Category

TMT/Internet

TMT: S&P 500, TerraUSD, Kuaishou Technology, Clearfield Inc, Newgen Software Technologies and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • US Equities: A Small Squeeze?
  • Stablecoin Part 2 – History of Stablecoins and the Best Stablecoin Yield Opportunities
  • Kuaishou (1024 HK): Right Decision to Cut Costs, Still 20% Upside After 13% Rise
  • CLFD: Not so Clear Field, Initiating with Sell
  • Newgen Software Technologies Ltd. | Q3FY22 Result Updare

US Equities: A Small Squeeze?

By Shyam Devani

  • Both the S&P 500 and the Nasdaq 100 have hit decent supports
  • This has come after the rise in yields has started to slow down
  • At this stage it appears at least a short term bounce may be seen. It is too soon to determine anything more than that

Stablecoin Part 2 – History of Stablecoins and the Best Stablecoin Yield Opportunities

By Josh Du

  • We explore the notion that stablecoins existed even before crypto was invented and shows the difficulties of creating a monetary medium with zero volatility 
  • We show that the supply of stablecoins has grown 27x over the past 2 years and breakdown the history of stablecoins and their modern-day use cases 
  • We demonstrate a strategy to generate 20% returns on stablecoins using TerraUSD (UST CURNCY)  and Anchor Protocol

Kuaishou (1024 HK): Right Decision to Cut Costs, Still 20% Upside After 13% Rise

By Ming Lu

  • The stock price has risen 13% since our last note, but we still believe there is an upside of 21%.
  • The company is cutting employee benefits, from housing allowance to afternoon tea.
  • We believe the operating loss will shrink significantly in the following two years.

CLFD: Not so Clear Field, Initiating with Sell

By Hamed Khorsand

  • CLFD has been the beneficiary of communication service providers investing in their broadband networks to meet an increase in data traffic.
  • The events of the last two years, namely the COVID-19 pandemic causing work/learn from home and Huawei and ZTE equipment replacement, were the reason for the boom CLFD has experienced.
  • CLFD’s community broadband customer was incentivized to replace Huawei and ZTE equipment with reimbursement checks from the FCC.

Newgen Software Technologies Ltd. | Q3FY22 Result Updare

By Edelweiss

Robust deal wins to drive growth

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.

Before it’s here, it’s on Smartkarma

TMT: Mercari Inc, United Microelectron Sp Adr, Delhivery, Microsoft Corp, Shift Inc, Ebay Inc, GTPL Hathway Limited and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Mercari – US GMV Is Downside Risk but Profitability Is a Larger Upside Risk
  • UMC (UMC.US, 2303.TT): 1Q22 Earnings Preview- Continuous Growth
  • Delhivery IPO Initiation: Can It Deliver?
  • Microsoft’s Activision Acquisition Is a Stupendous Deal
  • Microsoft – Thinking Through the ATVI Acquisition Further
  • Shift: Strong Earnings Momentum to Continue with Expanding Software Testing into Metaverse Market
  • Qoo10 Japan to Launch ¥10 Billion Fashion Mall Rival to Zozo
  • GTPL Hathway: Broadband to Be Key Growth Driver Ahead

Mercari – US GMV Is Downside Risk but Profitability Is a Larger Upside Risk

By Mio Kato

  • Mercari is down 33% since 22 November, actually underperforming the 31% decline in Mothers. 
  • YoY numbers for the US may only modestly beat the 20% growth target for the year and this reset of expectations may have been the driver of the decline. 
  • However, we expect significant upside surprises on profitability and that is our focus.

UMC (UMC.US, 2303.TT): 1Q22 Earnings Preview- Continuous Growth

By Patrick Liao

  • It is continuing to raise wafer price, and revenue/GM to reach ~NT$58billion/~39% and NT$60billion/~41.5% in 4Q21/1Q22 respectively. 
  • It will plan to add 5-8k 28nm production capacity in 12A Tainan during 2H22, and we consider it is to secure customers’ demands.
  • We do not see any sign to deteriorate for the 2nd half at this moment. 

Delhivery IPO Initiation: Can It Deliver?

By Arun George

  • Delhivery (1058656D IN) is the largest and fastest-growing 3PL express parcel delivery player in India by revenue in FY21. It has won SEBI approval to raise up to $1 billion.  
  • The fundamentals are mixed as it has been unable to leverage its leading position and strong growth to deliver profits or cash generation.  
  • Based on the draft red herring prospectus, we are cautious about this potential IPO as the negatives outweigh the positives.  

Microsoft’s Activision Acquisition Is a Stupendous Deal

By Aaron Gabin

  • A blizzard of cost synergies we conservatively estimate at $500MM from lower distribution commissions, hosting costs, and cutting ATVI’s highly paid C-Suite.
  • Multiple strategic benefits: Catalyzes Microsoft’s XCloud streaming game service and Game Pass subscription offering….potentially offers greater leverage for app store negotiations with Apple and Google.
  • Accretive on valuation alone…MSFT is paying a 10% discount to ATVI’s 23x average forward PE from last few years. MSFT’s 11x forward P/S vs. ATVI’s 5.5x revalues ATVI’s revenues 2x.

