In today’s briefing:
- O2Micro Wraps Up. GSMG Capitulates
- Trend Micro (4704 JP) – Value Act’s Activism Starts To Show, But It’s Still Small Potatoes
- EQD | TSMC (TSM US): Revisiting the Call Ratio and Vol Pair Trade with AAPL US
- [ACM Research Inc. (ACMR US, BUY, TP US$30) TP Change]: At the Foothill of a Multi-Category Monopoly
- MicroStrategy Inc (MSTR US): TSS < 10 - Target Tactical 10-13% Decline
- [Unity (U US, BUY, TP US$48.2) Rating Change]: Major Catalysts to Realize Among Industry Recovery
O2Micro Wraps Up. GSMG Capitulates
- At the EGM held on January 31, O2Micro International (OIIM US)’s shareholders approved the Merger Agreement. Completion was subject to satisfying certain conditions, which appeared rudimentary.
- An equity corporate action notice released yesterday (15 February) indicates the last day of trading will be the 24 February, with an effective date of 27 Feb.
- O2Micro is currently at a 2.7% gross spread. At the other end of the spectrum, Glory Star New Media (GSMG US) is at a staggering 79% spread, despite shareholder approval.
Trend Micro (4704 JP) – Value Act’s Activism Starts To Show, But It’s Still Small Potatoes
- Trend Micro Inc (4704 JP) is an interesting, but odd little company in an interesting odd little niche. They make cybersecurity products and are good at it.
- Last summer, well-known activist Value Act Capital showed up on the tape in August with an 8.7% position.
- What had been good dividend payout ratios are now cemented. Now there is a big buyback to return cash. Look for more. And as always, details matter.
EQD | TSMC (TSM US): Revisiting the Call Ratio and Vol Pair Trade with AAPL US
- We published last November about buying upside via selling call ratios and also about a vol pair trade idea versus AAPL US.
- Buffet has surprisingly exited the bulk of his stake in the chip maker causing concern that the value investor no longer sees value
- We update on the position and consider what to do next
[ACM Research Inc. (ACMR US, BUY, TP US$30) TP Change]: At the Foothill of a Multi-Category Monopoly
- We expect ACMR to report C4Q22 top-line, non-IFRS operating profit, and IFRS net income in-line, 21% and 96% vs. consensus, respectively.
- New SPE import limits provide ACMR with a multi category quasi-monopoly. Thus, we raise our FY23 market share estimate for ECD/wafer clean/furnace to 51%/32%/2% from prior 25%/25%/0%.
- ACMR’s quasi-monopoly position in multiple categories sustain its long-run growth, which underlines a 58% TP increase to US$ 30 and continued status as our top hardware pick.
MicroStrategy Inc (MSTR US): TSS < 10 - Target Tactical 10-13% Decline
- MSTR US has rallied strongly in 2023 (+138%), peaking at a new 6 month high of 315.00 on 16 February 2023.
- The 315.00 peak was plagued by extreme ST momentum failure and new highs were quick to fail and reverse.
- Our TSS methodology triggered a TSS < 10 at the high and justifies a further 10-13% decline in the coming 1-2 weeks.
[Unity (U US, BUY, TP US$48.2) Rating Change]: Major Catalysts to Realize Among Industry Recovery
- We forecast that Unity’s top line/bottom line would be 2.8% /24.7% vs cons. in 4Q22, with synergies from ironSource merger to take effect and gaming market to gradually recover.
- Price increase for Create segment and improved monetization for Operate segment would further boost the company’s 2023 outlook, leading to top line/bottom line beating cons. by 3%/55%.
- Due to our optimism of both industry and company uptrend, we upgrade to BUY and raise TP to US$ 48.2, implying 7.2X PS/ 159X PE in 2023.
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