TMT/Internet

• KRX considers a comprehensive change to the Value-up Index scoring system. Weightings emphasize ROE, PER, and FCF while reducing PBR weight.
• KRX considers adopting scoring-based constituent weighting to prevent JPX Prime 150’s issues, but NPS opposes. Float market cap weighting like JPX Prime 150 is contemplated to address concerns.
• Momentum trading in the Value-up initiative will favor low PER and high ROE stocks over low PBR. The semiconductor sector is anticipated to benefit significantly from float market cap-based weighting.

• Brother Industries (6448 JP) has disclosed an unexpected competing hostile offer for Roland DG Corp (6789 JP) at JPY5,200 per share, a marginal 3.3% premium to the Taiyo-sponsored MBO (JPY5,035).
• Unlike the Taiyo offer, the Brother offer is pre-conditioned on regulatory approvals and has a proposed start date of mid-May. The Board is evaluating the Brother offer. 
• The Board’s three options with declining probability are to ask Taiyo for a bump, continue to recommend an unchanged Taiyo offer or recommend the Brother offer. 

• Reportedly (AFR), Singtel (ST SP) is in advanced talks to sell Optus, Australia’s second-largest telco, to Brookfield for A$16bn-A$18bn. 
• SingTel quickly countered there is no impending deal; and “Optus remains an integral and strategic part of the Singtel Group and we are committed to Australia for the long term.”
• Optus’ EBITDA in 3Q24 and 9M24 fell 1.8% and 8.3% in S$ terms. Extrapolating out for FY24E suggests pricing under this (very) indicative Offer of around 7.6-8.6 turns of EBITDA.

• A month ago, Engagement Investor Taiyo Pacific Partners launched an MBO on Roland DG Corp (6789 JP) after having done a takeover of their former sub years ago.
• I said it was too cheap. Machinery company Brother Industries (6448 JP) has decided the same, and has announced a hostile/unsolicited overbid 3.3% higher. Tender to start in May. Fun!!!
• This will almost certainly get bid even higher as people would expect the MBO bidders won’t simply give up. More below.

• The speaker reflects on the excitement and nervousness of facing a new platform shift in technology and the need for continual innovation
• They consider the broader economic impact of technological advancements, like AI, and the potential for breakthroughs in various industries
• The decision to partner with OpenAI was driven by Microsoft’s history of seeking out ambitious technology innovators to collaborate with, even when the outcome is uncertain.

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

• Angel Robotics reported exceptional IPO bookbuilding results. Angel Robotics’ IPO price has been determined at 20,000 won, which is 33% higher than the high end of the IPO price range. 
• A total of 2,067 institutional investors participated in this IPO book building. The demand ratio was 1,157 to 1. Angel Robotics will start trading on 26 March 2024. 
• We remain positive on Angel Robotics. There is likely to be a sharp overshooting of its share price relative to its intrinsic value on the first day of trading. 

• Broadcom reported consolidated net revenue of $12 billion, a 34% increase year-on-year, with semiconductor solutions contributing $7.4 billion, up 4% from the previous year.
• Infrastructure software revenue saw a significant increase of 153% year-on-year, totaling $4.6 billion.
• These improvements are due in part to the contribution from VMware, which has resulted in a sequential jump in revenue by 132%.

• The short-term recovery momentum observed in China and consumer markets.
• The Gen 3 in 4Q23 accounts for about 50% of the production, expected to increase to around 60-70% in 4Q24F.
• Expecting to improve quarter by quarter after reaching the bottom in 1Q24F, and the growth is expected to recover to around 20%+ YoY in 2024F.

• CrowdStrike Holdings, Inc., a leader in the cybersecurity sector, reported an impressive fourth quarter and fiscal year for 2024 during its latest earnings conference call.
• The call highlighted several positive aspects of the company’s performance such as a record net new Annual Recurring Revenue (ARR) of $282 million, reflecting a year-over-year increase of 27%.
• Furthermore, the company achieved a record operating margin of 25%, an improvement of 10 percentage points when compared to the previous year.

• MongoDB reported robust Q4 results, with revenues reaching $458 million, marking a 27% YoY increase and exceeding the high end of the company’s guidance.
• MongoDB’s Atlas product line grew by 34% YoY, accounting for 68% of the company’s total revenue.
• The company also reported a healthy business quarter, owing much of this success to acquiring new workloads from existing Atlas customers.

