TMT/Internet

• Despite Hollysys Automation (HOLI US) receiving a myriad of proposals over the past three years, nothing moved forward.  Calling an SGM to spill the board would change that status quo. 
• But Hollysys’ board stonewalled the SGM, pinning its reason – and a proposed injunction – on the subjective ownership of Ace Lead, and in turn, its 6.7% holding in Hollysys. 
• That injunction was dismissed last week. An SGM will now be held late January. A firm merger proposal is expected in the middle of next month. This is a buy.

• Reportedly, Chinese investors, as well as Middle Eastern sovereign wealth funds, have expressed interest in acquiring a “significant ” minority stake in PCCW Ltd (8 HK)‘s fibre ops. 
• Preceding my comments on PCCW are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• There are 3 changes for the CNI Semiconductor Chips Index that will be implemented at the close on 8 December.
• This is yet another index inclusion for Hygon Information Technology C (688041 CH) – the stock continues to move higher on expected passive buying over the next two weeks.
• Over the last 6 months, the adds have underperformed the deletes but there has been a significant improvement in performance over the last 2 months.

• There will be 6 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index. Implementation is at the close on 8 December.
• There is a lot of overlap between the adds and deletes across both indices with the one-way trade across both indices estimated to be CNY 2.4bn.
• The adds and deletes have drifted lower over the last few months. However, the adds have outperformed the deletes significantly in the last month.

• Baidu reported revenue/non-GAAP operating profit/GAAP net income inline/7.72%/66.1% vs. our estimation.
• We believe short term cyclical and medium term AIGC-led upswing in advertising can bridge Baidu’s long-term business, which we do see them difficult to monetize.
• We maintain a BUY rating and adjusted TP to US$157, implying a 14.6x PE. It is currently trading at 11.4x PE in 2024.

• Today, Macnica Fuji Electronics Hol (3132 JP) (Macnica Holdings) announced that it would launch a tender offer to buy 100% of Glosel (9995 JP), a semiconductor trading company. 
• Glosel is special because it has three main assets. 1) 61% of net assets are inventory (<3mo), 2) 34% of net assets are net receivables (<3mos), 3) 8+% is securities.
• For that, Glosel’s Board decided 0.71x book was OK. Nah. The register is reasonably wide open, and this is a delayed start. Someone might get noisy, but < 50/50 bet.

• TSMC is expected to experience growth of ~15% YoY in 2024F.
• TSMC’s N3 is expected to dominate the market in 2024F, with applications in CPU, GPU, smartphone SoC, and more.
• We also estimate that the N2 pilot run will begin in 4Q24.

• TSMC: 8.2% Premium — Still Best to Wait for Better Levels
• ASE: 6.4% Premium — Wait for 5% as the Level to Go Long the Spread
• ChipMOS: -0.5% Discount — Stay Long the Spread if You Started at -2.0%

• Singapore-based early-stage VC firm Wavemaker Partners has led the US$1.5 million seed extension investment round for VAMA, a one-stop virtual platform providing easy access to an array of services for one’s religious and spiritual journey.
• This marks Wavemaker’s maiden investment in an India-incorporated startup.
• The deep-tech investor infused US$1.1 million into the startup, while the rest came from existing investors, such as Lisa Gokongwei-Cheng and Harit Nagpal.

• We are initiating coverage of Eventbrite (EB) with a Buy Rating and $12 target.
• Eventbrite benefits from social change where in-person meet ups are celebrated more so than virtual events.
• Eventbrite fills the void of online dating apps. The popularity of online dating apps is dwindling, and Eventbrite should benefit from this growing trend.

• Trip.com’s domestic hotel bookings increased by 70% over pre-COVID 3Q19.
• Xiaomi’s revenue began to grow in 3Q23 after decreasing for five quarters.
• China home appliance export surged in October, for example, fridge export amount growing by 42% YoY.

• There are 3 changes for the CES China Semiconductor Chips Index that will be implemented at the close on 8 December.
• Hygon Information Technology C (688041 CH) will be added to a global index in a week and then there will be multiple index inflows at the close on 8 December.
• After underperforming from May to September, the adds have gained ground on the deletes over the last two months and there could be further outperformance over the next two weeks.

