TMT/Internet

TSMC — Trading near parity, decent setup opportunity at the current level.
UMC — Trading at a discount, another decent setup opportunity.
Chunghwa Telecom — Rare opportunity here, trading at a steep discount compared to the tight historical range.

Singtel: Demand Surge

By Steven Holden

Sentiment switch for Singtel after surge in buying among Asia Ex-Japan funds
New positions from Fullerton Asia Focus, Jupiter Asian Fund and Fullerton Asia Growth & Income head a total of 14 funds opening exposure between 01/31/2022 and 10/31/2022.
Follows broader rotation in to key Singapore names despite heavy selling in Sea Ltd.

Intel Vs. TSMC Monitor: TSMC Outperformed Too Much Too Soon?

Intel has eked out a small outperformance vs. TSMC most recently, and we believe there is more to come.
Events appear to be in Intel’s favor in the near-term.
TSMC has outperformed by a historically extreme amount in just three weeks.

Bilibili (9626 HK): 3Q22, Growth Accelerated, Loss Shrank, 38% Upside

By Ming Lu

The revenue growth rate rose for the first time in one year and a half.
Also, operating loss shrank for the first time in one year and a half.
We believe the stock has an upside of 38% for year end 2023.

Nanya Technology: Inventory Risk, A 10% Downside Trade Is Still Available

Nanya Tech shares have dropped, but there’s still a 10% trading sell from these levels.
The company had dramatically outperformed the Taiwan market and Memory chip peers, yet is heading into weakening end-demand with inventory levels at multi-year highs.
We see the potential for inventory write-downs and a negative operating margin in the coming quarters. Meanwhile, opportunities for near-term good news appear limited.

Twitter’s Banks Are Stuck With Largest Chunk Of Unsold LBO Debt

By Vicki Bryan

Twitter’s banks are stuck with 30% of total US LBO debt unsold debt.
The banks already had lost more than $500 million on Twitter’s LBO debt even before the deal closed. They could sell it even at 50-60 cents on the dollar.
The trouble with Elon aggressively blowing up Twitter is that it’s banks probably won’t take his calls when Twitter needs more cash—which it probably will in the near future.

Is TSE Being Too Strict with the Honor Students and Too Lenient with the Underdogs?

By Aki Matsumoto

There are 236 companies with a trading unit of more than 500,000 yen, while there are 967 companies with a trading unit of less than 50,000 yen on the TSE.
It’s fair to amend the law to abolish the share unit system, but changing the law takes time. It’s also unclear why “between 50,000 yen and 500,000 yen” is appropriate.
While TSE still allows 300 companies that don’t meet the listing criteria to be listed on prime market, TSE requires companies with higher stock prices to increase their administrative burden.

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Nov 28

Daily Brief TMT/Internet: Nomura Research Institute Ltd, Kakaku.com Inc, Meituan and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Nomura Research Institute (4307) Large Secondary Offering – Demand Profile and Index Implications
Kakaku.com Inc.: A Deep-Dive View
Meituan: New Reporting Structure Conceals Loss-Making Businesses and Hard to Assess Core Businesses
Nomura Research Placement – Somewhat Well Flagged, past Deals Have Done Well but Momentum Is Weak

Nomura Research Institute (4307) Large Secondary Offering – Demand Profile and Index Implications

By Shifara Samsudeen, ACMA, CGMA

On Friday, Nomura Research Institute Ltd (4307 JP) announced that Jafco Co Ltd (8595 JP) and Nomura Holdings (8604 JP) would each sell NRI shares in a Secondary Offering.
JAFCO is selling to fund a giant buyback. Nomura is selling to round out the offering size. The total is 37mm shares plus greenshoe of 5.5mm shares.
At Friday’s price that is ~¥140bn (including greenshoe), 7% of shares out, 10% of float, and about 25% of Real World Float. There are index implications.

Kakaku.com Inc.: A Deep-Dive View

By Steven Chen

Kakaku.com Inc. can be a rare species among listed companies in Japan;
We had multiple email exchanges and meetings with the management team for a deep-dive view covering corporate cultural, management style, capital allocation, business model, and competitive strength.
We would wait for a 20%-30% pullback in the share price before looking to add to our position but would certainly remain reluctant to sell any share that we own.

