a cooperation agreement (with exclusivity period) regarding Canal+’s mandatory offer at ZAR 125/share (c. $1.9 billion), 67% premium, 6.7x EV/25e EBITDA.
• On both multiples and DCF, the offer seems fair. My fair value estimate (DCF-based) is ZAR 122.68/share (WACC 16.5%, 2.4% implied perpetuity growth rate).
• Considering the 133% share decline from March-November 2023, shareholders must be relieved by the offer and will surely tender. My TP is ZAR 125. Gross spread is 5.7%. Buy.

• Product introductions remained a core part of Ubiquiti’s (UI) business in calendar first quarter with more product rollouts in the period
• The new products come at a time when Ubiquiti has ample inventory, which should bode well for revenue growth as VARs, Ubiquiti’s primary customers
• Ubiquiti has managed to offset the slowdown in service provider from enterprise customers and we continue to believe this trend continued to be the case in the March quarter.

• NTT Data Corp (9613 JP) on Friday announced a Tender Offer to take over small custom software developer and system integrator Jastec Co Ltd (9717 JP). 
• It’s at a premium. But for a growing company ahead of “The 2025 Problem” where synergies are expected, you’d want to get a premium vs where comps trade. You don’t.
• But this gets to near 50% just from friendlies. Someone who wanted to interfere would have to be publicly noisy. I expect this gets done.

• Around 85% of the way through the review period, we see four changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the June rebalance.
• The impact on the potential inclusions ranges from 0.4-8 days of ADV while the impact on the potential deletions varies from 1-13 days of ADV.
• Hanmi Semiconductor (042700 KS) is up 72% in the last two months following its appearance on the list of potential Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) inclusions in June.

• TSMC: +16.2%, Bounced Back to Historically Extreme Level, Consider Short
• UMC: -0.3% Discount, Flipped to Positive and Now Negative Again
• ASE: +15.3% Premium; Bounced Back to Extreme Highs, Short the Spread

• AAOI recommends investing in Nintendo ahead of the launch of the Switch 2 console cycle in mid to late 2024
• Analyst sees potential for multiple expansion, margin improvement, and continued monetization of intellectual property through theme parks and movies
• Bullish on Nintendo’s stock in absolute terms and relative to other companies in the video game and media sectors, predicting significant gains based on past launch cycles.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• United Microelectronics Corp (2303 TT)‘s 2Q24F outlook is experiencing a slight upward now, possibly indicating a positive QoQ.  
• UMC’s notable contributors are showing a mixed outlook, and Novatek Microelectronics Corp (3034 TT) could be the most influencer.
• Attention should be paid to the 3Q24F outlook for any potential changes and a shift from a bearish view could positively impact the outlook, potentially signaling the end of downturn.  

• We explore Klarna’s and Stripe’s IPO prospects and valuations based on recent share transactions; Nuvei and Cielo are close to being taken private, with Worldpay now controlled by private equity
• Nuvei and Worldpay both grew by acquisition but failed to deliver on the market’s expected returns, in our view, ending up under PE ownership; is Nexi a potential PE target?
• We retain Visa as a core holding and also keep PagSeguro and PayPal as buys, replacing Cielo with new peer group addition Shift4; we keep our sell rating on Affirm