TMT/Internet

By Shifara Samsudeen, ACMA, CGMA

Tyro Payments (TYR AU) has rejected a proposal from a Potentia-led consortium at A$1.27/share, by way of a Scheme.
Mike Cannon-Brookes’ Grok Ventures, holding 12.5% and Tyro’s largest shareholder, has backed the Offer.
Tyro’s board considered the proposal to be materially below Tyro’s fundamental value and highly opportunistic. Tyro’s share price was down 66% ytd prior to Potentia’s approach.

Bilibili: Profitability Sinks and Top Line Growth to Further Drop with Cost Controls

Bilibili reported 2Q2022 results yesterday. Revenue grew 9.2% YoY to RMB4.91bn (in-line with consensus), however, it declined 2.9% YoY sequentially driven by YoY decrease in revenue from mobile games.
Operating losses for the quarter further widened to RMB2.2bn (vs consensus RMB2.1bn) which accounted for 44.6% of revenues compared to 33.8% in the same period a year ago.
Bilibili Inc (BILI US) has taken several measure to improve its deteriorating profitability including headcount reduction, S&M cost cuts and close down of unprofitable businesses.

Intuit Inc: Value Proposition

Intuit had a strong quarter and delivered an all-around beat while continuing its focus on small businesses and customers.
It delivered strong margins and strong growth in the quarter.
There was a rise in the volatility in personal loans and various personal loan partners tightened the undertaking, but with volume from the other partners, Intuit was able to offset this negative impact.

Palo Alto Networks: The NGFW Palo Alto Networks Cloud & Other Drivers

Palo Alto Networks’ management has continued to make significant investments to transform the company and take advantage of the rapidly growing and large market opportunity in cybersecurity.
Palo Alto Networks is looking to grab a large chunk of market share and become a leader in the firewall market.
We provide the stock of Palo Alto Networks with a ‘Hold’ rating with a revision in the target price.

SunPower Corporation: The IKEA Collaboration & Other Major Drivers

SunPower delivered a strong set of in Q2 surpassing Wall Street expectations on all counts.
These elements increase customer motivation to add rooftop solar while also giving the residential solar sector greater price power than in recent memory.
Furthermore, SunPower renewed its agreement with Dream Finders Homes in Colorado in the new home market and extended its arrangement with KB Homes internationally.

CrowdStrike Holdings: Increasing Cybercrime & Ransomware Upside & Other Drivers

CrowdStrike saw its quarterly revenue exceed the $500 million threshold for the first time in the last quarter and delivered an all-around beat.
For the second consecutive quarter, gross retention increased to a new high, and dollar-based net retention soared to its highest point in seven quarters.
In the quarter, the public sector also became stronger, fueled by record-breaking success in U.S. federal and international government agencies.

Tyler Technologies: Recent Acquisitions

Tyler Technologies is benefitting from positive trends in the environment of the public sector market as its demo activities, and RPF continue to trend positively.
The company leveraged successful cross-selling efforts and multi-suite wins to deliver a solid quarter with revenues and earnings surpassing Wall Street expectations.
Overall, we provide the stock of Tyler Technologies with a ‘Hold’ rating with a revision in the target price.

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Sep 09

Daily Brief TMT/Internet: Link Administration, Matrimony.com, Tyro Payments, Elan Microelectronics, Circles.Life, WCP, Sea Ltd, Bilibili and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Link Admin (LNK AU): ACCC Approval & Index Changes
Link Admin Gets ACCC Nod. Woodford Condition Outstanding
Link’s Scheme in the Home Stretch by Securing ACCC and CBI Approval
Matrimony.com (MATRIM IN) | Poor Quality Growth & Perplexing Operations
Tyro in Play as It Rejects Potentia’s A$1.27 Offer
Elan Microelectronics Event: Index Removal Selling Could Exacerbate Price Divergence
Circles.Life: A Fully Virtual Mobile Operator Targeting APAC’s Digital Natives
WCP: First Day IPO Trading Strategy
Reneging on Job Offers Underscores Sea’s Retrenchment
Bilibili (9626 HK): 2Q22, Game Fell, But to Reduce Expense

Link Admin (LNK AU): ACCC Approval & Index Changes

The ACCC will not oppose the proposed acquisition of Link Administration (LNK AU) by Dye & Durham removing a major hurdle. Other regulatory approvals are still pending.
If regulatory clearances are received in the next week and the Court approves the Scheme, Link Administration (LNK AU) will stop trading at the close on 15 September.
We estimate passive trackers across all indices will need to sell 35.53m shares (A$153m; 18 days of ADV) of Link Administration (LNK AU) at the close on 15 September.

Link Admin Gets ACCC Nod. Woodford Condition Outstanding

Link Administration (LNK AU) has announced the Australian Competition and Consumer Commission will not oppose Dye & Durham’s proposed acquisition.
The next step is the rescheduled second court hearing on the 15 September.
The key outstanding condition concerns the “Woodford Matters”, and whether D&D potentially waives this condition, or digs in its heels.

Link’s Scheme in the Home Stretch by Securing ACCC and CBI Approval

Dye & Durham/DND’s proposed acquisition of Link Administration (LNK AU) at A$4.81 per share has received approvals from the ACCC and the Central Bank of Ireland.
Key conditions precedent remaining are FIRB, UK FCA and Luxembourg approvals. The second court hearing date has been adjourned to 15 September.
The transaction is in the home stretch and will likely complete. At the last close, the gross and annualised spread for a 27 September payment is 4.8% and 151%, respectively.