• The reshuffle results align with expectations, but the decision to list 11 KOSDAQ Global stocks in April is surprising. Local authorities seem to prioritize boosting the derivatives market for liquidity.
• Ecopro Materials’ SSF listing, earlier than expected, attracts attention, potentially leading to an unusual basis pattern, coinciding with a major lockup release on May 17th.
• We should also be wary of a pattern akin to last July’s in KOSDAQ stocks. Spot prices of recent SSFs showed a pronounced short-term uptrend, especially in KOSDAQ, versus KOSPI.

• The increase in automotive revenue in 2023 has led to greater revenue diversification at Immersion (IMMR) reducing some of the variability the Company has historically experienced between quarters
• IMMR reported fourth quarter results better than we were projecting led by an increase in automotive and video game revenue.
• The fourth quarter results did not include the benefits of the settlement with Meta Platforms (META), which causes IMMR’s cash balance to rise further

• Cumulative 3Q sales came in at ¥1,458 mn (-1.2% YoY), operating profit at ¥75 mn (-38.1% YoY), and net profit at ¥76 mn (-37.0% YoY), marking a substantial drop in profit while the top line remained mostly flat.
• This reflects the company’s medium-term management plan, which calls for increased investment in human capital.
• The company disclosed sales by service for the first time in this quarter’s financial results, and cited sales expansion through cross-selling of each service as the key to future growth. 

Key points

• Eventbrite has reduced friction in the customer experience to scale efficiently
• Expanded offerings include reserved seating, merchandise sales, and on-site check-in
• Eventbrite has become a one-stop shop for event creators, increasing customer satisfaction and retention

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.

• Genius Sports has exclusive partnerships with major leagues and is one of two global data providers for sports betting
• The company is expected to benefit from the legalization of online sports betting in Brazil starting July 1st, 2024
• With strong cash position and positive Street EBITDA estimates, Genius Sports has an enterprise value of approximately $1.15 billion

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.

• Host Andrew Walker welcomes Drew Cohen from Speedwell Research onto the podcast to discuss Constellation Software.
• Constellation Software is a holding company founded in 1995 by Mark Leonard, known for acquiring small, niche vertical market software companies at low multiples.
• Constellation Software now has 750-1000 software companies under its umbrella, generating around 8 billion in revenue and 1.1 billion in free cash flow.

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

• Formerly known as WANdisco, now Cirata PLC (CRTA), has faced challenges including trading suspension and a capital raise due to fraud, causing investors to overlook its stock.
• A new management team has taken over and aims to leverage CRTA’s cutting-edge data migration software, powered by the distributed PAXOS algorithm, to achieve ambitious long-term goals.
• CRTA’s technology allows for fast and accurate replication of large, changing datasets with zero downtime and data loss, with potential applications in AI, machine learning, IoT, and data analytics, generating significant value 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.

• PAR Technology (PAR US), a hospitality technology outfit, and TASK Group Holdings (TSK AU) have entered into a Scheme agreement. 
• PAR is offering A$0.81/share in cash, a 103% premium to last close; or a 50:50 cash/scrip option with an implied value of A$0.98/share, an 145% premium to undisturbed. 
• TASK’s board unanimously recommends the Scheme in the absence of a superior proposal. A Scheme meeting is expected be held in June.

• Globalwafers (6488 TT) is looking to raise up to US$870m in its upcoming global depository receipts (GDRs) offering.
• GlobalWafer recently announced its board’s resolution to issue between 36-45m new shares in the form of GDRs, with the use of proceeds geared towards purchasing of raw materials overseas.
• Similar to previous GDR listings, the deal is a long drawn out process with the firm required to jump through a number of board/shareholder/regulatory approval loops.

• Lianlian DigiTech (2104619D CH)  is a digital payment solution provider in China has filed for an IPO on the Hong Kong Stock Exchange.
• As per news media outlets, the company plans to raise US$500m to help enhance its technological capabilities and expand global operations.
• In this insight, we have discussed the company’s business model, key financials and the outlook on the company.

• GSAT is a telecom infrastructure provider with two core businesses: Mobile Satellite Services and spectrum holdings
• Despite progress and validation from companies like Apple and Qualcomm, the stock price does not reflect the value of the assets
• Recent developments, including partnerships and leadership changes, indicate a promising future for GSAT, despite past challenges and skepticism from institutional 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.

