TMT/Internet

• Over 90% of the way through the review period, we see 9 potential adds/10 potential deletes in December. However, there can be a maximum of 5 changes at a review.
• We estimate a one-way turnover of 6.1% at the December rebalance leading to a one-way trade of CNY 5.27bn. Index arb balances could increase the impact on the stocks.
• The adds have outperformed the deletes this year though there has been a deterioration in performance over the last few months.

• Vanguard’s order visibility is about two months, and its order backlog is also about two months now.
• Vanguard’s goal is to establish a 12″ wafer Fab, which we estimate will likely be viable around 2026F.
• We believe that technology nodes below 28nm HKMG, specifically 40nm and below, would be suitable for transfer.

• Samsung Electronics and Nanya Technology will report their results this week. Samsung could reportedly increase NAND prices this month, giving a potential hint to the memory outlook they will provide.
• Hon Hai will begin mass production of its Model C electric car in 4Q23E in Taiwan. This will provide a proof point for Hon Hai’s global EV platform business model.
• Top gainers recently have included rebounding AI names — One can consider using the bounce to find AI shorts to pair against an Nvidia long.

• Monex (8698 JP) and Docomo announced an agreement. It is not clear ANY of this has to happen at prices favourable to minorities. But equally, it won’t be egregiously bad.
• People’s Insurance (PICC) (1339 HK)‘s implied stub is at a lifetime low. The market is assigning HK$35.6bn less for its steady and profitable life/health insurance stub ops, year-to-date.
• JMDC (4483 JP) is a growth stock, growing organically. It is a rare enough thing. If you want to buy the back end, wait until it gets here.

• Aequitas Reserach 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, Doosan Robotics (454910 KS) lived up to its hype, while JSW Infrastructure continued India’s strong run.
• In the placement space, IDFC First Bank Limited (IDFCBK IN) launched its well flagged QIP, while CALB Group (3931 HK)‘s shareholders were released from their IPO lockup.

• LX Semicon and Tokai Carbon Korea will be excluded, and these two positions will be filled by Eo Technics and either HPSP or ISC Co Ltd.
• The effective date is October 16th, and the rebalancing trading by the TIGER ETF occurs towards the closing (likely to start around 2 p.m.) on Friday, October 13th.
• The practical setup would entail an EO Technics-TCK Long Short pair. For a more aggressive strategy, we could explore the inclusion of HPSP in this setup.

• 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

• Universal Display Corporation managed to exceed the revenue expectations as well as the earnings expectations of Wall Street.
• The company announced $147 million in revenue, $59 million in operating profit, and $50 million in net income, or $1.04 per diluted share, for the second quarter of 2023.
• Universal Display’s revenue guidance range for the year has been reduced from $560 million to $600 million.

• Discovery, Inc. delivered a disappointing set of results as the company could not meet the revenue and earnings expectations of Wall Street.
• The company generated almost $1.7 billion in free cash flow this quarter, and the team anticipates around the same in Q3.
• Their global direct-to-consumer business was mildly EBITDA positive for the first half of this year and nearly breakeven in the second quarter.

• SunPower Corporation’s results were a major disappointment as the company failed to meet the revenue expectations as well as earnings expectations of Wall Street.
• This led to a revision of the 2023 guidance, reflecting market conditions, lower operating expenses, reduced platform investment, and a delay in certain projects.
• Adjusted revenue grew by 9%, partly offsetting higher product costs with price increases.

• Qualys, Inc. delivered an all-around beat in the previous quarter.
• The channel’s share of revenue stayed at 43% from the previous quarter.
• By geo, their overseas business rose 12%, outpacing the 16% rise in the U.S.

• Viavi Solutions Inc. managed to surpass the revenue expectations as well as the earnings expectations of Wall Street.
• Although NSE revenue decreased sequentially but increased year over year, it was primarily driven by the company’s NE business sector.
• Nevertheless, a stronger demand for anti-counterfeiting products helped the fourth quarter’s revenue increase somewhat than anticipated.

