TMT/Internet

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.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

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

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.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

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

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

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

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.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

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

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

Hon Hai Precision Industry (2317 TT) and Yulon Motor Company (2201 TT) plan to IPO their electric vehicles JV Foxtron Vehicle Technologies in 1Q23E, seeking NT$10bn.
The IPO’s valuation could be a major uplift for Yulon Motor Company (2201 TT)‘s valuation.
Hon Hai Precision Industry (2317 TT): Successful IPO would provide markets proof that its EV platform can create value uplifts again and again in the future. Accumulate.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 21

Daily Brief TMT/Internet: Semiconductor Manufacturing International Corp (SMIC), Weimob Inc., Bilibili, Taiwan Semiconductor (TSMC) – ADR and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Hang Seng TECH Index Rebalance: Float & Capping Changes
Weimob (2013 HK): Strategic Patience Will Be Rewarded (Part 2)
Hang Seng Tech Rebalance Dec 2022 – No Name Changes, Decent Flow
Taiwan Tech Weekly: AMAT Results Buoy Market, But Nanya at Risk, Foreigners Massively Buy Taiwan

Hang Seng TECH Index Rebalance: Float & Capping Changes

As expected, there are no adds or deletes for the Hang Seng Tech Index (HSTECH INDEX) in December. However, there are plenty of capping and float changes to drive flows.
The December rebalance is expected to have a one-way turnover of 2.3% resulting in a one-way trade of HK$1.9bn.
Short interest is greater than 5% of float on a few stocks and a continued recovering in markets could lead to a squeeze higher.

Weimob (2013 HK): Strategic Patience Will Be Rewarded (Part 2)

By Eric Chen

Weimob has emerged from the pandemic stronger and leaner, further consolidating its leadership in China’s e-commerce SaaS market.
Drawing insights into the supply side (merchants/brands) on Alibaba platform, our bottom-up analysis suggests that Weimob potentially has a US$600mn revenue opportunity by 2025.
We value Weimob at US$3bn assigning 5xPS on its US$600mn revenue by 2025, implying 25% CAGR over 3-year period. Patience needed to navigate high-inflation environment which pressures growth assets.

Hang Seng Tech Rebalance Dec 2022 – No Name Changes, Decent Flow

By Travis Lundy

The Hang Seng Tech Index Review was announced on Friday after the close. There are no name changes but there is decent flow. 3% one-way turnover.
There are five capping changes and one very large share count change making things interesting.
All told, this is less impactful than it was last time, and less impactful than the other index rebalances announced.

Taiwan Tech Weekly: AMAT Results Buoy Market, But Nanya at Risk, Foreigners Massively Buy Taiwan

Applied Materials (AMAT US) guidance buoyed the overall industry, but negative Memory news from AMAT and Micron make Nanya Technology (2408 TT) shares look at risk of near-term pullback.
Foreigners massively net-bought Taiwan over the last two weeks, and United Microelectronics Corp (2303 TT) has been a major recipient of capital. ADR premium still has legs.
Hon Hai Precision Industry (2317 TT) received 100,000+ new worker applications but now has trouble finding space for them! We remain structurally bullish on the company.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 20

Daily Brief TMT/Internet: Meituan, Taiwan Semiconductor (TSMC) – ADR, Travelsky Technology Ltd H, NVIDIA Corp, Hong Kong Hang Seng Index, Cisco Systems and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Index Rebalance & ETF Flow Recap: HSCI, S&P/ASX, HSI, HSCEI, KOSPI2, KOSDAQ150, Wharf, Meituan
Intel Vs. TSMC Monitor: TSMC Soars on Buffett Investment, Why INTC Could Now Revert
Last Week in Event SPACE: Tencent/Meituan, Halcyon Agri, Swire Pac, Perpetual/Pendal, OZ Minerals
ECM Weekly (20th Nov 2022) – I-Tail, Growatt, Lygend, SinoHytech, Meituan/Tencent, Olympus, Paytm
Travelsky (696): Beneficiary from Potential Reopening in China
NVIDIA Corp: New Product Launches & Other Drivers
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
Cisco Systems Inc: Major Drivers

