TMT: Sea Ltd, KMW Co Ltd, freee, Inari Amertron and more

• Sea Ltd (SE US) reports 1Q22 results tomorrow and we expect results to follow the overall sector’s trend of weak revenue growth but lower losses.
• Consensus 1Q22 revenue expectation was lowered in the last three months but there’s still a bit more downside due to Free Fire’s struggles.
• The biggest risk is the remaining three quarters of 2022 and the next year as consensus revenue seems too bullish with estimates of 42% revenue CAGR through 2021-23.

• The review period for the September rebalance of the KRX New Deal indices started on 1 May and will run till 31 July. Implementation is on 8 September.
• Intellian Technologies (189300) could replace Danal Co Ltd (064260) in the Internet index, while KMW Co Ltd (032500 KS) could replace AfreecaTV (067160 KS) in the top 3 index stocks.
• Nexon Games (225570 KS) could replace Devsisters (194480 KS) in the Game Index, though the flows are small on the stocks given the small benchmarked AUM.

• freee (4478 JP)  reported 3QFY06/2022 results on Friday. Revenue grew 35.7% YoY to JPY3.65bn (vs consensus JPY3.63bn) driven by strong growth in paying users.
• Operating losses declined to 18.5% of revenues during the quarter from 24.0% in the same period a year ago.
• The company’s shares moved up by about 9% at the end of Friday’s close following its earnings announcement.

• Generic segment positively surprised; maintain BUY
• Results within expectations
• Key takeaways from 3QFY22 results
• Resilient but not immune to downside risks

Inari posted another set of strong results for 9MFY22, supported by steady growth for its RF/Opto products, and a surprise beat by its Generic segment. In line with our recent moderation of the sector’s valuation pegs (given the Fed’s aggressive monetary tightening), we lower Inari’s to 28x FY23E PER, at +0.5SD to the LT mean (from 32x FY23 PER, at +1SD). Our TP is also lowered to MYR3.50 (-11%), but we maintain our BUY call/forecasts for now. Inari remains our top M’sian OSAT pick, premised upon its (i) RF division’s sustained resilience, (ii) proven mgmt team, and (iii) solid fundamentals (net cash pile of c.MYR2b, or 53 sen/share).