TMT/Internet

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• Alibaba (ADR) (BABA US)‘s restructuring news caused some exiciting in the IPO market this week, with Hong Kong filings picking up as well. 
• On the placements front, all eyes remain on Meituan (3690 HK) and whether Prosus (PRX NA) will do a placement.

• Alibaba (ADR) (BABA US)‘s multi-faceted logistics unit Cainiao Smart Logistics (1437124D HK) may seek an IPO in Hong Kong before the end of 2023, according to media reports
• In this piece we look at why CaiNiao is being spun off now, what the company actually does (and doesn’t do), what its likely comps are, and more
• CaiNiao is unique, but we can begin to understand its position and its valuation by comparing it to JD Logistics (2618 HK) and S.F. Holding (002352 CH)

• Socionext (6526 JP) was listed on 12th Oct 2022, when it raised US$457m in its upsized Japan IPO. Its six-month lockup will expire on 9th Apr 2023.
• Socionext is a fabless semiconductor provider which commenced operations after integrating the system on a chip (SoC) businesses of Fujitsu Semiconductor Limited and Panasonic Holding Corporation in 2015.
• Coming up for six-month lockup expiry are the Development Bank of Japan, Fujitsu and Panasonic, the trio had each trimmed their respective stakes in the IPO.

• The March rebalances of the NIFTY indices and the Nikkei 225 (NKY INDEX) were implemented last week. Plus some ad hoc rebalances for the KOSPI2 INDEX and KOSDQ150 INDEX.
• A quieter week coming up with multiple market holidays across markets. We also near the start of the review period for the MSCI May QCIR.
• There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and iShares FTSE/Xinhua A50 China (2823 HK) during the week while there were outflows from some Korea ETFs.

• One may presume that Prosus (PRX NA) moved their Meituan (3690 HK) shares received from their non-CCASS holdings of Tencent (700 HK). It does not tell us much else. 
• Allocation in the S.M.Entertainment Co (041510 KS) partial Offer was 44.14%. With shares trading ~₩95k, that was a pretty good outcome. 
• Toyo Construction (1890 JP) has asked the Japanese government to investigate YFO’s alleged breaches of FEFTA. Expect YFO to say they did no wrong. Expect Toyo to complain about it. 

• This is our first report on Global Payments Inc., a financial technology company providing payment solutions and services in the U.S.
• The company managed an all-around beat in its last result with a strong performance in Global Payments despite the increased global macroeconomic uncertainties.
• The most significant development was that their core Issuer business once more produced sequential financial and operational improvement, in line with their expectations and the strongest results since their merger with TSYS in 2019.

• 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

• Global Payments is a financial technology player providing payment solutions and services in the U.S.
• The company has decent fundamentals and performed well in 2022 despite the increased global macroeconomic uncertainties.
• With EVO, they strengthened their position as a major provider of payments technology with broad reach around the globe.

• The valuation divergence between Delta Electronics Thai (DELTA TB) and its parent Delta Electronics (2308 TT) has hit a new extreme.
• Delta Thailand surged 9.3% Thursday on no news, even prompting the Thailand Stock Exchange to query the company.
• Delta Taiwan’s stake in Delta Thailand is now worth more than all of Delta Taiwan. The valuation divergence would seem unsustainable, however when things revert is uncertain.

• While all eyes are on Alibaba splitting its business into six mini-Babas, some were quick to conclude that Tencent could be the next candidate for a similar split.
• Unlike Alibaba (ADR) (BABA US) whose business units have clear divisions and stand on its own, Tencent (700 HK) ’s businesses are interconnected making a similar split very difficult.
• Having looked at Tencent’s business units and past regulatory probe on the company, it seems unlikely for the company to be the next candidate for an Alibaba style separation.

• Another smallish one, but EV of ~$500m (bigger than PRST but still illiquid b.c. low free-float).
• Equity is probably not worth much more than $0. I’m not short this yet, because I fear that management still has some fight left in it to ride the AI-hype.
• I want to get my timing right. It is a heavily shorted stock which has been the victim of squeezes multiple times in the past. And I don’t much fancy getting my head ripped off.

