TMT/Internet

By Shifara Samsudeen, ACMA, CGMA

XPER used the CES event this year to make several news announcements, but the biggest news for XPER was the one released by Roku Inc. (ROKU).
The ROKU announcement causes TiVo being the only independent TV operating system. We believe this could result in XPER establishing greater market share for its TVOS than originally expected
During CES Verstel introduced a series of TVs under multiple brands that would use TiVo TVOS. Additionally, XPER revealed more automakers that are releasing car models with AutoSense and AutoStage

Bilibili Follow-On Offering: Limited Upside

Bilibili announced a follow-on equity offering of 15.34m ADS priced at $26.65 per ADS partially in exchange for convertible senior notes due 2026 (US$384.8m) and to replenish its cash reserves.
Each ADS represents one ordinary share and new equity offering of 15.34m shares will account for approx. 3.7% of the company’s extended share capital post follow-on offering.
Bilibili Inc (BILI US) ADS dropped 5.76% following the announcement of the follow-on offering and we believe there is limited upside.

Huobi Market Share Plummets in 2022

By Kaiko

Price Movements: Most Layer 1 tokens have struggled versus ETH since December, but SOL and ATOM have recently outperformed.
Market Liquidity: Curve’s 3pool – made up of USDT, USDC, and DAI – has seen its total value locked fall from $5.5bn to just $600mn over the past year.
Derivatives: Both SOL and LDO experienced a short squeeze as each token unexpectedly rallied.

IRDM: Snapping to a New Price Target

The technology agreement IRDM had first announced in July 2022 became clear with the official naming during CES.
QCOM has entered into a service provider agreement with IRDM that would result in new Snapdragon with satellite connectivity
The news is more significant than a smartphone maker since QCOM’s mobile processors are used by multiple smartphone makers

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Jan 09

Daily Brief TMT/Internet: Taiwan Semiconductor (TSMC) – ADR, Sun*, Keyence Corp, Ant Financial Services Group, Meta Platforms (Facebook), Youlife International Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Taiwan Dual-Listings: TSMC Premium Hitting High Territory, ASE Shoots to 6.1%
Sun* (Sun Asterisk – 4053 JP) TOPIX Inclusion Event
Keyence (6861) | Better Risk/Reward at Peers
Ant Group: Shareholder Restructuring Announced and the Lack of IPO Plan Are Negatives Surprise
Meta Platforms: A Value Opportunity In The Tech Environment
Youlife International Pre-IPO Tearsheet

Taiwan Dual-Listings: TSMC Premium Hitting High Territory, ASE Shoots to 6.1%

TSMC’s ADR premium is entering the higher end of its range since early 2022. Earnings coming this week.
UMC’s ADR has flipped from a discount to a moderate premium. Earnings are ahead as well.
ASE Technology’s ADR premium has reached 6.1%, high even for this usually higher-premium trading pair.

Sun* (Sun Asterisk – 4053 JP) TOPIX Inclusion Event

By Travis Lundy

In mid-December, digital UX creation agency (90% of revenues) and “talent agency” (10%) announced it would move from TSE Growth to TSE Prime mid-December 2022.
This was in Janaghan’s “Not Ready” list in TOPIX Inclusions: Who Is Ready (Dec 2022) because it did not meet two of the requirements. But it turns out it did.
This is therefore a TOPIX inclusion event at end-January 2023.

