In today’s briefing:
- Kioxia & Tokyo Metro: Japan’s Largest IPOs Since 2018 Expected This October
- TSMC (2330.TT; TSM.US): 2024 Top Clients
- Initial Thoughts on the Kioxia IPO – Impact on SK Hynix and Samsung Electronics
- [Q2 Earnings Preview] NVIDIA To Maintain AI GPU Leadership As Revenues Surge
- LG Corp: Three Key Catalysts + NAV Valuation
- Activist Investors Circling Intel? The Reasons Behind The Chipmaker’s Defensive Strategy!
- [Baidu, Inc. (BIDU US, SELL, TP US$80) TP Change]: Baidu’s Problem Is Not All Cyclical…Maintain SELL
- Upgrading Utilities to Overweight; Expecting $SPX to Roll Over; NVDA and SMH Topping?
- AMD’s Latest Acquisition Of ZT Systems: A Challenge to NVIDIA’s AI Dominance?
- KT Corp (030200 KS): Foreign Room Drops Below Critical Level; Passive Selling to Come
Kioxia & Tokyo Metro: Japan’s Largest IPOs Since 2018 Expected This October
- Kioxia and Tokyo Metro with valuations of ~$10bn and ~$4.6bn are expected to be listed in October 2024 and become the largest Japanese IPOs since Softbank Corp (9434 JP) in 2018.
- Kioxia Holdings (6600 JP) is currently forecasted to fail fast entries of both Global indices due to low IPO free float.
- Tokyo Metro is expected to be added via fast-entry in one Global Index because of higher IPO free float. Forecasted demand of ~$140m is expected on the fifth trading day.
TSMC (2330.TT; TSM.US): 2024 Top Clients
- TSMC’s top 5 clients for 2024 are Apple (AAPL US), Advanced Micro Devices (AMD US, Qualcomm Inc (QCOM US), Mediatek Inc (2454 TT) and NVIDIA Corp (NVDA US).
- Smartphone orders continue to dominate at TSMC, with QCOM and MediaTek being key clients.
- Looking ahead to 2025, Intel Corp (INTC US) is expected to rely more on TSMC, potentially leading to changes in TSMC’s client ranking.
Initial Thoughts on the Kioxia IPO – Impact on SK Hynix and Samsung Electronics
- Kioxia is getting ready to complete its IPO in Japan as soon as in October. Kioxia’s valuation is expected to exceed JPY 1.5 trillion (about USD 10.3 billion).
- SK Hynix’s stake in Kioxia (through Bain led consortium) is 19%. SK Hynix’s stake in Kioxia would rise to 34% if the CBs are converted into equity.
- The IPO of Kioxia has mixed implications for SK Hynix which is a major shareholder. However, the IPO of Kioxia has a more direct negative impact on Samsung Electronics.
[Q2 Earnings Preview] NVIDIA To Maintain AI GPU Leadership As Revenues Surge
- NVIDIA’s dominance in AI GPUs, with 80% market share, has driven data center revenue growth by 427% YoY, with analysts expecting a 112% YoY revenue increase to $28.68 billion.
- NVIDIA’s GPUs are crucial for AI workloads, with significant adoption by cloud giants like AWS and Microsoft Azure. AI-specific chips are expected to drive 40% of 2024 revenue.
- 47 out of 61 analysts rate NVIDIA a strong buy, with average 12-month price targets showing 13% upside, reflecting confidence in its AI leadership despite potential market volatility.
LG Corp: Three Key Catalysts + NAV Valuation
- Three key catalysts for LG Corp include potential inclusion in Korea Value Up Index, an IPO of LG CNS in 1Q 2025, and an increasing probability of higher shareholder returns.
- An IPO of LG CNS is likely in 1Q 2025. LG CNS is currently valued at about 7 trillion won and LG Corp has a 50% stake.
- Our base case NAV valuation analysis of LG Corp suggests implied NAV of 15.3 trillion won or NAV per share of 96,957 won, which is 19.8% higher than current price.
Activist Investors Circling Intel? The Reasons Behind The Chipmaker’s Defensive Strategy!
- Intel Corporation, once the undisputed leader in the semiconductor industry, is currently grappling with a series of challenges that have significantly impacted its market position and share price.
- Amidst these struggles, Intel is reportedly working with advisors like Morgan Stanley to prepare a defense against potential activist investors, a clear signal of the growing pressure the company faces.
- The need for such a defense highlights the precarious situation Intel finds itself in—a company in the throes of operational difficulties, financial underperformance, and strategic missteps.
[Baidu, Inc. (BIDU US, SELL, TP US$80) TP Change]: Baidu’s Problem Is Not All Cyclical…Maintain SELL
- BIDU reported C2Q24 top line, non-GAAP operating profit and GAAP net income inline, 5.6% and 7.6% vs. our estimate and inline, 10% and 8.4% vs. consensus.
- Weak economy is only part of the problem. Weak monetization exists across the entire product line.
- We cut the TP to US$80 and reiterate SELL rating.
Upgrading Utilities to Overweight; Expecting $SPX to Roll Over; NVDA and SMH Topping?
- The SPX is back near YTD highs and testing resistance in the 5670-5783 range, and we view this as an ideal time to reduce risk and shift to defensives.
- We continue to believe that the SPX and Nasdaq 100 (QQQ) are going through a 1- to 4-month pullback/consolidation that could end up being a topping pattern.
- After laying out expectations in our 8/13/24 Compass report for a bounce and test of YTD highs, we now expect SPX to roll over near current levels
AMD’s Latest Acquisition Of ZT Systems: A Challenge to NVIDIA’s AI Dominance?
- Advanced Micro Devices (AMD) has made headlines with its recent acquisition of ZT Systems for $4.9 billion, a move that signals the company’s intent to become a formidable force in the AI space.
- As the industry leader, NVIDIA has long dominated the AI hardware market, but AMD’s latest strategic acquisition could shift the competitive landscape.
- This acquisition is not just about expanding AMD’s capabilities; it’s about positioning the company as a viable alternative to NVIDIA in the rapidly growing AI infrastructure market.
KT Corp (030200 KS): Foreign Room Drops Below Critical Level; Passive Selling to Come
- Foreign investors have continued buying KT Corp (030200 KS) and the stock has outperformed SK Telecom (017670 KS), though not by a lot.
- Foreign buying has pushed foreign room in KT Corp (030200 KS) below 3.75% and the stock could be deleted from a global index at the next rebalance.
- There will be some interesting trading dynamics in KT Corp (030200 KS) over the next couple of months and there will be trading opportunities versus its peers.
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