TMT/Internet

Zoom Video Communications delivered a decent quarter and managed an all-around beat.
From a product perspective, the company had robust growth in Zoom Phone, along with contributions from Zoom Rooms and other products.
Zoom Video Communications has recently announced a wide range of updates in different business units like Zoom IQ for sales, Zoom Events, Zoom Spaces, Zoom Contact Centre, and Zoom One.

HuffPost Investor, Binance Join US$15.5M Series A+ Round of Fraud Detection Startup FrankieOne

By e27

FrankieOne, a global platform connecting customers to multiple identity verification and fraud detection vendors via one API, has added US$15.5 million to its Series A+ round.
The new tranche will allow FrankieOne to expand its business across Asia Pacific and North America.
Founded in 2019 by Simon Costello and Aaron Chipper, FrankieOne is an identity and fraud detection engine helping companies onboard and protect their customers.

Dell Technologies: Major Drivers

After announcing a weak outlook in the last quarter and causing its stock price to plummet, Dell has shown a decent recovery.
Its stock price has continued to recover after the company delivered an all-around beat in a challenging demand environment.
Overall, we remain neutral on Dell and give it a ‘Hold’ rating with a revised target price.

Expect Bigtincan To Reject SQN’s Proposal

Software provider Bigtincan Holdings Ltd (BTH AU) has announced an indicative proposal, by way of Scheme, from PE outfit SQN Investors at A$0.80/share, a 17.6% premium to last close.
Due diligence has not yet been afforded. SQN currently holds a 13.6% stake.
BTH also highlighted it has had preliminary discussions with other interested parties. Expect BTH’s board not to engage with SQN at this price.

Applied Materials: Key Drivers

Applied Materials delivered a strong quarterly performance and managed to surpass Wall Street expectations in terms of revenues as well as earnings.
Demand remains very high in cutting-edge foundry/logic, with customers vying for leadership and driving significant technological inflections that decide their respective competitive positions.
AMAT should have a strong resilience because of their substantial backlog, expanding service business, and strong customer demand for their leading technologies that support significant technological inflection points.

Analog Devices Inc: New SPoE PESE & PD Solutions & Other Drivers

Analog Devices delivered another all-around beat in the recent quarterly result.
In Communications, Analog Devices expanded its 5G radio systems leadership with its transceiver portfolio, winning some additional share at key suppliers.
We provide the stock of Analog Devices with a ‘Hold’ rating with a revision in the target price.

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Dec 01

Daily Brief TMT/Internet: Shanghai Fudan Microelectronics Group, Softbank Group, Appier Group, HYBE, Crowdstrike Holdings Inc, BLS International Services, Alibaba Health Information Technology, Marketingforce Management, Oracle Corp and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

CES China Semiconductor Chips Index Rebalance: Four Changes in December
Softbank Group (9984 JP) –The Masa Hurdles
Appier (4180) Nearing A TSE Prime (And TOPIX) Announcement?
End of Mandatory Lock-Up Periods for 58 Companies in Korea in December 2022
FY3Q23: If It’s All Macro, Do You Buy the Dip?
BLS International Services Ltd: Forensic Analysis
Alibaba Health 1H: Cost Enhancements Support Margins but Sustainabaility Remains to Be Seen
Marketingforce Management Pre-IPO Tearsheet
Oracle: What To Expect As It Reports Q2 2023 Results

CES China Semiconductor Chips Index Rebalance: Four Changes in December

By Brian Freitas

There are 4 changes for the CES China Semiconductor Chips Index that will be implemented at the close on 9 December.
Empyrean Technology, GalaxyCore, Shanghai Fudan Microelectronics and Shanghai Awinic Technology will replace Grinm Advanced Materials, Chengdu Corpro Technology, Shanghai Sinyang Smcndctr Mtls and Espressif Systems Shanghai in the index.
Shanghai Fudan Microelectronics Group (688385 CH) will be added to the MSCI China Index at the close today and will also be added to the CSI 500 Index in December.

Softbank Group (9984 JP) –The Masa Hurdles

By Victor Galliano

Masayoshi’s debt with Softbank group is big, and due to the poor performance of SoftBank Vision Fund 2, Masa’s equity interest as a co-investor is now zero
Internal hedge fund Northstar, in which Masa has a 33.3% stake, is in liquidation leaving Masa’s share of his Northstar debt to SoftBank at USD1.2bn
SoftBank’s collateral on Masa debt includes the Vision Fund 2 equity, as well as SoftBank shares and other personal assets; we expect SoftBank’s NAV discount of c 25% to widen

Appier (4180) Nearing A TSE Prime (And TOPIX) Announcement?

