TMT/Internet

• Razer Inc (1337 HK)‘s Scheme Document flags the abolishment of the headcount test may become law ahead of the shareholder meeting. That is a game-changer. If true.
• Daiho Corp (1822 JP) has announced a deal which is not quite what it looks like. This situation is kind of a governance disaster.
• Uniti Group Ltd (UWL AU) backs the revised Morrison/Brookfield tilt and severs ties with Macquarie

• The lows have likely been established for this correction, but a bottoming process would likely take weeks or potentially months and could come with more tests of the lows.
• Japan’s TOPIX and Nikkei 225 are each testing their respective downtrends. The EURO STOXX 50 is testing resistance in the 4040-4090 range. Germany’s DAX is testing major resistance at 14,815-14,950.
• It is likely that this initial 2-3 week bounce has run its course; stick with cyclical value and defensives, areas we have been focused on for most of 2022.

• SMIC will spend ~US$5bn in Capex in 2022, of which only the Beijing Fab is 12”, and Shenzhen and Tianjin are 8” Fabs.
• SMIC has three major trends: 1) the local demand is booming rapidly, 2) Auto, industry and others have developed actively, and 3) Huawei’s event had made a great impact.
• We note SMIC’s capacity of each Fab is an estimation because 1) the local governments’ subsidies are somewhat complicated, and 2) it is involved with three local governments in 2022.

• OneStore is getting ready to complete its IPO in May with IPO price range of 34,300 won to 41,700 won. It is one of the largest app operators in Korea.
• The IPO base deal size is from $187 million to $227 million. The expected market cap after the IPO is from 0.9 trillion won to 1.1 trillion won. 
• OneStore generated sales of 214.2 billion won (up 38% YoY), operating loss of 5.8 billion won, and EBITDA of 8 billion won in 2021. 

• Pc Partner posted record results with revenue and profits increasing by 99%% and 1,047% respectively. The final 1.61 HKD dividend was below my 2 HKD estimate but still solid.
• Cash grew to 3.1 b HKD vs a market cap of 4.37 b HKD, or 70% of market cap. By end of FY22 cash could be 100% of market cap.
• The outlook is mixed with short-term ASP pressure into 2Q22 but longer-term optimism into 2H22. As always visibility is low but offset by a cheap valuation and large cash buffer.

• Shopee India will lay off over 300 staff after it decided to shut down operations in the South Asian country.
• The news came as a shocker to its employees, who were unaware until Monday that the company was wrapping up its business in India, sources told Tech in Asia.
• While the ecommerce firm’s India unit had about 300 employees in December 2021, that number has since gone up to 350 workers, an employee told Tech in Asia on condition of anonymity.

• Startup enabler Y Combinator has unveiled the 33 Southeast Asian startups that have been included in its latest winter 2022 cohort.

• The number is almost doubled from the last batch and amounted to around 8% of the 414 startups that were funded by the accelerator in this cohort.

• As part of the accelerator program, Y Combinator will invest US$125,000 in seed capital for a 7% stake in each startup.

• Analyst meeting came out with positive tone. Cloud and cybersecurity businesses should grow rapidly over the next few years.Current inventory stock provides 4 to 6 months buffer from Chinese lockdown 
• We believe that cloud and cybersecurity will drive earnings at a CAGR of 18.5% between 2021-24E, led sales growth at 8.6% CAGR and slightly improved margins. Management maintains strong outlook 
• We expect 1Q22E earnings at Bt201m(+6%QoQ, +6%YoY)driven QoQ by GPM expansion. We recommend accumulating shares now as earnings in 1H22 should be the lowest of the year due to seasonality.

• Nintendo is up 25.2% since we turned genuinely bullish on the name at the end of Nov. 
• The weakening yen has helped significantly and should lead to a small overshoot on the dividend as well. 
• However, they just announced a delay of the Breath of the Wild sequel and we think this is a good time to take profit.

• The EGM to approve the 51 Job Inc Adr (JOBS US)’s privatisation offer of $61.00 in cash per ADS will be held at 9 am (Shanghai time) on 27 April.
• The transaction is expected to close during the second quarter of 2022. The continuing shareholders represent 56.2% of the voting rights according to the proxy statement.
• Based on 67.5 million ADS entitled to vote at the EGM, around 21% of disinterested shareholders are required to vote in favour to meet the two-thirds voting threshold.

• 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.

• TSMC is still focusing on their delivery targets for 3nm and 2nm for the next goals.
• Nvidia CEO Mr. Jensen Huang said he wants to diversify his company’s suppliers as much as possible, and he will consider working with Intel. 
• We have to leave a big question mark that Intel declares to deliver 3~4 technologies within 2024.

