TMT/Internet

• SenseTime Group (20 HK) currently has a float of 1.4%. That will increase to 46% at the end of June as pre-IPO and cornerstone investor lock-ups end.
• The Hang Seng Tech Index FAF increase and potential inclusion in the Hang Seng China Enterprises Index will require passive trackers to buy 700m shares early September.
• Economic stimulus in China, outlook for China tech, lock-up expiry, inclusion in Southbound Connect and flows from passive trackers will drive the stock for few months and provide trading opportunities.

• Square Enix announced the of sale Eidos Interactive, Crystal Dynamics, Square Enix Montreal and associated IPs to Embracer for $300m. 
• We had been puzzling over Square Enix’s strangely low guidance despite excellent momentum in its MMO business for some time. 
• Considering the underperformance in HD Games profitability and this sale we think we can now put two and two together.

• Novatek’s revenue was NT$36.512bn in 1Q22, which was 38.5% YoY and 62.6% QoQ. It was 50.73%/36.73%/30.5% GM/OPM/NM in 1Q22, which was higher than our prior expectation of 43.6%/27.3%/22.3% in GM/OPM/NM.   
• In our views, we revise up to be revenue/GM as NT$38.7bn/50.98% in 2Q20.
• As the inflation, 5G, Russia-Ukraine war did change the landscape, the outlook seems not that so much worse in 2022.

• AXTI continues to experience an increase in demand for substrates with indium phosphide (InP) and gallium arsenide (GaAs) growing in the first quarter
• AXTI has shifted away from the seasonality it would find itself since making the move to multiple new facilities two years ago. Customers have continued to increase their spending 
• AXTI reported first quarter revenue of $39.7 million compared to $37.7 million reported in the fourth quarter. We had been forecasting revenue of $39.6 million

• Hitachi Ltd (6501 JP) results were salutary but noisy and the year to March 2023 is forecast similar (salutary but noisy). Service integration and growth to external customers is key.
• Forecast growth in main businesses ex- to-be-sold listed subs is decent, but could be better. 
• A SEMI-Bigly buyback will help cushion any selling, but it has recently outrun Siemens on a like-for-like basis.

• Promised operating leverage is pushed out until likely 3Q22, but only higher employee RSUs is a permanent inflationary impact.
• Overcapacity is almost certainly transitory, as long as the retail business grows, this will be soaked up in a quarter or two.
• AWS backlog is booming again. Amazon’s current valuation = 12x forward AWS sales.

• The weekly & monthly close on NDX gives a notable sell signal
• Losses over the medium term towards 11k are expected to be seen
• The Stocks/Bonds ratio also indicates a turn in trend in favour of Bonds here

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore and the US (Chinese ADRs only).
• This week, the highest gross spreads are Dongzheng Automotive Finance (2718 HK), Yashili International Holdings (1230 HK), 21Vianet Group (VNET US), Sezzle Inc (SZL AU), Link Administration Holdings (LNK AU). 
• The lowest gross spreads are Beijing Enterprises Urban Resources (3718 HK), Virtus Health (VRT AU), 51 Job Inc Adr (JOBS US), China Logistics Property Holdings (1589 HK), Uniti Group.

• Bukalapak (BUKA IJ) 1Q2022 results were all about execution, with significant improvements in take-rates for its Mitra business, and even more so for its marketplace segment. 
• The launch of AlloFresh and Allo Bank Indonesia will add some further depth and breadth to the platform’s product offering and help to accerlate the move towards profitabilty.
• Bukalapak (BUKA IJ) looks like an increasingly interesting way to play the Indonesian digital economy with an expanding ecosystem and increasing take-rates at the same time. 

• Growth in number of subscribers on the back of increased workforce, it may be temporary spike
• Cost pressure visible as per our expectation and the margins continue to be at lower level on Y-o-Y basis
• Buyback of shares within a year of QIP meets more than the eye

• Lasertec’s 3Q disappointed as revenue of ¥16.6bn materially undershoot consensus estimates of ¥26.6bn but given quarterly volatility in deliveries and acceptances that is understandable. 
• What is more concerning is the emerging picture of gross margin decline which the company had previously warned about. 
• Given inflated valuations these small negatives together with no guidance raise could drive a continued correction.

