TMT/Internet

• The Naspers (NPN SJ) / Prosus (PRX NA) circularity was too complex. Lots of people hated it. It was actually easier than most thought, but optically was difficult to reconcile. 
• Swire Pacific (19 HK) was a clear buy: there is no justification for assigning a similar discount for cash from the US Coke ops as you would to unlisted ops
• A residual NTT (9432 JP) individual small-holder shareholding tenure reward does not get split 25:1 when the stock gets split 25:1. It doesn’t mean much, but it’s an interesting artefact. 

• We expect that Meituan and Douyin engaged in fierce competition in 2Q23. Meituan intensified its efforts in three aspects: commission reduction and rebates, promotion of “Meituan Quanquan,” and video subsidy. 
• However, our 2Q23 Meituan revenue/profit estimates are in-line/34% higher vs. cons. This is mainly because it was Meituan’s first quarter of counterattack.
• Meituan’s counterattack has shown initial results, in Douyin’s slowing local services growth during 618, and the return of merchants. We maintain Meituan’s BUY rating, but lowered TP to HK$ 165.

• In April 2022, after long prep and considerable public comment as to desires and design, the TSE launched its new market segments designed to encourage governance and foreign investment.
• At the time, the TSE wanted to showcase Japan’s best blue chips. In March, JPX announced JPX Prime 150, designed to make visible
• In March 2023, JPX announced JPX Prime 150, to “make visible the leading Japanese companies that are estimated to create value.” Ambitious? Yes. Fated to fail? Probably. Badly constructed?  Definitely. 

• 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

• TSMC’s ADR premium dropped to 8.8% but still historically high. The company has said it will send more Taiwan staff to get its U.S. production up and running.
• ASE’s ADR premium is high even for this usually-high premium range. ASE ADRs may be slightly behind the curve of the local shares’ recent decline, hence the spread opened up.
• Chunghwa Telecom is at a relatively high ADR premium for this tightly trading range.

• Delta Electronics Thai (DELTA TB) has been added to the Market Surveillance Measure List twice in the last few months. That increases the probability of index deletion in December.
• Given the big turnover every time Delta Electronics is added to and deleted from the index, there could be another go at weighting the SET50 Index by free-float market cap.
• Deletion from the index will have a big impact on Delta Electronics Thai (DELTA TB) and the passive selling could help narrow the gap with Delta Electronics (2308 TT).

• Samsung Display still holds a 5.85% stake. Hankyung reported that this remaining stake would also be disposed of in the future.
• Then the key lies in timing. Considering the ongoing pattern of block deals being exposed during the pre-sounding phase, we may be able to capture clues for preemptive trading.
• As seen from the chart depicting SFA’s loan balance and the percentage of short-selling to daily TV, we can observe a significant increase in activity just before today’s sale event.

• Asia Ex-Japan investors move from underweight to a record overweight in Samsung Electronics
• Samsung has been a key beneficiary of manager rotation over the last 6-months alongside BYD, Trip Com and Meituan.
• Majority of funds positioned overweight with a record 81.4% of funds holding a position.  Samsung becomes one of the highest conviction holdings in the Asia Ex-Japan region.

• Micron reported FQ3’23 revenues of $3.8 billion, up 2% sequentially and down 57% year-over-year.
• Despite upbeat AI notes among others, Micron quietly delivered more bad news than good with their overall outlook worsening in many key respects. 
• In the company’s own words, “Profitability and cash flow will remain extremely challenged for some time”. For “some time”, you could insert “at least 12 months”

• We have an Underperform rating for Delta Electronics Taiwan as a single stock trade due to our concerns that its valuation has been inflated by Delta Thailand.
• The extreme valuation mismatch between Delta Thailand and Delta Taiwan has corrected to some degree (Delta Thai crashed 23%) but still has a long way to go.
• Delta Thailand should be removed from the SET50 Index in our view, the stock could be at risk of just such an action by year end according to precedent.

• ALT Co is getting ready to complete its IPO in Korea in July. ALT tests high-performance non-memory semiconductors applied to various industries such as secondary batteries, artificial intelligence, and automotive. 
• The bankers used four companies as comps for ALT including Lb Semicon, LB Lusem, Doosan Tesna, and Nepes Ark. These four stocks are up on average 48% YTD.
• The IPO price range is from 16,700 won to 20,500 won. The expected market cap of the company post IPO is from 150 billion won to 184 billion won. 

