TMT/Internet

• Substantial disagreements over the video streamer DouYu International’s strategic direction, prompts ownership re-think at Tencent; 
• Tencent is allegedly privatizing Douyu near the bottom of the market; and 
• Unlike the JD.com move, this transaction maximizes shareholder value while getting into regulatory compliance.

• Advantest shares are down 19% from their Jan 4th high after a post earnings rally on Friday. 
• While order momentum remains strong it has moderated slightly since 2Q and longer-term risks are a concern. 
• What remains to be seen is how sustainable Chinese demand is given its steady rise since 2016.

• Korean prefs have outperformed ords on a YTD basis, probably due to the LG Energy listing. Many of KOSPI’s large-cap stocks have seen an outflow to make room for LGES.
• Samsung Electronics 1P and Mirae Asset 2PB have a negative pref-ord YTD yield difference and are currently below-1.0σ on a 20-day MA.
• Mirae widened the pref-ord spread by announcing an ord-only share buyback. So it should be seen as an outlier. Then, virtually all that remains is the Samsung Electronics 1P.

• We are broadly negative the FA sector as we expect earnings to fall next FY for most players and valuations are extended. 
• Keyence is an exception in that we expect further growth next year although valuations are extended even for Keyence. 
• We believe this is because the market is pricing in its greater earnings resilience but maybe not quite enough.

• Market Research expects that e-commerce will grow 15% and 13% in following two years.
• Big platforms, such as Alibaba and JD.com will still have advantage in the growth.
• The risk is that consumers care significantly more about product brand than platform reputation.

• Tencent is reportedly considering taking Douyu private, potentially in partnership with a PE fund. 
• Given weak earnings and reports of strategic confusion within management this is not entirely surprising. 
• While the news is positive for Douyu we would prefer to look one connection away at the implications for the less troubled Huya.

• SenseTime Group (20 HK) listed just prior to review cutoff and will be eligible for inclusion in the Hang Seng Tech Index (HSTECH INDEX) at the March rebalance.
• We expect SenseTime Group (20 HK) to be added to the index and replace Autohome (2518 HK) at the close of trading on 4 March.
• The real float of SenseTime Group is much lower than what HSIL is likely to use. Expect a BIG squeeze if the stock is added at a higher float.

• The rebalancing cycle of the KODEX Secondary Battery ETF was changed from semi-annual to quarterly. Also, the rebalancing trading takes place for three trading days instead of one trading day.
• This passive impact will be different from the previous rebalancing. LG Energy and SK Innovation will likely experience a significant passive outflow. Then, most small-cap constituents will receive an inflow. 
• Among the top weighting stocks, Samsung SDI and SKIET deserve attention. Sangsin Energy, E&D, and TSI will face exclusion, while C&I, Sang-A Frontec, and Enchem will likely join the ETF.

• Intel is promising is that it will advance five process nodes over the next four years, recapturing process leadership from TSMC by 2025, but significantly underspending TSMC in capex.
• Overearning in datacenter is unwinding, leading to lower profits…overearning in PCs will unwind in 2022, leading to lower profits.
• Lower profits and higher capex means less buybacks to support earnings growth. 

• Blowout 4Q21 results headlined by (adjusted) 38% subscription billings growth – unbelievable for a company this size. 
• Generated a Rule of 75 Quarter (29% revenue growth + 46% FCF margins)
• Multi-Module adoption continues to ramp, large deal sizes continue to ramp. At 12x forward revenues…incredible entry point.

• News reported that Alibaba is in talks with Shanghai Media Group to sell its 30% stake in Weibo Corp (WB US), which we have expected since Weibo’s Hong Kong listing.
• Since 2013, Alibaba has started to invest in Weibo before its NASDAQ IPO and continued to increase the holdings. Alibaba remains a strategic partner with Weibo on platform advertisement.
• We view the potential transaction net positive for Weibo Corp (WB US) as it will realign Weibo strategic direction and Alibaba impact will be minimized. Weibo valuation is also attractive.

