In today’s briefing:
- Shinko Electric (6967) – Break/Gap Risk Early May 2024 Update
- HK Connect SOUTHBOUND Flows (To 30-Apr/3-May 2024); Banks/SOEs Bought, Meituan, Tencent, Mobile Sold
- Hollysys (HOLI US): Further Thoughts on the Widening Spread
- LRCX. Mounting Tailwinds Bode Well For 2025 & Beyond
- KYEC (2449.TT): 1Q24F Was a Seasonal Dip, but 2Q24F Should Be Picking up Below 5% QoQ.
- TBO Tek IPO – RHP Updates & Quick Thoughts on Valuation
Shinko Electric (6967) – Break/Gap Risk Early May 2024 Update
- 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.
- 15wks 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 8wks ago, recommended taking profits.
- Shinko had outperformed Ibiden, gross spreads had narrowed 5+% on JSR approval. Spreads are now 3.6% wider than at narrowest, but gap risk has widened as Shinko outperforms, Ibiden.
HK Connect SOUTHBOUND Flows (To 30-Apr/3-May 2024); Banks/SOEs Bought, Meituan, Tencent, Mobile Sold
- A-Shares only two days of the week and were up small Monday and Tuesday. H-shares took a breather Wednesday after trailing A-shares, then rallied hard on Thursday and Friday.
- Net SOUTHBOUND buying was +HK6.0bn. Net buys every day and now 22 days straight, but buying still appears foreign-led price-taking action.
- The only big news this week in China/HK was probably the Politburo’s new stance of trying to do more for the mainland property market, concentrating on unsold homes.
Hollysys (HOLI US): Further Thoughts on the Widening Spread
- I have received several questions from readers on Ascendent’s binding proposal for Hollysys Automation Technologies (HOLI US) in the context of the current gross spread of 12.1%.
- The questions primarily concerned the Capital Forum article, NSR approvals, timelines, auditor resignation and deal break risks.
- Most of the questions concerned regulatory approval risk. The delay in closing is mainly procedural (government red tape) rather than an indication that regulators will block the deal.
LRCX. Mounting Tailwinds Bode Well For 2025 & Beyond
- Q124 revenues of $3.79 billion, pretty much flat sequentially both QoQ and YoY, and also marginally better than guidance.
- Looking ahead, the company forecasted Q224 revenues $3.8 billion, i.e. flat QoQ. Still no full year 2024 outlook
- Technology transitions such as GAA, Backside Power, molybdenum replacing tungsten & the rise of generative AI will all be growth drivers in 2025 & beyond
KYEC (2449.TT): 1Q24F Was a Seasonal Dip, but 2Q24F Should Be Picking up Below 5% QoQ.
- In 1Q24, it was reported that the revenue growth was -3.35% QoQ, slightly exceeding our expectation of a 5% QoQ decline.
- For 2Q24, revenue is expected to grow, but the increase is projected to be less than 5% QoQ.
- NVIDIA revenue in KYEC is forecasted to reach 15% by the end of 2024F, up from about 2% in 2023, driven by the increasing demand for AI.
TBO Tek IPO – RHP Updates & Quick Thoughts on Valuation
- TBO Tek (0395045D IN) is looking to raise approximately US$200m in its upcoming India IPO.
- TBO Tek is a global travel distribution platform. Its two-sided technology platform serves companies involved in the travel industry such as hotels, airlines, travel agencies and travel management companies.
- In this note, we provide a summary of its RHP updates and share our quick thoughts on valuation.
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