• It was announced on 30 March that a local activist firm called KCGI has invested 7.05% stake in DB Hitek, spending 196.4 billion won on buying this amount.
• KCGI mentioned that DB Hitek’s corporate value is extremely undervalued that the company should cancel its treasury shares and establish independent Board of Directors. 
• The probability of DB Hitek being included in MSCI Korea Standard could rise materially if its market cap climbs to more than 4 trillion won in the coming weeks.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Tower Bersama’s ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Adequate”.

• IAC/ InterActiveCorp is a major media and internet player publishing original and engaging digital content in the form of articles, illustrations, and videos and images across various fields.
• They had a HomeAdvisor that connected customers with service providers based on what the customer wanted to be done and what the service provider was qualified to accomplish.
• Baptista Research looks to evaluate the different credit strengths and credit risks of the company as well as a line-by-line analysis of the financial statements of the company for the past four years.

• This is our first report on IAC, a major media and internet player publishing original and engaging digital content in the form of articles, illustrations, and videos and images across various fields.
• They had a HomeAdvisor that connected customers with service providers based on what the customer wanted to be done and what the service provider was qualified to accomplish.
• Looking forward, IAC’s management intends to increase margins by generating additional revenue from a fixed-cost basis and they anticipate double-digit revenue growth in the coming quarters.

• Lee Seo-Hyun, via KEB Hana Bank, is looking to sell her entire stake in Samsung Sds (018260 KS) to raise US$132m.
• While a relatively large one to digest, the deal is very flagged.
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• Thunes, a global cross-border payments firm headquartered in Singapore, has raised US$30 million from London-based hedge fund Marshall Wace, according to VentureCap Insights, which tracks regulatory filings in the city-state.
• Peter de Caluwe, CEO of Thunes, has confirmed to Tech in Asia that Marshall Wace is the new investor.
• The funding brings the company closer to becoming a billion-dollar company, with an estimated post-money valuation now pegging at US$776 million after raising about US$166 million in equity funding.

• After the market close today, Samsung Sds announced a block deal of 1.51 million shares at a discount range of 3.5% to 4.5% to the closing price of 117,900 won.  
• Lee Seo-Hyun, the daughter of the late Samsung Chairman Lee Kun-Hee, is selling her 1.51 million shares of Samsung SDS (1.95% of oustanding shares) in a block deal.
• The company faces continued overhang on additional stake sale due to the inheritance tax issue in the next 2-3 years. As a result, we would avoid the block deal sale. 

• Bukalapak (BUKA IJ) may have disappointed some in missing on TPV but that is unimportant when it executes convincingly on improving take rates for both marketplace and its Mitra business. 
• The number of Mitra Bukalapak partners has increased to over 16m, with active Mitras taking increasing services and higher take rate products from Buka’s marketplace and specialty stores.
• Bukalapak beat on revenues and adjusted EBITDA and its guidance for adjusted EBITDA-positive by 4Q2023, with continuing improvements to take rates driving improvements. Valuations are attractive at <1x FY2024E EV/Sales.

• On 29 March, SK Inc announced that it will cancel 0.95 million in treasury shares, which represents 1.3% of the company’s outstanding shares and 5% of treasury shares.
• One of the concerns about SK Inc in the past several weeks has been lower DPS of 5,000 won in 2022 versus DPS of 8,000 won in 2021.
• Our base case valuation of SK Inc is NAV of 19.7 trillion won (NAV per share of 266,113 won), representing a 54% upside from current levels. 

• ADR premiums for dual-listed Taiwan shares have overall been on the uptrend this week, as semiconductor industy optimism in the U.S. as increased.
• TSMC’s ADR premium appears to be trading at a new higher range in the last few months.
• Other spreads have risen as well lately; it’s probably best to wait for significant reversals, which usually happen within two weeks at most.

