TMT/Internet

• Total Access Communication (DTAC TB) and True Corp Pcl (TRUE TB) shares declined as reports suggest that NBTC’s subcommittees voted 3:1 AGAINST the merger. True said the reports are false.
• An earlier press conference by CP Group and Telenor ASA (TEL NO) reiterated that the NBTC could only prescribe remedial measures. A court ruling on 16 June supports this view.
• NBTC will allegedly review the subcommittees’ findings on 26-27 July. We think this development results in the NBTC prescribing harsher remedial conditions to the merger rather than blocking it. 

• NTT announced it would build and operate a third trans-Pacific subsea cable (JUNO) with NEC as the vendor and a 2024 activation date
• This also represents the second trans-Pacific cable in five years and the one with the highest capacity to date
• This is not core to NTT’s business but it does highlight how capacity needs are expanding as network speeds accelerate and how those costs can be managed

• FactSet has a fundamentally solid business model and its business has not been significantly affected despite the bearish trends in the S&P500.
• Asia Pacific continued to be a growth-driving geography with ASV growth at 14.3%, driven by demand from asset managers and vested owners.
• With greater expansion with asset owners and asset managers, respectively, both CTS and analytics contributed to growth.

• In its last result, Accenture delivered robust overall results, reflecting strong double-digit revenue growth across all areas of its business and ongoing operating margin expansion due to its ongoing large-scale investments in its company.
• Accenture continued with its acquisition-led growth approach and agreed to acquire The Stable.
• In a nutshell, Accenture is in a unique position to support both its clients’ growth objectives and cost-saving initiatives.

• Link Administration (LNK AU) announced it has agreed to Dye & Durham’s latest $4.81/share offer, which is 13% below its initial $5.50/share approach last December.
• Link shareholders may also receive an additional A$0.13 from the sale of the Banking and Credit Management (BCM) business under the latest offer.
• This transaction is still subject to Australian Competition and Consumer Commission clearance, which should happen once D&D undertakes to offload its GlobalX ops.

• Link Administration (LNK AU) has entered a revised scheme implementation deed with Dye&Durham/DND at A$4.81 per share. The scheme meeting will be held in mid-August.
• Shareholders will be supportive due to deal fatigue, and the offer price is 11% above the undisturbed price and at the low end of the original IE valuation range.
• Regulatory approvals are a key risk. DND is presumably confident in its undertakings to gain ACCC approval. At last close, the gross spread is 7.8%.

• Are the cuts a sign of discipline that we have been waiting for or
• Is it due to lack of ability to procure the equipment? 
• Seems a combination of both if you listen to the words of the Chairman

• Alphyn Capital Management LLC (“ACML”) is a registered investment advisor in New York. We help clients invest in high quality public companies to both preserve and grow their wealth over the long-term.
• The Master Account, in which I am personally invested alongside SMA clients, returned -14.7% net in Q2 2022, as reported by our fund administrator.
• With the threat of increasing rates, investors have renewed their focus on profits.
• I try not to take a position on a discrete event, such as interest rates or quarterly earnings, as the odds of getting these right are too low, and the costs of getting these wrong are too high.

• Alphyn Capital Management LLC (“ACML”) is a registered investment advisor in New York. We help clients invest in high quality public companies to both preserve and grow their wealth over the long-term.
• The Master Account, in which I am personally invested alongside SMA clients, returned -14.7% net in Q2 2022, as reported by our fund administrator.
• With the threat of increasing rates, investors have renewed their focus on profits.
• I try not to take a position on a discrete event, such as interest rates or quarterly earnings, as the odds of getting these right are too low, and the costs of getting these wrong are too high.

• This is our first report on process automation player, Alteryx.
• The company had a great start to 2022 and saw increasing traction with large enterprise customers.
• The company’s brand-new, integrated Alteryx Analytics Cloud platform now offers access to its entire cloud portfolio.

• Consensus remains positive about Sea Ltd (SE US) with 12.3% QoQ revenue growth in Q2 and a 32.2% revenue CAGR over the next two years.
• However, with Free Fire losing active players and Shopee’s growth momentum in South East Asia broken, we expect a disappointing Q2 from Sea Ltd.
• Free Fire is on its last legs and Shopee has decided to halt its geographic expansion. Thus we think that there’s significant downside to Sea’s Q2 and medium-term consensus.