• Razer Inc (1337 HK)‘s Scheme Document is now out. The Court Meeting will be held on the 26 April. The IFA declares the Offer to be fair and reasonable. 
• More importantly, the Document flags the abolishment of the headcount test may become law ahead of the shareholder meeting. That is a game-changer.
• Trading at a wide spread of 14.2%. This will narrow on this latest development.

• Razer Inc (1337 HK)‘s scheme document is out with the scheme meeting scheduled for 26 April. The IFA considers the offer to be fair and reasonable. 
• The headcount test, the key risk, applies unless the amended Cayman Islands Act becomes law before the court meeting date on 26 April. The legislative timetable has not been set. 
• Current deal probability implies a 65% chance of success, which fairly reflects the deal risk in our view. At last close, the gross spread is 14.2%. 

• 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 brief look at the constituent selection methodology and the historical price performance of Index Rebalance Events for the above-mentioned indices.

• Shares are now up 1% in the quarter despite investment losses as 87% of assets are US$-linked
• A recovery for Alibaba, reports of ARM monetization and the $2bn sale of its stake in Cruise has eased leverage concerns with LTV back to 22% and CDS prices falling
• This report includes detail on Softbank dollar exposure, calculations for LTV on a quarterly and daily basis and updates to our usual NAV discount/VF performance tables

• Sea Ltd’s (SE US) decision to exit India came as a surprise but looks like a prudent move given the heightened risk for Shopee there post the FreeFire ban.
• The move will allow Sea Ltd (SE US) to focus its attention and resources on a more profitable markets such as Brazil, which is already seen as a core market.
• Sea Ltd’s growth model is intact with losses in its core e-commerce markets declining fast on a per order basis. Valuations are less challenging on 3.4x FY2023E EV/Sales.

• The long-awaited GoTo IPO is upon us with a listing scheduled for 4th April after the deal was priced sensibly in the middle of the range at IDR338 per share. 
• Since this was only offered to local investors and the IPO only represents 4.35% of shares in issue pre-Green Shoe, we see the potential for strong support from local institutions.
• Valuations are challenging but GoTo represents the best proxy for the Indonesian digital economy given its broad and unique exposure to key verticals of on-demand, digital finance, and e-commerce. 

• Both monthly active users and time on site grew strongly in 4Q21.
• Live streaming revenue recovered quarter over quarter in 3Q21 and 4Q21.
• Operating loss decreased in 4Q21, compared to the first three quarters in 2021.

We view AAC Technologies as “Low Risk” on the LARA scale, mainly due to the company’s market position in the acoustics segment, healthy financial profile and diversified product range. AAC is a supplier to reputable brands such as Apple, Samsung, Lenovo, LG Electronics, Huawei Technologies and Xiaomi Corp. The acoustics business is the company’s key profit centre. That said, AAC will need to further diversify its products to keep up with clients’ needs, as well as expand the customer base to boost revenue. The company’s operations and expansion plans could be disrupted by the resurgence of COVID-19 cases.

Our Credit Bias on AAC is “Stable”, given the company’s leading position in the acoustics segment, solid business fundamentals and healthy financial profile. That said, AAC may face supply disruptions due to the resurgence of COVID-19 cases, especially since Greater China is one of the company’s largest markets.

• Micron’s 2QF22 results were above the high end of guidance
• The company’s outlook for the current quarter is very strong
• Market data supports the company’s bullish outlook, and Micron’s performance speaks for itself

• Shopee, the e-commerce arm of Singapore-based Sea Ltd (SE US), announced today that they are shutting down operations in India due to global market uncertainties.
• We feel this could turn even the most hopeful followers of Sea Ltd as they must be running out of angles to justify their bullish calls on the company.
• We think, Sea Ltd shares could easily fall below the pre-COVID level once it starts losing these ardent followers.

• Meituan (3690 HK) reported 4Q2021 results on Friday. Revenue grew 30.6% YoY to RMB49.5bn (vs consensus RMB49.0bn) and reported operating losses of RMB5.0bn vs RMB2.9bn in 4Q2020 (vs consensus RMB7.0bn).
• Since 2Q2022, Meituan’s revenue growth has started decelerating with demand for online and food and grocery deliveries has been slowing down.
• Meituan’s 4Q2021 results were better than expected but we expect the company’s earnings to remain under pressure with new regulation on food delivery commission and resurgence of Covid-19.

