TMT/Internet

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs
Things remain quiet on the IPO front and are likely to remain that way till CNY. Korea was once again the one that set the IPO ball rolling.
Placements were a different matter with deal flow pickup up where it left off last week.

DearU’ Bubble + NCsoft’s Universe = The Largest K-Pop Fandom Platform in Korea

DearU’s acquisition of NCSoft’s Universe K-Pop fandom platform will expand DearU Bubble’s number one position in the K-Pop fandom platform in Korea.
The sale of Universe by NCSoft is a win-win situation for both DearU and NCsoft.
Applying a 25x P/E to an estimated net profit of 50 billion won in 2024 would suggest an market cap of 1.25 trillion won for DearU, representing a 52% upside.

Hong Kong CEO & Director Dealings (15 Jan): WWPKG, Tianyun International, Yeahka, Flat Glass

By David Blennerhassett

The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
Stocks mentioned include WWPKG Holdings Co Ltd (8069 HK), Tianyun International Holdings (6836 HK), Yeahka Limited (9923 HK), GHKGBA (1396 HK), and Flat Glass (6865 HK).

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Jan 14

Daily Brief TMT/Internet: OASIS Corp and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Oasis Corp IPO Valuation Analysis

Oasis Corp IPO Valuation Analysis

Our base case valuation of Oasis Corp is EV of 605 billion won, implied market cap of 788 billion won, and target price of 24,847 won per share.
This is 18.5% lower than the low end of the IPO price range. Given the lack of upside, we have a Negative View of the Oasis Corp IPO.
The end of COVID pandemic and relaxed regulations for hypermarkets in early morning delivery services are likely to have greater negative impact on Oasis Corp.

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Jan 13

Daily Brief TMT/Internet: Taiwan Semiconductor (TSMC) – ADR, OASIS Corp, Shift Inc, Imajin, Supermom and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Taiwan Tech Weekly: Global Optimism for Semi Stocks, Taiwan’s New Subsidies, TSMC CEO Buying Stock
Oasis Corp IPO Preview
2023 High Conviction Shift: Margins Begin to Recover as Unprofitable Projects Coming to an End
Imajin Reportedly Raises Seed Funding Round
Parenting Platform Supermom Closes US$6M Series A Led by Qualgro

Taiwan Tech Weekly: Global Optimism for Semi Stocks, Taiwan’s New Subsidies, TSMC CEO Buying Stock

By Vincent Fernando, CFA

Taiwan’s government has passed new major tax subsidies to support semiconductor firms’ R&D and capex spending.
TSMC results will be out this afternoon; Interestingly, TSMC’s CEO has been buying shares during October, November, and December.
Hon Hai has begun iPhone 15 trial production, and Zhengzhou is back to 100%.

Oasis Corp IPO Preview

By Shifara Samsudeen, ACMA, CGMA

Oasis Corp is getting ready to complete its IPO on KOSDAQ in February 2023. Oasis Corp is a leading online/offline provider of organic foods and other groceries in Korea.
IPO price range is from 30,500 won to 39,500 won, with a total offering amount of 160 billion won to 207 billion won.
Other than Coupang, the other three companies (bankers’ valuation) may not be appropriate comps, mainly because they operate in different markets around the world and are much bigger in size.

2023 High Conviction Shift: Margins Begin to Recover as Unprofitable Projects Coming to an End

Shift Inc (3697 JP) reported 1QFY08/2023 results today. Revenue increased 35.6% YoY to JPY19.3bn (vs consensus JPY19.8bn) while OP decreased 7.4% YoY to JPY1.8bn (vs consensus JPY2.2bn).
Both GPM and OPM have dropped compared to 1QFY08/2022 but shows significant improvement over last two quarters suggesting unprofitable development projects are coming to an end.
Though 1Q earnings fell a touch below consensus, we would not be too concerned as the company’s new services and being the market leader should drive long-term growth.

