TMT/Internet

In August, Janaghan Jeyakumar, CFA published his leaderboard and flow estimates for the FTSE Taiwan Dividend+ Rebalance which starts today and runs through next Thursday.
Late in August, I recommended a basket trade. Since then, the BUY basket has outperformed the SELL basket by 7.6%. Set & Forget it is up 7.2%.
I provided timing in the basket trade. Now it is time to swing the other way.

IStyle’s @Cosme Gets a Boost from Amazon Investment

By Michael Causton

Japan’s cosmetics market is the focus of attention from many large international businesses thanks to strong sales and new growth businesses.
The latest is Amazon, which is to become the biggest shareholder in Istyle Inc (3660 JP), providing a major boost to the @Cosme operator.
IStyle, meanwhile, plans to offer cosmetics brands the chance to open popup stores within its retail chain for fixed monthly fees.

💡 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

Sep 16

Daily Brief TMT/Internet: HPSP, Softbank Group, WCP, Openedges Technology, Fazz Financial, Zoominfo Technologies, Glife Technologies, M-DAQ, Uena and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

KOSDAQ 150 Early Entry Candidates for December Rebalancing
Softbank Group – An Acceleration in Investment Does Not Require a Third Vision Fund
Poor Initial IPO Book Building Results for WCP
Open Edges Technology IPO Book Building Results
Fazz Secures US$100M Series C to Grow Its Lending Services, Expand Team in SEA
Earnings Quality Short Candidates: ZoomInfo, Gogo, Elanco Animal Hlth, Sonos, Energizer
Glife Technologies Raises US$3M Series A+ to Connect Restaurants with Farmers
SG Fintech Firm M-Daq Expands into Japan with New Office
East Ventures Pours Seed Funding into Indonesian Online Kitchen Startup

KOSDAQ 150 Early Entry Candidates for December Rebalancing

By Sanghyun Park

HPSP (403870 KS) and Sungeel Hitech (365340 KS) are the candidates for Early Entry in the December rebalancing as they sit comfortably within the Early Entry zone.
Rsupport (131370 KS) and Kona I (052400 KS) are safe deletion bets. If they are not deleted through the rebalancing process, they will most likely be excluded by Early Entry.
HPSP and SungEel should see an inflow equivalent to 0.9x and 0.8x ADTVs, respectively. Rsupport and Kona I will likely suffer an outflow of 3.4x and 3.8x ADTVs, respectively.

Softbank Group – An Acceleration in Investment Does Not Require a Third Vision Fund

By Kirk Boodry

Press reports indicate Softbank Group (9984 JP) is considering a third Vision Fund which seems to conflict with its more defensive posture at Q1 results last month
Softbank can re-accelerate investment at any time without VF3 so talk of a new fund is not a signal change. Perceptions of private equity value are more important
And a key message over the last six months is founders are too optimistic and that seems unlikely to shift suddenly. We have updated our SB performance tables below

Poor Initial IPO Book Building Results for WCP

Several local Korean media reported that the initial book building results for the WCP IPO has been disappointing.
The IPO could be priced close to 60,000 won to 65,000 won won, which would be about 19%-25% lower than the low end of the IPO price range.
The final decision as to whether or not WCP will go ahead with the IPO at lower price or delay it altogether is expected to be made on/near 19 September.

Open Edges Technology IPO Book Building Results

Openedges Technology (394280 KS) announced its IPO book building results. The IPO price has been determined at 10,000 won (33% lower than the low end of the IPO range).
We maintain our Positive View on this IPO but we lowered our base case valuation by 33% to 16,542 won per share, representing a 65% upside from the IPO price.
Open Edges Technology is a system semiconductor IP specialist with one of the world’s only integrated AI semiconductor design asset IP platform. Its sales increased by 376% YoY in 2021.

Fazz Secures US$100M Series C to Grow Its Lending Services, Expand Team in SEA

By e27

Fazz claims it saw US$10B in annualised transaction volumes over the past year and looks to double the volumes in the next 12 months
Fazz, a digital financial services group dual-headquartered in Singapore and Indonesia, has announced a US$100 million Series C funding round.
Fazz will use the funds to grow the business and expand its teams in Singapore, Indonesia, Malaysia, Vietnam and Taiwan from 800 to 1,400.

Earnings Quality Short Candidates: ZoomInfo, Gogo, Elanco Animal Hlth, Sonos, Energizer

By Eric Fernandez, CFA

This 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.