Index Rebalance & ETF Flow Recap: HSCI, S&P/ASX, HSI, HSCEI, KOSPI2, KOSDAQ150, Wharf, Meituan

Plenty of index change announcements in the last week – Kospi 200 Index, KOSDAQ 150 Index, Hang Seng Index, HSCEI, HSTECH, S&P BSE SENSEX Index and FTSE AW/AC Index.
There are a bunch of indices that have the end of their review periods in the coming week while announcements for China indices are expected post market close on Friday.
There were outflows from ETFs for most Asian markets over the week with China and Hong Kong ETFs taking the biggest hits.

Intel Vs. TSMC Monitor: TSMC Soars on Buffett Investment, Why INTC Could Now Revert

TSMC has outperformed INTC by 23% in just two weeks, which is an extreme divergence in a short period of time by historical standards.
Foreseeable company-specific events or news flow over the next 30 days appears limited.
Valuation remains supportive for INTC and we believe it could recover part of its recent underperformance in the next month.

Last Week in Event SPACE: Tencent/Meituan, Halcyon Agri, Swire Pac, Perpetual/Pendal, OZ Minerals

The in-specie distribution is basically a forward block sale of Meituan (3690 HK). You know it’s coming. You don’t know how large it is. It is not unlike a lockup situation.
China Hainan Rubber Industry (601118 CH) will start with 36% in Halcyon Agri (HACL SP). Founders and friends have ~10%. Getting to 50%+ will be easy.
The Swire Pacific (B) / Swire Pacific (A) ratio is near a 19-year low. The last time it dipped to 6% under its 3mo average, it bounced back in 4 weeks.

ECM Weekly (20th Nov 2022) – I-Tail, Growatt, Lygend, SinoHytech, Meituan/Tencent, Olympus, Paytm

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, Indian IPOs delivered some decent performance while HK IPOs are likely to pick up as well.
There were a number of placement and blocks this week, after the expiry of lockups in a few Indian names.

Travelsky (696): Beneficiary from Potential Reopening in China

By Henry Soediarko

Travelsky Technology Ltd H (696 HK) is a system provider for airports in China that benefit from the reopening plan.
The company is not sensitive to the oil price and it has low debt which makes it attractive compared to the airlines.
The stock is trading at a 40% PBR discount to Shanghai International Airport. Historically, the company is trading at a 50% discount to its 5-year high on PBR.

NVIDIA Corp: New Product Launches & Other Drivers

NVIDIA Corp delivered a mixed performance as the company’s revenues exceeded the analyst consensus estimate.
However, its earnings were below par given the persistent supply chain interruptions, increased export bans, and macroeconomic challenges.
Leading U.S. cloud providers and a growing number of consumer Internet companies were the main drivers of year-over-year increases for workloads like big language models, recommendation systems, and generative AI.

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

By Simon Harris

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

Cisco Systems Inc: Major Drivers

Cisco had a good start to fiscal 2023 and managed to deliver an all-around beat.
The management continued their shift to greater software and subscription-based recurring revenue, even as they proactively manage through a developing and complicated market environment.
Web-scale orders increased by double digits or more on a trailing 12-month basis for the ninth consecutive quarter.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 19

Daily Brief TMT/Internet: Tencent, Weimob Inc., Alibaba (ADR), Taiwan Stock Exchange Weighted Index, Taiwan Semiconductor (TSMC), Bumble and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Tencent/Netease: Breakthrough in November Batch of Game Approval
Weimob (2013 HK): Strategic Patience Will Be Rewarded
EQD | Alibaba (BABA US): Use Elevated Upside to Buy Call Ratios into Year-End
Bullish Reversals Continue: TAIEX, KOSPI, AEX, Hang Seng, CSI 300. Buy Cyclicals/Growth on Pullbacks
Taiwan Semiconductor: Initiation of Coverage – Geopolitical Challenges & Other Factors
Bumble Inc.: Blind Dating Offering & Other Drivers

