TMT/Internet

NetEase will start its first game studio in Europe after setting up two studios in the U.S.
Tencent and Sony invested minor shareholding in a Japanese game developer.
In 1H22, S.F. Holding’s revenue grew dramatically and its margins improved significantly.

Trax: An AI-Powered Retail Analytics Solution Provider

Trax is a retail analytics company that provides digital solutions for both consumer packaged manufacturers/brands and retailers.
The company provides a suite of AI-powered solutions that help digitize and automate the operations of the brick-and-mortar stores.
It was valued at $2.4bn in its last capital raise and was reported to have been preparing for a US IPO for a year.

Advance Intelligence Group: The Parent Company of BNPL’s Atome

Advance Intelligence Group provides digital commerce and financial services across Asia through its 3 key business units – Atome Financial, Advance.AI, and Ginee.
The company was valued at >$2bn based on its latest fund raise in September 2021.
The BNPL industry is expected to face sector headwinds, but the company is likely in a better position than other pure-play BNPL companies, thanks to its more diversified business portfolio.

Zoom Video Communication: The Solvvy Acquisition & Other Drivers

Zoom had a mixed result with below par revenues though it did manage to post an earnings beat.
Though the online business had a low number of new subscriptions, renewals online improved which was a silver lining.
The platform strategy of Zoom is performing quite well, with Zoom Phone and Zoom Rooms being the vital components.

Coda Payments: Payment Solutions for Mobile Gaming Publishers

Coda Payments provides solutions that help digital content publishers monetize their products and services.
The company is now in >50 markets and was valued at $2.5bn based on its last capital raise in April 2022.
With its offerings, Coda Payments is well-poised to benefit from the strong future growth in the mobile gaming sector.

Twilio Inc: The Twilio Engage CX Offering & Other Drivers

Twilio had a pretty good performance in this quarter and surpassed Wall Street expectations on all fronts.
The company believes that this tool is the foremost growth solution that is built on the CDP (Customer Data Platform).
The Syniverse transaction concluded in the quarter will prove beneficial to the company in the long term.

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Sep 05

Daily Brief TMT/Internet: Link Administration, M-DAQ, Taiwan Semiconductor (TSMC), MogliX, Nium, Seiko Epson, CloudFlare and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Merger Arb Mondays (05 Sep) – Link Admin, Ramsay, Genex, ResApp, Infomedia, DTAC/True, Giordano
M-DAQ: A B2B FX Solutions Specialist
Taiwan Tech Weekly: More Nvidia Issues, Broadcom Surprises, Yulon Soars
Moglix: An E-Commerce Platform for B2B Procurement
Nium: Southeast Asia’s First B2B Payment Unicorn
Seiko Epson (6724) | Home Printing Running Out of Ink
Cloudflare ($NET)

Merger Arb Mondays (05 Sep) – Link Admin, Ramsay, Genex, ResApp, Infomedia, DTAC/True, Giordano

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), Infomedia Ltd (IFM AU), Link Administration (LNK AU), True Corp Pcl (TRUE TB).
Lowest spreads – MyDeal.com.au Ltd (MYD AU), MACA Ltd (MLD AU), Nearmap Ltd (NEA AU), Dongzheng Automotive Finance (2718 HK), Link Net (LINK IJ), Tassal (TGR AU), Frasers Hospitality Trust.

M-DAQ: A B2B FX Solutions Specialist

M-DAQ is an FX solutions specialist that builds OTT applications to facilitate cross-border business and transactions for various industries.
The company was reported to have processed ~S$10bn gross transactions and raked in ~S$46m revenue in FY19.
The company already broke-even back in 2018 and now has a solid, blue-chip shareholder base.

Taiwan Tech Weekly: More Nvidia Issues, Broadcom Surprises, Yulon Soars

US bans high end chip sales to China, Nvidia shares sink in reaction, as do Nvida suppliers and the overall sector.
Broadcom’s fiscal Q3 results beat expectations and its optimistic outlook bucks the industry trend.
Yulon motors soars 9%; its JV with Hon Hai has received 10,000 EV pre-orders in two days.

Moglix: An E-Commerce Platform for B2B Procurement

Moglix is an India-based e-commerce platform for B2B procurement of industrial supplies.
The company has been actively expanding into the supply chain financing space in recent years by leveraging its supply chain network and expertise.
The company was valued at $2.6bn in its last capital raise in Jan 2022.

Nium: Southeast Asia’s First B2B Payment Unicorn

Nium is a global B2B payment platform that embeds an ecosystem of financial services for its clients: Banking-as-a-Service & Crypto-as-a-Service.
The company was valued at $2bn based on its latest capital raise and is expected to generate a run-rate revenue of $100m in 2022.
A “payment + ecosystem/services” business model rather than just processing cross-border payments likely provides the right value proposition for users.