• It is expected that TSMC will have full capacity utilization of 3nm and 5nm technology nodes starting from 1Q24F.
• Regarding 3nm technology, the EUV mask layer will be reduced.
• The total number of iPhone 15 units sold in 2023F is expected over 85 million.

• ATEN continues to experience challenges with order timing from some of its largest customers. ATEN lowered Q3 revenue forecast after North American service providers delayed their purchases in the quarter
• ATEN has spent the entire year trying to add more enterprise customers to offset this volatility and, while successful, it was not enough in the third quarter.
• ATEN is projecting third quarter revenue between $56.5 million and $58.5 million compared to our estimate of $75.3 million.

In its H124 trading update, Datatec noted that all divisions reported improved performance versus H123. Westcon’s performance was described as excellent, with a strong performance from Logicalis International and a much-improved performance from Logicalis Latin America, although macroeconomic pressures remain in the region. The company continues to see good demand for its solutions and services and is actively managing supply chain challenges to service customers. We maintain our forecasts pending interim results due on 23 October.

• Kokusai Electric (6525 JP) is a speciality manufacturer of semiconductor production equipment. KKR & (KKR US) seeks to raise about US$745 million through listing Kokusai.
• We previously discussed the IPO in Kokusai Electric IPO: The Bull Case and Kokusai Electric IPO: The Bear Case. 
• In this note, we discuss valuation. Our analysis suggests that Kokusai is fully valued at the IPO reference price of JPY1,890 per share. We would pass on the IPO.

• KKR is looking to raise around US$750m via selling a stake in Kokusai Electric (6525 JP) (KE) in its 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 and undertaken a peer comparison. In this note, we talk about valuations.

• Despite beating guidance, Micron’s latest earnings report confirms a still-toxic memory market environment
• ASPs for both DRAM and NAND have now declined sequentially for the past eight quarters
• Their HBM3E solution is an unfortunate case of too much, too late. 

• DocuSign, Inc. delivered an all-around beat in the previous quarter, continuing to build momentum in its business by progressing on key projects and enhancing its product offering.
• With a non-GAAP operating margin of 25%, Q2 total sales of $688 million was up 11% from the same quarter last year.
• DocuSign shipped and announced several new, highly developed features for its Web Forms offering during the quarter.

• Guidewire Software delivered a solid result and managed an all-around beat in the last quarter.
• The management closed 17 cloud deals in the quarter, bringing the total for the year to 37.
• In terms of adoption, Guidewire achieved 13 go-lives on the Guidewire Cloud Platform during the quarter, reinforcing its positive trajectory.

• Smartsheet Inc. managed to surpass the revenue expectations as well as the earnings expectations of Wall Street.
• Revenue for the quarter was more than expected and increased by 26% year over year to $235.6 million, while billings increased by 18% year over year to $243.1 million.
• At the end of the quarter, they had more than 13.4 million active Smartsheet users and an annual recurring revenue of $933 million.

• Ambarella, Inc. delivered a positive result and managed an all-around beat last quarter.
• Ambarella’s blended ASP was over $12 and is on track to increase by nearly 20% from the previous quarter.
• Ambarella started porting META’s LLaMA 2 to the CV3-AD-High in the most recent quarter, and their team anticipates making chatbot demos accessible later this year.

• Zscaler managed to surpass the revenue expectations as well as the earnings expectations of Wall Street in Q4, achieving significant growth with a 43% increase in revenue and 38% growth in billings, reflecting balanced expansion across various verticals, customer segments, and geographic regions.
• The full-year results were equally impressive, with revenue reaching 48%, totalling $1.6 billion, and billings rising by 37% to over $2 billion.
• Notably, several records were set, including the addition of the highest number of $1 million ARR customers, record new pipeline generation, and a record operating profit margin.