• Norbit ASA is a sensor technology company that focuses on niche applications, delivering high returns on invested capital.

• By developing tailored, mission-critical technology, Norbit builds strong client relationships with significant barriers to entry.

• Its shareholder-aligned management fosters an entrepreneurial culture and enables further growth through a decentralized operating model.

• Carly Holdings Limited (ASX:CL8) operates a vehicle subscription business, which it launched in March 2019, leveraging existing operations, strategic relationships and technology.
• Car subscription allows business and retail customers to pay a single monthly fee to access a car for 30 days or more and is an alternative to purchasing or financing a vehicle.
• Continued fleet growth in the December half year drove strong subscription growth which accelerated further in January 2024 with a 12% increase in subscribers from December.

• The graph below shows the trend of capex, depreciation, OP and EBITDA. According to the Company, major capacity expansion capex has peaked out in FY24/3.
• While the peak in depreciation expense will come in FY25/3, the key takeaway here is that management has stuck to its guns and executed on its investment initiatives in the extended MTP targets to FY29/3 aiming to boost capacity for sales up 1.5x (see outline of capex plan on P4).
• Based on our follow-up interview, inventory consolidation at the intermediate distributor level, particularly for consumer electronics in the Greater China region, is still underway in the Jan-Mar quarter, a similar trend observed by global major Texas Instruments. 

• Asteria Corporation develops enterprise software that connects corporate information systems, cloud services, and hardware devices without coding (programming), enabling automated data exchange.
• In FY03/23, revenue increased 13.8% YoY. Revenue in the software business (excluding the design business) remained upbeat, growing 9.4% YoY, while revenue in the design business surged 39.8%.
• Asteria has announced a change in entities in its consolidated group due to sale of shares, as well as revisions to its consolidated earnings and year-end dividend forecasts for FY03/24.

• Carly Holdings Limited (ASX:CL8) operates a vehicle subscription business, which it launched in March 2019, leveraging existing operations, strategic relationships and technology.
• Car subscription allows business and retail customers to pay a single monthly fee to access a car for 30 days or more and is an alternative to purchasing or financing a vehicle.
• Continued fleet growth in the December half year drove strong subscription growth which accelerated further in January 2024 with a 12% increase in subscribers from December. 

1Spatial expects its FY24 results to be at least in line with our forecasts on revenue and EBITDA, driven by continued Enterprise strength, though higher rates and working capital swings affected PBT and net cash. Recent wins, including the €9m utility project, coupled with a robust pipeline and order book, underpin strong FY25 momentum. The transition to higher-margin recurring revenue models and rising SaaS adoption improved the sales mix. In the US, five new annual NG9-1-1 licences demonstrate execution by the new sales head, prompting a partner-led strategy to further accelerate demand. 1Streetworks is gaining traction after the UK Power Networks win and growing paid trial pipeline. Management believes expanding this flagship contract, leveraging efficiency and cost enhancements as a case study, could drive adoption across a potential £400m market opportunity.

• There are no constituent changes for the VanEck Vectors Semiconductor (SMH US) ETF in March but there are a lot of float and capping changes.
• Taiwan Semiconductor (TSMC) – ADR (TSM US) is the largest buy while capping results in NVIDIA Corp (NVDA US) being the largest sell by far.
• Estimated one-way turnover is 8.3% resulting in a round-trip trade of nearly US$3bn. There are a few stocks with more than 0.2x ADV to trade.

• WisdomTree has dropped ESG considerations while selecting stocks for the EMXSOE, CHXSOE and WTEMXC indices.
• That results in a lot of inclusions and fewer deletions across indices that will be implemented at the close on 15 March.
• The round-trip trade across the indices will exceed US$500m with Tencent (700 HK) as the largest buy.

• Massive TSMC Rises 13.8% in Just a Week; Mediatek a Top 10 Gainer for Second Week in a Row
• TSMC (2330.TT; TSM.US): Sales Should Be Gradually Increasing QoQ in 2024F; IPhone 16 Is on Schedule. 
• PC Monitor: Long Dell Vs. Short Acer Update; Dell & HPQ Results Indicate Opportunity in Asus 

• 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: APM Human Services Internation (APM AU), Probiotec Ltd (PBP AU), Genex Power Ltd (GNX AU), China Traditional Chinese Medicine (570 HK), Genetron Holdings Ltd (GTH US). 
• Lowest spreads: Tietto Minerals Ltd (TIE AU), CIMC Vehicle Group Co Ltd (1839 HK), Pact Group Holdings (PGH AU), CPMC Holdings (906 HK), Payroll (4489 JP), Welbe Inc (6556 JP). 

