In today’s briefing:
- KDDI (9433) – Own Share Tender Offer, Toyota To Sell (Gasp!)
- STAR50 Index Rebalance Preview: Potential Changes Playing Catchup
- Intel Results #1 Take-Away: Major Readthrough for PC Upgrade Cycle and Edge AI
- Taiwan Dual-Listings Monitor: TSMC Premium High & Short Interest Down; ASE Premium Precarious
- Delta Taiwan Vs. Thailand Monitor: Short Term Trade This Week on Delta Earnings; Or Pair Long/Short
- Unisound AI Technology IPO Valuation Analysis: SaaS Valuation Multiples Appear Rich For The Stock
- Cadence Design Systems Inc.: Shaping the Future of AI with its Unique Products? – Key Drivers
- Memory Monitor: Our Site Visit to Micron’s A3 Fab in Taiwan; AI Accelerating the Cycle Recovery
- ServiceNow Inc.: Acquisition Of The G2K AI-Powered Platform & Other Major Developments
- Meta Platforms Inc.: Interesting Progress On The VR Front! – Key Drivers
KDDI (9433) – Own Share Tender Offer, Toyota To Sell (Gasp!)
- Today, with Q1 earnings, which I found less than great, KDDI Corp (9433 JP) announced a Tender Offer Buyback to repurchase up to 64,102,500 shares for up to ¥250.03175bn.
- The Tender Offer – at ¥3900/share vs Last at ¥4,271/share (designed for cross-holding unwinds) – goes from 31-July through 28-August. It fills the 83.3% of the buyback programme announced 11-May.
- Toyota Motor (7203 JP) has announced it would sell ¥250bn of shares into this Tender Offer. This is less interesting than it looks. The whole thing is.
STAR50 Index Rebalance Preview: Potential Changes Playing Catchup
- The review period for the September rebalance ends today. The changes could be announced on 25 August with the implementation taking place after the close on 8 September.
- The upcoming launch of the STAR100 Index could result in the index committee continuing to use a 6-month minimum listing history resulting in two changes to the index.
- One way turnover is estimated at 2.3% resulting in a one-way trade of CNY 2,658m. The impact on the deletions will be much larger than that on the inclusions.
Intel Results #1 Take-Away: Major Readthrough for PC Upgrade Cycle and Edge AI
- Intel’s latest results imply a potential bottoming of its business & nascent turn-around; however the greater take-away is that the PC industry is heading into a major AI-driven up-cycle.
- PC industry inventories are now “healthy” and Intel’s Client Computing segment (PCs) showed the strongest QoQ revenue growth. Management is guiding for continued improvement next quarter.
- Edge AI will drive a major upgrade cycle for PCs worldwide and Intel’s new Meteor Lake chip could be a catalyst. Invest ahead of AI PCs having their “ChatGPT Moment”.
Taiwan Dual-Listings Monitor: TSMC Premium High & Short Interest Down; ASE Premium Precarious
- TSMC’s premium is trading at a historically high level after its recent results release, while ADR short interest has remained subdued.
- ASE’s ADR premium is at one of its highest levels in history, appears precarious in our view.
- ChipMOS premium near middle of range; the company will report results this week.
Delta Taiwan Vs. Thailand Monitor: Short Term Trade This Week on Delta Earnings; Or Pair Long/Short
- Delta Thailand has surged 22% in NT$ terms since our last piece, while Delta Taiwan rose only 6%. We see two potential trades here.
- Delta Thailand reported its results on 27 July and beat expectations by 22%. Delta Taiwan will release its results on August 1st with its analyst call at 15:00 Taiwan time.
- 1) Potential Long Delta Taiwan event trade into Taiwan earnings 2) Long Delta Taiwan vs. Short Delta Thailand based on the relative prices reverting back to their end June ratio.
Unisound AI Technology IPO Valuation Analysis: SaaS Valuation Multiples Appear Rich For The Stock
- Unisound AI Technology, a Beijing-based AI unicorn, filed to go public in Hong Kong. I used a diverse peer group of domestic AI companies to come up with IPO valuation.
- From a peer group perspective, I arrived at an IPO valuation close to ~RMB12b (or ~$1.7B), using a ~15x EV/CY22 Revenue to my 2023 revenue estimate of RMB780m (+30% y/y).
- However, I believe SaaS valuation multiples may appear rich for the stock, keeping in mind non-recurring revenue and the high hardware cost in the total cost of sales and services.
Cadence Design Systems Inc.: Shaping the Future of AI with its Unique Products? – Key Drivers
- Cadence exceeded the revenue and earnings expectations of Wall Street for the second quarter of 2023, resulting in year-over-year 14% revenue growth and 19% non-GAAP EPS growth.
- In terms of Generative AI, the customers of Cadence are adopting its chip, Generative AI portfolio, system, board, and package as they are achieving exceptional productivity benefits and quality results with these solutions.
- We give Cadence Design Systems a ‘Hold’ rating with a revised target price.
Memory Monitor: Our Site Visit to Micron’s A3 Fab in Taiwan; AI Accelerating the Cycle Recovery
- We visited Micron’s advanced A3 semiconductor fab in Taichung, Taiwan last Friday. Micron is committed to expanding leading edge capacity in Taiwan.
- Memory names rallied sharply at the end of last week after SK Hynix affirmed that 1Q23 was the cycle bottom and AI-driven DRAM demand was accelerating its recovery.
- We reiterate our Nanya Long trade and believe it can now run further given improving industry signals. Nanya presents pure-play exposure to a DRAM turn-around accelerated by AI demand.
ServiceNow Inc.: Acquisition Of The G2K AI-Powered Platform & Other Major Developments
- ServiceNow managed to exceed the revenue and earnings expectations of Wall Street.
- It beat expectations for every key performance metric.
- Also, it has introduced an innovative ServiceNow AI Lighthouse customer program along with Accenture and NVIDIA.
Meta Platforms Inc.: Interesting Progress On The VR Front! – Key Drivers
- Meta Platforms managed to exceed analyst expectations in terms of revenue as well as earnings.
- On Facebook, engagement trends have been stronger than the company’s management anticipated.
- We give Meta Platforms a ‘Hold’ rating with a revised target price.
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