Glife Technologies Raises US$3M Series A+ to Connect Restaurants with Farmers

By e27

Glife Technologies aggregates demand for food produce from restaurants and match it with suppliers, giving restaurants better access to a variety of products
Singapore-headquartered Glife Technologies, a B2B marketplace to connect restaurants with farmers, has extended its Series round with a US$3 million investment from Tin Men Capital.
Glife will use the fresh funds to accelerate the launch and operations of its digital marketplace for F&B suppliers and merchants in Q42022 and enlarge its market share in the Indonesian market.

SG Fintech Firm M-Daq Expands into Japan with New Office

By Tech in Asia

M-Daq Global, a Singapore-based fintech firm that provides forex solutions, has opened an office in Japan as part of its international expansion plans.
The move comes after the company expanded into European markets by signing an agreement with London-based trading platform Turquoise to provide multiasset services.
The company has processed over US$32 billion in cross-border transactions over 45 markets since the launch of its Aladdin FX ecommerce solution in 2016.

East Ventures Pours Seed Funding into Indonesian Online Kitchen Startup

By Tech in Asia

Food delivery is the digital sector with the highest adoption in Southeast Asia. The pandemic gave the segment a huge boost, as people were forced to stay at home.
Local food startup Uena tried to solve this by building a network of online kitchens that can deliver these meals directly to customers.
It targets lower and middle-income segments, such as office workers, university students, convenience store employees, and couriers of food delivery apps.

💡 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

Sep 15

Daily Brief TMT/Internet: 21Vianet Group, NTT (Nippon Telegraph & Telephone), 4Paradigm, Nasdaq-100 Stock Index, Arlo Technologies Inc and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

VNET: Management’s Low-Balled Non-Binding Proposal
NTT (9432) Buyback Has Come – But NTT Is Gonna Grind Out Better EPS So I’d Keep It
4Paradigm IPO: Is Third-Time a Charm?
Sell Resistances Post Plunge
ARLO: Penalized for Growth

VNET: Management’s Low-Balled Non-Binding Proposal

Back on the 11 April, Chinese internet data center services provider VNET (VNET US) announced a non-binding proposal from Hina Group and Shanghai’s Industrial Bank at an utterly underwhelming US$8.00/ADS.
Then crickets. A reported tilt from MBK Partners failed to materialise.
VNET has now announced a preliminary non-binding proposal from founder Josh Sheng Chen, at a similarly underwhelming price of US$8.20/ADS.

NTT (9432) Buyback Has Come – But NTT Is Gonna Grind Out Better EPS So I’d Keep It

NTT announced a buyback in May as discussed in NTT (9432) – Salutary Earnings Salutary Buyback, More to Go, via ToSTNeT-3 to buy a chunk of the govt’s stake.
That will be executed by ToSTNeT-3 buyback pre-open tomorrow, with a bid of 103.1725mm shares at ¥3,877. A separate report suggests the Ministry of Finance will sell 92mm shares.
It is like a mini tender offer so if you want to sell a large chunk of shares, you can. But I wouldn’t.

4Paradigm IPO: Is Third-Time a Charm?

4Paradigm (1764934D HK) is a pioneer and leader in enterprise AI. Company offers platform-centric AI solutions to enterprises that can be deployed on a large scale to support decision making.
The company was ranked the largest player in the platform-centric decision-making AI market in China in 2021 and has filed for a HKEx listing for the third-time this month.
4Paradigm’s top line and margins have improved since we last wrote on the company.

Sell Resistances Post Plunge

By Thomas Schroeder

NDX, DAX, Asia short levels met ahead of the CPI print. Today’s insight focuses on near resistance points to sell into after the conviction bear turn and reiterates downside targets.
Game plan was to short strength Monday/Tuesday and used pivot support/trailing stops to unwind some long exposure.
Call to buy the USD on this pullback at DXY 108 worked well with a focus on Euro, ZAR, and weaker Asian FX.

ARLO: Penalized for Growth

By Hamed Khorsand

ARLO deciding to spend more on brand awareness this year has given reason for some investors to move to the sidelines
ARLO’s second quarter results were better than expected and we believe the third quarter has trended better than expected as well
The timing of switching CFOs was a surprise since five months prior ARLO had established its ad spending strategy.