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• On the IPO front, Trial Holdings (5882 JP) was hoping for better luck with its listing this time around.
• For placements, it was a very busy week for a change with most regions, apart from Hong Kong, chipping in.

• A shares were up small on the week. HK stock indices were down. 
• Net SOUTHBOUND buying was HK$17.1bn in the third post-holiday week. SOUTHBOUND has net bought every day since the end of Chinese New Year.
• SOUTHBOUND continues to buy high-div SOEs. ex-div is still three months away, and given the new KPIs discussed late January by SASAC official, these still seem to be appropriate targets.

• We believe total revenue will grow by 11% in 4Q23 and 2024.
• We also believe the operating margin will improve slightly in 4Q23 and the following two years.
• Tencent sold weak business to China Literature in December 2024.

• 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 3.1bn of A-shares on slightly slower average activity after net buying RMB +63bn the previous five trading weeks. 
• Lower activity into the end of the Two Sessions Week. First net selling by NORTHBOUND in many weeks. 

• The SPX  has been rallying for 4 months, rising >+24%, is is OVERBOUGHT but we see the current pullback as a BUY opportunity.
• The index could pullback another 1-2 weeks before it restarts the rally.
• Price areas to buy are between 5069 and 5000, lower prices may indicate a deeper correction is unfolding (lasting up to 3 weeks down in total).

• We believe total revenue will increase by 17% YoY in 4Q23 and 15% in 2024.
• We also believe KS will see historical high operating profit in 4Q23 and the year 2023.
• We conclude that KS has an upside of 92% and a price target of HK$90. Buy.

• We expect Tencent to report C4Q23 revenue, IFRS op. profit and IFRS net income in line, (3.3%) and (4.9%) vs. consensus.
• The robust topline growth was mainly contributed by fast growing WeChat VA (Video Account) and strong performances of <Dream Star> in December.
• We cut our TP to HK$362 to reflect operating margin decline caused by increased sales and marketing. 

• Dell has outperformed Acer and other Taiwan PC names Asus and MSI by a wide margin. Close Long Dell vs. Short Acer. Dell’s value gap has dissipated.
• Latest indications from Dell and HP highlight that the AI PC’s will drive upgrades from customers, but the PC recovery remains soft. AI PC impact only in 2025E.
• Dell and HPQ’s recent results provide positive color for upcoming Asus, Acer, and MSI results. Trade: Long Asus into its upcoming earnings results.

• Astera Labs, which offers connectivity solutions tailored for AI accelerators, GPUs, FPGAs and other high-performance computing platforms, announced terms for its IPO today.
• California-Based semiconductor company plans to raise ~$392M by offering ~14.8M shares at a price range of $27 to $30. Selling stockholders offer ~3M shares of common stock in this IPO.  
• At the midpoint of the proposed price range, Astera Labs would command a fully diluted market value of $5B, above their last private round of $3.15B.

• The recent earnings of Baidu indicated solid performance for the fiscal year 2023.
• An extremely neutral analysis reveals several positives.
• The total revenue for Baidu Core’s total revenue for the year increased by 8% year-over-year, indicating strong financial resilience.

• Tokyo Electron (8035 JP) is a global manufacturer of semiconductor production equipment (SPE).
• In FY03/23, the company posted revenue of JPY2.2tn, operating profit of JPY617.7bn, recurring profit of JPY625.2bn, and net income attributable to owners of the parent of JPY471.6bn.
• Tokyo Electron Limited announced revisions to its full-year earnings forecast for FY03/24.

• Monolithic Power Systems (MPS) enters 2024 with a cautiously optimistic outlook, following a record revenue of $1.82 billion for the full year of 2023, marking its 12th consecutive year of revenue growth.
• The highlights of MPS’ performance in 2023 were the consistent execution, continuous innovation, and robust customer focus.
• However, the visibility beyond the current quarter remains limited due to uncertain customer ordering patterns reflecting overall economic uncertainty.