On 17 Feb 2022, Janaghan Jeyakumar, CFA wrote about Appier Group (4180 JP) suggesting it was a TOPIX inclusion candidate in the not-distant future.
In mid-August 2022, he reiterated his opinion. Three days later, the company said they had applied for TSE Prime membership. We are coming up on the timing for an announcement.
It would mean buying, but the shareholder structure is interesting, and intentions are not easy to read. But if they announce imminently, the calendar makes the event even more interesting.

End of Mandatory Lock-Up Periods for 58 Companies in Korea in December 2022

By Douglas Kim

We discuss end of the mandatory lock-up periods for 58 stocks in Korea in December 2022, among which 9 are in KOSPI and 49 are in KOSDAQ.
These 58 stocks on average could be subject to further selling pressures in December and could underperform relative to the market.
Among these 58 stocks, the top 5 market cap stocks include HYBE, Kakao Games, WCP, Sillajen, and Duksan Neolux.

FY3Q23: If It’s All Macro, Do You Buy the Dip?

By Aaron Gabin

First ever ARR miss, and big initial guide down on FY2024 ARR growth: low 30s vs. 37% into the Q. Pretty shocking given Crowdstrike’s track record.
Macro Macro Macro – deal close times pushed out for SMBs and Enterprise customers reworking timing of deal starts to match opex budgets.
Stock is overly punished down 20% and trading at 9x forward sales for a platform consolidator with 30% FCF margins.

BLS International Services Ltd: Forensic Analysis

By Nitin Mangal

BLS International Services (BLSIN IN) is engaged in business of providing outsourcing and administrative task of Visa, Passport and Consular services to various Diplomatic Missions across the world.
BLS is troubled with several forensic discomforts. One should take into account the discomforts on the subsidiaries end and other linked entities like DSS Gulf Realtors.
Other forensic setbacks include alarming bad debts, misstatement of operating cash flows and several grey areas pertaining to disclosure norms followed by the company.

Alibaba Health 1H: Cost Enhancements Support Margins but Sustainabaility Remains to Be Seen

Alibaba Health reported 1HFY03/2023 results on Monday. Revenue increased 22.9% YoY to RMB11.5bn and reported an adjusted net profit of RMB350m vs net loss of RMB283m reported in 1HFY03/2022.
Adjusted operating loss for the quarter decreased to RMB30m compared to RMB586m reported in the same quarter last year.
Ali Health’s fulfilment and S&M costs were the highest among peers and cutting down these costs has helped the company reduce its operating losses.

Marketingforce Management Pre-IPO Tearsheet

By Ethan Aw

Marketingforce Management (MFM HK) is looking to raise about US$100m in its upcoming HK IPO. The deal will be run by CICC and CCB International.
Marketingforce Management (MFM) is a domestic marketing and sales SaaS solution provider in China and considered the largest in terms of revenue in 2021, according to Frost & Sullivan.
Through its Marketingforce platform, MFM delivers integrated cloud-based solutions that cover the entire marketing and sales management process of enterprises, from content and experience to strategy and management, amongst others.

Oracle: What To Expect As It Reports Q2 2023 Results

By Vladimir Dimitrov, CFA

Oracle’s share price drop presented a good opportunity for long-term shareholders to average down.
Lagging analysts’ sentiment still presents an opportunity for future multiple repricing.
Headwinds for profitability will likely be an issue for investors with short-term investment horizons.

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Nov 30

Daily Brief TMT/Internet: Taiwan Semiconductor (TSMC) – ADR, Singtel, Bilibili, Nanya Technology, Twitter Inc, Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Taiwan Dual-Listings: TSMC & UMC Nice Setup Opportunities, Chunghwa Rare Deep Discount
Singtel: Demand Surge
Intel Vs. TSMC Monitor: TSMC Outperformed Too Much Too Soon?
Bilibili (9626 HK): 3Q22, Growth Accelerated, Loss Shrank, 38% Upside
Nanya Technology: Inventory Risk, A 10% Downside Trade Is Still Available
Twitter’s Banks Are Stuck With Largest Chunk Of Unsold LBO Debt
Is TSE Being Too Strict with the Honor Students and Too Lenient with the Underdogs?

Taiwan Dual-Listings: TSMC & UMC Nice Setup Opportunities, Chunghwa Rare Deep Discount

TSMC — Trading near parity, decent setup opportunity at the current level.
UMC — Trading at a discount, another decent setup opportunity.
Chunghwa Telecom — Rare opportunity here, trading at a steep discount compared to the tight historical range.

Singtel: Demand Surge

By Steven Holden

Sentiment switch for Singtel after surge in buying among Asia Ex-Japan funds
New positions from Fullerton Asia Focus, Jupiter Asian Fund and Fullerton Asia Growth & Income head a total of 14 funds opening exposure between 01/31/2022 and 10/31/2022.
Follows broader rotation in to key Singapore names despite heavy selling in Sea Ltd.