• DB was notified of the conversion to a holding company by the Korea FTC. DB must complete the conversion to a holding company by January 1, 2024.
• DB has no option but to ECO DB HiTek, the same trick employed for LG Energy Solution, to meet the 30% stake obligation for DB HiTek.
• There are still opportunities for outright shorting on DB HiTek as DB will likely announce DB HiTek split before August 12.

• The planned eToro IPO via SPAC merger with FinTech V was terminated in early July, due delayed regulatory process as well as poor market conditions
• The now defunct SPAC deal had implied an eToro valuation in excess of USD10bn; post failed SPAC deal, its latest funding round implies a valuation range of USD5bn to USD6bn
• Softbank made its eToro investment through the Vision Fund 2 in 4Q 2020; Softbank had been counting on the SPAC deal with FinTech V as its partial eToro exit strategy

• The review period for the September rebalance of the KRX New Deal indices started on 1 May and will run till 29 July. Implementation is on 8 September.
• Intellian Technologies (189300 KS) and Seojin System Co, Ltd. (178320 KS) could replace Danal Co Ltd (064260 KS) and Kcp Co Ltd (060250 KS) in the Internet Index.
• Nexon Games (225570 KS) could replace Devsisters (194480 KS) in the Game Index, and KMW Co Ltd (032500 KS) could replace AfreecaTV (067160 KS) in the BBIG Index.

Lenovo has launched a roadshow to market dual-tranche 144A/RegS bond offerings of 5.5Y and 10Y. The 10Y notes will be the company’s first green bonds, while the 5.5Y bonds will be conventional notes. Proceeds from the green bonds will be used to finance or refinance eligible projects, including green buildings and renewable energy initiatives. 

Lenovo also launched a concurrent tender offer for the USD 4.75 23 notes, of which USD 687 mn is outstanding. The tender offer price is USD 1,005 per USD 1,000 principal. The consideration will include accrued interest. The tender cap will be determined and announced on or around July 22nd, after the company has priced the notes offerings.

Initial price guidance was announced earlier today, as follows: 5.5Y: CT5 + 290 bps, and 10Y: CT10 + 370 bps. We find this fair, in view of the existing LENOVO curve and taking into account global peers HPQ and DELL.

• Delaware Chancery Court rejected Elon Musk’s excessive demand for more time to support his dubious claims against Twitter than he took to create and ram through his hostile buyout.
• Twitter’s solid legal case against Musk improves odds the sale of the company could be court-ordered before year end.
• If so, this is by far the best outcome for Twitter’s wary bondholders.

• Bumble is the second-largest player in the online dating market, right behind Match Group.
• The company had a decent start to 2022 with lucrative revenue growth and a total group revenue that was driven by a continuous strength in the Bumble app.
• The management continued its acquisition-led geopgraphic expansion and acquired famous Gen Z dating app, Fruitz to expand into Europe.

• This is our first report on go-to-market intelligence and engagement platform, ZoomInfo Technologies which is catering to sales and marketing teams across the globe.
• The expanding Revel platform of the company is a positive development and its expanding database bodes well for its enterprise customers.
• ZoomInfo has recently partnered with Sales Confidence for empowering revenue professionals through data privacy compliance and sales solutions.

• ZoomInfo Technologies is a major go-to-market intelligence and engagement platform that provides critical tools for sales and marketing teams and helps in lead generation and various other aspects of their work.
• The company’s rapidly expanding Revel platform is a positive development and its expanding database bodes well for its enterprise customers.
• ZoomInfo has recently partnered with Sales Confidence for empowering revenue professionals through data privacy compliance and sales solutions.

• This is our first report on the online dating giant, Bumble.
• The company had a decent start to 2022 with lucrative revenue growth and a total group revenue that was driven by a continuous strength in the Bumble app.
• The company continued its acquisition-led geopgraphic expansion and acquired famous Gen Z dating app, Fruitz to expand into Europe.

• Yesterday I published Nikkei 225 Sep Annual Review Predictions – 3 In, 3 Out. Assuming correct, and we move the last 6mos of data 6mos forward, March23 Rebal is below.
• This too is 3 in, 3 out. But it is complicated. “Required” changes would move the sector balance further out of whack. 
• And while some of the trades are “interesting”, the rebal is smaller and the bigger question is “What comes after that?”