• The capping for the Hang Seng family of indices will use closing prices from 28 November while implementation will take place at the close on 1 December.
• The changes for the next S&P/ASX 200 (AS51 INDEX) rebalance will be announced after the close of trading on 1 December.
• It was another week of inflows for the iShares Emerging Markets (EMXC US) to take units outstanding to a new high.

• Uchi Technologies (UCHI MK) reported a 15% YoY revenue growth/ 27% YoY operating profit growth led by constant USD revenue growth of 10% YoY and 4.5% MYR depreciation. 
• Profit grew only 3.5% YoY due to an increase in the effective tax rate from 2.8% to 21.0% as the company’s tax holidays lapsed earlier this year.
• Trading 12x PE, 7.5% dividend yield (based on a 90% payout), >30% ROE, and more than 10% of the market cap in cash; this a stock to explore. 

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• In the IPO space, Tata Technologies didn’t disappoint Tata Group fans, at least on the subscription front.
• The placements continued to flow in this week as well in Japan.

• There are 5 changes for the SSE50 Index (SSE50 INDEX) that will be implemented at the close on 8 December. There is over 1x ADV to trade on some stocks.
• We estimate a one-way turnover of 5.4% at the December rebalance leading to a one-way trade of CNY 4.85bn. Index arb activity could add to the impact on the stocks.
• The adds, deletes and SSE50 Index (SSE50 INDEX) have moved nearly in lockstep since May and the passive flows could move things around a bit.

• This is the somewhat brand-spanking-new Quiddity HK Connect SOUTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and Mainland Connect NORTHBOUND Monitor.
• SOUTHBOUND flows the last several weeks clearly indicated a momentum move. The top net sells were all down. The top buys were all up. We saw a pause, then continued.
• SOUTHBOUND sees more net selling this week of stocks. Last week ETF selling turned flows negative. This week, ETF flows flattered the net sell. Tech still being sold.

• Weekly summary of vol changes and moves across Global Markets
• Analysing ATM volatility and skew changes over the last 5 days
• We suggest a few trades to take advantage of the implied vol surfaces

The Asia Trade Book for November 2023 includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds across Asia HY and crossover credits.

Please reach out to our analysts to discuss any of these ideas, or other trade recommendations from our Asia coverage.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We view Bite’s ESG as “Adequate”, in line with its scores for the Environmental, Social and Governance pillars. Controversies are “Immaterial” and Disclosure is “Adequate”.
• Bite is a telecommunications service provider with operations in the Baltics. It offers mobile, broadband and pay-TV services in Latvia and Lithuania, and media services in both countries as well as in Estonia.

• Kuaishou reported revenue/non-GAAP operating profit/GAAP net income 1.13%/35.0%/52.2% vs. our estimation.
• The bottom-line beats were primarily due to reduced S&M costs related to effective user retention strategies and the operation of the newly constructed data centre in Ulanqab…
• We maintain our BUY rating and raised TP to HK$78 for a positive outlook in the e-commerce business and viral playlets, stimulating advertising growth…

• Q3FY24 revenues of 18.1 billion, up 34% QoQ and up a staggering 206% from the year ago period. It was also ~$2 billion higher than the guided number
• NVIDIA’s current quarter forecast was for a further revenue raise of almost $2 billion with gross margins staying roughly flat at 74.5%
• Share price reaction was negative, closing down 2.5% the following day. But why?

• Xiaomi reported C3Q23 top-line, non-GAAP EBIT, and GAAP net profit (2%), 7% and in-line vs. our est., and in-line, 4%, and 13%, vs. consensus respectively.
• Xiaomi’s recent run could be short lived, as (1) Huawei will soon launch mid-range 5G handsets, (2) the Mi 14 will soon face new high-end Android competition;
• And (3) its underinvested EV project could disappoint. We maintain our SELL rating and HK$ 12.6 TP, implying 28x CY24 P/E.

