Daily Brief TMT/Internet: CELSYS, Sea , GoTo, Douzone Bizon, Apple Inc, Alibaba Health Information Technology, AViC , Godaddy Inc Class A, DataTec Ltd, Media and Games Invest 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.
• Zuiko Corp (6279 JP), Anycolor (5032 JP), and Lifedrink (2585 JP) will have TOPIX Inclusion events at the end of June (Zuiko) or July 2023 (the other two).
• One of our pre-event TOPIX Inclusion candidates CELSYS (3663 JP) has experienced sharp price moves over the last few weeks.

• Most Brazilian e-commerce platforms evade taxes by treating orders as individual transactions instead of business operations, despite the 60% tax on international e-commerce shipments by companies.
• The Brazillian government plans to address this tax loophole by strengthening oversight and implementing administrative measures.
• If Sea (SE US) cannot find a viable solution to navigate this tax, there is a strong possibility that Shopee will exit the Brazilian market.

• GoTo (GOTO IJ) is seeking shareholder approval to raise new capital through a private placement of shares (118.4bn A shares). Shareholder meeting will be held on 30th June.
• The company’s strategy to prioritise profits have put pressure on growth rates and it seems that the company is in need of more funds to refuel its decelerating growth rates.
• Though profit matrices have improved, some important growth matrices such as GTV have shown a downward trend and the company is still burning cash.

• We believe shares of Douzone Bizon are deeply oversold and ready for a turnaround.
• The company is increasingly buying back shares. Treasury shares as a percentage of total outstanding shares increased from 0% at end of 2021 to 9.3% at end of 1Q 2023. 
• Korean government’s plans to boost the domestic software industry by spending more than 560 billion won in the software industry is also likely to positively benefit the company this year. 

• Apple’s stock reached an all-time high ahead of the 2023 Worldwide Developer Conference.
• The company unveiled its mixed-reality headset, Apple Vision Pro, which could revolutionize communications and be a game-changer for the metaverse.
• McKinsey predicts that the headset could be a $5 trillion opportunity by 2030.

• Against a backdrop of slowing revenue/active users growth, a return to profit in FY2023, while welcome, is shaky.We think Alibaba Health’s growth would continue to slow down in the future.
• The low gross profit and strong regulatory characteristics of drug sales indicate that Alibaba Health Information Technology (241 HK) is difficult to replicate the scale effect brought by traditional internet platforms. 
• The current business model and revenue structure have already made Alibaba Health lack imagination space.From a comprehensive perspective, its valuation should be lower than JD Health but higher than PAGD.

• AViC announced its 2HFY9/23 earnings on May 15.
• For 1H,Oct.–Mar., AViC posted net sales of ¥730 mn, +30.1% YoY, and operating profit of ¥140 mn, a slight year-on-year decline of 5.1%.
• On account of a deterioration in the funding environment for start-up companies, AViC lost some of its start-up clients, which account for a percentage of clients that is not insignificant, and saw others cut their budget.

• In the first quarter, GoDaddy drove double-digit growth in its Commerce and Applications segment, supported by 10% ARR growth in its Create and Grow products.
• The Core Platform revenue of GoDaddy was $698 million, with a strong normalized EBITDA margin.
• The newly managed WooCommerce store offering of GoDaddy replaced its old managed WordPress Commerce offering.

Datatec reported solid results for FY23 with revenue and adjusted EBITDA ahead of our forecasts. As supply chain issues eased in H2, all divisions accelerated revenue growth as they started to work down order backlogs, and working capital was tightly managed to reduce net debt by 18% at year-end. Further unwind of the backlog combined with sustained strong demand drives our revenue and adjusted EBITDA upgrades for FY24 and FY25. After factoring in higher interest rates, our underlying EPS reduces by 8% in FY24 and 4% in FY25.

MGI – Media and Games Invest (MGI) is building a strong position in the programmatic adtech sector, under the Verve name. Its supply (publishing) side is expanding its customer base in a difficult market, with Verve now the largest mobile in-app provider for Google in North America and EMEA and fourth largest on iOS. Verve’s demand (advertising) side is growing strongly, from a lower base. The group’s Q123 revenues were up by 1% (organic, +4% with currency), while lower costs from the slimmed-down games portfolio and the operational benefit of the combined tech stacks have lifted margins faster than we anticipated. The share price is at a sizable discount to peers. In our view, this does not reflect the value inherent in MGI’s large first-party data resource, AI-driven targeting or the scale of its opportunity.