• Over 96% of the way through the review period, we see 1 change using a 12 month minimum listing history, and 5 changes using a 6 month minimum listing history.
• We expect the index committee to continue using the shorter minimum listing history since the potential adds have much larger market caps than the potential deletes.
• The potential adds have outperformed the potential deletes over the last month and there could be more once the current consolidation is complete.

• As of July 19, SKT was in the top 50 short-selling KOSPI stocks. SK Telecom ranked 8th and 18th in terms of short-selling amount and short-selling ratio to trading volume.
• Deletion is practically a foregone conclusion if MSCI does not calculate SKT’s foreign room that reflects the DR situation. Reversing requires calculating a flexible foreign room considering the DR situation.
• However, the critical point here is that in any of the above cases, SKT’s stock price is highly likely to rise on the date the results are announced.

• This is our first report on game development software market leader, Unity Software.
• The company’s stock has taken a beating loke most other software players with a negative bottom-line.
• Its previous quarterly result was also below par despite the company generating $320 million, an increase of 36% from the previous year.

• Unsurprisingly, the independent financial advisor (IFA) considers WT Microelectronics (3036 TT)‘s S$1.93 offer for Excelpoint Technology (EXLP SP) to be fair and reasonable. We think that IFA’s valuation approach is sound. 
• The key condition is approval from shareholders and regulatory authorities (Taiwan pending). The scheme meeting is scheduled for 3:00 pm on 10 August. 
• We continue to think that offer is attractive. At the current price and for the 15 September payment date, the gross and annualised spread is 0.5% and 3.1%, respectively.

• On the 13 April, WT Microelectronics (3036 TT) entered into an agreement to acquire electronic component distributor Excelpoint Technology (EXLP SP) by way of a Scheme. 
• The cash consideration of S$1.93/share was a 7.8% premium to last close, but a 21.4% premium to the undisturbed price.
• The Scheme Doc is out. The Scheme Meeting will be held on the 10th August. The IFA considers the terms to be fair. Settlement is expected by the 15th September.

• We maintain our HOLD rating and TP of Bt47.60 based on DTAC’s tender offer price. Conference call came with negative tone, as management lowered its guidance on core service revenue 
• 2Q22 core profit was below expectation 2Q22 net profit was at Bt1bn (-34% YoY, +38% QoQ), growing QoQ due to a one-time Bt1bn deductible granted by the NBTC
• Excluding extraordinary items, 2Q22 core profit should be at Bt573m, 33% below our forecast, declining both QoQ and YoY due to losses in subsidizing handset sales to attract subscribers.

• The recent strength in the Dollar is likely to result in second half revenue ending up lower than anticipated
• ATEN generated 60% of its revenue in 2021 from outside the USA. The strength in the US Dollar is likely to result in revenue growing at a slower pace 
• Our new estimates reflect the impact of a stronger Dollar on revenue and expenses. We are currently not expecting demand softness to push results lower

• 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.
• The highest spreads are 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Australian Unity Office Fund (AOF AU), Link Administration (LNK AU). 
• The lowest gross spreads are Hwa Hong Corp (HWAH SP), Uniti Group Ltd (UWL AU), Excelpoint Technology (EXLP SP), Giordano International (709 HK), Dongzheng Automotive Finance (2718 HK). 

• Tencent’s games gave only three hours a week to juveniles in school summer vacation.
• Tencent and NetEase did not get new game licenses for the third time this year.
• Kingsoft censors files on users’ computers, which will benefit Microsoft Office.

• This is our first report on the material science behemoth, Corning.
• Both the gross margin and operating margin have been increasing since the start of 2022.
• The company also collaborated with 5E Advanced Materials to supply boron specialty materials.

• Corning is a major material science player that has been experiencing a rapidly improving margin profile since the past few results.
• Both the gross margin and operating margin have been increasing since the start of 2022.
• The management appears confident in their ability to promote long-term profitable growth combined with their steps to increase margins.

• Sungeel Hitech announced its IPO book building results. The IPO price has been determined at 50,000 won, higher than the high end of IPO price of 47,500 won.
• The demand ratio for Sungeel Hitech IPO was 2,269.7 to 1 which broke all time records in terms of highest ever demand ratio for a Korean IPO.
• Our base case valuation is implied price per won of 70,992 won per share, which represents 42% higher than the IPO price of 50,000 won.