• Kuaishou’s 4Q22 top line beat our est. by 3.9%, and non-IFRS net income was higher than our est. by 85% due to cost-saving measures.  
• We raise forecasts for its ads and eCommerce growth due to on-track macro recovery. However, we are still concerned about the intensified competition from WeChat Video Account.
• Maintain SELL for competition scenario, but slightly raise TP to HK$ 58 to reflect macro recovery. Our TP implies 2.1X PS/239X PE in 2023.

• We review Taiwan’s recently completed earnings season for both the Semiconductor and Tech Hardware sectors.
• Companies by and large missed expectations, with the % of revenue and earnings misses substantially higher for the 4Q22 earnings season than was the case for the 3Q22 earnings season.
• High inventory levels have persisted in both Semiconductors and Hardware, however appear to have leveled off at high levels rather than having become worse.

• Analog Devices has become one of the best-performing semiconductors stocks.
• The company’s strategy has certain weaknesses, but ADI remains among my top picks within the sector.
• ADI’s performance is not just a fluke and there are solid reasons behind it, such as high profitability, growth and competitive positioning.

• Singapore-based startup Right-Hand Cybersecurity has received US$5 million Series A funding from former PayPal executive Jack Selby and his venture capital firm AZ-VC.
• The startup will use the money to expand its operations across Asia and the US while investing heavily in its human risk management (HRM) platform.
• Right-Hand aims to expand its platform integrations with commonly adopted technologies to improve employee behaviours and lower risk tendencies.

• Meituan (3690 HK) shares hit accounts on Friday, they showed up in the CCASS data. All but about 2.3mm shares worth. Another 248.8mm shares showed up on Monday. 
• That was the Prosus stake, which was expected as of November 2022 (evidently, they did not convert more Tencent shares in the interim. 
• The data tells us some things. It does not tell us much else. Be careful of the details. 

• KT Corp (030200 KS) missed out on inclusion to the MSCI Korea Index at the May 2022 SAIR following a drop in foreign room below 15%.
• Bottoming out at 6.5%, foreign room has started to increase again. The last data point shows foreign room at 14.43%, just shy of the 15% threshold for inclusion eligibility.
• If foreign room increases above 15% in the next three weeks, KT Corp (030200 KS) will be added to the MSCI Korea Index at the May QCIR.

• CUBox is getting ready to complete its IPO in KOSDAQ in May. Given its leading position in the face recognition AI technology, it is expected to generate strong interest.
• CUBox is a leading company in Korea that specializes in artificial intelligence (AI) image recognition.
• The company is offering 1.5 million shares (100% new shares) in this IPO. The IPO price range is 17,200 to 23,200 won. 

• Telekomunikasi Indonesia (TLKM IJ) results reflect a company increasingly digital in nature with legacy services fading away and an increasing focus on building both quality infrastructure and subscribers. 
• Despite losing subscribers last year, customer data consumption picked up and the ARPUs also improved reflecting a more profitable subscriber base. Indihome continues to see growth in its customer base.
• Telkom continues to strengthen its presence in the cloud business and data centres as future growth drivers. Valuations are attractive versus historical levels with strong growth prospects ahead. 

• Intuit Inc.’s share price is now trailing the tech sector.
• Intuit investors relying on Non-GAAP figures should be careful as there are significant risks involved, according to the company’s share price.
• The company’s legacy brands are the key driver behind revenue growth and profitability, says Intuit.

Esker reported FY22 revenue growth of 19% (13% constant currency (cc)), operating profit growth of 29% and normalised diluted EPS growth of 29%. SaaS revenue grew 23% (17% cc) and now makes up 80% of group revenue. Bookings intake increased 19% cc y-o-y on an annual recurring revenue basis, providing support for growth in FY23 and FY24. Management maintained its guidance for FY23; we have trimmed our FY23 forecasts, which sit within the guidance range, and introduce forecasts for FY24. We forecast EPS to decline 1% in FY23 (as the currency benefit and accrual reversal are not expected to repeat) and increase 17% in FY24.

