Daily Brief TMT/Internet: Shinko Electric Industries, Hollysys Automation Technologies, Codan, Nexon, Cloudchain, Lumen Technologies, Pegasystems Inc, SolarEdge Technologies , Next 15 Group , Paychex Inc and more

• When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider. 
• 12wks ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 5wks ago, reco’d trimming.
• Shinko had outperformed Ibiden, and gross spreads had come in 5+% on JSR’s approval. Spreads are now 3% wider than their narrowest, but gap risk has widened as Shinko outperforms.

• On the 8th February 2024, 85% of Hollysys Automation (HOLI US) shareholders present and via proxy, voted for Ascendent Capital’s Offer. After three-plus years, the end was finally in sight.
• Then crickets. The merger was to complete in the 1Q. On the 15th April, HOLI released an accountant resignation notice. No word on dissenters or regulatory approvals. Shares sold off. 
• The accountant resignation is a nothing burger. HOLI should lift their game and provide more transparency on the outstanding merger conditions. Still, the spread is attractive. This is a buy. 

• In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run-up to the June 2024 index rebal event.
• There are up to two intra-review changes possible between now and the June 2024 review which could triggered by the Silver Lake (SLR AU) and Boral (BLD AU) deals.
• Separately, I see one ASX 20 change and two ASX 100 changes for the regular rebalance in June 2024.

• Nexon is a leader in the video game virtual worlds industry with an enterprise value of $11.4 billion
• The company has consistently high EBIT margins and a robust portfolio of popular franchises that have generated billions in revenue
• Despite being undervalued by the market compared to its peers, Nexon is poised for significant growth and offers potential for future success for investors

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Cloudchain (CC CH) is looking to raise up to US$200m in its upcoming HK IPO. 
• Cloudchain is an independent industry digital finance platform in China, serving anchor enterprises, chain-related enterprises, and financial institutions.
• In this note, we will talk about the not-so-positive aspects of the deal.

• Lumen Technologies’ Fourth Quarter 2023 Earnings revealed significant progress in the company’s business transformation.
• Led by the efforts of the new executive team under CEO Kathleen Johnson, Lumen indicated that it had met its 2023 EBITDA and free cash flow guidance and had made material progress in its strategic priorities.
• To strengthen its balance sheet, Lumen entered into an agreement with a majority of its creditors that extends most debt maturities to 2029.

• Pegasystems Inc. has noted robust cash flow growth and value delivered to its clients in Q4 of 2023.
• The company has adopted a new go-to-market strategy that has been received well by the team, leading to strong customer relationships.
• The company has focused on AI utilization to introduce industry-changing technologies, which has resulted in increased growth and cash flow.

• SolarEdge deemed its Q4 2023 and full-year results as clouded by adverse market dynamics and high inventory levels.
• For Q4, SolarEdge reported revenues of about $316 million, split between $282 million in their solar business and $33 million in non-solar activities.
• The company shipped 2.2 million power optimizers and 74,000 inverters during the quarter, along with 133-megawatt hours of batteries.

Next 15 Group’s net revenues grew 2.5% in the year to January, despite difficult markets. Adjusted operating margin rose from 20.2% to 21.0%, helped by head office cost savings. In common with much of the sector, spending by tech clients was soft, down 17% like-for-like. The group did well, though, in growing spend from non-tech clients, up 11%, making for a strong overall performance in a market beset by ongoing macro uncertainty. Next 15 has been building its AI capabilities for some time and this is now starting to show in efficiency and margin. It has the balance sheet strength to keep investing here, internally and through M&A, which should stand it in good stead as client confidence improves.

• Paychex, in its third quarter, reported a total revenue growth of 4%, which was dampened by a lower contribution from its Employee Retention Tax Credit (ERTC) service, compared to the previous year.
• However, the company stated that by eliminating this impact, the total revenue grew by 7% during the quarter.
• Factors such as the winding down of the ERTC program, moderated employment growth within Paychex’s client base, and marginally lower realized rates resulted in stronger headwinds during this quarter than the company had anticipated.