TMT/Internet

• L&F will likely be listed on the KOSPI in mid-December. The top reserved issue within the KOSDAQ 150 IT Sector will be added to the index via an ad-hoc change.
• Selvas AI stands as the foremost candidate for the screened top reserved issue, with a mere two trading days remaining in the six-month screening period.
• Given the relatively limited proactive position buildup due to more uncertainty regarding timing, the price impact leading up to the effective date might become even more significant.

• The increasing dominance of retailers (off/online) in the US consumer sector measured by market cap over last three decades tellingly illustrates the long term potential of Alibaba in China.
• While we believe consensus underestimates bottom line for 2QFY24, investors will likely focus on the outlook for 2024, with growth of Taobao/Tmall group remaining key share price driver.
• Investors pulling out of Alibaba due to geopolitical risks remind me of how ESG drove investments away from oil & gas years ago and eventually led to the latter’s outperformance.  

• We see early signs of recovery in PC and smartphone markets, stable server market (strengths in AI server, stable in non-AI server market), but weaknesses in automotive and industrial.
• We expect the PC semi market recovery of more than 10% y/y in 2024/2025, driven by inventory rebuild and silicon contents increase by adding AI into PC.
• We expect the smartphone semi market recovery of 7-8% y/y in 2024/2025, driven by inventory rebuild and adopting 3nE foundry node. But, Huawei/HiSilicon will take some of the growth.

• Q323 revenues of $14.2 billion, some $800 million above the guided midpoint, down 8% YoY but up 10% sequentially.
• Current quarter revenue guided up QoQ to $15.1 billion at the midpoint, shares up 10% 
• Intel is betting big on a return to a 300 million unit PC TAM. Is this realistic?

• MediaTek’s 4Q23F revenue guidance falls in line with our prior expectation. The general outlook is for double-digit growth in 2024F.
• MediaTek believes that the 3nm SoC will certainly perform differently in 2H24F.  
• MediaTek will pay NT$24 DPS for 1H23 earnings, and the dividend will be paid on 1/31, 2024F.

• The pivotal question now is the number of these companies that will effectively defer their year-end ex-dividend date to April next year.
• The most reliable way to accurately confirm this would be to check how many of them will publicly announce the dividend reference date two weeks before the December year-end deadline.
• This will serve as the most critical indicator in determining whether this year’s year-end flow trading event, the most significant in Korea, will recur.

• Hollysys (HOLI US), a leading automation control system solutions provider in China, has been subject to at least six indicative Offers since December 2020, ranging from US$15.47/share to $US$25/share. 
• Yue Xu and Lei Fang, the co-chief operating officers of Hollysys, who previously tabled a NBIO of US$23.00/share in August 2021, have now pitched a US$25/share proposal.
• What is different this time? >32% of the share registry has banded together to demand changes. That’s dramatically different vs previous Offers.

• 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.
• Carly has attracted larger automotive industry businesses as shareholders, with a direct offering and services to support automotive manufacturers and dealers to generate revenue from car subscriptions. 

• ASE’s 3Q23 results came in in-line with analyst estimates, and showed gross margin ticking slightly higher QoQ.
• Semiconductor Assembly, Testing, and Manufacturing (ATM) capacity utilization remains low, in the mid-60’s percent.
• Management is cautiously optimistic about an improving industry environment into next year, however was more guarded than what we gauged from TSMC or UMC in their recent results.

• SHEN is expanding its network footprint with the acquisition of Horizon Telecom for $385 million in cash and stock.
• SHEN is purchasing Horizon for the network footprint and the sales ability to capture commercial customers compared to the majority of SHEN’s customers being residential
• The valuation becomes financially reasonable to understand when considering SHEN is paying approximately $51 thousand per fiber miles

• 4Q23F demand recovery will be broad-based thanks to customers’ new product launch.
• ASEH has observed an increase in rush orders across the board as customers become more cautious about restocking.
• The DPS payout ratio for 2023F is projected to be 60-65%.

• NTGR benefited from an increase in demand for premium wireless mesh systems and routers in the third quarter resulting in a non-GAAP profit
• The return of normalcy should allow NTGR to convert its on hand inventory to cash over the next two quarters. NTGR’s cash balance should continue to rise
• A softer environment for SMB products forces us to reassess our model with NTGR guiding gross margin down

• LS Materials is getting ready to complete its IPO in Korea in late November. The IPO price range is from 4,400 won to 5,500 won per share. 
• According to the bankers’ valuation, the expected market cap after the IPO is from 298 billion won to 372 billion won. 
• LS Materials is one of the largest players globally in the large-size ultracapacitors, which stabilize power supply and are used to replace and supplement primary batteries and lithium-ion batteries.

