In today’s briefing:
- Shinko Electric (6967 JP): A Casualty of the China TCM Deal Break
- Japan Value | Effissimo Takes Significant Stake in Konica
- Taiwan Semiconductor (TSMC) Crushes Q3 Expectations with 54% Profit Surge—What’s Fueling This Chip Giant’s Growth?
- Bullish Outlook Focused on Large- And Mid-Caps; Russell 2000 Below Resistance; Concerns Dwindling
- Tech Supply Chain Tracker (23-Oct-2024): Foxconn focuses on SDV for smart car evolution.
- General Atlantic/Learning Technologies: Ahead of PUSU Deadline
- China Woes and Weak Sales Projections Send ASML Shares Plunging—Is AI Still a Lifeline?
Shinko Electric (6967 JP): A Casualty of the China TCM Deal Break
- At first glance, the Shinko Electric Industries (6967 JP) and China TCM merger arb has little or no similarities regarding the region, precondition, sector, type of offeror, or offer structure.
- The aftermath of China Traditional Chinese Medicine (570 HK) has resulted in funds resizing well-held merger arb positions, mainly long-dated names with tail event risks. This has increased the Shinko spread.
- Shinko’s tail event risk (no SAMR approval) remains low. Timing remains the primary risk, as a delay is possible. At the last close, the gross/annualised spread was 8.9%/29.2%.
Japan Value | Effissimo Takes Significant Stake in Konica
- Konica Minolta, a key player in the Japanese office equipment market, presents an attractive investment opportunity, particularly in light of the recent actions by activist investor Effissimo.
- The investment case for Konica Minolta hinges on several factors, including potential structural reforms, M&A activity, and undervaluation.
- Given Effissimo’s track record with Ricoh and the broader industry dynamics, the thesis for a bullish outlook on Konica Minolta is compelling.
Taiwan Semiconductor (TSMC) Crushes Q3 Expectations with 54% Profit Surge—What’s Fueling This Chip Giant’s Growth?
- Taiwan Semiconductor Manufacturing Company (TSMC) has reported a robust performance in the third quarter of 2024, underscored by significant revenue growth driven by both smartphone and AI-related demand.
- The company’s industry-leading 3-nanometer and 5-nanometer technologies have been at the forefront of this demand surge.
- Revenue for the third quarter increased sequentially by 12.8% in New Taiwan dollars, reflecting not only strong demand but also higher capacity utilization and cost improvement efforts.
Bullish Outlook Focused on Large- And Mid-Caps; Russell 2000 Below Resistance; Concerns Dwindling
- Considering constructive market dynamics and the recent $SPX breakout above 5783 following several months of consolidation, we upgraded our outlook to bullish as of our 10/15/24 U.S. Macro Vision report
- Since late-July, we have been neutral on the SPX, preferring to buy near 5100-5200 support and sell near 5670-5783 resistance until there is a break in either direction.
- The verdict of the market is the only one that matters, and the breakout above 5783 is the market’s way of saying the path of least resistance is higher.
Tech Supply Chain Tracker (23-Oct-2024): Foxconn focuses on SDV for smart car evolution.
- Foxconn is expanding its SDV development efforts to further the advancement of smart car technology.
- Intel is seeking collaboration with Samsung to better compete with TSMC in the competitive foundry market.
- Nvidia is collaborating with Indian partners to develop a custom chip for the Indian market, while Xiaomi launches China’s first 3nm SoC.
General Atlantic/Learning Technologies: Ahead of PUSU Deadline
- The Board will likely recommend the 100p/share cash offer (8.0x EV/NTM EBITDA) pending final terms. General Atlantic must make a formal offer by October 25, with potential deadline extensions.
- Shareholders would have the option to elect for an unlisted equity alternative. This means that top two shareholders (24%) will continue invested and that chances of a sweetening seem slim.
- Given LTG’s share performance, shareholders may willing to accept a 33.5% premium. Gross spread is 6.6% (39.4% estimated annual return if settlement by January 6). Long.
China Woes and Weak Sales Projections Send ASML Shares Plunging—Is AI Still a Lifeline?
- ASML Holding N.V. reported its financial results for the third quarter of 2024, highlighting both achievements and challenges.
- The company recorded total net sales of EUR 7.5 billion, surpassing its own guidance, largely due to increased sales of deep ultraviolet (deep UV) systems and heightened Installed Base Management sales.
- Net income for the quarter was EUR 2.1 billion, representing 27.8% of total net sales, with an EPS of EUR 5.28.
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