Microsoft – Thinking Through the ATVI Acquisition Further

By Mio Kato

  • Our initial thoughts on Microsoft’s bid for Activision Blizzard were on the sceptical side given various signs of trouble at the company. 
  • In contrast the majority of commentary on the deal has been somewhere between positive and euphoric though there are monopoly concerns from customers. 
  • Yet the more we examine the implications the less we like this deal for Microsoft.

Shift: Strong Earnings Momentum to Continue with Expanding Software Testing into Metaverse Market

By Shifara Samsudeen, ACMA, CGMA

  • Shift reported its 1QFY08/2022 results last week. Revenue for the quarter increased 51.5% YoY to JPY14.3bn while OP more than tripled to JPY1.95bn vs JPY548m a year ago.
  • Both Enterprise and Entertainment segments saw strong growth in revenue as well as improvement in GPM during the period.
  • Shift’s share price gained 7.4% following its earnings announcement and we expect the company’s strong earnings momentum to continue over the next few years.

Qoo10 Japan to Launch ¥10 Billion Fashion Mall Rival to Zozo

By Michael Causton

  • Qoo10 has become one of the most popular Japanese malls among young women for all things Korean, particularly cosmetics and fashion.
  • The online mall now wants to exploit this by creating a new dedicated fashion mall with better promotional opportunities for merchants of all nationalities.
  • This should bring more competition to ZOZO Inc (3092 JP) and Rakuten Inc (4755 JP).

GTPL Hathway: Broadband to Be Key Growth Driver Ahead

By ICICI Securities Limited

  • GTPL Hathway (GTPL) is a leading MSO (No. 1 in terms of subscribers) offering cable television (CATV) and broadband services
  • Expansion into new states and digitisation has led to strong topline and earnings growth of ~27% and ~86% CAGR, respectively, over FY16-21
  • We roll over to FY24 and value GTPL at Rs 290 i.e. 14x FY24E P/E
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.

Before it’s here, it’s on Smartkarma

TMT: Activision Blizzard, Netmarble Corporation, SK Square, Globalwafers, Mindtree Ltd, Mio, Hcl Technologies, Marvell Technology Group Ltd and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Microsoft Got Game! Plans to Buy Activision Blizzard for $95/Share or $68.7 Billion
  • Microsoft to Buy Activision Blizzard for $69 Billion: Impact on NCsoft, Krafton, & Netmarble
  • SK Square: NAV Valuation Analysis, 2 IPOs of Affiliates in 1H22, & Higher Weighting in MSCI Korea
  • Globalwafers (6488.TT): Stock Price Can Go Higher Even If Siltronic Mergence Case Failed
  • Mindtree Limited: Strong Growth Continues, Valuations Rich
  • Jungle Ventures Leads $8m Round of Vietnam Social Commerce App
  • HCL Technologies: Stellar Performance; Outlook Continues To Be Robust
  • Growth acceleration to compensate for margin hit
  • Earnings Quality Short Candidates: Marvell, Celsius, Fortive and Ranpak Hldg.

Microsoft Got Game! Plans to Buy Activision Blizzard for $95/Share or $68.7 Billion

By John DeMasi

  • Microsoft’s largest-ever acquisition provides boost for cloud gaming and metaverse ambitions.
  • Deal comes as Activision Blizzard’s been mired in gender pay disparity and sexual harassment storm.
  • Controversial CEO Bobby Kotick to continue in his role as head of Activision Blizzard, though WSJ says otherwise.

Microsoft to Buy Activision Blizzard for $69 Billion: Impact on NCsoft, Krafton, & Netmarble

By Douglas Kim

  • On 18 January, Microsoft Corp (MSFT US) announced that it will acquire Activision Blizzard (ATVI US) for $68.7 billion all-cash deal.
  • The acquisition of Activision Blizzard by Microsoft is likely to have a positive impact on the entire global game sector including in Korea. 
  • This major acquisition of Activision Blizzard by Microsoft could rejuvenate the entire global game sector as it could signal greater M&A interest in high-quality game companies.

SK Square: NAV Valuation Analysis, 2 IPOs of Affiliates in 1H22, & Higher Weighting in MSCI Korea

By Douglas Kim

  • Our updated NAV analysis of SK Square suggests an implied price of 92,050 won per share, representing 46.3% upside from current levels.
  • Among the affiliated companies, OneStore and SK Shieldus are expected to be listed in the Korean stock market in 1H 2022.
  • MSCI is likely to increase the weight of SK Square in the MSCI Korea Index rebalance announcement on 10 February. 

Globalwafers (6488.TT): Stock Price Can Go Higher Even If Siltronic Mergence Case Failed

By Patrick Liao

  • We think the chance for GlobalWafers mergence case to have the final approval could be high. Even if it finally failed, the raw wafer supply should be full until 2024.
  • This deal was granted by seven governments and organizations already. And it is still under review of Chinese and Japanese governments.
  • The deal will not change the worldwide raw wafer supply status, especially such supply tightness. To our understanding, the secrets to achieve success are cost reduction and resource management mostly.

