TMT/Internet

• 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). 

• Tata Technologies (TT) is looking to raise around US$370m in its upcoming 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. In this note, we talk about valuations.

• We believe there is significant evidence that global equities (MSCI ACWI) have bottomed, and a year-end rally has begun. Buys highlighted in global Technology, Discretionary, Real Estate, and Steel/Mining.
• We discussed in our prior Int’l Compass (11/2/23) how the false breakdown in MSCI ACWI (local currency) was bullish, and a potent rally has ensued. We expect more upside ahead.
• Now getting bullish 3+ month downtrend reversals and false breakdowns in the EURO STOXX 50, ACWI-US, MSCI ACWI ex-US (ACWX-US), MSCI EM (EEM-US), and EAFE (EFA-US). Major risk-on signals everywhere.

• Huawei Technologies Co. Ltd. on Thursday began taking preorders for the first electric vehicle (EV) it co-developed with auto partner Chery Automobile Co. Ltd., upping the ante in its push into China’s highly competitive EV market.
• Equipped with a digital cockpit powered by Huawei’s HarmonyOS 4.0 and an advanced assisted driving system, the Luxeed S7 is the first electric sedan marketed under Huawei’s Smart Selection business model. The previous releases with other auto partners were SUVs.
• The Luxeed S7 is available for pre-order in four versions with a starting price of 258,000 yuan ($35,417), according to Huawei’s Vmall website.

• 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 Altman – one of OpenAI’s founders and its CEO – has been ousted from the firm citing lack of consistent communication with the board. 
• OpenAI has garnered significant spotlight around Gen AI. Surely it is generating revenues at a rapid clip but far from making profits. What will this leadership transition mean?
• Sam’s ousting was totally not expected. On 6th November, OpenAI held its first ever developer conference which was led by him. Earlier this week, he spoke at APEC conference. 

• There is a prevailing sentiment in the local market that short selling by market makers (MM) and liquidity providers (LP) will effectively be prohibited very shortly.
• The widening of the futures basis extends the influence of futures on the spot market prices. This is precisely where trading opportunities that we should be keenly observing may arise.
• It also leads to a significant widening of ETF tracking errors due to the direct sell-off of underlying shares. We must capitalize on extreme spreads in ETFs.

• Sea Ltd (SE US) saw its 3Q2023 result swing back to a loss after turning on investment at Shopee during 3Q2023 in the face of competition.
• The company was open about its renewed investment in growth during the previous quarter in the face of threats from TikTok Shop, which may have lessened post its Indonesia expulsion. 
• Sea Ltd may not have engendered itself with investors impressed with its ability to pivot like no other to actual profitability, now introducing an element of uncertainty. Valuations reflect this.

• Tata Technologies (TATATECH IN) (TT) is looking to raise around US$370m in its upcoming 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.
• We have looked at the company’s past performance and undertaken a peer comparison and provided our initial thoughts on valutions. In this note we talk about the RHP updates.

• Q1-2 FY3/2024 results demonstrated robust growth by Geniee with sales growth of 23.7% YoY and operating profit growth of 99.9% YoY.
• The Marketing SaaS segment has seen robust sales growth and margin improvement YoY, paving the way for a resilient earnings stream going forward.
• However, given a weaker-than-expected outlook for the advertising market both domestically and overseas, the company has lowered FY3/2024 guidance whilst maintaining its medium-term guidance range for FY3/2026.

• Global silicon wafer area shipments declined 10% QoQ in Q323 but customer inventory remains at historical highs and is showing no signs of declining
• SUMCO’s Operating Profit forecasted to fall by ¥8.6 billion QoQ in Q423 
• The company vowed to make “substantial” production cuts in a bid to bring their inventory situation under control. 

• Tencent (700 HK) ’s 3Q2023 revenues fell marginally below consensus, however, OP beat consensus estimates. Domestic games returned to growth after a flat quarter in 2Q2023.
• Both Online Advertising and Fintech businesses have seen strong increase in top line with GPM approaching new highs for the two businesses.
• Though Tencent’s earnings show a recovery, we would remain cautious given the slowdown in Chinese economy and Tencent failing to make into new game approval list since July 2023.

