In today’s briefing:
- FTSE TWSE Taiwan 50/ Div+ Index Rebalance: Sinopac Holdings and Elan Micro To Watch For
- Softbank Group – ARM Suing a Key Customer Is Not the Summer News We Expected
- S&P/ASX Index Rebalance (Sep 2022): Adds, Deletes, Surprises & Pre-Positioning
- Declining Business Short Candidates: Corsair Gaming, Sinclair Broadcasting, Overstock, Ziff Davis
- Electronic Arts Inc: Market Position & Evolution & Other Drivers
- Microchip Technology: Excellent Base of Intangibles & Other Drivers
FTSE TWSE Taiwan 50/ Div+ Index Rebalance: Sinopac Holdings and Elan Micro To Watch For
- As expected, SinoPac Holdings (2890 TT) will replace Powerchip Semiconductor Manufacturing Corp (6770 TT) in the FTSE TWSE Taiwan 50 Index at the close on 16 September.
- Elan Microelectronics (2458 TT) will be deleted from the Mid-Cap 100 Index and will consequently be deleted from the Dividend+ Index. The Div+ selling will be spread over 16-22 September.
- Passives need to buy over 6 days ADV on SinoPac Holdings and sell over 12 days ADV on Elan Microelectronics, while there will be net inflows on Powerchip Semiconductor Manufacturing Corp.
Softbank Group – ARM Suing a Key Customer Is Not the Summer News We Expected
- ARM is suing Qualcomm for breach of license and trademark infringement for its acquisition of (fellow ARM licensee) Nuvia last year
- This is surprising on a number of levels as having Qualcomm inside the tent is better for sales, market share and its neutral-player reputation
- ARM’s valuation benefits from perceptions of an expanding addressable market so this is not a good look. Meanwhile, Softbank’s discount to NAV is widening again as tech valuations fall
S&P/ASX Index Rebalance (Sep 2022): Adds, Deletes, Surprises & Pre-Positioning
- There is one change for the S&P/ASX 100 Index, eight changes to the S&P/ASX 200 (AS51 INDEX), while there are 16 adds and 12 deletes for the S&P/ASX 300 Index.
- Passive trackers need to buy/sell a lot of stock for the ASX100 and ASX200 names. There appears to be large pre-positioning on the deletes.
- Link Administration (LNK AU)‘s privatisation may require an ad hoc inclusion prior to the implementation of the September rebalance – ACCC approval is key.
Declining Business Short Candidates: Corsair Gaming, Sinclair Broadcasting, Overstock, Ziff Davis
- Sales declines, margin compression, cuts in SG&A and cuts in guidance and estimates feature in our Declining Businesses model.
- Declining business shorts tend to be lower beta, have longer time horizons, and tend to produce steadier (although slower) short returns.
- Today we are flagging Corsair Gaming, Sinclair Broadcasting, Overstock, Ziff Davis.
Electronic Arts Inc: Market Position & Evolution & Other Drivers
- Electronic Arts’ solid results were driven by its extensive IP portfolio and expanding network of players that are actively involved in its live services.
- These distinctive structural advantages helped the company deliver an all-around beat despite the fact that it navigates the macro environment’s volatility.
- Their business’s durability and longevity are still fueled by their collection of sports and owned IP properties.
Microchip Technology: Excellent Base of Intangibles & Other Drivers
- Microchip’s results for the quarter were solid and the company’s revenue increased by 6.5% sequentially and 25.1% annually to $1.96 billion surpassing Wall Street expectations.
- The management has signed into multiyear long-term supply agreements with several significant clients, effectively granting them reserved capacity in exchange for assured purchases, often lasting five years.
- We also have a dedicated analysis of the company’s Environmental, Social, and Governance (ESG) risk scores in order to evaluate the sustainability risk.
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