In today’s briefing:
- HYBE: May Be Seeking to Raise As Much as 1 Trillion Won (Will Investors Support This Plan)?
- Carsales Renounceable Entitlement Offer – Following up on a Decade-Old Acquisition
- Digital Turbine: A Pivot Is In Sight
- [Sea Limited (SE US) Target Price Change]: Expect Weak Growth Trend into 2023
- The Oracle Playbook Goes Mainstream
- X2M Connect Limited – Solid Operating Leverage Demonstrated in H1 23
- Zebra Technologies: Improved Offerings For Industrial Automation & Other Drivers
- Company Appears to Be Back in Growth Mode in 2023 After a Challenging 2022
- Guidewire Software: Major Drivers
- ARLO: Profitability Back in View
HYBE: May Be Seeking to Raise As Much as 1 Trillion Won (Will Investors Support This Plan)?
- In the last few days, there have been local media accounts that mentioned that HYBE may be seeking as much as 1 trillion won (US$760 million) from investors.
- The more likely scenario is that HYBE encounters a greater backlash from the global investors in its attempts to raise nearly 1 trillion won.
- We maintain our existing stance of Kakao eventually winning this M&A battle for the controlling stake in SM Entertainment.
Carsales Renounceable Entitlement Offer – Following up on a Decade-Old Acquisition
- Carsales.Com Ltd (CAR AU) aims to raise around US$330m (A$501m) via a renounceable entitlement offer. The deal is relatively large to digest at 28.2 days of three month ADV.
- The use of proceeds will be to acquire 40% of Webmotors SA and strengthen its balance sheet.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
Digital Turbine: A Pivot Is In Sight
- Digital Turbine, Inc.’s misfortunes are about to pivot, providing ad spending reverts to its average growth trajectory.
- The company has a novel business model, and constant expansion by integrating growth ideas such as a Shopify-esque platform could yield substantial financial benefits, according to the company.
- Digital Turbine, Inc. (NASDAQ:APPS) stock has suffered from a trying time during the past year, conveyed by its more than 70% year-over-year drawdown.
[Sea Limited (SE US) Target Price Change]: Expect Weak Growth Trend into 2023
- SE reported C4Q22 total revenue 10% and 14% higher than our est. and cons., thanks to the improvement in monetization rate of eCommerce segment.
- We expect the weak trend to continue into 2023, with intensified competition from eCommerce competitors and weak performance of Free Fire.
- We raise our TP to US$62, which implies 2.5X PS/6X PE/4X PS for eCommerce/gaming/fintech in 2023. Maintain SELL rating due to challenging growth outlook.
The Oracle Playbook Goes Mainstream
- Oracle’s strategy is being acknowledged by one of its major peers – Salesforce.
- Oracle does not appear among the top three cloud infrastructure players, but it doesn’t need to.
- Oracle is expected to deliver another strong quarter, investors should remain focused on the long-term positioning of the business.
X2M Connect Limited – Solid Operating Leverage Demonstrated in H1 23
- X2M Connect Limited (ASX:X2M) has reported a 23% reduction in RaaS-adjusted EBITDA losses (to $2.4m) for H1 FY23 on the back of operating leverage from 96% sales growth, 135% gross profit growth and just a 14% increase in operating costs.
- While sales growth was driven by hardware sales (connected devices +100% over the pcp), hardware margins have improved ~500bps and connected devices in the field ultimately drive SaaS/maintenance fees (platform fees).
- Cash at bank was $3.05m with an additional net $0.5m received in January 2023 from an R&D tax credit.
Zebra Technologies: Improved Offerings For Industrial Automation & Other Drivers
- Zebra Technologies had a strong finish to the year, with profitability and sales near the high end of the outlook of the company and an all-around beat in the fourth quarter.
- Latin America sales increased with strong growth in Mexico and Brazil.
- However, due to an uncertain microenvironment, Zebra Technologies continue to see elongated sales cycles and softening of demand.
Company Appears to Be Back in Growth Mode in 2023 After a Challenging 2022
- Gaia reported 4Q22 revenues of $19.6 million versus $20.8 million in 4Q21, and 2022 revenues of $82.0 million versus $79.6 million in 2021.
- Given the small Yoga International acquisition in December 2021, this implies some revenue contraction in the core business for 2022.
- Despite the top-line challenge, net income was slightly positive for the year after adjusting for one-time legal fees and the anticipated SEC settlement accrual, which confirms the resilience of Gaia’s financial model.
Guidewire Software: Major Drivers
- Guidewire Software is delivered a mixed set of results in the recent quarter with revenues above Wall Street expectations.
- Both ARR and subscription revenue and particularly subscription and support gross margin, finished ahead of the expectations of the management.
- In the quarter, Guidewire Software executed several new InsuranceSuite production deployments on the Guidewire Cloud Platform, including DEFINITY Insurance.
ARLO: Profitability Back in View
- ARLO initiated a new marketing strategy based on price and it seems consumers have responded well in an otherwise tough market backdrop.
- The sell through led to ARLO growing the number of paid subscribers more than we were expecting, and on pace to surpass 2 million paid subscribers in first quarter 2023
- The revenue achieved in the fourth quarter was approximately $3 million higher than the top end of the guidance range ARLO had previously provided
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