Seiko Epson (6724) | Home Printing Running Out of Ink

By Mark Chadwick

Seiko Epson has been one of the better performing tech stocks during 2022
We believe that the stock benefited from COVID-related stay-at-home demand for printers
We now turn Bearish as the Covid boost should dissipate, while the PC market has taken a turn for the worse

Cloudflare ($NET)

By MT Capital

Over the last few weeks I have been picking away at the book “The Master and His Emissary”.
Within, Ian McGilchrist analyzes the differences between the two hemispheres of the brain (the right and the left), explaining how their inherent functionalities may drive the contradictions we all feel in human existence.
Without going into too much depth here (I encourage you to read his work instead), I found myself struck by the idea of The Belief in One Truth.

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Sep 04

Daily Brief TMT/Internet: Tencent, Nasdaq-100 Stock Index, Applied Materials, Livspace, Kyocera Corp, Dell Technologies Inc, NortonLifeLock, Cisco Systems and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

ECM Weekly (4th Sep 2022) – China ADRs, Tencent, Leapmotor, Onewo, Hongjiu Fruit, Doosan Ener
August Route Leads September Pain
Applied Materials Inc: The Picosun Oy Acquisition & Other Drivers
Livspace: A Tech-Enabled Home Interior and Renovation Marketplace in Asia
Last Week in Event SPACE: Kyocera, Hang Lung Group, CSRC/PCAOB Audit Terms, MACA, Nitro Software
Dell Technologies: New Additions To Storage Portfolio & Other Drivers
Norton LifeLock Inc: Evolution of Norton 360
Cisco Systems Inc: Financial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (09/22)

ECM Weekly (4th Sep 2022) – China ADRs, Tencent, Leapmotor, Onewo, Hongjiu Fruit, Doosan Ener

By Sumeet Singh

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, things are starting to move with Leapmotor and Onewo, while CALB continues to have second thoughts.
The biggest placement this week was Doosan, but there was news of Tencent setting its sights on sizeable future placements via divestments.

August Route Leads September Pain

By Thomas Schroeder

The impulsive decline in growth sectors (NDX) warns of more pain in September. Sell resistance lies at 12,500/800 below the 13k risk pivot. NDX early August relative peak led.
SPX macro sell call on August 19 worked well with a short NDX focus (short group includes DAX, HSI, Taiwan and recently Korea).
August was touted as the month to sell longs establish in June/July and to raise short bets for a bearish September as pundits turned bullish in mid-August, we were selling.

Applied Materials Inc: The Picosun Oy Acquisition & Other Drivers

Applied Materials saw a decent quarter as overall demand remains healthy which enabled the company to deliver an all-around beat.
In the quarter supply chain improved incrementally.
Among major updates, Applied Materials carried out the acquisition of Picosun Oy, a semiconductor equipment company based in Finland.

Livspace: A Tech-Enabled Home Interior and Renovation Marketplace in Asia

Livspace brings together designers, brands, manufacturers, and contractors onto its marketplace.
It automates the entire process from interior design to managing last mile fulfilment for all rooms in users’ homes.
The company was valued at $1.2bn based on its last capital raise in Feb 2022; it operates in India, Singapore, and Malaysia and plans to expand to other makers aggressively.

Last Week in Event SPACE: Kyocera, Hang Lung Group, CSRC/PCAOB Audit Terms, MACA, Nitro Software

By David Blennerhassett

Kyocera (6971 JP) is not blowing out the lights versus peers, but it’s relatively inexpensive to its history and peers. If Kazuo Inamori’s shares are sold, Kyocera can buy them.
Hang Lung (10 HK) currently trades at a 62% discount to NAV, a level last seen around the Covid lows in May 2020.
Washington and Beijing reach an agreement allowing US regulators access to audits of Chinese companies listed on American exchanges. However, US regulators remain cautious about the success of the deal.

Dell Technologies: New Additions To Storage Portfolio & Other Drivers

Dell Technologies’ stock price has crashed after the company indicated a weak sectoral outlook for PC sales.
The company observed ISG demand pushing throughout the quarter even though it was still expanding slowly.
Among new launches, Dell Technologies has also introduced software-driven modern storage solutions throughout its storage portfolio to promote improved intelligence, automation, cyber resilience, and multi-cloud flexibility.

Norton LifeLock Inc: Evolution of Norton 360

Norton LifeLock’s business has been adversely affected by the volatile forex environment and various macroeconomic pressures.
The customer unit retention stays stable, and it continues to drive improvements to main cohorts with the inclusion of its newer customers.
It has made inroads from its latest Norton Identity Advisory Plus launch in the UK market.