• In this insight, we discuss three key catalysts that are likely to positively impact SK Telecom in the next several months.
• The current gap between SK Telecom’s 2023 expected dividend yield (6.6%) and US 10 year treasury note (4.47%) is 2.13%.
• The gap between SK Telecom’s dividend yield and US 10 year treasury note yield could widen to 3-4%+ in 2024, making SK Telecom’s dividend yield more attractive. 

• Tata Technologies (TATATECH IN), the largest India-based ER&D service provider, seeks to raise US$350-375 million, which is lower than its previous target of US$600 million.
• Tata Technologies is seeking a valuation of US$2.5 billion, which is 27.5% higher than the valuation TPG Inc (TPG US) acquired a 9.0% stake on 25 October.
• The investment case rests on top-tier growth rates, strong core business, lower reliance on Vinfast (VFS US), high repeat rates, top-tier profitability, solid FCF profile and no debt. 

• Advertising, international game, and Fintech grew by two digits, but domestic entertainments were stagnant.
• The gross margins of all business lines improved and admin expense as percentage of total revenue decreased.
• We believe the stock has an upside of 30% for the year end of 2024.

• The SE600 index is one of the most widely followed benchmark indices in Europe. This index is rebalanced on a quarterly basis.
• In this insight, we take a look at the potential index changes that could take place between now and the end of the December 2023 rebalance.
• There are two more weeks for the base date. As things stand, there could be six ADDs/DELs during the December 2023 review and probably two more intra-review changes after that.

• Freee KK (4478 JP) ’s 1QFY06/2024 results beat consensus estimates. Introduction of qualified invoicing system in October has resulted in strong corporate user growth for the company.
• Upfront investment in selling and marketing has helped freee onboard a large no. of corporate clients prior to the introduction of the new invoice system.
• Freee expects selling and advertising spending to decline going forward which should help the company reach break-even in FY06/2025E.

• The inventory adjustment of consumer electronics products is nearing completion and industrial products will end later.
• Silergy Corp (6415 TT)‘s short-term growth momentum comes from the demand of new smartphone, while its long-term growth momentum comes from the automotive, new energy and high-performance computing area.
• In 1H24, the pro forma gross profit margin can be maintained at around 50%.

• XPER reported third quarter results in line with our forecast and reaching an inflection point in revenue where the operating leverage of the business becomes visible.
• Ahead of the results, there had been worries over XPER’s exposure to consumer electronics and pay TV industries that could cripple revenue growth.
• XPER reported third quarter revenue of $130.4 million compared to our forecast of $130.9 million. Adjusted EBITDA reached $9.3 million compared to our forecast of $9.2 million

• IMMR’s third quarter results affirmed our investment thesis of the Company beginning to experience an increase in automotive revenue by the end of 2023.
• IMMR reported quarterly revenue above our forecasts citing an increase of approximately $1.9 million from automotive related customers.
• IMMR has a reputation with investors for generating revenue from smartphones and video game consoles. The inclusion of haptics within automotive was the reason we were drawn to the stock.

• With the review period for the December rebalance of the CSI500 Index complete, we forecast 50 changes (the maximum permitted) for the index at the close on 8 December.
• Estimated one-way turnover is 9.66% at the December rebalance resulting in a one-way trade of CNY 6.36bn. There are 29 stocks with over 1 day of ADV to trade.
• The potential deletes have outperformed the potential adds over the last 6 months though there has been a narrowing of the gap recently. Position for a further narrowing.

• Looks like Sea (SE US) decided to take a detour back to the land of losses this quarter.
• But it’s not a massive issue. They’ve maintained close to 7% QoQ revenue growth, so things should be okay.
• Investors likely won’t delve into the details further to uncover the substantial costs hidden behind that apparent growth.

• Earnings season wrapping up — Hon Hai & Asustek recently reported… Some AI names rallied hard but our Nvidia L/S trade still working
• Hon Hai’s margin expansion story is finally starting to be realized. Stock’s perceived political risk could be an opportunity.
• How Asustek plans to take the lead globally in AI PCs; Gaming PCs will be the first key battleground. MSI could be an interesting play on Asustek’s recent strong performance.