Keyence (6861) | Better Risk/Reward at Peers

By Mark Chadwick

Keyence is a structural growth stock that has fallen by 31% over the past year reflecting near term risks to growth
Although Keyence is a major beneficiary of continued investment in industrial automation, the company would need to grow significantly quicker than the industry to justify the current valuation
We analyse Keyence’s core value drivers – revenue, margins, risk and reinvestment – but see better risk/reward in other growth stocks

Ant Group: Shareholder Restructuring Announced and the Lack of IPO Plan Are Negatives Surprise

By Victor Galliano

The announced restructuring of Ant Group holding companies will block founder Jack Ma from achieving majority voting on the board following the implementation of the holdcos adjustment
The majority of board directors will be “independent” post the holdco restructuring and they are likely to drive a more social policy focused agenda, as the 2021 sustainability report suggests
We see these developments, and especially the lack of IPO plan, to be negative for non-government aligned Ant Group shareholders, such as the international private equity groups and especially Alibaba

Meta Platforms: A Value Opportunity In The Tech Environment

By Moat Investing

META’s sustainable earnings come up with at least 30% to 35% upside potential.
There is a huge margin of safety at the current price, and multiple should expand from now forward.
Meta Platforms, Inc. (NASDAQ:META) is one of the most beaten-up stories among the FAANG, the storytelling around the Metaverse has failed to be understood by the market, and a great deal of pessimism and future catastrophic scenarios have been priced into the stock.

Youlife International Pre-IPO Tearsheet

By Ethan Aw

Youlife International Holdings (1759732D CH) is looking to raise at least US$100m in its upcoming HK IPO. The deal will be run by Macquarie and CCB International.
Youlife International is a blue-collar lifetime service platform in China. It assists blue-collar talent with upskilling and lifetime career development.
According to CIC, Youlife ranked first among all blue-collar lifetime service platforms in China in terms of revenue generated from blue-collar lifetime services in 2021.

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Jan 08

Daily Brief TMT/Internet: Meituan, LG Electronics, Alibaba (ADR), Hong Kong Hang Seng Index, Quanta Computer and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Meituan 4Q Food Delivery Updates
LG Electronics: A SELL Candidate Amid Difficult Business Condition for Consumer Electronics in 2023
ECM Weekly (8th Jan 2022) – Sinohytec, Beauty Farm, Sula, Kfin, Bionote, Meidong, CIFI, Jinxin Fert
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
Long Apple Vs. Short Quanta & Pegatron: Trade Ahead of Apple’s Upcoming Earnings

Meituan 4Q Food Delivery Updates

By Xin Yu, CFA

Food delivery daily order growth gradually recovered in late Dec
Instashopping continued its growth momentum. Community group purchase has transformed into Next Day Delivery
With the recovery of restaurants and travel post re-opening, Meituan is expected to be one of the biggest beneficiaries.

LG Electronics: A SELL Candidate Amid Difficult Business Condition for Consumer Electronics in 2023

By Douglas Kim

After a disappointing earnings results in 4Q 2022, we believe LG Electronics (066570 KS) is a SELL candidate.
The decline in housing prices in major countries such as the US and South Korea have negatively impacted consumers’ purchases of consumer appliances.
With the consensus that is likely to cut their operating profit estimates significantly in 2023, we think that LG Electronics’ shares could fall another 20-25% over the next year.

ECM Weekly (8th Jan 2022) – Sinohytec, Beauty Farm, Sula, Kfin, Bionote, Meidong, CIFI, Jinxin Fert

By Sumeet Singh

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs
On the IPO front, only the smaller issuers were active with most following through on year end listing plans.
On placements front, HK market got going in a jiffy, riding on the coattails of China reopening.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

By Simon Harris

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

Long Apple Vs. Short Quanta & Pegatron: Trade Ahead of Apple’s Upcoming Earnings

Apple shares have fallen significantly on a weakening outloook; Yet manufacturers Quanta and Pegatron’s shares still haven’t reacted negatively.
Inventory levels appear too high across Apple’s key contract manufacturers based on our analysis.
We see Quanta & Pegatron at risk of margin pressure in 2023E with negative operating leverage potentially causing significant profit declines.