Tencent/Netease: Breakthrough in November Batch of Game Approval

By Ke Yan, CFA, FRM

China just announced game approval for November batch after one month break. The number of games approved is inline with the previous three months.
Pace of China game approval stays flattish, at a much slower pace than pre-tightening.
Both Tencent and Netease received approval for one game. It is more symbolic than financially material. Sentiments are turning slightly but it is not out of the wood yet.

Weimob (2013 HK): Strategic Patience Will Be Rewarded

By Eric Chen

Weimob’s share price more than doubled in a month on encouraging 3Q preliminary data and improved sentiment towards China assets
We explore socio-economic factors resulting in the slow ramp up of China SaaS sector , size Weimob’s TAM by drawing insights from Alibaba and determine its valuation in two-piece report
In the first part, we argue that inadequate cost or efficiency competitiveness of SaaS solutions over existing labor-based or manual processes have been a key drag

EQD | Alibaba (BABA US): Use Elevated Upside to Buy Call Ratios into Year-End

By Simon Harris

Alibaba unveiled an upsized buyback plan this week and stock rallied despite a revenue miss
Sentiment in China is changing with tweaks to the Covid strategy and improving economic outlook
Call buying has elevated upside vols providing trading opportunites for both directional and volatility traders

Bullish Reversals Continue: TAIEX, KOSPI, AEX, Hang Seng, CSI 300. Buy Cyclicals/Growth on Pullbacks

By Joe Jasper

The bear market rally that we have discussed since our Sept. 29 Int’l Compass has managed to surpass our price targets, which were YTD downtrends on the ACWX-US and EFA-US.
As a result of these bullish reversals and breakdowns on the US dollar (DXY) and 10-year Treasury yield, we are upgrading our outlook to neutral.
Buy ideas on a pullback in: Consumer Discretionary, Energy, and Technology/Tech Services

Taiwan Semiconductor: Initiation of Coverage – Geopolitical Challenges & Other Factors

This is our first report on Taiwan Semiconductor, the world’s largest dedicated contract chip manufacturer.
The company delivered a mixed set of results for the past quarter with revenues below expectations as it continues to see softness in the consumer end-market category.
TSMC’s other end market categories, like data centers and the automotive industry, are currently stable and it did manage to deliver an earnings beat.

Bumble Inc.: Blind Dating Offering & Other Drivers

Bumble delivered a mixed set of third-quarter results as it failed to meet market expectations on the revenue front but managed an earnings beat.
The company produced a decent top-line growth of 17% year over year in Q3, driven by 28% growth for the Bumble App.
The revenue growth would have been 10 points higher and Bumble App revenue growth would have been 5 points higher after adjusting for forex and the situation in Ukraine.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 18

Daily Brief TMT/Internet: Sea Ltd, Grab, Appier Group, Taiwan Semiconductor (TSMC), Meituan, Dollar Index, Delta Electronics, ADDX, Mogul, Privy Identitas Digital and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Sea & Pinduoduo Are in Dangerous Territory With Tencent in Disposal Mode
Grab: Almost No Price Reaction to a So-Called Strong Set of Results as There Is Much to Prove
Appier (4180) | Why Has the Stock Outperformed?
Taiwan Dual-Listings: TSMC Premium Reverts, Rare Hon Hai & UMC Discounts
Buy Meituan on Tencent’s Distribution Announcement of Meituan Shares
Defending the Gold Premium
Delta Taiwan Vs. Thailand Monitor: China Concerns Easing, EV in 2023 Favor Delta Taiwan
SG’s ADDX Raises $20m in Round Led by Korea’s KB Securities
AI-Driven Property Portal MOGUL.sg Nets US$6.5M Series A
KKR Leads US$48M Series C Round of Indonesian EKYC Company Privy