Intel Vs. TSMC Monitor: TSMC Outperformed Too Much Too Soon?

Intel has eked out a small outperformance vs. TSMC most recently, and we believe there is more to come.
Events appear to be in Intel’s favor in the near-term.
TSMC has outperformed by a historically extreme amount in just three weeks.

Bilibili (9626 HK): 3Q22, Growth Accelerated, Loss Shrank, 38% Upside

By Ming Lu

The revenue growth rate rose for the first time in one year and a half.
Also, operating loss shrank for the first time in one year and a half.
We believe the stock has an upside of 38% for year end 2023.

Nanya Technology: Inventory Risk, A 10% Downside Trade Is Still Available

Nanya Tech shares have dropped, but there’s still a 10% trading sell from these levels.
The company had dramatically outperformed the Taiwan market and Memory chip peers, yet is heading into weakening end-demand with inventory levels at multi-year highs.
We see the potential for inventory write-downs and a negative operating margin in the coming quarters. Meanwhile, opportunities for near-term good news appear limited.

Twitter’s Banks Are Stuck With Largest Chunk Of Unsold LBO Debt

By Vicki Bryan

Twitter’s banks are stuck with 30% of total US LBO debt unsold debt.
The banks already had lost more than $500 million on Twitter’s LBO debt even before the deal closed. They could sell it even at 50-60 cents on the dollar.
The trouble with Elon aggressively blowing up Twitter is that it’s banks probably won’t take his calls when Twitter needs more cash—which it probably will in the near future.

Is TSE Being Too Strict with the Honor Students and Too Lenient with the Underdogs?

By Aki Matsumoto

There are 236 companies with a trading unit of more than 500,000 yen, while there are 967 companies with a trading unit of less than 50,000 yen on the TSE.
It’s fair to amend the law to abolish the share unit system, but changing the law takes time. It’s also unclear why “between 50,000 yen and 500,000 yen” is appropriate.
While TSE still allows 300 companies that don’t meet the listing criteria to be listed on prime market, TSE requires companies with higher stock prices to increase their administrative burden.

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Nov 28

Daily Brief TMT/Internet: Nomura Research Institute Ltd, Kakaku.com Inc, Meituan and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Nomura Research Institute (4307) Large Secondary Offering – Demand Profile and Index Implications
Kakaku.com Inc.: A Deep-Dive View
Meituan: New Reporting Structure Conceals Loss-Making Businesses and Hard to Assess Core Businesses
Nomura Research Placement – Somewhat Well Flagged, past Deals Have Done Well but Momentum Is Weak

Nomura Research Institute (4307) Large Secondary Offering – Demand Profile and Index Implications

On Friday, Nomura Research Institute Ltd (4307 JP) announced that Jafco Co Ltd (8595 JP) and Nomura Holdings (8604 JP) would each sell NRI shares in a Secondary Offering.
JAFCO is selling to fund a giant buyback. Nomura is selling to round out the offering size. The total is 37mm shares plus greenshoe of 5.5mm shares.
At Friday’s price that is ~¥140bn (including greenshoe), 7% of shares out, 10% of float, and about 25% of Real World Float. There are index implications.

Kakaku.com Inc.: A Deep-Dive View

By Steven Chen

Kakaku.com Inc. can be a rare species among listed companies in Japan;
We had multiple email exchanges and meetings with the management team for a deep-dive view covering corporate cultural, management style, capital allocation, business model, and competitive strength.
We would wait for a 20%-30% pullback in the share price before looking to add to our position but would certainly remain reluctant to sell any share that we own.

Meituan: New Reporting Structure Conceals Loss-Making Businesses and Hard to Assess Core Businesses

Meituan reported 3Q2022 results. Revenue increased 28.2% YoY to RMB62.6bn (vs consensus RMB62.3bn) while reported an OP of RMB988m (consensus OP loss of RMB935m) for the first time since 3Q2019.
However, on adjusted basis, Meituan made an adjusted operating loss of RMB1.1bn (1.7% of revenue) of revenues compared to an adjusted operating loss of RMB7.7bn (15.1% of revenue) in 3Q2022.
Tencent announced that it will distribute majority of its shareholding on Meituan (3690 HK) to its shareholders in dividends and Naspers is expected to sell the Meituan Shares it receives from Tencent.

Nomura Research Placement – Somewhat Well Flagged, past Deals Have Done Well but Momentum Is Weak

By Sumeet Singh

Nomura Holdings (8604 JP) and Jafco Co Ltd (8595 JP) are looking to raise around US$850m via selling 5.7% of Nomura Research Institute Ltd (4307 JP).
This is not the first sale by Nomura and marks a clean up for Jafco. Hence it might not come as a complete surprise.
In this note, we will run the deal through our ECM framework and talk about the recent updates.