• We spoke with management of Himax, the global leader in chips powering displays inside automotives including EVs. Its sales have been badly impacted by China’s EV price war.
• Himax sales have fallen recently largely due to China demand weakness; 70% of the company’s sales are in China.
• Himax has underperformed peer Novatek as well as the TWSE both YTD and on a 1-year basis. We believe the less-followed stock could represent an opportunity for investors.

• NTT (Nippon Telegraph & Telephone) (9432 JP) is splitting its stock 25:1 on record date 30 June 2023. That means it goes ex- at the new price on 29 June.
• The day before, the stock is up nearly 5% on heavy volume. This is likely punters buying before it splits so one round lot will be <¥20,000 vs ~¥420,000 yesterday.
• But there is a new attraction for retail, somewhat un-noticed. 

• Bain Capital has made a CHF 18.5/share offer proposal for SoftwareONE Holding (SWON SW), 33% premium, CHF 2,933 million implied equity value, 9.8x EV/NTM EBITDA and 18.7 Fwd P/E. 
• The offer is supported by founding shareholders (c.29.1% aggregate), who’d co-invest alongside Bain. SoftwareOne, in the middle of a turnaround, trades cheap vs. peers and my fair-value estimate (CHF 19.92/share).
• On IBES estimates, without significant cost-cutting, at CHF 20/share, Bain could achieve 18.6% IRR by year 6, thus could offer more. Gross spread is 3.7%. Considering prospects, I’d be long.

• Mobvoi is a leading AI company with generative AI and voice interaction technologies at the core of its business. The company has filed for an IPO on the HKEx.
• Unlike a lot of the AI start-ups, Mobvoi has already begun commercialising its products and services and the company has started generating operating profits in 2022.
• The advent of ChatGPT and Midjourney have created a hype for AI. Mobvoi has taken the right decision to go public at the right time.

• Hon Hai shares have rallied to new 52-week highs; We update our model and sanity check the company’s 2025E gross margin target.
• Hon Hai can realize its target higher gross margin as its revenue mix changes between its legacy contract manufacturing and components/ higher value products revenue.
• We maintain our 12-month price target of NT$155 per share, 35% above current levels and higher than the entire Street.

• Micron released results and its shares are rising U.S. afterhours. The company said that its trough is past, implying the same for other memory chip producers such as Nanya Tech.
• Given Nanya Tech recently rallied ahead of Micron, then reverted back most of the gains, we see at least a10% short-term Long trade for Nanya shares here.
• Micron also made positive comments about the PC industry inventories. However, Taiwan PC names are already near 52-week highs. Elan Microelectronics could be a yet-to-rally play: See our full piece.

• Yageo has been relatively range-bound since early 2023E, missing completely the ‘AI Rally’ that caused many other Taiwan names to rise. Hence one can buy it without chasing hype.
• We spoke with management. The company has historically enjoyed durable margins and we believe could enjoy a cycle turn-around as its products are linked to high-tech power needs.
• While not directly linked to AI demand, its products have strong long-term demand dynamics and are necessary for AI servers, high-end computing, autos, defense, and communications. Structural Long, NT$690 target.

• Oracle’s upside in the near term might appear limited, but there is potential for higher dividend growth going forward.
• The debt level should be monitored closely by investors, but in my view does not present a major risk for Oracle’s dividend.
• The dividend yield remains low, but the debt level must be monitored by investors.

Nano Dimension has extended its special tender offer for Stratasys, increasing its cash offer from $18.00 to $20.05 per share and extending the deadline to 24 July. It has reduced the number of shares it is seeking to acquire, from up to 27.926m to up to 25.266m, to achieve a holding of 46–51% including the 9.7m shares it already owns. On the same day, Stratasys received a revised bid from 3D Systems (offering a mix of cash and shares) and it is currently reviewing both revised bids.

• In mid-September 2019, Naspers (NPN SJ) listed Prosus (PRX NA) on international markets, but the law required Naspers own 70+% of Prosus and it created a dual-layer NAV Discount Trade.
• In summer 2021, they announced an Exchange Offer, where Naspers holders could get Prosus, and Prosus would end up owning 49% of Naspers, creating a cross-holding circularity – an Ouroboros.
• In summer 2022, they launched open-ended buyback programmes, and they’ve bought back a lot. NOW they are unwinding the Ouroboros, going back to the pre-EO structure. buybacks will continue. 