Sea & Pinduoduo Are in Dangerous Territory With Tencent in Disposal Mode

After distributing over 450m of JD.com Inc. (9618 HK) shares to its shareholders late last year, Tencent (700 HK) took a short break from the downsizing of its public investments.
Downsizing seems to have restarted with yesterday’s announcement of the distribution of more than 950m Meituan (3690 HK) shares to Tencent shareholders.
Having already met Tencent’s soft self-sustainability criteria, Pinduoduo (PDD US) and Sea Ltd (SE US) could be lined up as Tencent’s next portfolio downsizing targets.

Grab: Almost No Price Reaction to a So-Called Strong Set of Results as There Is Much to Prove

Grab (GRAB US) reported 3Q2022 results yesterday. 3Q revenue increased 143% YoY to $382m (vs consensus $348m) while reported an adjusted EBITDA (negative) of $161m (vs consensus $202m).
The highlight of 3Q2022 earnings was the break-even of deliveries business as well as improvement in Mobilities financials driven by reduction in incentives (as % of GMV).
Though the company called it a strong set of results, Grab’s share price moved up by 0.64% could be an indication that the profitability may not be sustainable.

Appier (4180) | Why Has the Stock Outperformed?

By Mark Chadwick

Appier has been by far the best performing small-cap growth stock in Japan this year
The company is gaining market share overseas, massively augmenting the Total Addressable Market
It’s high growth, rising margins, and growing TAM makes this a top stock for SaaS investors

Taiwan Dual-Listings: TSMC Premium Reverts, Rare Hon Hai & UMC Discounts

TSMC ADR’s premium has reverted after going as high as 10.9%.
Hon Hai’s London-listed GDRs are trading at a historically rare discount.
UMC ADRs also look interesting relative to the Taiwan shares given their rare discount.

Buy Meituan on Tencent’s Distribution Announcement of Meituan Shares

By Xin Yu, CFA

Tencent announced to transfer 958 million shares of Meituan as a special dividend
This distribution is similar to the previous JD distribution in Dec 2021
The transfer of Meituan shares can provide potential two entry points of the stock.

Defending the Gold Premium

By Kaiko

When you look around the world for a big, liquid, globally accepted safe haven, there is only one, and that is gold, which continues to reassert its status as the asset of last resort.
Pre-1970, in the days of the gold standard, gold formally enjoyed this role.
Today, after a 50-year break, the free market is putting gold back onto the pedestal where it belongs.

Delta Taiwan Vs. Thailand Monitor: China Concerns Easing, EV in 2023 Favor Delta Taiwan

Delta Taiwan has outperformed Delta Thailand, but remains at a historically low relative valuation.
China concerns, which may have impacted Delta Taiwan on a relative basis, appear to be incrementally improving.
We continue to favor Delta Taiwan vs. Delta Thailand, historical data implies Delta Taiwan is more likely to outperform Delta Thailand than vice-versa.

SG’s ADDX Raises $20m in Round Led by Korea’s KB Securities

By Tech in Asia

Singapore private market exchange ADDX has secured US$20 million in a pre-series B extension round.
The new capital injection comes on top of the US$58 million that ADDX initially raised in May, the company said in a release.
Regulated by the Monetary Authority of Singapore, ADDX uses blockchain and smart contract tech to automate the manual processes in private market investing.

AI-Driven Property Portal MOGUL.sg Nets US$6.5M Series A

By e27

MOGUL.sg’s 3D map supports searches with an immersive experience to help prospective buyers visualise the properties and their surrounding areas better.
MOGUL.sg, an AI-driven property search portal in Singapore, has raised S$9 (US$6.5) million in its first-ever funding round.
Launched in 2018, MOGUL.sg aims to make property searches easy with smart keywords, property tagging, and a specially curated agent concierge team to assist homeowners.

