Asia and Global Semiconductor and Tech Research

Andrew Lu

Thematic (Sector/Industry)

We see VR (Virtual Reality) might be only a niche application to drive semiconductor demand but believe spectacles type Magic Leap’s Photonic Lightfield display, <a href="https://www.smartkarma.com/entities/15273" target="_blank" data-smartkarma-citation="entities:15273">Microsoft Corp (MSFT US)</a>’s HoloLens and smartphone type ( <a href="https://www.smartkarma.com/entities/5415" target="_blank" data-smartkarma-citation="entities:5415">Nintendo Co Ltd (7974 JP)</a>'s Pokemon GO) Augmented Reality (AR) to become much larger markets than VR’s for consumer and semiconductor/software industry by mixing up smartphone and tablet display image, application, and interaction with a real world. We expect AR to have much broader spectrum of applications like 3D gaming, movie/TV, new products demo, Google (<a href="https://www.smartkarma.com/entities/11369" target="_blank" data-smartkarma-citation="entities:11369">Alphabet Inc Cl C (GOOG US)</a>) Goggles on photo/graphic/text searching, Yelp/BuUuk in location based finder, and various applications for education, healthcare, social networking, and even enterprise. We estimate 80-100mn AR spectacles market by 2021 globally with US$100-150 semiconductor values per box in sensors, CPU, HPU, GPU, AI, NAND, and DRAM. These semiconductor contents should account for 10-15% of global foundry/OSAT market size by 2021 by contributing 2-3% sales CAGR for next five years, offsetting slower growth from smartphone, PC, and tablet markets.

We see VR (Virtual Reality) might be only a niche application to drive semiconductor demand but believe spectacles type Magic Leap’s Photonic Lightfield display, Microsoft Corp (MSFT US)’s HoloLens and smartphone type ( Nintendo Co Ltd (7974 JP)'s Pokemon GO) Augmented Reality (AR) to become much larger markets than VR’s for consumer and semiconductor/software industry by mixing up smartphone and tablet display image, application, and interaction with a real world. We expect AR to have much broader spectrum of applications like 3D gaming, movie/TV, new products demo, Google (Alphabet Inc Cl C (GOOG US)) Goggles on photo/graphic/text searching, Yelp/BuUuk in location based finder, and various applications for education, healthcare, social networking, and even enterprise. We estimate 80-100mn AR spectacles market by 2021 globally with US$100-150 semiconductor values per box in sensors, CPU, HPU, GPU, AI, NAND, and DRAM. These semiconductor contents should account for 10-15% of global foundry/OSAT market size by 2021 by contributing 2-3% sales CAGR for next five years, offsetting slower growth from smartphone, PC, and tablet markets.

Augmented Reality as New Driver for Semis?

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Within the Technology sector, investors often unfairly gloss over the large, fragmented world of IT services, focusing instead on product development surrounding the latest hardware and software innovations. However, we believe the services market provides fertile ground for economic moats to proliferate. While the soft qualitative skills required to acquire and retain customers can seem vague, this Technology Observer serves to shine a light on the industry and provide investors with a manageable framework with which to judge vendors based on pertinent business trends.As the industry evolves, we think there are pockets within the market that are undergoing significant, often misunderstood, structural changes. For instance, digital readiness and cloud computing are reshaping client demand, legacy services, and vendor go-to-market. As these forces resonate through the industry, we think some vendors, like <a href="https://www.smartkarma.com/entities/13468" target="_blank" data-smartkarma-citation="entities:13468:1">Accenture Plc Cl A (ACN US)</a>, <a href="https://www.smartkarma.com/entities/21411" target="_blank" data-smartkarma-citation="entities:21411:1">Cap Gemini SA (CAP FP)</a>, <a href="https://www.smartkarma.com/entities/2785" target="_blank" data-smartkarma-citation="entities:2785:1">Cognizant Tech Solutions A (CTSH US)</a>, and <a href="https://www.smartkarma.com/entities/1064" target="_blank" data-smartkarma-citation="entities:1064:1">Intl Business Machines Corp (IBM US)</a>, are better positioned than others to adjust. Of the 10 companies under coverage, our top investment idea is Cognizant, as it offers investors a quality, well-positioned vendor that trades at a significant discount to our $69 fair value estimate.Analysts: Andrew Lange, Brian Colello &amp; Hari Narayan