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Jan 07

Daily Brief TMT/Internet: Intouch Holdings, iQIYI Inc, STMicroelectronics NV, NetEase Inc, Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Thaicom: Gulf Energy’s Low-Balled MTO Now Open For Acceptances
IQIYI (IQ US): Taking a Break
STMicroelectronics: Building Positions Ahead of the Next Upcycle
NetEase(NTES.US) 4Q22 Preview: Enter a Period of Lukewarm Performance
Time to Move Forward to Corporate Governance 2.0, Where the Substance Will Be Questioned

Thaicom: Gulf Energy’s Low-Balled MTO Now Open For Acceptances

By David Blennerhassett

Back on the 7 November, Intouch Holdings (INTUCH TB)‘s board approved the sale of its 41.13% stake in Thaicom Pcl (THCOM TB) to Gulf Energy Development Public Company (GULF TB).
The sale price was Bt 9.92/share, a 19.3% discount last close. Intouch shareholders overwhelmingly approved the sale on the 28 December, which subsequently triggered an MTO.
The Offer is now open for acceptances. The Offer closes on the 9 February. Intouch will pass through 100% of the sale proceeds via a special dividend.

IQIYI (IQ US): Taking a Break

By Eric Chen

Since we highlighted the compelling asymmetrical risk-return payoff of IQ last November, the stock has surged 200%, compared to 45% gain for KWEB which tracks China ADRs.
We believe the outperformance was driven by more concrete progress in fundamental turnaround including multiple blockbuster drama released, increase in subscription fee and removal of debt overhang.
With $7 billion market cap (on diluted basis), IQ already trades at 35 times 2023 earnings, pricing in fair degree of positive prospects. We advise investors to lock in profits.

STMicroelectronics: Building Positions Ahead of the Next Upcycle

By Alexis Dwek

New technologies such as 5G, 3D, Time of Flight and new materials such as silicon carbide and gallium nitride have paved the way for the Company’s long-term growth
The semis market should reach trough in H1 2023; the low point in share prices is generally a few months before the semis market itself reaches the bottom
Valuation is appealing at these levels. Discount to peers. Upside potential is over 50%

NetEase(NTES.US) 4Q22 Preview: Enter a Period of Lukewarm Performance

We estimate that NetEase’s 4Q22 revenue/non-GAAP net income will be in line/12% vs cons. Our 2023’s revenue/non-GAAP net income are in line/12% vs cons.
In 4Q22, several of NetEase’s mid-tier games saw declines in ranking. We expect that NetEase will have a period of single digit growth in revenue.
We still rate NetEase BUY and raise TP to US$ 87. But NetEase is not our top pick within China internet space.

Time to Move Forward to Corporate Governance 2.0, Where the Substance Will Be Questioned

By Aki Matsumoto

Although Fujitec’s corporate governance framework has improved in places, the Statutory Auditor and Nominating Committee aren’t functioning, and the Board of Directors with a majority of independent directors isn’t functioning.
METI survey shows that 20% of independent directors are friends of CEO, a glimpse of how companies expect independent outside directors to play a role in endorsing executive management policies.
With several revisions of Corporate Governance Code, companies have ostensibly made steady progress in corporate governance efforts. However, whether this has been accompanied by substance varies from company to company.

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Jan 06

Daily Brief TMT/Internet: Artspark Holdings, Weimob Inc., Tencent, SK Square, Futu Holdings Ltd, Ant Financial Services Group, Loongson Technology, FTX Token, A10 Networks and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

TOPIX Inclusions: Who Is Ready (Jan 2023)
Weimob Placement – Share Price Momentum over the past Few Months Have Been Strong
Tencent(700.HK) 4Q22 Preview:Turning Points Are Emerging
Korea M&A Outlook in 2023: What’s for Sale?
EQD | Tencent (700 HK): Use Derivatives to Protect Recent Gains
CSRC Sanction Is Likely Darkness Before Dawn
Ant Group’s Lending Unit Gets Approval for $1.5 Billion Capital Boost
Chinese Intel Alternative Makes Consumer Play With Retail Store
A Look at Gemini USD
ATEN: Shifting to a Second Half Event

TOPIX Inclusions: Who Is Ready (Jan 2023)

By Janaghan Jeyakumar, CFA

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
This insight is a follow-up to TOPIX Inclusions: Who Is Ready (Dec 2022).
Our latest top pick for TOPIX Inclusion pre-events is Artspark Holdings (3663 JP).