Mindtree Limited: Strong Growth Continues, Valuations Rich

By ICICI Securities Limited

  • Mindtree Ltd (Mindtree) is a mid-tier IT company with a presence in the US, Europe & RoW catering to BFSI, communication media & technology, retail & travel
  • Expertise in infrastructure & application catering to Global 2000 clients
  • We maintain HOLD rating on the stock. We value Mindtree at Rs 5,055 i.e. 40x P/E on FY24E
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.

Jungle Ventures Leads $8m Round of Vietnam Social Commerce App

By Tech in Asia

  • Mio, a Vietnam-based social commerce startup, has raised US$8 million in a series A funding round led by Jungle Ventures
  • The investment boosts Mio’s total funding raised to US$9.1 million.
  • Founded in June 2020, Mio uses a network of resellers to sell fresh produce such as fruit, vegetables, and meat

HCL Technologies: Stellar Performance; Outlook Continues To Be Robust

By Axis Direct

  • HCL Technologies Ltd (HCL Tech) Q3FY22 performance stood above our expectations and beat our estimate on all fronts.
  • The company reported revenues of Rs 22,331 Cr, up 8.1% QoQ and 15.7% YoY.
  • We recommend a BUY on the stock and assign a 24x P/E multiple to its FY24E earnings of Rs 67.4/share which gives a TP of Rs 1,600/share, indicating an upside of 20% from CMP.
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.

Growth acceleration to compensate for margin hit

By Motilal Oswal

HCLT delivered an exceptionally strong revenue growth of 7.6% QoQ CC in 3QFY22, 310bp above our estimate, led by its troubled Products and Platforms (P&P, +24.5% QoQ) vertical, which did exceptionally well despite benefitting from seasonality and deal spill over from 2QFY22 (600bp impact). Its Services verticals (IT Services/ER&D up 4.7%/8.3% QoQ CC) continued to clock strong growth and was ahead of our estimate. HCLT reported strong new deal TCV of USD2.1b (flat QoQ, +64% YoY).

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.

Earnings Quality Short Candidates: Marvell, Celsius, Fortive and Ranpak Hldg.

By Eric Fernandez, CFA

  • This short model seeks short-sale candidates among companies that use aggressive accounting and/or exhibit deteriorating quality of earnings.  
  • They are typically highly idiosyncratic shorts and require thoughtful analyses of upcoming catalysts.  When the company’s issues become well-known, there is often multiple compression as well as a rerating.
  • These shorts can have high or low betas, valuations based on artificial earnings and exhibit good short responses to subsequently disappointing earnings.

Before it’s here, it’s on Smartkarma

TMT: AKM Industrial, USD Coin, Qingdao Ainnovation Technology Group Co Ltd, Mindtree Ltd, Elastic NV, Fiserv Inc, Infosys Ltd, International Business Machines and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • AKM Industrial (1639 HK): SASAC and Xiamen Government-Backed Pre-Conditional Offer
  • Stablecoin Part 1 – The Game Changing Tech in Crypto and a Real World Arb Trade
  • Qingdao AInnovation Technology Group IPO – Fairly Valued with Mediocre Cornerstones
  • AInnovation Technology IPO: Valuation Insights
  • Mindtree: Robust Revenue Growth; Efficient Execution to Aid Margin Expansion
  • Elastic: High-Profile Search Company With Attractive Fundamentals
  • Fiserv – Investing In Transforming Leaders Rather Than Disruptors
  • Infosys Ltd: Strong Revenue, Margin Resilience Is Key
  • HSIE Results Daily: Mindtree, CESC
  • IBM: A Rising Tide Lifts All Boats

AKM Industrial (1639 HK): SASAC and Xiamen Government-Backed Pre-Conditional Offer

By David Blennerhassett

  • Flexible printed board player Akm Industrial (1639 HK) has announced a pre-conditional Scheme from Alpha Luck and AKM Meadville at HK$1.82/share. The Offer price will NOT be increased.
  • Alpha Luck is ultimately held by SASAC and AKM Meadville by the government of Haicang District, Xiamen. The two intend to hold 40:60 respectively in the unlisted vehicle. 
  • Various PRC regulatory approvals are required. This appears a transaction geared to complete. Timing is the key risk to the deal.

