TMT/Internet

• This morning – 26 July – Alibaba (ADR) (BABA US) / Alibaba Group (9988 HK) issued an announcement it would pursue a primary listing on the HKEX.
• When Alibaba listed in NY, it was on ADRs. When it listed in HK, it was the shares underlying the ADRs but it was a quickie secondary listing.
• It will now seek a dual primary listing as others have. This will make BABA Southbound-eligible and will slightly improve BABA’s HSI funding trade prospects in future. 

• 1H22 was a story of two halves: 1Q22 still showed record profits but 2Q22 got progressively worse. 3Q22 started weak with inventory clearance and Nvidia new GPU launch awaited.
• Even after paying a fantastic final dividend in June 2022, it is now trading below net cash on the balance sheet.  
• We estimate net cash on the balance sheet is now 9 HKD vs 7 HKD share price.

• Cars24 (1716847D IN) is one of India’s leading used auto (primarily car) marketplace.  The company claims a 90% share in the online used car market. 
• Channel feedback suggests no customer loyalty and a poor competitive position compared to local unorganised sales yards. 
• Losses narrowing due to reduction in expenses, declining revenues and recent high profile exits all point to caution. 

• Plus Digital Technologies (PDT CH) is looking to raise about US$150m in its upcoming Hong Kong IPO. The deal will be run by Jefferies and Guotai Junan.
• Plus Digital Technologies provides digitalised sales and marketing and SaaS+ services to its customers to enhance their offline sales and marketing efficiency and drive their offline retail sales. 
• Its provision of services is supported by its Field Management Ecology System (FMES) platform, which contains a variety of digitalised products with different functionalities to meet customers’ various requirements.

• This is our first report on the leading global technology solutions provider to the banking and finance industry – Fidelity National Information.
• The company’s annual organic growth expectations were all exceeded with a 9% organic top-line growth.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• This is our first report on diversified manufacturing services and solutions provider, Jabil Inc.
• The company has maintained a strong diversification strategy which has helped it perform despite a difficult supply chain environment and widely reported shutdowns in China.
• During the quarter, the company further collaborated with two companies, SolarEdge and Cardo Systems, to expand its supply chain.

• Fidelity National Information is a technology solutions provider to the worldwide banking and finance industry.
• The company had a strong start to the year, 2022 far outpacing its projections for revenue and delivering a solid organic top-line growth.
• During the quarter, they launched their Guaranteed Payments solution, making it the only payment processor to provide a fully integrated solution guaranteed to increase e-commerce transaction approval rates and remove chargebacks resulting from fraudulent purchases.

• Viavi Solutions is a leading provider of network test solutions, monitoring and assurance solutions to the telecom industry, enterprises, network equipment manufacturers, Governments, and avionics corporations.
• The North American service providers upgraded and expanded their networks with fibre which benefitted the company.
• Its solutions for assurance and products for data centres have been experiencing significant growth.

• Jabil Inc is a highly diversified manufacturing services and solutions provider across multiple industries.
• The company has maintained a strong diversification strategy which has helped it perform despite a difficult supply chain environment and widely reported shutdowns in China.
• The strong demand within EMS, partially offset by sporadic Covid-19 challenges within DMS, was the primary factor driving their revenues since the start of 2022.

• This is our first report on Viavi Solutions, a major player within the network test solutions and monitoring space.
• As North American service providers upgraded and expanded their networks with fibre, fibre grew by double-digit percentages from the same time the previous year.
• We initiate coverage on Viavi Solutions with a ‘Hold’ rating with a revised target price.

• Duolingo (DUOL US)  will announce its 2Q22 quarterly results on August 4, 2022. The leading U.S. EdTech unicorn raised FY22 guidance and reported strong operating metrics in 1Q22.
• Duolingo app is back in Apple App Store and Android stores in China after the app was removed from some app stores 1 year ago due to Beijing’s EdTech crackdown. 
• Durable Capital Partners acquired ~$158M worth of Duolingo (DUOL US)  shares this year. General Atlantic and Durable Capital Partners led the most recent Series H private round in November 2020. 

• We have completed days 1-5 in the review period for the MSCI August QIR. This is the last review that will use the current QIR methodology.
• Most changes are expected in China with the largest inflows on Gcl Poly Energy Holdings Limited (3800 HK), Tianqi Lithium (002466 CH) and Qinghai Salt Lake Industry (000792 CH). 
• There are a few stocks that will have same way flows from the FTSE All-World and All-Cap trackers at the September SAIR.

