TMT/Internet

• ~$900 million supercomputer deal is off the charts compared to all previous deals
• Without the deal, Cerebras would likely soon have run out of cash. With the deal, Cerebras is effectively working as a supercomputer contractor for G42 for the next several years
• Three supercomputers to be built in the US, we suspect the remaining six to be built in the UAE. That’s likely to raise some eyebrows. 

MGI – Media and Games Invest (MGI) continues to steadily gain market share in a difficult trading environment. It is the leading mobile open web supply-side platform on both Android and iOS in North America, and second on Android and fifth on iOS in EMEA. Q323 organic net revenue was 1% up on Q322, with early benefits from the €10m annualised cost savings plan helping to lift the adjusted EBITDA margin to 29% (Q322: 26%). The fundamentals for MGI are positive, with its vertical integration giving an efficient market proposition and earlier acquisitions providing a sound basis for its connected TV offering. The withdrawal of personal identifiers on Google should give further impetus, which we feel is not yet reflected in the rating.

• NTGR has brought back the goal of achieving double digit operating margin after three years of underperformance while turning the business around.
• Unlike prior years where NTGR was relying on unit volume growth to drive operating leverage, NTGR now has a growing base of subscription revenue that is contributing to earnings
• NTGR’s annual investor day highlighted the expectation of exiting 2023 with annual recurring revenue (“ARR”) of $40 million and $50 million in 2024

• It would be prudent to anticipate that a considerable portion of these 636 companies will indeed adjust their dividend record dates, effective from this year’s year-end dividends.
• One notable setup gaining attention is calendar spread trading for the KOSPI 200 futures in anticipation of an upward trend in the KOSPI 200 futures market towards the year’s end.
• This entails buying the near-month and selling the far-month, liquidating when the price difference reverts. Traders pay attention to potential far-month divergence due to the shift in dividend record dates.

For our next Corporate Webinar, we are glad to welcome Kuaishou Technology’s Head of Capital Market and Investor Relations, Matthew Huaxia Zhao.

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

The Corporate Webinar will be hosted on Tuesday, 12 December 2023, 17:00 SGT.

About Kuaishou Technology

Kuaishou is a leading content community and social platform with its mission to be the most customer-obsessed company in the world. Kuaishou has relentlessly been focusing on serving its customers and creating value for them through the continual innovation and optimization of its products and services. At Kuaishou, any user can chronicle and share their life experiences through short videos and live streams and showcase their talents. Working closely with content creators and businesses together, Kuaishou provides product and service offerings that address various user needs that arise naturally, including entertainment, online marketing services, e-commerce, online games, online knowledge-sharing, and more.

• This is our 9th “Annual Edition of the Major Korean IPOs Pipeline Preview” at Smartkarma.
• This insight will feature 50 of the biggest potential IPOs in Korea in 2024.
• These 50 IPOs in Korea are likely to represent more than 80% of all capital raised through IPOs in Korea next year.

• Is TSMC Leaving Samsung in the Dust with its New 3nm Process Technology?
• Our Pick Himax a Top Loser… Apple Lens Supplier, Yageo Peer, and Taiwan AI Chip Designer Top Winners
• Positive Sign for Apple Revenue — Hon Hai November Revenue Higher Than Expected, Guides for Better December

• Cellnex Telecom Sau (CLNX SM) plans to divest non-strategic assets in Ireland (for around €1.1 billion) and later in Austria in order to reduce its debt.
• The new strategy focuses on portfolio rationalisation due to the higher debt costs. Cellnex seeks expansion in certain markets, but without taking on too much debt.
• Using multiples EV/EBITDA, my base-case fair value estimate (pro-forma Ireland divestment) is €48.73; a reduction in leverage should drive multiple expansion. Long.

Solid State has confirmed the strong H124 performance, boosted by a full period contribution from Custom Power combined with the benefit of delivering the NATO contract. Despite the continuing challenges we expect organic growth to resume from the lower trend level of profit excluding the NATO uplift from H224. Following the recent 5% uplift for both revenue and PBT, FY24 guidance and market consensus estimates are unchanged.

• UBTech Robotics (1683374D HK) is looking to raise about US$200m in its upcoming HK IPO, after downsizing from an earlier reported float of up to US$700m.
• UBTech Robotics is engaged in artificial intelligence (AI)-empowered robotics in China, dedicated to the innovation of humanoid robots and development and sales of smart service robotic solutions.
• We have looked at the company’s past performance in our previous note. In this note, we talk about its PHIP updates.