Imajin Reportedly Raises Seed Funding Round

By e27

Init-6, East Ventures, 500 Southeast Asia, and a number of investors participated in this funding round for Imajin
Founded by Chendy Jaya, Imajin is a platform that connected local manufacturers with potential customers.
By July 2022, the startup has secured more than 400 local factory partners and 80 customers, including Japanese companies operating in Indonesia

Parenting Platform Supermom Closes US$6M Series A Led by Qualgro

By e27

Singapore-based parenting network Supermom has closed its “oversubscribed” SG$8 (US$6) million Series A fundraising round, led by Qualgro, with participation from AC Ventures
The startup will use the money to enhance its data and product capabilities and accelerate regional expansion
Supermom provides data and consumer insights for over 200 consumer brands, including mother & child, education, FMCG, fashion, and beauty

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Jan 12

Daily Brief TMT/Internet: Shinko Electric Industries, Appier Group, LG Energy Solution, Alibaba (ADR), Hong Kong Hang Seng Index, Kakao Entertainment, Futu Holdings Ltd, JD.com Inc (ADR), iQIYI Inc, Mastercard and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Fujitsu (6702) Subsidiary Selldowns To Come
January TOPIX FFW Review – Some Big Sells
LG Energy Solution: Trading Strategy on End of ESOP Lockup & Valuation Comparisons
Alibaba(Baba.US/9988.HK) 4Q22 Preview: Raise TP for Margin Beat and Topline Recovery
EQD | HSI Index Vs SPX Index: Sell Chinese Equity Vol to Buy US Equity Vol
PIF and GIC Combined Invest About 1.2 Trillion Won in Kakao Entertainment
FUTU(FUTU.US) 4Q22 Preview: Solid Fundamentals Drive Long Term Growth
JD(JD.US/9618.HK) 4Q22 Preview: Topline Reacceleration Could Happen in C2Q23
IQiyi(IQ.US) 4Q22 Preview: Strong Content Only Secures Temporal Performance
Mastercard: Turning Cautiously Positive On The Business As Recession Looms Ahead

Fujitsu (6702) Subsidiary Selldowns To Come

By Travis Lundy

Three years ago I wrote Fujitsu Subsidiary Selldowns or Buy-Ins? My choice then was Fujitsu Frontech which was bought out 8 months later.
A Bloomberg article today with quotes from an interview with the CEO of Fujitsu fuelled some movement today.
The “obvious” trade is Shinko Electric Industries (6967 JP) but you have to buy the new dream.

January TOPIX FFW Review – Some Big Sells

By Travis Lundy

The January 2023 TOPIX FFW Trade was announced today. The two-way trade is worth about ¥325bn.
There are four ADDs previously discussed: Sun* (4053 JP), Appier Group (4180 JP), Chubu Steel Plate (5461 JP), and Chubu Steel Plate (5461 JP).
There are 57 downweights, 11 upweights (but only seven FFW buys). The rest is reverse funding to buy. There are 10 names with >$10mm AND >3 days ADV to sell.

LG Energy Solution: Trading Strategy on End of ESOP Lockup & Valuation Comparisons

This insight provides a trading strategy on LG Energy Solution (373220 KS) with a focus on the end of the ESOP shares lockup period on 27 January.
Currently, LG Energy Solution is trading at P/E of 46.5x in 2024 which is more than 100% higher than the P/E multiples of CATL (20.4x) and Tesla (19.2x) in 2024.
Our view is that in the long-term, LG Energy Solution should not trade at such high valuation premium to Tesla given the latter company’s higher return on capital.

Alibaba(Baba.US/9988.HK) 4Q22 Preview: Raise TP for Margin Beat and Topline Recovery

We expect BABA’s revenue in C4Q22 to be in line with cons., non-GAAP net income to beat cons. by 6%, supported by cost reduction in Freshippo, Taocaicai and Taobao Deal.
Affected by logistics disruption and rising infections, we estimate BABA’s GMV and local consumer service in C4Q22 to decelerate compared to C3Q22. Both segments are to recover in C1Q23.
We raise TP from US$110 to US$130 to reflect upsides from rebound of discretionary demand, slowing Douyin eCommerce growth, and easing regulatory environment. Our TP implies 13x PE in FY2024.

