Equity Long-Short Analyst

Pyari Menon

Thematic (Sector/Industry)

<ul>
<li>The companies that are best positioned to take advantage of the 5G growth are a mix of equipment vendors, chipset companies, device makers, and enterprise solution providers. </li>
<li>The top ten companies to benefit from 5G rollout based on innovation and citation count are <strong>Samsung Electronics, Qualcomm, LG Electronics, AT&amp;T, Huawei, Intel, Google, Ericsson, Apple,</strong> and <strong>Nokia </strong>
</li>
<li>A stand-out in 5G technology rankings is <a href="https://www.smartkarma.com/entities/lg-electronics-inc" target="_blank" data-smartkarma-citation="entities:8814:1" rel="noopener">LG Electronics (066570 KS)</a> which is punching well above its current market share in the industry. </li>
</ul>


The companies that are best positioned to take advantage of the 5G growth are a mix of equipment vendors, chipset companies, device makers, and enterprise solution providers. 
The top ten companies to benefit from 5G rollout based on innovation and citation count are Samsung Electronics, Qualcomm, LG Electronics, AT&amp;T, Huawei, Intel, Google, Ericsson, Apple, and Nokia 

A stand-out in 5G technology rankings is LG Electronics (066570 KS) which is punching well above its current market share in the industry. 


Stock Ideas from Data Mining Technical Publications: A Look at 5G

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/razer-inc" target="_blank" data-smartkarma-citation="entities:24380:1" rel="noopener">Razer Inc (1337 HK)</a> announced a pre-conditional privatisation offer from Mr Tan, Mr Lim and CVC at HK$2.82 per share, a 55.8% premium to the unaffected price. </li>
<li>The pre-condition is anti-trust approval in several countries. Key conditions are the headcount test and approval by at least 75% disinterested shareholders (&lt;10% of all disinterested shareholders rejection).  </li>
<li>While the offer will leave many disappointed (such as IPO investors), it is reasonable compared to historical share prices and multiples. The gross spread at the last close is 14.6%. </li>
</ul>



Razer Inc (1337 HK) announced a pre-conditional privatisation offer from Mr Tan, Mr Lim and CVC at HK$2.82 per share, a 55.8% premium to the unaffected price. 
The pre-condition is anti-trust approval in several countries. Key conditions are the headcount test and approval by at least 75% disinterested shareholders (&lt;10% of all disinterested shareholders rejection).  
While the offer will leave many disappointed (such as IPO investors), it is reasonable compared to historical share prices and multiples. The gross spread at the last close is 14.6%. 


Razer’s Privatisation Bid by Founders and CVC

<p><a href="https://www.smartkarma.com/entities/razer-inc" target="_blank" data-smartkarma-citation="entities:24380:1" rel="noopener">Razer Inc (1337 HK)</a> designs and builds gamer-focused ecosystem of hardware, software, and services. It offers gaming peripherals and hardware, as well as virtual credit services and offline-to-online digital payment networks. Razer was listed on the HKEx in November 2017 to raise net proceeds of HK$3,930.7 million ($505 million) at HK$3.88 per share. </p><p>On Friday after market close, Razer announced that Mr Min-Liang Tan (co-founder, CEO and Chairman) and Mr Lim Kaling (a founding investor and non-executive director) are in preliminary discussions with financial investors to explore the possibility of a transaction involving Razer. The transaction may or may not lead to a general offer for the shares. The Board cautions that no decision has been made by Mr Tan and Mr Lim on whether to proceed with any transaction. </p><p>Mr Tan represents 3,009.3 million shares or 34.35% of outstanding shares and Mr Lim represents 2,054.8 million shares or 23.46% of outstanding shares. Consequently, Mr Tan and Mr Lim together represent 57.81% of outstanding shares.</p><p>Despite improving financial performance and strong 1H21, the shares are trading -14% and -49% below its 1-year VWAP and IPO price, respectively. Razer is cash rich with the net cash (including leases) accounting for around 23% of the market cap. Also, on 3 June 2021, Mr Tan and Mr Lim sold a combined 275 million shares (3.09% of the total issued share capital at that time) at HK$2.405 per share for financial management purposes. In this context, it is unsurprisingly that Mr Tan and Mr Lim are in discussions with financial investors. </p><div class="content-highlight"><p>While we think there is a good chance that a transaction materialises, the shares continue to be attractive on an underlying basis. Our base-case SoTP valuation of HK$2.47 per share implies a 26% upside to the last close price of HK$1.96 per share.</p></div>

