In today’s briefing:
- Socionext (6526 JP): The Current Playbook
- ChiNext/ChiNext50 Index Rebalance Preview: Potential Changes & Basket Performance
- Chindata (CD US): China Merchants Capital’s Rival Privatisation Offer
- Taiwan Tech Weekly: TSMC Packaging Tech Ahead of Samsung; China Rare Earths Restrictions Plays; DRAM
- Posco DX’s KOSPI Transfer Listing: Hankyung Exclusive Report
- PhilEnergy IPO: Trading Strategy on the First Day of Trading
- [Alibaba (BABA US, BUY, TP US$116) Target Price Change]: CMR Improves on Expanded Merchant Base
- Oddity Tech IPO Valuation Analysis: Growth and Profitability, Solid Upside With Limited Risk
- Heroz (4382) – Tailoring Business Growth Opportunities
- Jabil Inc.: Harnessing AI to Transform the Industry – Key Drivers
Socionext (6526 JP): The Current Playbook
- Since the announcement of the US$1.9 billion secondary placement, Socionext (6526 JP)’s shares are down -25.0% from the undisturbed price of JPY21,950 per share (5 July).
- So far, Socionext’s shares have mostly followed the pattern of previous large placements. Investors participating in previous large Japanese placements tend to secure positive returns.
- The offering will likely be priced on 11 July. Due to the steep share price decline, Socionext is trading at an undemanding multiple compared to global SoC peers.
ChiNext/ChiNext50 Index Rebalance Preview: Potential Changes & Basket Performance
- One third of the way through the review period, we forecast 10 changes for the ChiNext Index (SZ399006 INDEX EQUITY) and 5 changes for the ChiNext 50 Index in December.
- Passive trackers are estimated to trade around +/-0.5 days ADV on most of the potential adds/deletes, though there are some deletes that will have over 1 day ADV to sell.
- The potential inclusion to one or both indices have outperformed the potential deletes by a huge margin in the 5 months. We’d wait for a pullback to re-enter positions.
Chindata (CD US): China Merchants Capital’s Rival Privatisation Offer
- China Merchants Capital (CMC) disclosed a competing preliminary non-binding proposal to acquire Chindata Group (CD US) at US$9.20 per ADS, a 15.0% premium to Bain Capital’s US$8.00 per ADS offer.
- Astonishingly, Chindata did not publicly disclose the CMC offer, which was sent to the special committee on 9 June, i.e., 34 days ago.
- CMC must get Bain Capital’s support due to its 92.34% voting rights. The presence of a credible competing proposal will require Bain Capital to match CMC’s offer.
Taiwan Tech Weekly: TSMC Packaging Tech Ahead of Samsung; China Rare Earths Restrictions Plays; DRAM
- TSMC winning with Nvidia’s business, beating Samsung due to TSMC’s advanced packaging technology; this highlights the rising importance and complexity of chip packaging.
- China export restrictions for rare earths used in semiconductors highlight opportunity for U.S. and Australian rare earths producers. We identify two potential plays.
- Nanya Technology Earnings: DRAM market has bottomed, sees industry improvement ahead. We see a trading Long opportunity.
Posco DX’s KOSPI Transfer Listing: Hankyung Exclusive Report
- Posco DX has begun the selection process for its lead underwriter for its transfer to the KOSPI market and plans to complete the transfer listing within this year.
- Considering the recent retail insanity witnessed in most local large-cap battery stocks, Posco DX will likely experience further intensified short-term price fluctuations with this new development as a catalyst.
- The likely replacement for Posco DX’s KOSDAQ 150 spot is Konan Technology, which has become a top reserved issue in Posco DX’s GICS sector (Information Technology) in the previous review.
PhilEnergy IPO: Trading Strategy on the First Day of Trading
- PhilEnergy IPO will start trading this Friday on 14 July. We believe that PhilEnergy’s share price will surge higher on the first day of trading.
- We believe PhilEnergy’s shares could OVERSHOOT by more than 200% versus the IPO price on the first day of trading, which would be more than 102,00 won or more.
- Our trading strategy on PhilEnergy on the first day of trading would be to take partial profits (30-50%) if its price overshoots higher (by 200% or more than IPO price).
[Alibaba (BABA US, BUY, TP US$116) Target Price Change]: CMR Improves on Expanded Merchant Base
- We expect BABA to report C2Q23 (F1Q24) top-line and non-IFRS net income 2% and 21.5% vs. consensus. For C2Q23, we raised (1) Taobao/Tmall GMV/CMR estimates due to return of merchants,
- (2) International Commerce and Cainiao revenue estimates, and (3) EBITA margin estimates for all groups except cloud. We maintain our BUY rating and raise TP to US$ 116 TP,
- Due to 1) merchants return to Taobao/Tmall; 2) independent listing of groups; and 3) improved incentive structure after the organizational change.
Oddity Tech IPO Valuation Analysis: Growth and Profitability, Solid Upside With Limited Risk
- Oddity Tech, the owner of popular and fastest-growing global brands IL MAKIAGE and SpoiledChild, set terms for an upcoming IPO. The company offers ~10.5M Class A shares.
- Selling shareholders (private equity firm L. Catterton and Oran Holtzman, Co-founder & CEO) offer ~8.77M Class A shares, while Oddity Tech offers ~1.75M Class A shares.
- The net proceeds from the sale of Class A shares will be ~$41M. Oddity Tech will not receive any proceeds from the sale of shares by the selling shareholders.
Heroz (4382) – Tailoring Business Growth Opportunities
- HEROZ is an AI technology company that provides advanced AI development expertise to both B2C and B2B sectors.
- With a strategic focus on AI SaaS, it has embarked on a ‘buy-to-build’ strategy to develop profitable recurring revenue streams and accelerate earnings growth.
- In September 2022, it consolidated VarioSecure (4494), a subsidiary offering network security services, and in August 2022 acquired Strategit, a SaaS integration development support business.
Jabil Inc.: Harnessing AI to Transform the Industry – Key Drivers
- Jabil delivered a strong result and managed an all-around beat in the last quarter.
- The company’s growth was driven by improved profitability in electric vehicles, healthcare, renewable energy infrastructure, and cloud sectors.
- The healthcare sector also presents opportunities for Jabil, with increasing interest from OEMs seeking outsourcing manufacturing solutions.
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