• We prepared high beta and low risk recommendations for 2024:
• With 2024 YE as horizon, we recommend JD.com, JD Logistics, JDHealth, Tencent and Luckin.
• With 1H24 as horizon, we recommend KE Holdings, NetEase and Kuaishou.

• Local indices in China including the CSI 300 Index, CSI 500 Index, STAR50 Index and SSE50 Index will rebalance at the close tomorrow.
• There are many changes for the indices and there are stocks that are adds and/or deletes from multiple indices which results in cumulative or offsetting flows.
• We estimate turnover at the close tomorrow in China will be around US$7.5bn with big impact on a lot of stocks.

• SenseTime Group Inc. shares plummeted nearly 5% Tuesday after U.S.-based short-seller Grizzly Research released a report accusing the Chinese AI software developer of inflating its revenues.
• Grizzly’s report, citing court documents and social media posts, alleged that SenseTime engaged in what it called round-tripping, where it provided funds to customers who in turn used the money to purchase products from SenseTime that might never have been delivered.
• Its Hong Kong-listed stock tumbled as much as 9.7% before closing 4.86% lower to HK$1.37 ($0.18), down 64% from its IPO price of HK$3.85.

• Robosense Technology (ROBO HK) (RT) is now looking to raise up to US$150m in its upcoming Hong Kong IPO, down from US$300-400m earlier.
• As of Mar 23, it had earned design wins for mass production of LiDAR for 52 vehicles with 21OEMs and Tier 1 suppliers, ranking No. 1 globally, according to CIC.
• We looked at its past performance in our earlier notes. In this note, we talk about its PHIP updates.

• Back on the 11 August, Chinese data center provider Chindata Group (CD US) and major shareholder Bain Capital entered into a definitive agreement at US$8.60/ADS.
• The EGM was held yesterday, the 4 December, and the merger was approved by 97.75% of the total votes cast. No specific PRC regulatory approval is needed for this merger. 
• All good right? Not quite. There’s still the nagging issue involving 22.79% of shares out objecting to the deal, exceeding the 12% dissenting threshold, a condition to the merger. 

• TSMC looks set for a significant recovery in top-line growth in 2024F, driven by continued faster-than-expected demand for its 3nm volume production leading to significantly improved overall ASP.
• This should be supported by a concurrent improvement in the inventory cycle at major clients, helping recover TSMC’s utilisation back to historic norms.
• Lower capital intensity, improving internal inventory levels, and accelerating top-line growth should all combine to drive record levels of Free Cash Flow generation during 2024F.

• Maintaining a parent-subsidiary listing that fails to ensure the interests of minority shareholders indicates that the parent company is willing to tolerate dysfunctional corporate governance of the subsidiary.
• Parent-Subsidiary listings drain the profits of profitable subsidiaries from the parent company, reducing profits and corporate value. The solution to this problem is to eliminate parent-subsidiary listings.
• The elimination of parent-subsidiary listings through TOB will reduce market inefficiencies and improve the quality of TSE-listed companies.

• ZKH Group (ZKH US) is looking to raise about US$150m in its upcoming US IPO, after downsizing from an earlier reported float of US$300m.
• ZKH Group is a leading maintenance repair and operations (MRO) procurement service platform in China, according to CIC, providing one-stop MRO procurement and management services and digital and fulfillment solutions.
• We have looked at the company’s past performance in our previous note. In this note, we talk about its PHIP updates.

• On 4 December, the South Korean government announced that it will launch a tender offer to sell a 29.3% stake in NXC Corp for about US$3.6 billion.
• The two daughters of ex-Chairman Kim Jung-Ju handed over a 29.3% stake in NXC Corp to the Korean government as payment-in-kind in May 2023 to pay for inheritance taxes.
• The tender offer sale of the Korean government’s 29.3% stake in NXC Corp (worth nearly 4.7 trillion won) is a positive catalyst for Nexon (3659 JP).

• Mediatek Inc (2454 TT) has rebounded from the bottom of the cycle, and it will be able to reach more than 20% YoY in 2024F.
• The demand for 4G and 5G Smartphone SoC will be split around 55/45 by shipment volume, with Taiwan Semiconductor (TSMC) (2330 TT) being the primary supplier for MediaTek.
• The MediaTek Dimensity 6000 series will be the new flagship product line in 2024F.

