TMT/Internet

• Salesforce delivered an all-around beat in the previous quarter.
• The company’s non-GAAP operating margin increased in the quarter.
• Salesforce also had fantastic victories throughout the quarter with JPMorgan, Bayer, FedEx, Maersk, as well as the Department of Veterans Affairs.

• Splunk Inc. delivered a decent result and managed an all-around beat in the last quarter, marked by solid execution, operational discipline, and favorable customer engagement.
• Total revenue experienced a healthy year-over-year increase, demonstrating Splunk’s ability to achieve this growth while managing costs underscores its strategic approach.
• Additionally, Splunk continued to innovate by leveraging AI in security and observability, introducing the concept of Splunk AI to empower organizations to detect, investigate, and respond more efficiently.

• CrowdStrike Holdings managed to exceed analyst expectations in terms of revenue as well as earnings.
• The company outperformed top and bottom line metrics expectations, achieving strong, scalable growth, amazing leverage, and operating within its target model overall.
• CrowdStrike also successfully implemented a go-to-market strategy centered on cloud security this past quarter, hosting a virtual cloud security summit with over 12,500 security and DevOp attendees, followed by cloud-focused partner and sales plays.

• Freshworks, a cloud-based customer services software unicorn, held its first Investor Day on September 7, 2023. Management highlighted the long-term target to deliver the Rule of 40 by 2025. 
• The 2023 Investor Day agenda included company vision and strategy, solutions in action, strategy for durable growth, customer spotlight, and financial overview, among others. 
• Management plans to deliver a long-term balance of growth and profitability, with the 2026 model leading to an FCF margin of 20%+ and $1B+ revenue. 

• Marvell Technology delivered a positive result and managed an all-around beat in the last quarter, producing $1.34 billion in revenue.
• Revenue in their data center end market was $460 million, up 6% sequentially and significantly more than their forecast of a flat outlook.
• Notably, revenue from cloud AI and common cloud infrastructure both increased sequentially, with AI expanding more quickly.

• Alteryx Inc, a notable player in the tech and data analytics sphere has sent ripples of excitement across the investment domain, stirred by buzz surrounding its potential sale.
• Boasting a formidable client base of over 8,300 entities, including industry behemoths such as Coca-Cola, Vodafone, Walmart, and Ford, Alteryx has firmly entrenched its position in the data analytics industry.
• Insider sources suggest that the company has engaged the expertise of investment banking stalwart Qatalyst Partners to steer the preliminary talks with potential suitors.

• The upcoming rebalance of the MVIS US Listed Semiconductor 25 Index will be implemented on 15 September. There are no constituent changes, but there are float and capping changes.
• The VanEck Vectors Semiconductor (SMH US) ETF tracks the index and has an AUM of US$9.7bn.
• Estimated one-way turnover is 5.9% resulting in a one-way trade of US$595m. The stocks are extremely liquid, the impact on the stock in terms of ADV to trade is small.

• There are no constituent changes for the MVIS Australia Equal Weight Index at the September rebalance. JB Hi-Fi Ltd (JBH AU) and Charter Hall (CHC AU) have avoided deletion.
• Float and capping changes will result in a one-way turnover of 3.5% and in a one-way trade of A$69m.
• There is a lot of short interest on stocks that will have passive buy/sell flows, but there will not be enough volume traded for shorts to use to reduce positions.

• Intuit Inc. managed to exceed the revenue expectations as well as the earnings expectations of Wall Street.
• The company raised revenue by 13% for the entire year, produced good operating margin growth, and finished the year on a high note.
• Revenue from the desktop environment and QuickBooks Desktop Enterprise revenue increased significantly.

• NetApp delivered an all-around beat in the most recent quarterly result.
• The company’s rigorous operational management and the enthusiastic customer response to its innovation continue to yield positive results.
• They are also making strategic purchases in order to lock in significant loan NAND pricing and reduce future price increases.

• The changes at the Nikkei 225 September rebalance were announced on 4 September. The rebalance of the HSI, HSCEI, HSTECH and HSCI was implemented on the same day.
• The changes to the MVIS indices were announced on 8 September and will be implemented at the close on 15 September. The S&P/ASX family will also rebalance on 15 September.
• After a month and a half of big inflows to onshore China ETFs, there were small outflows from a lot of ETFs during the week.

