Daily Brief TMT/Internet: Fadu , Tencent, United Microelectronics Corp, Torex Semiconductor, SenSen Networks, Iridium Communications, ASML Holding NV, International Business Machines and more

• Fadu’s IPO price has been confirmed at 31,000 won (top end of the IPO valuation range). A total of 1,082 institutions participated, with a demand ratio of 362.9 to 1.
• Fadu is one of the biggest IPOs in Korea so far in 2023. 
• Our base case valuation analysis suggests implied market cap of 2.2 trillion won or 43,676 won per share, which represents 41% higher than the IPO price.

• Tencent (700 HK) ’s online games business grew for the first time in 1Q2023 (+10.8% YoY) after four consecutive quarters of YoY decline followed by regulatory hurdles.
• Our app data analysis reveals that online games revenue would grow by about 12% YoY in 2Q2023E driven by increases in both domestic and international games revenues.
• On Monday, it was also reported that Tencent is in the process of acquiring a majority stake in Polish gaming studio Techland, expanding the long list of overseas gaming acquisitions.

• UMC reported 2Q23E results with revenue falling 20% YoY and EPS down 30% YoY. Results were higher than consensus but forward guidance was worrisome in our view.
• We are concerned by UMC’s high exposure to more mature technology nodes, limited exposure to AI, and vulnerability to China competition forced to focus on non-leading edge technology nodes.
• We rate the stock Underperform with a target price of $36 which implies a 2023E PER of 10x.

• Since 1H FY24/3 corresponds with the bottom of the current reset cycle, initial guidance for net sales is -9.3% YoY.
• In addition to ongoing high electricity rates, depreciation expense is set to increase +51.1% YoY, and initial guidance for OP is -62.3% YoY.
• On a cash flow basis, implied EBITDA is forecast to decline -29.1% YoY.

SenSen’s Q423 update shows robust quarter-on-quarter growth in cash receipts, broadly aligning with our full year revenue forecast. Lead indicators for FY24 are positive, highlighted by the recent signing of a A$1.4m three-year contract with a new Asian casino customer, as well as a strong contract pipeline. SenSen also launched several new solution variants in Q4, which could lead to high-margin upsell opportunities. The group has identified cost-cutting measures for H124, with the aim of becoming cash flow positive for the full year, which we have reflected in our updated forecasts.

• IRDM reported second quarter results showing continued growth in service revenue. Commentary related to direct to device and an increase in equipment revenue that drew the ire of investors
• IOT had a larger increase in the number of subscribers than we were expecting, resulting in service revenue remaining towards the higher end of the 9% to 11% growth forecast
• We believe IRDM is managing the business for the longer term and not for a specific quarter, which could contrast with investor expectations related to equipment inventory

• ASML delivered an all-around beat in the previous quarter.
• Looking ahead to the third quarter of 2023, ASML expects continued growth in net sales, driven by deep UV systems and non-EUV bookings.
• We give ASML Holding N.V. a ‘Hold’ rating with a revised target price.

• IBM delivered a mixed result in the recent quarter, with revenues below market expectations, but it managed to surpass the analyst consensus regarding earnings.
• The last quarter demonstrated strong execution of their hybrid cloud and AI strategy, with solid growth in their software and consulting segments.
• Additionally, their enterprise AI initiatives, including the Watsonx platform, show promising results with multiple use cases across various industries.