• Amkor Technology, Inc. delivered a mixed set of results in its most recent results, with revenues falling short of Wall Street expectations but above-par earnings.
• Amkor met its estimates for the second quarter with revenue of $1.46 billion and EPS of $0.26.
• Due to decreased end-market demand, particularly in the Android supply chain, inventory consumption is taking longer than expected.

• Cirrus Logic, Inc. delivered an all-around beat in the most recent quarterly result.
• With the help of its products, shipments, and smartphones, Cirrus Logic achieved revenue of $317 million, which was near the high end of its forecast for the quarter.
• Beyond the laptop market, Cirrus Logic also continues to invest in additional products and client relationships that, in the long run, may increase both its revenue and market variety.

• Temasek-Backed Vertex Technology Acquisition Corporation (VTAC SP), the first of three SPACs (so far) to list on the SGX, has announced a transaction to buy Taiwanese live-streaming platform, 17Live.  
• Assuming the deal completes, potentially by year-end, the merged entity would be valued at ~S$1.16bn.
• All independent shareholders are entitled to redemption rights. That is, you’ll get ~$5 back if redeeming against $4.96/share now. But liquidity is not great. Plus this appears a related-party transaction.

• Vertex Technology Acquisition Corporation (VTAC SP) agreed to a De-SPAC transaction with 17LIVE, the top pure-play live streaming platform (by revenue) in Japan and Taiwan combined.
• Industry data and the financials suggest that 17LIVE does not have a sustainable competitive advantage to translate its position into high earnings quality. 
• The purchase consideration of 17LIVE in the De-SPAC transaction is S$925.1 million (US$682.2 million). Our valuation analysis suggests that this consideration is full.

• In this insight, we discuss numerous gap trades involving Korean preferred and common shares in 4Q 2023. Typically, fourth quarter is when pref stocks are emphasized the most in Korea.
• The excessive gaps in the preferred and common shares of Samsung Electronics (005930 KS), Hotel Shilla (008770 KS), and Amorepacific Corp (090430 KS) could reverse in the next several months.
• We see some attractive longer-term opportunities for Amorepacific, Doosan Fuel Cell, LG Electronics, and Hyundai Motor which have especially high discounts for the preferred shares versus their counterpart common shares.

• Micron has Outperperformed Nanya Tech & Hynix since our pre-earnings trade. Micron’s valuation has reverted vs. Nanya’s.
• Nanya Tech has recently reported a 15% YoY drop in its latest monthly revenue. Micron just had a US$1.3bn subsidy approved by the Japanese government.
• We are now agnostic on the upcoming relative performance between the three Memory names Micron, Nanya Tech, and SK Hynix. Nanya will report its results on October 11th.

• Hewlett Packard Enterprise Company delivered a positive result and managed an all-around beat last quarter.
• HPE produced significant free cash flow while increasing its revenue, gross margin, as well as earnings per share year over year.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks. The Asia Monthly is intended to broaden investors’ understanding of the Asian USD high-yield market.

• Despite a challenging market environment, HP increased net revenue, non-GAAP EPS, non-GAAP operating profit, and free cash flow quarter over quarter.
• With $13.2 billion in net revenue, the company’s annualized revenue was down 10% or 7% in constant currency.
• Despite not being immune to the end market concerns, these businesses combined produced strong sequential growth in the quarter.

• IAC/InterActiveCorp delivered a disappointing set of results as it could not meet the revenue and earnings expectations of Wall Street.
• The company experienced 1% growth in the digital space in June, driven largely by effective performance marketing, and it maintained sessions and traffic across the board for the entire month.
• IAC is pleased with the location of such assets in the migration and growth plans.

