In today’s briefing:
- Korea Short Sell Ban: Not a Lot Covered on Monday; Shorts Holding On?
- Hollysys: Court Injunction Hearing Is Key
- Alchip Technologies GDRs Early Look – Another Well Flagged GDR Issuance in the Pipeline
- Momentum Trading Opportunities Among Top 50 Stocks in KOSDAQ With Highest Short Interest Ratios
- ChiNext/ChiNext50 Index Rebalance Preview: Time for a Turnaround
- Deep-Dive Review – Simplex Holdings (4373 JP)
- Why Is Vanguard Semi Becoming to a Bad Student, Cyclical or Structural?
- GlobalFoundries Pops On Q323 Earnings. But Why?
- ATEN: Earnings Power for Cash Flow
- Pureprofile Ltd – Margin Expansion Delivered in Q1, Ahead of Forecast
Korea Short Sell Ban: Not a Lot Covered on Monday; Shorts Holding On?
- Following the short sell ban announced on the weekend, the KOSPI 200 and KOSDAQ 150 opened higher on Monday and rallied through the day.
- A lot of the intraday gains on Monday have been given up over the next two trading days. Surprisingly, KRX data indicates that not a lot of shorts have covered.
- Foreigners have been net cash buyers since Monday (could indicate covering of offshore borrow) while retail were big sellers on Monday.
Hollysys: Court Injunction Hearing Is Key
- Talk about your never-ending story. I count at least seven non-binding Offers for Hollysys Automation Technologies (HOLI US) since December 2020, three of which are still on the table.
- The latest, at US$26/share, was pitched earlier this week from Ascendent Capital Partners; who along with Changli Wang, Hollysys’ founder, previously made an US$23/share Offer in August 2021.
- However, all these Offers are largely moot until we get closure at the court injunction hearing. If that occurs. Separately, I had a solid discussion with Hollysys’ IR.
Alchip Technologies GDRs Early Look – Another Well Flagged GDR Issuance in the Pipeline
- Alchip Technologies (3661 TT) is looking to raise around US$375m in its upcoming global deposit receipts (GDRs) offering.
- Similar to previous GDR listings, the deal is a very well flagged one, with a drawn out process of regulatory/approval loops the firm has to jump through up till issuance.
- Based on its board’s approval to issue up to 4m new shares in its GDR offering, the deal is a relatively small one at just 5.4% of Alchip’s current mcap.
Momentum Trading Opportunities Among Top 50 Stocks in KOSDAQ With Highest Short Interest Ratios
- In this insight, we discuss near-term momentum trading opportunities among the top 50 stocks in KOSDAQ with highest short interest ratios.
- We have identified 10 companies in KOSDAQ that have high short interest ratios, among the worst performing stocks YTD, but with strongest share price performance in the past three days.
- These 10 stocks are up on average 10% in the past three trading days, outperforming KOSDAQ which is up 3.7% in the same period.
ChiNext/ChiNext50 Index Rebalance Preview: Time for a Turnaround
- With the review period complete, we forecast 9 changes for the ChiNext Index (SZ399006 INDEX EQUITY) and 5 changes for the ChiNext 50 Index in December.
- Some of the potential adds will also have passive flows from the CSI Smallcap 500 Index trackers at the same time as the ChiNext Index rebalance.
- The potential adds have slipped a lot versus the potential deletes over the last few months as the National Team has tried to stabilise the market via ETF creations.
Deep-Dive Review – Simplex Holdings (4373 JP)
- Presenting a clear growth roadmap – following disclosure of the new medium-term business plan (‘MTBP2027’ covering FY3/2025 to FY3/2027) and long-term growth strategy (‘Vision1000’ depicting timing around 2030), we have revised our earnings estimates for FY3/2025 and FY3/2026.
- These reflect 1) acquisitive growth impact towards FY3/2027 as capital is allocated to the fast-growing Strategy/DX Consulting business, and 2) stronger margin growth driven by productivity enhancements and improving sales mix.
- We believe diversifying into new market sectors will open new growth opportunities and develop a more resilient business.
Why Is Vanguard Semi Becoming to a Bad Student, Cyclical or Structural?
- Shortage/Oversupply, price hike/cut, automotive/industrial demand and inventory corrections are still cyclical. Gross margin should double from 22-24% now once utilization returning to 100% and no more free wafer by 2025.
- LCD driver foundry is facing a structural competition as China panel customers are building a local supply chain.
- Attractive below NT$70 as: 1. inventory correction should be done by 2Q24; 2. global 8″ foundry sales y/y improvement began 3Q23; 3. closing to cyclical low P/BV of 2.5x.
GlobalFoundries Pops On Q323 Earnings. But Why?
- Q323 revenues of $1.85 billion, flat sequentially but down 11% YoY. Net income was $249 million, up 5% sequentially but down 26% YoY.
- At a midpoint of $1.85 billion, forward guidance is once again flat sequentially. Overall it was a solid report with guidance slightly better than UMC delivered last week.
- Despite the solid quarter, the company’s outlook for 2024 was bleak with a 50% CapEx cut, LTAs under mounting pressure & ominous-sounding LTA “True Up” on the horizon.
ATEN: Earnings Power for Cash Flow
- ATEN reported third quarter results after having already warned there were order push outs towards the end of the period.
- ATEN has been trying to diversify the revenue stream to reduce the volatility order flow disruptions could have on the business
- ATEN managed to maintain gross margin above 80 percent, a feat that does not get much recognition from investors. ATEN should continue to achieve gross margin above 80 percent
Pureprofile Ltd – Margin Expansion Delivered in Q1, Ahead of Forecast
- Pureprofile Ltd (ASX:PPL) is a data analytics, consumer insights and media company underpinned by proprietary technology, servicing business decision makers in brands and media companies as well as market researchers.
- Pureprofile has reported a 16% lift in revenue from continuing businesses for Q1 FY24 to $12.3m and a 36% jump in underlying EBITDA excluding discontinued businesses to $1.5m.
- The EBITDA margin increased to 12% in Q1 FY24 compared with a 10% margin in the same quarter a year ago.
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