Cisco Systems Inc: Financial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (09/22)

Cisco Systems had quite a strong quarter and was able to exceed Wall Street expectation on all counts despite operating in an incredibly dynamic environment.
The company continues to view strong customer adoption of its subscriptions and software driven by its targeted investments.
We provide the stock of Cisco Systems with a ‘Hold’ rating with a revision in the target price.

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Sep 03

Daily Brief TMT/Internet: Elan Microelectronics, Softbank Group, Spark New Zealand, Corsair Gaming Inc, Electronic Arts, Microchip Technology and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

FTSE TWSE Taiwan 50/ Div+ Index Rebalance: Sinopac Holdings and Elan Micro To Watch For
Softbank Group – ARM Suing a Key Customer Is Not the Summer News We Expected
S&P/ASX Index Rebalance (Sep 2022): Adds, Deletes, Surprises & Pre-Positioning
Declining Business Short Candidates: Corsair Gaming, Sinclair Broadcasting, Overstock, Ziff Davis
Electronic Arts Inc: Market Position & Evolution & Other Drivers
Microchip Technology: Excellent Base of Intangibles & Other Drivers

FTSE TWSE Taiwan 50/ Div+ Index Rebalance: Sinopac Holdings and Elan Micro To Watch For

By Brian Freitas

As expected, SinoPac Holdings (2890 TT) will replace Powerchip Semiconductor Manufacturing Corp (6770 TT) in the FTSE TWSE Taiwan 50 Index at the close on 16 September.
Elan Microelectronics (2458 TT) will be deleted from the Mid-Cap 100 Index and will consequently be deleted from the Dividend+ Index. The Div+ selling will be spread over 16-22 September.
Passives need to buy over 6 days ADV on SinoPac Holdings and sell over 12 days ADV on Elan Microelectronics, while there will be net inflows on Powerchip Semiconductor Manufacturing Corp.

Softbank Group – ARM Suing a Key Customer Is Not the Summer News We Expected

By Kirk Boodry

ARM is suing Qualcomm for breach of license and trademark infringement for its acquisition of (fellow ARM licensee) Nuvia last year
This is surprising on a number of levels as having Qualcomm inside the tent is better for sales, market share and its neutral-player reputation
ARM’s valuation benefits from perceptions of an expanding addressable market so this is not a good look. Meanwhile, Softbank’s discount to NAV is widening again as tech valuations fall

S&P/ASX Index Rebalance (Sep 2022): Adds, Deletes, Surprises & Pre-Positioning

By Brian Freitas

There is one change for the S&P/ASX 100 Index, eight changes to the S&P/ASX 200 (AS51 INDEX), while there are 16 adds and 12 deletes for the S&P/ASX 300 Index.
Passive trackers need to buy/sell a lot of stock for the ASX100 and ASX200 names. There appears to be large pre-positioning on the deletes.
Link Administration (LNK AU)‘s privatisation may require an ad hoc inclusion prior to the implementation of the September rebalance – ACCC approval is key.

Declining Business Short Candidates: Corsair Gaming, Sinclair Broadcasting, Overstock, Ziff Davis

By Eric Fernandez, CFA

Sales declines, margin compression, cuts in SG&A and cuts in guidance and estimates feature in our Declining Businesses model.
Declining business shorts tend to be lower beta, have longer time horizons, and tend to produce steadier (although slower) short returns.
Today we are flagging Corsair Gaming, Sinclair Broadcasting, Overstock, Ziff Davis.

Electronic Arts Inc: Market Position & Evolution & Other Drivers

Electronic Arts’ solid results were driven by its extensive IP portfolio and expanding network of players that are actively involved in its live services.
These distinctive structural advantages helped the company deliver an all-around beat despite the fact that it navigates the macro environment’s volatility.
Their business’s durability and longevity are still fueled by their collection of sports and owned IP properties.

Microchip Technology: Excellent Base of Intangibles & Other Drivers

Microchip’s results for the quarter were solid and the company’s revenue increased by 6.5% sequentially and 25.1% annually to $1.96 billion surpassing Wall Street expectations.
The management has signed into multiyear long-term supply agreements with several significant clients, effectively granting them reserved capacity in exchange for assured purchases, often lasting five years.
We also have a dedicated analysis of the company’s Environmental, Social, and Governance (ESG) risk scores in order to evaluate the sustainability risk.

