Daily Brief TMT/Internet: NTT (Nippon Telegraph & Telephone), SoftwareONE Holding, Mobvoi, Hon Hai Precision Industry, Nanya Technology, Yageo Corporation, Oracle Corp, Nano Dimension and more

• NTT (Nippon Telegraph & Telephone) (9432 JP) is splitting its stock 25:1 on record date 30 June 2023. That means it goes ex- at the new price on 29 June.
• The day before, the stock is up nearly 5% on heavy volume. This is likely punters buying before it splits so one round lot will be <¥20,000 vs ~¥420,000 yesterday.
• But there is a new attraction for retail, somewhat un-noticed. 

• Bain Capital has made a CHF 18.5/share offer proposal for SoftwareONE Holding (SWON SW), 33% premium, CHF 2,933 million implied equity value, 9.8x EV/NTM EBITDA and 18.7 Fwd P/E. 
• The offer is supported by founding shareholders (c.29.1% aggregate), who’d co-invest alongside Bain. SoftwareOne, in the middle of a turnaround, trades cheap vs. peers and my fair-value estimate (CHF 19.92/share).
• On IBES estimates, without significant cost-cutting, at CHF 20/share, Bain could achieve 18.6% IRR by year 6, thus could offer more. Gross spread is 3.7%. Considering prospects, I’d be long.

• Mobvoi is a leading AI company with generative AI and voice interaction technologies at the core of its business. The company has filed for an IPO on the HKEx.
• Unlike a lot of the AI start-ups, Mobvoi has already begun commercialising its products and services and the company has started generating operating profits in 2022.
• The advent of ChatGPT and Midjourney have created a hype for AI. Mobvoi has taken the right decision to go public at the right time.

• Hon Hai shares have rallied to new 52-week highs; We update our model and sanity check the company’s 2025E gross margin target.
• Hon Hai can realize its target higher gross margin as its revenue mix changes between its legacy contract manufacturing and components/ higher value products revenue.
• We maintain our 12-month price target of NT$155 per share, 35% above current levels and higher than the entire Street.

• Micron released results and its shares are rising U.S. afterhours. The company said that its trough is past, implying the same for other memory chip producers such as Nanya Tech.
• Given Nanya Tech recently rallied ahead of Micron, then reverted back most of the gains, we see at least a10% short-term Long trade for Nanya shares here.
• Micron also made positive comments about the PC industry inventories. However, Taiwan PC names are already near 52-week highs. Elan Microelectronics could be a yet-to-rally play: See our full piece.

• Yageo has been relatively range-bound since early 2023E, missing completely the ‘AI Rally’ that caused many other Taiwan names to rise. Hence one can buy it without chasing hype.
• We spoke with management. The company has historically enjoyed durable margins and we believe could enjoy a cycle turn-around as its products are linked to high-tech power needs.
• While not directly linked to AI demand, its products have strong long-term demand dynamics and are necessary for AI servers, high-end computing, autos, defense, and communications. Structural Long, NT$690 target.

• Oracle’s upside in the near term might appear limited, but there is potential for higher dividend growth going forward.
• The debt level should be monitored closely by investors, but in my view does not present a major risk for Oracle’s dividend.
• The dividend yield remains low, but the debt level must be monitored by investors.

Nano Dimension has extended its special tender offer for Stratasys, increasing its cash offer from $18.00 to $20.05 per share and extending the deadline to 24 July. It has reduced the number of shares it is seeking to acquire, from up to 27.926m to up to 25.266m, to achieve a holding of 46–51% including the 9.7m shares it already owns. On the same day, Stratasys received a revised bid from 3D Systems (offering a mix of cash and shares) and it is currently reviewing both revised bids.