TMT/Internet

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• On the IPOs front, Zhihu and the SK twins were the main active deals, with LIC being in the pipeline for a potential launch in the coming week.
• Placement flows remained slow over the holiday shortened week. With Japan continuing to favour accelerated book build.

• Since the Russian invasion of Ukraine on February 24, the market has moved in somewhat of a barbell fashion.
• If higher interest rates and inflation characterize the landscape for the next several years, it likely spells the end of the era of unbridled speculation and high multiples, says FMI.

• WinSemi’s revenue was NTD$5.56bn in 1Q22, which was -7.3% YoY and -22.96% QoQ.
• We think WinSemi’s revenue could be seeing upside until 3Q22, and it could be still struggling in 2Q22. 
• The optical devices decreased the weakest. The communication infrastructure aligned the supply chain. The handset and WiFi decreased seasonality and the WiFi router was impacted because of chip shortage.

• Bukalapak’s (BUKA IJ) results saw very strong growth from its Mitra Business, with a much slower marketplace but we see the latter picking up as its specialty strategy is developed. 
• The launch of both Allo Bank Indonesia and Allo Fresh over the next two quarters should provide some excitement, whilst its gaming marketplace Itemku is already profitable. 
• Take rates should improve in 2022 as Bukalapak (BUKA IJ) offers a broadening array of services across its Mitra and marketplace verticals. Valuations look attractive versus peers. 

• TSMC’s 1Q results were extremely strong with revenue 4.15% above consensus and OP 9.04% above consensus. 
• With the strong pricing power and favourable forex factored in consensus OP estimates for the year have moved up to TWD954bn in line with our start of year estimate. 
• However, that now leaves limited further upside in our view and we expect earnings to decline next year rather than rise.

• Square Enix held their 20th anniversary event for Kingdom Heart over the weekend announcing a number of mobile titles as well the next mainline title Kingdom Hearts 4. 
• While a release date was not offered we would expect a launch during the next fiscal year.
• Just as importantly, the announcement lends added weight to already leaked information on the company’s upcoming pipeline.

• The Palm Valley Capital Fund invests in small cap stocks.
• The Fund is new, its underlying return-based investment strategy is not.
• The past year was the first time ever that aggregate small cap earnings actually achieved the forward estimates established by analysts one year earlier.

• Money Forward (3994 JP) posted solid Q1 financial results as revenue growth rebounded and EBITDA losses were within management’s forecast
• But revenue guidance for Q2 was weaker than expected and represents the lowest YoY growth to date which has raised questions on the effectiveness of marketing spend
• Full year guidance remains intact and the company expects that underlying growth in recurring revenue to remain robust which is positive for the long term thesis

• Elon Musk has apparently sent a letter to Bret Taylor, Chairman of the Board of Twitter, saying he would make a bid for 100% of Twitter at US$54.20/share. 
• Get it? Get it? Nudge nudge wink wink. That’s all part of the fun for him. 
• The question is whether this bid, which creates problems of whether one should take it seriously vs literally, or vice versa, engenders more discussion about how the platform makes money.

• WT Microelectronics (3036 TT) has entered into an agreement to acquire electronic component distributor  Excelpoint Technology (EXLP SP) by way of a Scheme at a cash consideration of S$1.93/share.
• This is an Offer premium 7.8% to last close but a 21.4% premium prior to the announcement Excelpoint was in discussions with a third party involving the company’s shares.
• Albert Phuay (founder and CEO) will reinvest part of his cash consideration under the Scheme in 20% equity of the Acquiring Entity, with the balance 80% stake owned by WT. 

• Visional Inc (4194 JP) had raised US$609m in its Japan IPO in April 2021, where it had been priced at the top end after books were reportedly multiple times covered.
• Visional is a HR technology company based in Japan. The company operates BizReach, an online recruiting platform that helps to connect professional job seekers to direct employers and third-party recruiters. 
• The Pre-IPO shareholder, YJ2 Investment, will be released from its lockup on 16th Apr 2022, 360 days post-listing.

• WT Microelectronics (3036 TT) will offer S$1.93 in cash and a final FY2021 dividend (ex-div date: 28 April, payment date: 13 May) of S$0.088 for a total consideration of S$2.018.
• The key scheme conditions are shareholder approval and Court approval. The scheme meeting will be held sometime in late June to early July.
• The offer price represents a 10-year share price high. At the last close of S$1.96, the gross and annualised spread for a mid-Sep effective date is 3.0% and 7.1%, respectively.

