Daily Brief TMT/Internet: CELSYS, Sea , ARM Holdings, WRKR, Keywords Studios, Shenandoah Telecommunications Company and more

• Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
• There were no Section Transfers announced in January or February so currently there are no live TOPIX Inclusion events but there are some pre-event names to be monitored closely.
• The upcoming TOPIX flows in end-April 2024 will be more complicated than the other quarterly rebalances as there will be more flows due to the annual liquidity factor review.

• Sea (SE US) has completed a full cycle of growth followed by a phase of profitability improvements/cost-cutting.
• Although substantial cost reductions have been implemented, these efforts have mainly focused on fixed costs.
• With marketing efficiency unchanged and significant improvements in gross margin difficult, the company appears no closer to achieving stable profitability than it initially was.

• Sea Ltd (SE US) released 4Q2023 and FY2023 results with a full-year net profit but another loss in 4Q but QoQ improvements for e-commerce and digital financial services. 
• E-Commerce core market growth rates where impressive, with strong growth momentum with Brazil seeing large profitability gains, whilst overall Shopee is gaining share with the additional benefits from greater scale.  
• Digital Financial Services saw a significant uptick in its loan book and profitability, whilst management pointed toward 2H2024 profitability for Shopee. Management is pointing towards 2024 being another profitable year. 

• Softbank raised around US$4.9bn via selling some of its stake in ARM Holdings (ARM US)’ US IPO. Its remaining 90% stake will be released from its IPO linked lockup soon.
• ARM develops and licenses high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
• In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

• Wrkr Ltd (ASX:WRK) offers compliance solutions for Australian superannuation contributions and payroll including member onboarding, super payments, messaging and employee validation.
• WRK has reported a H1 FY24 adjusted EBITDA loss of $0.53m, half that of H1 FY23 and in line with RaaS estimates.
• The result benefitted from both operating leverage (43% revenue growth against a 6% increase in operating costs) and some reallocation of employee costs to capitalised product development.

Key points

• Keyword Studios is the largest videogame outsourcing company globally with a strong track record of organic growth and strategic acquisitions
• Despite concerns about AI and market slowdown, the company remains well-positioned for long-term success
• Expected to continue delivering high single-digit to low double-digit organic growth and potential for compound annual growth rate of 15% over the next five years, making it an attractive investment opportunity

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• SHEN announced the sale of its tower assets for a price that would equivalently pay for the purchase of Horizon Telecom, effectively creating an asset trade that creates considerably value.
• SHEN has unlocked value by selling assets that are expected to experience a decline in revenue after this year for assets that should realize revenue and adjusted EBITDA growth
• The growth SHEN is purchasing without the need of cash financing should have a positive impact on SHEN’s valuation.

• Wrkr Ltd (ASX:WRK) offers compliance solutions for Australian superannuation contributions and payroll including member onboarding, super payments, messaging and employee validation.
• WRK has reported a H1 FY24 adjusted EBITDA loss of $0.53m, half that of H1 FY23 and in line with RaaS estimates. The result benefitted from both operating leverage (43% revenue growth against a 6% increase in operating costs) and some reallocation of employee costs to capitalised product development.
• We forecast positive H2 FY24 EBITDA on the back of continued operating leverage, and in particular significant Hong Kong implementation fees (estimated at $1.4m), higher float interest and continued cost control.