Meituan: New Reporting Structure Conceals Loss-Making Businesses and Hard to Assess Core Businesses

Meituan reported 3Q2022 results. Revenue increased 28.2% YoY to RMB62.6bn (vs consensus RMB62.3bn) while reported an OP of RMB988m (consensus OP loss of RMB935m) for the first time since 3Q2019.
However, on adjusted basis, Meituan made an adjusted operating loss of RMB1.1bn (1.7% of revenue) of revenues compared to an adjusted operating loss of RMB7.7bn (15.1% of revenue) in 3Q2022.
Tencent announced that it will distribute majority of its shareholding on Meituan (3690 HK) to its shareholders in dividends and Naspers is expected to sell the Meituan Shares it receives from Tencent.

Nomura Research Placement – Somewhat Well Flagged, past Deals Have Done Well but Momentum Is Weak

Nomura Holdings (8604 JP) and Jafco Co Ltd (8595 JP) are looking to raise around US$850m via selling 5.7% of Nomura Research Institute Ltd (4307 JP).
This is not the first sale by Nomura and marks a clean up for Jafco. Hence it might not come as a complete surprise.
In this note, we will run the deal through our ECM framework and talk about the recent updates.

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Nov 27

Daily Brief TMT/Internet: Trina Solar Co Ltd, Alibaba (ADR), Socionext, Meituan and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

SSE50 Index Rebalance: In Line with Forecasts; Trades Performing Well
ECM Weekly (27th Nov 2022) – Growatt, Lygend, Sunshine Ins, Weilong, DPC, Daiei, Skymark, GoTo
Socionext (6526 JP) TOPIX Inclusion – Great Performer Deserves Profit-Taking
Last Week in Event SPACE: Meituan, Link Admin/Pexa, DTAC/True, Medley
Meituan 105 Buy Support

SSE50 Index Rebalance: In Line with Forecasts; Trades Performing Well

There are 5 changes for the SSE50 Index that will be implemented at the close on 9 December. Passive selling on a few deletions is pretty large.
We estimate a one-way turnover of 4.07% at the December rebalance leading to a one-way trade of CNY 3.36bn. Index arb activity could add to the impact on the stocks.
The adds have dropped over the last few months while the deletes have moved higher. There could be a reversion of that trend till implementation of the changes.

ECM Weekly (27th Nov 2022) – Growatt, Lygend, Sunshine Ins, Weilong, DPC, Daiei, Skymark, GoTo

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, things are picking up again going into the year end.
There were no large placement or blocks this week, although prior lockup linked blocks kept flowing through.

Socionext (6526 JP) TOPIX Inclusion – Great Performer Deserves Profit-Taking

Socionext (6526 JP) was offered in a range of ¥3,480-3,650, oversubscribed, IPOed at ¥3,650 and closed ¥4200 on Day 1. We can assume that was the “right price.”
Since then, while peers are up 19.8% in the 6 weeks since then, Socionext is up 66%. This year’s biggest Japan IPO has been a big winner.
The TOPIX inclusion is on Tuesday at the close. Beware, you don’t know who is in the stock and who is not.

Last Week in Event SPACE: Meituan, Link Admin/Pexa, DTAC/True, Medley

You could imagine people covering their short in Meituan (3690 HK) now. The Hang Seng sell flow on 4 January 2023 is insignificant. But there will be more overhang later.
If you buy Link Administration (LNK AU) outright, you are buying a package of three potential future takeout targets.
It’s not certain the scrip terms will continue as stated in the DTAC /True merger, but if they change at all, that would almost certainly require a new shareholder meeting.

Meituan 105 Buy Support

By Thomas Schroeder

Meituan (3690 HK) has some big resistance hurdles to overcome and will act as tactical sell levels to seek out the 105 buy zone.
A tactical bounce back to 165 is on the cards with 168/75 the high degree sell barrier. Secondary trendline resistance rests near 185 as the bigger sell zone.
The bearish rising wedge stands out as the dominant force. The support break warns of fallout after a bounce attempt back to 168. A weak bounce would turn near 160.

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Nov 26

Daily Brief TMT/Internet: GoTo, Sea Ltd, Meituan and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

2023 High Conviction – GoTo – Burnt Through All Cash From the IPO, Weakest Cash Position Among Peers
Sea Ltd (SE US) – Wind Back in the Sails
2023 High Conviction Ideas: Meituan
Shanghai/Shenzhen Southbound Connect: Weekly Moves (25 November 2022)

2023 High Conviction – GoTo – Burnt Through All Cash From the IPO, Weakest Cash Position Among Peers

By Clarence Chu

In Mar 2022, GoTo (GOTO IJ) raised around US$1bn from what was essentially a domestic Indonesian IPO.
GoTo has already burnt through the cash it raised from the listing and cash burn still remains high, while its cash balance is amongst the lowest in its peer set.
At its current cash burn pace, the company will have to come to the markets again soon.