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Sep 02

Daily Brief TMT/Internet: PC Partner, Alibaba (ADR), Bilibili, CARRO, Intel Corp, Crowdstrike Holdings Inc, Glints, Jet Commerce, Ansys Inc and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

PC Partner: Strong 1H22 but High Uncertainty into 2H22. Downside Supported by Cash and Dividend.
Alibaba, Longfor Group, Country Garden, New World Development
Bilibili (9626 HK): 2Q22 Preview, Still Grew Rapidly, Will Reduce Loss
Carro Sees Profitability, Doubles Revenue to $464m
Intel Vs. TSMC/UMC Long/Sort Monitor: Take-Aways from DB Conference & Fireside Chat
Crowdstrike FY2Q23: FY2Q23: Not Just Endpoint, Identity and SIEM Accelerating Too
Glints Bags $50m Series D Funding After Doubling Revenue and Gross Profits
Jet Commerce Raises US$60M for Brazil and Singapore Expansion, to Further Scale up in China
Ansys Inc: The New R2 2022 & Other Drivers

PC Partner: Strong 1H22 but High Uncertainty into 2H22. Downside Supported by Cash and Dividend.

By Nicolas Van Broekhoven

Pc Partner reported a strong set of 1H22 results last week and held a conf call with investors this week. Importantly, management sees no impact by US/China Nvidia AI situation.
3Q22 results will be weak as old inventory is being discounted in front of the launch of RTX 40 by NVIDIA Corp (NVDA US) in early 4Q22.
Stock is unlikely to rally before more clarity on inventory situation improvement, but well supported by net cash (5.4 HKD) and high interim dividend (11.4%).

Alibaba, Longfor Group, Country Garden, New World Development

By Untying The Gordian Knot

Two big headlines drove the short squeeze, helped by the record level of short selling as a percentage of total volume in recent months.
The recovery remains a low volume rally and short turnover as share continues to be high.
Most of the short selling remains in Index ETF and very large-cap stocks.

Bilibili (9626 HK): 2Q22 Preview, Still Grew Rapidly, Will Reduce Loss

In 2Q22, we believe revenue will grow fast, especially for value added service and advertising.
We believe operating loss will shrink, but far from making profit.
We believe the stock has an upside of 18% for the end of 2023.

Carro Sees Profitability, Doubles Revenue to $464m

By Tech in Asia

Singapore-based Carro more than doubled its revenue in its latest financial year, raking in more than S$650 million (US$464.2 million) in revenue.
The used-car platform, which also achieved profitability in FY 2021, said it is tracking at over US$930 million in run-rate revenue. It expects to see another 2x growth in revenue for FY 2023.
Aaron Tan, co-founder and CEO of Carro, attributed the firm’s profitability to its focus on online retailing and machine learning.

Intel Vs. TSMC/UMC Long/Sort Monitor: Take-Aways from DB Conference & Fireside Chat

On August 31st, Intel’s GM of Data Center & AI spoke at Deutsche Bank’s Technology Conference. On the same day, another executive spoke at Arete Research’s fireside chat.
Q2 and Q3E should be the bottom for the business, implying a rebound in Q4. Consensus estimates a similar trend; the latest comments are a confirmation of Q2 results guidance.
We see opportunities for positive news flow in September and Q3 results, as Intel could make key product announcements and guide for Q4 to be a turnaround.

Crowdstrike FY2Q23: FY2Q23: Not Just Endpoint, Identity and SIEM Accelerating Too

By Aaron Gabin

Crowdstrike continues to gobble up share, printing another strong beat and raise, with ARR now at $2B, the second fastest software company to hit that mark.
EBIT margins up 800bps YoY, TTM FCF Margins 30%…profitable growth at Scale.
13x forward P/S for a unique software asset with long runways for 40%+ growth and multi-module driven margin expansion with a 15% pullback in the past week despite earnings.

Glints Bags $50m Series D Funding After Doubling Revenue and Gross Profits

By Tech in Asia

Glints, a Singapore-based careers platform, has raised US$50 million in a series D funding round co-led by DCM Ventures, Lavender Hill Capital, and Persol Holdings.
The deal pushed the firm’s total funding to date to more than US$80 million, making it the most funded startup in Southeast Asia’s talent recruitment space.
Glints connects companies to talent pools in Indonesia, Malaysia, Singapore, Vietnam, the Philippines, and Taiwan

Jet Commerce Raises US$60M for Brazil and Singapore Expansion, to Further Scale up in China

By e27

Jet Commerce launched a Live Commerce service through its newest business unit, Lumbalumba, last July and inaugurated its live streaming centre
Indonesia-based e-commerce enabler, Jet Commerce, has announced the completion of its Series B funding round of more than US$60 million (IDR 900 billion).
Jet Commerce will use the funds to upgrade infrastructure, recruit more professional local talent, improve research and technology development, and strengthen its ability in brand incubation.

Ansys Inc: The New R2 2022 & Other Drivers

This was an excellent quarter for Ansys, where the company managed to surpass Wall Street expectations in terms of revenues as well as earnings.
From the geographical perspective, the company viewed robust revenue growth from EMEA, the Americas, and the Asia Pacific.
Among key updates, TSMC certified the Power integrity software of Ansys for its NTE process and industry-leading N4P technologies.

