In today’s briefing:
- Kokusai Electric (6525 JP): Placement Price Could Be Determined Today; Index Impact Could Be Delayed
- TSMC. Take The Pullback Gift
- ASML Readthrough: Are There Signs of an Industry Slow Down?
- A/H Premium Tracker (To 19 Jul 2024): SB Bought, NB Sold, HK Crushed Vs A-Shares
- Taiwan Tech Weekly: Strong TSMC & ASML Data Fails to Rally the Semiconductor Sector
- Private Equity Interest Is Back
- Mainland Connect NORTHBOUND Flows (To 19 July 2024): A Big Broad Sell in Third Plenum Week
- Xiaomi Corp (1810 HK): Tops India Smartphone Market; Samsung Falls to Third
- Xiaomi (1810 HK): 2Q24 Shipments – High Growth and High Market Share
- Korea Small Cap Gem #29: Com2Us
Kokusai Electric (6525 JP): Placement Price Could Be Determined Today; Index Impact Could Be Delayed
- Kokusai Electric (6525 JP) could price their secondary offering after market close today. The stock is down 10.5% since the rumors of the placement began 7 trading sessions ago.
- The Philadelphia Stock Exchange Semiconductor Index (SOX INDEX) has been dropping over the last few days and is 8.6% lower over the last 8 trading days.
- Kokusai Electric (6525 JP) has been trading higher on expectations of index inclusion in August, but that could move to November now.
TSMC. Take The Pullback Gift
- TSMC guided Q324 revenues of $22.8 billion at the midpoint, up 9.5% QoQ and up 32% YoY
- Increased full year guidance to be above mid-20% YoY growth in US dollar terms
- Share price has declined ~14% from its 52 week high but still up >2x from its 52 week low. Many will view this pullback as a gift, we certainly do…
ASML Readthrough: Are There Signs of an Industry Slow Down?
- ASML’s results last week indicated continued strength in the semiconductor industry. We analyze the results to identify any potential signs of weakening or pauses in global industry momentum for Taiwan.
- Net system bookings surged 54% QoQ and ASML reported rising utilization levels of its clients’ equipment. Inventory days rose significantly, but this is due to upcoming 2025 orderbook deliveries.
- New US, Europe, and Japan fabs bolster strong revenue outlook into 2026E. Overall, robust industry demand persists according to ASML’s latest data, with no major signs of softness.
A/H Premium Tracker (To 19 Jul 2024): SB Bought, NB Sold, HK Crushed Vs A-Shares
- The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- SOUTHBOUND inflow strong but SOEs not leading and Hang Seng down hard. Bank buying minimal. NORTHBOUND saw significant selling, but A-share indices generally strong on the week. Window-dressing?
- AH Premia rose 3.3% on average. Really bad week for H vs A as Liquid Hs underperformed their As by 4%. Stunning week really. Relative performance a sea of red.
Taiwan Tech Weekly: Strong TSMC & ASML Data Fails to Rally the Semiconductor Sector
- Taiwan Stocks Fall On Potential New U.S. Tech Restrictions for China & Potential Policy Shift from a Trump White House… Strong TSMC & ASML Results Fail to Rally the Sector
- Even Tighter Technology Restrictions for China? — US Could Use Special Rule to Restrict Selling of Products Made by Foreign Companies
- We See TSMC’s Margins Increasing Much Higher Than Guidance in Long-Term; 2Q24 Shows Apple Ramping Up
Private Equity Interest Is Back
- SoftwareONE is currently considered a special situation case by the market, with its new Board of Directors being more receptive to a potential transaction, possibly above CHF 20/share.
- Compelling stock narrative: strong balance sheet (10.3% of market cap in net cash&equivalents), low valuation (8.7x EV/NTM EBITDA, 17.5x Fwd P/E), shareholder return policy (buyback and dividend), and ongoing recovery.
- My fair value estimate is CHF 20.04/share, which implies an undemanding 9.8x EV/Fwd NTM EBITDA. SoftwareONE releases Q2 and H1 results on 21 August. Long.
Mainland Connect NORTHBOUND Flows (To 19 July 2024): A Big Broad Sell in Third Plenum Week
- The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
- Last week saw NORTHBOUND net SELL RMB +19.3bn of A-shares. NORTHBOUND sold everything. Consumer, Finance, and Energy hit hardest.
- Net flows as a percentage of value traded are clearly “short gamma”, but the net buys this week were of stocks previously a net sell.
Xiaomi Corp (1810 HK): Tops India Smartphone Market; Samsung Falls to Third
- Xiaomi Corp (1810 HK)‘s smartphone shipments to India surged in Q2 2024, reclaiming the top spot, while Samsung slipped to third.
- Consumer discretionary sales, including smartphones, were weak during the quarter due to elections, subdued demand, and extreme weather.
- The upcoming festive season is crucial for sales, with customers anticipating new launches and better bargains. 5G device upgrades continue to drive growth in 2024.
Xiaomi (1810 HK): 2Q24 Shipments – High Growth and High Market Share
- Xiaomi (XM)’s shipments increased by 29% YoY in 2Q24, which is the most rapid growth among the global top five.
- Xiaomi is the only clear gainer of market share among the global top five.
- We believe the stock has an upside of 35% and the target price is HK$22.30 for the end of 2024.
Korea Small Cap Gem #29: Com2Us
- Com2Us’s net cash (including long-term financial investments) is 151% of its market cap. It is trading at P/B ratio of only 0.45x.
- The company paid out 2,600 won in DPS in FY23. If we assume the same DPS, this would suggest a dividend yield of 6.7% at current price of 38,900 won.
- Com2Us is a turnaround story. It had an operating profit of 1.2 billion won in 1Q 2024, improving from an operating loss of 13.3 billion won in 1Q 2023.
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