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Nov 27

Daily Brief TMT/Internet: Trina Solar Co Ltd, Alibaba (ADR), Socionext, Meituan and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

SSE50 Index Rebalance: In Line with Forecasts; Trades Performing Well
ECM Weekly (27th Nov 2022) – Growatt, Lygend, Sunshine Ins, Weilong, DPC, Daiei, Skymark, GoTo
Socionext (6526 JP) TOPIX Inclusion – Great Performer Deserves Profit-Taking
Last Week in Event SPACE: Meituan, Link Admin/Pexa, DTAC/True, Medley
Meituan 105 Buy Support

SSE50 Index Rebalance: In Line with Forecasts; Trades Performing Well

By Brian Freitas

There are 5 changes for the SSE50 Index that will be implemented at the close on 9 December. Passive selling on a few deletions is pretty large.
We estimate a one-way turnover of 4.07% at the December rebalance leading to a one-way trade of CNY 3.36bn. Index arb activity could add to the impact on the stocks.
The adds have dropped over the last few months while the deletes have moved higher. There could be a reversion of that trend till implementation of the changes.

ECM Weekly (27th Nov 2022) – Growatt, Lygend, Sunshine Ins, Weilong, DPC, Daiei, Skymark, GoTo

By Sumeet Singh

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, things are picking up again going into the year end.
There were no large placement or blocks this week, although prior lockup linked blocks kept flowing through.

Socionext (6526 JP) TOPIX Inclusion – Great Performer Deserves Profit-Taking

Socionext (6526 JP) was offered in a range of ¥3,480-3,650, oversubscribed, IPOed at ¥3,650 and closed ¥4200 on Day 1. We can assume that was the “right price.”
Since then, while peers are up 19.8% in the 6 weeks since then, Socionext is up 66%. This year’s biggest Japan IPO has been a big winner.
The TOPIX inclusion is on Tuesday at the close. Beware, you don’t know who is in the stock and who is not.

Last Week in Event SPACE: Meituan, Link Admin/Pexa, DTAC/True, Medley

You could imagine people covering their short in Meituan (3690 HK) now. The Hang Seng sell flow on 4 January 2023 is insignificant. But there will be more overhang later.
If you buy Link Administration (LNK AU) outright, you are buying a package of three potential future takeout targets.
It’s not certain the scrip terms will continue as stated in the DTAC /True merger, but if they change at all, that would almost certainly require a new shareholder meeting.

Meituan 105 Buy Support

By Thomas Schroeder

Meituan (3690 HK) has some big resistance hurdles to overcome and will act as tactical sell levels to seek out the 105 buy zone.
A tactical bounce back to 165 is on the cards with 168/75 the high degree sell barrier. Secondary trendline resistance rests near 185 as the bigger sell zone.
The bearish rising wedge stands out as the dominant force. The support break warns of fallout after a bounce attempt back to 168. A weak bounce would turn near 160.

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Nov 26

Daily Brief TMT/Internet: GoTo, Sea Ltd, Meituan and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

2023 High Conviction – GoTo – Burnt Through All Cash From the IPO, Weakest Cash Position Among Peers
Sea Ltd (SE US) – Wind Back in the Sails
2023 High Conviction Ideas: Meituan
Shanghai/Shenzhen Southbound Connect: Weekly Moves (25 November 2022)

2023 High Conviction – GoTo – Burnt Through All Cash From the IPO, Weakest Cash Position Among Peers

By Clarence Chu

In Mar 2022, GoTo (GOTO IJ) raised around US$1bn from what was essentially a domestic Indonesian IPO.
GoTo has already burnt through the cash it raised from the listing and cash burn still remains high, while its cash balance is amongst the lowest in its peer set.
At its current cash burn pace, the company will have to come to the markets again soon.

Sea Ltd (SE US) – Wind Back in the Sails

By Angus Mackintosh

Sea Ltd 3Q2022 results should be seen as the poster child for the rest of the space given a crystal clear focus on profitability and pragmatic approach to future growth.
The fact that the company is now contribution margin positive in ASEAN and even Adjusted EBITDA positive in Malaysia and Taiwan is a testament to its success in controlling costs.
Sea Ltd (SE US) has seen a significant compression in valuations and now looks attractive on 2.1x FY2023V EV/Sales and 1.7x FY2024E EV/Sales.

2023 High Conviction Ideas: Meituan

By Xin Yu, CFA

Meituan is a leading “service e-commerce” platform in China, leveraging technology to connect consumers with merchants.
With the gradual re-opening in 2023, core local commerce will deliver better than expected result.
Tencent’s distribution of Meituan shares provides a good entry point.