• Last week, the Cyberspace Administration of China (CAC) put forth a proposal to relax certain stringent regulations concerning the transfer of sensitive data to foreign countries.
• This could be advantageous for Alibaba Group Holding (9988 HK)‘s Cloud business, especially as a potential candidate for an IPO following the recent IPO filing of the logistics arm, Cainiao.
• Despite improved regulations, concerns about stability, leadership, and financial performance pose hurdles for Alibaba Cloud’s IPO.

• The Hollysys Automation Technologies (HOLI US) Board succumbs to shareholder pressure by announcing the formation of a special committee to conduct a formal sale process.
• Hollysys has received non-binding proposals from six parties since December 2020. The most recent is a non-binding proposal from the Recco consortium at US$25.00 per share.
• The Board’s change of heart should encourage previous bidders to re-engage. Recco’s offer, while attractive, is not a knockout bid, suggesting a possible bidding war. 

• On the 22 September, Symbio Holdings (SYM AU) received a best and final NBIO from Superloop Ltd (SLC AU) : A$1.425 cash and 2.14 Superloop shares for each Symbio share.
• Those indicative terms backed out an implied price of A$2.85/share, or a 20% premium to undisturbed.  Now Aussie Broadband (ABB AU) has snuck in with a superior cash/scrip Offer.
• The competing Offer’s implied consideration of A$3.151/share boasts a larger cash component vs. Superloop.  Symbio’s board is supportive if terms are firmed. Superloop’s Offer has now lapsed. 

• Business model: how does CaiNiao get paid, and by whom, and for what?
• Key relationships with parent Alibaba and with China’s listed express companies
• Differentiators: what makes CaiNiao different from other e-comm logistics names?

• KKR is looking to raise around US$750m via selling a stake in Kokusai Electric (6525 JP) (KE) in its 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. In this note, we will undertake a peer comparison.

• This week, Rajesh Vashist of SiTime came to talk about SiTime’s new product launch, Epoch. 
• SiTime is still the least understood story in semiconductors because timing is one of the least understood products or applications in semiconductors.
• Timing chips. They are the heartbeat of any system in any communications, processing, computing, or all of the above.

• This is a special, one-time report on CCC Intelligent Solutions Holdings Inc., a noteworthy provider specializing in car-insurance software, that has garnered substantial attention as it finds itself potentially at the cusp of a pivotal acquisition deal.
• The current ownership landscape of CCC is dominated by Advent International, holding a commanding 56% stake, and it has reportedly been exploring sale options following a Reuters report.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• Kokusai Electric (6525 JP) is a speciality manufacturer of semiconductor production equipment. KKR & (KKR US) seeks to raise about US$750 million through listing Kokusai.
• In Kokusai Electric IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The bear case rests on a declining revenue trend, a challenging near-term growth target, high China revenue risk, margins on a downward trend, increasing inventory days and deteriorating FCF.

• The Delta Electronics Thai (DELTA TB) / Delta Electronics (2308 TT) spread peaked earlier this year and has been trending lower for the last few months (but it is volatile!).
• Delta Electronics Thai (DELTA TB) dropped 20% on Friday following Delta Electronics (2308 TT)‘s placement of 0.72% of shares outstanding. The stock last closed 12.7% below the placement price.
• Delta Electronics (2308 TT) still owns over 63% of Delta Electronics Thai (DELTA TB) and there could be more downside for the Thailand line over the near term.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments  Kokusai Electric (6525 JP), Doosan Robotics (454910 KS), Seoul Guarantee Insurance (031210 KS), Cainiao Smart Logistics (1437124D HK), J&T Global Express (1936374D CH),VNG (VinaGame) (VNG US) IPOs. 
• Event-Driven developments – Keiyo Co Ltd (8168 JP), System Information (3677 JP), Toyo Construction (1890 JP), IMAX China Holding (1970 HK), Nws Holdings (659 HK), Symbio Holdings (SYM AU). 