• The Hollysys Automation Technologies (HOLI US) Board has finally succumbed to shareholder pressure by targeting a special meeting of shareholders in the week commencing 22 January 2024.
• The special meeting is a side event as the Board targets a binding proposal by mid-December, with some bidders proceeding to the confirmatory due diligence stage.
• The BVI takeover structure and Hollysys’ undemanding valuation facilitate a competitive bidding process. A 10% uplift to the current highest offer (Recco’s US$26.50 offer) is possible.

• By offering 15k and 30k/m 3nm capacity by 4Q24/4Q25 to Intel, TSMC will see Intel becoming one of its top 3 customers by accounting for 12% of TSMC 2025 sales
• By leveraging 3nm outsourcing, Intel will have incremental sales/capacity growth of 19-20% per year by accounting for 28%/44% of sales in 2024/2025, beating consensus’ 14%/9% y/y sales growth for 2024/2025.
• We estimate 30-35% 5 years EPS CAGR for Intel, driven by TSMC’s 2/3nm foundry support, lower cost and process R&D, lower capex and depreciation cost, and AI PC CPU launch.

• The SET50 index tracks the performance of the top 50 largest and most liquid names listed in the Stock Exchange of Thailand (SET).
• In this insight, we take a look at the potential ADDs/DELs for Thailand’s SET50 index rebalance in December 2023.
• I currently see only one ADD and one DEL for the SET 50 index and with more than 90% of the reference period complete, these are my final expectations.

• Erajaya Swasembada (ERAA IJ) had a tempestuous 3Q2023, with one-off write-downs of inventory in both Indonesia and Malaysia, despite booking strong sales and gross profit growth overall. 
• The company has also expanded its store network more aggressively in 9M2023, which meant higher opex and financing to build the new inventory, whilst stores take time to ramp up. 
• Erajaya should see a recovery in 4Q2023, given plans to limit store expansion plus a lack of write-offs. Trading on 5x FY2024E PER with forecast +25% EPS growth is attractive.

SenSen has won a major contract with Australia’s National Heavy Vehicle Regulator (NHVR), generating A$1.5m in upfront revenue and c A$500,000 in annual recurring revenue. This is a major scale-up with an existing customer, providing important validation of both SenSen’s technology and its ‘land and expand’ strategy, while retaining significant upsell potential through expanding deployments across other NHVR jurisdictions. The deal provides good support for our FY24 forecasts and strengthens the company’s prospects for delivering sustained, scalable growth.

• Xiaomi Corp (1810 HK) is a member of the Hang Seng Index, Hang Seng China Enterprises Index and Hang Seng TECH Index, among others.
• Capping of stocks at 8% of the index weight will lead to selling in Xiaomi (1810 HK) at the close on 1 December, mainly from Hang Seng TECH Index trackers.
• Relative underperformance vs the HSTECH Index from now to Tuesday will require passive to sell less stock, while outperformance will lead to increased passive selling. That opens up trading opportunities.

• Tata Technologies (TATATECH IN) awaited IPO is set to launch for subscription this week.
• The company is one of the largest ER&D player that is based in India with revenues crossing INR 44 bn in F23. 
• Balance sheet remains strong and cash rich. There are however, doubts on revenue recognition policy, forex risk and reliance on Tata Group.

• Kuaishou’s 3Q2023 earnings beat consensus estimates with significant improvement to the company’s profitability driven by growth across all business segments.
• Operating losses of the overseas segment has further reduced, and new offerings such as paid mini dramas have been driving strong growth for the company.
• Though Kuaishou’s share price has moved up during the last few months, valuation multiples are at a steep discount to historical multiples, suggesting there is further upside.

• Nvidia’s street-beating results indicate strong growth to continue; Generative AI demand will next expand from startups, consumer internet, and cloud service providers increasingly to enterprise AI-linked demand.
• Nvidia is not expensive despite recent market concerns. We believe Nvidia can meet or even beat its current calendar year 2024 earnings expectations and forward PE is cheap.
• Short a basket of Taiwan AI concept stocks vs. a core Nvidia long position rather than take profits in Nvidia. We have swapped one Taiwan stock in our short basket.