Shanghai/Shenzhen Southbound Connect: Weekly Moves (25 November 2022)

Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry.
Overall, the net inflow over the past week was ~HK$0.67bn, split (+HK$0.1bn) for Shanghai and (+HK$0.57bn) for Shenzhen.
The largest inflows were in Tencent (700 HK) and Tracker Fund of Hong Kong Ltd (2800 HK). The largest outflows were in Meituan (3690 HK) and Li Ning (2331 HK).

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Nov 25

Daily Brief TMT/Internet: Lockon Co Ltd, Taiwan Semiconductor (TSMC) – ADR, Meituan, iQIYI Inc, Alibaba (ADR), Skyworks Solutions, VMware Inc Class A, Lattice Semiconductor and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Meituan Index Flows Clarifications on the Tencent Distribution; Prosus Comments on Its Holdings
EQD | TSMC (TSM US): Buffet Is Betting on Long Term Upside – We Look at the Options Market for Ideas
Top Tencent Investor Naspers Considers Selling Meituan Shares
Iqiyi (IQ US): Compelling Asymmetrical Payoff
US Vs China Technology, Alibaba, China Unicom, and New World Development
Skyworks Solutions Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report
Skyworks Solutions Inc.: Initiation of Coverage – Business Strategy & Key Drivers
MergerTalk:Why Broadcom’s Pursuit of VMware Will Fare Better Than Nvidia’s Doomed Bid For ARM
Lattice Semiconductor Corporation: Initiation of Coverage – Strong Macro & Other Drivers

Meituan Index Flows Clarifications on the Tencent Distribution; Prosus Comments on Its Holdings

Days after the Tencent (700 HK) announcement about its planned distribution of the bulk of the Meituan (3690 HK) shares it owns, the Hang Seng Index team clarified index treatment.
It will be treated in HS Indices as a “listed non-cash distribution” for Tencent. There is theoretically wiggle room on the Meituan side, but it appears it will follow JD.com.
That means Meituan selling on 4 January at the close, limbo for two months, then Meituan buying. Full model below.

EQD | TSMC (TSM US): Buffet Is Betting on Long Term Upside – We Look at the Options Market for Ideas

By Simon Harris

Stock has suffered this year (-47% YTD) with rising geopolitcal tensions and slowing global economy
Berkshire Hathaway is betting on a recovery in the stock with their $4.1bn stake
We look at the options market to identify some trades

Top Tencent Investor Naspers Considers Selling Meituan Shares

By Caixin Global

Prosus NV, the Dutch unit of Tencent Holdings Ltd.’s largest shareholder Naspers Ltd., said it will consider selling the $4.6 billion of Meituan shares it will receive from Tencent as a special dividend.
South African media giant Naspers owns about 28% of the Chinese internet giant indirectly via Prosus.
On Nov. 16, Tencent announced a special distribution of 958 million Meituan shares to shareholders.

Iqiyi (IQ US): Compelling Asymmetrical Payoff

By Eric Chen

Iqiyi’s 3Q results released on Tuesday disappointed markets due to dim growth despite sustained profitability for the third quarter in a row.
“Iconic” turnaround actually put IQ on firmer footing almost on all counts compared to one year ago.
Stabilizing cost base, strong operating leverage potential and troughs in business and macro cycle spell for compelling asymmetrical payoff – limited downside VS. multi-fold upside.

US Vs China Technology, Alibaba, China Unicom, and New World Development

By Untying The Gordian Knot

The consensus of bottom in China Tech and China A shares continue to gain favour.
Bank of America is the latest to recommend selling US tech to buy China Tech.
The Bullish China stocks call is predicated on reopening Pivot, yet the daily increase in cases and sporadic lockdown put the Pivot callers to double down.

Skyworks Solutions Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

Skyworks Solutions is a major supplier in the field of radio frequency (RF) components.
The company has been performing well financially off-late with its growth driven by its diversified portfolio and expanding set of customers.
Furthermore, the management delivered strong earnings in the automotive industry, with revenue strength emphasizing their connectivity and power isolation portfolio.

Skyworks Solutions Inc.: Initiation of Coverage – Business Strategy & Key Drivers

This is our first report on Skyworks, one of the leading suppliers of radio frequency (RF) components to the electronics industry.
The company delivered another all-around beat in the last quarter driven by its diversified portfolio and expanding set of customers.
Furthermore, the management delivered strong earnings in the automotive industry, with revenue strength emphasizing their connectivity and power isolation portfolio.

MergerTalk:Why Broadcom’s Pursuit of VMware Will Fare Better Than Nvidia’s Doomed Bid For ARM

By Robert Sassoon

While the size of the $61BN Broadcom/VMware deal has naturally attracted the scrutiny of regulators, the transaction’s regulatory obstacles are far less onerous than the failed Nvidia/Arm deal
Timing risk is a consideration as we can expect a protracted review process
If the regulatory review timeline does not stretch too far beyond the end 2023, there are still decent IRRs to be earned by arbs

Lattice Semiconductor Corporation: Initiation of Coverage – Strong Macro & Other Drivers

This is our first report on Lattice Semiconductor.
The company delivered impressive results in the third quarter, with an all-around beat and a quarterly revenue growth of 31% year over year.
Overall, we initiate coverage on the stock of Lattice Semiconductor Corporation with a ‘Hold’ rating.