Matrimony.com (MATRIM IN) | Poor Quality Growth & Perplexing Operations

By Pranav Bhavsar

Matrimony.com (MATRIM IN) is a leading player with the highest market share in the Indian matchmaking market.
A close examination of the marketing expenses and subscriber additions reveals poor quality growth.
Employee remuneration is perplexing and so is the decision that leads to a reduction in PP&E.

Tyro in Play as It Rejects Potentia’s A$1.27 Offer

Tyro Payments (TYR AU) rejected an indicative proposal from the Potentia consortium at A$1.27 per share as it was highly conditional and materially undervalued the business.
Grok, the largest shareholder will vote for a Potentia scheme unless there is a rival scheme which is A$0.25 per share higher than the value of the Potentia proposal.
Potentia’s move puts Tyro in play, and Grok’s involvement will force the Board to get an improved offer and/or flush out a competing bidder. There is another round to go.

Elan Microelectronics Event: Index Removal Selling Could Exacerbate Price Divergence

Elan Microelectronics (2458 TT) will be removed from the FTSE Taiwan Mid Cap 100 Index on September 16th. As a result, it could see 12+ days of volume of selling.
We had a call with management. Guidance and product performance implies the company has relative strength vs. its end-market demand weakness.
The stock has already underperformed notebook-related peers by a wide margin, hence a further underperformance caused by passive selling could open up a rebound opportunity,

Circles.Life: A Fully Virtual Mobile Operator Targeting APAC’s Digital Natives

A fully virtual mobile operator which leases its 4G/5G networks to provide digital mobile services targeting mainly young digital natives.
Circles.Life is known for offering very flexible plans with highly competitive pricing; it also offers its proprietary tech platform, Circles Global, as a B2B SaaS product.
It was reported to be in early talks with a SPAC for a potential merger in July this year.

WCP: First Day IPO Trading Strategy

The IPO book building for WCP starts on 14 September. We have updated our earnings estimates following the company’s 2Q 2022 results.
Our base case target price of WCP is 78,317 won per share, which is 2% lower than the low end of the IPO price range of 80,000 won.
To derive our target price, we used 22.4x EV/EBITDA in 2023, which is the average multiple of its peers in 2023.

Reneging on Job Offers Underscores Sea’s Retrenchment

By Caixin Global

Southeast Asian conglomerate Sea Ltd. has pumped the brakes on its e-commerce unit Shopee’s expansion, resorting to measures such as reneging on jobs offers to Chinese employees at the last minute.
The strategy shift came as the Singaporean company backed by Chinese tech giant Tencent Holdings Ltd. tries to slash costs to shore up its bottom line amid widening losses.
The red ink has followed several years of aggressive expansion by Shopee, which has piled pressure on its balance sheet this year, just as challenges raising money abroad mounted.

Bilibili (9626 HK): 2Q22, Game Fell, But to Reduce Expense

By Ming Lu

In 2Q22, the revenue growth rate was lower than we expected, especially in the game business.
We believe the May layoff will reduce operating expenses in following quarters.
We set an upside of 8.3% and a price target of HK$197.

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Sep 08

Daily Brief TMT/Internet: Sea Ltd, KMW Co Ltd, JMDC Inc, True Corp Pcl, KT Corp, A8 New Media, Top Material, Salesforce.Com Inc, Workday Inc Class A and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Sea Ltd – Just About Doomed
KRX New Deal Index Rebalance: All Forecasts Right as KMW Soars and AfreecaTV Drops
KRX K-New Deal Rebalancing: Official Results & Passive Flows
JMDC Offering – Smaller Than It Looks
DTAC/True Merger: NBTC Likely to Set Measures to Approve Merger
Major Stock Swap Between Hyundai Motor Group and KT Corp
Hong Kong CEO & Director Dealings – 1st Sept 2022: A8 New Media, China Fordoo
Top Material IPO Preview
Salesforce.com Inc: Code Builder Update & Other Drivers
Workday Inc: Growing Customer Base

Sea Ltd – Just About Doomed

By Oshadhi Kumarasiri

It was reported yesterday that Sea Ltd (SE US)‘s e-commerce arm “Shopee” has begun rescinding job offers.
Having burnt around $2.0bn during the first six months of 2022 pursuing e-commerce and fintech growth aspirations, this seems like an extreme measure to ensure the company’s survival.
With the gaming profitability fading, we are starting to think that even the extreme cost-cutting could be insufficient to overturn Sea’s e-commerce and fintech cash burn.

KRX New Deal Index Rebalance: All Forecasts Right as KMW Soars and AfreecaTV Drops

The KRX announced the changes to the KRX New Deal indices post market close on Friday. But the changes were not made public and are only available to subscribers.
Intellian Technologies (189300) and Seojin System (178320) replace Danal (064260) and Kcp (060250) in the Internet Index, while KMW Co Ltd (032500 KS) replaces AfreecaTV (067160 KS) in BBIG.
Since we published our last forecast on 21 July, KMW Co Ltd (032500 KS) is up 12% while AfreecaTV (067160 KS) has dropped 17%.