• NetEase delivered a mixed set of results in the quarter, with revenues well below expectations, but managed an earnings beat.
• Revenues from the Fantasy Westward Journey Saga continued to increase year over year in the quarter, again impressing the industry with this IP’s enduring appeal.
• In the second quarter, Cloud Music’s GP margin increased significantly because of the growth of membership services and ongoing cost-cutting initiatives.

• Analog Devices delivered a disappointing set of results as the company was unable to meet the revenue and earnings expectations of Wall Street.
• The operating margin was almost 48%, the gross margin was above 72%, and the EPS was $249 million.
• Analog Devices anticipates revenue of around $2.7 billion for the fourth quarter.

• 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, things are getting busy again with multiple deals live across the region, whic his a refreshing change from the slow start in the first half.
• There were only a few placement this week, but what the lacked in volume they made up for in size. 

• After results were transitioned to non-public information, it has been observed that results are reflected in prices significantly later, with substantial price impact occurring close to the rebalancing trading day. 
• Even though the AUMs have recently decreased, the passive impact size is quite substantial, considering a recent pattern of price impact concentrating within a maximum of about two trading days.
• A heavy Long-Short setup on these pairs, DearU / Douzone Bizon and SK Biopharmaceuticals / SK Bioscience (302440 KS), is something we should very actively consider.

• SoftBank’s internal transaction acquiring the 25% Arm stake held by SVF1 valued Arm at USD64bn; the IPO valuation range is from USD48bn to USD52bn
• This valuation range implies an Nvidia-like price to prospective 2024E sales multiple range of 22x-25x; the prospectus reveals risks with Arm China, and confirms its lacklustre revenue and earnings growth
• Given SoftBank’s largely negative track record on the after-market performance of its investee companies IPOs and SPOs; we expect further downside to SoftBank’s share price

• VNG (VinaGame) (VNG US) is getting ready to complete its IPO on the NASDAQ exchange in the next several months. VNG operates the dominant chat app Zalo in Vietnam. 
• VNG is reminiscent of Kakao Corp (035720 KS) in its early years of operations when it captured a dominant portion of Korea’s chat app market through its KakaoTalk app.
• Although the company has yet to provide a firm timeline of the IPO, there is likely to be eye-popping demand for the IPO shares of VNG. 

• 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

• We remain bullish global equities if the major $93 support level on MSCI ACWI (ACWI-US) continues to hold (1+ year base support and the 10.5-month uptrend)
• The 10-year Treasury yield remains below 4.35% resistance (a positive), but the DXY is climbing above $103.70-$104.70 resistance, and $105.70 is the last line of defense (9-month resistance).
• Japan and India remain top overweights, with many of today’s buy recommendations from these countries (Real Estate, Energy, Tech/Services, Discretionary). Also downgrading Taiwan and Greece to market weight.

• US graphics chip designer NVIDIA Corp (NVDA US) has, to date, sourced HBM3 chips exclusively from SK Hynix (000660 KS).
• Shares in Samsung Electronics (005930 KS) promptly popped ~6% last Friday on news it had been added as a supplier to NVIDIA.
• Hana Micron Inc (067310 KS), which boasts Samsung as its largest customer, similarly jumped, and is up 45% in the past week. Too much too quickly?

• Sea Ltd began to step on the gas in terms of promotions in 2Q2023, even warning of potential quarterly losses, mainly due to perceived threats in Indonesia from TikTop Shop.
• Reports that TikTok Shop will be banned in Indonesia will provide significant relief in terms of competition as it is targeted for unfair competition versus local MSMEs through cheap imports.
• Sea Ltd has also relaunched FreeFire in India, which could become a significant catalyst for the recovery of the gaming business.  Valuations are attractive on both sales and earnings.

• The agreement helps Intel fill up some long-underutilised fab capacity at their Rio Rancho, New Mexico facility
• Tower likely gets a bargain-basement opportunity to increase their percentage of 300mm wafer capacity
• Tower’s automotive business grew from 11% of revenues in 2022 to 19% of revenues in H1’23. Greater 300mm capacity will help them meet this demand once foundry starts to recover. 

• NVIDIA Corporation delivered an all-around beat in the previous quarter.
• Notably, the Data Center segment experienced remarkable growth, driven by solid demand from prominent cloud service providers and major internet companies.
• In the quarter, Google Cloud and NVIDIA have recently introduced advanced AI infrastructure and tools.