• We have previously commented on Valorant’s relatively unique position in esports due to its high degree of regional parity and that is being further underscored during its ongoing Masters tournament. 
• In particular, Japan, a region not known for any particular prowess in FPS titles secured its first top eight position generating significant buzz on twitter in doing so. 
• The implications look positive here for both Valorant overall and for Japan’s esports ambitions where it is probably now time to truly familiarise yourself with the potential plays.

• The revenue/ GM/ OPM/ EPS/ ROE is USD$17.57b/ 55.6%/ 45.6%/ NT$7.82/ 36.2% in 1Q22. The revenue/ GMO/ OPM is US$17.6-18.2bn/ 56-58%/ OPM: 45-47% in 2Q22 guidance.
• Moving into 2Q22, TSMC expects their business to be supported by HPC, Automotive related demands, partially offset by smartphone seasonality.
• The HPC platform is the strongest growing platform and the largest contribution to TSMC’s growth in 2022.

• International equities were faced with numerous risks in the first quarter, ranging from resurging COVID-19 cases in large geographies like China to inflation and potential monetary tightening globally
• Europe was most directly impacted by the conflict as crude oil and natural gas prices spiked and already-challenged supply chains were further pressured
• One of the key drivers of the rotation from growth to value stocks was action in the bond market

• Lionheart Studio Corp, which is one of the fastest growing game making companies in Korea, is getting ready to complete its IPO as early as 2H 2022. 
• Lionheart Studio is best known for its popular mobile game Odin which ranked first in app market sales right after its launch in June of last year.
• Kakao Games’ share price could fall further as some investors that are enthusiastic about Odin would rather invest invest in Lionheart Studio directly rather than in Kakao Games.

• Getir has been one of the hottest tech companies in Europe from Turkey, with its valuation reaching c. $12 billion in March this year.
• Intense competition has put pressure on the topline. There’s no clear path to profitability in the medium term, as players in the sector are still burning capital to build scale.
• Future consolidation in the Q-commerce sector is given. Diversification is likely the way forward for current leaders to create more ways to monetize from its users.

• ClearBridge is a leading global asset manager committed to active management.
• ClearBridge believes Europe has the support structures and spending capacity to avoid a recession and keep an incipient post-COVID-19 recovery intact.
• We were active in repositioning the portfolio to better manage the volatile risk/reward environment in international markets.

• Shanghai is in lockdown and citizens are finding it hard to get enough food.
• Community group purchase has been taking consumers from e-commerce apps.
• The central government reiterates the zero-COVID policy, but the Omicron variant is spreading with very few death cases.

• Softbank has raised $2.4bn (¥300bn) from the sale of TMUS shares to DT with proceeds likely earmarked for VF2 and possibly supporting ongoing share buybacks
• The sale price is below market but surfacing cash is the more positive takeaway and should ease concerns on leverage that have lingered as tech valuations fall
• The impact on the discount to NAV is likely to be weaker than the reaction to the TMUS/DT monetization in August/September

• Q1 results are better than expected, achieving record-high quarterly growth in SaaS revenue
• Growth is driven by Corporate Customer ARR, which rose by 47% YoY
• For growth investors, Money Forward is out top pick in Japan

• Shift Inc (3697 JP) reported 2QFY08/2022 results last week. Revenue grew 43.5% YoY to JPY15.6bn (vs consensus JPY15.2bn) while OP 99.2% YoY to JPY1.9bn (vs consensus JPY1.1bn).
• Both enterprise and entertainment markets saw strong growth in revenue while GPM of enterprise biz further expanded during the quarter.
• Shift’s share price has moved up by about 16% since its results announcement and we think there is further upside.

• This is a follow up chart of the VIX Index that was shared last week
• While we have dipped in the very short term, the underlying pattern warns of a significant rise
• Such a development is likely to be seen with a falling S&P 500

• On April 13, Money Forward (3994, the company) announced 1Q (Dec-Feb) FY11/22 sales of 4.756bn yen (+37.2% YoY), EBITDA of -1.159bn yen (vs. 358m yen for 1Q FY11/21)
• Our 1Q earnings forecasts were sales of 4.363bn yen, EBITDA of -2.239bn yen, OP of -2.683bn yen, and SaaS ARR of 12.537bn yen
• SaaS ARR of 12.904bn yen includes 8.727bn yen for Business domain corporate customers (+46.7% YoY), 1.264bn yen for Business domain sole proprietors (+35.0% YoY)

• Money Forward (3994 JP) reported 1QFY11/2022 results yesterday. 1Q revenue grew 37.0% YoY to JPY4.8bn and beat consensus estimates by 4.4%.
• Operating losses for the quarter was JPY1.6bn and accounted for around 34.7% of revenues during the period.
• MF’s SAAS model has started taking-off, we would highlight that string user growth comes at the cost of heavy advertising and subsidies.