• Permira and Blackstone announced a NOK 115.0/share offer, two months after their approach was unveiled. 3-month VWAP premium is 52.6%. The offer represents 18.3x EV/NTM Fwd EBITDA (vs. 14.6x comparables)
• The three largest shareholders (c.72.3%) communicated at the outset their support, so it’s a done deal. 90% condition can be waived. Board says price “financially fair”, but cannot recommend it.
• I set my TP at NOK 115. The consortium could achieve an IRR of 17.8% by year 8. Spread is 3.3%/6.65% (gross/annualised, assuming settlement by 31 May). Long.

• BILL Holdings is a cloud-based provider of SaaS, payments, spend and expense management products, which automate accounts payable (AP) and accounts receivable (AR) transactions
• The company has successfully completed its IPO in 2019 and raised $200M+ in net proceeds. Today, BILL Holdings includes subsidiaries such as Bill.com, DivvyPay, Invoice2go, Cimrid and Finmark Financial.
• My bear case assumes a ~5% ten-year revenue CAGR from FY24 through FY34, maximum competitive pressure, high customer churn, headwind to float revenue and volatile transactional revenue.

• Wrkr Ltd (ASX:WRK) offers compliance solutions for Australian superannuation contributions and payroll including member onboarding, super payments, messaging and employee validation.
• New AGM commentary is guiding FY24 revenue to $9m-$10m (RaaS $10.2m), which includes forecast SMSF Hub revenue in-line with RaaS at ~$800k and higher interest income, boosted by the recent RBA rate increase.
• While the onboarding of a ‘significant fund’ client of Link is expected ‘within weeks’ we have little in the way of transactional revenue in FY24, just implementation revenue. 

• A fortnight after co-COOs pitched a US$25/share indicative Offer for Hollysys (HOLI US), Ascendent Capital, holding 13.7%, tabled a US$26/share Offer. The Recco/Dazheng consortium offered US$26.50 a week later.
• There is currently a dispute over the ownership and control of Ace Lead’s shares in Hollysys, which was subject to an injunction hearing in the Hong Kong High Court.
• That hearing took place today. So I went along to hear first-hand the key arguments from both sides. 

• Alchip Technologies (3661 TT) could replace Feng Tay Enterprise (9910 TT) in the Yuanta/P-Shares Taiwan Top 50 ETF at the December rebalance.
• This ETF inclusion for Alchip Technologies (3661 TT) could come back-to-back with another index inclusion scheduled for the end of November.
• Shorts in Alchip Technologies (3661 TT) have been building up while shorts in Feng Tay Enterprise (9910 TT) have surged over the last few months.

• Indian IT services giant Tata Consultancy Svcs (TCS IN) launched a US$2bn Buyback last week.
• The company will buy up to 40,963,855 shares in a Tender Offer-style Buyback at a Buyback Price of INR4,150/share (an 18% premium to today’s close).
• In this insight, we take a closer look at the indicative timeline of key events in this Buyback, the company’s Buybacks history, proration details, and what this means for investors.

• Nvidia Results Today U.S. Time — Taiwan Market Surged Recently on Improving AI/Semiconductor Expectations and Potential for Easing U.S.-China Tensions.
• Taiwan: Underowned, Yet Gaining on Peers. Our Fellow Insight Provider Analyzes Why Taiwan Might Still Be Underowned.
• Asia Geopolitics: Following Biden-Xi Meeting, Asia Is a Safer Place For Now.