• Autodesk demonstrated strong performance in the fourth quarter and full year results of fiscal 2024 with 14% constant currency revenue growth in Q4.
• The report reflects Autodesk’s resilience and discipline manifested through its subscription business model, product diversification, and robust customer base.
• The company’s diversified consumer base spans various regions and industries, enabling balanced growth.

• Over the quarter, Nutanix reported record revenue of $565 million, which surpassed guidance expectations, as well as an impressive annual recurring revenue (ARR) increment of 26% YoY reaching $1.74 billion.
• Besides solid financial performance, the company also accomplished its first GAAP operating profitability in Q2 which showcased the effective workings of their subscription model.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• Hewlett Packard Enterprise (HPE) reported that its Q1 2024 revenues did not meet expectations, mainly due to softening in the network industry and the timing of several large GPU acceptances.
• Reported revenue was lower than anticipated largely because of softening demand industry-wide for network, and the timing of several large GPU acceptances was shifted.
• Additionally, HPE did not have the supply of GPU it desired, which constrained revenue growth.

• Elastic’s Q3 fiscal figures demonstrated a robust financial performance, with a revenue growth of 19% YoY and Elastic Cloud growing 29% YoY, a testament to the continued traction in the cloud and consolidation under the Elasticsearch platform.
• Strong sales were driven by customer interest in Generative AI, with the platform being leveraged to develop Generative AI applications, providing an appreciable advantage relative to pure-play vector database vendors.
• Another key factor was platform consolidation, with customers choosing Elasticsearch to displace incumbent solutions for multiple use cases, underscoring the platform’s import within the IT infrastructure context.

• NetApp Inc.
• reported a decent performance in Q3 FY ’24.
• During this quarter, revenue grew above the company’s guidance, driven by the momentum of their expanded all-flash product portfolio.

• The NetEase Q4 earnings revealed several strengths and weaknesses in the company.
• On the positives, NetEase reported a 7% increase in total net revenue for 2023 to RMB 103.5 billion (USD 14.6 billion), driven by momentum across its businesses.
• The revenue growth was attributed mainly to increased revenue contribution from the launch of new games such as Justice Mobile, and sustainably developed titles like Egg Party.

• Seven weeks ago I wrote about Shinko Electric Industries (6967 JP)‘s changing Break/Gap Risk as comps had gained. Shinko was cheap to its main comp and peers vs Announcement Date. 
• Since then, Shinko is +4.1% and direct peer Ibiden Co Ltd (4062 JP) is -14.5%. This has erased Shinko’s underperformance since announcement, and shrunk a 9% spread to 3.3% yesterday. 
• With the spread tighter and tech showing some weakness, I’d be happy unwinding at yesterday’s closing spread (3.3%). 

• The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
• In this insight, we take a look at the potential index changes and the resultant capping flows for HSCEI index rebal event in June 2024.
• Based on the current data, I see two low-conviction ADDs and two low-conviction DELs.

• Telefonica SA (TEF SM) has decided to make a €2.35/share cash takeover offer to acquire the 5.65% stake in its German unit Telefonica Deutschland Holding (O2D GR) that it does not own. 
• The bidder and parent company, Telefonica, have informed Telefonica Deutschland that, except for FY 2023 dividend, they do not plan to support the distribution of dividends for future financial years.
• The Bidder will apply for delisting thus the shares will soon become illiquid. Accept offer.

• Viavi Solutions (VIAV US) and Spirent Communications (SPT LN) have agreed a cash acquisition via Scheme at 175p (61% premium, 2.5x EV/Fwd Revenue) with just 0.23% irrevocable undertakings. 
• The opportunity seems good enough so that Viavi (BB) will stretch even more its balance sheet, although Silver Lake is providing 1/3rd of the funds needed.
• Gross spread is +0.11%. I believe that shareholders are holding for a sweetening; quite possibly this is a target for activists too. Risk/return seems attractive. Long.

• Zoom Video Communications, Inc reported financial results for its fiscal Q4 and full-year 2024.
• The company’s revenue for the Q4 reached $1.146 billion, up 3% YoY. Zoom’s Enterprise revenue grew by 5% YoY and formed 58% of total revenue.
• The company’s non-GAAP income from operations grew 10% YoY to $444 million.

• Taiwan Semiconductor (TSMC) (2330 TT) is ramping up its CoWoS capacity, with the aim of increasing new capacity by 32k wafer/month in the end of 2024F.
• In the second half of 2024F, the Apple (AAPL US) iPhone 16 will contribute to revenue from shipments.
• The semiconductor industry is expected to rebound in 2024F, with TSMC being one of the leaders.