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Nov 24

Daily Brief TMT/Internet: Total Access Communication, Alibaba (ADR), Meituan, Grab, Link Administration, Kuaishou Technology, Oracle Corp, Broadridge Financial Solutions, Inc, Blackline Inc, Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Disaster As VTOs Cancelled Under DTAC/True Merger
Alibaba (BABA US): Fighting Back
Add Meituan on Rumors of Social Benefit Payments
Grab (GRAB US) – Shifting Down a Gear for A Steep Ascent
Link Admin (LNK AU) Sets in Motion a Strategy to Realise Underlying Value
Kuaishou: Domestic Business Turns Profitable for the First Time
Oracle Corporation (ORCL US): TSS Recommendation Closed After One Week (-4.5%)
Broadridge Financial Solutions Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report
BlackLine Inc.: Initiation of Coverage – Customer Attractiveness Scoring & Other Drivers
Without Disclosure and Ensuring Transparency, the Black Box on Compensation Will Increase

Disaster As VTOs Cancelled Under DTAC/True Merger

“The conditions precedent to the VTO have not been satisfied within one year from 22 November 2021 … the parties have declined to carry out the VTO.“
This statement was lifted from Telenor’s (the major shareholder of Total Access Communication (DTAC TB)) brief announcement. Telenor/CP Group aim to complete the transaction within the first quarter of 2023
This appears a cop-out on behalf of both Tender Offerors (Telenor & CP Group), who probably could have pushed for an extension. And why weren’t the scrip terms addressed?

Alibaba (BABA US): Fighting Back

By Steven Holden

Ownership in Alibaba Group Holdings is on the rise among active Greater China managers.
Stock price below $100 a catalyst for active Greater China managers to buy back in, with Invesco, JP Morgan and E Fund among those opening positions
Alibaba remains well behind both TSMC and Tencent on an average weight basis and is the 2nd largest underweight in the Greater China region.

Add Meituan on Rumors of Social Benefit Payments

By Xin Yu, CFA

Meituan’s recent price decline was partly due to the rumors about the social benefit payments.
First, rumors are unverified statements. There was no such meeting at all.
Second, the social benefit payment impact is probably controllable. I think the recent price decline provides a chance of adding on the stock.

Grab (GRAB US) – Shifting Down a Gear for A Steep Ascent

By Angus Mackintosh

Grab‘s recent results reflect a change of pace in terms of moving along the path to profitability with a more disciplined approach to incentives and a focus on cost controls.
Deliveries segment adjusted EBITDA turned positive for the first time, 3Qs ahead of previous guidance, and food 2Qs ahead of guidance both of which are positives.
A continuing drag will likely continue to come from expenses related to the buildout of its three digibanks. Grab‘s headline EBITDA is not forecast to be positive until 2025.

Link Admin (LNK AU) Sets in Motion a Strategy to Realise Underlying Value

By Arun George

The EGM to approve the PEXA Group (PXA AU) distribution of Link Administration (LNK AU)’s remaining 38.49% stake is on 23 December. Shareholders get one PEXA share per 7.52 Link shares.
This marks the latest move to unlock the underlying value by pursuing a breakup strategy. Discussions continue on DND’s acquisition of the CM and the BCM business for A$1.27 billion.
Our base-case SoTP value is A$4.42 per share, which is 28% above the last close. If you haven’t been turned off by the Link saga, it is worth a look.

Kuaishou: Domestic Business Turns Profitable for the First Time

Kuaishou Technology (1024 HK) reported 3Q2022 results. Revenue grew 12.9% YoY to RMB23.1bn (vs consensus RMB22.6bn) while reported operating losses declined to RMB2.6bn (vs consensus RMB3.1bn) from RMB3.1bn in 3Q2021.
The company’s domestic business made an operating profit for the first time while there has been significant reduction in operating losses from the overseas business
Kuaishou’s share price moved up 7% during today’s trade following its earnings announcement and we think there is further upside to the company’s current share price.

Oracle Corporation (ORCL US): TSS Recommendation Closed After One Week (-4.5%)

By David Coloretti, CMT

The development of TSS has been a life’s work. We anticipate a high win / loss ratio and accept than not every recommendation will be profitable.
On 15 November we determined that extreme ST momentum failure would likely deliver a 4.0% to 5.5% decline in ORCL US in 1-2 weeks.
ORCL US failed to deliver, declining only 0.6% before closing 1 week later, on 22 November, 4.5% above our recommendation entry level. This recommendation is now closed.