• TSMC: 7.4% Premium — Previous Short Has Worked, Now Wait For Better Levels
• ChipMOS: -2.0% Discount — Good Level to Go Long the Spread
• CHT: -1.2% Discount — Good Level to Go Long the Spread

• NetEase reported revenue/non-GAAP operating profit/GAAP net income inline/5.24%/16.2% vs. our estimation.
• The bottom-line beats were primarily attributed to the operational efficiency achieved through the usage of AIGC tools, and reduced S&M expenses resulting from organic traffic generated by high-quality game content.
• We maintain our BUY rating and raised TP to $138 for future game releases, implying 19x PE, and it is currently trading at 17x PE in 2024

• Nvidia reports/guides a better than expected 3Q/4Q23 sales, margin, and EPS on stronger AI GPU sales growth of nearly 3x.
• Nvidia reports a healthy 3.04 MOI, down 5% q/q and down 37% y/y and contributes nicely to account for 9% of TSMC sales.
• In spite of concerns on good news priced in, seasonal weaker 1Q24, and MI300X/ASIC alternative AI solutions, we expect more raise to come in 2024-2025E.

• TSMC’s N2 technology is currently undergoing verification for a 256Mb SRAM, and it will be implemented in Hsinchu and Kaohsiung, Taiwan.
• The TSMC N3 technology capacity was 65kwpm in 3Q23, and the current version is N3B, which were adopted by Apple for the iPhone 15 this year.
• Both N3E and N2 only have 20 layers EUV masks.

• Total revenue grew by 21% YoY in 3Q23, as both advertising and e-commerce expanded strongly.
• KS achieved historical high operating margin and operating profit, as the company continue to cut all operating expenses.
• We believe the stock has an upside of 63% and a price target of HK$95. Buy.

• BZ reported 3Q23 cash billing 0.8% higher than our est., revenue beat our estimate/consensus 5.2%/3.8%, non-GAAP NI beat our estimate/consensus by 103%/50%.
• Cost saving and investment income are the main reasons for bottom-line beat, which we think are not sustainable.
• Even BZ can deliver its “3 years with 100mn new users” target until 2025, we think its 20% earnings CAGR in 2023-25E still cannot justify its high valuation (TBC)

• In-Line results were overshadowed by company’s pullback from March restructuring plan and Jack ma’s family trust selling shares.
• Worst sell-off in a year was over-reaction as abrupt changes unnerved investors who tended to interpret the events  with excessive negative sentiments.
• Valuation almost priced in a scenario where company is overtaken by PDD in faltering Chinese economy. Selling amidst this extreme pessimism is the last thing investors want in our view. 

• In this insight, we take a look at the names leading the race to become ADDs/DELs for the T50 and T100 Indices for the December 2023 Rebalance.
• While I do not expect to see any changes to the T50 index, I expect four index changes for the T100 index.
• Some of the names involved in the T100 index changes could have significant influence on our TDIV index flow expectations for December 2023.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Lippo Karawaci
• Softbank Group
• Xiaomi Corp

• Reports 3Q23 revenues of $5.8 million and positive adjusted EBITDA of $405K, up from $2.1 million and negative ~$2 million, respectively, in 2Q23.
• The improved results reflect additional contributions from new projects that began ramping up in 2Q23, along with lower SG&A that reflects the cost-cutting efforts enacted earlier in 2023.
• We note that comparisons to 3Q22 are not meaningful given the company’s pivot to mostly hosting contracts at its data centers rather than proprietary Bitcoin mining where it recognized both higher revenues and costs.

• ATNI is getting set to undergo management change right when the Company was to begin harvesting cash flow from several years of capital expenditures
• In 2024, CEO would move to Executive Chairman and the CFO plans to retire. In their place, ATNI has named Brad Martin as CEO and Carlos Doglioli as CFO
• Current COO has overseen the investment in Alaska and other markets ATNI has been placing fiber lines in an attempt to thwart competition before there was a severe pricing pressure

• The Dec 23 review results for the Hang Seng Tech Index were announced on Friday 17 November after the close.
• There were no ADDs to or DELETEs from the index, in something of a surprise. 
• The “big flow” on HS TECH is the downweight on Xiaomi Corp (1810 HK) due to sharp capping after significant outperformance since the August review.

• Tata Technologies (TATATECH IN), the largest India-based ER&D service provider, seeks to raise gross proceeds up to US$366 million in a pure secondary offering.
• We previously discussed the IPO in Tata Technologies IPO: The Investment Case, Tata Technologies IPO: The Bull Case and Tata Technologies IPO: The Bear Case. 
• Our valuation analysis suggests that the IPO price range of Rs475-500 per share is attractive. Therefore, we would participate in the IPO.