• Snowflake reported strong annual performance for fiscal 2024 with a 38% YoY product revenue growth reaching $2.67 billion, highlighting the company’s continued growth trajectory.
• The company also saw an expansion of its non-GAAP product gross margins to 77.8% and it reported non-GAAP adjusted free cash flow worth $810 million, indicating robust fiscal health.
• The company’s exceptional bookings in Q4 with $5.2 billion of remaining performance obligations mark a significant 41% YoY growth, this along with 14 Global 2000 new customers, underscores strong customer adoption and trust in Snowflake’s offerings.

• Salesforce announced its Q4 and full year results for fiscal 2024, reporting a strong performance across all its key metrics.
• This signifies an exceptional year for the company, with revenue, margin, earnings per share (EPS), cash flows, and current remaining performance obligations (cRPO) all recording increased growth.
• The overall transformation seen in Salesforce and its industry has been noted to be substantive, primarily driven by the surge in artificial intelligence.

• eBay’s Fourth Quarter 2023 results demonstrated an approximate organic GMV (gross merchandise volume) growth breakdown of roughly 1% for the full year, despite discretionary spending pressure across major markets.
• This resilience was due to an improvement in this metric during each quarter of 2023.
• Focus category GMV indicated a promising upward trend, with growth close to 4%, significantly outpacing the other areas of eBay’s business by around 7 points.

• Lianlian DigiTech (2104619D CH), a digital payment services provider in China, has begun pre-marketing an HKEx IPO. It previously targeted a US$500 million raise.
• We previously discussed the IPO in LianLian DigiTech IPO: The Bull Case and LianLian DigiTech IPO: The Bear Case. 
• The PHIP reinforces the bear case of operating losses, an unconvincing path to profitability, and a volatile FCF with a deteriorating balance sheet.

For our next Corporate Webinar, we are glad to welcome Hua Hong Seminconductor’s Chief Financial Officer, Daniel Yu-Cheng Wang. 

In the upcoming webinar, Daniel will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Eric Wen. The Corporate Webinar will include a live Q&A session.

The Corporate Webinar will be hosted on Tuesday, 12 March 2024, 16:00 SGT.

About Hua Hong Semiconductor

Hua Hong Semiconductor Limited, an investment holding company, manufactures and sells semiconductor products. The company provides embedded non-volatile memory, standard logic and mixed-signal, radio frequency, power management integrated circuits, power discrete, and automotive solutions. It also offers foundry services; and design services comprising standard and customized IP development, full-custom layout design, and customer-specific integrated solutions, as well as design support and tape out services. In addition, the company provides multi-project wafer services; mask making services; and backend services, such as in-house testing, backside processing and dicing, and backend turnkey services, as well as assembly and testing services. 

Further, it engages in real estate development. Its products are used in consumer electronics, communications, computing, industrial, and automotive markets in the People’s Republic of China, North America, Europe, Japan, and other Asian countries. The company was founded in 1997 and is headquartered in Shanghai, the People’s Republic of China. Hua Hong Semiconductor Limited is a subsidiary of Shanghai Alliance Investment Ltd.

• Softbank Group (9984 JP)’s 180-day lock-up period on its 89.75% ARM Holdings (ARM US) shareholding expires on 12 March. SoftBank’s stake is worth US$124 billion.
• SoftBank will likely monetise its ARM stake using the Alibaba (ADR) (BABA US) playbook. This playbook uses prepaid forward contracts to raise capital with eventual settlement through shares. 
• ARM is currently trading 2.6x its IPO price on AI-driven hype. ARM trades at a premium multiple to NVIDIA Corp (NVDA US), despite forecasted lower growth and margin.  

• We first wrote about the iShares Emerging Markets ex-China (EMXC US) ETF 3 years ago when AUM was less than US$500m. AUM now stands at US$11bn.
• IShares Emerging Markets ex-China (EMXC US) has outperformed iShares Emerging Markets (EEM US) and iShares Emerging Markets Asia (EEMA US) with lower volatility and a lower drawdown.
• With the Chinese economy misfiring and markets under pressure, we could see a further shift in positioning away from China and that means inflows to other Emerging Markets.

