TMT/Internet

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

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

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

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

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

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

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

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

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

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

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

• Today post-close, Ryoyo Electro (8068 JP) and larger equity affiliate (20.1%) Ryosan Co Ltd (8140 JP) announced their final Management Integration Plan (merger by holdco) after signalling a deal May23.
• Activist-Ish-Y Silchester sold their stake in Ryosan to Ryoyo in February at a 20% premium. Activist Murakami-san had a top10 Ryosan stake end-March, went substantial 27 June, now owns 10%.
• Both low-margin/ROE electronics traders have been subject to activist campaigns over the years. Both “survived”. Now they are banding together to be a bigger independent low-margin electronics trader.

• Our Taiwan AI stock short basket of Quanta, Wistron, Gold Circuit, and Asia Vital has underperformed Nvidia by 12.5% since our previous piece.
• Most of Taiwan’s AI stock plays have underperformed Nvidia over the same period, but by less than our basket names. Analyst recommendations remain overwhelmingly Buy for our Short basket names.
• Conclusion: Maintain Quanta, Wistron, Gold Circuit, Asia Vital as a Short Basket vs. Long Nvidia. Nvidia revenue will grow at a higher percentage rate than most Taiwan AI concept stocks.

• U.S. expands China chip restrictions — Implementing lower performance thresholds and further restricting sales via third party countries.
• Intel and AMD chips likely also impacted, as well as equipment from ASML, Lam, Applied Materials, Tokyo Electron and others. We will learn more today from Lam and ASML results.
• Taiwan AI Plays also to be impacted — Shares of Wistron, Quanta, Gold Circuit, Asia Vital Gigabyte, Super Micro, Alchip appear precarious.

• Hana Microelectronics (HANA TB) aims to raise up to US$105m to finance expansion of Hana’s silicon carbide strategy including PMS (Power Master Semiconductor).
• The deal scores well on our framework given the company’s strong recent performance and decent long term track record
• In this note, we will talk about the deal dynamics.

• The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
• Depending on the changes, passive trackers will need to buy between 6-28x ADV (11-50% of real float) on the inclusions and sell between 2.8-44x ADV on the deletions.
• Fast Retailing (9983 JP) could be capped at 11% of the index weight and there will be buying in Nitori Holdings (9843 JP) due to the stepwise addition.

• The Brand-Spanking New (9 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning in pairs over time, etc.
• We used to do it. We brought it back better, with lots of cool interactive tables, and charts, heat maps, and comparative data. And 50 Trade Recommendations.
• The last 9 weeks (since the start of the new Trcker and Portfolio 8 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%, +0.12%, -0.29%, -0.71%.

• TSMC and ASML will report results this week. We may get additional detail about the scope of AI-related demand as a medium-term driver for the semiconductor industry.
• Many Taiwan AI plays were top losers last week. Separately, the U.S. is expected to announce new tech restrictions for China this week.
• SK Hynix is reportedly working closely with Mediatek to integrate some of its most advanced memory in Mediatek’s flagship Dimensity chips. Mediatek was a top gainer last week.

• The 4Q23F outlook is still coming down, but it’s not as worse as we originally expected.
• Samsung is staying a very stable demand for 28nm capacity in UMC.
• Based on our estimates, the wafer ASP is clearly increasing from 2Q22 to 4Q23F, despite a decline in demand from 4Q22 until now.

• We change our stance to be a bit bullish for Mediatek Inc (2454 TT).
• In 4Q23F, MediaTek’s outlook is getting a bit stronger upside.
• The Smartphone market is turning positive, but it’s too early to claim a fully rebound.

• The trade remains Long Nifty with a watch on earnings. 
• Infosys Ltd (INFO IN) reported a beat on revenues and a miss on EPS, heading into seasonally weak quarters is the pain now consensus? 
• Other names discussed include Delta Corp Ltd (DELTA IN), HDFC Asset Management Co Ltd (HDFCAMC IN) and Avenue Supermarts Ltd (DMART IN). 

• Money Forward (3994 JP) reported 3QFY11/2023 results on Friday. 3Q revenue fell below consensus despite increasing 37.4% YoY while reported operating losses were slightly below consensus estimated operating losses.
• MF also has provided more details on its ¥12bn convertible bond issuance in August to secure funds to further grow its SaaS and fintech businesses.
• This is concerning given the huge debt in the company’s balance sheet and it seems that the company may not be able to make profits in the near-term.

• Nanya Technology’s results missed expectations last week, showing a sharp decline in margin, underperforming the recent results performance of Micron & SK Hynix.
• The company was more conservative on a pricing recovery outlook for its memory ASPs than Micron & SK, due to lacking DDR5 DRAM products and lacking High Bandwith Memory DRAM.
• Nevertheless the company is cautiously reporting an improving environment and improved customer inventory levels, hence we believe the result still implies an improving memory industry pricing environment into year end.

• 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

• Braze, a leading customer engagement cloud-based platform provider, outperformed its key competitors, Adobe and Salesforce, on a year-to-date basis. 
• Braze shares massively outperformed, with shares up ~67% over the year versus a ~28% gain on the NASDAQ. However, the stock is still below the IPO price of $65/share. 
• Reported y/y revenue growth has decelerated from 58% in FY22 to 49% in FY23, and management has guided ~27% y/y revenue growth in FY24. 

• How did CaiNiao turn profitable? We answer with an analysis of the company’s P&L
• We also analyze CaiNiao’s Balance Sheet, Cash Flow statement, and Operating Stats
• We conclude with a list of ten questions we would put to CaiNiao management

• The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
• The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
• In this insight, we take a look at our final expectations for the ADDs and DELs for the December 2023 and their flow implications.