• MediaTek’s 4Q21/1Q22 revenue/GM is NT$128.65bn/49.6% and NT$136.35bn(+/-5.15bn)/49.5%(+/-1.5%) resp. Our previous estimate of 4Q21 is in short of NT$1.05bn/2.1% resp., and 1Q22 revenue/GM is at the low limit of guidance resp.
• MediaTek will keep leading in the smartphone area, including 4G/5G for ~700mn in 2022. The 5G penetration rate will be from 35-40% in 2021 to be 50% in 2022.
• Dividend payout ratio will be 80~85%, and it will be NT$72~76 for 2021. It will be a NT$16 of the special dividend in the coming 4 years.

100% capacity utilization rate; reiterate BUY with TP of NTD74. UMC’s growth momentum may come from 5G, IoT and EV in FY22. In particular, higher shipments of PMIC, transceiver/switch and OLED driver IC and demand for more sensors and controllers in multi-lens handset may boost UMC’s sales. UMC revised up FY22 foundry growth to +20% YoY. FY22 EPS is estimated at NTD6.03. Due to UMC’s 100% capacity utilization rate and higher ASP/earnings, we reiterate BUY with TP of NTD74.

Revenue/earnings momentum may decelerate in the short run; adjust from BUY to TRADING BUY. Catalyzed by growth in core businesses, Lite-On’s overall operations have improved. The company has significantly improved its profitability despite flat revenue in FY21. However, considering the lack of revenue/earnings momentum, we adjust Lite-On from BUY to TRADING BUY with TP of NT70 (11x FY22 EPS estimate).

• We had expected 3Q results for Capcom to be unsurprising given a lack of new titles and OP of ¥6.17bn was in line with consensus at ¥6.23bn. 
• The launch of Monster Hunter Rise for PC did not go as smoothly as we hoped but the trend appears to be improving. 
• All in all FY OP looks set to slightly beat consensus and guidance for better than double digit growth is likely in our view.

• In this analysis, we review allocations in Contemporary Amperex Technology among 3 sets of active China managers.  MSCI China Funds, China A-Share Funds and Greater China Funds. 
• We find that exposure in Contemporary Amperex Technology has risen to peak levels across all 3 investor sets, making it one of the largest overweight positions in China.
• Outside of dedicated China, we also see ownership growth among Global Emerging Market and Asia Ex-Japan active strategies.

• Qingdao Ainnovation Technology Group Co Ltd (1853807D CH) raised around US$151m after pricing its IPO at HKD26.3/share, at the bottom end of its IPO price range.
• Qingdao AInnovation Technology Group is an AI solutions provider offering full-stack AI-based products and solutions.
• In this note, we will look at the trading dynamics and current valuation.

• Sirclo, an Indonesia-based ecommerce enabler, has announced that it is set to acquire Warung Pintar
• The value of the deal is undisclosed, but the process is expected to be completed within the first quarter of this year
• Sirclo said that the deal helps its plan to offer more comprehensive online and offline commerce solutions for its clients

Tanla Platforms: Tanla reported a decent quarter with a slight miss on revenue (INR 8.8bn vs. estimate of INR 9.1bn) but better-than-expected margin performance. The gross margin of enterprise business improved +244bps QoQ to 24.6%, powered by a better mix. While enterprise growth was led by the BFSI, wholesale and government verticals, higher messaging volumes from enterprises were a result of festive season and marketing campaigns. The next phase of growth in the platform business will be powered by Wisely, whose commercial launch is expected in March 2022.

• The review period for the March review of the HSCI ended on 31 December. There are a lot of new listings that should be included in the index.
• SenseTime is a high probability inclusion to the index, though it will only be added to Stock Connect in July once it completes 6 months and 20 trading days.
• Xpeng and Li Auto will be added to Stock Connect in Feb/March if they pass the velocity test. We see Li Auto as failing the test, while Xpeng is close.