• 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.
• The highest spreads are 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Resapp Health (RAP AU), Yashili International Holdings (1230 HK), True Corp. 
• Lowest gross spreads are Excelpoint Technology (EXLP SP), Giordano International (709 HK), Frasers Hospitality Trust (FHT SP), MyDeal.com.au Ltd (MYD AU), Dongzheng Automotive Finance (2718 HK), Cocoaland Holdings (COLA MK). 

• A critical issue arose lately. The Nexon heirs do not have collateral for installment payment. The Korea NTS doesn’t accept shares of an unlisted company as collateral for tax payment.
• So, the contingency plan is a direct equity sale. The more feasible would be for NXC to sell its stake in Nexon for the convenience of valuation and finding buyers.
• The deal size is so large that it can come out in multiple block deals rather than a single buyer deal by the end of October.

• Micron Technology delivered a decent quarter matching Wall Street expectations in terms of revenues but delivered an earnings beat.
• The company’s performance has been driven by the forte in DRAM shipments to game, console, PC, and cloud customers.
• Among new launches, Micron recently announced the launch of the i400 microSD card and partnership programs with IQ (Industrial Quotient).

• Paychex had a strong quarter with growth driven by strong retention and sales.
• The company delivered an all-around beat surpassing market expectations and there was an increase in total revenue as well as service revenue.
• We provide the stock of Paychex Inc. a ‘Hold’ rating with a revision in the target price.

• Total Access Communication (DTAC TB) and True Corp Pcl (TRUE TB) shares declined as reports suggest that NBTC’s subcommittees voted 3:1 AGAINST the merger. True said the reports are false.
• An earlier press conference by CP Group and Telenor ASA (TEL NO) reiterated that the NBTC could only prescribe remedial measures. A court ruling on 16 June supports this view.
• NBTC will allegedly review the subcommittees’ findings on 26-27 July. We think this development results in the NBTC prescribing harsher remedial conditions to the merger rather than blocking it. 

• NTT announced it would build and operate a third trans-Pacific subsea cable (JUNO) with NEC as the vendor and a 2024 activation date
• This also represents the second trans-Pacific cable in five years and the one with the highest capacity to date
• This is not core to NTT’s business but it does highlight how capacity needs are expanding as network speeds accelerate and how those costs can be managed

• FactSet has a fundamentally solid business model and its business has not been significantly affected despite the bearish trends in the S&P500.
• Asia Pacific continued to be a growth-driving geography with ASV growth at 14.3%, driven by demand from asset managers and vested owners.
• With greater expansion with asset owners and asset managers, respectively, both CTS and analytics contributed to growth.

• In its last result, Accenture delivered robust overall results, reflecting strong double-digit revenue growth across all areas of its business and ongoing operating margin expansion due to its ongoing large-scale investments in its company.
• Accenture continued with its acquisition-led growth approach and agreed to acquire The Stable.
• In a nutshell, Accenture is in a unique position to support both its clients’ growth objectives and cost-saving initiatives.

• Link Administration (LNK AU) announced it has agreed to Dye & Durham’s latest $4.81/share offer, which is 13% below its initial $5.50/share approach last December.
• Link shareholders may also receive an additional A$0.13 from the sale of the Banking and Credit Management (BCM) business under the latest offer.
• This transaction is still subject to Australian Competition and Consumer Commission clearance, which should happen once D&D undertakes to offload its GlobalX ops.

• Link Administration (LNK AU) has entered a revised scheme implementation deed with Dye&Durham/DND at A$4.81 per share. The scheme meeting will be held in mid-August.
• Shareholders will be supportive due to deal fatigue, and the offer price is 11% above the undisturbed price and at the low end of the original IE valuation range.
• Regulatory approvals are a key risk. DND is presumably confident in its undertakings to gain ACCC approval. At last close, the gross spread is 7.8%.

• Are the cuts a sign of discipline that we have been waiting for or
• Is it due to lack of ability to procure the equipment? 
• Seems a combination of both if you listen to the words of the Chairman

• Alphyn Capital Management LLC (“ACML”) is a registered investment advisor in New York. We help clients invest in high quality public companies to both preserve and grow their wealth over the long-term.
• The Master Account, in which I am personally invested alongside SMA clients, returned -14.7% net in Q2 2022, as reported by our fund administrator.
• With the threat of increasing rates, investors have renewed their focus on profits.
• I try not to take a position on a discrete event, such as interest rates or quarterly earnings, as the odds of getting these right are too low, and the costs of getting these wrong are too high.