• Hollysys Automation Technologies (HOLI US) update notes a new MBO proposal at US$25 per share, a bidders shortlist in several weeks and an update on the special meeting. 
• The update suggests several potential bidders and enough shareholders with the required record date to convene the special meeting to appoint independent directors. 
• The MBO proposal, while potentially a delaying tactic, suggests that the Board are under pressure for a solution and is aiming for a friendly takeover. 

• Using data from the close on 25 October, there could be 6 adds and 5 deletes to the Yuanta/​P-Shares Taiwan Dividend Plus ETF in December.
• There will also be capping and funding flows that will lead to a one-way turnover of 19.5% and a one-way trade of US$1.39bn.
• A long adds/ short deletes trade is up double digits over the last three weeks and there are a few trade adjustments based on the new rankings.

• Appier’s stock initially surged 20% following strong Q2 results but later declined 25%, influenced by small-cap stock volatility, AI-induced valuations, and e-commerce sensitivity.
• The AI company’s competitive position remains strong compared to Braze; the differing stock price performance and valuation suggests significant upside.
• Appier’s thesis remains intact and we expect the company to benefit from key trends in consumer marketing, first-party data and AI solutions.

• UMC believes that the early signs indicate the end of inventory correction for smartphones and PCs. 
• The total wafer loading continues to decrease, but pricing for 12″ wafers remains firm. As a result, the average selling price (ASP) continues to increase slightly. 
• The demand for strength lies in computing, thanks to the LCD controller, codec, Wi-Fi, touch IC controller, and communication applications driven by RFFE and networking IC.

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.

• Adani Green Energy
• SK Hynix

• Kokusai Electric (6525 JP) priced its IPO at JPY1,840 per share to raise secondary proceeds of US$723 million. The shares will start trading on 25 October.
• We previously discussed the IPO in Kokusai Electric IPO: The Bull Case, Kokusai Electric IPO: The Bear Case and Kokusai Electric IPO: Lower Price Range Is Reasonable.
• The peers have modestly derated since the lowered IPO price range was announced on 10 October. However, the IPO price remains attractive. Our DCF valuation is JPY2,058. 

• Malaysian conglomerate YTL Corp Bhd (YTL MK) is coming up “cheap” versus YTL Power International (YTLP MK). And Richard Li chips away at PCCW Ltd (8 HK).
• Preceding my comments on YTL and 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%.

Freelancer achieved a key profitability target in Q323 by delivering positive operating EBITDA across divisions, leading to positive operating cash flow generation and an uplift in gross cash. Despite lower group gross merchandise value (GMV), revenue likely grew given the higher take rate of the marketplace division, where GMV increased. Near-term pipeline highlights include accelerating Enterprise momentum from US expansion and a Chinese retailer partnership, Loadshift’s ongoing marketplace transition and new Escrow.com partnerships to drive diversification.

• Waystar Holding will be valued like other unprofitable healthcare IT unicorns on a multiple of forward revenue. I used EV/Revenue valuation methodology and FY23 EV/Revenue multiples to value the Waystar. 
• In 2019, CPPIB and EQT acquired a majority stake in Waystar, valuing the company at $2.7B, which implies an EV/FY23E revenue multiple of ~ 6x, including a debt of ~$2.3B. 
• My ~$3.6B IPO valuation contemplates a ~5x EV/Revenue on my FY23E revenue of $795M and is supported by my analysis of healthcare IT comps. 

• We estimate that the outlook is still moderate downward in 4Q23F, which is a typically seasonality.
• SPIL, in ASEH group, is serving only limited on-Substrate (oW) of Chip-on-Wafer-on-Substrate (CoWoS).
• We note that the major big clients of ASEH are not changing at all during this time downturn.

• KKR raised around US$730m via selling a stake in Kokusai Electric’s (6525 JP) (KE) Japan IPO.
• KE main business activities consist of the manufacturing, sales and maintenance service of semiconductor manufacturing equipment.
• In our previous notes we have looked at the company’s past performance, undertaken a peer comparison and looked at valuations. In this note, we talk about the trading dynamics.