Sea Ltd (SE US) – Wind Back in the Sails

By Angus Mackintosh

Sea Ltd 3Q2022 results should be seen as the poster child for the rest of the space given a crystal clear focus on profitability and pragmatic approach to future growth.
The fact that the company is now contribution margin positive in ASEAN and even Adjusted EBITDA positive in Malaysia and Taiwan is a testament to its success in controlling costs.
Sea Ltd (SE US) has seen a significant compression in valuations and now looks attractive on 2.1x FY2023V EV/Sales and 1.7x FY2024E EV/Sales.

2023 High Conviction Ideas: Meituan

By Xin Yu, CFA

Meituan is a leading “service e-commerce” platform in China, leveraging technology to connect consumers with merchants.
With the gradual re-opening in 2023, core local commerce will deliver better than expected result.
Tencent’s distribution of Meituan shares provides a good entry point.

Shanghai/Shenzhen Southbound Connect: Weekly Moves (25 November 2022)

Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry.
Overall, the net inflow over the past week was ~HK$0.67bn, split (+HK$0.1bn) for Shanghai and (+HK$0.57bn) for Shenzhen.
The largest inflows were in Tencent (700 HK) and Tracker Fund of Hong Kong Ltd (2800 HK). The largest outflows were in Meituan (3690 HK) and Li Ning (2331 HK).

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Nov 25

Daily Brief TMT/Internet: Lockon Co Ltd, Taiwan Semiconductor (TSMC) – ADR, Meituan, iQIYI Inc, Alibaba (ADR), Skyworks Solutions, VMware Inc Class A, Lattice Semiconductor and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Meituan Index Flows Clarifications on the Tencent Distribution; Prosus Comments on Its Holdings
EQD | TSMC (TSM US): Buffet Is Betting on Long Term Upside – We Look at the Options Market for Ideas
Top Tencent Investor Naspers Considers Selling Meituan Shares
Iqiyi (IQ US): Compelling Asymmetrical Payoff
US Vs China Technology, Alibaba, China Unicom, and New World Development
Skyworks Solutions Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report
Skyworks Solutions Inc.: Initiation of Coverage – Business Strategy & Key Drivers
MergerTalk:Why Broadcom’s Pursuit of VMware Will Fare Better Than Nvidia’s Doomed Bid For ARM
Lattice Semiconductor Corporation: Initiation of Coverage – Strong Macro & Other Drivers

Meituan Index Flows Clarifications on the Tencent Distribution; Prosus Comments on Its Holdings

Days after the Tencent (700 HK) announcement about its planned distribution of the bulk of the Meituan (3690 HK) shares it owns, the Hang Seng Index team clarified index treatment.
It will be treated in HS Indices as a “listed non-cash distribution” for Tencent. There is theoretically wiggle room on the Meituan side, but it appears it will follow JD.com.
That means Meituan selling on 4 January at the close, limbo for two months, then Meituan buying. Full model below.

EQD | TSMC (TSM US): Buffet Is Betting on Long Term Upside – We Look at the Options Market for Ideas

By Simon Harris

Stock has suffered this year (-47% YTD) with rising geopolitcal tensions and slowing global economy
Berkshire Hathaway is betting on a recovery in the stock with their $4.1bn stake
We look at the options market to identify some trades

Top Tencent Investor Naspers Considers Selling Meituan Shares

By Caixin Global

Prosus NV, the Dutch unit of Tencent Holdings Ltd.’s largest shareholder Naspers Ltd., said it will consider selling the $4.6 billion of Meituan shares it will receive from Tencent as a special dividend.
South African media giant Naspers owns about 28% of the Chinese internet giant indirectly via Prosus.
On Nov. 16, Tencent announced a special distribution of 958 million Meituan shares to shareholders.

Iqiyi (IQ US): Compelling Asymmetrical Payoff

By Eric Chen

Iqiyi’s 3Q results released on Tuesday disappointed markets due to dim growth despite sustained profitability for the third quarter in a row.
“Iconic” turnaround actually put IQ on firmer footing almost on all counts compared to one year ago.
Stabilizing cost base, strong operating leverage potential and troughs in business and macro cycle spell for compelling asymmetrical payoff – limited downside VS. multi-fold upside.

US Vs China Technology, Alibaba, China Unicom, and New World Development

By Untying The Gordian Knot

The consensus of bottom in China Tech and China A shares continue to gain favour.
Bank of America is the latest to recommend selling US tech to buy China Tech.
The Bullish China stocks call is predicated on reopening Pivot, yet the daily increase in cases and sporadic lockdown put the Pivot callers to double down.