• Alphyn Capital Management LLC (“ACML”) is a registered investment advisor in New York. We help clients invest in high quality public companies to both preserve and grow their wealth over the long-term.
• The Master Account, in which I am personally invested alongside SMA clients, returned -14.7% net in Q2 2022, as reported by our fund administrator.
• With the threat of increasing rates, investors have renewed their focus on profits.
• I try not to take a position on a discrete event, such as interest rates or quarterly earnings, as the odds of getting these right are too low, and the costs of getting these wrong are too high.

• This is our first report on process automation player, Alteryx.
• The company had a great start to 2022 and saw increasing traction with large enterprise customers.
• The company’s brand-new, integrated Alteryx Analytics Cloud platform now offers access to its entire cloud portfolio.

• Consensus remains positive about Sea Ltd (SE US) with 12.3% QoQ revenue growth in Q2 and a 32.2% revenue CAGR over the next two years.
• However, with Free Fire losing active players and Shopee’s growth momentum in South East Asia broken, we expect a disappointing Q2 from Sea Ltd.
• Free Fire is on its last legs and Shopee has decided to halt its geographic expansion. Thus we think that there’s significant downside to Sea’s Q2 and medium-term consensus.

• DB was notified of the conversion to a holding company by the Korea FTC. DB must complete the conversion to a holding company by January 1, 2024.
• DB has no option but to ECO DB HiTek, the same trick employed for LG Energy Solution, to meet the 30% stake obligation for DB HiTek.
• There are still opportunities for outright shorting on DB HiTek as DB will likely announce DB HiTek split before August 12.

• The planned eToro IPO via SPAC merger with FinTech V was terminated in early July, due delayed regulatory process as well as poor market conditions
• The now defunct SPAC deal had implied an eToro valuation in excess of USD10bn; post failed SPAC deal, its latest funding round implies a valuation range of USD5bn to USD6bn
• Softbank made its eToro investment through the Vision Fund 2 in 4Q 2020; Softbank had been counting on the SPAC deal with FinTech V as its partial eToro exit strategy

• The review period for the September rebalance of the KRX New Deal indices started on 1 May and will run till 29 July. Implementation is on 8 September.
• Intellian Technologies (189300 KS) and Seojin System Co, Ltd. (178320 KS) could replace Danal Co Ltd (064260 KS) and Kcp Co Ltd (060250 KS) in the Internet Index.
• Nexon Games (225570 KS) could replace Devsisters (194480 KS) in the Game Index, and KMW Co Ltd (032500 KS) could replace AfreecaTV (067160 KS) in the BBIG Index.

Lenovo has launched a roadshow to market dual-tranche 144A/RegS bond offerings of 5.5Y and 10Y. The 10Y notes will be the company’s first green bonds, while the 5.5Y bonds will be conventional notes. Proceeds from the green bonds will be used to finance or refinance eligible projects, including green buildings and renewable energy initiatives. 

Lenovo also launched a concurrent tender offer for the USD 4.75 23 notes, of which USD 687 mn is outstanding. The tender offer price is USD 1,005 per USD 1,000 principal. The consideration will include accrued interest. The tender cap will be determined and announced on or around July 22nd, after the company has priced the notes offerings.

Initial price guidance was announced earlier today, as follows: 5.5Y: CT5 + 290 bps, and 10Y: CT10 + 370 bps. We find this fair, in view of the existing LENOVO curve and taking into account global peers HPQ and DELL.

• Delaware Chancery Court rejected Elon Musk’s excessive demand for more time to support his dubious claims against Twitter than he took to create and ram through his hostile buyout.
• Twitter’s solid legal case against Musk improves odds the sale of the company could be court-ordered before year end.
• If so, this is by far the best outcome for Twitter’s wary bondholders.

• Bumble is the second-largest player in the online dating market, right behind Match Group.
• The company had a decent start to 2022 with lucrative revenue growth and a total group revenue that was driven by a continuous strength in the Bumble app.
• The management continued its acquisition-led geopgraphic expansion and acquired famous Gen Z dating app, Fruitz to expand into Europe.

• This is our first report on go-to-market intelligence and engagement platform, ZoomInfo Technologies which is catering to sales and marketing teams across the globe.
• The expanding Revel platform of the company is a positive development and its expanding database bodes well for its enterprise customers.
• ZoomInfo has recently partnered with Sales Confidence for empowering revenue professionals through data privacy compliance and sales solutions.