• Results highlighting both strengths and limitations – Q1-3 FY12/2023 results were below expectations, with the company experiencing a delay and potential cancellation of a large license sale, which had a negative knock-on effect on related Consulting demand.
• FY12/2023 company guidance has been revised to reflect lowered earnings visibility.
• Although this highlights the need for the company to strengthen business model resilience, growth in DX-related in-house LaKeel Products remained stable with sales up 19.3% YoY. 

• Korea’s financial authorities prompted LPs to refrain from providing liquidity to ETFs through short-selling. This has resulted in a significant increase in both the frequency and magnitude of tracking errors.
• Therefore, it’s time to actively explore this from an arbitrage trading standpoint. ETF arbitrage involves straightforward steps: purchasing and redeeming ETFs, followed by selling the underlying shares in the market.
• The focus should be particularly directed towards sector ETFs that include a select few large-cap stocks carrying single-stock futures.

• Gentrack (GTK NZ) and Turners Automotive (TRA NZ) will be added to the S&P/NZX 50 Index while Synlait Milk (SML NZ) and Pacific Edge (PEB NZ) will be deleted.
• There is a lot to trade on the stocks. The impact in terms of days of ADV appears high but historically there has been volume on implementation date.
• The adds have jumped recently and there will be pre-positioning on the stocks. Not so much on the deletes.

• Elastic NV (ESTC US) reported a solid quarter, reflecting strong cloud revenue growth, ~13% non-GAAP operating margin and rapid adoption of ESRE.
• Elastic NV (ESTC US) shares rallied 35%+ during regular trading session and closed up ~37% on Friday at $110.20. I raised PT to $121 from $112.
• However, I downgrade Elastic NV (ESTC US) to Equal-weight from Overweight on valuation and expect the stock to trade in-line with peers.

• I tally 42 – 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 on Smartkarma this week: Glosel (9995 JP)‘s Tender Offer; and the indicative Offer for CIMC Vehicle Group Co Ltd (1839 HK)‘s H-shares. 
• Key updates on: Orecorp Ltd (ORR AU), Tietto Minerals Ltd (TIE AU), and Lansen Pharmaceutical Holdings Co, Ltd. (503 HK) 

• Bilibili reported  C3Q23 revenue, operating profit, and GAAP net income inline, 4.37%, (21.6%) vs. consensus. The miss was primarily due to ineffective investment in game studio and related costs.
• We are bearish on BILI’s game pipeline as ACGN is already a crowded market with well-entrenched competitors
• We maintain our SELL rating and cut the TP from US$ 12.3 to US$ 9.04, and consider that it is unlikely for them to breakeven in 2024

• I warned Elon Musk wouldn’t help his beleaguered banks via refi of billions in losing LBO debt they foolishly fronted him to buy Twitter.
• He can’t even stop setting it and himself on fire every day.
• Now he admits Twitter is being killed by the advertiser boycott he again caused—but takes no responsibility for his incendiary actions.

• 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

• Sam returned as the CEO of OpenAI days after his surprise removal. Its board was overhauled with new members – Larry Summers and Bret Taylor.
• The surprise removal of Sam was driven by philosophical differences over AI safety. Fears of employee exodus to Microsoft is the primary driver of his return to OpenAI leadership.
• Recent events have solidified Microsoft’s partnership with OpenAI and Sam. Outcome from fallout suggests Microsoft will have a larger role in shaping OpenAI’s future.

• With the review period complete, KCE Electronics PCL (KCE TB) should replace Ngern Tid Lor (TIDLOR TB) in the SET50 INDEX at the December rebalance.
• Liquidity is poor in Intouch Holdings (INTUCH TB) and Thai Life Insurance (TLI TB) but the stocks should be maintained in the index.
• Passive trackers will need to buy 0.9x ADV (1.2% of float) of KCE Electronics PCL (KCE TB) and sell 0.8x ADV (1.6% of float) of Ngern Tid Lor (TIDLOR TB).

• LS Materials IPO price has been determined at 6,000 won per share, which is higher than the high end of the IPO price range (5,500 won). 
• A total 2,025 institutional investors participated in this IPO book building. The demand ratio was 396.8 to 1. The IPO offering amount is 87.8 billion won. 
• We believe that its share price is likely to trade higher than the high end of our valuation range (7,953 won per share) post IPO. 

• Memory names have rallied strongly, with Nanya Tech outperforming since the start of November.
• DRAM bottomed and NAND flash prices have jumped. Micron says that 2025E could be a record year for the Memory industry.
• High valuations make near-term upside for Memory names uncertain. For Long/Shorts one can consider Long Micron vs. Short SK Hynix or Long Micron vs. Short Nanya Tech.