• Q323 revenues of $3.48 billion, ahead of guidance and up 8.6% sequentially
• December quarter guidance of $3.7 billion at the midpoint suggests ongoing recovery
• However, still-declining services revenue indicates that all other headwinds remain in place

• Waystar Holding, a cloud-based technology company and healthcare RCM solution provider, filed for a $100M placeholder IPO.
• Founded in 2017 through the merger of two healthcare firms, ZirMed and Navicure, Waystar Holding provides mission-critical cloud software to healthcare organizations in the United States. 
• The company has ~$2.3B of outstanding borrowings and plans to use net proceeds from an upcoming IPO to repay outstanding indebtedness under credit facilities. 

For H124, Datatec reported 15% y-o-y revenue growth, gross margin expansion, EBITDA growth of 39% and adjusted EBITDA growth of 2%. Underlying EPS increased 336% to 9.6c. After incurring restructuring charges and elevated share-based compensation in FY23, H124 provided a cleaner set of numbers. Supply chain issues eased during H1 allowing Datatec to reduce its order backlog by 21% from the end of FY23. The company is seeing strong demand for cyber security and networking solutions, and while challenges still persist in Latin America, it expects FY24 performance to improve versus FY23 for all divisions.

• Q323 revenues of $17.28 billion. In US$ terms, this represented a 10.2% increase QoQ, but still down 14.6% YoY.
• TSMC’s forecasted Q423 revenues of $19.2 billion at the midpoint, representing a 10% QoQ increase
• CEO C.C Wei robustly rebuffed Intel’s popular claim to be on track for process technology leadership by 2025

• Premiums have generally fallen sharply most recently, likely driven by weaker global markets.
• Key earnings: TSMC reported last week; UMC and ASE to report this week.
• We describe our latest recommended premium/discount levels to Long or Short the spreads.

• In this insight we first consider which comparables are the most appropriate for CaiNiao
• We then discuss which valuation multiples make sense, plus some potential pitfalls 
• We believe CaiNiao and their bankers could justify a valuation up to 310 bn CNY

• Delta Thailand shares haven’t recovered from their sharp drop at the end of September, which happened after the parent Delta Taiwan sold a stake in the Thai subsidiary.
• Delta Thailand shares fell to the point that its market cap finally became smaller than Delta Taiwan, for the first time since December 2022.
• Delta Thailand’s market cap should be substantially smaller than its parent Delta Taiwan. We analyze what history tells us the further relative downside for Delta Thailand could be.

• This week will see a wave of earnings releases for the industry including Intel, Microsofot, Mediatek, ASE, and UMC.
• TSMC results last week provided positive color on the 2024E onwards outlook for the company as well as comments regarding a turn around for PC and mobile.
• Taiwan AI names were some of the top losers across our Taiwan Tech universe last week.

• If Descente Ltd (8114 JP) earnings disappoints, buy the dip. Itochu Corp (8001 JP) is buying for the long-term.
• MGM China Holdings (2282 HK) has gained market share in mass table market, VIP, and total revenue. Yet MGM’s FY24E EV/EBITDA is ~40% below its two-year forward average EV/EBITDA pre-Covid.
• If you had a J-REIT portfolio, Sankei Real Estate (2972 JP) would go in and push something else out or smaller. I think one gets beta-plus, which is usually called alpha.

• Novatek Microelectronics Corp (3034 TT)‘s outlook is expected to be slightly negative QoQ in 4Q23F. 
• The Apple (AAPL US) iPhone 16 qualification samples of Novatek OLED DDIC is targeting to deliver by 4Q23F.
• Novatek is increasing its wafer orders at UMC in 4Q23F.

• ASML reported Q323 revenues of €6.7 billion, largely in line with guidance, down 3% QoQ but up 15.5% YoY. Q423 revenue forecast of €6.9 billion. 
• ASML remains on track for a remarkable 30% YoY growth in 2023 revenues
• ASML forecasting 2024 as a zero growth year as order intake in Q323 falls to €2.6 billion, massively down on the €8.9 billion in the year-ago quarter. 