• ZoomInfo Technologies is a major go-to-market intelligence and engagement platform that provides critical tools for sales and marketing teams and helps in lead generation and various other aspects of their work.
• The company’s rapidly expanding Revel platform is a positive development and its expanding database bodes well for its enterprise customers.
• ZoomInfo has recently partnered with Sales Confidence for empowering revenue professionals through data privacy compliance and sales solutions.

• This is our first report on the online dating giant, Bumble.
• The company had a decent start to 2022 with lucrative revenue growth and a total group revenue that was driven by a continuous strength in the Bumble app.
• The company continued its acquisition-led geopgraphic expansion and acquired famous Gen Z dating app, Fruitz to expand into Europe.

• Yesterday I published Nikkei 225 Sep Annual Review Predictions – 3 In, 3 Out. Assuming correct, and we move the last 6mos of data 6mos forward, March23 Rebal is below.
• This too is 3 in, 3 out. But it is complicated. “Required” changes would move the sector balance further out of whack. 
• And while some of the trades are “interesting”, the rebal is smaller and the bigger question is “What comes after that?”

• Over 96% of the way through the review period, we see 1 change using a 12 month minimum listing history, and 5 changes using a 6 month minimum listing history.
• We expect the index committee to continue using the shorter minimum listing history since the potential adds have much larger market caps than the potential deletes.
• The potential adds have outperformed the potential deletes over the last month and there could be more once the current consolidation is complete.

• As of July 19, SKT was in the top 50 short-selling KOSPI stocks. SK Telecom ranked 8th and 18th in terms of short-selling amount and short-selling ratio to trading volume.
• Deletion is practically a foregone conclusion if MSCI does not calculate SKT’s foreign room that reflects the DR situation. Reversing requires calculating a flexible foreign room considering the DR situation.
• However, the critical point here is that in any of the above cases, SKT’s stock price is highly likely to rise on the date the results are announced.

• This is our first report on game development software market leader, Unity Software.
• The company’s stock has taken a beating loke most other software players with a negative bottom-line.
• Its previous quarterly result was also below par despite the company generating $320 million, an increase of 36% from the previous year.

• Unsurprisingly, the independent financial advisor (IFA) considers WT Microelectronics (3036 TT)‘s S$1.93 offer for Excelpoint Technology (EXLP SP) to be fair and reasonable. We think that IFA’s valuation approach is sound. 
• The key condition is approval from shareholders and regulatory authorities (Taiwan pending). The scheme meeting is scheduled for 3:00 pm on 10 August. 
• We continue to think that offer is attractive. At the current price and for the 15 September payment date, the gross and annualised spread is 0.5% and 3.1%, respectively.

• On the 13 April, WT Microelectronics (3036 TT) entered into an agreement to acquire electronic component distributor Excelpoint Technology (EXLP SP) by way of a Scheme. 
• The cash consideration of S$1.93/share was a 7.8% premium to last close, but a 21.4% premium to the undisturbed price.
• The Scheme Doc is out. The Scheme Meeting will be held on the 10th August. The IFA considers the terms to be fair. Settlement is expected by the 15th September.

• We maintain our HOLD rating and TP of Bt47.60 based on DTAC’s tender offer price. Conference call came with negative tone, as management lowered its guidance on core service revenue 
• 2Q22 core profit was below expectation 2Q22 net profit was at Bt1bn (-34% YoY, +38% QoQ), growing QoQ due to a one-time Bt1bn deductible granted by the NBTC
• Excluding extraordinary items, 2Q22 core profit should be at Bt573m, 33% below our forecast, declining both QoQ and YoY due to losses in subsidizing handset sales to attract subscribers.

• The recent strength in the Dollar is likely to result in second half revenue ending up lower than anticipated
• ATEN generated 60% of its revenue in 2021 from outside the USA. The strength in the US Dollar is likely to result in revenue growing at a slower pace 
• Our new estimates reflect the impact of a stronger Dollar on revenue and expenses. We are currently not expecting demand softness to push results lower

• 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.
• The highest spreads are 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Australian Unity Office Fund (AOF AU), Link Administration (LNK AU). 
• The lowest gross spreads are Hwa Hong Corp (HWAH SP), Uniti Group Ltd (UWL AU), Excelpoint Technology (EXLP SP), Giordano International (709 HK), Dongzheng Automotive Finance (2718 HK). 

• Tencent’s games gave only three hours a week to juveniles in school summer vacation.
• Tencent and NetEase did not get new game licenses for the third time this year.
• Kingsoft censors files on users’ computers, which will benefit Microsoft Office.