• Sakura Internet, a Japanese cloud provider, has seen a significant surge in stock price and market capitalization due to entry into AI cloud services.
• The company plans to invest in NVIDIA H100 GPUs for AI servers, expecting substantial demand but with uncertain revenue and profitability projections.
• Risks include concentrated ownership, lack of analyst coverage, potential shareholder pressure, and competition from larger cloud providers like AWS with advanced AI computing capabilities.

• Wiwynn Corp (6669 TT) is looking to raise up to US1.3bn in its upcoming global depository receipts (GDRs) offering.
• Wiwynn recently reported its board’s resolution to issue up to 17m new shares in the form of GDRs for purchasing overseas raw materials, debt repayment, investing overseas and others.
• Similar to previous GDR listings, the deal is a long drawn out process with the firm required to jump through a number of board/shareholder/regulatory approval loops.

• Redbubble was a bubble. On the wings of pandemic mania, the stock price increased 13 times from March 2020 to January 2021.
• Reaching a 1.9B market cap. Today, the situation looks quite different.
• The stock is down 93% from its highs of 7 AUD and currently sits at 0.

• The sales in January 2024 were the lowest during the period of 2022-2024, indicating a likely downtrend for the first quarter of 2024.
• Demand is expected to be flat or slightly increase in 2Q24F for GlobalWafers, which is encouraging.
• The market for 12″ raw wafers is expected to have a more stable demand-supply balance, while raw wafers of 8” and smaller sizes could experience reduced demand in 1H24F.

Key points

• HPE is a $21.5 billion provider of networking, servers, and storage products, with a focus on higher quality businesses and services
• The company generates cash from operations and divestitures, presenting an attractive investment opportunity with potential for upside to $29/share or a 35% IRR through 10/2025
• HPE’s recent Security Analysts Meeting emphasized its business segments, particularly highlighting opportunities in the Compute segment for AI inferencing needs and Proliant Gen 11 servers

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.

• Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
• There were no Section Transfers announced in January or February so currently there are no live TOPIX Inclusion events but there are some pre-event names to be monitored closely.
• The upcoming TOPIX flows in end-April 2024 will be more complicated than the other quarterly rebalances as there will be more flows due to the annual liquidity factor review.

• Sea (SE US) has completed a full cycle of growth followed by a phase of profitability improvements/cost-cutting.
• Although substantial cost reductions have been implemented, these efforts have mainly focused on fixed costs.
• With marketing efficiency unchanged and significant improvements in gross margin difficult, the company appears no closer to achieving stable profitability than it initially was.

• Sea Ltd (SE US) released 4Q2023 and FY2023 results with a full-year net profit but another loss in 4Q but QoQ improvements for e-commerce and digital financial services. 
• E-Commerce core market growth rates where impressive, with strong growth momentum with Brazil seeing large profitability gains, whilst overall Shopee is gaining share with the additional benefits from greater scale.  
• Digital Financial Services saw a significant uptick in its loan book and profitability, whilst management pointed toward 2H2024 profitability for Shopee. Management is pointing towards 2024 being another profitable year. 

• Softbank raised around US$4.9bn via selling some of its stake in ARM Holdings (ARM US)’ US IPO. Its remaining 90% stake will be released from its IPO linked lockup soon.
• ARM develops and licenses high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
• In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

• Wrkr Ltd (ASX:WRK) offers compliance solutions for Australian superannuation contributions and payroll including member onboarding, super payments, messaging and employee validation.
• WRK has reported a H1 FY24 adjusted EBITDA loss of $0.53m, half that of H1 FY23 and in line with RaaS estimates.
• The result benefitted from both operating leverage (43% revenue growth against a 6% increase in operating costs) and some reallocation of employee costs to capitalised product development.

Key points

• Keyword Studios is the largest videogame outsourcing company globally with a strong track record of organic growth and strategic acquisitions
• Despite concerns about AI and market slowdown, the company remains well-positioned for long-term success
• Expected to continue delivering high single-digit to low double-digit organic growth and potential for compound annual growth rate of 15% over the next five years, making it an attractive investment opportunity

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• SHEN announced the sale of its tower assets for a price that would equivalently pay for the purchase of Horizon Telecom, effectively creating an asset trade that creates considerably value.
• SHEN has unlocked value by selling assets that are expected to experience a decline in revenue after this year for assets that should realize revenue and adjusted EBITDA growth
• The growth SHEN is purchasing without the need of cash financing should have a positive impact on SHEN’s valuation.