• Caixin reported on Wednesday that Meituan (3690 HK) has shut down community-group service (Meituan Select) in Beijing following news that the company plans to shut down operations in loss-making cities.
• Community-Group buying (CGB) became popular in China in 2020 and Meituan entered the market in 3Q2020 and continues to spend heavily on the biz.
• The market became heavily competitive in the form of price war, which attracted regulatory scrutiny and led to large players like Alibaba and JD.com opting out of the market.

• In this insight, we discuss end of the mandatory lock-up periods for 40 stocks in Korea in May 2022, among which 4 are in KOSPI and 36 are in KOSDAQ.
• These 40 stocks on average could be subject to further selling pressures in May and could underperform relative to the market. 
• Among these 40 stocks, the following stocks such as Kakao Pay, Enchem, DearU, and 4by4 could face further selling pressures in the coming weeks.

• Inline quarter, though margins continue to decline on market share loss and ramping new nodes. 
• Intel is overly optimistic about PCs rebounding in the 2H; 2021’s 15% growth is not sustainable.
• Intel maintained its full year revenue guidance and increased its EPS despite lowering 2Q’s guidance. This implies an acceleration in the back half. We find that overly optimistic

• SEA sell volumes are deteriorating into new lows with two buy tranche levels outlined to align with the RSI near 25 as the primary long trigger.
• Selling exhaustion is noted as the descending price wedge matures. Sell volumes deteriorating into new low sets up the entry.
• 102 is the key hurdle to clear with macro targets at 132 and 170. Buy probe near 70 with a higher conviction buy near 54.

• For 2Q22 guidance, the revenue declines high single digits % QoQ, and GM falls between high twenties to low-thirties.
• The current China smartphone inventory digestion won’t influence WinSemi’s expansion plan because it’s in construction phase now.
• It is due to cellular for 2Q22 decline, which is not easy to clarify whether it’s 4G, or 5G.

• Mercari’s 3Q results underwhelmed with both revenue (-4.5%) and OP (¥2.9bn loss vs. a predicted ¥1.0bn profit) missed. 
• Guidance was also weak and problems with rising fraudulent transactions in Japan and low tax reporting thresholds for sellers in the US are headwinds. 
• Nevertheless, the drastic fall in the stock price appears to have gotten far ahead of these problems and ignores the bright future of the company in our view.

• In the 2Q22 guidance, the revenue for ATM/EMS is ~NT$76.7bn/NT$61.2bn, the GM for ATM is ~27.5% and OPM for EMS is ~8.8%.
• In the first quarter, ASE Holding already surpassed the historical peak of 27% gross margins. And ASE Holding will see that trend continue.
• It’s a normal phenomenon that ASE Holding is seeing inventory level being higher than before.

• Persistent Systems Ltd (Persistent) reported strong and broad-based growth in Q4FY22 and beat our expectations on all key parameters.
• The company’s revenue stood at Rs 1,638 Cr, up 9.8% QoQ and 42.2% YoY. Its operating profits registered a growth of 14% QoQ to Rs 230 Cr and operating margins marginally expanded by 40bps QoQ to 14%
• We recommend a BUY rating on the stock and assign a 38x P/E multiple to its FY24E earnings of Rs 126.8/share to arrive at a TP of Rs 4,820/share, indicating an upside potential of 18% from CMP.

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• About 9 days I ago I wrote Renesas (6723 JP) – On Top of Peer-Beating Growth, and Valuation… Watch for Buybacks. Today with Q1 earnings, they announced a ¥200bn buyback. 
• What appears to be a quite strong Q1 in automotive in both revenues and margins, and decent incremental margins, sees a stronger Q2 forecast (but less good incremental margins).
• The Street is well behind guidance, and a buyback at the high end of potential guidance and coming earlier than expected is all to the good. 