• Taiwan AI names rebounded strongly after having previously suffered declines. Nevertheless, many names have outperformed Nvidia and could be good hedges vs. a Long Nvidia position.
• Nanya Tech crashed after the market reacted to Micron’s weaker than expected near-term guidance. We believe the negative reaction to Micron is short-sighted. Please see our piece.
• Delta Thailand crashed vs. Delta Taiwan after the parent sold a stake in the Thai subsidiary. We continue to believe Delta Taiwan offers substantially better value.

• In an updated HKEX filing posted on September 28th, Lalatech disclosed H123 financial results
• Solid Revenue growth plus sharp expense reductions led to +28 ppt OP margin expansion
• Is this progress sustainable, defendable? Lalatech management needs to explain gains

• The introduction of float market cap is anticipated to apply not only to sector-based screening for the KOSPI 200 but also to special entry considerations.
• Cosmo AM&T emerges as a direct beneficiary of this change. It currently ranks 52nd within the KOSPI, maintaining a tight gap with the borderline (50th).
• Once it enters the KOSPI 200, it will also become a part of KOSPI 200 IT. As a result, the estimated flow size is approximately ₩230B, about 6x ADTV.

• Taiwan’s AI supply chain names have fallen over the last month, yet many have still outperformed Nvidia by a wide margin over the last six months.
• We don’t want to sell our Nvidia despite market risks — We believe a basket of Taiwan AI stocks can act as a Short to hedge a Long Nvidia position.
• Shorting a basket of Wistron, Quanta, Gold Circuit, and Asia Vital Components can act as a hedge vs. a Long Nvidia position. Below we explain why.

• Aequitas Reserach 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, Cainiao Smart Logistics finally set the ball rollling for Alibaba (ADR) (BABA US)‘s restrucuting, by filing for an HK listing
• In the placement space, Star Entertainment Group (SGR AU) was back in the market again, while Zhejiang Leapmotor Technologie (9863 HK) and DPC Dash (1405 HK) came of lock-ups.

• Our range for TSMC’s spread trading appears to be working. Premium has rebounded lately and we would Short if breaks above 9.8%.
• Our UMC trading range also appears to be working. We should Short if the premium increases slightly further to break 1%.
• One can consider Shorting ASE’s ADR premium at the current 10.8% premium level. After latest premium spike, risk appears skewed to the downside in the coming weeks.

• Delta Thailand shares crashed over 20% in one day after its Taiwan parent sold a stake in the company.
• Given the small size of the stake sale, we believe the share sale by the parent represents an opportunistic sale to crystallize value from Delta Thailand’s high share price.
• We spoke with Delta Taiwan to update our model. Delta Taiwan continues to offer much better value than Delta Thailand, earning more than double Thailand’s net profit with similar growth.

• Symbio Holdings (SYM AU)‘s indicative proposal from Aussie Broadband Pty Ltd (ABB AU) is A$2.36 + 0.192 ABB shares per SYM share, 10.6% premium to Superloop Ltd (SLC AU)’s offer.
• The Board has declared ABB’s offer as the superior proposal and granted exclusive due diligence until 20 October. The Board intends to recommend a binding ABB proposal.
• Superloop’s offer was the final offer in the absence of a superior proposal. If it chooses to enter a bidding war, Superloop will need a higher cash component. 

• Kaspi.kz is the local super-app in Kazakhstan, with payments, marketplace, and Fintech as its three main business segments.
• The company has achieved strong topline and bottom line growth since listing with a RoAE >70% over the years and its share price having gone up ~3x.
• Key concerns arise from its political ties and future growth potential, given the country’s relatively low population/user size.