• The PC supply/demand outlook appears to be improving and Elan’s leading position providing touch technologies for PCs and other devices makes it an interesting play on the cycle rebound.
• Elan’s results were recently weak due to industry-cycle factors; its company-specific strengths haven’t been affected and its product leadership makes it well positioned for an industry rebound.
• Just retracing half its distance from 52-week highs would imply 24% upside and an undemanding valuation in our view.

• Following the settlement of Meituan (3690 HK) shares from Tencent (700 HK)‘s in-specie dividend, nearly all the shares are now in CCASS. 
• Meituan (3690 HK) has underperformed Tencent (700 HK) by nearly 50% and Alibaba Group (9988 HK) by 27% since the announcement of the in-specie dividend.
• Short interest is higher over the last couple of months but is far lower than the selling that could come through, especially on the Prosus (PRX NA) holding.

• WCP (393890 KS) raised around US$314m via in its Korean IPO. The stock was listed on 30th Sep 2022, its six-month lockup will expire soon.
• WCP designs, manufactures, and sells separators, which are one of the four core materials for secondary Lithium-ion batteries.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• On 16th Nov 22, post-market close, along with its 3Q22 results Tencent declared an interim dividend by way of distribution in specie of Class B Ordinary shares of Meituan.
• At the time of declaration, the dividend amounted to US$20bn or 15.5% of Meituan’s outstanding shares.
• We have spoken about the background of the deal in our earlier notes. In this note, we talk about the overnight updates.

• Meituan reported C4Q22 total revenue 4% higher than cons. Non-IFRS net margin beat cons. by 0.4ppt due to strong cost control during lockdowns.  
• Meituan has limited options against Douyin’s fast expansion of new service categories and customized offerings. The competition against Douyin will continue to pressure the in-store business in the long run.
• Maintain SELL and cut TP to HK$125. Our TP implies 3x PS, 10x PE and 1x PS for on-demand delivery, in-store, and new initiatives, respectively.

• Indosat (ISAT IJ) has come back from being the loss-making underdog amongst the Indonesian telcos and is now well and truly on the rebound, with significant potential upside.
• The acquisition of Hutchison’s “3” has propelled the company into the number two spot in terms of market share and enabled better quality coverage after a well-orchestrated merger. 
• Indosat now has a 4G footprint in Java greater than Telkomsel and with significant potential to gain share ex-Java, which provides higher returns. Valuations remain attractive. 

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• Last week complemented November 2022’s  bullish LT confirmation with a bullish MT confirmation, re-instating the MT uptrend after a period of correction in Feb/Mar.
• Tencent Holdings Ltd (700 HK) has likely entered the 2nd leg of a material MT uptrend. Q2 2023 target towards 451.95 (+25%).

• Micron earnings this week, will provide insight on the outlook for the memory chip space.
• The Taiwanese market has substantially lagged the surge in the Philadelphia Semiconductor Index.
• Chinese firms are trying to poach engineers from TSMC and UMC by offering 2-3x their salaries.

• In our February 6, 2023 EM Strategy, we discussed that we were buyers of the MSCI EM (EEM-US) on a pullback to the 50-day MA. 
• The pullback went a bit deeper but managed to hold at our $37.50 line-in-the-sand which we discussed in our recent ETF Pathfinder reports (Mar. 6 and Mar. 20, 2023).
• The EEM-US displays a bullish 2-month downtrend reversal- add exposure. Signs continue to point to a topping DXY, and a declining DXY has historically resulted in EM outperformance (vs. EAFE).

• Xiaomi reported C4Q22 top-line, non-IFRS EBIT and non-IFRS net income in-line, 14%, and 25% vs. our est., and in-line, 78%, and 26% vs. consensus; 
• Beginning in 2023,  we expect it will be forced to sacrifice for or the other given its lack of moat in any category; 
• Xiaomi will likely improve phone gross margins due to declining IC prices, RMB appreciation, underlying our TP raise to HK$8.2, but we maintain SELL.  

• The way fans interact with sports has changed an incredible amount over the past 20 years.
• We’ve seen broadcasting, social media, streaming and such all impact the way fans consume the sports they love.
• The future of fan engagement is always a hot topic because things are always changing, of course.

