Daily Brief Equity Bottom-Up: Softbank Group (Neutral) – Japan’s Global Tech Play: Initiation of Coverage and Q3 Preview and more

• In this deep dive report, we initiate coverage on Softbank Group with a ¥6,300 target price and Neutral recommendation
• We are cautious on global tech and consider that the main risk to the story but a recovery in China sentiment provides some offset
• For Q3 results next week, we expect the defensive theme of the last two quarters to continue

• We expect a 10,000-12,000 Rph dividend for FY22 (div yield 28%-33%) from Indo Tambangraya Megah (ITMG IJ) as earnings are set to improve >70% HoH (H1 dividend – 4128 Rph/share).
• With coal prices remaining elevated, if volumes remain flat YoY, we could see >50% of the stock price returned in dividends throughout FY22e/23e.
• There is an excellent margin of safety, with almost 40% of the market capitalization in net cash. With a >65% payout ratio, we will see cash levels build further. 

• Konan Technology is one of the competitors to Open AI (Chat GPT) in Korea. 
• Konan Technology’s share price is up more than 4x this year. We would not chase the stock at current levels. We provide a framework of valuing Konan Technology. 
• Four large Korean companies that could be long-term winners in AI space in Korea include Naver, Kakao Corp, SK Telecom, and KT Corp. SK Telecom owns 20.8% of Konan Technology. 

• We expected the market to react positively to the Q3 beat. There are clouds on the order horizon, but that is well-known
• A big management shuffle was also announced. We think the new CEO and CFO will follow the same LT Vision, but need to do more to meet rising capital costs
• Our core bullish thesis rests on growth in Industrial Automation.  As expectations for interest rate hikes fade, we think investors will start to price in a 2023/4 order recovery

Kazia Therapeutics has released its Q223 activity report and provided a business update for the quarter. Q2 was marked by increased preclinical efforts towards exploring the applicability and efficacy of paxalisib in non-central nervous system (CNS) oncology indications such as melanoma and other solid tumors, including breast cancer. Post-period, Kazia announced a A$4.5m fund-raise through a two-stage private placement of 40.9m new shares (25.4m unconditional shares and 15.5m conditional shares) at A$0.11 per share. Management intends to use the proceeds to support its development programs (including the paxalisib GBM AGILE study due to readout in H2 CY23) and working capital requirements. The period-end net cash balance stood at A$4.4m and this, along with the A$4.5m fund-raise, should provide headroom into H2 CY23, based on current burn rates.

• Inline performance and inline guidance…the stock mistakingly traded down on Tinder’s optically weak sub growth.
• Longer term, CEO BK Kim is making the right moves reorganizing the company to focus on the growth engines (Tinder, Hinge), the idiosyncrantic drivers (Asia), and cost cutting (Evergreen Brands).
• Reiterated 2023 guidance will prove conservative, with the stock still trading at alltime lows despite the 30% move up so far this year…we buy this dip.

• As expected space segment revenue growth accelerated as global/mobile sales took off offsetting media revenue erosion
• User trends in the video business remain weak although Q3 subscriber losses improved QoQ despite this being the seasonally weakest quarter
• We are leaving our forecasts unchanged and remain at Buy

• Cosco Shipping Energy Transportation (1138 HK) rallied 12.5% in the last two trading days after issuing a FY22 positive profit alert, but we are concerned that momentum is peaking. 
• Its P/B of 0.92x is 4SD above average since 2016, more than sufficient to reflect rebound in FY23-24F profitability. Meanwhile, VLCC rate has plunged 80% in the last 3 months.  
• We believe CSET is already midway in the upcycle which normally lasts for 2-3 years. With high 4Q22 profit difficult to sustain for long, there is downside risk on earnings.  

• IBM delivered a strong result for the last quarter and managed an all-around beat as a result of excellent execution with respect to its AI and hybrid cloud strategy.
• It delivered decent revenue growth in its business across geographies, infrastructure segments, consulting, and software.
• The company added a series of innovative IBM software offerings in the AWS marketplace available as-a-Service.

• Lam Research ended the previous year on a strong note and posted an all-around beat in the last quarter.
• The CSBG revenues in the company’s installed base business expanded faster than its growth in the installed base units.
• We provide the stock of Lam Research with an ‘Underperform’ rating with a revision in the target price.