Stablecoin Part 1 – The Game Changing Tech in Crypto and a Real World Arb Trade

By Josh Du

  • Stablecoins are the critical $170 billion dollar sector that is the key building block for the entire $2 trillion dollar crypto asset class with increasing attention from regulators
  • In part 1, we explore some real world case studies on problems that stablecoins solved for crypto such as stability of payments to vendors, and the enabling of lending
  • We also present a (almost) risk-free arb where traders pay 1.5% to borrow USD and receive 9% on stablecoin dollars 

Qingdao AInnovation Technology Group IPO – Fairly Valued with Mediocre Cornerstones

By Clarence Chu

  • Qingdao Ainnovation Technology Group Co Ltd (1853807D CH) is looking to raise up to US$157m in its Hong Kong IPO.
  • Qingdao AInnovation Technology Group is an AI solutions provider offering full-stack AI-based products and solutions. 
  • While we don’t have a fundamental issue with the listing, at asking valuations, the firm appears to be fairly valued with limited upside on its FY23 numbers. 

AInnovation Technology IPO: Valuation Insights

By Arun George

  • AInnovation Technology (AIT HK) is a fast-growing enterprise AI solutions provider in China. It has launched an HKEx IPO to raise up to US$157 million. 
  • In AInnovation Technology IPO Initiation: Code Amber, we stated that the negatives outweigh the positives and we would give the IPO a pass.
  • Our valuation analysis suggests that the IPO price is fair. Due to our concerns about the fundamentals, we remain on the sidelines. Pricing is 20 January, listing on 27 January.

Mindtree: Robust Revenue Growth; Efficient Execution to Aid Margin Expansion

By Axis Direct

  • Mindtree beat our estimates with revenue of Rs 2,750 Cr for Q3FY22, reporting revenue growth of 35.9% YoY and 6.3% QoQ
  • The company posted operating profits of Rs 592 Cr, registering a growth of 9.7% QoQ
  • We recommend a BUY on the stock and assign 40x P/E multiple to its FY24E earnings of Rs 131.5/share to arrive at a, implying an upside potential of 12% from CMP.
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.

Elastic: High-Profile Search Company With Attractive Fundamentals

By Andrei Zakharov

  • Elastic NV (ESTC US)  has grown its ARR from ~$207 million as of Jul-18 to ~$760 million today and may become a multi-billion dollar unicorn in the future.  
  • We like the subscription-based freemium business model, strong net expansion rate, and acceleration in revenue growth of Elastic Cloud business, which currently represents ~33% of total revenue. 
  • Elastic Search is one of the most popular search engines globally, and the company’s products have been downloaded more than 350 million times since 2013. 

Fiserv – Investing In Transforming Leaders Rather Than Disruptors

By Vladimir Dimitrov, CFA

  • Fiserv is valued as a slow-growth and low return on capital legacy business, although this does not appear to be the case.
  • At present, the expected topline growth rate is far from spectacular, but parts of the business are growing fast and could result in a multiple repricing.
  • Due to the acquisition of First Data, the company’s improving profitability is a better measure of business performance than return on capital is.

Infosys Ltd: Strong Revenue, Margin Resilience Is Key

By ICICI Securities Limited

  • Infosys Ltd (Infy) is one of the leading IT players catering to BFSI, retail, communication, manufacturing & hi tech verticals.
  • The company generates >58% of revenues from digital technologies
  • We continue to remain positive and retain our BUY rating on the stock. We value Infosys at Rs 2,300 i.e. 32x P/E on FY24E EPS
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.

HSIE Results Daily: Mindtree, CESC

By HDFC Securities

  • Mindtree (MTCL) delivered healthy QoQ growth (following a very strong quarter) and margin beat (~100bps expansion) was the highlight of the quarter
  • Recovery in T1 business was encouraging and growth was broad-based across verticals, geographies, and service lines
  • Our target price of INR 5,060 is based on 37x Mar-24E EPS (25% CAGR over FY21-24E on a high base in FY21 of >70%)
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.

IBM: A Rising Tide Lifts All Boats

By Vladimir Dimitrov, CFA

  • Even though IBM shares ended 2021 in the green, total return was very disappointing on a risk-adjusted basis.
  • Kyndryl shareholders were severely punished, and prospects for the company remain rather bleak.
  • 2022 will be a critical year for IBM’s management to prove that it could turn the business around.

Before it’s here, it’s on Smartkarma

TMT: Mercari Inc, Tether, Qingdao Ainnovation Technology Group Co Ltd, Akm Industrial, Hcl Technologies, Money Forward and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Mercari (4385) Applying for TSE Prime Means TOPIX Inclusion in 4-5 Months
  • Crypto Weekly: Will Hong Kong Be the Macau of Crypto?
  • AInnovation Technology IPO Initiation: Code Amber
  • AKM Industrial’s Privatisation Bid
  • HSIE Results Daily: HCL Technologies
  • Money Forward (3934) – Solid, Not Spectacular

Mercari (4385) Applying for TSE Prime Means TOPIX Inclusion in 4-5 Months

By Travis Lundy

  • Mercari was expected to announce at some point that it would attempt to transfer to TSE Prime. They have now announced. 
  • This will end up being a BIG TOPIX inclusion in May or June. 
  • And the changes to the TOPIX Free Float Weight Methodology will mean it is bigger than it would have been under the old regime (despite unchanged FFW).

Crypto Weekly: Will Hong Kong Be the Macau of Crypto?