Broadridge Financial Solutions Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

Broadridge Financial Solutions is a well-known investor communications and technology-driven solutions provider for the financial services industry.
The company has had a decent financial performance in recent times and has seen a continuous expansion in investor positions, notwithstanding the market downturn.
Given their forward testing capabilities, Broadridge is confident of seeing steady growth in investor positions in the coming year.

BlackLine Inc.: Initiation of Coverage – Customer Attractiveness Scoring & Other Drivers

This is our first report on BlackLine, the renowned cloud-based solutions provider for accounting and financial management operations.
The company delivered solid financial results in the last quarter and managed an all-around beat with good growth in revenue.
Moreover, continued free cash flow and margin improvement were seen due to further disciplined expense management and operating efficiencies.

Without Disclosure and Ensuring Transparency, the Black Box on Compensation Will Increase

By Aki Matsumoto

Progress on ESG initiatives should be evaluated objectively. With insufficient transparency and disclosure of compensation, there is concern that incorporating ESG factors into compensation will further increase uncertainty.
Leadership is required for management to seek the evolution of essential initiatives so that ESG efforts don’t fall into “numbers matching” and not be intimidated by temporary setbacks or modifications.
There are the following unresolved issues: non-disclosure of individual director compensation, bias toward fixed compensation, opaque compensation formulas, and ensuring the independence of the Compensation Committee.

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Nov 23

Daily Brief TMT/Internet: Link Administration, Delta Electronics Thai, Total Access Communication, Chindata Group, GoTo, Kuaishou Technology, Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Link Admin Is Cheap Amid PEXA In-Specie And Possible BCM/CM Sale
SET50 Index Rebalance Preview: Four Potential Changes in December
DTAC/True Merger to Proceed but Without the VTOs
2023 High Conviction: Chindata’s Track Record & Rating Makes It a Takeover Target
GoTo: Long-Term Profitability Is Worrying
Kuaishou (1024 HK): 3Q22, Promising Live Streaming, Better Margin, 39% Upside
GoTo IPO Lockup Expiry – US$13bn Lockup Release or in Other Words, the Real IPO
Should the 2022 Annual Meeting of Shareholders Be Regarded as Constant Progress?

Link Admin Is Cheap Amid PEXA In-Specie And Possible BCM/CM Sale

Link Administration (LNK AU) has released the explanatory memorandum regarding the PEXA Group (PXA AU) in-specie distribution.
Link shareholders will receive one PEXA share for every 7.52 Link shares. Shareholders will vote on the distribution on the 23 December. The IE, rightfully, deemed the process fair.
If D&D buys Link’s BCM/CM ops for A$1.27bn, Link would be net cash of ~A$1.40/share versus an ex-entitlement price of ~A$1.58/share. And Link would still hold the lucrative RSS ops.

SET50 Index Rebalance Preview: Four Potential Changes in December

By Brian Freitas

The market cap review period for the December rebalance of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) ends in 6 trading days.
Following the market consultation and reduction in the turnover ratio, there could be four changes to the index. The DTAC/TRUE merger could result in another inclusion in Q1 2023.
Estimated one-way turnover at the December rebalance is 8.1% and will result in a one-way trade of THB 7.4bn. More than 1x ADV to trade on most stocks.

DTAC/True Merger to Proceed but Without the VTOs

By Arun George

Telenor and CP Group will proceed with the Total Access Communication (DTAC TB)/True Corp Pcl (TRUE TB) merger but without the VTO due to missing the VTO conditions precedent deadline.
The likely real reason for the VTO cancellation was the realisation that the VTO prices were too generous, particularly in the context of the NBTC’s harsh conditions.
Completion is targeted for 1Q23. The current share price ratio of 8.750x vs the exchange ratio of 10.221x is attractive. Timing and potential tweaks to the exchange ratio are risks.

2023 High Conviction: Chindata’s Track Record & Rating Makes It a Takeover Target

By Arun George

Chindata Group (CD US)’s 3Q22 results beat both revenue and adjusted EBITDA consensus estimates. Chindata raised its full-year guidance for the second time this year.
Chindata continues to attract rumours of takeover interest, most recently from China Merchants. Its track record of beating guidance, modest leverage and beaten-down rating make it a target.
A forward EV/EBITDA multiple of 10.8x, in line with 21Vianet Group (VNET US)’s multiple implied by its founder’s offer (at US$8.20), would imply Chindata’s price of US$8 per ADS.

GoTo: Long-Term Profitability Is Worrying

GoTo (GOTO IJ) reported 3Q2022 results on Monday. Gross revenue increased 30.4% YoY to IDR5.9trn while adjusted EBITDA (losses) dropped to 81.3% of net revenues vs 289% in 3Q2021.
There has been notable improvement in the company’s earnings (decline in losses in particular) driven by huge cost cuts on promotions which helped reduce losses.
However, cutting down promotions/marketing costs could lead to drop in top line growth and market share.