Weimob Placement – Share Price Momentum over the past Few Months Have Been Strong

By Clarence Chu

Weimob Inc. (2013 HK) is looking to raise about US$205m in its primary placement to fund R&D, upgrade marketing systems, and for general working capital purposes.
On an ADV basis, the deal is a relatively small one at just 3.6 days of the firm’s three month ADV.
In this note, we will run the deal through our ECM framework and talk about the recent updates.

Tencent(700.HK) 4Q22 Preview:Turning Points Are Emerging

Our Tencent 4Q22’s rev. is in line, while non-IFRS net income would beat cons. by 5.2%. We estimate that top and bottom line will grow 13%/14% YoY in 2023.
We suggest major business lines see turning points in 4Q22, supported by rebound of Peacekeeper Elite’s gross billings, approval of new game codes, monetization of Wechat Video Account, etc.
Tencent is one of our top picks. Video Account, global game publishing, and margin beat are three major catalysts. Our TP HK$ 407 implies 26.1X PE in 2023.

Korea M&A Outlook in 2023: What’s for Sale?

By Douglas Kim

More than 20 trillion won (US$16 billion) worth of deals are up for M&As in 2023.
However, due to high interest rates and differences on valuations among buyers and sellers, the M&A market in Korea is likely to continue to be weak in 2023.
In this insight, we discuss 24 companies that are up for M&As this year in Korea, including Hanon Systems, SK Shieldus, and K Car.

EQD | Tencent (700 HK): Use Derivatives to Protect Recent Gains

By Simon Harris

Stock is up over 80% from October lows and almost 10% in 2023 already
Sentiment over fundamentals appears to be driving the rally and stock is back in the worlds top 10 most valuable companies
We consider some option strategies to roll profits and reduce exposure

CSRC Sanction Is Likely Darkness Before Dawn

CSRC’s rectification on FUTU to suspend new user registration from mainland China while allow service continuation to existing user is well expected. We believe the market over-reacted;
FUTU caters to overseas Chinese and populations falling outside of major currency zones. This market supports a paying user growth of 12% and revenue growth of 19% CAGR to 2025.
We maintain BUY and cut TP from US$58.5 to US$50 due to moderate decline in mainland China users.

Ant Group’s Lending Unit Gets Approval for $1.5 Billion Capital Boost

By Caixin Global

Ant Group Co. Ltd.’s online lending subsidiary has been given the go-ahead from regulators to boost its registered capital by 10.5 billion yuan ($1.5 billion), marking a key step forward in the fintech giant’s government-driven, year-long revamp
The approval was granted a month and a half after some of the unit’s shareholders disclosed the plan, underscoring the recent pledge by authorities to promote healthy development
Ant Group, backed by billionaire Jack Ma’s e-commerce giant Alibaba Group Holding Ltd., has been conducting a rectification required by the government since a regulatory storm saw its planned blockbuster IPO suspended in November 2020

Chinese Intel Alternative Makes Consumer Play With Retail Store

By Caixin Global

Loongson Technology Corp. Ltd., a Chinese chip architecture developer, took a major step into the consumer market by opening its first brick-and-mortar pop-up store
Loongson is also exhibiting its development kits and solutions for printers, smart door locks, and treadmills in the store
This is not the first time Loongson has attempted to enter the consumer market. The firm opened an online store on e-commerce platform JD.com in October 2021, selling laptops, desktops, and their components like motherboards and memory kits

A Look at Gemini USD

By Kaiko

The fall of the FTX and Alameda house of cards built atop a seemingly innocuous token – FTT – has raised skepticism about centralized exchanges and the tokens that they issue.
Attention was first turned to Binance, BNB, and BUSD; as a result, BUSD’s market cap fell from $23.5bn to $16.5bn in just 90 days, though Binance has seemingly passed its stress test.
Attention has now turned to Gemini, Genesis, and Digital Currency Group (DCG).