KRX K-New Deal Rebalancing: Official Results & Passive Flows

By Sanghyun Park

KMW replaces AfreecaTV in BBIG. There is no constituent change for Battery and Bio. Seojin and Intellion replace NHN KCP and Danal in Internet. Nexon Games replaces Devsisters in Game.
The effective date has been postponed to the 13th, and the ETF operators will conduct the rebalancing trading at the close tomorrow, the 8th.
Regarding relative passive impact, KMW and AfreecaTV should receive the most attention, and this pattern is already appearing today.

JMDC Offering – Smaller Than It Looks

By Travis Lundy

In February 2022, Noritsu Koki (7744 JP) – longtime holder of JMDC Inc (4483 JP) – sold 2/3 of its holdings to Omron (6645). Omron made a US$1bn new bet.
Shares fell after Q1 results, and then fell another 7% in 2 days after the company announced a primary offering for ¥22bn to international investors, ¥11bn to Omron.
High PER but Fundamental Forecasts are up-and-to-the-right, and there is a surprising amount of flow mitigation from passive investor activity the next 3 months.

DTAC/True Merger: NBTC Likely to Set Measures to Approve Merger

The Bangkok Post reports that the Thai regulator (NBTC) will propose ten remedial measures to approve the Total Access Communication (DTAC TB)/True Corp Pcl (TRUE TB) merger.
The NBTC board is not expected to issue a final decision as it waits for an interpretation by the Council of State if it can approve or reject the merger.
The current share price ratio is 9.511x vs the swap ratio of 10.221x. At last close, DTAC and True’s gross spread to the VTO price is 9.2% and 10.7%, respectively.

Major Stock Swap Between Hyundai Motor Group and KT Corp

On 7 September, Hyundai Motor (005380 KS) announced a major stock swap with KT Corp (030200 KS).
KT will exchange about 750 billion won (7.7%) of KT’s treasury stock for 445.6 billion won (1.04%) of Hyundai Motor shares and 300.3 billion won (1.46%) of Hyundai Mobis shares.
This stock swap is likely to have a bigger positive impact on KT versus Hyundai Motor and Hyundai Mobis.

Hong Kong CEO & Director Dealings – 1st Sept 2022: A8 New Media, China Fordoo

The data in this insight is collated from the “shareholding disclosure” link on the HKEx website
Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute.
These insights may also flag those companies where shares have been pledged, both recently and ongoing. Stocks mentioned include A8 New Media (800 HK) and China Fordoo Holdings (2399 HK).

Top Material IPO Preview

Top Material is getting ready for an IPO in October in Korea. The IPO price range is from 27,000 won to 30,000 won.
Established in 2012, Top Material’s main business is in system engineering. It also provides high performance electrode and cathode materials for the lithium ion based rechargeable batteries.
Top Material had sales of 31.9 billion won (up 375% YoY) and operating profit of 4.8 billion won (up 930% YoY) in 2021.

Salesforce.com Inc: Code Builder Update & Other Drivers

Salesforce has generated excellent revenue growth, profitability, and cash flows in its last result, surpassing Wall Street expectations on all counts despite operating in a challenging financial climate.
With new clients like the U.S.
Department of Veterans Affairs, Workday, and Uber, Service Cloud grew 14% year over year or 18% in constant currency.

Workday Inc: Growing Customer Base

By Shifara Samsudeen, ACMA, CGMA

Workday delivered another all-around beat, outperforming market expectations with respect to its operating indicators, highlighting the ongoing significance of digital transformation for finance and HR.
Along with the significant expansion of their core HCM and financial apps, Q2 saw remarkable momentum throughout their broader spectrum of solutions.
Customers create apps with Extend customized for their specific use cases, potentially eliminating the need for additional specialized development tools.

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Sep 07

Daily Brief TMT/Internet: JMDC Inc, Tencent, Ninja Van, Openedges Technology, iQIYI Inc, CARRO, Ubiquiti Inc. and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

JMDC Placement – Lots to like but past Deals Have Been Mixed and It Is Expensive
Tencent Increases Its Stake in Ubisoft
Ninja Van: SEA’s Last-Mile Courier with ~100% Regional Coverage
Open Edges Technology IPO Valuation Analysis
IQiyi: Improving Profitability but Headwinds Continue
Carro: Southeast Asia’s Leading Used Car Marketplace
UI: Revenue Rebounds, Target to $375

JMDC Placement – Lots to like but past Deals Have Been Mixed and It Is Expensive

By Sumeet Singh

JMDC Inc (4483 JP) aims to raise around US$235m, US$150m coming via an international offering and the rest via issuing shares to its largest shareholder, Omron Corp (6645 JP) .
The company plans to use the proceeds to repay some of its debt that was taken on earlier to acquire other companies.
In this note, we will talk about the placement and run the deal through our ECM framework.

Tencent Increases Its Stake in Ubisoft

It was reported in August that Tencent was looking to raise its stake in Ubisoft and had reached out to Ubisoft’s founding family Guillemot who currently owns 14.0% of Ubisoft.
Tencent has acquired a 49.9% economic stake in Guillemot Brothers for EUR300m and as part of the deal, will be allowed to up its current stake in Ubisoft.
Ubisoft announced on Tuesday that its board of directors have authorised Tencent to increase its direct stake in Ubisoft from 4.5% to 9.99%.

