United States

• Happy New Year everybody and welcome to this year’s first edition of the Energy Cable.
• Crude oil prices started rallying into and over the Christmas holiday period with focus on the Houthis’ attacks on vessels in the Red Sea which prompted us to have a look at the numbers.
• The developments over the weekend have increased tensions, and we are eagerly awaiting the initial price action of the year to see how nervous the market is.

• During the period under consideration, i.e. November 15th to December 15th, 2023, the EUR/USD exchange rate fluctuated between 1,084 and 1,095 in the initial period until November 27th, 2023.
• After reaching 1,099 on November 28th, the exchange rate followed an immediate downtrend until the 11th of December (except for one session), although it remained higher than the levels seen at the beginning of November.
• Conversely on December 12th, the pair recorded an ascent, finally settling at 1.0894.

• Long Nvidia vs. Short Basket of Taiwan AI Concept Stocks — The trade has held steady since our last piece with Nvidia outperforming the shorts slightly.
• CES 2024 will be held January 9th to 12th. It will showcase AI expanding into a wide range of Edge AI applications such as home appliances and PCs.
• One can maintain the L/S trade into CES 2024 given that the Taiwan AI Short Basket constituents are unlikely to be beneficiaries of positive news flow from the event.

• Marvell Technology managed to surpass Wall Street’s revenue and earnings expectations, achieving a commendable revenue of $1.42 billion, marking a 6% sequential growth above the midpoint of the provided guidance.
• The data center end market witnessed revenue of $556 million in the third quarter, surpassing expectations, mainly driven by robust AI revenue.
• Despite the anticipated decline in enterprise on-premise revenue, Marvell’s diverse product portfolio, including PAM4 optical products and Teralynx Ethernet switches, contributed to the broad-based growth.

• Ministry of Finance and National Health Commission issued new policy strictly prohibiting public hospitals from borrowing to purchase medical equipment, which will change the investment logic of medical device sector.
• “PD-1+ADC” is expected to replace “PD-1+chemotherapy” as the first-line standard therapy. This will be a huge market. So, good story of ADC CDMO (such as WuXi XDC) would continue.
• The inspiration that AstraZeneca’s acquisition of Gracell brings to investors is IPO isn’t the only way for exit.Being acquired is also good, which will become more important in the future.

• Akamai Technologies, Inc. exceeded analyst expectations in terms of revenue as well as earnings, with a revenue surge to $965 million, marking a substantial 9% year-over-year growth.
• The non-GAAP operating margin stood impressively at 31%, while non-GAAP earnings per share reached $1.63, reflecting a remarkable 29% year-over-year increase.
• Akamai’s security segment experienced a notable 20% year-over-year growth in Q3.

• AIG delivered mixed results for the previous quarter, with revenues well below analyst expectations, but managed an earnings beat.
• In the third quarter, AIG continued to achieve remarkable results, demonstrating significant progress in strategic, operational, and financial objectives across the organization.
• They had adjusted after-tax income of $1.2 billion, a 92% YoY increase, and consolidated net investment income reaching $3.3 billion, a 29% YoY increase.

• Analog Devices, Inc. delivered a mixed set of results in its most recent result, with revenues above Wall Street expectations but below-par earnings, reaching $2.7 billion, primarily fueled by substantial growth in the automotive sector.
• Amid challenging times, ADI’s design win pipeline witnessed double-digit growth, buoyed by sustained momentum in Maxim revenue synergies, surpassing initial expectations.
• In the consumer sector, ADI secured multiple power management sockets in portable applications, showcasing the success of its acquisition strategy.

• American Airlines Group delivered mixed results for the previous quarter, with revenues below the analyst consensus.
• The financial results for the third quarter showcased high revenues of approximately $13.5 billion, driven by a resilient demand environment and significant travel rewards program revenue.
• American Airlines experienced steady domestic demand, with international demand fueling revenue growth, particularly in the Atlantic, Caribbean, and Central America regions.

• Best Buy Co., Inc. delivered mixed results for the previous quarter, with revenues well below analyst expectations but managed earnings beat.
• The company disclosed a 6.9% decline in comparable sales, a tad below the projected figure, due to softened consumer demand during the quarter.
• The third quarter witnessed growth in the paid membership base and enhanced customer satisfaction across various service offerings.

• BILL Holdings, Inc. surpassed the revenue expectations as well as the earnings expectations of Wall Street, marking a milestone with Q1 revenue surpassing $300 million, a remarkable 33% YoY increase.
• Despite surpassing expectations and witnessing strong customer adoption, the company faced growing macroeconomic pressures toward the end of the quarter, persisting into October.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• AppLovin Corporation delivered an all-around beat in the previous quarter, experiencing substantial year-over-year and quarter-over-quarter revenue growth.
• As part of the portfolio optimization program, the apps sector marked its first quarter of quarter-over-quarter revenue growth, generating a total revenue of $864 million, surpassing guidance with an adjusted EBITDA of $490 million, up 63% year-over-year.
• In the app segment, revenue grew 5% sequentially to $360 million, representing the initial quarter of growth since the portfolio optimization initiative began.

• I tally 50 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Two new deals discussed this week: Seedheiwa (1739 JP)‘s (now Meldia DC) Tender Offer; and Boart Longyear (BLY AU)‘s ignominious exit. 
• Key updates took place on: Orecorp (ORR AU), Symbio Holdings (SYM AU), IJTT (7315 JP), Shidax Corp (4837 JP), Ohizumi Mfg (6618 JP), and Hollysys Automation Technologies (HOLI US).