ATEN: Shifting to a Second Half Event

The recent wave of layoff related headlines along with companies putting greater scrutiny on cash outflows could result in ATEN experiencing slower than expected revenue growth in 2023
When there are layoffs and changes to employees working more from the office it is likely to reduce the number of security devices purchased
Our lowered revenue outlook comes with the expectation ATEN would be able to ramp revenue in the second half of the year

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Jan 05

Daily Brief TMT/Internet: Pinduoduo and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Raise 2023 Forecasts Due to High Take Rate

Raise 2023 Forecasts Due to High Take Rate

There has been debate: 1) why PDD’s take rate can be higher than BABA, 2) how to justify PDD’s long term margin, 3) will PDD be able to beat cons.
We suggest that the key driver of PDD’s outperformance in recent quarters has been the weak macro environment.
We raise our 2023 forecasts of total revenue and non-GAAP net income by 4% and 19%, more than consensus by 8% and 7% respectively.

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Jan 04

Daily Brief TMT/Internet: Softbank Group, Taiwan Semiconductor (TSMC) – ADR, Arlo Technologies Inc and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Softbank Group – Vision Fund: Gains on Dollar Basis in Q3 but Stronger Yen Points to Quarterly Loss
Taiwan Tech Weekly: Signs TSMC Winning the 3-Nm Battle Vs. Samsung, Apple Bargaining Down Suppliers
ARLO: Discounts and Subscriber Growth

Softbank Group – Vision Fund: Gains on Dollar Basis in Q3 but Stronger Yen Points to Quarterly Loss

By Kirk Boodry

The Vision Fund public portfolio closed Q3 in the black as gains for Didi and AutoStore offset weakness for Asian investments Goto and Coupang. We have included updated tables inside
On a yen basis, however, Softbank will likely post a Q3 segment loss for Vision Fund as a weaker dollar more than offsets the local currency gains.
SBG shares have traded close to the 35% discount to NAV level since end-November but that could expand if sentiment on China weakens or tech valuations remain volatile

Taiwan Tech Weekly: Signs TSMC Winning the 3-Nm Battle Vs. Samsung, Apple Bargaining Down Suppliers

TSMC’s revenue could drop in the near-term due to customers cutting orders, however full year 2023E growth still likely thanks to advanced chips.
Samsung has guided staff internally for a major slump in its semiconductor unit’s operating profit.
Apple is pushing for price cuts amongst its suppliers due to weak end demand for its products.

ARLO: Discounts and Subscriber Growth

ARLO spent the fourth quarter adjusting to a tough consumer environment with deep discounts to clear out channel inventory.
ARLO had already provided quarterly revenue guidance taking into consideration the discounting and promotions that would run during the quarter.
Paying subscriber count rising remains the value proposition in owning shares of ARLO. Quarterly adds closer to what ARLO has been achieving would be a positive for the stock.

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Jan 03

Daily Brief TMT/Internet: New Relic Inc, Tencent, Universal Display and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

New Relic: $1B+ Revenue By FY24. Cost Discipline Will Drive Profitability
China Internet Weekly (2Jan2023): Alibaba, Tencent, Douyin, Bilibili, Uxin
Universal Display Corporation: Initiation of Coverage – Contract With Samsung & Other Drivers

New Relic: $1B+ Revenue By FY24. Cost Discipline Will Drive Profitability

By Andrei Zakharov

We double down on New Relic stock as we see operational improvement and a clear path to non-GAAP profitability. A strong balance sheet will help to survive an economic downturn.
The company will repay 0.5% senior convertible notes in 2023 and is not interested in diluting existing shareholders. New Relic ended 2QFY23 with $833M in cash and cash equivalents.
American activist investor Jana Partners held ~3.2M New Relic shares as of Nov-22. New Relic Inc (NEWR US) shares underperformed in 2022, with shares down ~49%

China Internet Weekly (2Jan2023): Alibaba, Tencent, Douyin, Bilibili, Uxin

By Ming Lu

Alibaba’s CEO will lead the cloud business himself, because the retailing business faces headwind.
Tencent will enter the short video market again, because the online game is till stagnant.
Douyin will launch a car-hailing platform, which will compete with Meituan.