• Chinese consumers have been buying Huawei’s latest flagship smartphone faster than stores can keep up with online and in some parts of the country, sources tell Caixin, amid mounting speculation the telecom giant has been able to weather U.S. sanctions.
• Huawei Technologies Co. Ltd. began shipping the new Mate 60 Pro Sunday, several people familiar with the matter told Caixin, five days after the phone’s discreet launch.
• A number of distributors told Caixin on Monday that the Mate 60 Pro had immediately sold out upon delivery.

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.

• Due to the sharp appreciation of Hana Micron’s share price this year, its valuation discount to companies such as HPSP has narrowed substantially. 
• Samsung Electronics is one of the major customers of Hana Micron. Samsung recently reported that it has successfully secured the right to supply advanced memory chips to NVIDIA.
• We do not believe Hana Micron’s valuations are attractive right now. Rather than chasing after its shares, we would rather wait for its shares to retreat (20-30%) a bit.

• Over the past few years, SAP has transformed itself into a cloud company with a lean and agile operating structure
• SAP’s cloud business is set to grow over 20% per annum through 2025
• SAP has the potential to re-rate to multiples enjoyed by its ‘pure play’ cloud peers.

• Baidu delivered a positive result and managed an all-around beat last quarter, characterized by progress and expansion.
• The focus on transformation through foundation models, particularly ERNIE and ERNIE bot, led to enhancements in products like Baidu Search and Baidu Wenku, resulting in increased user engagement and conversion rates.
• Baidu’s online marketing division harnessed generative AI to automate and enhance ad offerings, driving growth in online marketing revenue.

• Snowflake Inc. delivered a solid result and managed an all-around beat in the last quarter.
• In terms of the booking aspect, Snowflake observed encouraging indications of stabilization since the number of new bookings surpassed its initial projections.
• The company’s strong developer support, expansion of application providers, and successful events like Snowflake Summit reflected positive momentum and a growing ecosystem.

• So the terms are out for Softbank’s attempt to list Arm. 
• In typical sparkling form, Masayoshi Son has clocked a ~19% drawdown within weeks. 
• Good thing all the bankers will easily get their $8bn loan paid back in full and aren’t subject to conflicting interests…?

• Super Seven are chiefly responsible for the rally in the S&P 500. >80% of the index gains this year were due in large part to the Super Seven.
• Amazon, Apple, Google, Meta, Microsoft, Nvidia, & Tesla are referred to as Super Seven. S&P is market-cap weighted. Little wonder that Super Seven have an outsized impact on it.
• Having strongly priced in expectations, investors wait for the Super Seven to deliver. Falling short can result in sharp price pullback. What next for the Super Seven?

• Axiata Group (AXIATA MK)‘s NAV discount and implied stub are around their lows since the CelcomDigi (CDB MK) / Digi.com merger last November. 
• Preceding my comments on Axiata are the current setup/unwind tables for Asia-Pacific Holdcos. 
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Over 85% of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
• We estimate a one-way turnover of 1.93% at the December rebalance leading to a one-way trade of CNY 6.93bn.
• The huge inflow to passive trackers has led to the gap between the potential adds and deletes narrowing. That should reverse as passive will need to sell the deletes.

• Our base case valuation of Arm Holdings is target price of US$36.3 per share, which represents 23% lower than the lower end of the IPO price range. 
• We estimate Arm’s sales to reach US2,832 million in FY2024 (up 5.7% YoY) and US$3,038 million in FY 2025 (up 7.3% YoY). 
• Given the lack of upside, we have a NEGATIVE view of Arm Holdings. Our valuation sensitivity analysis suggests implied price of US$29.4 to US$43.9 per share. 

• The bankers provided additional valuation framework using P/S basis for Doosan Robotics and based on this methodology, the IPO price range is from 19,000 won to 24,000 won. 
• This does not mean that the bankers have actually lowered the IPO price range but rather they have provided another framework to value the company. 
• We continue to have a Positive view of the Doosan Robotics IPO. 

• JF Wealth Holdings (9636 HK) was listed on 10th March 2023, its one-year lockup will expire on 9th Sept 2023.
• The firm had raised around US$129m in its Hong Kong IPO, at the bottom end of its indicative price range.
• JF Wealth (JFW) is an online investment decision-making solution provider in China, focusing on the online investor content services market.