• The 4Q23F results will be higher than 3Q23, but lower than 4Q22.
• If the market is unchanged, and it will be slightly upside in 2024F market. 
• For the target of GM 10% is still unchanged in 2025F.

• Asustek reported results on November 13th that beat analyst expectations thanks to a major margin rebound. The stock soared post results.
• Asus plans to be the first company globally to release an AI PC, leveraging extensive AI R&D across different devices as well as its leading market share in gaming PCs.
• However, gaming PC competitor MSI is already moving fast; Shows how gaming PCs are likely to be the first AI PC battleground. Long Asustek, remains preferred over Acer.

• Hon Hai beat expectations yesterday when it reported thanks to higher than expected margins. Gross margin rose to its highest level since 2018, hitting 6.7%.
• The company has maintained its 2025E 10% gross margin target and implied that 2024 will see significant margin improvement as new higher margin businesses ramp up revenue contribution.
• Two key market concerns: News of Chinese government investigation and political risk given Mr. Gou running for president. Company said operations continue as normal. Hon Hai remains a Structural Long.

MGI – Media and Games Invest (MGI) has been steadily gaining market share in a difficult trading environment. It is now the leading mobile open web supply-side platform (SSP) on both Android and iOS in North America; second on Android and fifth on iOS in EMEA. Continuing weak advertising pricing means that FY23 revenue guidance was pulled back at the interims, but careful cost management should ensure EBITDA is flat over FY22, with an annualised cost-saving programme of €10m also put in place. MGI’s fundamentals 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.

• With the review period for the December rebalance of the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) complete, there could be 13 changes for the index.
• We estimate one-way turnover of 1.94% at the December rebalance leading to a one-way trade of CNY 6.98bn. There are a lot of stocks with over 1x ADV to trade.
• Over the last 6 months, the potential adds and potential deletes have tracked each other and underperformed the index. Positioning has led to outperformance in the last week.

• TSMC’s ADR premium is 10.4%, this is a decent level to short it based on the historical trading range.
• UMC’s ADR premium is near a good level to short the spread but one should wait for it to rise above 1.5% in our view.
• UMC ADR short interest continues to trend higher; TSMC ADR short interest continues to fall.

• We suspect that the recent strength in Sea (SE US)‘s price performance is likely due to short covering, with shorts incentivized to cover after a nearly 38% gain.
• As earnings approach, short positions have been increasing since late October, likely anticipating another earnings disappointment from Sea Ltd’s Q3 report on November 14, 2023.
• Consensus estimates for Sea Ltd are at their lowest since its inception. A modest outperformance could lead to a squeeze in short interest.

• Appier’s Q3 demonstrated a 39% YoY revenue increase, reaching a record JPY7.1B. This was driven by substantial growth in the US/EMEA markets (117% YoY), customer expansion, and Digital Content growth.
• Appier’s gross margin expanded from 51.3% to 52.6% and the operating margin reached a historical high of 4.4%. Despite ongoing investments, EBITDA margins hit12.1%, showcasing strong operating leverage.
• Appier’s revised full-year outlook, with increased revenue target (JPY 26.2B), operating income (JPY0.70B), and EBITDA (JPY2.6B), exceeds consensus expectations by 1%, 11%, and 8%, respectively.

• Both Himax and Novatek reported their results last week; both delivered gross margins at the high-end or above their previous guidance.
• Both companies showed a continued decline in inventory levels. Himax is trading at one of the cheapest levels relative to Novatek in history.
• Novatek sees industry inventory levels as normalized and expects 2024E to be an industry growth year. We rate both stocks as Structural Longs.

As anticipated, now that the German whistleblower protection laws are in place, EQS is recruiting substantial numbers of new customers and is set for a strong fourth quarter, with good momentum into FY24. Once these new customers convert, they become a pipeline of warm leads for other EQS products and services, including more recent additions such as those for ESG monitoring and reporting. Q323 revenues were up 14% on the prior year and newly won annual recurring revenue (ARR), which precedes reported revenue, was up 50%. The rating remains well below that of peers and the value indicated by a discounted cash flow (DCF).