KKR Leads US$48M Series C Round of Indonesian EKYC Company Privy

By e27

Privy has 30M+ verified users and 1,800 enterprise consumers and processes 40M+ digital signatures per year.
Jakarta-based digital signature and identity company Privy has secured US$48 million in a Series C funding round.
Privy will use the capital to support the development of its new consumer and enterprise products. The company also intends to expand into overseas markets to accelerate growth further.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 17

Daily Brief TMT/Internet: Meituan, Sea Ltd, Devsisters, WCP, Tencent, Meta Platforms (Facebook), NVIDIA Corp and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Meituan (3690 HK): Impact of Tencent’s In-Specie Dividend
Tencent Distribution of Meituan Shares Official – Impact and Index Implications
Tencent Meituan Dividend – The US$20bn Overhang – Impact, Placement, Index, Other Investees
Sea Ltd 3Q22 Results – Set up Nicely To Make Big Gains On The Short Side
KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises
KOSPI 200 & KOSDAQ 150 Constituent Changes: Several Surprises
Tencent 3Q: Shows Signs of Improvement
Tencent (700 HK): Rev Down by 1.6% in 3Q22, But Game Sees Positive Comment from Gov for First Time
Buy Polygon For Big-Brand Crypto Scaling
Breaking Growth Short Candidates: Plug Power, Nvidia, Palantir, Roblox

Meituan (3690 HK): Impact of Tencent’s In-Specie Dividend

Tencent (700 HK) has announced that it will pay an interim dividend via an in-specie distribution of the bulk of its holding in Meituan (3690 HK).
Passive FTSE and MSCI trackers will receive shares in Meituan (3690 HK) from their Tencent (700 HK) holdings and they will not need to trade anything in the market.
First it was JD.com Inc. (9618 HK), now it is Meituan (3690 HK). The market will be looking for other stocks held by Tencent (700 HK) that could be next.

Tencent Distribution of Meituan Shares Official – Impact and Index Implications

By Travis Lundy

In mid-August at mid-day, a Reuters article suggested Tencent (700 HK) would seek to divest its $24bn stake in Meituan (3690 HK) this year. The stock fell 9% that afternoon.
The general underlying suggestion was that regulators wanted them to sell. Other articles suggested later both aspects were “untrue”
With Q3 earnings, Tencent today announced a Jan23 distribution (Mar23 settlement) of 958,121,562 Meituan shares (1 for every 10 Tencent shares held). There are significant flow and index implications.

Tencent Meituan Dividend – The US$20bn Overhang – Impact, Placement, Index, Other Investees

By Sumeet Singh

On 16th Nov 22, post-market close, along with its 3Q22 results Tencent also declared an interim dividend by way of distribution in specie of Class B Ordinary shares of Meituan.
The share distribution follows the template of the US$16bn worth of JD.com shares that Tencent paid out after its dividend announcement at the end of 2021.
In this note, we talk about the implications of the deal.

Sea Ltd 3Q22 Results – Set up Nicely To Make Big Gains On The Short Side

Sea Ltd (SE US) shares were up 36% yesterday following a relatively small top-line beat of 4.8% and a narrower-than-expected operating loss of $495.6m (consensus: $581.9) through rigorous cost-cutting.
The share price move sets-up nicely to make gains on the short-side, as e-commerce and fintech remain unprofitable after cutting-down necessary expenses such as logistics and senior management cash compensation.
We estimate the fair value of Sea Ltd at around $10.0bn EV compared to the current EV of $33.1bn, which implies a downside of 66% to Sea’s post-3Q22 price.

KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises

There are 11 inclusions and 11 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance to be implemented at the close on 8 December.
We had forecast most of the changes (10 adds and 9 deletes), so there are a few surprises. The inclusion of SillaJen Inc (215600 KS) is the biggest one.
The adds to the index become short sell eligible from the open of trading on 9 December while the deletions will not be short sell eligible from the same time.

