In today’s briefing:
- SenseTime (20 HK): Lock-Up Expiry Will Bring BIG Passive Flow
- Square Enix – Eidos Sale Removes Downside Risks
- Novatek (3034.TT): 1Q22 Results/ 2Q22 Outlook- The Outlook Seems Better than Feared in 2022. .
- AXTI: Underappreciated Growth
SenseTime (20 HK): Lock-Up Expiry Will Bring BIG Passive Flow
- SenseTime Group (20 HK) currently has a float of 1.4%. That will increase to 46% at the end of June as pre-IPO and cornerstone investor lock-ups end.
- The Hang Seng Tech Index FAF increase and potential inclusion in the Hang Seng China Enterprises Index will require passive trackers to buy 700m shares early September.
- Economic stimulus in China, outlook for China tech, lock-up expiry, inclusion in Southbound Connect and flows from passive trackers will drive the stock for few months and provide trading opportunities.
Square Enix – Eidos Sale Removes Downside Risks
- Square Enix announced the of sale Eidos Interactive, Crystal Dynamics, Square Enix Montreal and associated IPs to Embracer for $300m.
- We had been puzzling over Square Enix’s strangely low guidance despite excellent momentum in its MMO business for some time.
- Considering the underperformance in HD Games profitability and this sale we think we can now put two and two together.
Novatek (3034.TT): 1Q22 Results/ 2Q22 Outlook- The Outlook Seems Better than Feared in 2022. .
- Novatek’s revenue was NT$36.512bn in 1Q22, which was 38.5% YoY and 62.6% QoQ. It was 50.73%/36.73%/30.5% GM/OPM/NM in 1Q22, which was higher than our prior expectation of 43.6%/27.3%/22.3% in GM/OPM/NM.
- In our views, we revise up to be revenue/GM as NT$38.7bn/50.98% in 2Q20.
- As the inflation, 5G, Russia-Ukraine war did change the landscape, the outlook seems not that so much worse in 2022.
AXTI: Underappreciated Growth
- AXTI continues to experience an increase in demand for substrates with indium phosphide (InP) and gallium arsenide (GaAs) growing in the first quarter
- AXTI has shifted away from the seasonality it would find itself since making the move to multiple new facilities two years ago. Customers have continued to increase their spending
- AXTI reported first quarter revenue of $39.7 million compared to $37.7 million reported in the fourth quarter. We had been forecasting revenue of $39.6 million
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