TMT/Internet

• In the past year, four KOSPI transfer listings showed similar patterns, with pre-listing price increases and substantial corrections in the first five trading days post-listing.
• ChatGPTAmid a sideways market and a 54.2% YoY growth in the local ETF market last year, the impact of passive flow imbalances may have been more significant than before.
• A key factor is the short-selling ban. Posco DX’s SSFs showed significant backwardation pre-KOSPI listing, concentrating proactive short positions, requiring caution in adjusting pre-listing short position costs.

• No changes in the rankings since last time. Socionext (6526), Disco (6146), and a Consumer Goods stock (Zozo (3092) top-ranked, Ryohin Keikaku (7453) a better choice) are ADDs.
• The DELETEs are still Takara Holdings (2531), Pacific Metals (5541), Sumitomo Osaka Cement (5232) with a dark horse candidate in Hitachi Zosen (7004) to replace Takara.
• There is the upweight to Nitori (9843) but now less funkiness with Fast Retailing (9983). But it will continue being an interesting Nikkei 225 influence (for years to come).

• Hollysys Automation Technologies (HOLI US) has announced that an EGM is scheduled for February 8th to vote on the merger agreement with Ascendent Capital Partners. 
• The Offer price remains at US$26.50/ADS. The shareholder approval required is simple majority. Regulatory approvals include NDRC, MoC and SAFE. Maybe a national security review.
• And the Dazheng consortium? Apparently insufficient information as to its financing sources and consortium structure ruled it out. Separately, the SGM to spill the board has now been called off. 

• 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.
• As things stand, there could be one index change for the SENSEX index. 
• There could be four ADDs/DELs for the BSE 100 index and four ADDs/DELs for the BSE 200 index.

• Our conviction long Shift Inc (3697 JP) ‘s share price went up by more than 50% in 2023 driven by strong growth in top line alongside further improvement in margins.
• The company’s margins fell in 2022 due to unprofitable projects, however, as these projects came to an end and the company being careful with projects, margins began to recover.
• Shift’s share price has declined over the last few days which we think is temporary and offers an  opportunity to make an entry.  

• 2023 marked our eighth year covering Equity Capital Markets in Asia Pacific. In 2023, IPOs didn’t pick up much from the low base of 2022  while placements showed upward momentum.
• We ended 2023 with an accuracy rate of 73.7% across 57 IPOs that we covered and 79.3% across 115 placements.
• For those not familiar with our coverage, we aim to cover all IPOs and placements with a minimum deal size of US$100m across Asia-Pacific, including China ADRs.

In our inaugural Asian Monthly for 2024, we discuss the regional credit outlook for the year, with a focus on China, India, Indonesia as well as our favoured bonds. We also provide a review of 2023, including new Asian USD corporate bond issuances and defaults last year.

• Alibaba is transforming into a leaner, more efficient and more profitable technology company with sharpened focus on core business and shareholder return.
• While we don’t expect growth to define the company in the near future, high single-digit P/E more than compensates for the lack of it.
• This worst-performing and cheapest technology stock among global peers stands a big chance of staging a comeback in 2024 in our view.

• The review period for the LQ45 Index ended on 29 December. The changes should be announced in the last week of January, becoming effective after the close on 31 January.
• Based on the index methodology, there could be up to 5 changes at the rebalance. Plus there will be capping changes for Bank Rakyat (BBRI) and Bank Central Asia (BBCA).
• The impact of passive trading will be higher on the deletions than the inclusions since lower liquidity stocks are replaced with higher liquidity stocks.

• SOUTHBOUND flows showing momentum tendencies this past week on a single-stock basis, still. Hs gave up some ground vs As in Week One.
• SOUTHBOUND saw HK$14.4bn of net IN-flows in the 4-day week to 5 Jan 2024. Total flows were HK$96bn.
• SOUTHBOUND start the year by buying ETFs, high-div SOEs like China Mobile and CNOOC, coal names, and sports/consumer names.