KOSPI 200 & KOSDAQ 150 Constituent Changes: Several Surprises

By Sanghyun Park

For KOSDAQ 150, SillaJen and WCP made it to the index. As for deletions, Intron Biotechnology, Ebest I&S, and Devsisters are additional names to leave the index through regular review.
Lotte Confectionery and Samyang Holdings do not have sizeable DTV. And they were fully expected. Nevertheless, the passive impact is so significant that the LONG/SHORT approach still seems valid.
We should focus on KOSDAQ 150 inclusions whose return has been high due to the inflow to secure a borrow pool for short-selling on top of the preemptive rebalancing flow.

Tencent 3Q: Shows Signs of Improvement

Tencent (700 HK) reported 3Q2022 results yesterday. Revenue decreased 1.6% YoY to RMB140.1bn (vs consensus RMB140.0bn) while adjusted OP declined 0.2% YoY to RMB28.4bn.
Revenue from both Internet VAS and Online Advertising declined YoY during the quarter. Social networks revenue declined YoY for the first time by 1.9%.
Tencent also announced that it will distribute majority of its shareholding on Meituan (3690 HK) to its shareholders in dividends similar to the special dividend of its stake in JD.com.

Tencent (700 HK): Rev Down by 1.6% in 3Q22, But Game Sees Positive Comment from Gov for First Time

By Ming Lu

Revenue decreased by 1.6% YoY in 3Q22, less than a decrease of 3.1% YoY in 2Q22.
A governmental media gave positive comment to game industry for first time.
We believe the stock has an upside of 52% for year end 2023.

Buy Polygon For Big-Brand Crypto Scaling

By Kevin George

Polygon added to Disney Accelerator program. Fashion and payments companies add to the recent partnerships.
Polygon also added to the recently partnerships with Instagram NFTs.
In a recent article, I advised buying Disney for eventual growth in the metaverse. Polygon (MATIC-USD) is a crypto project that has been making waves with a series of big-name corporate partnerships, including Disney.

Breaking Growth Short Candidates: Plug Power, Nvidia, Palantir, Roblox

By Eric Fernandez, CFA

This model looks for slowing growth, margin declines, sales and/or earnings disappointments, troubling working capital trends, poor estimate trends or lowered guidance, among other characteristics.
The key judgement is whether a slowdown is temporary or the beginning of a trend. These shorts tend to have high valuations and betas. Multiple compression accelerates the stock’s decline.
Today we are flagging Plug Power, Nvidia, Palantir, and Roblox

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 16

Daily Brief TMT/Internet: Taiwan Semiconductor (TSMC) – ADR, Sea Ltd, Chindata Group, Nitro Software Ltd, HYBE, AVEVA Group PLC, Palantir Technologies Inc, FTX Token and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

TSMC (TSM/2330 TT): Berkshire Buying Could Push ADR Premium Higher
Buffett’s Investment in TSMC – Impact on Samsung Electronics and SK Hynix
Sea Ltd: Another Sell-Off?
Chindata: China Merchants Potentially In The Mix
Chindata Takeover: China Merchants Enters as Government Interest in Data Centers Increase
Nitro (NTO AU)’s Binding Offer from Alludo to Force Potentia’s Hand?
HYBE Shorting Opportunity with a Lockup Release from Dunamu
Schneider Electric Sweetens AVEVA Bid
Palantir Inc: Major Drivers
#40 The Contagion Vectors of the FTX debacle

TSMC (TSM/2330 TT): Berkshire Buying Could Push ADR Premium Higher

Overnight, Berkshire Hathaway Inc Cl B (BRK/B US) announced that it held 60.06m shares (US$4.43bn) of Taiwan Semiconductor (TSMC) – ADR (TSM US) as of 30 September.
That caused the ADR to spike after-hours and the local shares have rallied 8% today to close the gap with the ADR.
The ADR premium is trading near the lows and with Berkshire buying up a substantial chunk, Taiwan Semiconductor (TSMC) – ADR should trade at a bigger premium to Taiwan Semiconductor (2330).