EQD | HSI Index Vs SPX Index: Sell Chinese Equity Vol to Buy US Equity Vol

Chinese equity vol has been high over the last few months with extreme market moves on a number of headlines but is starting to calm down
US equity volatility continues to screen cheap despite calls for a challenging year and likely recession
We consider 2 relative vol trades to play a narrowing of the spread

PIF and GIC Combined Invest About 1.2 Trillion Won in Kakao Entertainment

On 11 January, it was announced that Kakao Entertainment (103260 KS) has attracted large scale investments from Saudi Arabia’s Sovereign Fund (Public Investment Fund – PIF) and GIC (Singapore).
Maekyung Business Daily reported that PIF and GIC combined invested about 1.1 trillion won to 1.2 trillion won in Kakao Entertainment, valuing the company at about 10 trillion won.
This major investment in Kakao Entertainment by PIF and GIC should have a positive impact on Kakao Corp (035720 KS), the controlling shareholder of the company.

FUTU(FUTU.US) 4Q22 Preview: Solid Fundamentals Drive Long Term Growth

We expect FUTU to post C4Q22 revenue and non-GAAP net income 6.4% and 16.0% above consensus, driven by the improved turnover rate in HKEX and the rising interest rate.
We believe the recent regulation measures has little impact on FUTU’s adjusted expectations now widely held by investors. We expect revenue growth to reaccelerate at 37%/31% YoY in 4Q22/2023.
Maintain BUY to FUTU and raise TP by US$1 to US$51.

JD(JD.US/9618.HK) 4Q22 Preview: Topline Reacceleration Could Happen in C2Q23

In C4Q22, we expect JD’s total revenue to grow 8% YoY, largely in line with cons. Non-GAAP net margin is expected to reach 2.0%, up 0.7ppt YoY.
We estimate JD’s GMV growth in C4Q22 to be ~7% YoY, slightly slower than C3Q22 due to logistics disruption in October and November.
Maintain BUY rating and raise TP to US$70.0 due to for acceleration in top line as well as margin improvement. Our TP implies 23x P/2023E.

IQiyi(IQ.US) 4Q22 Preview: Strong Content Only Secures Temporal Performance

We forecast iQIYI 4Q22 top line would be in line, while bottom line would beat cons by 6.4%, largely due to the strong content pipeline and continued cost-saving measures.
Although IQ conducted a series of cost saving measures, we expect these measures are not sustainable. Our top and bottom lines in 2023 are (3.4%)/3.4% vs cons.
Reiterate with SELL and TP US$ 4.15, implying 14.9X PE in 2023.

Mastercard: Turning Cautiously Positive On The Business As Recession Looms Ahead

By Vladimir Dimitrov, CFA

As M&A activity has cooled down, some risks for shareholders have been reduced and management has prioritized higher returns to shareholders.
Although I am turning cautiously positive on Mastercard, there are still risks that need to be considered, according to Mastercard’s chief executive.
The performance gap between Mastercard (NYSE:MA) and the S&P 500 that opened in 2021 has now been completely closed.

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Jan 11

Daily Brief TMT/Internet: KT Corp, Alibaba (ADR), Darktrace, S&P 500, Creative Technology and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Foreign Ownership Limit Stocks in Korea: KT Is Again in the Limelight
Aequitas 2023 Asia IPO Pipeline – Hong Kong
Darktrace: Undervalued Cyber Defense Unicorn. A Steep Discount Is Unjustified
EQD | SPX and NDX : Its US CPI Time and We Look at Trading Opportunites in the Options Market
Creative Technology: After the Passing of Founder, Is the Company’s Independence at Stake?