• This is a special one-time report on Emerald Holding that is creating ripples in the news circuit, courtesy of the exploration endeavors by its predominant shareholder, Onex.
• Emerald Holding, though operating with a low profile, has been wielding a silent yet significant influence over the events sphere.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• This is a special one-time research report on United States Cellular Corporation (UScellular).
• In light of recent announcements, the company emerges as a subject of intricate valuation and examination for potential investors and acquisition entities.
• With the strategic review underway without a definitive completion timetable, it’s crucial for investors to understand the merits and demerits of UScellular as an acquisition target.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We view PPF Telecom’s ESG as “Adequate”, in line with the Governance score, while the Environmental and Social scores are “Strong”. Controversies are “Immaterial” and Disclosure is “Adequate”.
• PPF Telecom Group (PPF) is part of the PPF Group, a holding company with investments in financial services, telecommunications, real estate and other industries.

• China just announced game approval for September batch. The number of games approved is in-line with the pace of approval in recent month.
• Pace of China game approval stays flattish, at a much slower pace than pre-tightening.
• Neither Tencent or Netease received approval for any game. Same thing happened for July batch.

• The latest Mate 60 Kirin SOC is a major accomplishment for the Huawei, SMIC combo
• SMIC will likely continue to refine their N+2 node and develop a 5nm-like process within 2-3 years, even without the use of EUV
• SMIC’s accomplishment is not reflected in its share price which lies midways between 52 week highs & lows

• After a heavy decline in ownership between 2016 and 2020, active Asia Ex-Japan managers are re-engaging with Baidu Inc.
• Ownership levels are at 4-year highs, with Baidu one of the key beneficiaries of manager rotation this year.
• Baidu is the 3rd largest holding in the Communication Services sector, but there a plenty of funds with a history of ownership who remain on the sidelines for now.

• 4Paradigm, a self-developed AI platform and scenario-specific AI applications provider, has completed an IPO and raised net proceeds of ~HK$836M, excluding the over-allotment option. 
• Founder-Led AI unicorn priced its IPO at the bottom end of the range at HK$55.60 per share. Cornerstone investors agreed to purchase ~13.6M H shares at the IPO price. 
• I like the company’s leadership position in China’s fastest-growing decision-making AI market, large TAM for their enterprise-grade generative AI offering SageGPT and top-tier VC investors. 

• Despite a sluggish macro environment, Microchip Technology’s quarterly earnings were solid due to resilient end markets and broad client base.
• The company’s net sales increased 2.5% sequentially and 16.6% annually to reach $2.29 billion.
• From a product line standpoint, their mixed-signal microcontroller net sales hit another all-time high, increasing 0.8% sequentially and 22.5% annually in the quarter.

• Twilio Inc. delivered a positive result and managed an all-around beat in the last quarter, exceeding its revenue and profit targets and producing a significant quarterly non-GAAP revenue from operations of $120 million.
• Twilio had a successful quarter in communications and continues to see encouraging signs of stabilization across its client base.
• Their management believes that bookings will recover toward the end of the year and that revenue growth will resume throughout 2024.

• Fox delivered decent results in the quarter, with revenue growth of 7%, including 12% growth in advertising, supported by significant tentpole events like the midterm elections, Super Bowl LVII, and the FIFA Men’s World Cup, as well as outstanding growth of Tubi and 3% affiliate growth driven by the first third of its distribution renewal cycle.
• These results show that Fox’s distinctive strategy continues to produce engaged audiences at scale for its distribution and advertising partners across its sports and news verticals while also propelling remarkable growth throughout its digital businesses.
• For the ninth consecutive quarter, the FOX News Channel concluded the fourth quarter as the most-watched cable network overall.

• 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

• Huawei Technologies Co. Ltd. launched a line of new products this week, including a tablet and smart TV, powered by self-developed chips, in its latest show of semiconductor self-sufficiency in the face of U.S. sanctions.
• The fall season launch event on Monday came a month after the tech giant made headlines with the rollout of its new flagship smartphone the Mate 60 Pro — a handset using Huawei’s own Kirin 9000s chip that reviewers claimed can rival 5G speeds.
• During the launch event, the head of Huawei’s consumer division, Richard Yu, spent much of his time on stage measuring the company’s new MatePad Pro tablet against Apple’s iPad Pro.