Daily Brief TMT/Internet: ARTERIA Networks Corp, Sea , KT Corp, Kape Technologies, Unity Software, Tata Technologies, SenSen Networks, Siltronic AG and more

• Marubeni (8002 JP) and Secom (9735 JP) today announced a Tender Offer to take private Marubeni’s subsidiary ARTERIA Networks Corp (4423 JP) at a 54% premium to the close. 
• Listed 4.5yrs ago, the company hasn’t grown hugely. Revenue growth is slow. EBITDA growth is flat. The takeout is 3.6x book, 7x estimated EBITDA, and about mid-teens PER. Without synergies.
• The price is OK, not great. The Board rejected the final price because it was too low and didn’t include synergies, then accepted because the bidders wouldn’t go further? Hmmm…

• ARTERIA Networks Corp (4423 JP) has recommended Marubeni Corp (8002 JP) and Secom Co Ltd (9735 JP)’s tender offer of JPY1,980 per share, a 54.1% premium to the undisturbed price.
• The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 16.61% ownership ratio.
• The offer is conditional on Chinese and Japanese regulatory approvals. The minimum acceptance condition requires a 33% minority acceptance rate. This is doable as the tender price is attractive. 

• We expect that Shopee is spending more in recent months to defend from TikTok Ecommerce’s growth; 
• Further, we see increased marketing to maintain <FreeFire’s> user base, especially in Indonesia; We suggest that SEA’s strong margin performance in 4Q22 was temporary. 
• We forecast that 1Q23’s net margin is 11.2% vs. 4Q22’s 17.9%. We maintain our SELL rating and US$ 62 TP, implying 27x FY23 P/E.

• On 11 May, it was announced that KT Cloud received a 600 billion investment from IMM, valuing KT Cloud at 4.6 trillion won. 
• Given that KT Cloud is valued at 4.6 trillion won, an 86.6% stake would be worth 4 trillion won which would be 49% of KT’s current market. 
• The investment in KT Cloud is likely to have a positive impact on KT Corp. Plus, KT Corp is a likely candidate for MSCI Korea Standard inclusion in May 2023.

• Unikmind (Teddy Sagi, 54.18% holder), adamant on delisting Kabe, increased the offer price to USD3.60/share. The USD adjusted spread was positive until the offer was sweetened.
• Unikmind has so far c.87.89% acceptances (above 75% threshold), therefore, the delisting will be carried out on an accelerated timeline on 31 May. A squeeze-out is highly likely.
• Closing is on 19 May and settlement should happen on or before 2 June. Spread is 0.31%/5.14%, using FX 1.2614, and assuming settlement on 2 June. Long.

• Unity’s 1Q23 top line was in line with our estimate, and  bottom line was USD 34mn, vs. our est./cons. of USD 4/(3)mn, due to headcount reductions.
• We expect it to outperform in coming quarters because: 1) Create solutions are reducing low margin businesses with low churn rate, 
• 2) Growth solutions continue to gain share driven by integrated Mediation platform, 3) announced AI products with accumulated R&D further diversify Unity toolsets.

• Tata Technologies (TATATECH IN) , a subsidiary of Tata Motors, offers turnkey product engineering and digital transformation solutions to global OEMs and operates across automobiles, heavy industrials and aerospace sectors.
• The company has filed for an IPO in India to raise around US$600m through an offer for sale of its shares by existing shareholders including Tata Motors.
• Though the company’s revenues and margins have seen improvement over the last 2-3 years, we have highlighted a few concerns which investors should wary about.

SenSen Networks (SNS) reported its ninth consecutive quarter of year-on-year record cash receipts in Q323, with growth across all key verticals and no customer churn. The company has also introduced further measures to achieve cash flow positivity and profitability from Q423, focusing on upselling to existing customers and introducing a salary sacrifice scheme for senior staff. We moderate our revenue growth forecasts to reflect these measures but upgrade our profitability and cash forecasts as a result. The short to medium term is likely to see greater focus on the smart cities segment, where the company has established a promising international market presence and where it has considerable scope to expand its engagements in its existing customer base. This positions SenSen well to scale more profitably in the mid-term.

• Q1’23 revenues of €404.4 million, -14.3% QoQ and -3% YoY.
• Q2’23 revenues forecasted flat sequentially with no prospect of a second half recovery.
• Why no H2 recovery ? And why did GlobalWafers outperform Siltronic last quarter?