In today’s briefing:
- Akatsuki Inc (TYO 3932): A $188M Net Net Japanese Game Developer
- Tech Supply Chain Tracker (29-May-2024): Samsung targets 1,000-layer 3D NAND by 2030.
- Indian Energy Exchange: Do You Want to Earn a Royalty on India’s Economic Growth?
- Is Akeso’s Sell-Off a Long Waited Opportunity or a Long Overdue Correction?
- Yahoo Still Falling Further Behind Amazon and Rakuten
- UMC (2303.TT; UMC.US): The Outlook for 2024 Could Show Flat to Low Single-Digit Growth.
- Chariot Limited (AIM: CHAR): Drilling success onshore Morocco
- JTEC Corp (3446) – Facing Some Challenges over Lead Times
- Virtuoso Optoelectronics Ltd- Forensic Analysis
- DRX: Here We Go Again; Increasing TP on Contract Announcement
Akatsuki Inc (TYO 3932): A $188M Net Net Japanese Game Developer
- Akatsuki Inc (TYO 3932) is a net-net Japanese video game developer with 10 years of profitability.
- They’re undergoing a big transformation in an effort to better compete globally by investing enormous amounts into their core development capabilities and increasing their average budget per game 3-6x.
- They recently formed a capital alliance with Sony (6758) and Koei Tecmo (TYO 3635) with each taking a 10% and 8% stake respectively.
Tech Supply Chain Tracker (29-May-2024): Samsung targets 1,000-layer 3D NAND by 2030.
- Samsung aims to revolutionize memory technology by launching 1,000-layer 3D NAND by 2030, utilizing innovative materials for enhanced performance.
- Lenovo expands its market reach with AI PCs targeting a global audience, but faces stiff competition amidst concerns over Indian restrictions on imported PCs and notebooks.
- TSMC’s collaboration in Taiwan on 7nm tech brings together academia and industry, while China, Japan, and South Korea look to strengthen supply chains at a summit for mutual benefit. Samsung aims to increase its presence in China through collaboration.
Indian Energy Exchange: Do You Want to Earn a Royalty on India’s Economic Growth?
- As one of the fastest-growing economies globally, India is projected to become the third-largest economy, trailing only China and the US, by 2027.
- Amid macroeconomic challenges worldwide, investors are eager to tap into India’s robust economic growth.
- However, economic growth does not always correlate with equity market growth, as seen in Spain and Italy during the 1980s and 1990s, and more recently in China.
Is Akeso’s Sell-Off a Long Waited Opportunity or a Long Overdue Correction?
- Disputable Phase III result of Akeso’s (9926 HK) flagship pipeline Ivonescimab (AK112) caused Akeso’s share price to drop 28% in three days, reaching the bottom of a year-long trading range;
- The fundamental difference of opinions is around Ivonescimab’s global prospects against (1) Merck’s Keytruda, (2) J&J’s Rybrevant, (3) Kelun’s SKB264 and domestic prospect against (4) Innovent’s IBI305;
- Some answers are clear while others are now. What can provide answers are (1) SKB264‘s Phase III data, and to a lesser degree (2) AK112’s head-to-head trial against Keytruda.
Yahoo Still Falling Further Behind Amazon and Rakuten
- LY (4689 JP)‘s Yahoo Shopping looks to be in trouble after five straight quarters of negative growth while Amazon and Rakuten move ahead.
- Despite a revenue increase in 4Q2023, Yahoo Shopping continues to struggle with merchant fraud and a lack of a clear USP.
- If effective integration between the many parts of LY is not forthcoming soon, the company may eventually attract demands for better synergies, as well as a stick-wielding Softbank.
UMC (2303.TT; UMC.US): The Outlook for 2024 Could Show Flat to Low Single-Digit Growth.
- UMC is currently forecasting a flat to low single digit growth QoQ for 3Q24, which is slight lower than consensus.
- UMC has received orders from domestic and international clients. However, we believe it couldn’t be able to compensate for the loss of Samsung’s 28nm orders so far this year.
- With accelerated construction in Singapore in 2024, the full-year capital expenditure has slightly risen to $3.3 billion.
Chariot Limited (AIM: CHAR): Drilling success onshore Morocco
- The OBA-1 well onshore Morocco has encountered an approximate 70 m gross interval containing elevated resistivities coincident with elevated mud gas readings, indicating potential gas pays, with no water-bearing reservoirs identified.
- While the approximate 200 m gross thickness for the reservoirs is in line with pre-drill expectations, the absence of water in the 70 m gross interval is particularly encouraging and could suggest larger than expected resources (12 bcf pre drill).
- The well is now expected to be tested in 3Q24.
JTEC Corp (3446) – Facing Some Challenges over Lead Times
- Lengthening order lead times impacting revenue recognition – Q1-3 FY6/24 results were behind expectations in our view, with sales declining 27.6% YoY.
- Whilst a negative optic, the reason stems from lengthening lead times for shipment, given customer demands for more high-end and exacting technical requirements for custom-made products requiring more time for delivery.
- We believe this highlights the value-added technical expertise of the company and delays in revenue recognition.
Virtuoso Optoelectronics Ltd- Forensic Analysis
- Virtuoso Optoelectronics (VOEPL IN) is a contract manufacturer company engaged into production of ACs, Lightings and other equipments. The company is renowned for supplying ACs to Voltas.
- The company has grown sharply over the last five years and has been engaging in constant capex. However, it does struggle in converting its earnings to cash.
- Among the forensic checks, it nets off receivables and payables/advances, the exact nature of these line items cannot be commented upon. VOEPL also faces high cost of borrowings
DRX: Here We Go Again; Increasing TP on Contract Announcement
- ADF announced a series of new contracts totalling $90M spanning the pharmaceutical, industrial, and public infrastructure sectors.
- This includes additional work awarded for the pharmaceutical project in the Midwest U.S. which ADF was recently awarded phase 2 for.
- ADF will be reporting Q1/25 on June 11th, we are expecting $90.1M revenue (12% YoY), 23.5% gross margin, and $17.2M EBITDA (19% margin).
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