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Aug 31

Daily Brief TMT/Internet: Baidu, SK Telecom Co Ltd (Adr), Nitro Software Ltd, Prosus , Link Net, Elastic NV, Delta Electronics, SDI Corporation, Micro Focus International, Invesco Solar ETF and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

HSI, HSCEI, HSTECH: September Rebalance Flows Post Capping
SKT ADR Play on the 31st for MSCI Exclusion
Nitro’s Opportunistic A$1.58 Offer from Potentia
Prosus: 30% Discount Seems About Right
Link Net: Axiata’s MTO Kicks Off Today
Observability Pair Trade: Long Elastic / Short Splunk
Delta Electronics: Taiwan Vs. Thailand Pairs Monitor, Call with Management
Two Niche Semiconductor Industry Stocks Highly Exposed to EV Acceleration
Open Text/Micro Focus: Next Chapter in an Acquisition Growth Story
Headwinds Persist, Including Rising DXY, 10-Yr Treasury Yield, & Commodities; Buying Staples, Solar

HSI, HSCEI, HSTECH: September Rebalance Flows Post Capping

By Brian Freitas

The September rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituents at 8%. This will lead to large flows.
The largest inflows will be on Baidu (9888 HK), SenseTime Group (20 HK), China Shenhua Energy (1088 HK), Tencent (700 HK), Kuaishou Technology (1024 HK) and Anta Sports (2020 HK).
The largest outflows will be on Meituan (3690 HK), AIA Group (1299 HK), Sunny Optical (2382 HK), SMIC (981 HK), China Pacific Insurance (2601 HK) and China Construction Bank (939).

SKT ADR Play on the 31st for MSCI Exclusion

By Sanghyun Park

We need a hedge to short SKT on the 31st. For this, we need to consider trading SKT ADR, which is pretty liquid as DTV reaches nearly $8mil.
The play structure is simple. It exploits the pattern that passive flow is concentrated on underlying shares rather than ADRs. We witnessed this pattern in the last two cases.
Passive outflow may be aggravated since SKT leaves not only STANDARD but also sub-indices such as ESG. So, the degree of a temporary DR premium can get thicker.

Nitro’s Opportunistic A$1.58 Offer from Potentia

Nitro Software Ltd (NTO AU) entered a trading halt in response to an AFR report that Potentia has lobbed an indicative non-binding proposal at A$1.58 per share.
Potentia’s offer follows its success in securing a 17% stake at A$1.58 per share on Monday night. The stake is large enough to deter rival schemes.
The offer is opportunistic and unattractive. However, the ability of Potentia to relatively quickly secure a significant stake suggests that the Board will be under pressure to engage.

Prosus: 30% Discount Seems About Right

By Wium Malan, CFA

The initial impact, of the share repurchase program, was for Prosus’ simple discount to listed NAV to reduce from roughly 50% to around 25% within 4 weeks of implementation.
The weekly size of the share repurchase program has been reduced by ~40%, on a 4-week rolling average basis, since the discount has been below 30%.
We remain constructive on Tencent and, with Prosus at 25% or less simple discount to NAV, would own Tencent directly (long-only), or be long Tencent, short Prosus/Naspers.

Link Net: Axiata’s MTO Kicks Off Today

By David Blennerhassett

After Axiata (AXIATA MK) completed the acquisition of 66.03% in Link Net (LINK IJ) on the 22 June, Axiata was obligated to undertake a mandatory offer for the remaining 33.97%.
The MTO commences today and concludes on the 28 September. Payment will be the 6 October.
There are no conditions attached to the MTO. Play the spread, where available.

Observability Pair Trade: Long Elastic / Short Splunk

By Aaron Gabin

Like PANW and SNOW, Elastic continues to power through macro headwinds seen by many other software companies.
Elastic has a Crowdstrike like dynamic, where it is capturing new workloads from incumbents, in the cloud. In this case, Symantec’s share donator role is being played by Splunk.
In this tough volatile environment, we like an observability pair trade of Long ESTC / Short SPLK.

Delta Electronics: Taiwan Vs. Thailand Pairs Monitor, Call with Management

We had a call with Delta Electronics (2308 TT) management to understand the company’s latest developments, particularly in relation to its growing automotive and EV businesses.
Delta Thailand shares have rallied 55.4% in T$ terms, while Delta Taiwan has only rallied 9.3%.
Delta’s EV business is growing 50% per year and has major customers including Tesla, GM, and Volkswagen, however, our sense is the Taiwan entity has an advantage.

Two Niche Semiconductor Industry Stocks Highly Exposed to EV Acceleration

SDI Corporation (2351 TT) and Jih Lin Technology (5285 TT) are well positioned to generate significant long-term business from automotive end-market chip demand.
The companies are the #1 and #2 leaders globally by market share respectively for power lead frames.
Could receive earnings upgrades if CEV to EV market expectations are pulled forward.

