In today’s briefing:
- Silicon Wafers. SUMCO Sounds The Alarm As Inventory Continues To Climb
- Tencent: Domestic Gaming Returns to Growth
- SK Telecom: Three Key Catalysts
- Tata Technologies IPO: The Investment Case
- Tencent (700 HK): Raise Margin Estimates After 3Q23 Results, 30% Upside, Buy
- Quiddity Leaderboard SE600 Dec 23: 6 ADDs/DELs and Two Intra-Review Changes Possible
- Freee 1Q: Earnings Beat; Qualified Invoice System to Further Drive Earnings
- Silergy (6415.TT): Silergy Expect to Grow Slightly in 4Q23F.
- XPER: Scaled for Growth
- IMMR: Ramp in Auto Has Begun
Silicon Wafers. SUMCO Sounds The Alarm As Inventory Continues To Climb
- Global silicon wafer area shipments declined 10% QoQ in Q323 but customer inventory remains at historical highs and is showing no signs of declining
- SUMCO’s Operating Profit forecasted to fall by ¥8.6 billion QoQ in Q423
- The company vowed to make “substantial” production cuts in a bid to bring their inventory situation under control.
Tencent: Domestic Gaming Returns to Growth
- Tencent (700 HK) ’s 3Q2023 revenues fell marginally below consensus, however, OP beat consensus estimates. Domestic games returned to growth after a flat quarter in 2Q2023.
- Both Online Advertising and Fintech businesses have seen strong increase in top line with GPM approaching new highs for the two businesses.
- Though Tencent’s earnings show a recovery, we would remain cautious given the slowdown in Chinese economy and Tencent failing to make into new game approval list since July 2023.
SK Telecom: Three Key Catalysts
- In this insight, we discuss three key catalysts that are likely to positively impact SK Telecom in the next several months.
- The current gap between SK Telecom’s 2023 expected dividend yield (6.6%) and US 10 year treasury note (4.47%) is 2.13%.
- The gap between SK Telecom’s dividend yield and US 10 year treasury note yield could widen to 3-4%+ in 2024, making SK Telecom’s dividend yield more attractive.
Tata Technologies IPO: The Investment Case
- Tata Technologies (TATATECH IN), the largest India-based ER&D service provider, seeks to raise US$350-375 million, which is lower than its previous target of US$600 million.
- Tata Technologies is seeking a valuation of US$2.5 billion, which is 27.5% higher than the valuation TPG Inc (TPG US) acquired a 9.0% stake on 25 October.
- The investment case rests on top-tier growth rates, strong core business, lower reliance on Vinfast (VFS US), high repeat rates, top-tier profitability, solid FCF profile and no debt.
Tencent (700 HK): Raise Margin Estimates After 3Q23 Results, 30% Upside, Buy
- Advertising, international game, and Fintech grew by two digits, but domestic entertainments were stagnant.
- The gross margins of all business lines improved and admin expense as percentage of total revenue decreased.
- We believe the stock has an upside of 30% for the year end of 2024.
Quiddity Leaderboard SE600 Dec 23: 6 ADDs/DELs and Two Intra-Review Changes Possible
- The SE600 index is one of the most widely followed benchmark indices in Europe. This index is rebalanced on a quarterly basis.
- In this insight, we take a look at the potential index changes that could take place between now and the end of the December 2023 rebalance.
- There are two more weeks for the base date. As things stand, there could be six ADDs/DELs during the December 2023 review and probably two more intra-review changes after that.
Freee 1Q: Earnings Beat; Qualified Invoice System to Further Drive Earnings
- Freee KK (4478 JP) ’s 1QFY06/2024 results beat consensus estimates. Introduction of qualified invoicing system in October has resulted in strong corporate user growth for the company.
- Upfront investment in selling and marketing has helped freee onboard a large no. of corporate clients prior to the introduction of the new invoice system.
- Freee expects selling and advertising spending to decline going forward which should help the company reach break-even in FY06/2025E.
Silergy (6415.TT): Silergy Expect to Grow Slightly in 4Q23F.
- The inventory adjustment of consumer electronics products is nearing completion and industrial products will end later.
- Silergy Corp (6415 TT)‘s short-term growth momentum comes from the demand of new smartphone, while its long-term growth momentum comes from the automotive, new energy and high-performance computing area.
- In 1H24, the pro forma gross profit margin can be maintained at around 50%.
XPER: Scaled for Growth
- XPER reported third quarter results in line with our forecast and reaching an inflection point in revenue where the operating leverage of the business becomes visible.
- Ahead of the results, there had been worries over XPER’s exposure to consumer electronics and pay TV industries that could cripple revenue growth.
- XPER reported third quarter revenue of $130.4 million compared to our forecast of $130.9 million. Adjusted EBITDA reached $9.3 million compared to our forecast of $9.2 million
IMMR: Ramp in Auto Has Begun
- IMMR’s third quarter results affirmed our investment thesis of the Company beginning to experience an increase in automotive revenue by the end of 2023.
- IMMR reported quarterly revenue above our forecasts citing an increase of approximately $1.9 million from automotive related customers.
- IMMR has a reputation with investors for generating revenue from smartphones and video game consoles. The inclusion of haptics within automotive was the reason we were drawn to the stock.
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