• Introducing expanded ESG tear sheet; maintain BUY
• Trimming FY22-23 earnings estimates
• Extended Shanghai lockdown potentially adverse
• Extending MOU timeline for CFTC JV

•  TCS’ performance highlight was its strong deal bookings of USD 11.3bn, supported by mega deals of ~USD 1.8bn TCV (~0.5/0.8% revenue impact for FY23/24E)
• Medium term drivers such as prioritization of tech budgets, strong execution framework (including high retention) and services breadth including industry platforms remain intact.
• Our target price of INR 4,210 is based on 32x FY24E EPS with EPS CAGR at 12% over FY22-24E and we maintain ADD on TCS

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• Tata Consultancy Services (TCS) reported revenue growth of 2.6% QoQ USD terms (3.2%QoQ CC) and margins of 25% in line with our estimates.
• Revenue growth was broad-based across verticals with communications, BFSI and retail leading the growth.
• TCV was strong at US$11.3bn (all-time high) growing 49% QoQ and 23% YoY- partly aided by two mega-deals of ~US$1 bn each.

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• China’s gaming regulator, National Press and Publication Administration granted publication licenses to a list of 45 games, ending the nine-month long freeze on new game approvals in the country.
• While it comes as a relief, The Cyberspace Administration of China has kicked off a formal campaign to investigate and rectify algorithm security issues of tech companies.
• Though any of Tencent (700 HK) games didn’t receive approvals, the company’s shares have moved positively during today’s trade and up 2.1% from yesterday’s close.

• Zhihu Technology (ZH US) has launched an HKEx dual-primary listing to raise $150-200 million. The H Shares will be priced on 14 April and listed on 22 April.
• In Zhihu Dual-Primary Listing: A Question of Judgment, we stated that while a loss-making tech name is not everybody’s cup of tea, Zhihu has resilient performance and an undemanding valuation.  
• In this note, we will look at Zhihu’s potential HK-ADS premium/(discount). Zhihu pricing its H-shares at a discount of 3-4% to its ADSs will be reasonable, in our view.

• Chinese Internet data center services provider 21Vianet Group (VNET US) has recently received a non-binding proposal letter from the Hina Group and Shanghai’s Industrial Bank Co. 
• The indicative Offer price is US$8.00/ADS, or ~US$1.3333 per ordinary share.
• The Offer Price is utterly underwhelming. A successful outcome will more than likely find its way to the Cayman Court.

• ONE Store (ONE KS) is looking to raise up to US$228m in its Korean IPO.
• One Store is a mobile app market platform, formed by a cooperation between South Korea’s three telecom carriers, together with Naver Corp, an internet firm in South Korea.
• Given the lack of direct comparables, one way to look at valuation would be to compare the firm to its historical asking valuations.

• Viva Republica (Toss), one of the largest fintech companies in Korea, is expected to become the first decacorn in Korea in 2Q 2022. 
• Toss is expected to have a value range of 10 trillion won to 15 trillion won in the upcoming funding round in 2Q 2022. 
• Kakao Bank has P/S multiple of 20.2x in 2021. Applying this multiple on Viva Republica’s sales of 781 billion won, this would imply a valuation of 15.8 trillion won. 

• The 1Q22 revenue is NTD$63.4bn, and we estimate GM is ~40%, which is consistent with 1Q22 guidance.
• We estimate the order is pretty much confirmed in UMC in 3Q22, which should be ~NTD$65bn.
• UMC will increase about 10-15k/month of 28nm capacity in 2H22.

• In Q4FY22, Tata Consultancy Services Ltd (TCS) reported revenue growth of 3.4% QoQ in Rupee terms, beating our expectations.
• The company’s revenues stood at Rs 50,591 Cr, up 15.8% YoY.
• We recommend a BUY rating on the stock and assign a 31x P/E multiple to its FY24E earnings of Rs 135.2/share to arrive at a TP of Rs 4,200/share, implying an upside of 14% from the CMP.

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• VNET, formerly known as 21Vianet Group (VNET US), is a leading carrier and cloud-neutral data centre services provider in China. 
• It has received a non-binding privatisation proposal from The Hina Group and Industrial Bank Co Ltd A (601166 CH) at $8.00 per ADS, a 48.1% premium to the undisturbed price. 
• The Board has not made any decisions on the offer. Despite the juicy premium, the offer is unattractive in the context of historical multiples and share prices.    