Buffett’s Investment in TSMC – Impact on Samsung Electronics and SK Hynix

By Douglas Kim

This insight will discuss the impact of Buffett’s investment in Taiwan Semiconductor (TSMC) – ADR (TSM US) on Samsung Electronics (005930 KS) and SK Hynix (000660 KS).
We believe that Buffett’s sizeable investment in TSMC is likely to have a positive impact on Samsung Electronics and SK Hynix.
This would be similar to how Buffett’s investment in the Japanese trading companies which has had a positive impact on the major Korean trading companies.

Sea Ltd: Another Sell-Off?

The last leg of Sea Ltd (SE US)’s original bull thesis is about to break with Shopee’s revenue expected to start declining from 3Q22 onwards.
However, a lower-than-expected operating loss, driven by cost-cutting could get the bulls excited for a short while following the 3Q22 results due later this week.
With the business remaining unprofitable after cost-cutting, we think 3Q22 results could be another opportunity to profit on the short-side as the FV of Sea could be around $10bn EV.

Chindata: China Merchants Potentially In The Mix

Bain Capital-backed Chindata Group (CD US) is on the move after Bloomberg flagged – again – interest from industry players.
This time, SOE-backed China Merchants Group is understood to be mulling a takeover of Chindata. Shares are up 23% since that article earlier this month.
Back in April, Bloomberg mentioned GDS Holdings (ADR) (GDS US), PE outfit PAG, and EQT AB (EQT SS)-backed EdgeConneX were rumoured to be interested in merging with Chindata.

Chindata Takeover: China Merchants Enters as Government Interest in Data Centers Increase

Chindata Group (CD US) is the leading carrier-neutral hyperscale data center solutions provider in Asia Pacific emerging markets.
At the beginning of the month, Bloomberg reported a takeover offer for Chindata from China Merchants Group, which is a state-owned company.
Several state-owned companies have shown interest towards acquiring data centers and data center companies, which is likely to be in line with China’s strategy of digitization.

Nitro (NTO AU)’s Binding Offer from Alludo to Force Potentia’s Hand?

Nitro Software Ltd (NTO AU) has entered into a binding agreement with Alludo at A$2.00 per share via a scheme or an off-market takeover, with a 50.1% minimum acceptance condition.
This is a good move by the Board to force Potentia to improve its off-market takeover bid of A$1.80 per share. Alludo can leverage synergies to support a higher bid.
The shares are trading through Alludo’s terms as there is an expectation of Potentia returning with improved terms. The break fee implies that Potentia needs to offer at least A$2.02.

HYBE Shorting Opportunity with a Lockup Release from Dunamu

By Sanghyun Park

Dunamu may not be in a financial situation that will allow it to hold HYBE shares. With FTX’s liquidity crisis, Upbit’s liquidity management risk will inevitably rise to the surface.
Doubts about whether the size of Upbit’s assets is sufficiently absorbing the shock of a bank run are still strongly raised in the local market.
These concerns are likely to affect HYBE’s share price as the December 9 release approaches, and yes, we need to design short position setups aimed at this.

Schneider Electric Sweetens AVEVA Bid

By Jesus Rodriguez Aguilar

Schneider increased its cash offer by 4% to 3,225p/share, 47% premium, implied equity value of c.£9,863m and EV of £10,569m, 27.8x EV/Fwd EBIT. Schneider said the sweetened bid is final.
The deal seems dilutive for Schneider: it would mean an implied Fwd P/E of 31.4x vs. 18.7x for Schneider and should increase Schneider’s debt leverage to 1.9x.
The increased offer had been anticipated as the spread had been positive since the offer announcement. Gross spread has now turned negative and is -1.91% (including dividend) as of 14 November. Long.

Palantir Inc: Major Drivers