• TSMC: 7.7% Premium — Spread Has Fallen Further, Likely Can Short a Bit Further
• ASE: Drops to 5.1% Premium — Can Consider Going Long at Current Level Due to Maxed Headroom & ASE’s Strong Advanced Chip Packaging Story
• CHT: Trading at -0.9% Discount — Good Level to Long the Spread, Rare Discount

• Hollysys Automation Technologies (HOLI US) shareholders vote on Ascendent’s US$26.50 offer on 8 February. The special meeting will not be held as the 30% shareholding threshold is no longer satisfied.
• The proxy statement shows that despite Dazheng Consoritum’s competing public campaign, it has withdrawn its court injunction and has struggled to provide proof of financing.
• The proxy statement suggests that the special committee ran a fair process. While shareholders should approve Ascendent’s offer, the 0.2% gross spread indicates an unfavourable risk/reward profile.

• TDCX (TDCX US), a Singapore-headquartered digital customer experience (CX) provider, has announced a preliminary non-binding proposal from Laurent Junique, founder/CEO, and largest shareholder (98.3% of the voting power).
• Junique is offering US$6.60/ADS, a 39% premium to the 30-day VWAP, but a 63% discount to its IPO price a little over two years ago. 
• One issue dogging TDCX is the key man risk given Junique’s almost absolute control. Now he’s trying to take the company private on the cheap.

• From a growth forecast of >20% YoY just two months ago, 2024 is now pegged as a low-to-no growth year
• This will be a big negative for the likes of Infineon, ST Microelectronics, NXP, Globalfoundries and HH Grace, among others. 
• Our anticipated gloomy Q423 earnings season just got a whole lot gloomier

• Vanguard Intl Semiconductor (5347 TT) is likely to see that there could be a decline of around 10% QoQ in 1Q24F.
• In terms of revenue contribution, Taiwan, US, China, Europe, and Japan account for approximately 40%, 20%, 15%, 15%, and 10% respectively.
• Taiwan Semiconductor (TSMC) (2330 TT) may give up technology development at 40nm and above and transfer them to Vanguard.

• On January 4th, Microsoft announced a design change for PCs whereby a new physical key will be added to PC keyboards; the Microsoft Copilot key.
• Microsoft Copilot will become a must-have for companies in our view. Initial Copilot capabilities can dramatically improve worker productivity and this should help drive AI PC upgrades for the industry.
• CES 2024 Jan 9th – 12th will showcase AI PC models sporting Intel’s Core Ultra processors and Microsoft’s new Copilot key. We also update our Dell vs. Taiwan PCs trade.

• The wafer demand outlook for 1Q24F should be around flat, but ASP (Average Selling Price) is expected to decline by negative mid-single digits.
• Compared to 4Q23, Mediatek Inc (2454 TT)‘s foundry demand is larger and Samsung Electronics (005930 KS)‘s foundry demand is downsized in 1Q24F. 
• United Microelectronics Corp (2303 TT) and Intel Corp (INTC US) are currently discussing the allocation issue of 12nm capacity.

• A10 Networks (ATEN) not warning about missing consensus estimates is a positive, but not enough for a victory lap after a volatile 2023
• The fourth quarter was of particular importance since the Company had reported third quarter revenue materially below estimates
• Service providers represented 50 percent of ATEN’s third quarter revenue compared to 67 percent in prior years. Throughout 2023 this customer base was not consistent with their purchasing

• On track to scale – over the last 12 months we believe LaKeel has made progress in developing its ecosystem, driving new customer acquisitions, and increasing MMR for its key DX-related in-house LaKeel Products.
• While Q1-3 FY12/2023 results highlighted risks over license sale slippages, LaKeel’s strategy remains focused on providing innovative business and technology solutions with high ROI, and reducing IT ownership costs with reusable microservices and sustainable software development.
• Despite the slower-than-expected business development, we believe LaKeel’s products and services are differentiated to make headway in a market with a significant need for digital transformation, and its ecosystem will expand and become more commercialized.

• The Kishida administration put out a Doubling Asset-Based Income Plan in 2022. The goal? To get cash savings (corporate/individual) into growth assets and increase asset-based return contribution to income.
• The goal included doubling the number of NISA accounts, and the amount invested in the next five years. On 1 January 2024, NEW NISA account contribution totals were trebled.
• If accounts double, and contribution totals treble, and exemptions are now permanent, investment doubling is a quasi-certainty. The question is how it turns into income-producing assets. That’s MUCH tougher.

• In this insight, we take a look at a group of names with reasonably high likelihood of being involved in index changes for the Hang Seng Index in March 2024.
• The index changes for the March 2024 index rebal will be announced on 16th February 2024.
• While the Hang Seng Index selection process is highly subjective, we continue to believe that identifying eligible names and grouping them by conviction level could be a valuable exercise.