• Bridgetown Holdings, a SPAC backed by Peter Thiel and Richard Li, is considering a potential merger with Singapore’s virtual telco Circles.Life (merger valuation could range US$1.5 billion to US$2.5 billion). 
• All in all, the valuation range of the proposed M&A merger of Bridgetown Holdings and Circles.Life needs to be reduced substantially, in order to generate more interest in this deal. 
• Otherwise, there is likely to be weak demand for this merger deal. In addition, the market environment for SPAC related M&A deals have deteriorated significantly in the past 6-12 months.

• Glory Star New Media Group H (GSMG US) (GSMG), a leading digital media platform and content-driven e-commerce company in China, has entered a definitive privatisation transaction with Cheers Inc.
• Cheers is offering US$1.55/share, in cash, a 76% premium to GSMG’s undisturbed price, and a 22% premium to the US$1.27/share proposal from GSMG’s CEO Bing Zhang. 
• The buyer consortium owns ~72.8% of shares out and this Offer requires a two-thirds vote from shareholders. This looks done with expected completion this year. But it’s a low-balled Offer.

• The Holding Foreign Companies Accountable Act (HFCAA) could result in China ADRs being delisted in 2024. The Accelerated HFCAA, if passed, will bring that date ahead to 2023.
• FTSE has announced its implementation plan to migrate the China ADRs in its indices to the local listings using an accelerated schedule.
• Expect a lot more secondary listings/ dual primary listing in Hong Kong over the next few months. The increase free float market cap could keep a lid on prices.

• Softbank sale of Fortress removes an asset that is surplus to requirements at a price that is not as bad as headlines suggest
• A sale to Mubadala at ~$1bn seems low versus the $3.3bn it paid in 2017 but dividend payments and a strong yen mean a c. 70% loss is actually ~10%
• The discount has modestly narrowed recently but VF valuations likely to remain volatile whilst worries on China tech regulation persist

• Money Forward has one of the largest SaaS/Fintech platforms in Japan and is a key beneficiary of corporate digital transformation 
• The stock has fallen 48% year to date as valuations crashed with global SaaS multiples
• We think MF will emerge from downturn in good shape. At 10x EV/Rev, we see 22% upside (maybe even 55%….)

• Q2 financial results were in-line or better than management targets but lagged consensus expectations
• Guidance for Q3 is slightly disappointing with the target range for revenue mostly below expectations whilst promotional and marketing spend continues to expand
• The secular growth story is attractive and operating KPI growth remains robust but investors probably needed more from a stock that trades at 7.5x EV/FY22 rev in a risk-off environment

• Money Forward (3994 JP) reported 2QFY11/2022 results yesterday. Revenue grew 27.2% YoY to JPY5.08bn (vs consensus JPY5.13bn). Operating losses for the quarter was JPY2.2bn (vs consensus JPY1.9bn).
• MF’s top line growth has been slowing down, and the company continues to spend heavily on advertising to acquire users for its SaaS business.
• Though MF continues to grow its user base, it comes at the cost of profits.

• 2022 Version of JAPAN PASSIVE: Who Owns What? where we break down the major (and minor) passive tracking indices and which category of investor owns how much of each. 
• Even if you do not “play” index changes, understanding impact is important. Japan Exchange Group (8697 JP) entered Nikkei 225 in July 2020 after rising 30%. That was the top.
• Understanding the nature of the ownership and flows is crucial to understanding how to trade certain stocks. 

• China just announced game approval for July batch. More games were approved in July compared to June and May.
• Pace of China game approval has picked up albeit at a much slower pace than pre-tightening.
• Tencent and Netease will be under pressure as they continue to score zero in July domestic game approval. 

• China’s NPPA issued a list of 67 new games approved for July 2022, and once again, Tencent (700 HK)  and its smaller rival NetEase were excluded from the list.
• The nine-month long freeze on new game approval was lifted in April, however, none of Tencent’s new games were included in the approved lists in April, June and July.
• This further affirms our view that the anti-monopoly crackdown on tech firms hasn’t slowed down, but regulators are probing on dominant players such as Tencent to level the playing field.