Skyworks Solutions Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

Skyworks Solutions is a major supplier in the field of radio frequency (RF) components.
The company has been performing well financially off-late with its growth driven by its diversified portfolio and expanding set of customers.
Furthermore, the management delivered strong earnings in the automotive industry, with revenue strength emphasizing their connectivity and power isolation portfolio.

Skyworks Solutions Inc.: Initiation of Coverage – Business Strategy & Key Drivers

This is our first report on Skyworks, one of the leading suppliers of radio frequency (RF) components to the electronics industry.
The company delivered another all-around beat in the last quarter driven by its diversified portfolio and expanding set of customers.
Furthermore, the management delivered strong earnings in the automotive industry, with revenue strength emphasizing their connectivity and power isolation portfolio.

MergerTalk:Why Broadcom’s Pursuit of VMware Will Fare Better Than Nvidia’s Doomed Bid For ARM

By Robert Sassoon

While the size of the $61BN Broadcom/VMware deal has naturally attracted the scrutiny of regulators, the transaction’s regulatory obstacles are far less onerous than the failed Nvidia/Arm deal
Timing risk is a consideration as we can expect a protracted review process
If the regulatory review timeline does not stretch too far beyond the end 2023, there are still decent IRRs to be earned by arbs

Lattice Semiconductor Corporation: Initiation of Coverage – Strong Macro & Other Drivers

This is our first report on Lattice Semiconductor.
The company delivered impressive results in the third quarter, with an all-around beat and a quarterly revenue growth of 31% year over year.
Overall, we initiate coverage on the stock of Lattice Semiconductor Corporation with a ‘Hold’ rating.

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Nov 24

Daily Brief TMT/Internet: Total Access Communication, Alibaba (ADR), Meituan, Grab, Link Administration, Kuaishou Technology, Oracle Corp, Broadridge Financial Solutions, Inc, Blackline Inc, Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Disaster As VTOs Cancelled Under DTAC/True Merger
Alibaba (BABA US): Fighting Back
Add Meituan on Rumors of Social Benefit Payments
Grab (GRAB US) – Shifting Down a Gear for A Steep Ascent
Link Admin (LNK AU) Sets in Motion a Strategy to Realise Underlying Value
Kuaishou: Domestic Business Turns Profitable for the First Time
Oracle Corporation (ORCL US): TSS Recommendation Closed After One Week (-4.5%)
Broadridge Financial Solutions Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report
BlackLine Inc.: Initiation of Coverage – Customer Attractiveness Scoring & Other Drivers
Without Disclosure and Ensuring Transparency, the Black Box on Compensation Will Increase

Disaster As VTOs Cancelled Under DTAC/True Merger

By Shifara Samsudeen, ACMA, CGMA

“The conditions precedent to the VTO have not been satisfied within one year from 22 November 2021 … the parties have declined to carry out the VTO.“
This statement was lifted from Telenor’s (the major shareholder of Total Access Communication (DTAC TB)) brief announcement. Telenor/CP Group aim to complete the transaction within the first quarter of 2023
This appears a cop-out on behalf of both Tender Offerors (Telenor & CP Group), who probably could have pushed for an extension. And why weren’t the scrip terms addressed?

Alibaba (BABA US): Fighting Back

By Steven Holden

Ownership in Alibaba Group Holdings is on the rise among active Greater China managers.
Stock price below $100 a catalyst for active Greater China managers to buy back in, with Invesco, JP Morgan and E Fund among those opening positions
Alibaba remains well behind both TSMC and Tencent on an average weight basis and is the 2nd largest underweight in the Greater China region.

Add Meituan on Rumors of Social Benefit Payments

By Xin Yu, CFA

Meituan’s recent price decline was partly due to the rumors about the social benefit payments.
First, rumors are unverified statements. There was no such meeting at all.
Second, the social benefit payment impact is probably controllable. I think the recent price decline provides a chance of adding on the stock.

Grab (GRAB US) – Shifting Down a Gear for A Steep Ascent

By Angus Mackintosh

Grab‘s recent results reflect a change of pace in terms of moving along the path to profitability with a more disciplined approach to incentives and a focus on cost controls.
Deliveries segment adjusted EBITDA turned positive for the first time, 3Qs ahead of previous guidance, and food 2Qs ahead of guidance both of which are positives.
A continuing drag will likely continue to come from expenses related to the buildout of its three digibanks. Grab‘s headline EBITDA is not forecast to be positive until 2025.