💡 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

Sep 14

Daily Brief TMT/Internet: Link Administration, 21Vianet Group, Canon Inc, Socionext, NEC Corp, 111 Inc, Netdragon Websoft, Taiwan Semiconductor (TSMC) – ADR, Enphase Energy and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Link Admin/D&D Deal Appears Toast As The Woodford Shoe Drops
VNET’s Opportunistic US$8.20 Bid from the Founder
Canon Buyback Done, Ricoh’s Done Shortly, Back To Your Regularly Scheduled Program
Socionext Pre-IPO – Could Expect a Further Bump in Profitability, Although Some Hidden Risks Remain
Link’s Scheme on Life Support as the FCA Lands a Heavy Blow
NEC (6701) | Even Higher Conviction
111 Inc’s Low-Balled Homecoming Is A Done Deal
Netdragon Websoft – Ms Tang Yu Becomes World’s First Virtual Humanoid Robot CEO
Taiwan Dual-Listings – TSMC Premium Almost Wiped Out, UMC & ChipMOS ADRs Trading at Discounts
Supports to Be Tested Again Following CPI? Stick With Solar Stocks, Buying Manufacturing Names

Link Admin/D&D Deal Appears Toast As The Woodford Shoe Drops

The UK Financial Conduct Authority will approve Dye & Durham’s Offer for Link Administration (LNK AU) provided it backstops restitution and/or redress payments that the FCA may levy on …
… Link Fund Solutions Limited (LFSL) in relation to its management of the Woodford Fund. The amount? Up to a maximum ~A$523mn.
The FCA decision is not final. LFSL does not agree with its view. If D&D does not accept this commitment then a condition under the Scheme may not be satisfied.

VNET’s Opportunistic US$8.20 Bid from the Founder

21Vianet Group (VNET US) disclosed a privatisation proposal from the founder at US$8.20 per ADS, a 2.5% premium to The Hina Group/Industrial Bank’s offer of US$8.00 (disclosed on 11 April).
The data centre industry continues to be a hotbed for M&A. Bloomberg reported on 27 July that MBK Partners is mulling an offer for VNET.
The offer is unattractive, and Mr Cheng, with 28.79% of voting rights, will need the support of other substantial shareholders. This latest offer underlines the current mispricing of the shares

Canon Buyback Done, Ricoh’s Done Shortly, Back To Your Regularly Scheduled Program

Canon Inc (7751 JP) has announced two buyback programs this year of ¥50bn each. Ricoh Company Ltd (7752 JP) announced one in May for ¥30bn.
The result is 2.9% bought back vs 4.4%. The accretion nod goes to Ricoh. But so does the overhang nod going forward. Effissimo+Crossholders is 40% for Ricoh. Mid20s for Canon.
Buyback impact-related trade timing has worked for Canon. Ricoh’s buyback ends imminently. There may be a trade to do here.

Socionext Pre-IPO – Could Expect a Further Bump in Profitability, Although Some Hidden Risks Remain

By Clarence Chu

Socionext (6526 JP) is looking to raise up to US$285m in its Japan IPO.
Socionext is a fabless semiconductor provider in Japan. Sales and profitability has been on an overall uptrend, and design wins in earlier fiscal years should materialize in the coming periods.
However, the firm has generated a substantial portion of revenue from a related party and is reliant on a particular foundry for its front-end manufacturing.

Link’s Scheme on Life Support as the FCA Lands a Heavy Blow

FCA approval, a condition precedent, will be granted subject to a condition that Link Administration (LNK AU) makes funds available to cover any redress payments related to the Woodford matters.
The FCA’s maximum redress payment is £306 million. The timeline and amount of the final FCA fine remain unknown. Dye&Durham/DND and Link will struggle to find a resolution.
With a 30 September end date, the deal is teetering on collapse. The share price may prove attractive for long-term value investors as it reflects a sizeable FCA fine.

NEC (6701) | Even Higher Conviction

By Mark Chadwick

NEC’s buyback announcement sends a clear message that the MTP is on track and management feel the stock is undervalued
The recent IR DAY increased our conviction in the financial model. We were impressed with the improving pipeline of Open RAN customers
The stock is significantly undervalued, trading below book value, with improving ROE

111 Inc’s Low-Balled Homecoming Is A Done Deal

111 Inc (YI US), an online healthcare platform operator in China, announced an unsolicited preliminary non-binding proposal from Gang Yu and Junling Liu – both co-founders and co-chairmans.
Yu and Liu are offering US$3.66/ADS, a 20% premium to the undisturbed price.
Yu and Liu control 92.1% of the votes. There is no shareholder vote on this transaction should a firm Offer unfold.