By Josh Du

  • HKMA released a discussion paper on the regulation of stablecoins in Hong Kong which seems to suggest a divergence in regulatory approach towards crypto from China’s current stance
  • China has historically allowed banned activities from the mainland to operate in a controlled environment such as gaming in Macau
  • We explore the potential that HK is the perfect firewalled environment where crypto could be allowed to develop without contagion for the rest of China

AInnovation Technology IPO Initiation: Code Amber

By Arun George

  • AInnovation Technology (AIT HK) is a fast-growing enterprise AI solutions provider in China. It is set to launch an HKEx IPO to raise up to US$157 million.  
  • The fundamentals are mixed as diverging growth profiles of key segments, low market share and cash burn are accompanied by a narrowing loss margin. 
  • Overall, we believe the negatives outweigh the positives and we would give the IPO a pass. 

AKM Industrial’s Privatisation Bid

By Arun George

  • Akm Industrial (1639 HK) announced a privatisation offer from Alpha Luck and AKM Meadville at HK$1.82 per scheme share, a 14.47% premium to last full trading day price of HK$1.59. 
  • The key pre-condition is several regulatory approvals which be forthcoming as Alpha Luck is indirectly 100% owned by the SASAC. 
  • The key condition is the scheme approved by at least 75% disinterested shareholders (<10% disinterested shareholders rejection). We think the offer price is reasonable and the scheme will pass. 

HSIE Results Daily: HCL Technologies

By HDFC Securities

We maintain our BUY rating with a target price of INR 1,485, valuing the HCLT stock at 22x Mar-24E EPS, factoring in +13/14% CAGRs in revenue/EPS over FY21-24E HCL Technologies: We maintain BUY on HCL Tech (HCLT), supported by strong growth in services (+5.3% QoQ CC) and recovery in P&P (+24.5% QoQ CC). The services growth was led by ER&D but the ~200 bps decline in margin was higher than peers. Key attributes that support our growth outlook are: (1) growth momentum in ER&D services (+8.3 QoQ CC), supported by digital engineering and IoT services; (2) robust TCV of USD 2.14bn (+64% YoY growth), led by eight large deals in services and product; and (3) strong fresher hiring, which will continue in FY23E.

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.

Money Forward (3934) – Solid, Not Spectacular

By Mark Chadwick

  • Money Forward reported full year results post close on Friday. The stock will react negatively…probably.  
  • The stock is down 45% from its 52-week high, along with most high growth SaaS stocks 
  • The fundamentals, earnings and growth remain intact, but valuations are unlikely to recover as excess liquidity drains out of the market.  One for patient LT investors

Before it’s here, it’s on Smartkarma

TMT: Razer Inc and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Asia-Pac Weekly Risk Arb Summary: Razer, Crown Resorts, Katakura, Ausnutria, API, Irongate

Asia-Pac Weekly Risk Arb Summary: Razer, Crown Resorts, Katakura, Ausnutria, API, Irongate

By David Blennerhassett


Before it’s here, it’s on Smartkarma

TMT: Krafton Inc, Nasdaq-100 Stock Index, Kakao Pay, Tata Consultancy Svcs, Wipro Ltd, Infosys Ltd and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Krafton – Breaking Down
  • NDX Trendline Is the Risk Inflection that Would Change Course
  • End of Lock-Up Periods for Kakao Pay, Kakao Bank, Krafton, HHI, & SD Biosensor in 1Q 2022
  • Healthy topline beat to assuage growth concern; outlook strong
  • HSIE Results Daily: Tata Consultancy Services, Infosys, Wipro
  • TCS: A Mixed Bag Result; Revenue In-Line But Margins Decline
  • Wipro: Revenue Below Expectations; Efficient Execution Provides Margins Resilience
  • Excellent growth in 3QFY22 to drive further outperformance
  • Wipro Ltd: Miss on 3Q and 4Q Revenue Guidance
  • Infosys: Robust Business Performance; Improved Growth Visibility

Krafton – Breaking Down

By Mio Kato

  • We have been sceptical about Krafton’s valuation and ability to generate new hits since its listing. 
  • After treading water close to its IPO price for five months the new year has seen the stock crater 25%. 
  • In our view the bad news is just getting started and that is despite PUBG: Mobile still doing well in China and India.

NDX Trendline Is the Risk Inflection that Would Change Course

By Thomas Schroeder

  • NDX is dangerously close to a meaningful break below macro trendline and price support that would induce downside pressure on supports in other key indices.
  • NDX Pivot support break would set in motion a downward spiral in the DJI and SPX as well as the global risk cycle. On alert!
  • Late January a weaker cycle for a washout that sets up a tender bullish February grind with Q1 topping signals maturing.

End of Lock-Up Periods for Kakao Pay, Kakao Bank, Krafton, HHI, & SD Biosensor in 1Q 2022

By Douglas Kim

  • In this insight, we discuss the end of lock-up periods for Kakao Pay, KakaoBank, Hyundai Heavy Industries, Krafton Inc, and SD Biosensor in 1Q 2022.
  • Typically, investors tend to focus on the end of the lock-up periods in Korea about 1-2 months ahead of the actual end of these lock-up periods.
  • Among these five companies, there are relatively large number of shares that could be sold post end of the lock-up periods for Kakao Pay and Kakao Bank in 1Q 2022. 