Open Text/Micro Focus: Next Chapter in an Acquisition Growth Story

By Jesus Rodriguez Aguilar

Open Text agreed a 532p/share cash offer for legacy software, highly leveraged FTSE250 constituent, Micro Focus (98% premium, 2.3x EV/Fwd Revenues, 6.4x EV/Fwd EBITDA), taking advantage of target’s downwards re-rating.
My TP based (5.6x EV/Fwd EBITDA based) is 350p, which reflects macro challenges. Although the offer from Open Text seems every generous, ROIC could reach low single teens.
Gross spread is 2.35% and the estimated annual return would be 4.38% assuming settlement by mid-February. Irrevocables amount to 16.62%, the lengthy part will be antitrust and FDI approvals. Long.

Headwinds Persist, Including Rising DXY, 10-Yr Treasury Yield, & Commodities; Buying Staples, Solar

By Joe Jasper

In last week’s Compass (Aug. 23) we discussed the increasing odds for a deeper pullback in the broad market indexes.
This was due to 5-week uptrend breaks on the SPX, NDX, and Russell 2000, the Fed tightening, and with Treasury yields, the U.S. dollar (DXY), and commodities (DJP) inflecting higher.
The market remains in pullback mode; the SPX, NDX, and Russell 2000 are all approaching 50-day MA support, the first big area of interest on this pullback.

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Aug 30

Daily Brief TMT/Internet: Alibaba (ADR), Meituan, Link Net, Tencent, Duolingo, Snowflake Inc and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

China ADRs Delisting – Tide Is Turning – Non-HK Listed ADRs Are Already Outperforming
Meituan (3690 HK): 2Q22, Reduced Loss, But Unnecessarily Reclassifies Revenue
Link Net’s MTO of IDR4,800 from Axiata Open from 30 August
China Internet Weekly (29Aug2022): Tencent, JD, JD Health, KE, Dada, Kanzhun
Meituan: Earnings Beat Estimates but Sudden Change in Segmental Disclosure Is Dubious
Duolingo. User Growth And Cash Flow Metrics Remain Robust. Management Raised FY22 Guidance
Earnings in Review: DLocal and Snowflake

China ADRs Delisting – Tide Is Turning – Non-HK Listed ADRs Are Already Outperforming

By Sumeet Singh

On 26th Aug 2022, PCAOB and CSRC announced that they had entered into an agreement granting US authorities access to investigate public accounting firms headquartered in China and HK.
On 2nd Apr 2022, CSRC put out a draft for public comments on the revision of certain provisions which would allow easier access by overseas regulators to China ADRs audits.
In this note, we’ll talk about the latest developments and its implications.

Meituan (3690 HK): 2Q22, Reduced Loss, But Unnecessarily Reclassifies Revenue

The revenue growth rate decelerated, but operating loss shrank in 2Q22.
We believe the the revenue reclassification is unnecessary and suspicious.
We set a downside of 19% and a price target of HK$148.

Link Net’s MTO of IDR4,800 from Axiata Open from 30 August

On 22 June, Axiata Group (AXIATA MK) and XL Axiata (EXCL IJ) completed the acquisition of a combined 63.45% interest in Link Net (LINK IJ) for approximately RM2.63 billion (IDR8.72 trillion).
Today, Axiata announced that the mandatory tender offer (MTO) runs from 30 August to 28 September. The MTO price is IDR4,800 with no minimum acceptance condition.
At the current price of IDR4,740 per share, the gross and annualised spread for a mid-October payment is 1.3% and 9.1%, respectively.

China Internet Weekly (29Aug2022): Tencent, JD, JD Health, KE, Dada, Kanzhun

By Shifara Samsudeen, ACMA, CGMA

Tencent invested in Samsung Insurance China Co. Ltd. and is the second largest shareholder.
JD Health’s revenue increased by 48% YoY, but the stock plunged.
KE revenue shrank by 45% YoY due to the weak property market.

Meituan: Earnings Beat Estimates but Sudden Change in Segmental Disclosure Is Dubious

Meituan (3690 HK) reported 2Q2022 results on Friday. Revenue grew 16.4% YoY to RMB50.9bn (vs consensus RMB49.2bn) while operating losses dropped to 1.0% of revenue to RMB493m (vs consensus RMB3.3bn).
The company has changed its segmental reporting to a new reporting structure; Core Local Commerce, New Initiatives and Unallocated items.
Disclosures on key operating matrices such as GTV and no. of hotel room nights have not been provided and difficult to assess the performance of core businesses.