Foreign Ownership Limit Stocks in Korea: KT Is Again in the Limelight

By Sanghyun Park

KT’s foreign room has been rising since early September last year. If this trend continues, it will likely approach the inclusion borderline of 15% within a month or two.
This trend is expected to continue for the time being as the tough relationship between the KT CEO and the government seems unlikely to be resolved in the short term.
The February inclusion is pretty tight, but May seems like we could be looking out for it.

Aequitas 2023 Asia IPO Pipeline – Hong Kong

In this note, we will take a look at the Asia Pacific IPO pipeline for 2023, starting with Hong Kong.
This list has been compiled on a best effort basis from tracking the company filings and through various other sources.
The deals you see in this note are only a part of our full IPO pipeline tracker. Feel free to drop us a message for additional information on these IPOs.

Darktrace: Undervalued Cyber Defense Unicorn. A Steep Discount Is Unjustified

By Andrei Zakharov

Darktrace is a cyber security and AI unicorn backed by leading VC firms. The company was founded in Cambridge, UK, in 2013 and crossed the $500M ARR mark in 2022.
Darktrace (DARK LN) currently trades at ~4x EV/CY22E revenues, a steep discount relative to other US-based cybersecurity peers that trade at an average of ~9x EV/CY22E revenues.
The cyber defense company achieved GAAP Op Margin and FCF Margin break-even in FY21 and FY22, with an opportunity to deliver profitable stellar growth in the coming years.

EQD | SPX and NDX : Its US CPI Time and We Look at Trading Opportunites in the Options Market

US CPI data is due on Thursday 12th January and is likley to be another important data point
SPX Index is down nearly 5% since November and NDX Index is down nearly 8% over the same period
We look for short-term trading opportunities in the options market

Creative Technology: After the Passing of Founder, Is the Company’s Independence at Stake?

By Nicolas Van Broekhoven

Sim Wong Hoo, founder, and CEO of Creative Technology (CREAF SP), passed away last week.
Sim Wong Hoo controls 33% of Creative. He has two children but they are not involved in the company. What will happen to his stake is a big unknown.
The IP portfolio of Creative Technology (CREAF SP) could be appealing to other technology companies. Given its large cash position, the Enterprise Value is only 34M USD.

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Jan 10

Daily Brief TMT/Internet: Bilibili Inc, Ant Financial Services Group, Paypal Holdings, Alibaba (ADR), Vantage Towers, Xperi, Huobi Token, Iridium Communications and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Bilibili Follow-On Offering – Seems Opportunistic
Ant Group – Headlines Overwhelmingly Positive & Hides Micro Loans Business’ Value
PayPal Holdings Inc (PYPL US): TSS Target Achieved in 12 Days (+12.5%)
Aequitas 2022 IPOs and Placements Performance Review – From the Busiest Year to the Slowest Year
Oak Holdings/Vantage Towers: Tendering Vs. Domination Agreement
XPER: CES and a New Catalyst
Bilibili Follow-On Offering: Limited Upside
Huobi Market Share Plummets in 2022
IRDM: Snapping to a New Price Target

Bilibili Follow-On Offering – Seems Opportunistic

Bilibili Inc (BILI US) aims to raise around US$400m via a follow-on ADS offering.
The company plans to use most of the proceeds to redeem its 2026 notes.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

Ant Group – Headlines Overwhelmingly Positive & Hides Micro Loans Business’ Value

By Oshadhi Kumarasiri

News headlines on Ant Group are overwhelmingly positive these days and they try to hide the fact that the consumer finance business is worth just 1/2 of last year’s value.
We think the main reason why markets are so optimistic these days is that they seem to think that regulatory crackdowns on the platform economy are finally over.
With Jack Ma surrendering control of Ant Financial Services Group (6688 HK) just a few days ago, could anybody say that regulatory pressure is really over?