• VNG (VinaGame) (VNG US) is Vietnam’s leading, homegrown digital ecosystem. VNG has filed for a Nasdaq listing to raise US$300 million.
• In VNG 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 the Communications and Media business’ faltering fundamentals, the Fintech business’ uncertain path to profitability and VNG’s underlying cash burn.

• ARM IPO — TSMC says will decide this week whether to participate. ARM is a company potentially without peers and enjoys support from Apple, Nvidia, AMD, and Samsung.
• Elan, Yageo, ChipMOS top gainers in Taiwan — Three of our Longs have done well most recently on high volume and little new public news.
• Recent Dell & HP results provide additional clarity on the coming AI PC wave.

• VNG (VinaGame) (VNG US), Vietnam’s leading internet platform, aims to raise up to US$300m in its US IPO.
• VNG is Vietnam’s leading homegrown digital ecosystem, as per the company, with diverse product offerings across games, communications and media, fintech and other opportunities
• We looked at the company’s past performance in our earlier notes. In this note, we undertake a comparison versus its local competitors.

• ARM Holdings (1822695D US) has launched a roadshow for its IPO. Softbank Group (9984 JP) offers 95.5 million ADSs (over-allotment option of 7.0 million ADS) at US$47.00-51.00 per ADS.
• We previously discussed the IPO in ARM Holdings IPO: The Bull Case, ARM Holdings IPO: The Bear Case and ARM Holdings IPO: Valuation Insights. 
• The IPO price range values ARM at a premium to peers’ multiples. DCF sensitivity analysis suggests a need for ambitious forecasts to justify the price range.

• Softbank Group (9984 JP) aims to raise around US$8-10bn via selling some of its stake in ARM Holdings‘ US IPO.
• ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
• In our earlier note, we looked at Arm’s past performance and undertook a peer comparison. In this note, we talk about valuations.

• Globalfoundries may be considering filing a complaint regarding TSMC’s recently announced European JV with three of their customers, Bosch, Infineon and NXP
• Yet they just inked their own deal for a JV with ST Micro in France. What gives?
• In conjunction with their recent CFO hiring fiasco, one wonders if all is well with the GF leadership team. 

• VNG (VinaGame) (VNG US) is Vietnam’s leading, homegrown digital ecosystem. VNG has filed for a Nasdaq listing to raise US$300 million.    
• VNG is the number one mobile games publisher in Vietnam. VNG’s Zalo, Zing MP3 and Bao Moi applications are Vietnam’s leading messaging, music streaming and online news applications. 
• The bull case rests on the core games business’ improving KPIs, return to growth, good revenue visibility, and reducing dependence on critical partners combined with VNG’s improving margin.

• The IPO price range of Shinsung ST is from 22,000 won to 25,000 won and the expected IPO offering amount is from 44 billion won to 50 billion won.
• Shinsung ST produces busbars that connect currents of electric components in secondary battery batteries for EVs and ESSs, and module cases that protect battery cells from external shocks.
• The total order backlog of the company’s products reached 1.5 trillion won at the end of 2022. Order backlog ratio is 14x, which is very high. 

• Tower Semi will pay Intel $300 million to acquire and own equipment and other fixed assets to be installed in the New Mexico facility
• Intel’s termination fee on the failure of the proposed Tower Semi acquisition was $353 million
• It’s quite the clever move and doesn’t require China’s approval…

• Our base case valuation is implied price per share of 51,050 won, which is 104% higher than the high end of the IPO price range of 25,000 won. 
• We estimate Shinsung ST to generate sales of 133.9 billion won (up 25.7% YoY) and operating profit of 15.4 billion won (up 94.6% YoY) in 2023. 
• Our valuation sensitivity analysis suggests an IPO price range of 41,351 won to 61,771 won per share.

• Softbank Group (9984 JP) aims to raisebetween US$4.5-4.9bn via selling some of its stake in ARM Holdings‘ US IPO.
• ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
• In our previous notes, we looked at the company’s past performance. In this note, we talk about valuation.

• Kinatico Ltd (ASX:KYP) is a ‘Know Your People” regtech company providing workforce compliance monitoring and management technology and services.
• KYP has reported FY23 NPAT of $0.237m, an increase of 116% on the previous corresponding period (pcp), the company’s best-ever result.
• On an adjusted basis (for non-cash items), NPAT was $0.75m, a turnaround of $1.5m on the prior period while the gross margin and EBITDA margin hit record levels of 65.7% and 11.2% respectively. 