• Former Samsung executive attempted to construct replicated factory 1.5 km away from Samsung Electronics’ Chinese plant by stealing technology
• Prosecutors described this case as a leakage of “core national technologies”
• This technology theft incident falls under the category of risk oversight, and currently, Samsung Electronics’ company risk is rated at an extreme level of 4.0

• NPS has expressed concerns about the wide risk range of the KOSDAQ 150 index, and there has been speculation about whether they will take advantage of the KOSDAQ Global Index.
• The launch of these ETFs should be closely watched as it could potentially be a turning point in the investment patterns of local pension funds in KOSDAQ.
• It may be worth considering the constituents included in this index where the NPS ownership stake does not reach 5%.

• First some caveats: while we have all probably read Charlie Munger’s quote “I never allow myself to hold an opinion on anything that I don’t know the other side’s argument better than they do”, the reality is this is exceptionally uncommon and challenging.
• In fact, when investors mention risks about a company they like, they often deliberately choose strawman arguments from the other side and advertently or inadvertently ignore steelman arguments.
• I will try to avoid strawman bear cases (and boy there are many), and only outline the bear cases that indeed concern me as a shareholder.

• Indonesian e-commerce enabler Sirclo Group has secured US$10.5 million in a Series C funding round from Vertex Ventures Southeast Asia and India.
• This takes the company’s total capital raised to approximately US$100 million, according to VentureCap Insights.
• Founded in 2013 by Brian Marshal, Sirclo provides omnichannel commerce solutions. It offers two main categories of solutions: entrepreneur solutions and enterprise solutions.

• Oddity Tech (ODD US) , innovative consumer-tech unicorn and a prominent player in the beauty industry, filed for a $100M U.S. IPO, with Goldman Sachs leading the offering.
• Founded in 2013 in Israel by CEO Mr. Holtzman and Chief Product Officer Ms. Holtzman-Erel, Oddity Tech (ODD US)  wants to disrupt the global beauty and wellness market.
• Founder-Led company delivered profitable high-growth at a scale and has a rapidly growing user base. Given the company’s attractive fundamentals, Oddity Tech is bound to have a very successful IPO.

• Singapore-based startup ONEVIEW today announced that it had raised S$4 million (US$2.9 million) in a seed funding round from ADERA Global; Beyon Connect, part of the Beyon Group; and Cumulo9 to transform the digital payments and communication landscape across Southeast Asia.
• In a press statement, the company said that it aims to set the benchmark for a digital post-box service that will greatly improve people’s lives.
• It aims to revolutionise bill payments by simplifying everyday digital communications with what it promised to be a more convenient, sustainable, and spam-free experience.

• Hybr1d, a workforce management platform co-founded by Hmlet co-founder Yoan Kamalski, has raised US$3.2 million in pre-seed funding from Global Founders Capital, MS&AD, 468 Capital, and 1982 Ventures.
• Kamalski, who stepped down from his role as CEO of Hmlet in March 2021, established Hybr1d with Aditya Anand and Pauline Wetzer last year.
• His latest venture helps businesses automate and streamline their IT and HR processes, such as onboarding, procurement, and leave and attendance management.

• We believe that Masa’s AI predictions and ambitions in the AGM presentation may well need a reality check; nonetheless, Softbank subsidiary Arm is a beneficiary of increasing AI applications
• The prospective Arm IPO is a key driver in the recent Softbank group share price rally; we look at AMD’s acquisition of Xilinx for an indication of Arm’s potential valuation
• Softbank group’s stated NAV discount narrowed by 19 pp to 31%; we explore Arm IPO valuation scenarios for NAV upside but we only see Softbank upside in a super-premium valuation

• 4Paradigm (1764934D HK) is looking to raise about US$600m in its upcoming IPO in Hong Kong. 
• 4P is a platform-centric AI enterprise solutions provider. It was the largest player by revenue in the platform-centric decision-making AI market in China in 2022, as per CIC. 
• In our previous note, we took a look at the company’s background and financial performance. In this note, we will cover the firm’s refiling updates.

• Micron results this week; will give a key readthrough for Nanya Tech. The latest memory chip pricing data implies it was another tough quarter.
• Hon Hai’s break out continues, with the shares achieving a new 52-week high. The company’s new JV with automaker Stellantis may finally be winning over naysayers.
• AI Leaders Basket: TSMC and ASML have substantially lagged Nvidia and could serve as AI-exposure alternatives to chasing Nvidia’s rally.

• JST Group (1703609D CH) is looking to raise at least US$100m in its upcoming HK IPO. The deal will be run by CICC and JP Morgan.
• Jushuitan (JST) is China’s largest e-commerce SaaS ERP provider in terms of revenue in 2022, with a market share of 20.7%, according to CIC. 
• The firm offers a suite of cloud-based e-commerce SaaS products, and is able to connect merchants with over 350 e-commerce platforms in China and across the world.