Duolingo. User Growth And Cash Flow Metrics Remain Robust. Management Raised FY22 Guidance

By Andrei Zakharov

Duolingo (DUOL US) reported solid 2QFY22 results and hosted annual Duocon 2022 event in August. Management raised full-year revenue guidance, but the stock remained range bound.
We model total revenues growing +45% y/y to $365M in FY22 and +42% y/y to $517M in FY23, up vs. our prior estimates and projections.
2QFY22 results beat all key estimates, driven by accelerating user growth and strength across the entire business. Duolingo (DUOL US) remains our top mid-cap pick in the EdTech industry.

Earnings in Review: DLocal and Snowflake

By BluSuit

In my opinion, DLocal is an expensive stock. Typically when you see very expensive businesses not outperform on every metric, or at least a majority of them, you see their stock price struggle.
On a valuation perspective, DLocal finds itself priced in line with the most expensive stocks on the stock market.
The thing that makes DLocal unique is its profitability compared to many of the other software stocks as they run 35%+ EBITDA margins on a consistent basis.

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Aug 29

Daily Brief TMT/Internet: True Corp Pcl, Tencent, Sumo Logic Inc and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Merger Arb Mondays (29 Aug) – Ramsay, DTAC/True, Pendal, Link Admin, Ramsay, Infomedia, ResApp, MACA
Tencent: Domestic Game Approvals Over-Hyped as a Revenue Growth Driver
Sumo Logic. 2QFY23 Wrap: Rising From The Ashes?

Merger Arb Mondays (29 Aug) – Ramsay, DTAC/True, Pendal, Link Admin, Ramsay, Infomedia, ResApp, MACA

By Shifara Samsudeen, ACMA, CGMA

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), Infomedia Ltd (IFM AU), Ramsay Health Care (RHC AU), Resapp Health (RAP AU), True Corp Pcl (TRUE TB).
Lowest spreads MACA Ltd (MLD AU), Nearmap Ltd (NEA AU), Dongzheng Automotive Finance (2718 HK), Excelpoint Technology (EXLP SP), MyDeal.com.au Ltd (MYD AU), China Vast Industrial Urban Development (6166 HK)

Tencent: Domestic Game Approvals Over-Hyped as a Revenue Growth Driver

By Wium Malan, CFA

New title approvals halved during 2021, yet overall industry games revenue grew by 3.4%y/y. 1H22 new games approvals are down a further 82%y/y, yet games revenue is down 1.8%.
Tencent has lost revenue market share to the overall Chinese online game software market, most notably to NetEase, this year.
Tencent’s paying gamer participation rate has dropped to levels last seen during 2018.

Sumo Logic. 2QFY23 Wrap: Rising From The Ashes?

By Andrei Zakharov

Sumo Logic Inc (SUMO US) surprised investors and reported solid 2QFY23 results pushing shares up over 10% during a regular trading session on Friday.
Provider of cloud-based machine data analytics reported revenue/non-GAAP EPS of $74.1M/($0.10), above consensus, and improved FY23 outlook.
Management focused on delivering more efficient growth and reduced hiring plans. Customer metrics remained strong, with a dollar-based net retention rate of 115%.

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Aug 27

Daily Brief TMT/Internet: Grab, Softbank Group, Advanced Micro Devices, Model Solution, Paypal Holdings, Verizon Communications and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Grab: Earnings Beat Estimates but No Meaningful Improvement Yet
Softbank Group – Back Where We Started
Advanced Micro Devices: The New Ryzen Embedded R-Series Launch & Other Drivers
Model Solution IPO Preview
PayPal Holdings Inc: Venmo & Other Innovations
Verizon Communications Inc: Navigating Through A Challenging Business Environment

Grab: Earnings Beat Estimates but No Meaningful Improvement Yet

Grab (GRAB US) reported 2Q2022 results today. Revenue grew 79% YoY to $321m (vs consensus $273.5m) and reported an adjusted EBITDA (negative) of $233m (vs consensus $256.5m).
Demand for food deliveries has started softening with opening of economies in the SEA region and the segment’s 2Q earnings were driven by the integration of Jaya Grocers.
Grab has downgraded its GMV forecast for 2022E due to softening of food deliveries and the launch of digital bank is postponed to the second half of the year.

Softbank Group – Back Where We Started

By Kirk Boodry

The Softbank share price and discount to NAV are largely back to where they were before the Q1 report earlier this month
The early settlement of Alibaba derivative contracts has eased leverage worries although that may be less obvious within Softbank’s net calculation of that measure
But worries about tech valuations, particularly in the private portfolio, remain robust. We have updated our main tables below

Advanced Micro Devices: The New Ryzen Embedded R-Series Launch & Other Drivers

Advanced Micro Devices continued its strong execution across the board and delivered an all-around beat in the recent result driven by its premier product line, and diverse business strategy.
The management also observed a significant year-over-year rise for their networking and FPGA solutions, which are the best in the business, with cloud and financial customers.
During the quarter, they also launched Ryzen Embedded R-Series system-on-chips processors in order to broaden their product line and target emerging markets.