• Crypto continues to drawdown due to tightening, however, the industry continues to grow with several large VC fund raises underway such as a16z’s $4.5 billion dollar fund 
• Web 3 is a hot topic and we explore how several entrepreneurial individuals have monetized their selfies for millions
• We also explore LooksRare’s potential to disrupt Opensea and their potential 2022 public listing

• The fresh break today to new trend lows on the Kospi Index forces one to identify potential supports & targets 
• The chart warns of at least a test of the January 2018 high at 2,607 which is almost 6.5% below current levels
• The more concerning target is the 200 week moving average at 2,448 – some 12% lower

• NDX break below trendline and price support at 15,300 did open Pandora’s box and was touted as a key risk driver for a global sell off into late January.
• NDX 14,300/100 low zone to kick off a recovery rise in February. We prefer the DJI near 34k and SPX near 4,350. Late January cycle low timeline in focus.
• NDX underside of broken trendline at 15,500 is the level to re take to mend the technical damage – a tall order at this stage.

• We are electing to close out our Sell Rating on Clearfield (CLFD) after an unprecedented market response to our initiation. 
• In less than 4 trading days, CLFD’s stock has declined by approximately 32.3 percent
• We see less of a reason to maintain coverage when the market has priced in for the business risks we had originally highlighted.

• Liquidity shorts can be great short candidates.  The key characteristic is that the company may not be viable, economically, given their cash flows and cash requirements. 
• Liquidity shorts have built-in catalysts, have moderate to higher betas,  and can have strong down moves if a crisis develops.  They can go bankrupt, pushing the stock price near zero.
• HashiCorp Inc (HCP), Fluence Energy (FLNC), Rivian Auto (RIVN), Domo Inc (DOMO)

• Maintain BUY rating with a new TP of Bt50 (+10% from last TP) based on 19.7xPE’22 (+2.5SD historical 5-Year PE) due to positive prospects from new cloud and cybersecurity segments
• We rerate PE target to 19.7xPE’22 from 18.1xPE’22 to factor in upside from change in market valuations. While SIS trades at 16.2xPE’22,SYNEX and COM7 trade at an average of 35.5xPE’22
• •Expect earnings to grow 28% YoY in 22E, off the backs of new high-margin and high-demand cloud and cybersecurity segments.

• Upstart is down 73% from its all-time highs after delivering a robust earnings report that saw revenue grow over 200%.
• There are 5 key factors that will likely continue to drag down the stock as the Nasdaq continues its downtrend.
• The big question for investors is to rigorously evaluate if Upstart is providing investors with excellent value right now for a company that is growing over 200% and highly profitable

• Mastek Ltd (Mastek) offers data, apps, cloud services to public & private enterprise in the UK, US, Middle East, Asia Pacific and India
• The company’s recent acquisition of Evosys has enabled Mastek to provide end-to-end solutions and improves margins from ~14% to 21%
• We now assign BUY rating to the stock (from HOLD earlier). We value Mastek at Rs 3,360 i.e. 26x P/E on FY24E EPS

• We maintain HOLD rating with a TP of Bt28.40 derived from 27.0xPE’22E, (+2S.D. ten-year average). We believe that the company’s strong expected growth in 22E is largely priced in.
• We expect 4Q21 net profit to be Bt218mn (+12%QoQ), which is the company’s all time-high. All-time high revenue of Bt10.5bn (+19%QoQ),will be driven by strong sales of new Apple products
• Positive earnings growth in 2022,driven by sales in gaming devices and equipment, which are high-margin products. Gaming equipment sales come from partnerships with major gaming-related companies like Nintendo, Sony (Playstation),Razer.

• To merge with Siltronic has reached to 95% in probability for GlobalWafers now. Our target price for GlobalWafers doesn’t change at NT$880~960 and $1,200 if it finally past.  
• Chinese government requested that GlobalWafers has to spin off its Denmark’s subsidiary 8” float zone (FZ) wafer within no more than 9 months at most.
• Currently, Siltronic is delivering a GM of 25.6~32% during 1Q~3Q in 2021, which is competitive to Sumco, Shin Etsu. However, it shall be able to improve the GM further.

• In our estimate, the 4Q21/1Q22 revenue/GM is about NT$127.6bn/47.5% and NT$136bn/47.5% respectively. 
• We forecast MediaTek to ship 4G/5G for ~355mn/220nm chipsets in 2022 respectively. 
• Besides Oppo, Vivo, Xiaomi and Honor, MediaTek is shipping for a few thousand sets of Dimensity 9000 to Samsung in 1H22. 