• Earable Neuroscience, a US-headquartered deep-tech company that has developed a sleep tech wearable device, has secured undisclosed bridge funding from Samsung Ventures.
• Through this investment, Samsung Ventures plans to forge alliances within its local and global network to support Earable Neuroscience’s global expansion, including the Korean market.
• Established in 2018 by Vietnamese founder Tam Vu, the startup’s sleep tech wearable, FRENZ Brainband, incorporates cutting-edge neuroscience technology into a consumer wearable to enhance sleep quality, improve focus, and promote relaxation.

• Japan System Techniques announced itsfull-year results for FY23/3 after the close of the market on Friday, May 12.
• Operating profit rose 19.3%, to ¥2,385 mn, on a 9.9% rise in sales, to ¥23,519 mn.
• Ordinary profit rose 19.4%, to ¥2,450 mn, and net profit rose 33.2%, to ¥1,772 mn. 

• Malaysian insurtech company PolicyStreet has raised US$15.3 million in its series B funding round led by local sovereign fund Khazanah Nasional Berhad.
• This investment was made under the fund’s 6 billion ringgit (US$1.3 billion) Dana Impak mandate.
• PolicyStreet offers digital insurance options to both consumers and businesses, aiming to make such products more accessible and affordable with the firm’s in-house underwriting capabilities.

• Impinj was a late beneficiary to the COVID-19 pandemic and could now be on the cusp of a correction in its revenue growth trajectory
• The developer of radio frequency identification (“RFID”) chips used in RFID tags benefited when companies were facing supply chain issues resulting in ordering much more inventory than necessary
• Consensus estimates are for another 36 percent increase in revenue in 2023 even though Impinj is heavily dependent on retail apparel

• 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 – Alibaba (ADR) (BABA US)‘s Cainiao & Cloud Intelligence Group, J&T Global Express (1936374D CH),  Amman Mineral Internasional (1416286D IJ), Tata Technologies (TATATECH IN) IPOs.
• Event-Driven developments – Invocare Ltd (IVC AU), Arcland Service (3085 JP), JSR Corp (4185 JP), SBI Shinsei Bank (8303 JP), Amara Holdings (AMA SP), Yashili International Holdings (1230 HK).       

• The adoption of AI promises to be highly disruptive and has to potential to improve profitability of companies that adopt the technology.
• It faces regulatory hurdles and risk-pricing challenges as insurance companies learn to price AI risk, but those problems are a few years away.
• In the near term, the technology rally appears extended and may need a breather.

• In the face of potential recession and inflationary pressures, the luxury goods market stands out from its peers.
• This resilience can largely be attributed to strong pent-up demand following pandemic lockdowns, coupled with the spending power of high-end consumers.
• One of the leaders of the space is Global Blue Group, a tax-free shopping-focused company that had a turbulent introduction to public markets in 2020, through a SPAC deal, amidst the pandemic.

• There were a couple of ad hoc rebalances in Korea last week for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY) and KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY). 
• Coming Friday will mark the end of the review period for the next rebalance of the HSI, HSCEI, HSTECH, HSCI, LQ45, PCOMP as well as the SET50 June implementation.
• With Japan indices moving higher, the largest inflows went into ETFs tracking the Nikkei 225 (NKY INDEX) and other local/global indices.

• 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

• By combining TMG+TD+IFS into a single reportable segment, all internal demand will move to this new entity, leapfrogging Intel to global #2 foundry by Q1’24 instead of by 2030
• This new structure risks obfuscating the details of external foundry customer growth
• A much simpler step by step approach which achieves all Intel’s stated goals while retaining visibility into IFS would be far more preferable from a shareholder perspective

• Silver Lake announced it waived the minimum acceptance threshold of 50% + 1 share in  its offer for Software AG (SOW GR) . The acceptance period has been extended until 28 June.
• Bain Capital abandons the pursuit and will sell its 10.01% stake to Silver Lake, which will now controls 41%, plus another 10% from a convertible bond.
• Silver Lake is now pressing the minority shareholders to tender. Spread is 1.44%/15.13% (gross/annualised), assuming settlement on 31 July. I believe that Silver Lake will be successful. Long and tender.

• Ambarella managed to exceed analyst expectations in terms of revenue as well as earnings.
• However, despite these headwinds, the company’s Q1 results exceeded expectations.
• The introduction of the CV3 platform marks a new phase in the development of the AI market for Ambarella.