PayPal Holdings Inc (PYPL US): TSS Target Achieved in 12 Days (+12.5%)

By David Coloretti, CMT

On 16 December we determined that the new interim downtrend low at 69.77 would likely fail and produce an 8% to 13% correction to 75.00/78.50 in 1-2 weeks.
PYPL US subsequently bottomed at 66.39, before reversing to 78.48 (+12.5% from 69.77), 12 days after our recommendation.
Please refer to our publication on 19 October 2022 … “Introducing Our Tactical Trend Reversal Methodology: TSS (Trend Sustainability Score)” for a description of our proprietary TSS methodology.

Aequitas 2022 IPOs and Placements Performance Review – From the Busiest Year to the Slowest Year

By Shifara Samsudeen, ACMA, CGMA

2022 marked our seventh year covering Equity Capital Markets (ECM) in Asia Pacific. 2022 was rather quiet ending with us covering one of the lowest number of IPOs and placements.
We ended 2022 with an accuracy rate of 74.6% across 55 IPOs that we covered and 70.5% across 78 placements.
For those not familiar with our coverage, we aim to cover all IPOs and placements with a minimum deal size of US$100m across Asia-Pacific, including China ADRs.

Oak Holdings/Vantage Towers: Tendering Vs. Domination Agreement

By Jesus Rodriguez Aguilar

The agreement between Vodafone and the consortium values the company at a generous 24x EV/Fwd EBITDA, 19% premium over the 3-month VWAP (14.7% above my DCF-based fair value estimate).
Nevertheless the spread (+0.44%) signals that Oak Holdings may not obtain the necessary 95% to squeeze-out. Risk arb funds are betting on higher returns from a Domination Agreement.
On rather aggressive assumptions (90% payout, 4.5% rate of return, 2.5% growth) a dividend-discount model provides a €39.6/share valuation. This could still turn into another messy Kabel Deustschland scenario.

XPER: CES and a New Catalyst

By Hamed Khorsand

XPER used the CES event this year to make several news announcements, but the biggest news for XPER was the one released by Roku Inc. (ROKU).
The ROKU announcement causes TiVo being the only independent TV operating system. We believe this could result in XPER establishing greater market share for its TVOS than originally expected
During CES Verstel introduced a series of TVs under multiple brands that would use TiVo TVOS. Additionally, XPER revealed more automakers that are releasing car models with AutoSense and AutoStage

Bilibili Follow-On Offering: Limited Upside

Bilibili announced a follow-on equity offering of 15.34m ADS priced at $26.65 per ADS partially in exchange for convertible senior notes due 2026 (US$384.8m) and to replenish its cash reserves.
Each ADS represents one ordinary share and new equity offering of 15.34m shares will account for approx. 3.7% of the company’s extended share capital post follow-on offering.
Bilibili Inc (BILI US) ADS dropped 5.76% following the announcement of the follow-on offering and we believe there is limited upside.

Huobi Market Share Plummets in 2022

By Kaiko

Price Movements: Most Layer 1 tokens have struggled versus ETH since December, but SOL and ATOM have recently outperformed.
Market Liquidity: Curve’s 3pool – made up of USDT, USDC, and DAI – has seen its total value locked fall from $5.5bn to just $600mn over the past year.
Derivatives: Both SOL and LDO experienced a short squeeze as each token unexpectedly rallied.

IRDM: Snapping to a New Price Target

By Hamed Khorsand

The technology agreement IRDM had first announced in July 2022 became clear with the official naming during CES.
QCOM has entered into a service provider agreement with IRDM that would result in new Snapdragon with satellite connectivity
The news is more significant than a smartphone maker since QCOM’s mobile processors are used by multiple smartphone makers