Team Internet’s results for the nine months to 30 September 2023 (9M23) showed good, continued progress, with revenue, adjusted EBITDA and adjusted EPS growing 16%, 11% and 28% y-o-y. Online Presence continued its return to form, with 20% growth over the period. While the weak advertising market and a strong comparative period was reflected in a moderation in growth in Online Marketing (15%), this still implies outperformance of the overall market. Management expects full year results to be at least in line with consensus. We make no material changes to our P&L estimates and continue to see scope for upside. We have increased our year end net debt forecast (previously below consensus) to reflect higher capital investment in content and software development, acquisition costs and working capital than previously modelled. In our view, the company’s value P/E rating of 7.1x FY23 dropping to 6.1x in FY24 is in stark contrast the company’s growth track record and prospects.

• Persol Holdings, Hakuhodo Dy Holdings, Welcia Holdings, GMO Payment Gateway, CyberAgent Inc, Kobayashi Pharmaceutical, NGK Insulators, Lixil Group, Kurita Water Industries and Keio Corp have underperformed the Nikkei 225 recently.
• The underperformance could lead to selling from global passive trackers and liquidity events on some of the stocks at month-end.
• There has been an increase in short interest on most stocks over the last week as positioning for the liquidity event ramps up.

• Ferrotec Corp (6890 JP) on Friday announced a takeover for subsidiary Ohizumi Mfg (6618 JP) on Friday. There will be synergies and growth and corporate value increase. 
• The takeover price is not overly high, and includes no measure of synergies – not even the DCF value of delisting the company (no listing/filing/IR/legal fees/costs). 
• I think this gets done. It is too closely held, there are few foreigners in it, and it’s not large enough for an activist to care.

• 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 four weeks clearly indicate a momentum move. The top net sells are all down. The top buys are all up.
• Tencent and three ETFs see the top net buys as SOUTHBOUND bought HK$18.4bn this past week. Energy and Telco net sales persist. And persist. And persist.

• NCsoft plans to launch the highly anticipated new MMORPG game called Throne and Liberty in Korea on 7 December 2023.
• NCsoft reported operating profit of 16.5 billion won (down 89% YoY) and  revenue of 423.1 billion won (down 30% YoY) in 3Q 2023. 
• Throne and Liberty has a solid chance to become successful globally through Amazon Game platform, which is likely to drive a strong turnaround of NCsoft’s sales and profits.

• Fuji Soft Inc (9749 JP), as target of activist-ish investor 3D Investment Partners, launched a “Special Committee to Increase Corporate Value” in August 2022. They reported in Nov22 and Feb23. 
• They also reported in Aug23, mentioning the four listed subs and synergies. Last week, Fujisoft announced it was buying them all out.
• Cybernet Systems Co (4312 JP)  is one of the two larger ones. It is being done too cheaply. Waaay too cheaply. It would not be impossible to block.

• Fuji Soft Inc (9749 JP), as target of activist-ish investor 3D Investment Partners, launched a “Special Committee to Increase Corporate Value” in August 2022. They reported in Nov22 and Feb23. 
• They also reported in Aug23, mentioning the four listed subs and synergies. Last week, Fujisoft announced it was buying them all out.
• Vinx Corp (3784 JP) is one of the two larger ones. It is being done too cheaply, but it would be nigh impossible to block. A safe deal. 

• More y/y improvement (or decline deceleration) for PC/server, power management IC (PMIC), CMOS sensor/touch controller, GaAs RF/VCSEL, gaming GPU card, memory, and foundry vendors
• GaAs RF/VCSEL and gaming GPU card vendors saw very impressive sales growth, driven by new phones introduction and rush orders to use NVIDIA RTX 4090 gaming card for AI training.
• Stronger than expected Oct for TSMC and Gigabyte might drive 4Q sales and near term share price upside; Visera, Andes Tech, and AP Memory might see sales and price downside.

• Wednesday will be a busy day as positions are put on and unwound following announcement of the changes to the MSC indices.
• Friday will end the review cutoff for the ASX indices and Hang Seng Indexes will announce the December changes for the HSI, HSCEI, HSTECH and HSCI post market close.
• Another week of large outflows for China focused ETFs with redemptions across all the major indices.