Netdragon Websoft – Ms Tang Yu Becomes World’s First Virtual Humanoid Robot CEO

NetDragon Websoft announced that it has appointed Ms. Tang Wu (a virtual humanoid robot powered by AI) as its new CEO which would be the first ever in the world.
The company’s education revenue increased by 71.2% YoY to reach 2.4 billion RMB in 1H 2022. Profitability of the edtech business is also improving.
Despite the company’s lower valuation multiples than its peers combined with catalysts including improving edtech business, we are cautious on its shares mainly due to the overall market related risks.

Taiwan Dual-Listings – TSMC Premium Almost Wiped Out, UMC & ChipMOS ADRs Trading at Discounts

By Vincent Fernando, CFA

Taiwan ADR premiums vs. their local shares have generally decreased across the board.
Is TSMC’s high ADR premium a thing of the past?
UMC and ChipMOS ADRs are both trading at historically rare discounts to their Taiwan shares.

Supports to Be Tested Again Following CPI? Stick With Solar Stocks, Buying Manufacturing Names

By Joe Jasper

Key supports that we highlighted in last week’s Compass (Sept. 7) held strong, including 3900-3910 on the SPX, $293 on the Nasdaq 100 (QQQ), $177-178 on the Russell 2000 (IWM).
We got the bounce where bulls needed to hold, but these levels could be tested again following this morning’s hotter-than-expected CPI report.
As long as the aforementioned supports continue to hold, we continue to believe the lows are likely in for this bear market — something we noted throughout late-July and August.

💡 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

Sep 12

Daily Brief TMT/Internet: 111 Inc, Total Access Communication, Tencent, Enovix Corp and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

111’s Opportunistic US$3.66 Bid from the Co-Founders
Merger Arb Mondays (12 Sep) – DTAC/True, Link Admin, Ramsay, Genex, Tyro, EVOC, Giordano, 111
ECM Weekly (12th Sep 2022) – Onewo, CALB, YSB, Medanta, Beneunder, JMDC, SH Holdings, Indigo
Breakthrough Battery Innovation
China Internet Weekly (12Aug2022): Tencent, JD.com, Meituan, NetEase, Inkeverse

111’s Opportunistic US$3.66 Bid from the Co-Founders

111 Inc (YI US), the largest virtual pharmacy network in China, disclosed a privatisation proposal from a co-founder-led consortium at US$3.66 per ADS, a 20.0% premium to the undisturbed price.
For privatisation to succeed, shareholders representing two-thirds of shares present and voting need to approve the deal. The co-founders represent 92.04% of the total voting power.
The offer price is unattractive but this is a done deal. At the last close, the gross and annualised spread for a January 2023 completion is 11.6% and 33.4%, respectively.

Merger Arb Mondays (12 Sep) – DTAC/True, Link Admin, Ramsay, Genex, Tyro, EVOC, Giordano, 111

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
Highest spreads – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Genex Power Ltd (GNX AU), Infomedia Ltd (IFM AU), 111 Inc (YI US).
Lowest spreads – Tyro Payments (TYR AU), Nitro Software Ltd (NTO AU), Nearmap Ltd (NEA AU), Dongzheng Automotive Finance (2718 HK), MyDeal.com.au Ltd (MYD AU), MACA Ltd (MLD AU).

ECM Weekly (12th Sep 2022) – Onewo, CALB, YSB, Medanta, Beneunder, JMDC, SH Holdings, Indigo

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, a few large Hong Kong IPOs are lining up to launch soon.
Placements picked up this week in Japan and India with most being secondary deals.

Breakthrough Battery Innovation

By subSPAC

For those unfamiliar, Battery Maker Enovix has developed the next generation of Lithium-ion cells that powers everything from Smartphones to Electric Vehicles.
The company’s 3D silicon Cells use 100% active silicon anodes, compared to graphite anodes that are used by most Li-on batteries manufactured today.
Battery makers have stayed away from Silicon anodes due to several technical challenges, including battery swelling and short usable lifespan.

China Internet Weekly (12Aug2022): Tencent, JD.com, Meituan, NetEase, Inkeverse

By Ming Lu

Tencent invested more in Ubisoft Entertainment, a French game developer.
The monthly active users of local life recovered in China in June and July.
NetEase will close Music Street, the social networking-oriented karaoke app.

💡 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

Sep 11

Daily Brief TMT/Internet: Tyro Payments and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Tyro, Shidax, Link Admin, Giordano, Hitachi Transport

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Tyro, Shidax, Link Admin, Giordano, Hitachi Transport

There are 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals were discussed this week: Potentia’s rejected proposal forTyro Payments (TYR AU) and Oisix ra daichi (3182 JP)‘s tilt for Shidax Corp (4837 JP).
Key updates took place for Link Administration (LNK AU), Giordano International (709 HK), and Hitachi Transport System (9086 JP).