Razer Inc (1337 HK) designs and builds gamer-focused ecosystem of hardware, software, and services. It offers gaming peripherals and hardware, as well as virtual credit services and offline-to-online digital payment networks. Razer was listed on the HKEx in November 2017 to raise net proceeds of HK$3,930.7 million ($505 million) at HK$3.88 per share. On Friday after market close, Razer announced that Mr Min-Liang Tan (co-founder, CEO and Chairman) and Mr Lim Kaling (a founding investor and non-executive director) are in preliminary discussions with financial investors to explore the possibility of a transaction involving Razer. The transaction may or may not lead to a general offer for the shares. The Board cautions that no decision has been made by Mr Tan and Mr Lim on whether to proceed with any transaction. Mr Tan represents 3,009.3 million shares or 34.35% of outstanding shares and Mr Lim represents 2,054.8 million shares or 23.46% of outstanding shares. Consequently, Mr Tan and Mr Lim together represent 57.81% of outstanding shares.Despite improving financial performance and strong 1H21, the shares are trading -14% and -49% below its 1-year VWAP and IPO price, respectively. Razer is cash rich with the net cash (including leases) accounting for around 23% of the market cap. Also, on 3 June 2021, Mr Tan and Mr Lim sold a combined 275 million shares (3.09% of the total issued share capital at that time) at HK$2.405 per share for financial management purposes. In this context, it is unsurprisingly that Mr Tan and Mr Lim are in discussions with financial investors. While we think there is a good chance that a transaction materialises, the shares continue to be attractive on an underlying basis. Our base-case SoTP valuation of HK$2.47 per share implies a 26% upside to the last close price of HK$1.96 per share.

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/asustek-computer-inc" target="_blank" data-smartkarma-citation="entities:13002:1" rel="noopener">Asustek Computer (2357 TT)</a> is one of the top three consumer notebook vendors and the number one manufacturer of award-winning motherboards in the world. After rallying around 140% during the March 2020-May 2021 period due to an acceleration in demand during the COVID-19 pandemic, the company’s share price has come down by around 20% during the past four months due to fears of a nearing cycle peak in the PC market, supply shortage, and rising input costs.</li>
<li>We think the PC cycle has around 1.5-2.0 years to run before going into a down turn, and Asus has handled the supply shortage rather well through MOUs and long- term agreements for the supply of components. Thus, we think the recent price reaction is unwarranted.</li>
</ul>



Asustek Computer (2357 TT) is one of the top three consumer notebook vendors and the number one manufacturer of award-winning motherboards in the world. After rallying around 140% during the March 2020-May 2021 period due to an acceleration in demand during the COVID-19 pandemic, the company’s share price has come down by around 20% during the past four months due to fears of a nearing cycle peak in the PC market, supply shortage, and rising input costs.
We think the PC cycle has around 1.5-2.0 years to run before going into a down turn, and Asus has handled the supply shortage rather well through MOUs and long- term agreements for the supply of components. Thus, we think the recent price reaction is unwarranted.


AsusTeK: Too Early to Worry About the PC Cycle Peak

External broker reports(aggregated public sources), Masterlink Securities Corp

Masterlink Securities

External broker reports(aggregated public sources)

<p>We forecast Asustek’s FY21 and FY22EPS at NT$57.3 and NT$41.61, respectively. Based on a recent shareprice of NT$323, Asustek’s valuations of 6x FY21 PER and 8x FY22 PERare relatively cheap. The market is concerned about PC demandslowdown in 2022. However, Asustek’s current PC market share is lessthan 10%, and the company focuses on commercial, gaming and creatorPC markets. Thus, the impact of PC demand slowdown on Asustek shouldbe mild. Moreover, Asustek’s high profits this year will lead to rich dividenddistribution next year. Therefore, we reiterate BUY on Asustek, with a TP ofNT$416.</p><div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>

We forecast Asustek’s FY21 and FY22EPS at NT$57.3 and NT$41.61, respectively. Based on a recent shareprice of NT$323, Asustek’s valuations of 6x FY21 PER and 8x FY22 PERare relatively cheap. The market is concerned about PC demandslowdown in 2022. However, Asustek’s current PC market share is lessthan 10%, and the company focuses on commercial, gaming and creatorPC markets. Thus, the impact of PC demand slowdown on Asustek shouldbe mild. Moreover, Asustek’s high profits this year will lead to rich dividenddistribution next year. Therefore, we reiterate BUY on Asustek, with a TP ofNT$416.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Asustek (2357 TT) Relatively Low Valuation

Taiwan

Asustek Computer Inc. manufactures and markets computer motherboards, interface cards, notebook computers, and other related products.

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Asustek Computer (2357 TT)

Stock Ideas from Data Mining Technical Publications: A Look at 5G

5G connectivity is expected to spawn new business and services across sectors. We review the technological positioning of companies competing in...

Pyari Menon

Razer’s Privatisation Bid by Founders and CVC

While the HK$2.82 per share offer will leave many disappointed (such as IPO investors), it is reasonable compared to historical share prices and...

Arun George

Razer Potentially in Play?

Razer announced that Mr Tan and Mr Lim are in discussions with investors on a possible transaction that may lead to a general offer. The shares...

Arun George

AsusTeK: Too Early to Worry About the PC Cycle Peak

We think the PC cycle has around 1.5-2.0 years to run before going into a down turn, and Asus has handled the supply shortage rather well through...

Oshadhi Kumarasiri

Asustek (2357 TT) Relatively Low Valuation

We forecast Asustek’s FY21 and FY22EPS at NT$57.3 and NT$41.61, respectively. Based on a recent shareprice of NT$323, Asustek’s valuations of 6x...

Masterlink Securities

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