Within the Technology sector, investors often unfairly gloss over the large, fragmented world of IT services, focusing instead on product development surrounding the latest hardware and software innovations. However, we believe the services market provides fertile ground for economic moats to proliferate. While the soft qualitative skills required to acquire and retain customers can seem vague, this Technology Observer serves to shine a light on the industry and provide investors with a manageable framework with which to judge vendors based on pertinent business trends.As the industry evolves, we think there are pockets within the market that are undergoing significant, often misunderstood, structural changes. For instance, digital readiness and cloud computing are reshaping client demand, legacy services, and vendor go-to-market. As these forces resonate through the industry, we think some vendors, like Accenture Plc Cl A (ACN US), Cap Gemini SA (CAP FP), Cognizant Tech Solutions A (CTSH US), and Intl Business Machines Corp (IBM US), are better positioned than others to adjust. Of the 10 companies under coverage, our top investment idea is Cognizant, as it offers investors a quality, well-positioned vendor that trades at a significant discount to our $69 fair value estimate.Analysts: Andrew Lange, Brian Colello &amp; Hari Narayan

Commissioning a Digital and Cloud Strategy? Best to Consult With Moaty IT Services Leaders

CEO, CIO, ClearMacro

Mike Simcock

CEO, CIO

Strategic & Tactical Asset Allocation Global Macro

ClearMacro

CIO, & CEO ClearMacro Ltd
An institutional investor with over 25 years experience, laterly having spent 10 years at GIC Singapore SWF. Managng Director, managing Global Macro, FIxed Income (Europe) and Global Credit businesses.
Passionate about utilising technology to enhance portfolio idea generation across global, multi-asset classes and optimisation of the investment process.

Macroeconomics

Technology can transform institutional asset allocation. - Consolidation of strategic and tactical opportunity sets, embed your own regime view and compare the global public and private asset market opportunity sets on a single common interface. The Holy Grail?

Technology can transform institutional asset allocation. - Consolidation of strategic and tactical opportunity sets, embed your own regime view and compare the global public and private asset market opportunity sets on a single common interface. The Holy Grail? 

Technology -Transforming Asset Allocation Decision Making

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Internet of Things will Change the World. This is part 5 of our series. The focus of this report is the cloud service industry in Korea. Specifically, we zone in on what companies could potentially become the Amazon of Korea in providing cloud services. We explain the triangular structure of the Korean cloud services market.<ul><li>First, you have the major global players including Amazon, Microsoft, Google, and IBM. </li><li>Second, there are big chaebol related IT service companies such as Samsung SDS and LG CNS that are keen to expand their cloud services. The plus side of this is the fact that they could have a relatively stable customer base for cloud services within their own chaebol umbrella. The downside of this is that outside of their own chaebols umbrella, it is difficult for them to attract other chaebols companies to use their own cloud services. </li><li>Third, there are non-chaebol related companies such as <a href="https://www.smartkarma.com/entities/4411" target="_blank" data-smartkarma-citation="entities:4411">Daou Technology Inc</a> , <a href="https://www.smartkarma.com/entities/20161" target="_blank" data-smartkarma-citation="entities:20161">Duzonbizon Co Ltd</a> , <a href="https://www.smartkarma.com/entities/13366" target="_blank" data-smartkarma-citation="entities:13366">Hancom Inc</a> , and <a href="https://www.smartkarma.com/entities/19824" target="_blank" data-smartkarma-citation="entities:19824">Ahnlab Inc</a>  that are increasingly gaining business in cloud services and are well positioned to capitalize on the growth of cloud services in Korea. In our view, this third group of companies appear most interesting in terms of long-term revenue generation from cloud services in Korea. </li></ul>

Internet of Things will Change the World. This is part 5 of our series. The focus of this report is the cloud service industry in Korea. Specifically, we zone in on what companies could potentially become the Amazon of Korea in providing cloud services. We explain the triangular structure of the Korean cloud services market.First, you have the major global players including Amazon, Microsoft, Google, and IBM. Second, there are big chaebol related IT service companies such as Samsung SDS and LG CNS that are keen to expand their cloud services. The plus side of this is the fact that they could have a relatively stable customer base for cloud services within their own chaebol umbrella. The downside of this is that outside of their own chaebols umbrella, it is difficult for them to attract other chaebols companies to use their own cloud services. Third, there are non-chaebol related companies such as Daou Technology Inc , Duzonbizon Co Ltd , Hancom Inc , and Ahnlab Inc  that are increasingly gaining business in cloud services and are well positioned to capitalize on the growth of cloud services in Korea. In our view, this third group of companies appear most interesting in terms of long-term revenue generation from cloud services in Korea. 