💡 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

Sep 10

Daily Brief TMT/Internet: Nasdaq-100 Stock Index, Tyro Payments, Bilibili Inc, Intuit Inc, Palo Alto Networks, Sunpower Corp, Crowdstrike Holdings Inc, Tyler Technologies and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

US Fresh Sell Levels
Tyro Payments Rejects Potentia’s Proposal. MCB Accepts
Bilibili: Profitability Sinks and Top Line Growth to Further Drop with Cost Controls
Intuit Inc: Value Proposition
Palo Alto Networks: The NGFW Palo Alto Networks Cloud & Other Drivers
SunPower Corporation: The IKEA Collaboration & Other Major Drivers
CrowdStrike Holdings: Increasing Cybercrime & Ransomware Upside & Other Drivers
Tyler Technologies: Recent Acquisitions

US Fresh Sell Levels

By Thomas Schroeder

US bounce in line off of SPX 3,900 support. Index trendline resistances will offer fresh sell points with NDX our top short pick in the US.
RTY was our long pick off of 1,775 support, to trade a bounce toward trendline and will then turn bearish again.
NDX 12,500 zone the fresh short area. DAX and weaker Asia still a high conviction short group.

Tyro Payments Rejects Potentia’s Proposal. MCB Accepts

Tyro Payments (TYR AU) has rejected a proposal from a Potentia-led consortium at A$1.27/share, by way of a Scheme.
Mike Cannon-Brookes’ Grok Ventures, holding 12.5% and Tyro’s largest shareholder, has backed the Offer.
Tyro’s board considered the proposal to be materially below Tyro’s fundamental value and highly opportunistic. Tyro’s share price was down 66% ytd prior to Potentia’s approach.

Bilibili: Profitability Sinks and Top Line Growth to Further Drop with Cost Controls

Bilibili reported 2Q2022 results yesterday. Revenue grew 9.2% YoY to RMB4.91bn (in-line with consensus), however, it declined 2.9% YoY sequentially driven by YoY decrease in revenue from mobile games.
Operating losses for the quarter further widened to RMB2.2bn (vs consensus RMB2.1bn) which accounted for 44.6% of revenues compared to 33.8% in the same period a year ago.
Bilibili Inc (BILI US) has taken several measure to improve its deteriorating profitability including headcount reduction, S&M cost cuts and close down of unprofitable businesses.

Intuit Inc: Value Proposition

Intuit had a strong quarter and delivered an all-around beat while continuing its focus on small businesses and customers.
It delivered strong margins and strong growth in the quarter.
There was a rise in the volatility in personal loans and various personal loan partners tightened the undertaking, but with volume from the other partners, Intuit was able to offset this negative impact.

Palo Alto Networks: The NGFW Palo Alto Networks Cloud & Other Drivers

Palo Alto Networks’ management has continued to make significant investments to transform the company and take advantage of the rapidly growing and large market opportunity in cybersecurity.
Palo Alto Networks is looking to grab a large chunk of market share and become a leader in the firewall market.
We provide the stock of Palo Alto Networks with a ‘Hold’ rating with a revision in the target price.

SunPower Corporation: The IKEA Collaboration & Other Major Drivers

SunPower delivered a strong set of in Q2 surpassing Wall Street expectations on all counts.
These elements increase customer motivation to add rooftop solar while also giving the residential solar sector greater price power than in recent memory.
Furthermore, SunPower renewed its agreement with Dream Finders Homes in Colorado in the new home market and extended its arrangement with KB Homes internationally.

CrowdStrike Holdings: Increasing Cybercrime & Ransomware Upside & Other Drivers

CrowdStrike saw its quarterly revenue exceed the $500 million threshold for the first time in the last quarter and delivered an all-around beat.
For the second consecutive quarter, gross retention increased to a new high, and dollar-based net retention soared to its highest point in seven quarters.
In the quarter, the public sector also became stronger, fueled by record-breaking success in U.S. federal and international government agencies.

Tyler Technologies: Recent Acquisitions

Tyler Technologies is benefitting from positive trends in the environment of the public sector market as its demo activities, and RPF continue to trend positively.
The company leveraged successful cross-selling efforts and multi-suite wins to deliver a solid quarter with revenues and earnings surpassing Wall Street expectations.
Overall, we provide the stock of Tyler Technologies with a ‘Hold’ rating with a revision in the target price.

