Daily Brief TMT/Internet: Tencent, Taiwan Semiconductor (TSMC) – ADR, ASE Technology Holding , Cadence Design Sys, Acal PLC, Verizon Communications, Visa and more

• SOUTHBOUND was again a net buyer, for HK$7.8bn this week (now 25wks in a row of net buying), on smallish two-way volumes. 
• I’ve thought national team was buying banks for months. This week, 1 bank showed up in the top 20 net buys after only 1 in the top ten last week.
• There were three ETFs in the top six SOUTHBOUND buys this past week. That was unusual. Some high div SOEs got sold. 

• TSMC: Crashed Then Rebounded to +15.1% Premium; Likely to Break Down Again
• UMC: -0.2% Discount; Earnings Imminent; Notable Decrease in ADR Headroom
• ASE: Rebounded to +9.2 Premium After Major Breakdown; Likely to Drop Again

• A TALE OF TWO SEMI INDUSTRIES: ASE’s latest earnings commentary indicates that the performance gap between “leading-edge” technologies and “traditional/mature” semiconductor technologies may be widening.
• CAPITAL REQUIREMENT TO KEEP PACE IS RISING: Capacity utilization is starkly different for traditional vs. leading-edge capacity; and capital requirements to keep up in terms of advanced capacity is rising.
• ENTRY BARRIERS RISING: We suspect that smaller players could face significant challenges in keeping up with the investments necessary for leading-edge packaging and testing capacity. ASE needs to invest heavily.

• Cadence Design Systems, Inc. reported strong results and exceeded expectations for their second quarter of 2024, with broad-based momentum seen across their product portfolio.
• The company also posted stronger bookings than anticipated, leading to a strong backlog, demonstrating the robust demand for their innovative products.
• Cadence updated its revenue guidance for the year to over 13% year-over-year growth, reflecting its strong performance.

discoverIE’s Q125 trading update confirmed that underlying earnings expectations for FY25 are unchanged. While the Q125 revenue decline reflects the lower bookings environment in previous quarters, book-to-bill was above one and bookings increased organically year-on-year despite ongoing destocking by customers in the industrial market. Robust gross margins and a well-controlled cost base support the company’s 13.5% target operating margin for FY25 and we maintain our forecasts.

• Verizon Communications Inc. had a successful second quarter of 2024 as the company reports strong results, with wireless service revenue climbing 3.5% year-over-year, adjusted EBITDA rise by 2.8%, and free cash flow increasing by 3% compared to last year.
• In addition, the company’s customer-centric measures such as myPlan and Verizon Business Complete are resonating with its consumers, leading to further growth and stronger customer relationships.
• The company’s impressive results follow its commitment to innovation and the implementation of a brand refresh, signifying its evolution and future visions for connectivity.

• Visa Inc.’s fiscal third quarter of 2024 reveals a strong financial position, but also indicates room for improvement.
• Net revenue was $8.9B, notching a 10% YoY increase and included a 12% YoY rise for EPS, indicating an increased level of profitability.
• One of Visa’s strongest areas this past quarter has been its focus on global client engagement, resulting in a 3-pt increase in their global Net Promoter Score (NPS) to 76.