Daily Brief TMT/Internet: Kokusai Electric , SK Square , LG Corp, Softbank Group, F5 Networks Inc, Advanced Micro Devices, Ansys Inc, Fleetcor Technologies, Lumen Technologies, Marizyme and more

• Kokusai Electric (6525 JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 25 October.
• At the reported indicative IPO price of JPY 1890/share, Kokusai Electric (6525 JP) will be valued at JPY 435bn (US$2.94bn).
• The stock should be added to the TPX INDEX at the close on 29 November where trackers will need to buy over 14% of the stock issued in the IPO.

• In this insight, we provide an updated valuation analysis of SK Square (402340 KS) amid a potential sale of 11st to Alibaba (ADR) (BABA US).
• Our NAV analysis of SK Square suggests NAV of 9.2 trillion won or NAV per share of 65,069 won, representing a 55% upside from current levels.
• If SK Square is able to sell its stake in 11st to Alibaba, the capital inflow from the sale could be used to raise dividends and complete more share buybacks. 

• Our NAV analysis of LG Corp suggests an implied market cap of 16.9 trillion won or 107,217 won per share which is 28.4% higher than current share price. 
• We believe that LG Corp could announce another share buybacks representing 2-3% of outstanding shares in the next 6-12 months. 
• Another reason that could result in LG Corp’s shares outperforming other major LG related shares is due to the value investors increasing capital allocation to higher dividend paying LG Corp.

We view Softbank Group (SBG) as “Low Risk” on the LARA scale. This is mainly due to the group’s low reported leverage, as measured by LTV. SBG has demonstrated its ability to manage LTV, by periodically monetising large holdings of liquid assets (e.g. Alibaba Group Holding or T-Mobile/Deutsche Telekom shares) via derivatives or non-recourse margin loans. Investors can derive comfort from SBG’s remaining holdings of those liquid assets on the balance sheet. Domestic telco Softbank Corp is the only significant cash generator consolidated into SBG. We see risks stemming from the group’s reliance on its Alibaba stake (which may be volatile), as well as the use of cash from the asset monetisation programme. We are also concerned about the large share repurchase programmes despite SBG’s weak results, as well as the company’s ability to invest.

Our Credit Bias is “Stable”. We believe the worst is over for SBG. The North American and Chinese tech sectors appear to be improving. SBG executed a major asset monetisation exercise in FY 2022-23 to shore up the balance sheet, raising it to a healthy level. LTV is very low, and liquidity is sound. We see little downside going forward, and more upside.

Controversies are “Immaterial”, but the ESG Impact on Credit is “Moderately Negative”. SBG has faced governance concerns, particularly over internal controls and the outsized influence of Chairman, CEO and founder Masayoshi Son. Such issues flare up on occasion, weighing on the credit. One concern is that the chairman could make imprudent investments, lowering the value of SBG’s holdings while driving leverage up.

• F5 Networks Inc. delivered an all-around beat in the most recent quarterly result.
• F5 also continues to observe increased maintenance attach rates on older deployments due to customers worrying about their existing assets.
• Their product revenue increased by 1%, their systems revenue increased by 5%, and their software revenue decreased by 3%.

• Advanced Micro Devices Inc. (AMD) delivered mixed results for the previous quarter, with revenues above analyst expectations but below-par earnings, showcasing strategic execution and notable achievements.
• Despite a year-over-year decline in revenue, the company reported steady performance compared to the previous quarter.
• The data center segment experienced sequential growth, primarily attributed to cloud providers’ accelerated adoption of the fourth-gen EPYC CPUs.

• ANSYS Inc. delivered a solid result and managed an all-around beat in the last quarter, surpassing its financial guidance across all key metrics.
• During Q2, the company reported reliable performance, beating its ACV, revenue, operating margin, and EPS guidance.
• Total revenue for the quarter exceeded expectations, reflecting the positive impact of ACV outperformance and the mix of license types sold.

• Fleetcor Technologies managed to surpass the revenue expectations as well as the earnings expectations of Wall Street.
• Both print revenue growth and organic revenue growth stood at 10% for the quarter.
• While Q2 print revenue benefited from acquisition revenue, it was offset by lower fuel prices.

• Lumen Technologies, Inc. delivered a mixed result in the quarter, with revenues below anticipations but surpassed the Wall Street consensus regarding earnings.
• The total revenue was $3.661 billion, decreased 2.1% sequentially.
• In the quarter, free cash flow was negative $896 million, including $938 million in taxes paid in connection with their two divestitures from the previous year.

• Marizyme, Inc. (MRZM) is a fast-growing biomedical company with a powerful multi-technology platform.

• At the forefront is DuraGraft (DG), which has already demonstrated improved outcomes and lower costs for cardiac care through clinical trials and actual implementation in select overseas markets.

• In addition to continued ‘OUS’ expansion, MRZM is readying for the implementation of DG in US markets, pending FDA approval.