• Renesas’ 1Q numbers blew away guidance and consensus as revenue beat by 3.4% and adjusted OP beat by 16%. 
• Revenue growth was strong for both Auto and Industrial with Industrial margins also improving noticeably vs. last Q. 
• Renesas also announced a rather large buyback which is effectively a repurchase of the INCJ’s stake.

• Another quarter another Keyence beat as revenue beat by 5.3% and OP beat by a more modest 4.7% due to high SG&A costs. 
• Sell side analysts on the conference call remain confused by the outperformance vs. peers because they fail to realise that Keyence gonna Keyence. 
• Despite this strength we remain cautious as Keyence is now a truly exceptional company that is being priced like a magical one.

• Twitter suddenly decided to accept Elon Musk’s hostile $54.20 bid (no one else was even interested).
• Now they have to sell billions in pricey & yet likely still underpriced bonds vs Twitter’s already weak ops & truly ugly pro forma credit quality & dicey prospects.
• Does that make Elon a winner or a bagholder? And will he stay or will he go? We’re going to find out.

• Church donor management tech play Pushpay Holdings (PPH NZ) said it “recently received unsolicited, non-binding and conditional expressions of interest or approaches from third parties“.
• No price was mentioned. Shares promptly gained 24% on the news. 
• Separately, Pushpay reaffirmed its EBITDA guidance for FY22. Those results will be announced on the 11 May.

• Advantest results were relatively uneventful with a marginal beat at the top line and a marginal miss at the OP level. 
• Guidance was decent however with both revenue and OP above consensus and some lowballing on margins suggesting some upside to guidance. 
• The company also said that it would no longer disclose orders because changing lead times made them less comparable because of course they do…

• The 1Q22 revenue beat the prior guidance, GM was in-line the guidance. The guidance is within our expectation in 2Q22.  
• MediaTek believes they shall be on the right track to grow revenue 20% and the GM 48-50%, and MediaTek has a 3-year target to grow mid-teens percentage from 2022.
• For shareholders, the board had approved NTD$37 for cash dividend in this year.

• UMC delivered a shining GM and outlook. The GM outlook is 45% in 2Q22, which beat our forecast.
• UMC believes 22/28 nanometer will be a long-lasting node driven by applications, such as Wi-Fi 6, 6E, networking and OLED driver IC.
• The overall business covered by LTA is close to 30%-40%.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

• Razer Inc (1337 HK)‘s Scheme was comfortably voted through by shareholders.  
• The overarching risk to the transaction, that it may fail the headcount test, largely turned out to be a storm in a tea cup. 
• Tomorrow is the last day of trading with payment under the Scheme on or before the 20 May. Index sell flows come at the close. 

• Razer Inc (1337 HK)’s scheme was approved at today’s court meeting. The value test passed with 94.74% of the total disinterested shareholders voting in favour of the scheme.
• Despite our reservations about the headcount test, the scheme comfortably passed the headcount test with 465 for and just 16 against the scheme. 
• At the last close and for the 20 May payment date, the gross and annualised spread to the offer is 3.7% and 56.1%, respectively.

• Flexible printed board player AKM Industrial (1639 HK) has announced the pre-conditions attached to the Scheme have now been fulfilled.
• The despatch of the Scheme Document has been delayed until the 10 June. 
• Trading at a gross/annualised spread of 2.5/9.6%, including the FY21 final dividend, and payment in early August.

• This insight focuses on private unicorns backed by Sea Ltd (SE US) , Walmart (WMT US) , Softbank Group (9984 JP) & Prosus NV (PROSY US) 
• Growth would require new and even larger investments across the Internet Sector.  
• Reliance and Tata’s retail plans are likely to challenge even giants like Amazon and Flipkart.