• On 16th Nov 22, post-market close, along with its 3Q22 results Tencent declared an interim dividend by way of distribution in specie of Class B Ordinary shares of Meituan.
• At the time of declaration, the dividend amounted to US$20bn or 15.5% of Meituan’s outstanding shares. Its value has since declined to US$17bn
• We have covered the background of the event in our previous notes. In this note, we talk about the recent updates.

• In 4Q22, the growth rates of total revenue and most business lines are better than our expectation.
• The operating margins have stayed at a low level for the third quarter.
• We believe the stock has an upside of 45% and a price target of HK$204 for year end 2023.

• Meituan (3690 HK) reported 4Q2022 results. Revenue increased 21.4% YoY to RMB60.1bn (vs consensus RMB57.7bn) while reported operating losses dropped to RMB732m (vs consensus RMB1.4bn) from RMB5.0bn in 4Q2021.
• Covid outbreak in China in 4Q2022 led to strong growth in food delivery service revenues, however, losses have widened compared to 3Q2022 due to increased rider costs and others.
• We expect Meituan’s top line growth to slow down and margins to remain under pressure with Douyin’s entry into food delivery and the company’s expansion into Hong Kong.

• Chinese Apps’ time on site decreased to 26.7 hours in 2022 from 28.5 hours in 2021.
• The Press and Publication Administration approved 27 imported games in March.
• Douyin launched a medium-duration video app, which can be Bilibili’s competitor.

• The pandemic has been a catalyst for change, propelling the edtech sector to unprecedented heights as traditional educational institutions scrambled to adapt.
• However, as we enter 2023, the landscape has shifted significantly from the edtech boom of 2021.
• Companies now face the challenges of customer retention, unit economics, and the looming shadow of inflation and recession concerns.

• There are a bunch of implementations in the coming week, the largest being the Nikkei 225 (NKY INDEX) March rebalance.
• There are some ad hoc changes to the KOSPI2 INDEX and KOSDAQ 150 Index following constituent stocks being designated as Administrative Issues and Investment Attention Issues.
• Inflows to the iShares MSCI Emerging Markets ex China ETF (EMXC US) have continued and has taken AUM to a new high.

• 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

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• Japan and Indonesia appear to be the hubs of APAC ECM activity with Rakuten Bank (5838 JP) and PT Trimegah Bangun Persada Tbk (Harita Nickel) (2230010D IJ) going live
• On the placements front, this week was comparatively quiet, given the market volatility. There are a few lockup expiries coming up next week.

• It is virtually certain that KT’s foreign rooms will exceed 15% today or tomorrow. This month, foreign net sales of 200-300k are continuing almost every day.
• Assuming the Cutoff of the MSCI Korea Standard to be 2.7 trillion won and setting the float rate to 25%, KT beats the hurdles quite comfortably.
• If KT achieves re-inclusion with a 25% float rate, a passive inflow worth 140 billion won is expected to occur. This is a 3.55x ADTV.

• MTN Group Limited (‘MTN’) is a Johannesburg (South Africa)-headquartered multinational mobile telecommunications company with a presence in 22 countries in Africa and the Middle East.
• Apart from offering traditional voice and data services MTN also provides mobile financial services, business enterprise solutions and digital services.
• MTN’s largest markets are Nigeria and South Africa which collectively contributed 63% and 68% to FY16 group revenues and EBITDA, respectively. 

• Qualcomm has appeared on the radar for attractive dividend plays.
• The current yield is among the highest in the sector and also appears safe based on historical data.
• There are a number of important risks that overshadow Qualcomm’s ability to consistently increase its dividend.

• UI is coming off a strong performance in the December quarter but should continue to show improving margins as the Company maintains products in stock and at higher prices
• The March quarter can be seasonally challenging. For Ubiquiti, it could end up being a period where customers are able to find the products they are looking for in stock 
• In the March quarter Ubiquiti has maintained a higher level of product availability than what we had been observing in the prior year

• Samsung SDS and Meritz Financial will welcome a 6%p and 30%p increase, respectively, in the upcoming rebalancing in June.
• Assuming a K200 tracking fund size of 65 trillion won, they are expected to receive 2.69x and 5.47x ADTVs, respectively. This is enough for us to consider a preemptive position.
• However, in the case of Samsung SDS, we need to consider potential price correction by the scheduled block deal (1.95%) and develop a multi-phased approach to minimize timing conflicts.

