In today’s briefing:
- Never-Seen Price Pattern Detected in a Split-Off Event Granting Appraisal Rights in Korea
- Baidu: Undervalued Cyclical Revenue Growth Acceleration and Margin Expansion Story
- Nitro (NTO AU): Potentia Comes Good with a Three-Part Offer
- Taiwan Semiconductors Mid-Earnings Season Review: Margins, Inventories Appear Worse Than Expected
- AI Leaders Monitor: Nvidia, TSMC, ASML Trading Monitor – Nvidia Results Key Take-Aways
- New U.S. CHIPS Act Speech: Commerce Secretary Emphasizes National Security Game Changer; Conclusions
- Indian Web3 Gaming Firm Raises $20m at $150m Valuation
- NVIDIA Rebounds On ChatGPT Surge
Never-Seen Price Pattern Detected in a Split-Off Event Granting Appraisal Rights in Korea
- A rather unusual price movement came out on February 20 for HLB. On the first trading day after the board of directors’ decision, the price reached the upper daily limit.
- The short covering got to a temporarily excessive level in the process of securing appraisal rights should be the reason that led to the upper limit.
- We should design a trading setup targeting excessive short covering-triggered price overheating in split-off events. At this point, the most likely candidate to pursue a split-off is DB Hitek.
Baidu: Undervalued Cyclical Revenue Growth Acceleration and Margin Expansion Story
- Following several years of sustained revenue share loss, Search’s digital advertising revenue market share has stabilised, having seemingly retained its core advertising customers.
- With China’s economic growth recovery, Baidu is perfectly positioned to accelerate its core marketing revenue growth, which is also a high-margin operation.
- Baidu is set up for significant group margin expansion as the higher-margin core marketing business returns to positive annualised growth and it continues to expand AI Cloud margins.
Nitro (NTO AU): Potentia Comes Good with a Three-Part Offer
- Potentia has returned with an improved three-part offer for Nitro Software Ltd (NTO AU). The base offer of A$2.17 is 0.9% higher than Alludo’s A$2.15 offer.
- The offer could rise to A$2.20 or A$2.25 per share based on hitting additional conditions. There is a clear path for the final offer to reach A$2.20 per share.
- A A$2.25 per share offer is unlikely due to the onerous 25% scrip acceptance condition. At the last close, the gross spread to the likely final A$2.20 offer is 0.5%.
Taiwan Semiconductors Mid-Earnings Season Review: Margins, Inventories Appear Worse Than Expected
- We’re now two-thirds through the Taiwan Semiconductor earnings season and about one-third through the Taiwan Hardware earnings season.
- Semiconductor gross margins declines have been relatively large, and we believe are tracking to be worse than what consensus expected going into the earnings season.
- There have been few examples of inventory situations improving for semicondcutor companies; results data released so far indicates a potentially deeper trough than previously expected.
AI Leaders Monitor: Nvidia, TSMC, ASML Trading Monitor – Nvidia Results Key Take-Aways
- The three companies Nvidia, TSMC, and ASML are all key global leaders in the AI industry chain.
- Nvidia’s latest results indicate that the company could be returning to a period of multi-year growth and an inflection point for AI demand.
- One can consider going Long a basket of Nvidia, ASML, and TSMC based on a structural growth thesis for AI demand.
New U.S. CHIPS Act Speech: Commerce Secretary Emphasizes National Security Game Changer; Conclusions
- U.S. Commerce Secretary gave a new speech providing additional public detail about the U.S. CHIPS Act aimed at re-shoring the manufacture of semiconductors in the U.S.
- Emphasis on national security means that financial cost is now secondary for the U.S. and we should not expect any loosening of chip restrictions for China.
- Taiwan companies are straddling a “sweet spot” given they are not restricted, can invest in the U.S. expansion, maintain local non-U.S. advantages, and have had their China-based competition weakened.
Indian Web3 Gaming Firm Raises $20m at $150m Valuation
- Kratos Studios, a Web3 gaming venture based in India, has raised about US$20 million in seed funding at a valuation of US$150 million.
- The round was led by Accel and saw participation from Prosus Ventures, Courtside Ventures, Nexus Venture Partners, and Nazara, among others.
- Kratos was built by Manish Agarwal, previously CEO of gaming company Nazara, and Ishank Gupta, a former executive at multinational firms like Belgian brewing firm Anheuser-Busch InBev.
NVIDIA Rebounds On ChatGPT Surge
- NVIDIA yesterday reported Q4 2022 revenues of $6.05 billion, in line with their forecast, down 21% from a year ago and up 2% sequentially.
- Interestingly, NVIDIA’s current downturn is playing out almost exactly like their previous downturn back in 2019 as can clearly be seen in the above chart.
- We expect to see this same recovery pattern continue throughout the remainder of 2023.
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