• IRDM used its third quarter results as means to update investors on where operating EBITDA would end up for 2023 and the continued progress with direct to device
• IRDM reported quarterly results missing our estimates due to a larger than expected decline in equipment revenue. 
• The Qualcomm (QCOM) partnership is poised to emerge as the most significant catalyst for 2024

• For the impending December rebalancing, the effective date is set for December 18th, while the ETF rebalancing trading will take place on December 15th.
• Jusung Engineering and Eugene Technology are likely to be added, while Lake Materials and SFA Semicon are expected to exit the index.
• Aside from constituent changes, Hansol Chemical is anticipated to significantly benefit from the passive impact as the primary beneficiary of the ceiling reversion.

• The revenue/ GM/ OPM/ EPS/ ROE is USD$17.57b/ 54.3%/ 41.7%/ NT$8.14/ 25.8% in 3Q23. The revenue/ GMO/ OPM is US$18.8-19.6bn/ 51.5-53.5%; OPM: 39.5-41.5% in 4Q23F guidance.
• Moving into 4Q23F, TSMC expects their business to be supported by smartphone seasonality, while AI-related demand continues to be strong. 
• TSMC anticipates 2024F to experience healthy growth, and TSMC has noticed a resurgence in demand for smartphones and PCs.

• TSMC reported 3Q23 results yesterday — Gross margin beat expectations and remains near historical highs.
• TSMC maintains expectation of a 15-20% earnings CAGR through 2026E. Gross margin guided to remain near all-time highs.
• Accumulate TSMC as a Structural Long position — Undemanding multiple can drive Target Price NT$760 for ~40% Upside.

• Yesterday about 5 minutes before the close, Shinko Electric Industries (6967 JP) went into kehai, rising 8.6%, then falling back to end + 3% on the day. 
• This morning, the stock opened down 2%, rose 4%, fell 4%, then rose 4%. All in the first 45 minutes. Then it fell back 4% and ended down 2% today.
• The proximate cause of all of this was a Reuters article out 5mins before the close yesterday suggesting Mitsubishi Corp (8058 JP) is considering bidding for Shinko Electric.

• Reuters reported that Mitsubishi Corp (8058 JP) is considering a joint bid for Fujitsu Ltd (6702 JP)’s 50% stake in Shinko Electric Industries (6967 JP). 
• Fujitsu first flagged a potential stake sale in its 1HFY22 results last October. Previously rumoured suitors include Apollo Global Management, Bain Capital, Dai Nippon Printing, JIC and KKR.
• Shinko’s shares are up 73% YTD, which is not excessive compared to Ibiden Co Ltd (4062 JP) (up 63.2% YTD). The valuation is undemanding, which facilitates a potential offer.

• Money Forward’s Corporate SaaS business is thriving, with +44% year-over-year growth in ARR, a 139,000-strong customer base, and a healthy CAC-to-LTV ratio of 3.7x.
• Despite strong fundamentals, the stock’s 20% decline is attributed to market fixation on quarterly earnings and concerns about rising interest rates.
• The company’s untapped potential lies in the mid-market segment, where cross-selling opportunities across 18 paid products could significantly boost ARPA, tapping into a TAM estimated at $15 billion.

• On 16 October, Douzone Bizon (012510 KS) announced that it is entering the global software-as-a service (SaaS) market in cooperation with Amazon Web Services (AWS). 
• The agreement stipulates that Douzone Bizon will develop global SaaS through AWS support and enter overseas markets. 
• We believe shares of Douzone Bizon have been oversold. Valuations have become more attractive and its cooperation with AWS is also likely to improve the company’s overseas sales and profits. 

• There is downside risk to SoftBank’s NAV, due to valuations relating to Arm and the Vision Funds including LatAm; on aggregate, these holdings account for 70% of group equity value
• We believe that Arm’s super-premium valuation is unsustainable; there is lack of transparency on the valuations relating to the unlisted Vision Fund holdings, especially in SVF2
• We estimate that SoftBank shares trade at a 44% NAV discount, tighter than the average at the end of the last eight quarters; add to this Arm’s current over valuation

• Nvidia’s CEO Jensen Huang joined Hon Hai at its annual Tech Day yesterday, announcing  an expansion of their partnership into the development of AI factories that will produce new software.
• Hon Hai unveiled its new ‘Model N’ EV, a van designed for logistics use cases. Its Model C SUV will have first customer deliveries in Taiwan in January 2024E.
• The latest Nvidia partnership expansion announcement and EV developments will transform Hon Hai’s unique value proposition to automakers. We continue to expect nearly 50% upside for the shares.