Link Admin (LNK AU) Sets in Motion a Strategy to Realise Underlying Value

By Arun George

The EGM to approve the PEXA Group (PXA AU) distribution of Link Administration (LNK AU)’s remaining 38.49% stake is on 23 December. Shareholders get one PEXA share per 7.52 Link shares.
This marks the latest move to unlock the underlying value by pursuing a breakup strategy. Discussions continue on DND’s acquisition of the CM and the BCM business for A$1.27 billion.
Our base-case SoTP value is A$4.42 per share, which is 28% above the last close. If you haven’t been turned off by the Link saga, it is worth a look.

Kuaishou: Domestic Business Turns Profitable for the First Time

Kuaishou Technology (1024 HK) reported 3Q2022 results. Revenue grew 12.9% YoY to RMB23.1bn (vs consensus RMB22.6bn) while reported operating losses declined to RMB2.6bn (vs consensus RMB3.1bn) from RMB3.1bn in 3Q2021.
The company’s domestic business made an operating profit for the first time while there has been significant reduction in operating losses from the overseas business
Kuaishou’s share price moved up 7% during today’s trade following its earnings announcement and we think there is further upside to the company’s current share price.

Oracle Corporation (ORCL US): TSS Recommendation Closed After One Week (-4.5%)

By David Coloretti, CMT

The development of TSS has been a life’s work. We anticipate a high win / loss ratio and accept than not every recommendation will be profitable.
On 15 November we determined that extreme ST momentum failure would likely deliver a 4.0% to 5.5% decline in ORCL US in 1-2 weeks.
ORCL US failed to deliver, declining only 0.6% before closing 1 week later, on 22 November, 4.5% above our recommendation entry level. This recommendation is now closed.

Broadridge Financial Solutions Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

Broadridge Financial Solutions is a well-known investor communications and technology-driven solutions provider for the financial services industry.
The company has had a decent financial performance in recent times and has seen a continuous expansion in investor positions, notwithstanding the market downturn.
Given their forward testing capabilities, Broadridge is confident of seeing steady growth in investor positions in the coming year.

BlackLine Inc.: Initiation of Coverage – Customer Attractiveness Scoring & Other Drivers

This is our first report on BlackLine, the renowned cloud-based solutions provider for accounting and financial management operations.
The company delivered solid financial results in the last quarter and managed an all-around beat with good growth in revenue.
Moreover, continued free cash flow and margin improvement were seen due to further disciplined expense management and operating efficiencies.

Without Disclosure and Ensuring Transparency, the Black Box on Compensation Will Increase

By Aki Matsumoto

Progress on ESG initiatives should be evaluated objectively. With insufficient transparency and disclosure of compensation, there is concern that incorporating ESG factors into compensation will further increase uncertainty.
Leadership is required for management to seek the evolution of essential initiatives so that ESG efforts don’t fall into “numbers matching” and not be intimidated by temporary setbacks or modifications.
There are the following unresolved issues: non-disclosure of individual director compensation, bias toward fixed compensation, opaque compensation formulas, and ensuring the independence of the Compensation Committee.

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Nov 23

Daily Brief TMT/Internet: Link Administration, Delta Electronics Thai, Total Access Communication, Chindata Group, GoTo, Kuaishou Technology, Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Link Admin Is Cheap Amid PEXA In-Specie And Possible BCM/CM Sale
SET50 Index Rebalance Preview: Four Potential Changes in December
DTAC/True Merger to Proceed but Without the VTOs
2023 High Conviction: Chindata’s Track Record & Rating Makes It a Takeover Target
GoTo: Long-Term Profitability Is Worrying
Kuaishou (1024 HK): 3Q22, Promising Live Streaming, Better Margin, 39% Upside
GoTo IPO Lockup Expiry – US$13bn Lockup Release or in Other Words, the Real IPO
Should the 2022 Annual Meeting of Shareholders Be Regarded as Constant Progress?

Link Admin Is Cheap Amid PEXA In-Specie And Possible BCM/CM Sale

Link Administration (LNK AU) has released the explanatory memorandum regarding the PEXA Group (PXA AU) in-specie distribution.
Link shareholders will receive one PEXA share for every 7.52 Link shares. Shareholders will vote on the distribution on the 23 December. The IE, rightfully, deemed the process fair.
If D&D buys Link’s BCM/CM ops for A$1.27bn, Link would be net cash of ~A$1.40/share versus an ex-entitlement price of ~A$1.58/share. And Link would still hold the lucrative RSS ops.