Ninja Van: SEA’s Last-Mile Courier with ~100% Regional Coverage

Ninja Van is a leading Singapore-based logistics company in Southeast Asia with almost 100% last-mile courier coverage of the region.
The company was valued at $1.85bn based on its previous capital raise in September 2021.
An investment in the company could offer indirect and broader exposure to Southeast Asia’s e-commerce sector since it counts most of the e-commerce players in the region as its clients.

Open Edges Technology IPO Valuation Analysis

By Shifara Samsudeen, ACMA, CGMA

Our valuation analysis suggests an implied target price of 24,813 won per share, representing 38% higher than the high end of the IPO price range of 18,000 won.
Given the solid upside, we have a Positive view of the Open Edges Technology, despite the weak IPO market conditions.
Open Edges Technology is one of the leading companies in Korea that specializes in the semiconductor design asset platforms.

IQiyi: Improving Profitability but Headwinds Continue

IQIYI Inc (IQ US) reported 2Q2022 earnings last week. Revenue decreased 12.5% YoY to RMB6.66bn (vs consensus RMB6.67bn) and reported an OP of RMB125.8m (vs consensus RMB30.4m).
The company also announced a US$500m private placement of convertible notes with PAG (PAG HK) and the transaction is expected to close in 4Q2022.
The company also has entered into a content licensing agreement with Douyin which will likely bring in high-margin business for content distribution segment.

Carro: Southeast Asia’s Leading Used Car Marketplace

An online used car marketplace in Singapore that offers full-stack services across a customer’s car ownership lifecycle.
The company facilitated an annual run-rate GMV of ~S$1 billion (with >2 million MAUs) in 2020 and managed to earn a revenue of c. $465m in FY21.
It reached unicorn status in the previous round of fund raise in Jun 2021 and has started preparing for an IPO internally.

UI: Revenue Rebounds, Target to $375

By Hamed Khorsand

Ubiquiti showcased a rebound in its business in the June 2022 quarter with revenue rising by nearly 24 percent from the March 2022 quarter
Ubiquiti reported fiscal fourth quarter revenue of $443.1 million compared to our estimate of $387.0 million
The increase in revenue during the June quarter suggests demand remains healthy enough to put Ubiquiti back on pace for potentially exceeding $500 million in revenue in a single quarter

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Sep 06

Daily Brief TMT/Internet: Singtel, Tencent, Trax Technology Solutions, Advance Intelligence Group, Zoom Video Communications Inc, Coda Payments, Twilio Inc and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

StubWorld: Singtel Coming Up “Cheap” As Divestments Continue Apace
China Internet Weekly (5Aug2022): Tencent, NetEase, S.F., Baidu, IQ
Trax: An AI-Powered Retail Analytics Solution Provider
Advance Intelligence Group: The Parent Company of BNPL’s Atome
Zoom Video Communication: The Solvvy Acquisition & Other Drivers
Coda Payments: Payment Solutions for Mobile Gaming Publishers
Twilio Inc: The Twilio Engage CX Offering & Other Drivers

StubWorld: Singtel Coming Up “Cheap” As Divestments Continue Apace

S&P revises its outlook for Singtel (ST SP) following a series of divestments.
Preceding my comments on Singtel are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

China Internet Weekly (5Aug2022): Tencent, NetEase, S.F., Baidu, IQ

By Ming Lu

NetEase will start its first game studio in Europe after setting up two studios in the U.S.
Tencent and Sony invested minor shareholding in a Japanese game developer.
In 1H22, S.F. Holding’s revenue grew dramatically and its margins improved significantly.

Trax: An AI-Powered Retail Analytics Solution Provider

Trax is a retail analytics company that provides digital solutions for both consumer packaged manufacturers/brands and retailers.
The company provides a suite of AI-powered solutions that help digitize and automate the operations of the brick-and-mortar stores.
It was valued at $2.4bn in its last capital raise and was reported to have been preparing for a US IPO for a year.

Advance Intelligence Group: The Parent Company of BNPL’s Atome

Advance Intelligence Group provides digital commerce and financial services across Asia through its 3 key business units – Atome Financial, Advance.AI, and Ginee.
The company was valued at >$2bn based on its latest fund raise in September 2021.
The BNPL industry is expected to face sector headwinds, but the company is likely in a better position than other pure-play BNPL companies, thanks to its more diversified business portfolio.

Zoom Video Communication: The Solvvy Acquisition & Other Drivers

Zoom had a mixed result with below par revenues though it did manage to post an earnings beat.
Though the online business had a low number of new subscriptions, renewals online improved which was a silver lining.
The platform strategy of Zoom is performing quite well, with Zoom Phone and Zoom Rooms being the vital components.

Coda Payments: Payment Solutions for Mobile Gaming Publishers

Coda Payments provides solutions that help digital content publishers monetize their products and services.
The company is now in >50 markets and was valued at $2.5bn based on its last capital raise in April 2022.
With its offerings, Coda Payments is well-poised to benefit from the strong future growth in the mobile gaming sector.

Twilio Inc: The Twilio Engage CX Offering & Other Drivers

Twilio had a pretty good performance in this quarter and surpassed Wall Street expectations on all fronts.
The company believes that this tool is the foremost growth solution that is built on the CDP (Customer Data Platform).
The Syniverse transaction concluded in the quarter will prove beneficial to the company in the long term.