💡 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

Sep 09

Daily Brief TMT/Internet: Link Administration, Matrimony.com, Tyro Payments, Elan Microelectronics, Circles.Life, WCP, Sea Ltd, Bilibili and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Link Admin (LNK AU): ACCC Approval & Index Changes
Link Admin Gets ACCC Nod. Woodford Condition Outstanding
Link’s Scheme in the Home Stretch by Securing ACCC and CBI Approval
Matrimony.com (MATRIM IN) | Poor Quality Growth & Perplexing Operations
Tyro in Play as It Rejects Potentia’s A$1.27 Offer
Elan Microelectronics Event: Index Removal Selling Could Exacerbate Price Divergence
Circles.Life: A Fully Virtual Mobile Operator Targeting APAC’s Digital Natives
WCP: First Day IPO Trading Strategy
Reneging on Job Offers Underscores Sea’s Retrenchment
Bilibili (9626 HK): 2Q22, Game Fell, But to Reduce Expense

Link Admin (LNK AU): ACCC Approval & Index Changes

By Brian Freitas

The ACCC will not oppose the proposed acquisition of Link Administration (LNK AU) by Dye & Durham removing a major hurdle. Other regulatory approvals are still pending.
If regulatory clearances are received in the next week and the Court approves the Scheme, Link Administration (LNK AU) will stop trading at the close on 15 September.
We estimate passive trackers across all indices will need to sell 35.53m shares (A$153m; 18 days of ADV) of Link Administration (LNK AU) at the close on 15 September.

Link Admin Gets ACCC Nod. Woodford Condition Outstanding

Link Administration (LNK AU) has announced the Australian Competition and Consumer Commission will not oppose Dye & Durham’s proposed acquisition.
The next step is the rescheduled second court hearing on the 15 September.
The key outstanding condition concerns the “Woodford Matters”, and whether D&D potentially waives this condition, or digs in its heels.

Link’s Scheme in the Home Stretch by Securing ACCC and CBI Approval

Dye & Durham/DND’s proposed acquisition of Link Administration (LNK AU) at A$4.81 per share has received approvals from the ACCC and the Central Bank of Ireland.
Key conditions precedent remaining are FIRB, UK FCA and Luxembourg approvals. The second court hearing date has been adjourned to 15 September.
The transaction is in the home stretch and will likely complete. At the last close, the gross and annualised spread for a 27 September payment is 4.8% and 151%, respectively.

Matrimony.com (MATRIM IN) | Poor Quality Growth & Perplexing Operations

By Pranav Bhavsar

Matrimony.com (MATRIM IN) is a leading player with the highest market share in the Indian matchmaking market.
A close examination of the marketing expenses and subscriber additions reveals poor quality growth.
Employee remuneration is perplexing and so is the decision that leads to a reduction in PP&E.

Tyro in Play as It Rejects Potentia’s A$1.27 Offer

Tyro Payments (TYR AU) rejected an indicative proposal from the Potentia consortium at A$1.27 per share as it was highly conditional and materially undervalued the business.
Grok, the largest shareholder will vote for a Potentia scheme unless there is a rival scheme which is A$0.25 per share higher than the value of the Potentia proposal.
Potentia’s move puts Tyro in play, and Grok’s involvement will force the Board to get an improved offer and/or flush out a competing bidder. There is another round to go.

Elan Microelectronics Event: Index Removal Selling Could Exacerbate Price Divergence

By Vincent Fernando, CFA

Elan Microelectronics (2458 TT) will be removed from the FTSE Taiwan Mid Cap 100 Index on September 16th. As a result, it could see 12+ days of volume of selling.
We had a call with management. Guidance and product performance implies the company has relative strength vs. its end-market demand weakness.
The stock has already underperformed notebook-related peers by a wide margin, hence a further underperformance caused by passive selling could open up a rebound opportunity,

Circles.Life: A Fully Virtual Mobile Operator Targeting APAC’s Digital Natives

By Alec Tseung

A fully virtual mobile operator which leases its 4G/5G networks to provide digital mobile services targeting mainly young digital natives.
Circles.Life is known for offering very flexible plans with highly competitive pricing; it also offers its proprietary tech platform, Circles Global, as a B2B SaaS product.
It was reported to be in early talks with a SPAC for a potential merger in July this year.

WCP: First Day IPO Trading Strategy

The IPO book building for WCP starts on 14 September. We have updated our earnings estimates following the company’s 2Q 2022 results.
Our base case target price of WCP is 78,317 won per share, which is 2% lower than the low end of the IPO price range of 80,000 won.
To derive our target price, we used 22.4x EV/EBITDA in 2023, which is the average multiple of its peers in 2023.