• Q1FY24 revenues of $4.7 billion, up 18% QoQ and up 16% YoY, and $100 million above guided high end, as already flagged on November 28
• Q2FY24 guidance of $5.3 billion, a ~13% increase QoQ. This will once again be loss-making quarter to the tune of an EPS loss of 28 cents.
• Things are looking up for Micron, but 2024 will still be a “recovery” year.

• Brazil’s weather forecast remains mixed on showers with heavy rains to arrive only in January. Rainfall in Brazil’s key agricultural region.
• U.S. soybean net sales show a significant uptick, but recent lack of large export sales could signal a slowdown in demand.
• Asset managers reduce long positions in soybean futures and options, showing a shift towards a bearish market outlook but prices remain resilient above USc 1,300.

• Oil has been one of the few movers during the quiet days of Christmas and therefore we thought we would run down the news driving crude oil markets and deliver our takes.
• We start with crude oil exports where the latest m/m numbers reveal that the US has seen a 4.65% drop in export numbers in line with seasonal effects.
• The fewer seaborne barrels paired with tensions in the Red Sea have added to the momentum for oil prices, but we also note that the EIA has started to ramp up SPR buying again with contracts signed for the purchase of 3 million barrels.

• Taiwan PC makers have been top performers in the market; some may worry that their rallies have become over-extended by too much AI PC excitement.
• We believe Dell may present a Long opportunity as the Long side to a Long/Short trade whereby one Sells Acer against it. Acer rose over 50% in December.
• Dell will report its results end-February. We would Long Dell vs. Short Acer ahead of the Dell earnings event. We see more upside surprise potential in Dell.

• The S&P 500 INDEX has been closing up for 9 consecutive weeks (CC=+9). In theory it could go higher for another 3 weeks, but it is ultra-OVERBOUGHT.
• The market has moved past the Tails resistance limit at 4747 this last week, rallying more than +15% from the bottom on October 26th.
• A SHORT trade may not be effective but being prepared for a pullback is a good idea, maybe just to add positions at better prices (assuming the rally will continue).

• For me, the most unexpected aspect of recent events has been that both bonds and stocks moved up together.
• My expectation for this year was that equities do well.
• But I thought they would eventually shake off bonds. Economic resilience (or in fact acceleration) would then force bond investors to chase equities. 

• On the 13 December, Bloomberg reported that the Recco-led group consortium was weighing a revised Offer to be “significantly higher than the $26.50-a-share cash offer from Ascendent Capital”
• On the 24 December, a buyer consortium led by Dazheng Group announced an all-cash proposal of US$29.00/share, a 9.4% premium to Ascendent’s Offer. “Credible” financing is in place.
• “The Consortium stands ready to engage with the Board“.  The Board should engage. The one curious aspect of this latest Offer is the apparent absence of Recco’s involvement. 

• Dazheng (without Recco) has returned with a revised US$29.00 offer for Hollysys Automation Technologies (HOLI US), 9.4% higher than Ascendent Capital’s US$26.50 binding offer.
• While Dazheng’s proposal represents an all-time high, it would likely not be a superior proposal based on the Ascendent merger agreement due to the clauses on financing and due diligence.
• Nevertheless, to avoid the high risk that shareholders vote down the Ascendent offer and/or there are substantial dissenting shareholders, the Board will likely ask Ascendent to match Dazheng’s offer.  

• Despite being a hated stock among the Super Sevens, Apple shares are up >51% YTD this year. Apple has had little to claim for within captivating AI hype.
• Apple is not a first mover. Its reputation is of a late comer. But its superior products with mind bending experiences blows competition out of the water.
• Outperformance of iPhone 15, deepening services penetration, and roll out of AI-features will propel Apple to a USD 4 trillion market cap in 2024.

• Surprising a pessimistic market, global liquidity rebounded, prompting expectations of increased buying pressure in the new year, as the Fed appears to remain on hold.
• The crypto market is expected to benefit from a structural shift, with Bitcoin (BTC) emerging as a frontrunner after breaking out of a prolonged bear market consolidation.
• Solana is anticipated to outperform in the coming year, driven by mean reversion, market share normalization, and narrative developments.

• As warned in Newcrest-Newmont Merger: Fancy Index Shenanigans in October, the merger construct meant flowfront, index flowback, then later index flowback.
• We are now between the second and third events. The data on the third is there, but it won’t be obvious to everyone. 
• There should be a large, not publicly announced, downweight on Newmont (NEM AU) in the March 2024 index review for the major local indices.

• I tally 50 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Six new deals discussed this week, all Down Under: Adbri (ABC AU), Link Administration (LNK AU), Pacific Smiles (PSQ AU), Probiotec (PBP AU), A2B Australia (A2B AU), and Whispir (WSP AU).
• Key updates took place on: Azure Minerals (AZS AU), Lithium Power International (LPI AU), JSR Corp (4185 JP), Allkem Ltd (AKE AU), and Toyo Construction (1890 JP).

• Following a strong margin performance in 2Q, we are raising our 3QFY24 EPS estimate to $0.43, just below the midpoint of guidance, from $0.38.
• The increase is the result of higher margin assumptions on a lower revenue forecast.
• We are also reviewing and lowering our revenue assumptions for the remainder of FY24 and FY25. 

• Relative Value Trade in Micron Has Worked Since Our Last Piece; Results Blow Away Expectations
• Memory Pricing Improvement Continues, Management Expects Pricing Increases Through Calendar Year 2024 and 2025
• We Remain Structurally Long Memory; Now See Relative Value in SK Hynix

• The guest on the show is Michael Lee, a dealer in rare photographs and the director of the Lee Gallery.
• The discussion explores the differences between the primary and secondary markets in art, as well as the challenges of finding liquidity and pricing inventory.
• Michael shares his views on NFTs and explains the capital-intensive nature of being a secondary market dealer in the art industry.

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