• Koei Tecmo’s earnings yesterday were on the strong side with 4Q OP beating by 28.7% despite a 1.79% miss at the top line. 
• Thus, the typical pattern of heavy expensing of development costs in 4Q was missing and combined with some one offs could make hurdles for next year high. 
• With the stock struggling to gain positive momentum and few clear positive catalysts on the horizon we remain negative.

• The S&P BSE family of indices represents the performance of stocks listed on the Bombay Stock Exchange (BSE) across various sizes, themes, industries, and strategies.
• This series will mainly focus on the following indices of the S&P BSE family: S&P BSE 500, S&P BSE 200, S&P BSE 100, and S&P BSE SENSEX.
• In this insight, we take a look at the leading candidates who could become Adds/Deletes during the June 2022 Semi-annual Rebalance.

• According to Bloomberg, Bain Capital-backed Chindata Group (CD US) is being scoped out by industry players.
• GDS Holdings (ADR) (GDS US) is rumoured to be interested in merging with Chindata. PE outfit PAG and EQT AB (EQT SS)-backed EdgeConneX are also, reportedly, in the mix.
• Chindata’s shares popped but are still 64% below its IPO price. This rumour follows data center provider 21Vianet (VNET US)‘s recent proposal from Hina Group and Shanghai’s Industrial Bank. 

• Omron’s 4Q results continued the trend of weakness in the FA sector and guidance was tepid unlike Yaskawa. 
• In particular, the Healthcare Segment’s margins appear to be normalising and poses a downside risk along with typical cyclicality. 
• At 14x EV/OP on guidance vs. a 10x multiple that we would consider fair, there is downside risk here.

• Chindata Group (CD US) is a leading carrier-neutral hyperscale data center solution provider in Asia Pacific emerging markets with a focus on China, India and Southeast Asia.
• Bloomberg and several other news media outlets reported that the company has attracted takeover interest from other firms in the industry including rival GDS and PAG.
• CD’s shares are down more than 65% since its IPO primarily driven by the ongoing regulatory crackdown on tech firms in China alongside US-China trade tensions.

• Giverny Capital Asset Management, LLC is a partnership between GivernyCapital of Montreal and David Poppe, the former president and chief executive officer of Ruane, Cunniff & Goldfarb, LLC.
• The best companies tend to weather crises better than average ones, Poppe says.

• Razer Inc (1337 HK)‘s Court Meeting will be held tomorrow.
• The highly anticipated abolishment of the headcount test will not become law ahead of the shareholder vote.
• Trading at a gross spread of 8%, unchanged since the record date. That’s positive. Plus this Offer has proxy advisor support.

• A Bloomberg article claimed that Chindata Group (CD US) is attracting takeover interest from GDS Holdings (ADR) (GDS US), PAG and EdgeConneX. Shares rose 9.8% to close at $4.81.
• Potential privatisation will require the blessing of Bain Capital, the largest shareholder. Chindata’s track record of beating guidance, modest leverage and the beaten-down rating make it a target. 
• A forward EV/EBITDA multiple of 8.9x, in line with 21Vianet Group (VNET US)’s proposed acquisition multiple, would imply $6.85 per ADS. 

• Valorant’s Masters 1 Tournament concluded today in Iceland with North America’s Optic Gaming defeating Brazil’s Loud, leaving Japan’s Zeta Division in third place. 
• These are three key regions for viewership and Japan’s surprising performance bodes well for the esports scene in the country. 
• Gameplay for Valorant Mobile has also leaked and early indications are that Krafton could be cannibalised here.

• AKM Industrial (1639 HK)’s privatisation offer from Alpha Luck and AKM Meadville of HK$1.8345 consists of a base offer (HK$1.82) and a final dividend (HK1.45 cent).
• The pre-condition was fulfilled on 22 April. The latest date for the despatch of the scheme document has been extended to 10 June. 
• Shareholders with blocking stakes have previously provided irrevocables. At last close and for an early-August effective date, the gross and annualised spread to the offer is 3.1% and 10.7%, respectively.