• Keep Inc (3650 HK) and Tuhu Car (9690 HK) will be added to the Hang Seng Composite Index (HSCI) after the close of trading on 1 December.
• Keep (3650 HK) will be added to Southbound Stock Connect from the open on 4 December while Tuhu Car (9690 HK) will only be added to Stock Connect in April.
• There are lock-up expiries on both stocks, prior to or after inclusion in Stock Connect, and trading strategies will need to take that into account.

• Existing Tata Technologies (TATATECH IN) shareholders are looking to sell 60.85m shares and raise between INR 28.9-30.4bn (US$347-365m) giving the company a market cap of between US$2.31-2.44bn.
• Tata Technologies (TATATECH IN) will have a float of around 10% at the time of listing and that will increase close to 30% after the pre-IPO lock-up ends.
• Tata Technologies (TATATECH IN) could be added to global indices in May and June, but inclusion in local indices with meaningful tracking assets will take longer.

• OpenAI was founded in 2015 by investors, including Elon Musk, Reid Hoffman, Peter Thiel, AWS, and YC Research.
• The goal was to pursue Artificial General Intelligence (AGI) safely for the benefit of humanity.
• There was an initial pledge of $1 billion, but the money that came in was $100 million from Elon Musk and $30 million from Open Philanthropy.

• BABA reported C3Q23 revenue, non-GAAP operating profit and GAAP net income in-line, 6% and (7%) vs. our est., and in-line, in-line and (14%);
• Instead of appointing capable management to oversee key subsidiaries, BABA backpedalled to call off its spin-off plans;
• We cut TP from US$ 127 to US$ 72, and downgrade to SELL.

• Tencent reported C3Q23 revenue, non-IFRS operating profit and IFRS net income (2.4%), 8.9% and 17% versus our estimates. The bottom-line beat was mainly due to the growth of high-margin businesses;  
• We view commercialization of Video Accounts and expansion of overseas gaming are still at early stage.
• Progression of these high-margin, high-quality business will persist into 2024;  We maintain BUY but raise target price to HK$ 432. 

• JD.com reported in-line revenue and a non-GAAP net profit beat of 12% vs. consensus, mainly due to the 145% beat by subsidiary JD Logistics (JDL).
• 3Q GMV grew low-single digit and growth could remain similar in 4Q given the high-COVID related FMCG base. JDs GMV may reaccelerate in 2024 as smartphone and FMCG growth returns.
• Meanwhile, JD lowered the minimum spend required for free shipping, which we expect to lead to accelerate parcel volume growth for JD Logistic. 

• On 16th November 2023, Tokyo-based Industrial-use precious metal products manufacturer Furuya Metal (7826 JP) announced they would be moving from TSE Standard to TSE Prime on 6th December 2023.
• This move would trigger a TOPIX Index Inclusion event at the end of January 2024 which would require all the TOPIX-tracking passive funds to buy shares in the company.
• The company also launched an offering in conjunction with the TSE Prime announcement. In this insight, we take a look at the flow dynamics of the upcoming TOPIX Inclusion event.

• We discuss the two remaining options for 11 Street post the cancellation of its sale to Qoo10 Pte.
• As these strategic sale of 11 Street to Qoo10 Pte. has failed, the possibility of a forced sale of 11 Street by the financial investors has increased.
• The higher probability event is for the Nile Holdings consortium to try to sell 11 Street to other financial investors.

• As expected, there are no constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in December. However, there are float and capping changes for a lot of stocks.
• Estimated one-way turnover is 4.8% leading to a one-way trade of HK$5.29bn (US$679m). There are 4 stocks with over 1 day of ADV to trade.
• The largest selling will be on Xiaomi Corp (1810 HK) offset by buying in Meituan (3690 HK), JD.com (9618 HK) and Alibaba Group Holding (9988 HK).