Reneging on Job Offers Underscores Sea’s Retrenchment

By Caixin Global

Southeast Asian conglomerate Sea Ltd. has pumped the brakes on its e-commerce unit Shopee’s expansion, resorting to measures such as reneging on jobs offers to Chinese employees at the last minute.
The strategy shift came as the Singaporean company backed by Chinese tech giant Tencent Holdings Ltd. tries to slash costs to shore up its bottom line amid widening losses.
The red ink has followed several years of aggressive expansion by Shopee, which has piled pressure on its balance sheet this year, just as challenges raising money abroad mounted.

Bilibili (9626 HK): 2Q22, Game Fell, But to Reduce Expense

By Ming Lu

In 2Q22, the revenue growth rate was lower than we expected, especially in the game business.
We believe the May layoff will reduce operating expenses in following quarters.
We set an upside of 8.3% and a price target of HK$197.

💡 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

Sep 08

Daily Brief TMT/Internet: Sea Ltd, KMW Co Ltd, JMDC Inc, True Corp Pcl, KT Corp, A8 New Media, Top Material, Salesforce.Com Inc, Workday Inc Class A and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Sea Ltd – Just About Doomed
KRX New Deal Index Rebalance: All Forecasts Right as KMW Soars and AfreecaTV Drops
KRX K-New Deal Rebalancing: Official Results & Passive Flows
JMDC Offering – Smaller Than It Looks
DTAC/True Merger: NBTC Likely to Set Measures to Approve Merger
Major Stock Swap Between Hyundai Motor Group and KT Corp
Hong Kong CEO & Director Dealings – 1st Sept 2022: A8 New Media, China Fordoo
Top Material IPO Preview
Salesforce.com Inc: Code Builder Update & Other Drivers
Workday Inc: Growing Customer Base

Sea Ltd – Just About Doomed

By Oshadhi Kumarasiri

It was reported yesterday that Sea Ltd (SE US)‘s e-commerce arm “Shopee” has begun rescinding job offers.
Having burnt around $2.0bn during the first six months of 2022 pursuing e-commerce and fintech growth aspirations, this seems like an extreme measure to ensure the company’s survival.
With the gaming profitability fading, we are starting to think that even the extreme cost-cutting could be insufficient to overturn Sea’s e-commerce and fintech cash burn.

KRX New Deal Index Rebalance: All Forecasts Right as KMW Soars and AfreecaTV Drops

By Brian Freitas

The KRX announced the changes to the KRX New Deal indices post market close on Friday. But the changes were not made public and are only available to subscribers.
Intellian Technologies (189300) and Seojin System (178320) replace Danal (064260) and Kcp (060250) in the Internet Index, while KMW Co Ltd (032500 KS) replaces AfreecaTV (067160 KS) in BBIG.
Since we published our last forecast on 21 July, KMW Co Ltd (032500 KS) is up 12% while AfreecaTV (067160 KS) has dropped 17%.

KRX K-New Deal Rebalancing: Official Results & Passive Flows

By Sanghyun Park

KMW replaces AfreecaTV in BBIG. There is no constituent change for Battery and Bio. Seojin and Intellion replace NHN KCP and Danal in Internet. Nexon Games replaces Devsisters in Game.
The effective date has been postponed to the 13th, and the ETF operators will conduct the rebalancing trading at the close tomorrow, the 8th.
Regarding relative passive impact, KMW and AfreecaTV should receive the most attention, and this pattern is already appearing today.

JMDC Offering – Smaller Than It Looks

In February 2022, Noritsu Koki (7744 JP) – longtime holder of JMDC Inc (4483 JP) – sold 2/3 of its holdings to Omron (6645). Omron made a US$1bn new bet.
Shares fell after Q1 results, and then fell another 7% in 2 days after the company announced a primary offering for ¥22bn to international investors, ¥11bn to Omron.
High PER but Fundamental Forecasts are up-and-to-the-right, and there is a surprising amount of flow mitigation from passive investor activity the next 3 months.

DTAC/True Merger: NBTC Likely to Set Measures to Approve Merger

The Bangkok Post reports that the Thai regulator (NBTC) will propose ten remedial measures to approve the Total Access Communication (DTAC TB)/True Corp Pcl (TRUE TB) merger.
The NBTC board is not expected to issue a final decision as it waits for an interpretation by the Council of State if it can approve or reject the merger.
The current share price ratio is 9.511x vs the swap ratio of 10.221x. At last close, DTAC and True’s gross spread to the VTO price is 9.2% and 10.7%, respectively.