Healthy topline beat to assuage growth concern; outlook strong

By Motilal Oswal

TCS reported 3QFY22 revenue of USD6.52b, up 4.0% QoQ in constant currency (CC) above our estimate of 3.2% QoQ growth. 3Q topline was driven by Communication, Technology and Regional markets, while Manufacturing and Retail verticals dragged down growth. EBIT margin contracted 60bp QoQ to 25.0%, 100bp lower than our estimate of 26.0%, as TCS augmented its employee intake (all-time high at 28k), along with a spike in sub-contracting cost.

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.

HSIE Results Daily: Tata Consultancy Services, Infosys, Wipro

By HDFC Securities

  • Tata Consultancy Services: TCS reported in-line revenue performance, while the margin was a miss
  • Infosys: We maintain BUY on Infosys (INFY), following a significant beat in revenue (+7% QoQ CC vs. estimate of 4.4%) and a strong growth outlook.
  • Wipro: Wipro delivered a muted performance in Q3; growth of 3.0% QoQ CC was below estimate and the lowest in the last five quarters
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.

TCS: A Mixed Bag Result; Revenue In-Line But Margins Decline

By Axis Direct

  • Tata Consultancy Services Ltd (TCS) reported a 4.3% revenue growth QoQ in Q3FY22 in Rupee terms, much in line with our expectations
  • The company’s revenues stood at Rs 48,885 Cr, up 16.3% YoY and 4.3% QoQ
  • We recommend a HOLD rating on the stock and assign a 31x P/E multiple to its FY24E earnings of Rs 135.2/share to arrive at a TP of Rs 4,200/share
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.

Wipro: Revenue Below Expectations; Efficient Execution Provides Margins Resilience

By Axis Direct

  • Wipro Ltd’s (Wipro) revenue growth stood below our expectations at Rs 20,313 Cr, up 3.1% QoQ and 27% YoY in CC terms
  • Operating profit grew robust 30.8% YoY to Rs 3,492 Cr, aided by better executions, better employee management and service mix
  • We recommend a HOLD rating on the stock and assign a 27x P/E multiple to its FY24E earnings of Rs 27.7/share to arrive at a TP of Rs 750/share, implying an upside of 9% from CMP.
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.

Excellent growth in 3QFY22 to drive further outperformance

By Motilal Oswal

INFO reported a growth of 7% QoQ CC, ahead of our estimate of 4.8%, on the back of a broad based performance. Large deal TCV stood at USD2.53b (net new at 44%). The management indicated traction in large deals, and highlighting that the deal pipeline was the highest in a very long time. EBIT margin dipped only 10bp QoQ to 23.5%, in line with our estimate, despite a drag from employee additions (12.5k), higher sub-contracting, and…

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.

Wipro Ltd: Miss on 3Q and 4Q Revenue Guidance

By Motilal Oswal

  • Wipro (WPRO) reported 3QFY22 IT Services revenue of USD2.64b (+3.0% QoQ CC), missing our estimate by 70bps
  • We now expect FY22 IT Services revenue growth at 27.4% (18.5% YoY organic growth), down 100bps v/s the previous expectation.
  • We lower our FY22–24E EPS estimate by 1% to factor in the miss on the growth front. We maintain our Neutral stance as we view the current valuation as fair
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.

Infosys: Robust Business Performance; Improved Growth Visibility

By Axis Direct

  • Infosys Ltd (Infy) reported Q3FY22 revenue of Rs 31,867 Cr, up 7.7% QoQ and 7% QoQ (in CC terms)
  • The company’s operating profit stood at Rs 7,484 Cr, reporting a growth of 7.3% on a QoQ basis
  • We recommend a BUY rating on the stock and assign a 29x P/E multiple to its FY24E earnings of Rs 73.5/share to arrive at a TP of Rs 2,140/share
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TMT: Hang Seng Tech Index, 51 Job Inc Adr, TSMC, Bukalapak, SKonec Entertainment, Tata Consultancy Svcs, Bitcoin and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • A Share Fizzle – HK Tech Bullish Base
  • 51job’s Lowered Privatisation Bid
  • TSMC – Exceptional as Usual
  • Bukalapak: Still Overvalued & Former CEO’s Ownership Is an Overhang
  • Skonec Entertainment IPO Valuation Analysis
  • Earnings Update | TCS: Reports Decent Earnings
  • Crypto: A Demographic Based Investment Thesis

A Share Fizzle – HK Tech Bullish Base

By Thomas Schroeder

  • A share pop a flash in the pan and still shows heavy price action as the bull wedge matures into late January.
  • HSI is meeting the fresh short target zone near 24,700 with a minor new low in store for late January.
  • HK tech is making strides to bottom as RSI divergence matures but still needs some final strokes for a higher conviction base.

