Daily Brief TMT/Internet: Softbank Group, Paytm, Activision Blizzard, Nearmap Ltd, GoTo, Nitro Software Ltd, NCSOFT Corp, Taiwan Semiconductor (TSMC) – ADR, Paypal Holdings and more

• Headline 2QFY22 results for Softbank Group were in the black, largely due to the Alibaba stake sale, but the group’s three funds registered an aggregate USD10bn of valuation losses
• FTX’s write-down to zero will cost Softbank’s Vision Fund 2 USD100m in 3Q22, our main concern is what the VC funding downturn means for portfolio valuations in the coming quarter
• The group’s NAV discount has now tightened meaningfully; we believe that this makes it less advantageous for management to announce another share buy-back programme

• In Nov 2021, Paytm raised around US$2.2bn via selling a mix of primary and secondary shares in its IPO. 
• The company is backed by Alibaba (ADR) (BABA US), Softbank Group (9984 JP) and counts Berkshire Hathaway Inc Cl A (BRK/A US) among its investors. 
• In this note, we will talk about the upcoming lockup expiry.

• NetEase and Activision Blizzard will possibly terminate their cooperation next January.
• Singles’ Day sales were not very successful for e-commerce apps such as Alibaba and JD.com.
• IQiyi announced a revenue share rule to short TV series producers, including cost per mille and membership fee.

• Nearmap Ltd (NEA AU)’s litigation and trading update resulted in the spread to Thoma Bravo’s A$2.10 offer widening to 7.7%. The scheme meeting is on 25 November.
• There is no chance that the MAC clause will be triggered due to the downbeat trading update. However, the update is softening the stance of some of the retail dissenters.
• There is a small chance of a bump as peers have re-rated. Nevertheless, the low spread prior to the update suggested that the risk of the NO vote was minimal.

• Bloomberg reported on Friday that GoTo (GOTO IJ) is planning to cut more than 1k jobs across all its divisions to cutdown its costs and improve its financials.
• Though GoTo’s top line has continued to expand, the company continues to burn cash and the losses have further widened during the recent quarters.
• GoTo’s shares rose 11.7% during Friday’s trade, however, share price is still down by about 45%  from the company’s IPO price.

• Adobe rival Nitro Software Ltd (NTO AU)  has announced KKR (via Alludo) has firmed its $2.00/share Offer, by way of a Scheme, in tandem with an off-market takeover.
• Both the Scheme and takeover are subject to FIRB and MACs/prescribed occurrences. The takeover is subject to a 50.1% acceptance hurdle. The proposals have the unanimous support of Nitro’s board.
• The Transaction Booklet is expected to be despatched to shareholders in early February 2023, with a Scheme Meeting expected to be held in March 2023.

• In this insight, we discuss a pair trade between NCSOFT Corp (036570 KS) (go long) and Netmarble Corporation (251270 KS) (go short).
• NCSoft is currently trading at lower valuation multiples (in terms of EV/EBITDA and P/E) than Netmarble, which we believe is not justified.
• One of the key risk factors of Netmarble is that it could be excluded from the MSCI Korea Index in 2023/2024.

Softbank Group (SBG) has delivered acceptable Q2/22-23 results. Despite the large loss on investments, the company monetised an even greater amount of Alibaba shares to record a large quarterly net gain. As a result, the financial risk profile did not deteriorate. LTV was mostly stable q-o-q, improving since March 2022. Liquidity has strengthened, and now covers four years of planned bond redemptions.

The significant debt reduction and acceleration of share buybacks showed that SBG is trying to balance shareholders’ and creditors’ interests. In the past, SBG appeared more aligned towards shareholders’ interests, with frequent mentions of the share price’s discount to NAV, as well as large share purchases since 2016.

• Berkshire Hathaway Inc Cl B (BRK/B US) disclosed that it has acquired about 60.1m shares in Taiwan Semiconductor (TSMC) – ADR (TSM US).  
• Hon Hai is receiving local government support to recruit/return workers in order to ease its crisis there. Meanwhile, it will also quadruple its India-based iPhone manufacturing staff.
• UMC’s ADR premium is 0% and could see a bounce given the surge in TSMC.

• PayPal’s financial performance was impressive and the company managed to deliver an all-around beat.
• This will make it simple for PayPal’s merchant community to utilize their iPhone as a mobile point of sale without using a dongle or other payment terminals.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.