• Tencent (700 HK) will announce its first quarter 2021 results on 18th May 2022.
• Since 3Q2021, Tencent’s earnings have started to decelerate, and the previous quarter marked the slowest ever revenue growth for the company since 2004.
• We expect Tencent’s earnings weakness to continue well into 1H2022E due to slowdown in online games and online advertising businesses.  

• Revenue fell 0.4% QoQ in USD CC terms in 4QFY22, but was above our estimate of -1.1% QoQ USD CC.
• The beat was led by both Services (+1.6% QoQ USD CC) and DLM (-9.3% QoQ USD).
• Growth in Services was driven by Portfolio (10% QoQ), Aerospace (3.9%), and Communications (3.5%), while growth in Rail Transportation (-9.5%) was weak.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

• While we have underweighted the IT sector (Report) HCL Technologies (HCLT) is a preferred pick due to (1) Significant narrowing of growth differential in FY23 despite disappointment on revenue guidance – vis-à-vis Indian Tier-1 growth leader Infosys.
• We also see modest acceleration in FY23 while most Tier-1 peers will see deceleration
• Our view that underlying growth in Products and Platforms (P&P) business is positive…(continued).

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

• Crypto complex rose mid-week but ended the week down after Powell confirmed market’s expectation of 50bps hike in May 
• Uncorrelated to the rest of market, ApeCoin (APE CURNCY)  continues to grind higher in anticipation of Yugalab’s Land mint event on April 30th, possibly the largest NFT mint in history 
• Coinbase (COIN US) launched a beta version of its NFT marketplace as direct competition to the $13bn dollar Opensea; and much more

• SSG.com is getting ready for an IPO in 2H 2022/1H 2023. Local media have mentioned that SSG.com is targeting a valuation of 10 trillion won for the company.
• We believe SSG.com would need to cut the valuation by at least 50% (5 trillion won) in order to complete its IPO. 
• We believe valuation levels of 11st would need to come down significantly in the 2 trillion won to 3 trillion won range in order for an IPO to be completed. 

• ASE Holding revenue was NTD$144.4bn in 1Q22, which was 20.9% YoY and -16.5% QoQ. We expect the GM is 19.5% in 1Q22.
• ASE Holding could target at NTD$148.1bn/20.5% GM in 2Q22. We expect the gross margin of IC ATM and EMS portions are around 26.8%/9.1% respectively.
• We think it should be picking up since 2Q22 because of the seasonality, and it’s likely to peak out until 4Q22.

• The bullish breakout on the VIX Index looks similar to January
• Further gains are expected, probably this week and as we enter May
• As a consequence expect continued losses on the S&P 500

• The amended Cayman Islands Act is yet to become law which increases the odds that the headcount test remains for Razer Inc (1337 HK)‘s court meeting on 26 April. 
• Since the despatch of the scheme document, the gross spread has narrowed to 7.6% (last close). Current deal probability implies an 80% chance of success.
• The rising deal probability negatively skews the risk/reward profile. We are hesitant to be long this trade into a scheme meeting that is too close to call.

• The Strategy underperformed during a pronounced rotation out of higher-growth companies due to investor de-risking and a less accommodative macro backdrop.
• We used opportunities created by heightened volatility to establish seven new positions while exiting eight other names to increase conviction in stocks with more attractive risk/reward profiles.

• ClearBridge is a leading global asset manager committed to active management.
• The Strategy’s overweight in growth and smaller cap stocks caused it to endure the worst of the selling pressure facing these areas.

• A sharp spike in bond yields pressured growth stocks and weighed on Strategy performance against its core benchmark, where leadership was decidedly one-sided in favor of value.
• Nevertheless, we remain positive on areas like the IT sector and have largely maintained holdings in our highest-conviction ideas.

• ClearBridge is a leading global asset manager committed to active management.
• Research-based stock selection guides our investment approach, with our strategies reflecting the highest-conviction ideas of our portfolio managers.
• Recent underperformance was driven by stock selection, where earnings shortfalls impacted several names in communication services and technology.