• 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, WuXi XDC provided some rare rays of hope in Hong Kong, while Honasa Consumer, Cuscal (1229Z AU) and EcoPro Materials did the opposite.
• This week was more about placement with two US$1bn+ deals, a cleanup in Renesas Electronics (6723 JP) and a QIP for Bajaj Finance Ltd (BAF IN). 

• INCJ made a lot of money on Renesas Electronics (6723 JP) over the years and arguably did a great job helping the firm change direction. Now they are out.
• Last night they launched a block sale through JPM and Bof A for 130.2317mm shares. They priced the heavily-oversubscribed deal at a discount of 8% or ¥2143/share. 
• That’s a big discount (so bad broking) for such oversubscription on a clearly-flagged deal but now they are out. 

• First mover advantage is half-truth. For every academic study proving that first-mover advantages exist, there is a study proving they do not.
• Engineers at OpenAI, scaled up a special machine learning method using large data sets to create GPT or “Generative Pre-trained Transformer.”
• Launch of ChatGPT has put OpenAI revenues on steroids with reports suggesting USD 1.3B this year (versus USD 28 million before ChatGPT was rolled out).

• We expect that Tencent’s C3Q23’s revenue/non-IFRS operating profit/IFRS net income to be 2.3%/3.3%/4.2% above consensus.
• We raised estimates of Tencent’s international game growth to 12% YoY to reflect the success. We also expect Tencent’s advertising business to benefit from e-commerce advertisers’ competition.
• We raised the Target Price to HK$425, which implies 22.4X PE in 2024.

• OpenAI held its first developer conference on November 6th. The event announced the launch of OpenAI’s latest model and feature upgrades.
• The latest OpenAI model, GPT-4 Turbo offers drastically lower costs, updated knowledge cutoff, better vision and voice support, and improved API.
• Event unveiled custom chatbots called GPTs for specific applications, showcasing expanded domain knowledge. They’ll be sold in a digital store, adding a new revenue stream for OpenAI.

• Softbank’s exposure to WeWork continues to haunt it beyond the close of 2QFY23, due to its credit support agreements
• Aside from WeWork, we continue to see risks to valuations supporting the NAV; in particular, Arm Holdings and SVF2 which accounted for 45% of group equity value
• Softbank shares trade at a 45% discount to the stated NAV yet there is downside risk to Arm’s valuation along with questions over private company valuations at SVF1 and SVF2

• Revenues of US$568.5 million, down 10% sequentially and down 9.7% YoY, at the bottom of the previously guided range.
• Net loss of $25.8 million compared to a profit of $7.8 million in the previous quarter and $65.5 million in the year ago period.
• With current quarter gross margins in the 2-5% range, HHGrace has flipped from best in class in H123 to the worst in class now.

• Based on the some judgments, SMIC consider it will be relatively flat demand in 2024F.
• SMIC took into consideration geopolitical instability and allowed equipment vendors to submit orders in advance. 
• Currently, only a few manufacturers are stockpiling smartphones in response to this wave. The overall industry remains relatively stable.

• Foxconn is facing one of its biggest compliance challenges on the Chinese mainland, where the key iPhone assembler has been caught in the crosshairs of government investigators.
• Multiple Foxconn-affiliated entities are being investigated by Chinese authorities as part of probes into the company’s mainland facilities, Caixin confirmed Monday with Foxconn Industrial Internet Co. Ltd., the Taiwanese contract manufacturer’s Shanghai-listed arm.
• State-owned newspaper Global Times first reported Sunday that Foxconn, also known as Hon Hai Precision Industry Co. Ltd., was facing tax and land-use probes into its mainland facilities.

• ARLO reported third quarter results underscoring the continued growth in paid subscribers leading the Company to another quarter of positive free cash flow.
• ARLO has maintained its rate of quarterly net subscriber adds throughout 2023 and is poised to cross 3 million paid subscribers by the middle of 2024.
• ARLO reported third quarter revenue of $130.0 million compared to our forecast of $127.5 million.

