Daily Brief TMT/Internet: CELSYS, SK Square , KT Corp, Taiwan Semiconductor (TSMC), Horizon Robotics, Solid State PLC, Spirent Communications 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 the last 3 months so currently there are no live TOPIX Inclusion events at present.
• There are currently 79 names capable of satisfying all the key section transfer requirements. Our long-term pre-event candidate CELSYS (3663 JP) is one of them.

• SK Square owns a 20.07% stake in SK Hynix which is now worth 27.2 trillion won. SK Square’s market cap is only 39% of SK Square’s stake in SK Hynix.
• SK Square has benefited from increased capital allocation to low P/B stocks in Korea due to the Corporate Value Up program. SK Square is trading at P/B of 0.7x. 
• Amid the tremendous demand for Nvidia’s AI related chips, this has also benefited several Korean companies including SK Hynix and SK Square. 

• Hyundai Motor Group has become the largest shareholder of KT Corp, as the National Pension Service has recently reduced its stake in KT from 8.53% previously to 7.51%. 
• Despite this recent change in the largest shareholder status of KT Corp, this requires the approval from the Korean Ministry of Science and ICT. 
• Although the Hyundai Motor Group (HMG) has become the largest owner in KT Corp, the most likely scenario is for HMG to remain a passive investor in KT.

• TSMC Q2 2024 outlook is expected to increase by approximately 5% QoQ, with 2024 projected Capex to see a slight uptick. 
• Intel is expected to adopt TSMC N3B technology in 2Q24F, while we anticipate that MediaTek will transition to N3E by the end of 3Q24F.  
• Intel has received financial assistance of US$8 billion through the US Chips and Science Act, and TSMC is also projected to receive around US$5 billion.

• Horizon Robotics is looking to raise US$500m in its upcoming Hong Kong IPO. The bookrunners on the deal are GS, MS and China Securities International.
• Horizon Robotics (HR) is a provider of advanced driver assistance systems (ADAS) and autonomous driving (AD) solutions for passenger vehicles, empowered by its proprietary software and hardware technologies.
• HR was the first and the largest Chinese company providing integrated ADAS and AD solutions in terms of annual installation volume since 2021, according to CIC.

Solid State’s trading update affirms the sustained strength in demand throughout H224, resulting in record FY24 revenue and adjusted PBT ahead of prior consensus of £155m and £12.5m, respectively. This is attributable to the earlier-than-expected delivery of a NATO contract. As a result, consensus FY24 revenue and adjusted PBT estimates have been raised by c 6% and c 20%, with respective FY25 estimates declining commensurately.

• Keysight Technologies In (KEYS US) and Spirent Communications (SPT LN) have agreed a recommended 201.5p/share cash acquisition via Scheme of Arrangement, an increase of 26.5p (15.1%) relative to Viavi Solutions (VIAV US)‘s Offer.
• Spirent, with some scarcity value, should be able to improve its cyclicality as part of Keysight. A counteroffer from Viavi looks unlikely unless Silver Lake significantly increases its stake.
• Gross spread is 1.99%. Using Keysight’s forecast s about completion, at best, estimated annual return would be 3.51% while at worst, 1.88%. This suggests there may be better opportunities elsewhere.