Model Solution IPO Preview

By Douglas Kim

Model Solution makes prototypes to mainly check design and function in the product development stage, which is before the mass production stage of new products such as IT devices.
The IPO price range is from 24,000 won to 27,000 won. The expected market cap of the IPO is from 153 billion won to 173 billion won.
The company had sales of 61.1 billion won (up 9.9% YoY) and operating profit of 8.9 billion won (up 32.1% YoY) in 2021.

PayPal Holdings Inc: Venmo & Other Innovations

PayPal has seen some level of recovery after the stock nosedived and stayed low in the period from May to July 2022.
Also, it has reinvigorated its organizational operating model and has been recruiting world-class talent in its product, technology, and engineering functions.
We see a further recovery in the stock of PayPal Holdings and we give it a ‘Buy’ rating with a revision in the target price.

Verizon Communications Inc: Navigating Through A Challenging Business Environment

Verizon Communications had a below par performance in the quarter as the inflationary pressure has been impacting consumer behavior resulting in the company failing to match earnings expectations and just about beating revenue expectations of Wall Street.
The company updated its financial guidance by lowering its expectations of other revenue and service.
The company launched its plan Welcome Unlimited for consumers wireless which will meet the requirements of budget-conscious consumers without offering device subsidies.

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Aug 26

Daily Brief TMT/Internet: Softbank Group, Taiwan Semiconductor (TSMC) – ADR, Intel Corp, XL Axiata, Snowflake Inc, Paycom Software and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Softbank (9984 JP) – This Time, It’s Chime
Taiwan Dual-Listings – TSMC Premium Continues to Decline, ChipMOS ADR Discount Widens
US CHIPS Act: Long Intel Vs. Short TSMC or UMC?
XL Axiata (EXCL IJ) – Following the Road to Convergence Fuelled by Data
Snowflake FY2Q23 Earnings: High in the Hierarchy of Needs
Paycom Software: The Beti Upside

Softbank (9984 JP) – This Time, It’s Chime

By Victor Galliano

US fintech Chime, another high-profile fintech in Softbank’s Vision Fund 2 portfolio, sees its secondary market valuation in the private market fall by nearly 50% on a year-to-date basis
Chime had been planning to IPO in 1H 2022, with its IPO valuation estimated at close to USD40bn; poor market conditions have led to the IPO being shelved
Chime’s reduced valuation is another hit to Softbank’s portfolio, which has yet to feature a recent “down round”, and which we believe negatively impacts its Vision Fund 2 in particular

Taiwan Dual-Listings – TSMC Premium Continues to Decline, ChipMOS ADR Discount Widens

TSMC’s ADR premium falls past the lower bound of its 3-year range
All dual-listed Taiwan semiconductor companies have seen a decline in premiums or an increase in discounts.
ChipMOS ADR’s discount to the company’s Taiwan listing widens further.

US CHIPS Act: Long Intel Vs. Short TSMC or UMC?

Intel and Brookefield Asset Management recently announced that they intend to jointly invest US$30 billion into building Intel foundries in Arizona, leveraging on the US CHIPS Act.
Although inflation and declining consumer demand continue to affect all chipmakers, U.S. strategic objectives and policies will set Intel on a new growth trajectory and competitive position in our view.
A Long Intel/ Short Taiwan semiconductor strategy present a compelling opportunity. We prefer Long Intel vs. Short UMC, however, we expect Long Intel vs. Short TSMC to also be profitable.

XL Axiata (EXCL IJ) – Following the Road to Convergence Fuelled by Data

By Angus Mackintosh

XL Axiata 2Q2022 results reflected a better pricing environment and the success of its focus on high-quality service, with the highest data speeds, leading to higher subs and ARPUs.
The company continues to migrate its subscribers to 4G, and build out its 4G BTS whilst shutting down its 3G towers, which should be positive for the quality of service.
XL Axiata (EXCL IJ) should be seen as the leader in providing converged services in Indonesia, with the acquisition of Link Net accelerating its lead, which will boost long-term profitability.

Snowflake FY2Q23 Earnings: High in the Hierarchy of Needs

By Aaron Gabin

Product revenues beat consensus by 7% and EBIT margins by 5%, while full year guidance was and margins were raised ~2% ahead of consensus.
Fears of a consumption model driven slowdown (like Datadog) did not play out, and cRPO growth actually accelerated QoQ to 81%.
Data sharing is picking up with larger customers, with 65% of $1M+ customers utilizing stable edges.

Paycom Software: The Beti Upside