Internet of Things Will Change the World (Part 5) - Korea; What's In the Cloud?

Equity Pricing Strategies

Keith Neruda, CFA

This report serves two purposes. One is to screen large cap, non-financial US stocks for those that might be worth buying or shorting. The second is to introduce a valuation framework that helps investors determine what the market is pricing into a particular equity.We call this framework, "Normalized Free Cash Flow" or "N-FCF." Its key advantage is that it focuses investors on the value drivers of revenue, margins, capex intensity and balance sheet leverage. Using N-FCF, investors gain a deep understanding of what the market is pricing in, and we believe are in a better position than most others to decide whether a stock is cheap or not. Haphazardly throwing around PEs, EV/EBITDAs or DCFs cannot provide the same depth of insight.Our screen using unadjusted, first pass assumptions finds that Apple (AAPL), Oracle (ORCL) and Pfizer (PFE) are pricing in the most pessimistic scenarios when balanced against growth and risk while Walmart (WMT), Proctor &amp; Gamble (PG) and Coca Cola (KO) are pricing in the most optimistic.Besides using the N-FCF framework to screen stocks, we can also use it to take deep dives into their value drivers. For example, we can quantify answers to questions such as "how much would Apple's revenue and margins need to fall to justify the current price?" or the opposite in the case of Amazon. In this report, we demonstrate exactly how the N-FCF framework can answer those questions for these two stocks.It turns out that Apple’s revenue would need to fall by 26% from the current consensus or its EBITDA margin fall by another 790bp to justify the current share price at a target N-FCF yield of 8%, which is still high relative to our universe's average of 5.7%. On the other hand, Amazon’s revenue would need to rise by a further 75% ahead of consensus estimates or its EBITDA margin expand by an additional 710bp to justify its price at a relatively low target yield of 5%. Does either outcome seem reasonable? If not, then there may be a good reason to buy Apple and short Amazon at current levels.

This report serves two purposes. One is to screen large cap, non-financial US stocks for those that might be worth buying or shorting. The second is to introduce a valuation framework that helps investors determine what the market is pricing into a particular equity.We call this framework, "Normalized Free Cash Flow" or "N-FCF." Its key advantage is that it focuses investors on the value drivers of revenue, margins, capex intensity and balance sheet leverage. Using N-FCF, investors gain a deep understanding of what the market is pricing in, and we believe are in a better position than most others to decide whether a stock is cheap or not. Haphazardly throwing around PEs, EV/EBITDAs or DCFs cannot provide the same depth of insight.Our screen using unadjusted, first pass assumptions finds that Apple (AAPL), Oracle (ORCL) and Pfizer (PFE) are pricing in the most pessimistic scenarios when balanced against growth and risk while Walmart (WMT), Proctor &amp; Gamble (PG) and Coca Cola (KO) are pricing in the most optimistic.Besides using the N-FCF framework to screen stocks, we can also use it to take deep dives into their value drivers. For example, we can quantify answers to questions such as "how much would Apple's revenue and margins need to fall to justify the current price?" or the opposite in the case of Amazon. In this report, we demonstrate exactly how the N-FCF framework can answer those questions for these two stocks.It turns out that Apple’s revenue would need to fall by 26% from the current consensus or its EBITDA margin fall by another 790bp to justify the current share price at a target N-FCF yield of 8%, which is still high relative to our universe's average of 5.7%. On the other hand, Amazon’s revenue would need to rise by a further 75% ahead of consensus estimates or its EBITDA margin expand by an additional 710bp to justify its price at a relatively low target yield of 5%. Does either outcome seem reasonable? If not, then there may be a good reason to buy Apple and short Amazon at current levels.

What's the Market Pricing In: Apple Vs. Amazon

United States

Xerox Holdings Corporation operates as a holding company. The Company, through its subsidiaries provides printers, scanners, supplies, and accessories. Xerox Holdings serves health care, insurance, government and retail sectors worldwide.

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