• Amkor Technology delivered a disappointing set of results as the company was unable to meet the revenue expectations as well as earnings expectations of Wall Street.
• Despite the decline in revenue, the company’s diversified end-market exposure provided stability and resilience.
• Amkor’s technology leadership in advanced packaging allowed them to win new programs in the communications market, offsetting the softening of the consumer and computing markets.

• Cirrus Logic managed to surpass the revenue expectations as well as the earnings expectations of Wall Street.
• The company achieved a significant revenue of $1.9 billion.
• We give Cirrus Logic a ‘Hold’ rating with a revised target price.

• Grab‘s announcement this week that it would cut 11% of its workforce was a move to rationalise costs to give the platform a sure footing for longer-term growth. 
• Near-Term profit targets would be achieved without these recent cuts which are focused on addressing geographical cost imbalances and taking into account potential automation through the impact of Generative AI.
• The outlook for growth this year looks promising, with the potential for a strong 2H recovery despite employee-related costs but cuts will establish a more competitive cost base long term. 

• The market’s attention has shifted to the second part, which is the additional utilization of a portion of the harvest result for shareholder returns.
• There is a significant possibility that the timing to allocate the ₩200B for shareholder returns will be advanced to late July or early August.
• We should set up a position aiming for the potential for a special dividend, which may lead to momentum trading flow just before the quarterly ex-div date later this month.

• SK Square announced that it will cancel treasury shares worth 2.5 million shares on 4 October 2023, which represents 1.8% of its current outstanding shares.
• Our NAV analysis of SK Square suggests NAV of 9.4 trillion won or NAV per share of 66,421 won, representing a 45% upside from current levels.
• SK Square’s positive shareholder return policies including higher share buybacks, cancellations, and dividends are result in further outperformance of SK Square relative to KOSPI this year. 

• Advantest’s stock has doubled in the past two months, outperforming even Nvidia, indicating a potential peak in momentum
• Near term technical indicators suggest the stock could be running out of steam, with few catalysts ahead of July Q1 earnings
• The stock is trading at a significant premium to Japanese-listed SPE peers and its historical EV/EBIT multiple of 15x

• Alibaba (ADR) (BABA US) aims to complete a spin-off of the Cloud Intelligence Group via a stock dividend distribution, with it becoming publicly listed in the next 12 months.  
• The Cloud business is pursuing a land-grab strategy to reignite growth. While it is the only profitable Chinese cloud platform, the profitability gap to Amazon AWS highlights the opportunity. 
• The aim to bring in external strategic investors before the spin-off will provide a valuation benchmark. Our analysis points to a Cloud business valuation range of US$45-58 billion. 

• PCCW Ltd (8 HK) is selling an initial 26.1% equity stake in its streaming platform Viu, to Vivendi SA (VIV FP)‘s Canal+, for US$200mn.
• Via a staggered investment, Canal+ can increase its equity to US$300mn. In addition, a further investment, at Canal+’s option, could result in increasing its stake in Viu to 51%.  
• Elsewhere, PCCW’s 18% discount to NAV is the narrowest in over two years.

• Comms Group Ltd (ASX:CCG) has announced an extension of the Vodafone contract term to a minimum five-years together with an expansion in the range of services provided in delivering voice connectivity for Microsoft Teams, including the more advanced Operator Connect.
• The extended agreement also includes a minimum monthly payment to CCG of A$30k beginning October 2023.
• While our Vodafone assumptions are unchanged, and our medium-term expectations for Vodafone well above the minimum monthly payment, the revised agreement improves visibility and demonstrates Vodafone’s commitment to the relationship. 

• PagerDuty delivered a mixed set of results in its most recent result, with revenues falling short of Wall Street expectations but above-par earnings.
• In terms of the pipeline, the total ARR and mix from new products significantly improved.
• PagerDuty AIOps offers end-to-end automation, from event intake through auto-remediation, to efficiently manage large volumes of data and events.

• Ciena managed to exceed analyst expectations in terms of revenue as well as earnings.
• Inventory levels decreased by $80 million from Q1 as the operating environment continued to improve.
• As the year progresses, their management anticipates further inventory reductions, which will enable the company to resume the steady rate of cash flow they were experiencing prior to the supply chain disruptions.

• Smartsheet delivered a solid result and managed an all-around beat in the last quarter.
• The quarter’s revenue increased by 31% year over year to $219.9 million, while billings increased by 20% year over year to $215.5 million.
• Enterprise expansions during the quarter included Eli Lilly, Foxtel, Motorola Solutions, and Novocure, and new customer wins included Liberty Media, Hostess Brands, and Eight Eleven Group.