• 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), EcoPro Materials (ECO123 KS), Seoul Guarantee Insurance (031210 KS), Cainiao Smart Logistics (1437124D HK), J&T Global Express (1936374D CH) IPOs.
• Event-Driven developments – Eoflow (294090 KS), Nws Holdings (659 HK), Origin Energy (ORG AU), Liontown Resources (LTR AU), Estia Health (EHE AU), Pact Group Holdings (PGH AU).       

discoverIE’s trading update confirmed organic revenue growth and operating margin expansion in H124. The company expects to deliver FY24 underlying earnings in line with its recently upgraded expectations; we maintain our operating profit and EPS forecasts. As expected, the order book continues to normalise but still provides good visibility for H224, and strong design win activity provides support for growth in the medium term.

• Shinko Electric Industries (6967 JP) has been on the block. 2nd Round Bids were apparently due last month, but with “Economic Security” considerations, one wonders if that stretches a bit.
• The stock is now at the low end of its range vs Ibiden, and the timing is right for a deal which could give it a pop. 
• A “split price” takeover seems reasonable as a structure. I expect upside. Still. 

• If you’re an investor in any firm with some form of dominance in US markets, then you need to know who Ms Lina Khan is.
• Corporate misbehavior is a topic of her interest. She shows zero tolerance towards large corporations who wield outsized market power.
• FTC along with 17 US states filed a lawsuit against Amazon for illegally maintaining monopoly power. How will Amazon be impacted?

• Shift Inc (3697 JP) reported 4Q and full-year FY08/2023 results today. 4Q revenue increased 38.2% YoY while OP more than doubled during the quarter. Both revenue and OP beat consensus estimates.
• Full-Year revenues and OP increased 35.7% and 67.4% respectively beating consensus estimates by 1.2% and 67.4% respectively. Both revenue and OP were above the company’s own guidance.
• Shift’s share price has dropped by about 17% since August as market became concerned over the growth prospects, however, share price has started to move up.

• The SSE 50 and SSE180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
• In this insight, we take a look at our final expectations for potential index changes for SSE 50 and SSE 180 during the December 2023 Rebalance event.
• I currently expect 5 ADDs/DELETEs for the SSE 50 index 18 ADDs/DELs for the SSE 180 index. Some of these names are different from my previous expectations.

• RingCentral Inc. managed to surpass the revenue expectations as well as the earnings expectations of Wall Street.
• The profit increase also resulted in another quarter of significant free cash flow.
• Revenue from subscriptions increased 11% year over year to $514 million.

• Digital Turbine, Inc. delivered mixed results for the previous quarter, with revenues above the analyst consensus.
• With $146.4 million in revenue, $27 million in EBITDA, and non-GAAP earnings per share of $0.18, the company demonstrated significant improvement compared to the previous quarter.
• Continuing the multi-year partnership will enhance Digital Turbine’s rate of innovation and expand its scale to a greater extent.

• BlackBerry Limited delivered a mixed result in the recent quarter, with revenues below market expectations but it managed to surpass the analyst consensus in terms of earnings.
• In the automotive sector, QNX triumphed with 20 new design wins in the auto industry and seven in general embedded market verticals.
• This quarter, the company added acoustic middleware to its offerings, indicating a promising new market for software-defined acoustics.

• Lumentum Holdings Inc. surpassed the revenue expectations as well as the earnings expectations of Wall Street.
• Despite inventory challenges in the second half of fiscal year ’23, the company achieved a 3% increase in full-year revenue from fiscal year ’22.
• While fiscal 2024 3D sensing revenue is projected to be lower than fiscal ’23 due to market dynamics and competition, the company achieved sequential growth in Commercial lasers revenue, driven by applications in solar cell processing.

• Accenture plc delivered a mixed set of results in its most recent results, with revenues falling short of Wall Street expectations but above-par earnings.
• Accenture now boasts a roster of 300 Diamond clients, underscoring its extensive capabilities and the trust these clients place in its services.
• The company is poised to leverage opportunities in cloud migration, modern ERP, data and AI, and the emerging Gen AI space.

• Peloton Interactive, Inc. delivered a mixed set of results for the previous quarter with revenues above the analyst consensus.
• The company has witnessed a remarkable surge in engagement with Generation Z, successfully capturing individuals at the outset of their fitness journeys.
• The introduction of Peloton for Business has been a notable success, contributing positively to the company’s momentum.

• Kokusai Electric (6525 JP) has trimmed its IPO price from JPY1,890 to JPY1,830-1,840 per share to raise up to US$727 million. The IPO price will be determined on 16 October.
• We previously discussed the IPO in Kokusai Electric IPO: The Bull Case, Kokusai Electric IPO: The Bear Case and Kokusai Electric IPO: Valuation Insights. 
• Our base-case DCF valuation is JPY2,058 per share. Peers have modestly re-rated, and a lower IPO price range helps increase the IPO’s attractiveness.

• Posco DX (022100 KS) has applied to the KRX for a transfer from the KOSDAQ market to the KOSPI market.
• Based on history, the approval for the transfer and the listing change could take place in the next two months.
• That means a deletion from the KOSDAQ 150 Index (KOSDQ150 INDEX) and inclusion in the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX). But the timeline is important. 

1Spatial’s H124 results show robust revenue growth and continued improvement in the revenue mix, with recurring revenue growing by 24%. Investment in sales resource, inflationary pressures and FX compressed margins, but a strong pipeline for both renewals and SaaS products could drive revenues and margins in H2 and beyond. In particular, the market opportunity for both 1Streetworks and NG9-1-1 has the potential to be transformative. We have upgraded our revenue forecast but leave earnings largely unchanged. Good conversion of the SaaS pipeline could justify further revisions, which may not be reflected in the current valuation.