51job’s Lowered Privatisation Bid

By Arun George

  • The consortium’s updated transaction has lowered the offer price -27.6% to $57.25 in cash per ADS, a 24.92% premium to the last trading price (11 January 2022).
  • The combination of the dramatically lower price, spurious justification for lowering the price and the shares recently trading higher than the revised price is unlikely to win over minorities.
  • Meeting the two-thirds shareholder approval threshold is likely a challenge due to the need to convince around 27% of disinterested shareholders to vote in favour of the transaction. 

TSMC – Exceptional as Usual

By Mio Kato

  • TSMC posted results at or above the top end of its guidance ranges for 4Q21 at the revenue, GPM and OPM levels. 
  • Guidance for 1Q22 was also punchy with the midpoint of revenue guidance 6.0% above consensus and mid to high 20s revenue growth guidance for the year. 
  • We still suspect however that momentum could actually accelerate through the year.

Bukalapak: Still Overvalued & Former CEO’s Ownership Is an Overhang

By Oshadhi Kumarasiri

  • With the penetration rate as high as 42%, Mitra could be fast running out of room for growth.
  • Consensus seems to be overestimating Bukalapak (BUKA IJ)’s 2021 and 2022 revenue by 22% and 40% respectively.
  • At 6.0x consensus FY+2 revenue, Bukalapak is still expensive compared to the peer average of 4.3x.

Skonec Entertainment IPO Valuation Analysis

By Douglas Kim

  • We expect a wide price range ranging from 18,001 won to 39,939 won for Skonec Entertainment IPO, which is much higher than the high end of IPO price range.
  • We estimate Skonec to generate sales of 6.0 billion won in 2021 (up 27.6% YoY) and 13.9 billion won in 2022 (up 132% YoY). 
  • Skonec Entertainment’s main business is VR-based content production. It has also been providing metaverse VR game business through VR platforms such as Oculus and PlayStation.

Earnings Update | TCS: Reports Decent Earnings

By Ankit Agrawal, CFA

  • TCS reported a healthy revenue growth of 15.4% YoY in constant currency (CC) terms. Operating margins contracted by -60bp to 25%, due to supply-side challenges. 
  • LTM attrition for TCS was 15.4%, best in the industry. However, on an absolute basis, it is high and TCS is continuously working on stabilizing it.  
  • Growth has been broad-based across sectors and the demand outlook remains robust on the back of strong spends by corporates on digital transformation and adoption of cloud.

Crypto: A Demographic Based Investment Thesis

By Josh Du

  • It’s commonly known that investment theses are the most powerful when demographic trends are on your side. Crypto adoption may enjoy the same tailwind as internet adoption
  • We analyze the fact that the younger segment of the population has evolved to be early adopters of crypto and blockchain technology, which protends strong future growth
  • We argue that the young are embracing crypto because it is a much easier game to play and win for those who do not benefit as traditional asset owners 

Before it’s here, it’s on Smartkarma

TMT: Taiwan Semiconductor Sp Adr, Capcom Co Ltd, Bilibili Inc, Qingdao Ainnovation Technology Group Co Ltd, Infosys Ltd, Samsara, Calix Inc and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • TSMC (TSM.US, 2330.TT): Bright Outlook in 2022
  • Capcom – Monster Hunter Rise PC Launches Even as Stock Hits 12 Month Low
  • Bilibili Makes a Late Entry into Livestreaming E-Commerce; Timing Is Not Just Right
  • Qingdao AInnovation Technology Group Pre-IPO – Has Grown Fast, but Holds an Unproven Track Record
  • Earnings Update | Infosys: Raises Revenue Growth Guidance
  • Recent IPO Insights: Samsara
  • CALX: Designed for Decline

TSMC (TSM.US, 2330.TT): Bright Outlook in 2022

By Patrick Liao

  • TSMC’s 2022 outlook is bright, but new drama around Intel’s possible orders could define the foundry in 2023
  • IPhone’s 2022 modem is currently equipped with Qualcomm’s design but 2023’s will be designed by Apple
  • TSMC’s continuously updated technology roadmap shows it as a tech-leader in the foundry space

Capcom – Monster Hunter Rise PC Launches Even as Stock Hits 12 Month Low

By Mio Kato

  • Early last year we very wrongly called Capcom as our top short-term pick as we expected an earnings blowout in 1QFY22. 
  • The blowout duly came with OP 37% above clueless sell side expectations and… the stock tanked. 
  • Almost a year later the stock languishes 28% lower just as the PC version of Monster Hunter Rise launches.

Bilibili Makes a Late Entry into Livestreaming E-Commerce; Timing Is Not Just Right

By Shifara Samsudeen, ACMA, CGMA

  • Bilibili launched a shopping cart feature (Xiaohuangche) recently on its livestreaming platform which enables users to purchase goods while watching a live-stream.
  • This comes at a time; China’s common prosperity crackdown has set its eyes on livestreaming e-commerce.
  • Bilibili has been looking at ways to improve its monetisation to reduce losses, but we think the new initiative will likely add further pressure on deteriorating margins.