Kuaishou (1024 HK): 3Q22, Promising Live Streaming, Better Margin, 39% Upside

By Ming Lu

There are three positive signs in online marketing despite the business slowed down.
For living streaming, both active user base and time spent grew rapidly.
The operating margin improved significantly to -13% in 3Q22 from -37% in 3Q21.

GoTo IPO Lockup Expiry – US$13bn Lockup Release or in Other Words, the Real IPO

By Sumeet Singh

In Mar 2022, GoTo raised around US$1bn from what was essentially a domestic Indonesian IPO. Its pre-IPO shareholders will be released from their lockup soon.
GoTo was formed in May 2021 as a result of a merger between two of Indonesia’s largest unicorns Gojek, leading player in ride hailing, and Tokopedia, leading e-commerce player.
In this note, we will talk about the upcoming lockup expiry.

Should the 2022 Annual Meeting of Shareholders Be Regarded as Constant Progress?

By Aki Matsumoto

Early disclosure of convocation notices and the use of electronic voting platforms, as specified in Corporate Governance Code, and electronic voting, which reduces the companies’ administrative burden, have also progressed.
Although the provision of English-language convocation notices was included in the Corporate Governance Code, only a few companies still send all documents in English translation.
More than 10 years after the regulatory-changes, few companies still file their annual securities reports prior to AGMs. Few companies take such a proactive approach by changing their company workflow.

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✓ Company Data and News
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Nov 22

Daily Brief TMT/Internet: Greatek Electronics, SUMCO Corp, Tencent, Ant Financial Services Group, ARTERIA Networks Corp, Hon Hai Precision Industry and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

FTSE TWSE 50 & 100 Dec 22 Final Expectations: Greatek Is Still the Main Talking Point
Sumco (3436) | Bargain Basement
China Internet Weekly (21Nov2022): NetEase, Blizzard, Tencent, Meituan, Tencent Music, JD Logistics
Ant Group: Consumer Finance Finds Investors But Beijing Could Throw New Obstacles At Ant’s Direction
Arteria Networks (Buy) – Q2 22 Results Reaction: Core Business Growth Intact
Hon Hai & Yulon IPO: Media Reports of Electric Vehicle JV 1Q23 Listing, Stock Implications

FTSE TWSE 50 & 100 Dec 22 Final Expectations: Greatek Is Still the Main Talking Point

By Janaghan Jeyakumar, CFA

The base date for the December 2022 index review FTSE TWSE Taiwan 50 and Taiwan Mid-Cap 100 for the December 2022 Rebalance is today (21st November 2022).
In this insight, we take a look at Quiddity’s final predictions for expected ADDs/DELs for the December 2022 index review.
I expect one change for the Taiwan 50 Index and one change for the Taiwan Mid-Cap 100 index.

Sumco (3436) | Bargain Basement

By Mark Chadwick

Sumco is a pure play wafer maker that is geared into demand for cutting edge 300mm wafers
Sumco is attractive given weak sentiment towards tech, attractive valuation, strong profitability and long-term earnings drivers
With the stock down 12% YTD, we believe the stocks is undervalued and see at least 20% upside from here

China Internet Weekly (21Nov2022): NetEase, Blizzard, Tencent, Meituan, Tencent Music, JD Logistics

By Ming Lu

The authorization contracts between Activision Blizzard and NetEase will terminate in January 2023.
Tencent plans to distribute 91% of its Meituan share as dividend.
JD Logistics revenue increased by 39% YoY and Net loss decreased to one tenth.

Ant Group: Consumer Finance Finds Investors But Beijing Could Throw New Obstacles At Ant’s Direction

By Oshadhi Kumarasiri

Earlier this year, an RMB 22.0bn fundraising was likely blocked by Beijing with the state-backed asset manager, China Cinda pulling out of the deal at the last moment.
Several media outlets reported last week that Ant Group is pushing ahead yet again with an RMB 10.5bn fundraising effort for its Consumer Finance business.
This fundraising could yet again face obstacles as Beijing might want Ant Financial Services Group (6688 HK) to surrender a controlling stake in the Consumer Finance business to state-backed firms.

Arteria Networks (Buy) – Q2 22 Results Reaction: Core Business Growth Intact

By Kirk Boodry

Favorable industry trends like work from home and expanding mobile data usage are helping drive Arteria revenue growth
Headline profits are down but core OP is up when one-time gains last year are stripped out and quarterly results will start to look better in H2 when fully lapped
Management says macro concerns such as inflation and power costs are manageable and FY targets remain unchanged

Hon Hai & Yulon IPO: Media Reports of Electric Vehicle JV 1Q23 Listing, Stock Implications