• The review period for the March rebalance ends on 31 January, the changes will be announced early March and implemented at the close of trading on 14 March.
• There is one change currently for each of the Secondary Battery, Bio, Internet and Game indices. There are two changes for the BBIG Index.
• There will be big flow on Ecopro BM (247540 KS) and Posco Future M (003670 KS) and big impact on Douzone Bizon (012510 KS) and DearU (376300 KS). 

• In this insight, we discuss numerous gap trades involving Korean preferred and common shares in 1Q 2024. 
• The excessive gaps in the preferred and common shares of Kumho Petro Chemical, Amorepacific Corp, and Samsung Electronics could reverse in the next several months.
• We see some attractive longer-term opportunities for Amorepacific, Doosan Fuel Cell, LG Electronics, and CJ Cheiljedang which have especially high discounts for the preferred shares versus their counterpart common shares.

• New product introductions have historically resulted in revenue growth at Ubiquiti (UI) and fiscal second quarter 2024 (December 2023) had several of them
• Ubiquiti has introduced a series of new products. The biggest change at Ubiquiti is the availability of paid for tech support
• There are several products that have stood out this past quarter. Including, a new Dream Machine meant for the home, called UniFi Express. The device immediately sold out

• The authorities granted licenses to 105 new domestic games and promised to review the game law draft.
• Alibaba is restructuring its main business unit, Taobao-Tmall, to reach flexibility.
• Both Alibaba and JD.com changed their refund policies to follow PDD.

• Long Nvidia vs. Short Basket of Taiwan AI Concept Stocks — The trade has held steady since our last piece with Nvidia outperforming the shorts slightly.
• CES 2024 will be held January 9th to 12th. It will showcase AI expanding into a wide range of Edge AI applications such as home appliances and PCs.
• One can maintain the L/S trade into CES 2024 given that the Taiwan AI Short Basket constituents are unlikely to be beneficiaries of positive news flow from the event.

• Nvidia Vs. Taiwan Short Basket: Hedge Working; CES 2024 Likely Positive for Nvidia Vs. Basket
• Silicon Motion: Next Wave of the Memory Recovery; High-End NAND Prices More Than Doubled From Lows
• AI PC Reality Check: PC Upgrade Cycle Ahead, But Worth a 50% 1M Acer Rally? Long Dell Vs. Short Acer

• TSMC: 9.2% Premium — Spread Fell But Remains Historically High; Short Interest Spiked for ADRs
• UMC: Trading at -1.2% Discount — Still Uncompelling, Wait for Lower Levels
• ASE: Drops to 7% Premium — Could Soon Be at a Level to Go Long

• Marvell Technology managed to surpass Wall Street’s revenue and earnings expectations, achieving a commendable revenue of $1.42 billion, marking a 6% sequential growth above the midpoint of the provided guidance.
• The data center end market witnessed revenue of $556 million in the third quarter, surpassing expectations, mainly driven by robust AI revenue.
• Despite the anticipated decline in enterprise on-premise revenue, Marvell’s diverse product portfolio, including PAM4 optical products and Teralynx Ethernet switches, contributed to the broad-based growth.

• Recent results from Micron and SK Hynix did not only signal a recovery for DRAM but also for NAND flash memory. Micron expects improving NAND pricing through CY2025E.
• Latest data shows a surge in NAND pricing — 512GB NAND pricing is now up 116% from its 2023 lows.
• Silicon Motion shares are down 5% over the last year. They have been weighed down by their terminated acquisition by MaxLinear, but now could offer a laggard play.

• Baidu managed to exceed analyst expectations in terms of revenue as well as earnings in the most recent quarter sustaining solid revenue, profit, and cash flow.
• The strategic reinvention of the product portfolio with ERNIE and ERNIE bot played a pivotal role in achieving these results.
• Baidu successfully launched EB4 ahead of expectations, attributing it to a unique end-to-end 4-layer AI infrastructure and valuable user feedback.

• ARM Holdings, post its recent IPO, presents an investment case characterized by robust growth in licensing and cautious optimism in royalties.
• The company reported strong licensing revenue, surpassing expectations, which is indicative of its aggressive push in emerging markets like AI and compute subsystems.
• We believe that ARM Holdings offers a compelling mix of strong licensing revenue growth and a recovering royalty segment, albeit with challenges in operating expenses and margin pressures.