Qingdao AInnovation Technology Group Pre-IPO – Has Grown Fast, but Holds an Unproven Track Record

By Clarence Chu

  • Qingdao Ainnovation Technology Group Co Ltd (1853807D CH) is looking to raise up to US$200m in its Hong Kong IPO.
  • Qingdao AInnovation Technology Group is an AI solutions provider offering full-stack AI-based products and solutions. 
  • While revenue has grown since inception, margin improvement can’t be attributed solely to better cost controls. It also has an unproven track record and operates in a highly fragmented market. 

Earnings Update | Infosys: Raises Revenue Growth Guidance

By Ankit Agrawal, CFA

  • Infosys reported strong Q3FY22 earnings with constant currency (CC) sequential growth of 7%, despite weak seasonality.  YoY CC growth at 21.5% is the highest ever over the past 11 years.
  • Large deal wins and continued momentum in digital revenue growth helped Infosys Ltd (INFO IN) to post a strong Q3. Share of digital revenues grew to 58.5% vs 50.1% YoY.
  • On the back of strong Q3FY22 earnings, Infosys raised its FY22 revenue growth guidance to 19.5-20% vs 16.5%-17.5% earlier.

Recent IPO Insights: Samsara

By Aaron Gabin

  • IOT data platform meant to digitize physical operations for manufacturing, transportation, construction, utilities, healthcare, and education. 
  • Excellent management team, previously co-founded Meraki, which was sold to Cisco.
  • Hypergrowth software business on par with ServiceNow and Workday at this stage in growth, but much less profitable (so far) due to hardware and bandwidth costs.

CALX: Designed for Decline

By Hamed Khorsand

  • CALX has yet to experience the full extent of our original sell thesis even though there are growing signs of an impending impact
  • Component issues could have become a headwind in the fourth quarter and remain a challenge in 2022.
  • With Huawei equipment replacement predominately complete, small service providers could reduce their spending

Before it’s here, it’s on Smartkarma

TMT: Bitcoin, SK Square, Alibaba Group, US Treasury (10 Yr Generic), Square Enix Holdings and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Crypto Weekly: Historical Corrections, Fund Performance, and NFT Adoptions
  • SK Square Is Victim of LG Energy IPO-Triggered Market Flow Imbalance, Then Rebound Timing?
  • 1H22 Obex Research Long Portfolio
  • Yield Breakout and NDX LT Trendline Inflection for US and Global Risk
  • Square Enix – WAGMI

Crypto Weekly: Historical Corrections, Fund Performance, and NFT Adoptions

By Josh Du

  • In this weekly, we look at the macro where the recent selldown is well within the historical performance of the asset class
  • Despite the end year correction, crypto funds have returned 178% in 2021 based on Eurekahedge which is leading to significant new launches in 2022 
  • Meanwhile, NFTs continue to make headlines as Eminem spent half a million on a BAYC jpeg and a South Korean presidential hopeful taps NFTs to raise campaign funds 

SK Square Is Victim of LG Energy IPO-Triggered Market Flow Imbalance, Then Rebound Timing?

By Sanghyun Park

  • SK Square’s discount to NAV is reaching 68%, pretty close to the deepest end of the local peers.
  • The cause of this price correction can be seen as the collapse of the overall market flow balance due to the LG Energy IPO.
  • Entry timing for MSCI float-rate increase momentum is early February.

1H22 Obex Research Long Portfolio

By Aaron Gabin

  • With half of Nasdaq stocks down 50% from the top, is further meltdown ahead?  Valuation compression is already larger than recent big growth selloffs.  
  • We like a balance of highest quality high growth (CRWD, SNOW, RBLX) and attractive relative valuations (PANW, NOW, BABA)
  • Amazon is poised for a big 2022 as 1 day Prime shipping reaccelerates growth, and price increases hike profits.

Yield Breakout and NDX LT Trendline Inflection for US and Global Risk

By Thomas Schroeder

  • We have made a bullish yield argument from the 10yr 1.37% zone to clear the key 1.68% breakout barrier. A yield spike will pressure tech at NDX macro trendline support.
  • NDX long term trendline make or break support lies at 15,300. We expect a break in later Q1 but if broken now it will bring forward a negative risk cycle.
  • Our macro 10yr yield rise to the 2%+ region for a top correlated with a peak in the equity cycle in late Q1. Rate sensitive ration undercurrents.

Square Enix – WAGMI

By Mark Chadwick

  • Blockchain games are gaining popularity and traction with new players. There are now over 1.4m people playing blockchain games daily  
  • The economics of blockchain gaming and NFT is driving a flood of new investment into the space, with $4b committed by VCs in 2021. This year will be significantly higher  
  • Square Enix understands that blockchain games are here to stay despite opposition from “legacy fans.” We expect further announcements on blockchain gaming to drive the stock

Before it’s here, it’s on Smartkarma