• Zhihu plans to raise around US$130m via a dual primary listing in Hong Kong.
• Unlike all the prior dual primary/secondary listings which have been done via offering either only primary or a mix of primary+secondary shares, Zhihu’s offering will consist of only secondary shares.
• In this note, we’ll talk about the deal dynamics and structure.

• Here are the tradable stocks for Long/Short position buildups for the KOSDAQ 150 rebalancing in June.
• LONG (Additions): Dear U (376300 KS), Vidente (121800 KS), GOLFZON (215000 KS), Hana Micron (067310 KS), Danal (064260 KS), & Intellian Technologies (189300 KS)
• SHORT (Deletions): Daea Ti (045390 KS), Advanced Process Systems (265520 KS), Unison (018000 KS), Danawa (119860 KS), OE Solutions (138080 KS), & Toptec (108230 KS)

• China announced game approval last night, after 8 months of silence.
• We discussed in our previous note that China would resume game approval.
• There is no game approved for Tencent and Netease this round but we believe their approval will come in due time.

• Zhihu has filed for a dual primary listing on the HKEx through offering of 26m shares (Class A) by existing shareholders at a maximum offer price of HK$51.8 per share.
• Two ADS represent one Class A ordinary share and shares closed at US$2.56 per ADS, and the maximum offer price implies a 31.5% premium to the last close.
• Zhihu’s business model seems to work in favour and the company’s shares are extremely cheap at the current multiples. There is upside but we would remain cautious.

• Kurly’s management team needs to drastically lower its valuation expectation in this difficult market environment.
• Due to weak market conditions, it is likely to have a difficult time completing this IPO if its valuation is stretched to about 6 trillion won to 7 trillion won. 
• In our view, the company could complete its IPO if the valuation is close to about 3.5 trillion won to 4.5 trillion won. 

• The prices at work on the S&P 500 are warning of further weakness ahead
• Short term focus is on 4418 and if that gives way we could be en route towards the 4101 low again over the coming weeks
• Overall it is beginning to look as though the rebound over the past 4-6 weeks has been corrective

• GoTo (GOTO IJ) lists on the IDX tomorrow. The IDX has GoTo (GOTO IJ)‘s free float at 66% which would mean IDX30, LQ45 and IDX80 Fast Entry index inclusion. 
• If included in the indices at a free float of 66%, GoTo (GOTO IJ) will have a weight of 13.55% in the IDX30 Index and 12.12% in the LQ45 Index.
• Passive trackers will then need to buy 13.2% of the real float on the stock. Active funds will also buy the stock as it would appear in their benchmarks.

• Zhihu Technology (ZH US) has launched an HKEx dual-primary listing to raise $150-200 million. Zhihu will not receive any of the net proceeds as it is offering from selling shareholders.
• Zhihu shares are down 73% from the IPO price of $9.50 per ADS (March 2021) largely due to the tech sell-off and regulatory uncertainty on ADR listings.  
• While a loss-making Chinese tech name is not everybody’s cup of tea in the current environment, Zhihu has delivered resilient performance and the valuation is undemanding. 

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore and the US (Chinese ADRs only).
• This week, the highest gross spreads are Yashili International Holdings (1230 HK), Pendal Group (PDL AU), Sezzle Inc (SZL AU), Razer Inc (1337 HK), Link Administration Holdings (LNK AU).   
• The lowest gross spreads are Uniti Group Ltd (UWL AU), 51 Job Inc Adr (JOBS US), China Logistics Property Holdings (1589 HK), Irongate Group (IAP AU), Jin Jiang Capital.    

• The S&P/ASX 200 (AS51 INDEX) rebalance takes place at the close on Monday, 11 April with HomeCo Daily Needs REIT (HDN AU) replacing CIMIC Group Ltd (CIM AU). 
• The review period for the MSCI May SAIR starts on 18 April. There will be adds/deletes, listing switches, and FIF changes (both big and small).
• There were big inflows to the iShares MSCI Emerging Markets (EEM US), Vanguard FTSE Emerging Markets ETF (VWO US) and iShares Core MSCI Emerging Markets ETF (IEMG US) ETFs.

• Crowdstrikes’ growing platform offers three end markets as large as its core endpoint protection: log management, identity, and IT hygiene.
• 43 public enterprise software companies with more >$1 billion in revenues, only 5 are growing >60%, and only one has 30%+ free cash flow margins: Crowdstrike.  
• New $5B ARR 2026 target will prove as ridiculously conservative as last year’s $3B ARR 2025 target.