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Sep 05

Daily Brief TMT/Internet: Link Administration, M-DAQ, Taiwan Semiconductor (TSMC), MogliX, Nium, Seiko Epson, CloudFlare and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Merger Arb Mondays (05 Sep) – Link Admin, Ramsay, Genex, ResApp, Infomedia, DTAC/True, Giordano
M-DAQ: A B2B FX Solutions Specialist
Taiwan Tech Weekly: More Nvidia Issues, Broadcom Surprises, Yulon Soars
Moglix: An E-Commerce Platform for B2B Procurement
Nium: Southeast Asia’s First B2B Payment Unicorn
Seiko Epson (6724) | Home Printing Running Out of Ink
Cloudflare ($NET)

Merger Arb Mondays (05 Sep) – Link Admin, Ramsay, Genex, ResApp, Infomedia, DTAC/True, Giordano

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
Highest spreads – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Infomedia Ltd (IFM AU), Link Administration (LNK AU), True Corp Pcl (TRUE TB).
Lowest spreads – MyDeal.com.au Ltd (MYD AU), MACA Ltd (MLD AU), Nearmap Ltd (NEA AU), Dongzheng Automotive Finance (2718 HK), Link Net (LINK IJ), Tassal (TGR AU), Frasers Hospitality Trust.

M-DAQ: A B2B FX Solutions Specialist

M-DAQ is an FX solutions specialist that builds OTT applications to facilitate cross-border business and transactions for various industries.
The company was reported to have processed ~S$10bn gross transactions and raked in ~S$46m revenue in FY19.
The company already broke-even back in 2018 and now has a solid, blue-chip shareholder base.

Taiwan Tech Weekly: More Nvidia Issues, Broadcom Surprises, Yulon Soars

US bans high end chip sales to China, Nvidia shares sink in reaction, as do Nvida suppliers and the overall sector.
Broadcom’s fiscal Q3 results beat expectations and its optimistic outlook bucks the industry trend.
Yulon motors soars 9%; its JV with Hon Hai has received 10,000 EV pre-orders in two days.

Moglix: An E-Commerce Platform for B2B Procurement

Moglix is an India-based e-commerce platform for B2B procurement of industrial supplies.
The company has been actively expanding into the supply chain financing space in recent years by leveraging its supply chain network and expertise.
The company was valued at $2.6bn in its last capital raise in Jan 2022.

Nium: Southeast Asia’s First B2B Payment Unicorn

Nium is a global B2B payment platform that embeds an ecosystem of financial services for its clients: Banking-as-a-Service & Crypto-as-a-Service.
The company was valued at $2bn based on its latest capital raise and is expected to generate a run-rate revenue of $100m in 2022.
A “payment + ecosystem/services” business model rather than just processing cross-border payments likely provides the right value proposition for users.

Seiko Epson (6724) | Home Printing Running Out of Ink

By Mark Chadwick

Seiko Epson has been one of the better performing tech stocks during 2022
We believe that the stock benefited from COVID-related stay-at-home demand for printers
We now turn Bearish as the Covid boost should dissipate, while the PC market has taken a turn for the worse

Cloudflare ($NET)

By MT Capital

Over the last few weeks I have been picking away at the book “The Master and His Emissary”.
Within, Ian McGilchrist analyzes the differences between the two hemispheres of the brain (the right and the left), explaining how their inherent functionalities may drive the contradictions we all feel in human existence.
Without going into too much depth here (I encourage you to read his work instead), I found myself struck by the idea of The Belief in One Truth.

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Sep 04

Daily Brief TMT/Internet: Tencent, Nasdaq-100 Stock Index, Applied Materials, Livspace, Kyocera Corp, Dell Technologies Inc, NortonLifeLock, Cisco Systems and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

ECM Weekly (4th Sep 2022) – China ADRs, Tencent, Leapmotor, Onewo, Hongjiu Fruit, Doosan Ener
August Route Leads September Pain
Applied Materials Inc: The Picosun Oy Acquisition & Other Drivers
Livspace: A Tech-Enabled Home Interior and Renovation Marketplace in Asia
Last Week in Event SPACE: Kyocera, Hang Lung Group, CSRC/PCAOB Audit Terms, MACA, Nitro Software
Dell Technologies: New Additions To Storage Portfolio & Other Drivers
Norton LifeLock Inc: Evolution of Norton 360
Cisco Systems Inc: Financial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (09/22)

ECM Weekly (4th Sep 2022) – China ADRs, Tencent, Leapmotor, Onewo, Hongjiu Fruit, Doosan Ener

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, things are starting to move with Leapmotor and Onewo, while CALB continues to have second thoughts.
The biggest placement this week was Doosan, but there was news of Tencent setting its sights on sizeable future placements via divestments.

August Route Leads September Pain

By Thomas Schroeder

The impulsive decline in growth sectors (NDX) warns of more pain in September. Sell resistance lies at 12,500/800 below the 13k risk pivot. NDX early August relative peak led.
SPX macro sell call on August 19 worked well with a short NDX focus (short group includes DAX, HSI, Taiwan and recently Korea).
August was touted as the month to sell longs establish in June/July and to raise short bets for a bearish September as pundits turned bullish in mid-August, we were selling.

Applied Materials Inc: The Picosun Oy Acquisition & Other Drivers

Applied Materials saw a decent quarter as overall demand remains healthy which enabled the company to deliver an all-around beat.
In the quarter supply chain improved incrementally.
Among major updates, Applied Materials carried out the acquisition of Picosun Oy, a semiconductor equipment company based in Finland.