Major Stock Swap Between Hyundai Motor Group and KT Corp

On 7 September, Hyundai Motor (005380 KS) announced a major stock swap with KT Corp (030200 KS).
KT will exchange about 750 billion won (7.7%) of KT’s treasury stock for 445.6 billion won (1.04%) of Hyundai Motor shares and 300.3 billion won (1.46%) of Hyundai Mobis shares.
This stock swap is likely to have a bigger positive impact on KT versus Hyundai Motor and Hyundai Mobis.

Hong Kong CEO & Director Dealings – 1st Sept 2022: A8 New Media, China Fordoo

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. However, such disclosures are by no means an absolute.
These insights may also flag those companies where shares have been pledged, both recently and ongoing. Stocks mentioned include A8 New Media (800 HK) and China Fordoo Holdings (2399 HK).

Top Material IPO Preview

Top Material is getting ready for an IPO in October in Korea. The IPO price range is from 27,000 won to 30,000 won.
Established in 2012, Top Material’s main business is in system engineering. It also provides high performance electrode and cathode materials for the lithium ion based rechargeable batteries.
Top Material had sales of 31.9 billion won (up 375% YoY) and operating profit of 4.8 billion won (up 930% YoY) in 2021.

Salesforce.com Inc: Code Builder Update & Other Drivers

Salesforce has generated excellent revenue growth, profitability, and cash flows in its last result, surpassing Wall Street expectations on all counts despite operating in a challenging financial climate.
With new clients like the U.S.
Department of Veterans Affairs, Workday, and Uber, Service Cloud grew 14% year over year or 18% in constant currency.

Workday Inc: Growing Customer Base

Workday delivered another all-around beat, outperforming market expectations with respect to its operating indicators, highlighting the ongoing significance of digital transformation for finance and HR.
Along with the significant expansion of their core HCM and financial apps, Q2 saw remarkable momentum throughout their broader spectrum of solutions.
Customers create apps with Extend customized for their specific use cases, potentially eliminating the need for additional specialized development tools.

💡 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

Sep 07

Daily Brief TMT/Internet: JMDC Inc, Tencent, Ninja Van, Openedges Technology, iQIYI Inc, CARRO, Ubiquiti Inc. and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

JMDC Placement – Lots to like but past Deals Have Been Mixed and It Is Expensive
Tencent Increases Its Stake in Ubisoft
Ninja Van: SEA’s Last-Mile Courier with ~100% Regional Coverage
Open Edges Technology IPO Valuation Analysis
IQiyi: Improving Profitability but Headwinds Continue
Carro: Southeast Asia’s Leading Used Car Marketplace
UI: Revenue Rebounds, Target to $375

JMDC Placement – Lots to like but past Deals Have Been Mixed and It Is Expensive

By Sumeet Singh

JMDC Inc (4483 JP) aims to raise around US$235m, US$150m coming via an international offering and the rest via issuing shares to its largest shareholder, Omron Corp (6645 JP) .
The company plans to use the proceeds to repay some of its debt that was taken on earlier to acquire other companies.
In this note, we will talk about the placement and run the deal through our ECM framework.

Tencent Increases Its Stake in Ubisoft

It was reported in August that Tencent was looking to raise its stake in Ubisoft and had reached out to Ubisoft’s founding family Guillemot who currently owns 14.0% of Ubisoft.
Tencent has acquired a 49.9% economic stake in Guillemot Brothers for EUR300m and as part of the deal, will be allowed to up its current stake in Ubisoft.
Ubisoft announced on Tuesday that its board of directors have authorised Tencent to increase its direct stake in Ubisoft from 4.5% to 9.99%.

Ninja Van: SEA’s Last-Mile Courier with ~100% Regional Coverage

By Alec Tseung

Ninja Van is a leading Singapore-based logistics company in Southeast Asia with almost 100% last-mile courier coverage of the region.
The company was valued at $1.85bn based on its previous capital raise in September 2021.
An investment in the company could offer indirect and broader exposure to Southeast Asia’s e-commerce sector since it counts most of the e-commerce players in the region as its clients.

Open Edges Technology IPO Valuation Analysis

Our valuation analysis suggests an implied target price of 24,813 won per share, representing 38% higher than the high end of the IPO price range of 18,000 won.
Given the solid upside, we have a Positive view of the Open Edges Technology, despite the weak IPO market conditions.
Open Edges Technology is one of the leading companies in Korea that specializes in the semiconductor design asset platforms.

IQiyi: Improving Profitability but Headwinds Continue