• From a market point of view, Intel’s risk-reward profile appears more compelling than many of its high-flying peers.
• From a business perspective, the company will likely continue to suffer in the short-term, however, strategic positioning is still strong.
• What has historically been Intel’s weak spot could prove to be its key competitive advantage over the coming years.

• The haptic technology industry is expected to grow at a CAGR of 14.5% from 2021 to 2027 according to PR Newswire.
• IMMR issues with management, investor relations management, and litigations is limiting the value of the stock.
• Immersion is putting less money into R&D, making some investors worried onto whether it will have a sustained strong future as market leader in haptic technology.

• Larsen & Toubro Infotech (LTI) offers application development, IMS, digital solution services to BFSI, retail, health, media & hi-tech verticals
• LTI has 71 Fortune-500 clients with a presence in North America & Europe
• We maintain BUY rating on the stock Target Price and Valuation: We value LTI at Rs 8050 i.e. 42x FY23E EPS

• Both the S&P 500 and the Nasdaq 100 have hit decent supports
• This has come after the rise in yields has started to slow down
• At this stage it appears at least a short term bounce may be seen. It is too soon to determine anything more than that

• We explore the notion that stablecoins existed even before crypto was invented and shows the difficulties of creating a monetary medium with zero volatility 
• We show that the supply of stablecoins has grown 27x over the past 2 years and breakdown the history of stablecoins and their modern-day use cases 
• We demonstrate a strategy to generate 20% returns on stablecoins using TerraUSD (UST CURNCY)  and Anchor Protocol

• The stock price has risen 13% since our last note, but we still believe there is an upside of 21%.
• The company is cutting employee benefits, from housing allowance to afternoon tea.
• We believe the operating loss will shrink significantly in the following two years.

• CLFD has been the beneficiary of communication service providers investing in their broadband networks to meet an increase in data traffic.
• The events of the last two years, namely the COVID-19 pandemic causing work/learn from home and Huawei and ZTE equipment replacement, were the reason for the boom CLFD has experienced.
• CLFD’s community broadband customer was incentivized to replace Huawei and ZTE equipment with reimbursement checks from the FCC.

Robust deal wins to drive growth

• Mercari is down 33% since 22 November, actually underperforming the 31% decline in Mothers. 
• YoY numbers for the US may only modestly beat the 20% growth target for the year and this reset of expectations may have been the driver of the decline. 
• However, we expect significant upside surprises on profitability and that is our focus.

• It is continuing to raise wafer price, and revenue/GM to reach ~NT$58billion/~39% and NT$60billion/~41.5% in 4Q21/1Q22 respectively. 
• It will plan to add 5-8k 28nm production capacity in 12A Tainan during 2H22, and we consider it is to secure customers’ demands.
• We do not see any sign to deteriorate for the 2nd half at this moment. 

• Delhivery (1058656D IN) is the largest and fastest-growing 3PL express parcel delivery player in India by revenue in FY21. It has won SEBI approval to raise up to $1 billion.  
• The fundamentals are mixed as it has been unable to leverage its leading position and strong growth to deliver profits or cash generation.  
• Based on the draft red herring prospectus, we are cautious about this potential IPO as the negatives outweigh the positives.  

• A blizzard of cost synergies we conservatively estimate at $500MM from lower distribution commissions, hosting costs, and cutting ATVI’s highly paid C-Suite.
• Multiple strategic benefits: Catalyzes Microsoft’s XCloud streaming game service and Game Pass subscription offering….potentially offers greater leverage for app store negotiations with Apple and Google.
• Accretive on valuation alone…MSFT is paying a 10% discount to ATVI’s 23x average forward PE from last few years. MSFT’s 11x forward P/S vs. ATVI’s 5.5x revalues ATVI’s revenues 2x.

• Our initial thoughts on Microsoft’s bid for Activision Blizzard were on the sceptical side given various signs of trouble at the company. 
• In contrast the majority of commentary on the deal has been somewhere between positive and euphoric though there are monopoly concerns from customers. 
• Yet the more we examine the implications the less we like this deal for Microsoft.