• GoTo was initially aiming to raise around US$1.25bn from a local listing. It managed to raise US$960m after downsizing its deal and pricing close to the midpoint.
• GoTo, is an Indonesian holding company, was formed in May 2021 as a result of a merger between Gojek, leading player in ride hailing, and Tokopedia, leading e-commerce player.
• In this note, we’ll talk about the trading dynamics of the deal.

• Japan-Based BPO company Bewith (9216 JP) was listed in the First Section (now known as the “Prime” Market) of the Tokyo Stock Exchange (TSE) on 2nd March 2022.
• When a company gets listed in the TSE First Section, it subsequently gets included in the TOPIX Index requiring TOPIX-tracking funds to purchase the stock during an Inclusion Event.
• Usually, this presents interesting trading opportunities to generate sharp market-neutral returns in the space of few trading days. Below is a look at the details for Bewith’s Inclusion Event.

• We expect TSMC will grow ~4.7% QoQ in 2Q22, and the revenue/GM/OPG is around US$17.7bn/55.1%/43.8%.
• We highlighted TSMC was considering to increase the wafer price nearly 2 months ago, but TSMC has still not made the final decision yet.  
• TSMC 4/5nm capacity will be ready for for 150k/month within 4Q22. We think the new iPhone 14 would request more than half of the capacity.

• Yaskawa reported weak results as we expected (¥12.9bn OP vs. our ~¥14bn estimate and consensus at ¥16.7bn). 
• Despite this the company actually guided for a very punchy ¥72bn in OP next FY even above consensus’ ¥65.5bn and our expectation for OP to be flattish or even decline. 
• Nevertheless, there was nothing on the earnings call to suggest that guidance was anything more than overoptimism on the top line.

• MSCI comprehensively evaluates the free float for stocks at the May SAIR. The changes will be announced on 12 May and implemented at the close on 31 May.
• We expect an increase in the FIF for some stocks. Largest inflows are expected on Tencent (700 HK), Kuaishou Technology (1024 HK), JD Health (6618 HK) and KakaoBank (323410 KS). 
• There is reasonably large short interest on some of the stocks and there could be some short covering on stocks where there could be large passive inflows.

• Our base case valuation of OneStore is market cap of 1.3 trillion won and target price of 48,713 won per share (28% higher than the IPO mid-point price range).
• Our valuation of the company is based on P/S multiple of 4.8x (average of the peers) using our estimated sales of 269 billion won for the company in 2022. 
• In our comparable companies valuation analysis, we have used the following four Korean companies as comps including Kakao Corp, Naver Corp (035420 KS), AfreecaTV (067160 KS), Kidari Studio (020120 KS).

• ONE Store (ONE KS) is looking to raise up to US$228m in its upcoming Korean IPO.
• One Store is a mobile app market platform, formed by a cooperation between South Korea’s three telecom carriers, together with Naver Corp, an internet firm in South Korea.
• By cutting its commission take rate to attract developers, the firm has managed to turnaround its transaction volume in FY18, leading it to record consecutive quarters of growth.

• HOOD’s performance indicators are deteriorating.  Growth in funded accounts is not growing.  Monthly average users are declining, and ARPU is falling.  Margins remain negative and are declining.
• The company’s main sources of revenue are from transactions in speculative instruments.  Options and crypto trading represent 80% of transaction revenue… in accounts that average $4,300 in size.
• Small scale and lack of diversification leave it disadvantaged.   Further, it generates little fee income, such as asset management fees.  It is nearly entirely reliant on payment for order flow.

• This model uncovers companies facing recent sharp cuts in estimates. These shorts can have very disparate characteristics.
• The key judgement involves whether the negative revisions are temporary or if they are indications of ongoing weakness in the business. 
• Breaking Estimates stocks often continue to decline after the cuts.  This week we flag: UiPath, EchoStar, Stitch Fix, First Solar

• Yaskawa reports today and we expect earnings and guidance to both be on the weak side. 
• The stock has been weak of late but we still lean towards the idea that there is a little downside risk remaining. 
• The key question is whether the market attaches any credibility to consensus projections of 15% YoY OP growth next FY.

• PC Partners has solid bull base line support to stage a fresh bull cycle. Old high support and key lows rest at the 7.50 level. 
• RSI is due to rally off of the bull wedge breakout support. Buy volumes are constructive on strength with weak sell volume on recent weakness (underlying bullish).
• 12.50 and 14 bull targets with the later the hurdle to clear to open the way higher.