In today’s briefing:
- Advantest (6587) | Testing the Limits of AI
- FINAL PREDICTIONS: March 2024 Nikkei 225 Rebal (Socionext, Disco, and 1 Consumer Goods Stock to ADD)
- Quiddity JPX-Nikkei 400 Rebal 2024: End-Jan 2024
- STAR50 Index Rebalance Preview: Sustaining Outperformance on Expected Impact
- Samsung Memory Revenues Up Impressively
- KRX New Deal Index Rebalance Preview: Douzone Bizon Does It Again
- MediaTek (2454.TT): 2024F Indicating a Complete Recovery from the Previous Downturn Situation.
- Mediatek Results Take-Aways: High-End Devices to Take Market Share Globally; Upward Revisions Likely
- UMC (2303.TT; UMC.US): 1Q24F Guidance Is Slightly Lower than 4Q23; Intel Project Grasps Attention
- UMC’s Results Show How Intel’s New Foundry Business Is Poised to Become More Valuable
Advantest (6587) | Testing the Limits of AI
- Advantest reported strong Q3 results, driven by robust demand for memory testers
- The company raised its full-year guidance for revenue and operating profit to inline with analyst estimates
- Advantest’s stock price remains overvalued on AI-hype. We remain bearish with a potential downside of 25%.
FINAL PREDICTIONS: March 2024 Nikkei 225 Rebal (Socionext, Disco, and 1 Consumer Goods Stock to ADD)
- The Nikkei 225 data for the March 2024 rebalance is a wrap. The names are the same as before but there is likely less DISCO Corp (6146 JP) to buy.
- It’s still big, but smaller than before because of the difference between performance and the change in PAF required to be below 1%. A 4:1 share split would be optimal.
- I recommend a few positioning changes from before, and the Fast Retailing trade loses one short-term option but the longer-term one stays in place.
Quiddity JPX-Nikkei 400 Rebal 2024: End-Jan 2024
- JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
- A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the rankings of the potential ADDs/DELs every month.
- Below is a look at potential ADDs/DELs for the JPX-Nikkei 400 index rebal event to come in August 2024 based on trading data as of end-January 2024.
STAR50 Index Rebalance Preview: Sustaining Outperformance on Expected Impact
- The review period for the March rebalance ended 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
- We expect the index committee to continue using a 6-month minimum listing history resulting in three changes to the index.
- The potential inclusions have dropped but there has been significant outperformance versus the potential deletions. That could continue as positioning continues for the high expected impact on the stocks.
Samsung Memory Revenues Up Impressively
- Samsung’s earnings was recently reported, with memory revenues up nearly 50% in the fourth quarter
- This gain has been driven by very strong growth in AI and a normalization of inventory levels
- The memory business is approaching positive margins once again, and SK hynix is already profitable
KRX New Deal Index Rebalance Preview: Douzone Bizon Does It Again
- The review period for the March rebalance ended yesterday, the changes will be announced early March and implemented at the close of trading on 14 March.
- We forecast one change for each of the Secondary Battery, Bio, Internet and Game indices. There could be two changes for the BBIG Index.
- Douzone Bizon (012510 KS) is up 65.5% in the last month and we’d look to lighten positions on this move higher.
MediaTek (2454.TT): 2024F Indicating a Complete Recovery from the Previous Downturn Situation.
- MediaTek expects a reduced DOI level in 2024F while maintaining operating expenses and pricing discipline in 2023.
- The upgrade cycle has begun for devices equipped with AI functions. The Dimensity 9300 is just the first edge AI product for smartphones.
- MediaTek does not predict a significant increase in demand and expects a steady demand for smartphones.
Mediatek Results Take-Aways: High-End Devices to Take Market Share Globally; Upward Revisions Likely
- Mediatek’s results for 4Q23 exceeded expectations; Forward guidance also suggests that consensus forecasts for 2024 may need to be revised upward.
- Foresees the start of its “next growth phase” in 2024, with AI influencing mobile upgrades and the introduction of new products in late 2025, indicating potential growth through 2026E.
- Mediatek indicated that AI interest will drive high-end mobile devices to gain market share in 2024E.
UMC (2303.TT; UMC.US): 1Q24F Guidance Is Slightly Lower than 4Q23; Intel Project Grasps Attention
- The 1Q24F guidance is expected to decrease by 2-3% QoQ. However, we believe there is a good chance of achieving a flat QoQ performance.
- Production is expected to be ready by 2027F, with the process likely to be prepared by 2025F and enter pilot run in 2026F.
- The semiconductor market is expected to grow at a high single-digit rate, while the foundry market is expected to grow close to 10% YoY in 2024F.
UMC’s Results Show How Intel’s New Foundry Business Is Poised to Become More Valuable
- UMC delivered full-year net income roughly in line with consensus forecasts, though reported a capacity utilization drop sequentially.
- Capacity utilization fell during the latest quarter despite strength from UMC’s 22nm & 28nm offerings due to older capacity weighing down performance.
- UMC’s latest US$3.3bn capex budget contrasted with the rising cost of advanced fabs shows how Intel’s Foundry business will be increasingly needed by the industry.
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