In today’s briefing:
- HK Connect SOUTHBOUND Flows (To 17 May 2024); Banks, Banks, Banks, Tencent, and Big SOEs
- Hang Seng Index (HSI) Rebalance: BYD Electronics Added; Country Garden Services Deleted
- TSMC (2330.TT; TSM.US): A16 Technology Continues to Evolve in 1H27.
- BYD Electronic (285 HK): Will HSI Inclusion Be a Kiss of Death?
- Taiwan Dual-Listings Monitor: TSMC Spread Trading at New High Range, CHT Spread at Short Levels
- Arista Networks: Artificial Intelligence (AI) Networking
- Dolby Laboratories Inc.: Will The Increased Demand for Dolby Atmos and Dolby Vision Technology Last? – Major Drivers
- Trimble Inc.: Expanding Addressable Market and Ecosystem Approach! – Major Drivers
- Universal Display Corporation (OLED): Continued Penetration in the Smartphone Market
HK Connect SOUTHBOUND Flows (To 17 May 2024); Banks, Banks, Banks, Tencent, and Big SOEs
- SOUTHBOUND was again a net buyer for HK$18.6bn on strong two-way volumes. The top three net buys of the week were SOE banks. Some may be Central Huijin.
- Some of this may be driven by the dividend w/h tax cancellation on H divs and by significant H-share discounts, but high-div CNOOC was the biggest net sell.
- No end to the inflows, and HK valuations are not at a place where they would hamper continued flows. Alibaba making HK a Primary will spur more inflows over time.
Hang Seng Index (HSI) Rebalance: BYD Electronics Added; Country Garden Services Deleted
- BYD Electronics (285 HK) will be added to the Hang Seng Index (HSI INDEX) after market close on 7 June while Country Garden Services (6098 HK) will be deleted.
- Estimated one-way turnover is 1.9% and the estimated round-trip trade is HK$8.46bn (US$1.08bn) with over 1x ADV to trade in the add and delete.
- We remain at 82 index constituents and the road to 100 index members looks to be a long and winding one.
TSMC (2330.TT; TSM.US): A16 Technology Continues to Evolve in 1H27.
- After Taiwan Semiconductor (TSMC) – ADR (TSM US) N2 technology in 2H25F, A16 technology will be pilot-production in 2H26 and likely unveiled in around 1H27.
- TSMC A16 technology will be utilizing best-in-class backside power delivery solution.
- Si Photonics co-exists with traditional Substrates packages, linked with fiber.
BYD Electronic (285 HK): Will HSI Inclusion Be a Kiss of Death?
- While historically many new inclusions to the HSI have performed disappointingly after their addition, BYD Electronic (285 HK) looks unlikely to follow such a pattern.
- Its share price has underperformed YTD, absolute PER valuations are not stretched and forward P/B multiple is only at the historical average level. These provide a good buffer.
- Its industry and business are not at structural and cyclical peaks, with further growth prospects from AI-enhanced products and solutions. A 33% surge in 1Q24 earnings also adds comfort.
Taiwan Dual-Listings Monitor: TSMC Spread Trading at New High Range, CHT Spread at Short Levels
- TSMC: +17% Premium; Has Remained Above 15% for Over Nearly Two Weeks
- ASE: +11.8% Premium; We Continue to View 14%+ as Range to Short From
- CHT: +0.6% Premium; Can Consider Shorting the Spread at Current Level
Arista Networks: Artificial Intelligence (AI) Networking
- Arista Networks is well-positioned to take advantage of the rapidly growing opportunities in the artificial intelligence (AI) and cloud computing landscape.
- For the first quarter of 2024, the company reported revenue of $1.57 billion, representing a 16.3% year-over-year growth.
- Contributing a substantial 16.9% of this revenue was services and software support renewals.
Dolby Laboratories Inc.: Will The Increased Demand for Dolby Atmos and Dolby Vision Technology Last? – Major Drivers
- Dolby Laboratories, Inc., a leader in immersive entertainment technologies, posted its Q2 2024 results, providing significant insights into its performance and future outlook.
- The report highlighted that the revenues were on par with their expectations, while the earnings exceeded the forecasted figures.
- However, the full-year guidance remained unchanged.
Trimble Inc.: Expanding Addressable Market and Ecosystem Approach! – Major Drivers
- Trimble, in the first quarter of 2024 results, highlighted three key areas: performance exceeding expectations, a strategic portfolio highlight involving divestitures and joint venture, and the implementation of its new reporting segments.
- Trimble posted a solid performance with all its three segments surpassing expectations.
- Its annual recurring revenue (ARR) grew 13% organically alongside a strong free cash flow of $227 million.
Universal Display Corporation (OLED): Continued Penetration in the Smartphone Market
- Universal Display Corporation reported strong results for its first quarter of 2024.
- The company’s revenue was $165 million, its operating profit was $63 million, and its net income was $57 million or $1.19 per diluted share.
- Its strong start to the year and continuing OLED momentum have led them to raise the lower end of their annual guidance range to now believe that their 2024 revenues will be in the range of $635 million to $675 million.
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