• Qualcomm Inc.’s handset chip business in China will not be affected by Huawei’s push for semiconductor self-sufficiency, said chief executive Cristiano Amon.
• Despite Huawei’s return to the mobile arena spotlight with an in-house chip, the growth trajectory of Qualcomm’s business with Android handset-makers in China will remain unchanged, according to Amon on a post-earnings call on Wednesday.
• Chief Financial Officer Akash Palkhiwala cited an estimated jump of more than 35% in chip sales to Chinese smartphone-makers in and outside China for the fourth quarter of fiscal 2023.

• INCJ is selling the last of its stake in Renesas Electronics (6723 JP). This will remove the overhang but could lead to selling in the short-term.
• Renesas Electronics (6723 JP) has outperformed its peers over the last couple of years but valuations are in-line with the peer group (or slightly cheaper).
• The float increase in global indices will coincide with the offering, but the TSE Tokyo Price Index TOPIX (TPX INDEX) float increase will take quite a while.-

• Trend Micro Inc (4704 JP) has been under pressure to improve capital allocation after Value Act bought in 2022. In February 2023, Trend announced a weak sauce capital return policy.
• They promised a 100% payout ratio with 70% div payout ratio. But with huge piles of cash and securities, it wasn’t going to be enough, and shareholder structure ALWAYS matters.
• Here it meant Trend Micro was vulnerable to further attack. Today, Trend announced a HUGE capital return with buyback, and a special div and this will excite Nikkei 225 arbs.

• During the previous period of short-selling restrictions, a pattern was observed in which ETFs were utilized as a workaround for short-selling.
• We should anticipate more substantial price impacts this time. Of particular significance is the possibility of utilizing not only the MSCI Korea ETF but also sector ETFs for similar purposes.
• This calls for our attention to the possibility that this short-selling workaround could generate a significantly wider range of trading opportunities in the spot market compared to three years ago.

• Cybernet Systems Co (4312 JP) has recommended Fuji Soft Inc (9749 JP)’s tender offer of JPY1,095 per share, a 31.8% premium to the undisturbed price (8 November).
• The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 12.28% ownership ratio.
• The offer price is attractive and marginally below the ten-year share price high. The minimum acceptance condition (lower limit) requires a 26.9% minority acceptance rate, which is doable.

• As a result of the deal with KKR, Telecom Italia SPA (TIT IM) projects a decrease in net debt of about €14 billion, bringing Net Debt/EBITDAaL from >4.5x to around 2.0x.
• This should guarantee the survival of Telecom Italia, but Vivendi is ready to challenge the decision. Equity is volatile as net debt represents 3.7x the market cap. Debt looks more interesting.
• TLIT 6.875 FEB-2028 with YTM 6.624, or TLIT 7.875 JUL-2028, with YTM 6.838, likely to profit from a rating upgrade. Savings shares are unlikely to receive a dividend until 2027.

• Duolingo reported stronger than expected 3QFY23 results, including revenues of $137.6M (consensus: $132.2M) and net income of $2.8M. The company raised guidance for FY23 revenues and total bookings. 
• Stock indicated up ~9% after hours. Duolingo beat all key estimates. However, ABPDAU declined to $25.38, while net new ARR growth will slow in 4Q and the next fiscal year. 
• With a market cap of ~$8.2B on a fully diluted basis, Duolingo shares trade at ~14x and ~11x EV/Rev on my respective FY23/FY24 estimates, a significant premium to comparable companies.

• ACMR reported C3Q23 revenue, non-GAAP EBIT, GAAP net profit (5%), 21%, in-line vs. our est., and (3%), 63%, 49% vs. cons., respectively. Gross margin beat by +9ppts due to FX.
• ACMR received a second order from a U.S. semiconductor maker, which indicates potential for significant market share gain by 2025. SK Hynix is engaging its entire product line, per management.
• We maintain BUY rating and US$ 30 TP, implying 18x FY23 EV/Earnings.

• Chenqi Technology Limited (CT HK) is looking to raise US$300m in its upcoming Hong Kong IPO. 
• Chenqi Technology (Chenqi) is a mobility technology and service company in China, founded by the GAC Group and Tencent. 
• Chenqi has grown its GTV fast on the back of network expansion. However, Dida’s inability to list and Chinese regulators’ scrutiny on Didi would likely dent sentiment surrounding Chenqi.