We view Xiaomi Corp as “Low Risk” on the LARA scale, driven by: [1] the company’s leading market position in smartphones and smart hardware; [2] its increasing market share, scale and brand name; and [3] the company’s strong financial metrics with large positive FCF, solid balance sheet with net cash, as well as sound liquidity position. Xiaomi has a strong track record of execution and innovation, along with the entrance into and success in new verticals (e.g. cleaning robots, smart speakers, smart TVs and smart routers). The company also has fast-growing revenue streams from Internet services and gaming. On the other hand, the mobile phone industry is very competitive with low switching costs, particularly for Android phones (Blackberry and Nokia have gone out of business despite having been leading players). The credit is further weighed down by: [1] potential trade sanctions from the US; and [2] execution risk related to Xiaomi’s entry into the increasingly competitive electric vehicle market.

Our Credit Bias is “Stable”, given the company’s robust business risk profile and strong balance sheet.

• Adobe’s high quality business model does not matter much in a sector where topline growth is the main driver of valuations.
• In the meantime, the company’s organic growth is showing signs of slowing down which could result in more risk taking by the management.

• The British competition regulator questions the acquisition of cybersecurity company Avast PLC (AVST LN) by NortonLifeLock (NLOK US). and refers the transaction for an in-depth phase 2 investigation.
• The combination would not hold more than c.31% of the UK antivirus market and probably less than 30% in malware protection. The CMA investigation should take 20-24 weeks.
• Deal closing could happen during Q4 2022. Spread on the majority cash option is 11.9%, spread on the majority stock option is 3.9%.

• 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 cents). 
• Approval from the State Administration of Foreign Exchange is the remaining pre-condition. The Court hearing of the petition for the sanction of the scheme is set for 19 July.
• At last close and for a July end effective date, the gross and annualised spread to the total offer of HK$1.8345 is 3.6% and 11.2%, respectively.

• The stock is down 54% over the past year despite 41% revenue growth. We see 3 key drivers in 2022.   
• Appier is growing rapidly in the US, a much bigger market than its home market of North Asia. 
• Appier is at the forefront of digital transformation, benefitting from structural DX of marketing functions and increased use of 1st party data.

• Meituan’s total revenue continued to rise strongly by 31% in 4Q21.
• Initiatives businesses are losing money, but two of them are in leading positions.
• We believe the stock has a 20% upside for this year.

• D/G to HOLD with lower TP of RM1.07 (-38%)
• Labour and components shortages dragged earnings
• QoQ core profit improvement may not be sustainable
• Rising costs and inflation headwinds ahead

• Sequoia Capital India, one of the key shareholders of Freshworks (FRSH US) , made notable insider purchases in March. This is the biggest insider buying since IPO in 2021. 
• According to SEC filings, venture capital firm acquired ~5 million Freshworks (FRSH US)  shares at an average price of $17.38 per share. 
• We believe that strong insider buying may indicate a bottom in Freshworks (FRSH US)  stock after significant multiple compression in the technology software sector. 

• We discuss the potential additions and deletions in the upcoming June 2022 KOSDAQ150 rebalance. The ongoing war in Ukraine has impacted the potential additions/deletion candidates in KOSDAQ150.
• The recent new additions (among potential inclusions) include Nexon GT Co Ltd (041140 KS) and Netgames (225570 KS), and SNK Corp (950180 KS).
• The top 10 potential exclusions are down on average 25.7% YTD, underperforming KOSDAQ which is down 9.6% in the same period. 

• Flexible printed board player AKM Industrial (1639 HK) has announced the approvals for the pre-conditions attached to the Scheme are in the final stages.
• Separately, the Court date for sanctioning the Scheme has been listed for the 19 July.
• Trading at a gross spread to terms of 3.6%, including the final dividend.

• We discuss the end of the three months lock-up period, higher short selling of LG Energy Solution as well as the recent JV formation with Stellantis.
• At the current price of 439,000 won, we believe there is a 15% downside risk to LG Energy Solution shares over the next 3-6 months.
• LGES’s share price has rallied by 8% since the news about the JV with Stellantis have been announced but we believe this rally is likely to be short-lived. 