• Alteryx, Inc. delivered a solid result and managed an all-around beat in the last quarter, demonstrating commendable performance across various fronts.
• These achievements were propelled by improved sales execution and heightened customer commitment to the Alteryx platform.
• Alteryx’s Executive License Agreement (ELA) strategy, featuring simplified pricing and bundled features, resonated well with larger organizations.

• CrowdStrike Holdings delivered an all-around beat in the most recent quarterly result.
• The company’s commitment to innovation was underlined by strategic acquisitions, such as Bionic, expanding the Falcon Cloud Security suite.
• CrowdStrike’s diverse product portfolio, including cloud security, identity threat protection, and LogScale’s next-gen SIEM, contributed to their impressive Q3 performance.

• AppLovin Corporation delivered an all-around beat in the previous quarter, experiencing substantial year-over-year and quarter-over-quarter revenue growth.
• As part of the portfolio optimization program, the apps sector marked its first quarter of quarter-over-quarter revenue growth, generating a total revenue of $864 million, surpassing guidance with an adjusted EBITDA of $490 million, up 63% year-over-year.
• In the app segment, revenue grew 5% sequentially to $360 million, representing the initial quarter of growth since the portfolio optimization initiative began.

• SOUTHBOUND flows showing momentum tendencies this past week on a single-stock basis. Hs up vs As quite strongly. Liquid Hs even better.
• SOUTHBOUND saw HK$1.2bn of net IN-flows in the 3-day week to 29 Dec. Total flows were HK$88bn.
• Bullish end to year for SOUTHBOUND owners but they did not mark the close. They were, however, big buyers of high-div SOEs.

• I tally 50 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Two new deals discussed this week: Seedheiwa (1739 JP)‘s (now Meldia DC) Tender Offer; and Boart Longyear (BLY AU)‘s ignominious exit. 
• Key updates took place on: Orecorp (ORR AU), Symbio Holdings (SYM AU), IJTT (7315 JP), Shidax Corp (4837 JP), Ohizumi Mfg (6618 JP), and Hollysys Automation Technologies (HOLI US).

• 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 BUY RMB 18.7bn of A-shares on stronger average activity. BIG net buying flows on Weds and Thursday.
• Looking at the change in the weekly position charts over the last year is striking (easiest in the Sectors table to start). Still.

• Himax shares have performed relatively well during December but have still significantly underperformed other fabless Media IC names over the last six months.
• Comparing results data across all names, Himax has exhibited relative strength in Display IC revenue thanks to its strong position supplying automakers with automotive display technology.
• Himax will be speaking at Nomura’s CES 2024 event and presenting its new edge AI camera products; This creates potential for positive news flow within two weeks.

• The spot prices of the newly listed SSFs generally exhibited a notable upward trend. This trend was consistently more pronounced in KOSDAQ-listed stocks compared to KOSPI-listed ones.
• Various factors, including actions by ETF operators, may contribute. Their SSF purchases could deepen contango, leading to temporary spot price increases through arb spread seekers anticipating this development.
• We should focus on a potentially consistent price pattern persisting before a sufficient learning effect accumulates. The tight schedule after July increases the likelihood of similar opportunities next March.

• Q1FY24 revenues of $4.7 billion, up 18% QoQ and up 16% YoY, and $100 million above guided high end, as already flagged on November 28
• Q2FY24 guidance of $5.3 billion, a ~13% increase QoQ. This will once again be loss-making quarter to the tune of an EPS loss of 28 cents.
• Things are looking up for Micron, but 2024 will still be a “recovery” year.

• A recent news report speculates that Analog Devices (ADI US)  is planning to raise prices by ~20%.
• Silergy Corp (6415 TT) is reportedly considering a price increase of over 15% in the Chinese market.
• We believe that now is a good time to invest in Silergy.

• Taiwan PC makers have been top performers in the market; some may worry that their rallies have become over-extended by too much AI PC excitement.
• We believe Dell may present a Long opportunity as the Long side to a Long/Short trade whereby one Sells Acer against it. Acer rose over 50% in December.
• Dell will report its results end-February. We would Long Dell vs. Short Acer ahead of the Dell earnings event. We see more upside surprise potential in Dell.