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Jan 09

Daily Brief TMT/Internet: Taiwan Semiconductor (TSMC) – ADR, Sun*, Keyence Corp, Ant Financial Services Group, Meta Platforms (Facebook), Youlife International Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Taiwan Dual-Listings: TSMC Premium Hitting High Territory, ASE Shoots to 6.1%
Sun* (Sun Asterisk – 4053 JP) TOPIX Inclusion Event
Keyence (6861) | Better Risk/Reward at Peers
Ant Group: Shareholder Restructuring Announced and the Lack of IPO Plan Are Negatives Surprise
Meta Platforms: A Value Opportunity In The Tech Environment
Youlife International Pre-IPO Tearsheet

Taiwan Dual-Listings: TSMC Premium Hitting High Territory, ASE Shoots to 6.1%

By Vincent Fernando, CFA

TSMC’s ADR premium is entering the higher end of its range since early 2022. Earnings coming this week.
UMC’s ADR has flipped from a discount to a moderate premium. Earnings are ahead as well.
ASE Technology’s ADR premium has reached 6.1%, high even for this usually higher-premium trading pair.

Sun* (Sun Asterisk – 4053 JP) TOPIX Inclusion Event

By Travis Lundy

In mid-December, digital UX creation agency (90% of revenues) and “talent agency” (10%) announced it would move from TSE Growth to TSE Prime mid-December 2022.
This was in Janaghan’s “Not Ready” list in TOPIX Inclusions: Who Is Ready (Dec 2022) because it did not meet two of the requirements. But it turns out it did.
This is therefore a TOPIX inclusion event at end-January 2023.

Keyence (6861) | Better Risk/Reward at Peers

By Mark Chadwick

Keyence is a structural growth stock that has fallen by 31% over the past year reflecting near term risks to growth
Although Keyence is a major beneficiary of continued investment in industrial automation, the company would need to grow significantly quicker than the industry to justify the current valuation
We analyse Keyence’s core value drivers – revenue, margins, risk and reinvestment – but see better risk/reward in other growth stocks

Ant Group: Shareholder Restructuring Announced and the Lack of IPO Plan Are Negatives Surprise

By Victor Galliano

The announced restructuring of Ant Group holding companies will block founder Jack Ma from achieving majority voting on the board following the implementation of the holdcos adjustment
The majority of board directors will be “independent” post the holdco restructuring and they are likely to drive a more social policy focused agenda, as the 2021 sustainability report suggests
We see these developments, and especially the lack of IPO plan, to be negative for non-government aligned Ant Group shareholders, such as the international private equity groups and especially Alibaba

Meta Platforms: A Value Opportunity In The Tech Environment

By Moat Investing

META’s sustainable earnings come up with at least 30% to 35% upside potential.
There is a huge margin of safety at the current price, and multiple should expand from now forward.
Meta Platforms, Inc. (NASDAQ:META) is one of the most beaten-up stories among the FAANG, the storytelling around the Metaverse has failed to be understood by the market, and a great deal of pessimism and future catastrophic scenarios have been priced into the stock.

Youlife International Pre-IPO Tearsheet

By Ethan Aw

Youlife International Holdings (1759732D CH) is looking to raise at least US$100m in its upcoming HK IPO. The deal will be run by Macquarie and CCB International.
Youlife International is a blue-collar lifetime service platform in China. It assists blue-collar talent with upskilling and lifetime career development.
According to CIC, Youlife ranked first among all blue-collar lifetime service platforms in China in terms of revenue generated from blue-collar lifetime services in 2021.

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Jan 08

Daily Brief TMT/Internet: Meituan, LG Electronics, Alibaba (ADR), Hong Kong Hang Seng Index, Quanta Computer and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Meituan 4Q Food Delivery Updates
LG Electronics: A SELL Candidate Amid Difficult Business Condition for Consumer Electronics in 2023
ECM Weekly (8th Jan 2022) – Sinohytec, Beauty Farm, Sula, Kfin, Bionote, Meidong, CIFI, Jinxin Fert
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
Long Apple Vs. Short Quanta & Pegatron: Trade Ahead of Apple’s Upcoming Earnings

Meituan 4Q Food Delivery Updates

By Xin Yu, CFA

Food delivery daily order growth gradually recovered in late Dec
Instashopping continued its growth momentum. Community group purchase has transformed into Next Day Delivery
With the recovery of restaurants and travel post re-opening, Meituan is expected to be one of the biggest beneficiaries.