• We believe TSMC represents defensive exposure to AI for investors concerned that many other AI-related stocks’ valuations may be too high.
• While one may think TSMC seems too obvious as a play, we note that the stock is up only 4.5% over the last six months.
• We view TSMC as trading at an inexpensive valuation; even a cheap valuation should our hypothesis that the stock is structurally re-rating upwards turn out to be true.

• Improving outlook with Q1F24 revenue forecast slightly above the high end of the guided range
• 2024 is being positioned as a “recovery year”, helping reset investor expectations about the nature and speed of the recovery
• Micron’s share price typically rallies strongest into record revenue years. 2024 will not be a record revenue year. As such, we think the present rally is premature. 

• Nvidia’s quarter was surprising to me because it was boring. There were a few incremental pieces, but the big news was everything to do with China.
• As you know, there was another round of export restrictions with a myopic focus on AI Accelerators.
• This impacted results and the outlook.

• CDW Corporation delivered mixed results for the previous quarter, with revenues below the analyst consensus.
• A strategic response to evolving market dynamics marked the recent quarter for CDW Corporation.
• The quarter was also marked by the company’s launch of the integrated brand campaign, Make Amazing Happen.

• Broadridge Financial Solutions, Inc. managed to surpass the revenue expectations as well as the earnings expectations of Wall Street, marked by an 8% surge in recurring revenue, entirely organic.
• The adjusted EPS saw a remarkable 30% increase, propelled by robust recurring revenue expansion, event-driven fee timing, and sustained expense discipline.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• ANSYS Inc. delivered a mixed result in the recent quarter, with revenues below market expectations, but it surpassed the analyst consensus regarding earnings.
• These restrictions included incremental approval processes and export restrictions on selling certain ANSYS products and services to entities in China.
• Despite these challenges, ANSYS delivered a robust quarter marked by double-digit growth in Annual Contract Value (ACV).

• SK Square announced it will not exercise the call option to repurchase minority stake in 11 Street. This is likely to have a positive impact on the company. 
• SK Square does not need to pay 500 billion won plus 3.5% annualized interest to the financial investors of 11 Street. This will also accelerate sale of 11 Street.
• In addition, SK Square announced the merger of TVing and Wavve OTT services. 

• Tata Technologies (TATATECH IN) priced its IPO at Rs500 per share to raise gross proceeds of US$365 million. The shares will start trading tomorrow.
• We previously discussed the IPO in Tata Technologies IPO: The Investment Case and Tata Technologies IPO: Valuation Insights. 
• The market sentiment on the sector has improved. In 2023, Indian IPOs with a >US$100 million raise had an average first-day gain of 28.3%. The IPO price is attractive.  

• Tata Technologies (TATATECH IN) (TT) raised around US$370m in its India IPO.
• Tata Technologies is a global engineering services company offering product development and digital solutions, including turnkey solutions, to global original equipment manufacturers (OEMs) and their tier 1 suppliers.
• In our previous note, we looked at the company’s past performance and valuation. In this note, we talk about the demand and trading dynamics.

• Taiwan Tech companies beat analyst expectations by a high rate in the latest quarter
• Semiconductors: Consensus could be underestimating a margin rebound for 2024E
• Hardware aggregate forecast earnings growth increased significantly for 2024E as compared to just three months ago

• Tata Consultancy Svcs (TCS IN) launched an INR170bn (US$2bn) Buyback in mid-November 2023 which is one of the largest Buybacks in India in recent years.
• The company has published the Letter of Offer confirming the final details and the expected timeline for this Buyback.
• Below is a closer look at these details and their implications for shareholders.

• Taiwan AI Plays Top Losers Recently, Dell Results Coming Today U.S. Time to Provide Color for PCs and Servers
• Taiwan Tech Post-Earnings Takeaways: Semis Margins Underestimated? Hardware 2024E Forecasts Ramped
• Nanya, Yageo Top Gainers; We Rate the Stocks Outperform and Structural Long Respectively

• Although it is still early to determine the extent of the utilization rate that could be reached in UMC for 2Q24F, there is a greater chance for a rebound.
• UMC’s high-end technology, specifically 28nm, has a utilization rate of over 80% in 4Q23F. 
• MediaTek is UMC’s largest client, dominating in WiFi, TV SoC, Bluetooth, and other areas.