• Our negative recommendations from December – especially Paytm – worked better than our positive ones, given 1Q22 market conditions; we see much value in payment companies but we remain selective
• Based on our screens, we continue to favour Mastercard in the megacaps, we stick with PagSeguro and Getnet, adding Nexi which looks very oversold, despite its fundamental headwinds
• We take Paytm off the sell list, but we remain negative on DLocal on its very demanding valuations, and we add Kakao Pay to the negative list

• Bukalapak (BUKA IJ) is rapidly broadening its exposure to a greater range of services, with the latest move increasing its exposure to gaming, a potential future cash cow. 
• We have already seen Bukalapak (BUKA IJ) making bold moves into digital banking through Allo Bank Indonesia and a direct commitment to online groceries through AlloFresh with Trans Retail Indonesia.
• We continue to focus on the improving fundamentals of Bukalapak (BUKA IJ) and its growing ecosystem and would use any short-term trading anomalies to accumulate the stock.

• Novatek’s monthly revenue is increasing above 20% YoY from July 2020.  However, the growth trend seems slowing down from 1Q22.
• The price for DDIC (Display Driver IC) is the lowest among in the foundry companies’ products although its demand quantity can be large, which gives its actual price bargaining power.
• Somehow, the end demand still needs a Display with related ICs for the application. So, there must be some certain suppliers to complete the supply chain.

• Adobe’s stock has pulled back 35% since November, a far larger drawdown than megacap software peers on fears of pulled in growth for Creative Cloud.
• Weak initial guidance for 2022 was reiterated this past week, implying reacceleration in 2H22.
• Price increases should serve as a tailwind in 2H22, providing a good entry point on a quality compounder that is trading at 5 year trough multiples.

• Today I will be completing an in-depth analysis on Shopify. Within, I will spend time breaking down the opportunity in front of the company, both broadly within the e-commerce space as a whole, as well as more specifically from a value proposition point of view.
• In addition, I will break down the company’s business model, clearly outline how the company makes money, analyze their most recent earnings report, delve into some KPIs and discuss some bear and bull cases that some investors should be wary of going forwards.
• As always, the format of this research piece can be seen outlined below, feel free to skip ahead to the sections that you feel will be most useful.

• Tencent’s revenue growth continued to slow down to 8% YoY in 4Q21.
• The company used more extraordinary income to bolster EPS in recent years.
• We believe the stock has a downside of 28% within 2022.

• The family is done with selling stakes in Samsung Life Insurance and Samsung SDS. What remains now is the sale of a 0.33% stake in Samsung Electronics by Hong Ra-hee.
• Hong Ra-hee’s 0.33% stake in Samsung Electronics is highly likely to appear soon. The deadline is April 25th. It will likely cause an impact of 1.5x ADTV.
• Additional stake sales are likely. SDS for sure, and probably more Life. But more SamE? This remains unclear due to the substantially lower controlling stake percentage.

• GoTo (1379371D IJ) is the leading digital ecosystem in Southeast Asia. It has extended its book build for a $1.3 billion IPO to 24 March.
• In GoTo Gojek Tokopedia IPO: Valuation Insights, we noted that our valuation analysis suggests that the price range is aggressive and unattractive. 
• In this note, we compare GoTo vs Bukalapak (BUKA IJ), Grab (GRAB US) and Sea Ltd (SE US)‘s relevant businesses across GTV, take rates and segmental margins.   

• Xiaomi Corp (1810 HK) reported 4Q2021 results on Tuesday. Revenue grew 21.4% YoY to RMB85.6bn (vs consensus RMB82.1bn) while reported OP declined 54.0% YoY to RMB4.5bn (vs consensus RMB4.3bn).
• Adjusted OP (excluding fair value adjustment and other gains) grew 21.4% YoY to RMB85.6bn, with an adjusted OPM of 4.0% vs 3.0% in 4Q2020.
• Xiaomi’s smartphone revenues bounced back in 4Q2021 after growing less than 1.0% YoY during the previous quarter. The company also announced a share buyback of HK$10bn.

• Bukalapak (Buka) raised US$1.5bn in Aug 2021 when it priced its IPO at the top end of its pricing range.
• Buka is an Indonesian e-commerce company. The company operates an online consumer-to-consumer (C2C) marketplace. It also operates Mitra Bukalapak (Mitra) which provides online-to-offline (O2O) services to MSMEs.
• The pre-IPO shareholders will be released from the lockup on 6th April 2022.

• Tencent (700 HK) reported 4Q2021 results yesterday. Revenue grew 7.9% YoY to RMB144.2bn (vs consensus RMB146.5bn) while non-IFRS OP decreased 13% YoY to RMB33.2bn.
• This marks the slowest quarterly revenue growth for Tencent since 2004 mainly due to lower VAS revenue growth and decline in revenue from online advertising.
• Tencent’s 4Q revenues were in line with our forecast of RMB144bn while adjusted OPM of 23% was slightly below our estimates of 26%.