Livspace: A Tech-Enabled Home Interior and Renovation Marketplace in Asia

Livspace brings together designers, brands, manufacturers, and contractors onto its marketplace.
It automates the entire process from interior design to managing last mile fulfilment for all rooms in users’ homes.
The company was valued at $1.2bn based on its last capital raise in Feb 2022; it operates in India, Singapore, and Malaysia and plans to expand to other makers aggressively.

Last Week in Event SPACE: Kyocera, Hang Lung Group, CSRC/PCAOB Audit Terms, MACA, Nitro Software

Kyocera (6971 JP) is not blowing out the lights versus peers, but it’s relatively inexpensive to its history and peers. If Kazuo Inamori’s shares are sold, Kyocera can buy them.
Hang Lung (10 HK) currently trades at a 62% discount to NAV, a level last seen around the Covid lows in May 2020.
Washington and Beijing reach an agreement allowing US regulators access to audits of Chinese companies listed on American exchanges. However, US regulators remain cautious about the success of the deal.

Dell Technologies: New Additions To Storage Portfolio & Other Drivers

Dell Technologies’ stock price has crashed after the company indicated a weak sectoral outlook for PC sales.
The company observed ISG demand pushing throughout the quarter even though it was still expanding slowly.
Among new launches, Dell Technologies has also introduced software-driven modern storage solutions throughout its storage portfolio to promote improved intelligence, automation, cyber resilience, and multi-cloud flexibility.

Norton LifeLock Inc: Evolution of Norton 360

Norton LifeLock’s business has been adversely affected by the volatile forex environment and various macroeconomic pressures.
The customer unit retention stays stable, and it continues to drive improvements to main cohorts with the inclusion of its newer customers.
It has made inroads from its latest Norton Identity Advisory Plus launch in the UK market.

Cisco Systems Inc: Financial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (09/22)

Cisco Systems had quite a strong quarter and was able to exceed Wall Street expectation on all counts despite operating in an incredibly dynamic environment.
The company continues to view strong customer adoption of its subscriptions and software driven by its targeted investments.
We provide the stock of Cisco Systems with a ‘Hold’ rating with a revision in the target price.

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Sep 03

Daily Brief TMT/Internet: Elan Microelectronics, Softbank Group, Spark New Zealand, Corsair Gaming Inc, Electronic Arts, Microchip Technology and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

FTSE TWSE Taiwan 50/ Div+ Index Rebalance: Sinopac Holdings and Elan Micro To Watch For
Softbank Group – ARM Suing a Key Customer Is Not the Summer News We Expected
S&P/ASX Index Rebalance (Sep 2022): Adds, Deletes, Surprises & Pre-Positioning
Declining Business Short Candidates: Corsair Gaming, Sinclair Broadcasting, Overstock, Ziff Davis
Electronic Arts Inc: Market Position & Evolution & Other Drivers
Microchip Technology: Excellent Base of Intangibles & Other Drivers

FTSE TWSE Taiwan 50/ Div+ Index Rebalance: Sinopac Holdings and Elan Micro To Watch For

As expected, SinoPac Holdings (2890 TT) will replace Powerchip Semiconductor Manufacturing Corp (6770 TT) in the FTSE TWSE Taiwan 50 Index at the close on 16 September.
Elan Microelectronics (2458 TT) will be deleted from the Mid-Cap 100 Index and will consequently be deleted from the Dividend+ Index. The Div+ selling will be spread over 16-22 September.
Passives need to buy over 6 days ADV on SinoPac Holdings and sell over 12 days ADV on Elan Microelectronics, while there will be net inflows on Powerchip Semiconductor Manufacturing Corp.

Softbank Group – ARM Suing a Key Customer Is Not the Summer News We Expected

By Kirk Boodry

ARM is suing Qualcomm for breach of license and trademark infringement for its acquisition of (fellow ARM licensee) Nuvia last year
This is surprising on a number of levels as having Qualcomm inside the tent is better for sales, market share and its neutral-player reputation
ARM’s valuation benefits from perceptions of an expanding addressable market so this is not a good look. Meanwhile, Softbank’s discount to NAV is widening again as tech valuations fall

S&P/ASX Index Rebalance (Sep 2022): Adds, Deletes, Surprises & Pre-Positioning

There is one change for the S&P/ASX 100 Index, eight changes to the S&P/ASX 200 (AS51 INDEX), while there are 16 adds and 12 deletes for the S&P/ASX 300 Index.
Passive trackers need to buy/sell a lot of stock for the ASX100 and ASX200 names. There appears to be large pre-positioning on the deletes.
Link Administration (LNK AU)‘s privatisation may require an ad hoc inclusion prior to the implementation of the September rebalance – ACCC approval is key.

Declining Business Short Candidates: Corsair Gaming, Sinclair Broadcasting, Overstock, Ziff Davis

By Eric Fernandez, CFA

Sales declines, margin compression, cuts in SG&A and cuts in guidance and estimates feature in our Declining Businesses model.
Declining business shorts tend to be lower beta, have longer time horizons, and tend to produce steadier (although slower) short returns.
Today we are flagging Corsair Gaming, Sinclair Broadcasting, Overstock, Ziff Davis.

