Daily Brief TMT/Internet: Mercari Inc, Softbank Group, Konan Technology, O2Micro International, Omron Corp, International Business Machines, Lam Research, Servicenow Inc, Lumen Technologies, Cliq Digital AG and more

• The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation. 
• For companies with “low liquidity” the FFW will be multiplied by a fixed liquidity factor of 0.75 to derive the final FFW used for index calculation. 
• Every April, the application of this liquidity factor is reviewed by the TSE. In this insight, we take an early look at what could happen in April 2023.

• In this deep dive report, we initiate coverage on Softbank Group with a ¥6,300 target price and Neutral recommendation
• We are cautious on global tech and consider that the main risk to the story but a recovery in China sentiment provides some offset
• For Q3 results next week, we expect the defensive theme of the last two quarters to continue

• Konan Technology is one of the competitors to Open AI (Chat GPT) in Korea. 
• Konan Technology’s share price is up more than 4x this year. We would not chase the stock at current levels. We provide a framework of valuing Konan Technology. 
• Four large Korean companies that could be long-term winners in AI space in Korea include Naver, Kakao Corp, SK Telecom, and KT Corp. SK Telecom owns 20.8% of Konan Technology. 

• O2Micro International (OIIM US)‘s US$5.00 per ADS privatisation offer from FNOF Precious Honour Limited was overwhelmingly approved by shareholders.
• The key remaining condition precedent is obtaining the required regulatory approvals related to the listing rules of NASDAQ and the Cayman Islands. There are no Chinese regulatory approvals required.
• The conditions precedent should be satisfied shortly. At the current price and for an end-March close, the gross and annualised spread to the offer is 6.4% and 45.6%, respectively. 

• We expected the market to react positively to the Q3 beat. There are clouds on the order horizon, but that is well-known
• A big management shuffle was also announced. We think the new CEO and CFO will follow the same LT Vision, but need to do more to meet rising capital costs
• Our core bullish thesis rests on growth in Industrial Automation.  As expectations for interest rate hikes fade, we think investors will start to price in a 2023/4 order recovery

• IBM delivered a strong result for the last quarter and managed an all-around beat as a result of excellent execution with respect to its AI and hybrid cloud strategy.
• It delivered decent revenue growth in its business across geographies, infrastructure segments, consulting, and software.
• The company added a series of innovative IBM software offerings in the AWS marketplace available as-a-Service.

• Lam Research ended the previous year on a strong note and posted an all-around beat in the last quarter.
• The CSBG revenues in the company’s installed base business expanded faster than its growth in the installed base units.
• We provide the stock of Lam Research with an ‘Underperform’ rating with a revision in the target price.

• ServiceNow continues performing well as its recent quarterly result met market expectations in terms of the reported revenues.
• The company exceeded its subscription revenue guidance and drove strong expansion and renewal rates.
• The free cash flow was above its guidance, and it beat the guidance with the growth in subscription revenue and also managed an earnings beat.

• Lumen with a Buy Rating: Anticipating Near-Term Rally. Lumen’s new CEO Brings a Track Record of Growth.
• The company’s focus is on Fuel Core Business Development.
• Lumens’ new CEO has a track record of growth and a track Record of growth for the company.

CLIQ Digital’s FY22 update showed strong year-on-year growth across all KPIs, as it continues to roll out its subscription-based bundled-content streaming services. The results were broadly in line with our expectations and CLIQ finished the year with a stronger-than-expected net cash position of €10m. Looking ahead, driven by continued investment into marketing and content, management expects FY23 revenue and EBITDA to exceed €345m and €50m, respectively, reflecting growth of at least 25% and 15%. We will update our numbers following the publication of the annual report, scheduled for 21 February.