LG Electronics: A SELL Candidate Amid Difficult Business Condition for Consumer Electronics in 2023

After a disappointing earnings results in 4Q 2022, we believe LG Electronics (066570 KS) is a SELL candidate.
The decline in housing prices in major countries such as the US and South Korea have negatively impacted consumers’ purchases of consumer appliances.
With the consensus that is likely to cut their operating profit estimates significantly in 2023, we think that LG Electronics’ shares could fall another 20-25% over the next year.

ECM Weekly (8th Jan 2022) – Sinohytec, Beauty Farm, Sula, Kfin, Bionote, Meidong, CIFI, Jinxin Fert

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, only the smaller issuers were active with most following through on year end listing plans.
On placements front, HK market got going in a jiffy, riding on the coattails of China reopening.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces

Long Apple Vs. Short Quanta & Pegatron: Trade Ahead of Apple’s Upcoming Earnings

By Vincent Fernando, CFA

Apple shares have fallen significantly on a weakening outloook; Yet manufacturers Quanta and Pegatron’s shares still haven’t reacted negatively.
Inventory levels appear too high across Apple’s key contract manufacturers based on our analysis.
We see Quanta & Pegatron at risk of margin pressure in 2023E with negative operating leverage potentially causing significant profit declines.

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Jan 07

Daily Brief TMT/Internet: Intouch Holdings, iQIYI Inc, STMicroelectronics NV, NetEase Inc, Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Thaicom: Gulf Energy’s Low-Balled MTO Now Open For Acceptances
IQIYI (IQ US): Taking a Break
STMicroelectronics: Building Positions Ahead of the Next Upcycle
NetEase(NTES.US) 4Q22 Preview: Enter a Period of Lukewarm Performance
Time to Move Forward to Corporate Governance 2.0, Where the Substance Will Be Questioned

Thaicom: Gulf Energy’s Low-Balled MTO Now Open For Acceptances

By David Blennerhassett

Back on the 7 November, Intouch Holdings (INTUCH TB)‘s board approved the sale of its 41.13% stake in Thaicom Pcl (THCOM TB) to Gulf Energy Development Public Company (GULF TB).
The sale price was Bt 9.92/share, a 19.3% discount last close. Intouch shareholders overwhelmingly approved the sale on the 28 December, which subsequently triggered an MTO.
The Offer is now open for acceptances. The Offer closes on the 9 February. Intouch will pass through 100% of the sale proceeds via a special dividend.

IQIYI (IQ US): Taking a Break

By Eric Chen

Since we highlighted the compelling asymmetrical risk-return payoff of IQ last November, the stock has surged 200%, compared to 45% gain for KWEB which tracks China ADRs.
We believe the outperformance was driven by more concrete progress in fundamental turnaround including multiple blockbuster drama released, increase in subscription fee and removal of debt overhang.
With $7 billion market cap (on diluted basis), IQ already trades at 35 times 2023 earnings, pricing in fair degree of positive prospects. We advise investors to lock in profits.

STMicroelectronics: Building Positions Ahead of the Next Upcycle

By Alexis Dwek

New technologies such as 5G, 3D, Time of Flight and new materials such as silicon carbide and gallium nitride have paved the way for the Company’s long-term growth
The semis market should reach trough in H1 2023; the low point in share prices is generally a few months before the semis market itself reaches the bottom
Valuation is appealing at these levels. Discount to peers. Upside potential is over 50%

NetEase(NTES.US) 4Q22 Preview: Enter a Period of Lukewarm Performance

We estimate that NetEase’s 4Q22 revenue/non-GAAP net income will be in line/12% vs cons. Our 2023’s revenue/non-GAAP net income are in line/12% vs cons.
In 4Q22, several of NetEase’s mid-tier games saw declines in ranking. We expect that NetEase will have a period of single digit growth in revenue.
We still rate NetEase BUY and raise TP to US$ 87. But NetEase is not our top pick within China internet space.