• Shift reported its 1QFY08/2022 results last week. Revenue for the quarter increased 51.5% YoY to JPY14.3bn while OP more than tripled to JPY1.95bn vs JPY548m a year ago.
• Both Enterprise and Entertainment segments saw strong growth in revenue as well as improvement in GPM during the period.
• Shift’s share price gained 7.4% following its earnings announcement and we expect the company’s strong earnings momentum to continue over the next few years.

• Qoo10 has become one of the most popular Japanese malls among young women for all things Korean, particularly cosmetics and fashion.
• The online mall now wants to exploit this by creating a new dedicated fashion mall with better promotional opportunities for merchants of all nationalities.
• This should bring more competition to ZOZO Inc (3092 JP) and Rakuten Inc (4755 JP).

• GTPL Hathway (GTPL) is a leading MSO (No. 1 in terms of subscribers) offering cable television (CATV) and broadband services
• Expansion into new states and digitisation has led to strong topline and earnings growth of ~27% and ~86% CAGR, respectively, over FY16-21
• We roll over to FY24 and value GTPL at Rs 290 i.e. 14x FY24E P/E

• Microsoft’s largest-ever acquisition provides boost for cloud gaming and metaverse ambitions.
• Deal comes as Activision Blizzard’s been mired in gender pay disparity and sexual harassment storm.
• Controversial CEO Bobby Kotick to continue in his role as head of Activision Blizzard, though WSJ says otherwise.

• On 18 January, Microsoft Corp (MSFT US) announced that it will acquire Activision Blizzard (ATVI US) for $68.7 billion all-cash deal.
• The acquisition of Activision Blizzard by Microsoft is likely to have a positive impact on the entire global game sector including in Korea. 
• This major acquisition of Activision Blizzard by Microsoft could rejuvenate the entire global game sector as it could signal greater M&A interest in high-quality game companies.

• Our updated NAV analysis of SK Square suggests an implied price of 92,050 won per share, representing 46.3% upside from current levels.
• Among the affiliated companies, OneStore and SK Shieldus are expected to be listed in the Korean stock market in 1H 2022.
• MSCI is likely to increase the weight of SK Square in the MSCI Korea Index rebalance announcement on 10 February. 

• We think the chance for GlobalWafers mergence case to have the final approval could be high. Even if it finally failed, the raw wafer supply should be full until 2024.
• This deal was granted by seven governments and organizations already. And it is still under review of Chinese and Japanese governments.
• The deal will not change the worldwide raw wafer supply status, especially such supply tightness. To our understanding, the secrets to achieve success are cost reduction and resource management mostly.

• Mindtree Ltd (Mindtree) is a mid-tier IT company with a presence in the US, Europe & RoW catering to BFSI, communication media & technology, retail & travel
• Expertise in infrastructure & application catering to Global 2000 clients
• We maintain HOLD rating on the stock. We value Mindtree at Rs 5,055 i.e. 40x P/E on FY24E

• Mio, a Vietnam-based social commerce startup, has raised US$8 million in a series A funding round led by Jungle Ventures
• The investment boosts Mio’s total funding raised to US$9.1 million.
• Founded in June 2020, Mio uses a network of resellers to sell fresh produce such as fruit, vegetables, and meat

• HCL Technologies Ltd (HCL Tech) Q3FY22 performance stood above our expectations and beat our estimate on all fronts.
• The company reported revenues of Rs 22,331 Cr, up 8.1% QoQ and 15.7% YoY.
• We recommend a BUY on the stock and assign a 24x P/E multiple to its FY24E earnings of Rs 67.4/share which gives a TP of Rs 1,600/share, indicating an upside of 20% from CMP.

HCLT delivered an exceptionally strong revenue growth of 7.6% QoQ CC in 3QFY22, 310bp above our estimate, led by its troubled Products and Platforms (P&P, +24.5% QoQ) vertical, which did exceptionally well despite benefitting from seasonality and deal spill over from 2QFY22 (600bp impact). Its Services verticals (IT Services/ER&D up 4.7%/8.3% QoQ CC) continued to clock strong growth and was ahead of our estimate. HCLT reported strong new deal TCV of USD2.1b (flat QoQ, +64% YoY).