Electronic Arts Inc: Market Position & Evolution & Other Drivers

Electronic Arts’ solid results were driven by its extensive IP portfolio and expanding network of players that are actively involved in its live services.
These distinctive structural advantages helped the company deliver an all-around beat despite the fact that it navigates the macro environment’s volatility.
Their business’s durability and longevity are still fueled by their collection of sports and owned IP properties.

Microchip Technology: Excellent Base of Intangibles & Other Drivers

Microchip’s results for the quarter were solid and the company’s revenue increased by 6.5% sequentially and 25.1% annually to $1.96 billion surpassing Wall Street expectations.
The management has signed into multiyear long-term supply agreements with several significant clients, effectively granting them reserved capacity in exchange for assured purchases, often lasting five years.
We also have a dedicated analysis of the company’s Environmental, Social, and Governance (ESG) risk scores in order to evaluate the sustainability risk.

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Sep 02

Daily Brief TMT/Internet: PC Partner, Alibaba (ADR), Bilibili, CARRO, Intel Corp, Crowdstrike Holdings Inc, Glints, Jet Commerce, Ansys Inc and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

PC Partner: Strong 1H22 but High Uncertainty into 2H22. Downside Supported by Cash and Dividend.
Alibaba, Longfor Group, Country Garden, New World Development
Bilibili (9626 HK): 2Q22 Preview, Still Grew Rapidly, Will Reduce Loss
Carro Sees Profitability, Doubles Revenue to $464m
Intel Vs. TSMC/UMC Long/Sort Monitor: Take-Aways from DB Conference & Fireside Chat
Crowdstrike FY2Q23: FY2Q23: Not Just Endpoint, Identity and SIEM Accelerating Too
Glints Bags $50m Series D Funding After Doubling Revenue and Gross Profits
Jet Commerce Raises US$60M for Brazil and Singapore Expansion, to Further Scale up in China
Ansys Inc: The New R2 2022 & Other Drivers

PC Partner: Strong 1H22 but High Uncertainty into 2H22. Downside Supported by Cash and Dividend.

By Nicolas Van Broekhoven

Pc Partner reported a strong set of 1H22 results last week and held a conf call with investors this week. Importantly, management sees no impact by US/China Nvidia AI situation.
3Q22 results will be weak as old inventory is being discounted in front of the launch of RTX 40 by NVIDIA Corp (NVDA US) in early 4Q22.
Stock is unlikely to rally before more clarity on inventory situation improvement, but well supported by net cash (5.4 HKD) and high interim dividend (11.4%).

Alibaba, Longfor Group, Country Garden, New World Development

By Untying The Gordian Knot

Two big headlines drove the short squeeze, helped by the record level of short selling as a percentage of total volume in recent months.
The recovery remains a low volume rally and short turnover as share continues to be high.
Most of the short selling remains in Index ETF and very large-cap stocks.

Bilibili (9626 HK): 2Q22 Preview, Still Grew Rapidly, Will Reduce Loss

By Ming Lu

In 2Q22, we believe revenue will grow fast, especially for value added service and advertising.
We believe operating loss will shrink, but far from making profit.
We believe the stock has an upside of 18% for the end of 2023.

Carro Sees Profitability, Doubles Revenue to $464m

By Tech in Asia

Singapore-based Carro more than doubled its revenue in its latest financial year, raking in more than S$650 million (US$464.2 million) in revenue.
The used-car platform, which also achieved profitability in FY 2021, said it is tracking at over US$930 million in run-rate revenue. It expects to see another 2x growth in revenue for FY 2023.
Aaron Tan, co-founder and CEO of Carro, attributed the firm’s profitability to its focus on online retailing and machine learning.

Intel Vs. TSMC/UMC Long/Sort Monitor: Take-Aways from DB Conference & Fireside Chat

On August 31st, Intel’s GM of Data Center & AI spoke at Deutsche Bank’s Technology Conference. On the same day, another executive spoke at Arete Research’s fireside chat.
Q2 and Q3E should be the bottom for the business, implying a rebound in Q4. Consensus estimates a similar trend; the latest comments are a confirmation of Q2 results guidance.
We see opportunities for positive news flow in September and Q3 results, as Intel could make key product announcements and guide for Q4 to be a turnaround.

Crowdstrike FY2Q23: FY2Q23: Not Just Endpoint, Identity and SIEM Accelerating Too

By Aaron Gabin

Crowdstrike continues to gobble up share, printing another strong beat and raise, with ARR now at $2B, the second fastest software company to hit that mark.
EBIT margins up 800bps YoY, TTM FCF Margins 30%…profitable growth at Scale.
13x forward P/S for a unique software asset with long runways for 40%+ growth and multi-module driven margin expansion with a 15% pullback in the past week despite earnings.

Glints Bags $50m Series D Funding After Doubling Revenue and Gross Profits

By Tech in Asia

Glints, a Singapore-based careers platform, has raised US$50 million in a series D funding round co-led by DCM Ventures, Lavender Hill Capital, and Persol Holdings.
The deal pushed the firm’s total funding to date to more than US$80 million, making it the most funded startup in Southeast Asia’s talent recruitment space.
Glints connects companies to talent pools in Indonesia, Malaysia, Singapore, Vietnam, the Philippines, and Taiwan

Jet Commerce Raises US$60M for Brazil and Singapore Expansion, to Further Scale up in China

By e27

Jet Commerce launched a Live Commerce service through its newest business unit, Lumbalumba, last July and inaugurated its live streaming centre
Indonesia-based e-commerce enabler, Jet Commerce, has announced the completion of its Series B funding round of more than US$60 million (IDR 900 billion).
Jet Commerce will use the funds to upgrade infrastructure, recruit more professional local talent, improve research and technology development, and strengthen its ability in brand incubation.