Time to Move Forward to Corporate Governance 2.0, Where the Substance Will Be Questioned

By Aki Matsumoto

Although Fujitec’s corporate governance framework has improved in places, the Statutory Auditor and Nominating Committee aren’t functioning, and the Board of Directors with a majority of independent directors isn’t functioning.
METI survey shows that 20% of independent directors are friends of CEO, a glimpse of how companies expect independent outside directors to play a role in endorsing executive management policies.
With several revisions of Corporate Governance Code, companies have ostensibly made steady progress in corporate governance efforts. However, whether this has been accompanied by substance varies from company to company.

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Jan 06

Daily Brief TMT/Internet: Artspark Holdings, Weimob Inc., Tencent, SK Square, Futu Holdings Ltd, Ant Financial Services Group, Loongson Technology, FTX Token, A10 Networks and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

TOPIX Inclusions: Who Is Ready (Jan 2023)
Weimob Placement – Share Price Momentum over the past Few Months Have Been Strong
Tencent(700.HK) 4Q22 Preview:Turning Points Are Emerging
Korea M&A Outlook in 2023: What’s for Sale?
EQD | Tencent (700 HK): Use Derivatives to Protect Recent Gains
CSRC Sanction Is Likely Darkness Before Dawn
Ant Group’s Lending Unit Gets Approval for $1.5 Billion Capital Boost
Chinese Intel Alternative Makes Consumer Play With Retail Store
A Look at Gemini USD
ATEN: Shifting to a Second Half Event

TOPIX Inclusions: Who Is Ready (Jan 2023)

By Janaghan Jeyakumar, CFA

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
This insight is a follow-up to TOPIX Inclusions: Who Is Ready (Dec 2022).
Our latest top pick for TOPIX Inclusion pre-events is Artspark Holdings (3663 JP).

Weimob Placement – Share Price Momentum over the past Few Months Have Been Strong

By Clarence Chu

Weimob Inc. (2013 HK) is looking to raise about US$205m in its primary placement to fund R&D, upgrade marketing systems, and for general working capital purposes.
On an ADV basis, the deal is a relatively small one at just 3.6 days of the firm’s three month ADV.
In this note, we will run the deal through our ECM framework and talk about the recent updates.

Tencent(700.HK) 4Q22 Preview:Turning Points Are Emerging

Our Tencent 4Q22’s rev. is in line, while non-IFRS net income would beat cons. by 5.2%. We estimate that top and bottom line will grow 13%/14% YoY in 2023.
We suggest major business lines see turning points in 4Q22, supported by rebound of Peacekeeper Elite’s gross billings, approval of new game codes, monetization of Wechat Video Account, etc.
Tencent is one of our top picks. Video Account, global game publishing, and margin beat are three major catalysts. Our TP HK$ 407 implies 26.1X PE in 2023.

Korea M&A Outlook in 2023: What’s for Sale?

More than 20 trillion won (US$16 billion) worth of deals are up for M&As in 2023.
However, due to high interest rates and differences on valuations among buyers and sellers, the M&A market in Korea is likely to continue to be weak in 2023.
In this insight, we discuss 24 companies that are up for M&As this year in Korea, including Hanon Systems, SK Shieldus, and K Car.

EQD | Tencent (700 HK): Use Derivatives to Protect Recent Gains

Stock is up over 80% from October lows and almost 10% in 2023 already
Sentiment over fundamentals appears to be driving the rally and stock is back in the worlds top 10 most valuable companies
We consider some option strategies to roll profits and reduce exposure

CSRC Sanction Is Likely Darkness Before Dawn