• This short model seeks short-sale candidates among companies that use aggressive accounting and/or exhibit deteriorating quality of earnings.  
• They are typically highly idiosyncratic shorts and require thoughtful analyses of upcoming catalysts.  When the company’s issues become well-known, there is often multiple compression as well as a rerating.
• These shorts can have high or low betas, valuations based on artificial earnings and exhibit good short responses to subsequently disappointing earnings.

• Flexible printed board player Akm Industrial (1639 HK) has announced a pre-conditional Scheme from Alpha Luck and AKM Meadville at HK$1.82/share. The Offer price will NOT be increased.
• Alpha Luck is ultimately held by SASAC and AKM Meadville by the government of Haicang District, Xiamen. The two intend to hold 40:60 respectively in the unlisted vehicle. 
• Various PRC regulatory approvals are required. This appears a transaction geared to complete. Timing is the key risk to the deal.

• Stablecoins are the critical $170 billion dollar sector that is the key building block for the entire $2 trillion dollar crypto asset class with increasing attention from regulators
• In part 1, we explore some real world case studies on problems that stablecoins solved for crypto such as stability of payments to vendors, and the enabling of lending
• We also present a (almost) risk-free arb where traders pay 1.5% to borrow USD and receive 9% on stablecoin dollars 

• Qingdao Ainnovation Technology Group Co Ltd (1853807D CH) is looking to raise up to US$157m in its Hong Kong IPO.
• Qingdao AInnovation Technology Group is an AI solutions provider offering full-stack AI-based products and solutions. 
• While we don’t have a fundamental issue with the listing, at asking valuations, the firm appears to be fairly valued with limited upside on its FY23 numbers. 

• AInnovation Technology (AIT HK) is a fast-growing enterprise AI solutions provider in China. It has launched an HKEx IPO to raise up to US$157 million. 
• In AInnovation Technology IPO Initiation: Code Amber, we stated that the negatives outweigh the positives and we would give the IPO a pass.
• Our valuation analysis suggests that the IPO price is fair. Due to our concerns about the fundamentals, we remain on the sidelines. Pricing is 20 January, listing on 27 January.

• Mindtree beat our estimates with revenue of Rs 2,750 Cr for Q3FY22, reporting revenue growth of 35.9% YoY and 6.3% QoQ
• The company posted operating profits of Rs 592 Cr, registering a growth of 9.7% QoQ
• We recommend a BUY on the stock and assign 40x P/E multiple to its FY24E earnings of Rs 131.5/share to arrive at a, implying an upside potential of 12% from CMP.

• Elastic NV (ESTC US)  has grown its ARR from ~$207 million as of Jul-18 to ~$760 million today and may become a multi-billion dollar unicorn in the future.  
• We like the subscription-based freemium business model, strong net expansion rate, and acceleration in revenue growth of Elastic Cloud business, which currently represents ~33% of total revenue. 
• Elastic Search is one of the most popular search engines globally, and the company’s products have been downloaded more than 350 million times since 2013. 

• Fiserv is valued as a slow-growth and low return on capital legacy business, although this does not appear to be the case.
• At present, the expected topline growth rate is far from spectacular, but parts of the business are growing fast and could result in a multiple repricing.
• Due to the acquisition of First Data, the company’s improving profitability is a better measure of business performance than return on capital is.

• Infosys Ltd (Infy) is one of the leading IT players catering to BFSI, retail, communication, manufacturing & hi tech verticals.
• The company generates >58% of revenues from digital technologies
• We continue to remain positive and retain our BUY rating on the stock. We value Infosys at Rs 2,300 i.e. 32x P/E on FY24E EPS

• Mindtree (MTCL) delivered healthy QoQ growth (following a very strong quarter) and margin beat (~100bps expansion) was the highlight of the quarter
• Recovery in T1 business was encouraging and growth was broad-based across verticals, geographies, and service lines
• Our target price of INR 5,060 is based on 37x Mar-24E EPS (25% CAGR over FY21-24E on a high base in FY21 of >70%)

• Even though IBM shares ended 2021 in the green, total return was very disappointing on a risk-adjusted basis.
• Kyndryl shareholders were severely punished, and prospects for the company remain rather bleak.
• 2022 will be a critical year for IBM’s management to prove that it could turn the business around.