Universal Display Corporation: Initiation of Coverage – Contract With Samsung & Other Drivers

By Baptista Research

This is our first report on Universal Display Corporation, one of the largest players in the domain of OLED technologies and materials for use in display and solid-state lighting applications.
The management anticipates that the OLED market will continue on its long-term growth trajectory.
We initiate coverage on the stock of Universal Display Corporation with a ‘Hold’ rating.

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Jan 02

Daily Brief TMT/Internet: Alibaba (ADR), Hong Kong Hang Seng Index and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Alibaba 4Q Ecommerce Outlook
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

Alibaba 4Q Ecommerce Outlook

By Xin Yu, CFA

December GMV was below expectations, due to elevated case counts after the relaxation of the covid restriction
With high return rate and more merchant supports, gap between GMV growth and CRM growth remained large in 4Q.
Long-Term wise, Alibaba will continue losing market share while PDD’s market share may potentially surpass JD.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

By Simon Harris

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

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Jan 01

Daily Brief TMT/Internet: Taiwan Semiconductor (TSMC) – ADR, Meituan, Elan Microelectronics, Quanta Computer and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

China Semiconductor Restrictions: How the Vice Is Becoming Tighter and Tighter
Index Rebalance & ETF Flow Recap: Meituan, S&P/ASX All Tech, 2022 ETF Flows
Taiwan Dual-Listings: Premium/Discounts Mostly in the Middle, ChipMOS Opportunity
Elan Microelectronics: Capacity for Share Buybacks in 2023E, Intel Event Could Provide Cycle Clarity
Taiwan Apple Ecosystem Monitor: Quanta and Pegatron Shares Lagging Apple Decline?

China Semiconductor Restrictions: How the Vice Is Becoming Tighter and Tighter

We provide a timeline and analysis of key measures from May 2019 to December 2022.
How successive tightening steps led to a critical consolidation in October 2022.
Recent developments show the U.S. has motivated additional countries to participate and more restrictions are likely in 2023E.

Index Rebalance & ETF Flow Recap: Meituan, S&P/ASX All Tech, 2022 ETF Flows

By Brian Freitas

The Stock Exchange of Thailand SET 50 Index (SET50 INDEX) rebalance was implemented at the close on Friday and there were a bunch of review cutoffs on the same day.
Passive Hang Seng trackers need to sell Meituan (3690 HK) at the close on 4 January following Tencent (700 HK) in-specie distribution.
We take a look at flows to Asian focused ETFs over the course of 2022. A lot of winners in terms of AUM, but a few losers too.

Taiwan Dual-Listings: Premium/Discounts Mostly in the Middle, ChipMOS Opportunity

TSMC ADRs are trading at a small premium; 4Q22 results will be released on January 12th.
UMC ADRs are trading at a discount; 4Q22 results will be released on January 16th.
ChipMOS ADRs are trading at a decent discount, opening a trade opportunity.

Elan Microelectronics: Capacity for Share Buybacks in 2023E, Intel Event Could Provide Cycle Clarity

We believe Elan Microelectronics has capacity for share buybacks in 2023E, and that it could be in shareholder interests.
Even in the coming 2023E down-year, we believe the company could generate over NT$1.7bn in EBITDA. Its balance sheet will remain net-cash.
The company is in a strong position as a leader in touch screens, touch pads, and fingerprint sensors. Intel’s upcoming January webinar could provide clarity on the industry cycle.

Taiwan Apple Ecosystem Monitor: Quanta and Pegatron Shares Lagging Apple Decline?