Ansys Inc: The New R2 2022 & Other Drivers

This was an excellent quarter for Ansys, where the company managed to surpass Wall Street expectations in terms of revenues as well as earnings.
From the geographical perspective, the company viewed robust revenue growth from EMEA, the Americas, and the Asia Pacific.
Among key updates, TSMC certified the Power integrity software of Ansys for its NTE process and industry-leading N4P technologies.

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Aug 31

Daily Brief TMT/Internet: Baidu, SK Telecom Co Ltd (Adr), Nitro Software Ltd, Prosus , Link Net, Elastic NV, Delta Electronics, SDI Corporation, Micro Focus International, Invesco Solar ETF and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

HSI, HSCEI, HSTECH: September Rebalance Flows Post Capping
SKT ADR Play on the 31st for MSCI Exclusion
Nitro’s Opportunistic A$1.58 Offer from Potentia
Prosus: 30% Discount Seems About Right
Link Net: Axiata’s MTO Kicks Off Today
Observability Pair Trade: Long Elastic / Short Splunk
Delta Electronics: Taiwan Vs. Thailand Pairs Monitor, Call with Management
Two Niche Semiconductor Industry Stocks Highly Exposed to EV Acceleration
Open Text/Micro Focus: Next Chapter in an Acquisition Growth Story
Headwinds Persist, Including Rising DXY, 10-Yr Treasury Yield, & Commodities; Buying Staples, Solar

HSI, HSCEI, HSTECH: September Rebalance Flows Post Capping

The September rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituents at 8%. This will lead to large flows.
The largest inflows will be on Baidu (9888 HK), SenseTime Group (20 HK), China Shenhua Energy (1088 HK), Tencent (700 HK), Kuaishou Technology (1024 HK) and Anta Sports (2020 HK).
The largest outflows will be on Meituan (3690 HK), AIA Group (1299 HK), Sunny Optical (2382 HK), SMIC (981 HK), China Pacific Insurance (2601 HK) and China Construction Bank (939).

SKT ADR Play on the 31st for MSCI Exclusion

By Sanghyun Park

We need a hedge to short SKT on the 31st. For this, we need to consider trading SKT ADR, which is pretty liquid as DTV reaches nearly $8mil.
The play structure is simple. It exploits the pattern that passive flow is concentrated on underlying shares rather than ADRs. We witnessed this pattern in the last two cases.
Passive outflow may be aggravated since SKT leaves not only STANDARD but also sub-indices such as ESG. So, the degree of a temporary DR premium can get thicker.

Nitro’s Opportunistic A$1.58 Offer from Potentia

Nitro Software Ltd (NTO AU) entered a trading halt in response to an AFR report that Potentia has lobbed an indicative non-binding proposal at A$1.58 per share.
Potentia’s offer follows its success in securing a 17% stake at A$1.58 per share on Monday night. The stake is large enough to deter rival schemes.
The offer is opportunistic and unattractive. However, the ability of Potentia to relatively quickly secure a significant stake suggests that the Board will be under pressure to engage.

Prosus: 30% Discount Seems About Right

By Wium Malan, CFA

The initial impact, of the share repurchase program, was for Prosus’ simple discount to listed NAV to reduce from roughly 50% to around 25% within 4 weeks of implementation.
The weekly size of the share repurchase program has been reduced by ~40%, on a 4-week rolling average basis, since the discount has been below 30%.
We remain constructive on Tencent and, with Prosus at 25% or less simple discount to NAV, would own Tencent directly (long-only), or be long Tencent, short Prosus/Naspers.

Link Net: Axiata’s MTO Kicks Off Today

After Axiata (AXIATA MK) completed the acquisition of 66.03% in Link Net (LINK IJ) on the 22 June, Axiata was obligated to undertake a mandatory offer for the remaining 33.97%.
The MTO commences today and concludes on the 28 September. Payment will be the 6 October.
There are no conditions attached to the MTO. Play the spread, where available.

Observability Pair Trade: Long Elastic / Short Splunk

By Aaron Gabin

Like PANW and SNOW, Elastic continues to power through macro headwinds seen by many other software companies.
Elastic has a Crowdstrike like dynamic, where it is capturing new workloads from incumbents, in the cloud. In this case, Symantec’s share donator role is being played by Splunk.
In this tough volatile environment, we like an observability pair trade of Long ESTC / Short SPLK.

Delta Electronics: Taiwan Vs. Thailand Pairs Monitor, Call with Management

We had a call with Delta Electronics (2308 TT) management to understand the company’s latest developments, particularly in relation to its growing automotive and EV businesses.
Delta Thailand shares have rallied 55.4% in T$ terms, while Delta Taiwan has only rallied 9.3%.
Delta’s EV business is growing 50% per year and has major customers including Tesla, GM, and Volkswagen, however, our sense is the Taiwan entity has an advantage.

Two Niche Semiconductor Industry Stocks Highly Exposed to EV Acceleration