• Following Nanos Co Ltd (151910 KS)‘s designation as an Investment Attention Issue, the stock will be deleted from the KOSDAQ150 Index and replaced with Em Tech Co Ltd (091120 KS).
• Passive trackers are estimated to buy 1.3 days of ADV on Em Tech Co (091120 KS) while they will need to sell 1.1 days of ADV on Nanos (151910 KS).
• Em Tech Co Ltd (091120 KS) was up yesterday but the stock is still way off its highs. The stock should trade higher over the next few days.

• The Korea Exchange announced special changes in KOSDAQ 150 after the market close today.
• Effective 28 March, SBW Life Science (151910 KS) will be excluded from KOSDAQ 150 index and Em Tech Co Ltd (091120 KS) will replace it.
• We expect 20-30% additional upside for EM-Tech from the KOSDAQ 150 inclusion and further downside risk for SBW Life Science from the index exclusion.

• Established in 2020, Rebellions is a leading AI based fabless startup in Korea. In February 2023, Rebellions launched a new artificial intelligence chip, challenging the global leader NVIDIA. 
• According to the company, its ATOM chip targets specific tasks, allowing the chip to consume only about 20% of the power of an Nvidia A100 chip on those tasks. 
• Since the company’s inception, Rebellions raised 122 billion won in funding including 30 billion won from KT. The company was last valued at 350 billion won in June 2022.

• Headlines for GoTo 4Q2022 and FY2022 headlines do not tell the whole story, given large one-off charges for goodwill write-downs, without which significant progress has been made towards profitability. 
• GoTo significantly reduced incentive&product marketing spending in 4Q but also posted decent growth, albeit at a slower pace, with an increasing emphasis on building foundational products to drive future profitability.
• 1H2023 will see slower headline growth from a COVID base but 1Q2023 should see improving take rates and CM breakeven. This is the transient stage of the long-term GoTo story.

• In this insight, we take a look at the names leading the race to become ADDs/DELs for the T50 and T100 Indices for the June 2023 Rebalance.
• As things stand, there do not seem to be any ADDs/DELs for the T50 index or the T100 index.
• However, with multiple names close to the border and with two more months to the base date a lot of ranks could change.

• There’s been a major disconnect between performance of the Philly Semiconductor Index and the Taiwan market recently.
• Semi optimism has picked up substantially in U.S. markets and institutional favor towards the Taiwan market could improve as a result.
• We indentify US$1bn+  market cap stocks most under-held by institutions, as well as those who may be most at risk of a short squeeze.

• Tencent reported 4Q22 top line/ bottom line of 0.3%/(3.7%) vs cons. Online ads is stronger, while gaming and G&A slightly missed our est. 
• We expect that ads will be the main driver, thanks to video accounts. Gaming will have better performance after more approved game codes.
• We raise 2023 ads growth from 12% YoY to 15% YoY. Raise TP to HK$ 433. Maintain Tencent as one of the top picks in China Internet

• WOM is the fastest growing mobile telecommunications provider in Chile in terms of total subscribers and revenues. 
• They are a consumer-focused mobile network operator offering mobile voice, data, and broadband services to individuals and small and medium enterprises in Chile.
• They have grown their market share by positioning themselves as the “value-for-money” provider and are focused on continued growth and profitability in the Chilean mobile telecommunications market.

• qlub, a payment solution that splits restaurant bills between customers, has raised US$25 million in a new funding round, bringing its total fundraising to US$42 million.

• The startup plans to use the new capital to accelerate growth, expand to new markets, and build new value-added services for restaurants and customers on the qlub platform.

• qlub enables customers to pay their restaurant bills in various options — as a group, splitting, or tipping — without needing an app or registration.