• Wrkr Ltd (ASX:WRK) offers compliance solutions for Australian superannuation contributions and payroll including member onboarding, super payments, messaging and employee validation.
• WRK has reported a H1 FY24 adjusted EBITDA loss of $0.53m, half that of H1 FY23 and in line with RaaS estimates. The result benefitted from both operating leverage (43% revenue growth against a 6% increase in operating costs) and some reallocation of employee costs to capitalised product development.
• We forecast positive H2 FY24 EBITDA on the back of continued operating leverage, and in particular significant Hong Kong implementation fees (estimated at $1.4m), higher float interest and continued cost control.

• The changes to the Nikkei 225 Average for the March 2024 Review were announced today after the close. A little earlier than I expected. 
• Socionext, Disco, Zozo IN; Takara Hldgs, Sumi Osaka Cement, Pacific Metals OUT. Nitori PAF increase. US$4bn+ to trade one way on 29Mar close. One interesting surprise. 
• Overall more impactful than it looks. And it changes the front-end arithmetic on Fast Retailing (9983 JP). There may be fun on the DELETEs.

• Investing in semiconductors can be pretty simple if you let it be.

• At a high level, I believe you want to invest in the secular at a decent price or invest in places where there are unwarranted dislocations.

• Sometimes the entire ecosystem says one thing and the stocks say another. Usually, the ecosystem is right.

• Reddit plans to price its IPO between $31 to $34 a share, which would suggest equity value of US$6.0 billion to US$6.5 billion on a fully diluted basis.
• Our base case valuation of Reddit is implied market cap of US$7.9 billion or implied price of US$41.2 per share. 
• Given the moderate upside relative to the IPO price range, we have a Positive view of the Reddit IPO. 

• On the 2 January, TDCX (TDCX US), a Singapore-headquartered digital customer experience (CX) provider, announced it had received a preliminary non-binding proposal from Laurent Junique to be acquired at $6.60/ADS.  
• On the 1st March, TDCX entered in a definitive agreement by way of a short form merger at US$7.20/ADS, a 48% premium to undisturbed.
• As Laurent Junique holds 98.4% of the voting power, there is no shareholder vote on the merger. This is done. The Offer should close in the 2Q24.  

• NetEase reported C4Q23 top line, GAAP operating profit and GAAP net income (4.8%), (16%) and (9.0%) vs. our estimates, and (3.6%), (12%) and (6.8%) vs. consensus， mainly due to..
• The positive, however, is the acceleration of launch of <Naraka Mobile> by 1-2 quarters. Our estimate of the gross billing remains the same;
• We remain optimistic about the upcoming pipeline, and we raise our TP to US$122. Our new TP implies 15.4X PE, which is 12% above current price.

• Reddit, an American social news aggregation, content rating, and forum social network, filed to go public. The company plans to trade on the NYSE under the ticker “RDDT”.
• Reddit was founded in 2005 by Steven Huffman, Aaron Swartz and Alexis Ohanian. The company is forecasted to surpass $1B in total revenue in 2024.
• They chose the right time to go public. I have a positive view of the upcoming Reddit IPO and looking forward to seeing them trade as a public company.

• According to Pitchbook and their S-1, Reddit has raised ~$1.5B in equity financing. Their last private round, a Series F led by Fidelity in August 2021, was around ~$10B valuation.
• I derive a target valuation for Reddit using a ~8x EV/Revenue multiple on my 2024 estimates. The multiple represents a top-range multiple of the peer group.
• I arrived at my ~$9.6B target valuation, which implies 50% upside to indicative IPO valuation at the midpoint. I expect Reddit will trade above their last round valuation of $10B.

MGI – Media and Games Invest (MGI) had a good Q423, gaining market share in an improving trading environment. Organic revenue growth of 16% in the quarter helped lift the full year figure to +5%. This good momentum has continued into the new year, with 18% revenue growth in January. MGI has leading positions in in-app advertising in the US on both iOS and Android, with the US its largest market at 70% of revenues, and has well established non-identifier-based and AI-driven solutions in the market. In the fast-growing Connected TV (CTV) market, MGI is targeting margin over volume. We have lifted our FY24 estimates reflecting the improving growth and margin prospects. Our view is that these are not yet factored into the valuation.