SET50 Index Rebalance Preview: Four Potential Changes in December

By Shifara Samsudeen, ACMA, CGMA

The market cap review period for the December rebalance of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) ends in 6 trading days.
Following the market consultation and reduction in the turnover ratio, there could be four changes to the index. The DTAC/TRUE merger could result in another inclusion in Q1 2023.
Estimated one-way turnover at the December rebalance is 8.1% and will result in a one-way trade of THB 7.4bn. More than 1x ADV to trade on most stocks.

DTAC/True Merger to Proceed but Without the VTOs

By Arun George

Telenor and CP Group will proceed with the Total Access Communication (DTAC TB)/True Corp Pcl (TRUE TB) merger but without the VTO due to missing the VTO conditions precedent deadline.
The likely real reason for the VTO cancellation was the realisation that the VTO prices were too generous, particularly in the context of the NBTC’s harsh conditions.
Completion is targeted for 1Q23. The current share price ratio of 8.750x vs the exchange ratio of 10.221x is attractive. Timing and potential tweaks to the exchange ratio are risks.

2023 High Conviction: Chindata’s Track Record & Rating Makes It a Takeover Target

By Arun George

Chindata Group (CD US)’s 3Q22 results beat both revenue and adjusted EBITDA consensus estimates. Chindata raised its full-year guidance for the second time this year.
Chindata continues to attract rumours of takeover interest, most recently from China Merchants. Its track record of beating guidance, modest leverage and beaten-down rating make it a target.
A forward EV/EBITDA multiple of 10.8x, in line with 21Vianet Group (VNET US)’s multiple implied by its founder’s offer (at US$8.20), would imply Chindata’s price of US$8 per ADS.

GoTo: Long-Term Profitability Is Worrying

GoTo (GOTO IJ) reported 3Q2022 results on Monday. Gross revenue increased 30.4% YoY to IDR5.9trn while adjusted EBITDA (losses) dropped to 81.3% of net revenues vs 289% in 3Q2021.
There has been notable improvement in the company’s earnings (decline in losses in particular) driven by huge cost cuts on promotions which helped reduce losses.
However, cutting down promotions/marketing costs could lead to drop in top line growth and market share.

Kuaishou (1024 HK): 3Q22, Promising Live Streaming, Better Margin, 39% Upside

By Ming Lu

There are three positive signs in online marketing despite the business slowed down.
For living streaming, both active user base and time spent grew rapidly.
The operating margin improved significantly to -13% in 3Q22 from -37% in 3Q21.

GoTo IPO Lockup Expiry – US$13bn Lockup Release or in Other Words, the Real IPO

In Mar 2022, GoTo raised around US$1bn from what was essentially a domestic Indonesian IPO. Its pre-IPO shareholders will be released from their lockup soon.
GoTo was formed in May 2021 as a result of a merger between two of Indonesia’s largest unicorns Gojek, leading player in ride hailing, and Tokopedia, leading e-commerce player.
In this note, we will talk about the upcoming lockup expiry.

Should the 2022 Annual Meeting of Shareholders Be Regarded as Constant Progress?

By Aki Matsumoto

Early disclosure of convocation notices and the use of electronic voting platforms, as specified in Corporate Governance Code, and electronic voting, which reduces the companies’ administrative burden, have also progressed.
Although the provision of English-language convocation notices was included in the Corporate Governance Code, only a few companies still send all documents in English translation.
More than 10 years after the regulatory-changes, few companies still file their annual securities reports prior to AGMs. Few companies take such a proactive approach by changing their company workflow.

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Nov 22

Daily Brief TMT/Internet: Greatek Electronics, SUMCO Corp, Tencent, Ant Financial Services Group, ARTERIA Networks Corp, Hon Hai Precision Industry and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

FTSE TWSE 50 & 100 Dec 22 Final Expectations: Greatek Is Still the Main Talking Point
Sumco (3436) | Bargain Basement
China Internet Weekly (21Nov2022): NetEase, Blizzard, Tencent, Meituan, Tencent Music, JD Logistics
Ant Group: Consumer Finance Finds Investors But Beijing Could Throw New Obstacles At Ant’s Direction
Arteria Networks (Buy) – Q2 22 Results Reaction: Core Business Growth Intact
Hon Hai & Yulon IPO: Media Reports of Electric Vehicle JV 1Q23 Listing, Stock Implications

FTSE TWSE 50 & 100 Dec 22 Final Expectations: Greatek Is Still the Main Talking Point

By Janaghan Jeyakumar, CFA

The base date for the December 2022 index review FTSE TWSE Taiwan 50 and Taiwan Mid-Cap 100 for the December 2022 Rebalance is today (21st November 2022).
In this insight, we take a look at Quiddity’s final predictions for expected ADDs/DELs for the December 2022 index review.
I expect one change for the Taiwan 50 Index and one change for the Taiwan Mid-Cap 100 index.

