In today’s briefing:
- Alibaba Potential IPOs – The Final Part – Quick Look at Investees and Eventual Holdco
- Taiwan Tech Weekly: TSMC Cuts Capex; Hon Hai AI Servers in Demand; ASE Winning TSMC Orders
- Alibaba IPOs, Freshippo IPO: Conflict of Interest Arising from Competition with Tmall Supermarket
- Sanken (6707)| Attractive for Activists and Growth Investors
- KT CORPORATION: Fines, Favoritism, and ESG Risks
- Dell, HP, Qualcomm Signal AI-Driven PC Refresh Cycle, 2024E PC Growth, Accelerated Windows Upgrades
- Tencent Investee Selldown – JD.com Done, Meituan Done, Two More Still Left
- Broadcom: Proceed With Caution
Alibaba Potential IPOs – The Final Part – Quick Look at Investees and Eventual Holdco
- On 28th Mar 2023, Alibaba (ADR) (BABA US) announced that it would adopt a new organizational and governance structure, splitting into six major business groups and other investments.
- Alibaba also stated that each of the business groups would be set up as an independent entity with its own board and the groups will eventually seek to list.
- In this note, we will talk about some of the company’s investments and how the overall Holdco would look post restructuring.
Taiwan Tech Weekly: TSMC Cuts Capex; Hon Hai AI Servers in Demand; ASE Winning TSMC Orders
- TSMC reduced capex guidance to the bottom of its guidance range but maintained revenue expectations and still expects substantial growth in 2024E.
- Dell, HP, and Qualcomm comments signal an AI-Driven PC refresh cycle ahead and 2024E PC Growth. Windows 11 upgrades could be accelerated as new PC AI applications roll out.
- Hon Hai reported that it gained market share globally in 2022, and that it has 40% global market share for servers. Hon Hai’s AI servers expected to experience triple-digit growth.
Alibaba IPOs, Freshippo IPO: Conflict of Interest Arising from Competition with Tmall Supermarket
- Freshippo (Hema) is set to be the first Alibaba (ADR) (BABA US) company to have an IPO after the business split into six units.
- Two key concerns for Freshippo’s IPO are its failure to secure outside funding in two attempts last year and the potential conflict of interest arising from competition with Tmall Supermarket.
- While it is still premature to make a definitive assessment of Freshippo’s IPO prospects, we maintain a level of skepticism towards the company.
Sanken (6707)| Attractive for Activists and Growth Investors
- Sanken benefits from the structural growth in EVs, which should underpin revenue growth and margin accretion.
- DCF valuation suggests the stock is slightly undervalued. However, better-than-expected revenue trends could easily drive significant upside.
- Almost 30% of shares are held by activist investors – there is an attractive 57% upside to a SOTP valuation that could be realised over time.
KT CORPORATION: Fines, Favoritism, and ESG Risks
- Domestic telecom company faced significant fines for false advertising of 5G, the second-largest penalty ever imposed.
- Investigations into the telecom market, dominated by a long-term duopoly, are expanding.
- Within KT Group’s subcontracting process, allegations of favoritism and manipulation in project allocation are currently under investigation by the prosecution.
Dell, HP, Qualcomm Signal AI-Driven PC Refresh Cycle, 2024E PC Growth, Accelerated Windows Upgrades
- HP and Dell’s industry outlook after their results last week indicate a PC market stabilizing and set for growth in 2024E. Qualcomm provided AI comments at a recent conference.
- Both HP and Dell managed to beat earnings expectations despite experiencing 20%+ YoY revenue declines. Neither stock’s price has made a significant move since results.
- AI incorporated into Windows 11 and PC’s themselves could be a major reason for companies and consumers to buy new PC’s. PC’s are being designed to run AI capabilities locally.
Tencent Investee Selldown – JD.com Done, Meituan Done, Two More Still Left
- Tencent has been busy distributing shares in some of its investments over the past two years, with JD.com’s distribution announced in 2021 and Meituan’s in 2022.
- In our earlier note in 2022, Tencent Investee Selldown – The US$120bn Global Overhang, we had looked at its overall investment portfolio.
- With two of its large investments spun-out, we now re-look at Tencent’s shareholding in various companies to try and gauge which ones it could sell out of and how.
Broadcom: Proceed With Caution
- Broadcom Inc. has been the best-performing semiconductor stock over the past 3-month period.
- Robust demand partially justifies the recent share price increase, but not all the way to a near double-digit revenue multiple.
- Just three months ago, I analyzed Broadcom Inc.’s (NASDAQ:AVGO) strong business model through the lens of profitability, competitive advantages and capital allocation.
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