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• China Vanke
• Lenovo
• Vedanta Resources
• Yuexiu Property

• Today, somewhat earlier than expected), the Nikkei Index Team announced the changes to the Nikkei 225.
• Lasertec Corp (6920 JP), Mercari (4385 JP), and Nitori Holdings (9843 JP) are added. Nippon Sheet Glass (5202 JP), Mitsui E&S Holdings (7003 JP), and Matsui Securities (8628 JP) removed.
• That triggers flows of about ¥480bn a side, and some big, big changes. The announcement helps understand new process better.

• Softbank Group (9984 JP) aims to raise around US$8-10bn via selling some of its stake in ARM Holdings’ US IPO.
• ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
• In our earlier note, we looked at Arm’s past performance. In this note, we undertake a peer comparison.

• Dell and HP’s latest results indicate an improving PC industry environment in 2H23E, though weaker than expected China demand has softened initial expectations.
• A key take-away is that a major AI PC upgrade cycle is indeed on the horizon, with additional clarity now provided as to when and how it will unfold.
• A ‘step-change’ AI PC upgrade cycle will make the strength of the current near-term cycle recovery less relevant, and isn’t yet priced-in by the market.

• The Chinese economy looks weak according to the data from the statistics bureau.
• However, many big Chinese internet companies began to recover in Q2 as we mentioned in August.
• Here we list five recovering companies that investors may not pay attention to.

• Elastic NV (ESTC US) delivered a high quality beat and raise and reported a modest upside to revenue and profitability. The start of the fiscal year looked strong.
• The leading provider of search engine for enterprises and SMBs guided FY24 ahead of consensus estimates. I reiterate our Overweight rating on ESTC.
• The 1Q print was outstanding, with +17% y/y revenue growth, a record non-GAAP Op Margin of ~10% and FCF margin of ~13%.

• BILL Holdings Inc. managed to exceed analyst expectations in terms of revenue and earnings.
• The company demonstrated robust growth in total revenue and core revenue, reflecting the success of its various services.
• In the fourth quarter, BILL Holdings continued to exhibit impressive growth, reporting a significant increase in total revenue and attaining non-GAAP net income.

• Applied Materials delivered an all-around beat in the most recent quarterly result.
• Applied Materials’s strategic focus on the IoT AI era yielded substantial growth and innovation within the semiconductor industry.
• This transition aligns with Applied’s strengths in materials engineering and allows the company to offer comprehensive solutions to manage complexity.

• Money continues to flow into mainland China ETFs taking the total inflows since 18 July to over US$25bn. This has likely helped stabilise the market and prevent a bigger fall.
• The inflows continue to be largest on ETFs tracking headline indices – CSI 300, STAR50, CSI1000, CSI 500, SSE50, ChiNext. Plus there are inflows on some sectoral and thematic ETFs.
• The skew between stocks gaining 20%+ over the period vs those dropping -20% or more has improved significantly over the last week.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• O-Net Technologies (Group)

• Marginal float helped fuel the VinFast (VFS US) bubble. Then it popped. 
• The Prosus (PRX NA)/Naspers (NPN SJ) Circularity Detour and subsequent unwind created the B-Share construct which means they can maintain the voting control in South Africa without maintaining economic control.
• The backlash against Star CM Holdings (6698 HK) calls into question the broader Chinese entertainment industry, and how it strikes a balance between viewership/profitability and ethical boundaries.

• 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, we primarily looked at Doosan Robotics, Tuhu Car and VNG (VNG US). 
• There were placements in AIA NZ , Ventia (VNT AU), FIVESTAR IN and Daiwa House Reit. ZOMATO IN also had large blocks post its acquisition led lockup release.

• In our two previous Int’l Compass reports (Aug. 18 & 24) we discussed that we were buyers on the pullback to the major $93 support level on MSCI ACWI (ACWI-US).
• $93 on ACWI is 1+ year base support and a level that coincides with the 10-month uptrend. We remain bullish as long as the ACWI-US is above $93.
• $93 on ACWI-US is likely the low for this pullback as long as the 10-year Treasury yield and DXY can stay below respective resistance levels (4.3%-4.35% and $103.70-$105.70).