Sumco (3436) | Bargain Basement

By Mark Chadwick

Sumco is a pure play wafer maker that is geared into demand for cutting edge 300mm wafers
Sumco is attractive given weak sentiment towards tech, attractive valuation, strong profitability and long-term earnings drivers
With the stock down 12% YTD, we believe the stocks is undervalued and see at least 20% upside from here

China Internet Weekly (21Nov2022): NetEase, Blizzard, Tencent, Meituan, Tencent Music, JD Logistics

By Ming Lu

The authorization contracts between Activision Blizzard and NetEase will terminate in January 2023.
Tencent plans to distribute 91% of its Meituan share as dividend.
JD Logistics revenue increased by 39% YoY and Net loss decreased to one tenth.

Ant Group: Consumer Finance Finds Investors But Beijing Could Throw New Obstacles At Ant’s Direction

By Oshadhi Kumarasiri

Earlier this year, an RMB 22.0bn fundraising was likely blocked by Beijing with the state-backed asset manager, China Cinda pulling out of the deal at the last moment.
Several media outlets reported last week that Ant Group is pushing ahead yet again with an RMB 10.5bn fundraising effort for its Consumer Finance business.
This fundraising could yet again face obstacles as Beijing might want Ant Financial Services Group (6688 HK) to surrender a controlling stake in the Consumer Finance business to state-backed firms.

Arteria Networks (Buy) – Q2 22 Results Reaction: Core Business Growth Intact

By Kirk Boodry

Favorable industry trends like work from home and expanding mobile data usage are helping drive Arteria revenue growth
Headline profits are down but core OP is up when one-time gains last year are stripped out and quarterly results will start to look better in H2 when fully lapped
Management says macro concerns such as inflation and power costs are manageable and FY targets remain unchanged

Hon Hai & Yulon IPO: Media Reports of Electric Vehicle JV 1Q23 Listing, Stock Implications

Hon Hai Precision Industry (2317 TT) and Yulon Motor Company (2201 TT) plan to IPO their electric vehicles JV Foxtron Vehicle Technologies in 1Q23E, seeking NT$10bn.
The IPO’s valuation could be a major uplift for Yulon Motor Company (2201 TT)‘s valuation.
Hon Hai Precision Industry (2317 TT): Successful IPO would provide markets proof that its EV platform can create value uplifts again and again in the future. Accumulate.

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Nov 21

Daily Brief TMT/Internet: Semiconductor Manufacturing International Corp (SMIC), Weimob Inc., Bilibili, Taiwan Semiconductor (TSMC) – ADR and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Hang Seng TECH Index Rebalance: Float & Capping Changes
Weimob (2013 HK): Strategic Patience Will Be Rewarded (Part 2)
Hang Seng Tech Rebalance Dec 2022 – No Name Changes, Decent Flow
Taiwan Tech Weekly: AMAT Results Buoy Market, But Nanya at Risk, Foreigners Massively Buy Taiwan

Hang Seng TECH Index Rebalance: Float & Capping Changes

As expected, there are no adds or deletes for the Hang Seng Tech Index (HSTECH INDEX) in December. However, there are plenty of capping and float changes to drive flows.
The December rebalance is expected to have a one-way turnover of 2.3% resulting in a one-way trade of HK$1.9bn.
Short interest is greater than 5% of float on a few stocks and a continued recovering in markets could lead to a squeeze higher.

Weimob (2013 HK): Strategic Patience Will Be Rewarded (Part 2)

By Eric Chen

Weimob has emerged from the pandemic stronger and leaner, further consolidating its leadership in China’s e-commerce SaaS market.
Drawing insights into the supply side (merchants/brands) on Alibaba platform, our bottom-up analysis suggests that Weimob potentially has a US$600mn revenue opportunity by 2025.
We value Weimob at US$3bn assigning 5xPS on its US$600mn revenue by 2025, implying 25% CAGR over 3-year period. Patience needed to navigate high-inflation environment which pressures growth assets.

Hang Seng Tech Rebalance Dec 2022 – No Name Changes, Decent Flow

The Hang Seng Tech Index Review was announced on Friday after the close. There are no name changes but there is decent flow. 3% one-way turnover.
There are five capping changes and one very large share count change making things interesting.
All told, this is less impactful than it was last time, and less impactful than the other index rebalances announced.

