TMT: Renesas Electronics, Tencent, Appen Ltd, Mediatek Inc, Yanolja, Netflix Inc, Apple Inc, Snowflake Inc, Lenovo and more

• The Nikkei Index Team has suggested a methodology change to the Nikkei 225 Average.
• It involves capping stocks, creating a method for re-weighting once capped then stocks fall, and they recommend changing to a semi-annual Periodic Review – twice a year rather than once.
• More interestingly, they also change the “High Liquidity” definition to be related to traded value not volume, which starts to favour higher-market cap stocks with more shares out.

• The Hang Seng index constituents have moved away from just local Hong Kong shares to being dominated by China H and China-centric shares
• Focusing on these constituents adds much value, especially with shifting liquidity away from US-listed ADS to HKEX listed shares.
• It brings together a more diverse investor base ranging from local Hong Kong, mainland China and the rest of the world.

• AI data service provider Appen (APX AU) has announced an unsolicited, conditional, and non-binding indicative proposal from Canada’s Telus International, by way of a Scheme of Arrangement, at A$9.50/share.  
• That’s around a 48% premium. Appen’s board is seeking an improvement in terms through offering a limited course of due diligence.
• The Offer backs out an equity value of A$1.2bn, significantly down from Appen’s 2020 pandemic peak of A$5.4bn.

• In response to media reports, Appen Ltd (APX AU) disclosed a non-binding indicative proposal from Telus International (TIXT US) at A$9.50, a 48.4% premium to the undisturbed price of A$6.40.
• Appen also announced a weak trading update. The 1HFY22 EBITDA is expected to be materially lower than the comparable period due to the lower revenue and the ongoing investment. 
• Subsequently, Appen noted that Telus revoked its indicative proposal. No reason was given for the decision. Nevertheless, Appen’s depressed share price will continue to attract suitors. 

• MediaTek’s revised downward forecast for 650-680nm smartphone delivery in 1Q22 earnings conference, but we think that number could be revised down again by the end of July.
• MediaTek announced new WiFi products, Filogic 880 and 380, in COMPUTEX2022 on May 24-27. Besides, MediaTek invests in new opportunities for AI in the US.
• The mainland China fights fiercely against COVID-19 and stays at the Zero Policy. 

• There is a strong possibility of the launch of corporate growth fund private companies ETFs in Korea in 2023. 
• Once government gives final approval to launch the unlisted Korean companies ETFs in 2023, there is likely to be much greater interest in investing and researching in private Korean companies.
• Starting next year, there is a strong probability that we will spend a lot more time on researching and writing about these promising, private companies in Korea. 

• Tidefall is a concentrated, unconstrained investment fund that attempts to compound its capital at an attractive rate of return. Our investment advantage comes from our in-depth research, long-term time horizon and appreciation of biases.
• With Netflix stock down by more than 50% since its high in November (and 10% below Reed Hastings’ $20m purchase in January) we re-entered the position in April.
• We believe the current price of Netflix shares creates a compelling long term investment opportunity.

• Wedgewood Partners is a money manager founded in 1988 with the goal of providing investors with a superior approach to managing investment portfolios.
• For the first quarter 2022, our Composite (net)i declined -10.6%.
• We expect to be busy this year as all financial markets come to grips with the Federal Reserve’s unprecedented task of reigning in 40-year highs in inflation with two monetary tightening tools.

• Ignore the slight macro weakness from consumer facing internet companies in April. It is irrelevant for the LT model. 
• Snowflake upped its LT (FY2029) targets: $10B in revenues, growing 30%, 78% product margins, 20% operating margins, and 25% adjusted FCF margins.
• At 12x forward revenues, Snowflake’s valuation is…dare we say… cheap?

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Adani Ports & Special Economic Zone
• Bharti Airtel
• Lenovo
• Vedanta Resources