Taiwan Tech Weekly: AMAT Results Buoy Market, But Nanya at Risk, Foreigners Massively Buy Taiwan

Applied Materials (AMAT US) guidance buoyed the overall industry, but negative Memory news from AMAT and Micron make Nanya Technology (2408 TT) shares look at risk of near-term pullback.
Foreigners massively net-bought Taiwan over the last two weeks, and United Microelectronics Corp (2303 TT) has been a major recipient of capital. ADR premium still has legs.
Hon Hai Precision Industry (2317 TT) received 100,000+ new worker applications but now has trouble finding space for them! We remain structurally bullish on the company.

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✓ Company Data and News
✓ Events & Webinars

Nov 20

Daily Brief TMT/Internet: Meituan, Taiwan Semiconductor (TSMC) – ADR, Travelsky Technology Ltd H, NVIDIA Corp, Hong Kong Hang Seng Index, Cisco Systems and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Index Rebalance & ETF Flow Recap: HSCI, S&P/ASX, HSI, HSCEI, KOSPI2, KOSDAQ150, Wharf, Meituan
Intel Vs. TSMC Monitor: TSMC Soars on Buffett Investment, Why INTC Could Now Revert
Last Week in Event SPACE: Tencent/Meituan, Halcyon Agri, Swire Pac, Perpetual/Pendal, OZ Minerals
ECM Weekly (20th Nov 2022) – I-Tail, Growatt, Lygend, SinoHytech, Meituan/Tencent, Olympus, Paytm
Travelsky (696): Beneficiary from Potential Reopening in China
NVIDIA Corp: New Product Launches & Other Drivers
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
Cisco Systems Inc: Major Drivers

Index Rebalance & ETF Flow Recap: HSCI, S&P/ASX, HSI, HSCEI, KOSPI2, KOSDAQ150, Wharf, Meituan

Plenty of index change announcements in the last week – Kospi 200 Index, KOSDAQ 150 Index, Hang Seng Index, HSCEI, HSTECH, S&P BSE SENSEX Index and FTSE AW/AC Index.
There are a bunch of indices that have the end of their review periods in the coming week while announcements for China indices are expected post market close on Friday.
There were outflows from ETFs for most Asian markets over the week with China and Hong Kong ETFs taking the biggest hits.

Intel Vs. TSMC Monitor: TSMC Soars on Buffett Investment, Why INTC Could Now Revert

TSMC has outperformed INTC by 23% in just two weeks, which is an extreme divergence in a short period of time by historical standards.
Foreseeable company-specific events or news flow over the next 30 days appears limited.
Valuation remains supportive for INTC and we believe it could recover part of its recent underperformance in the next month.

Last Week in Event SPACE: Tencent/Meituan, Halcyon Agri, Swire Pac, Perpetual/Pendal, OZ Minerals

The in-specie distribution is basically a forward block sale of Meituan (3690 HK). You know it’s coming. You don’t know how large it is. It is not unlike a lockup situation.
China Hainan Rubber Industry (601118 CH) will start with 36% in Halcyon Agri (HACL SP). Founders and friends have ~10%. Getting to 50%+ will be easy.
The Swire Pacific (B) / Swire Pacific (A) ratio is near a 19-year low. The last time it dipped to 6% under its 3mo average, it bounced back in 4 weeks.

ECM Weekly (20th Nov 2022) – I-Tail, Growatt, Lygend, SinoHytech, Meituan/Tencent, Olympus, Paytm

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, Indian IPOs delivered some decent performance while HK IPOs are likely to pick up as well.
There were a number of placement and blocks this week, after the expiry of lockups in a few Indian names.

Travelsky (696): Beneficiary from Potential Reopening in China

By Henry Soediarko

Travelsky Technology Ltd H (696 HK) is a system provider for airports in China that benefit from the reopening plan.
The company is not sensitive to the oil price and it has low debt which makes it attractive compared to the airlines.
The stock is trading at a 40% PBR discount to Shanghai International Airport. Historically, the company is trading at a 50% discount to its 5-year high on PBR.

NVIDIA Corp: New Product Launches & Other Drivers

NVIDIA Corp delivered a mixed performance as the company’s revenues exceeded the analyst consensus estimate.
However, its earnings were below par given the persistent supply chain interruptions, increased export bans, and macroeconomic challenges.
Leading U.S. cloud providers and a growing number of consumer Internet companies were the main drivers of year-over-year increases for workloads like big language models, recommendation systems, and generative AI.

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

Cisco Systems Inc: Major Drivers