TMT/Internet

• SK Square (402340 KS) was inexpensive after its November listing. Now it’s even cheaper. 
• Preceding my comments on SK Square – and LG Chem Ltd (051910 KS) – are the current setup/unwind tables for Asia-Pacific Holdcos. 
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• China Banking and Insurance Regulatory Commission warned on Friday against fund-raising and investment products related to the metaverse concept given the speculative nature of these investments.
• The Office of the United States Trade Representatives (USTR) announced on Thursday that e-commerce sites operated by Tencent have been placed on US government’s “notorious markets” list of entities.
• Tencent’s shares have dropped 5.2% during today’s trade following speculation that fresh regulatory crackdowns are possible following the warning on metaverse.

• NTES is exploring overseas market by starting studios and selling games.
• We believe NTES has the experience in dealing with the license suspension for new games.
• We believe the stock has an upside of 48% for year end 2022.

• We spoke to Yaskawa today to understand recent trends and the detailed outlook on demand going forward. 
• There were no major surprises with the company still relatively positive on demand remaining strong across the board though only robots seem to offer strong growth potential. 
• Profitability for robots should also improve going forward creating a nice story, but valuations are still too dear.

• GRAB exhibits overhead sell pressure with a new low in sight. Basing for a key low as selling pressure diminishes and the stage sets up for a cycle trough.
• RSI bull divergence (squeezing out latent sellers, as sell volumes/ downside momentum diminish). RSI near sub 30 should set up a key low as a counter marker.
• Ping the long side near 4.60, a weak bounce would place an emphasis on the 4.0 ideal low projection. 7.55/64 is the level to clear for bull traction.

• Both management and consensus seem to think that BASE Inc (4477 JP) will be able to maintain the COVID-19 growth trajectory beyond the COVID affected years.
• However, investors seem more circumspect with shares currently trading around 90% below the peak level.
• With the company likely failing to meet revenue targets and losses expanding exponentially, we think Base Inc could fall another 25-30% towards the pre-COVID level.

• Lg Innotek (011070 KS), a leading global producer of optical electronic parts, has one of the most attractive fundamentals in Korea. 
• LG Innotek has become one of the critical suppliers for Apple’s smartphones. For example, LG Innotek accounted for more than 70% of the camera modules used for Apple’s iPhone 13.
• In the intermediate term, LG Innotek is expected to benefit from higher demand for metaverse related cameras, 3D sensing modules, and autonomous vehicle cameras. 

• High redemption De-SPAC low float “squeezes” have returned in a big way, apparently.
• Starting with Inspirato (ISPO) on Thursday with seemingly all other low float (due to very high redemptions) De-SPACs following suit
• Software Acquisition Group Inc. III (SWAG) & Nogin (Valuation: $646M EV)

• While crypto is definitely banned in China, the treatment of NFTs is somewhat unclear in China with state-sponsored backers like the Metaverse Industry Committee and the National Team’s Blockchain
• This weekly explores possible creations of NFTs with Chinese characteristics based on China’s own “permissioned” blockchain technology  to be launched in March
• Meanwhile, China sponsored NFTs like the popular Olympics mascot Bing Dwen Dwen is now straddling unchartered territories as both an officially endorsed product as well as an official banned product 

• To our understanding, UMC and Samsung have dealt the 28nm wafer demand and have lifted 28nm wafer price in 2Q22.
• We think it’s possible to lift the wafer price again in 2H22 if TSMC decides to further lift wafer price recently.
• Entering the 5G era, there could be more demand in several aspects, like data storage, data transmission and processing, smartphone, and PC/NB upgrade and etc.

• The US Trade Representative (“USTR”) office added Tencent and Alibaba Group to the US government’s latest “notorious markets” list; 
• Similar to being implicated in running afoul of regulators in mainland China, Tencent “strongly disagrees” with the USTR label; and
• *We look forward to Tencent’s 4Q21 results announcement on March 23, 2021 where management will continue to refuse to discuss anything meaningful.

• This year the market presents investors with opportunities, especially in the technology sector, and we believe VC-backed Amplitude is one of them. 
• The market cap of the leading product and data analytics unicorn fell to ~$2.3B, keeping in mind last private round valuation was ~$4B in June of 2021. 
• $21 valuation, based on ~10x 2022E EV/Revenue and ~8x 2023E EV/Revenue, applies to our bear case revenue estimates of $226M in CY22 and $287M in CY23.

• SK Hynix has lost slight market share in DRAM, but gained significantly in NAND to become a strong #2 contender
• Revenue growth expectations seem conservative given Intel consolidation, market growth expectations, and the current pricing environment
• The company is still trading at discount valuation multiples despite improved market positioning and medium-term dividend clarity

• We are moving our PT to $26 by applying a 14x multiple to CY22 revenue estimate of $491M, which we believe is fair given lower implied CY22 growth. 
• Freshworks has resolved the litigation filed by Zoho Corporation regarding trade secret misappropriation against Freshworks, eliminating key risk factor for investors.
• Freshworks crossed the $400M ARR mark in the quarter ended Dec-21, and quarterly revenue exceeded $100M for the first time. 

• Results above expectations; maintain BUY
• 2QFY22 results takeaways
• Revised earnings estimates for FY22-24
• China to be the next growth driver?

2QFY22 core NP of MYR113m was above expectations, as 1HFY22 core NP of MYR226m came in at 56%/58% of our/the street’s FY22E estimates. We have raised our FY22-24E earnings assumptions by 17%/23%/24%, but lower our valuation peg to 35x FY23E PER, at +1.5SD to the LT mean (from 44x at +2.5SD), to account for the accelerated inflation-induced rate increase cycle. Imputing for both, our TP is nudged marginally higher to MYR4.77 (+1%). Inari remains our top OSAT pick, underpinned by its RF division’s strength/robust volume loading and the potential onboarding of new customers

• We speak to a B2B e-commerce consultant who onboards companies looking to sell on platforms like Amazon, Flipkart, Meesho & Shopee. 
• Shopee’s approach to a deal based app is seeing encouraging responses both from customers and sellers. 
• Indian E-Com has its own nuances, and there is a possibility that growth projections companies operating in the Industry may be overstated. 

• We believe TSMC shall decide whether to raise wafer price in one, or two month.
• To our understanding, Intel has gotten the wafer allocation from TSMC for the next two years.
• To our understanding, MediaTek is the first client to perform 4nm production, although the booking quantity is less than Apple iPhone.

• Meituan short near 300 and on the  bear wedge break has paid off. Friday’s price action is disturbing and warrants a downgrade.
• The breakdown below flat range/triangle support is a big negative on the back of sell volume. Bear triangle breaks are often volatile affairs.
• 142 is the fresh downside projection. 200 represents the sell barrier to work with.

• Palantir’s ongoing SPAC investment strategy is driving an increasing bifurcation between reported and underlying results… which continues to be ignored by sell side and retail investors. 
• Revenue growth missed ex-SPAC, while Billings Growth collapsed 31% YoY ex-SPAC investments…unheard of for a software company.
• Margin guidance for 1Q22 well below consensus as sales headcount continues to ramp. Stay short.

• With Spotify’s newfound all-things-audio ambition, we can take note of some noticeable happenings within the broad media category as a whole
• Starting off high-level, the company offers users access to its platform in two distinct manners, with a free membership or through a premium counterpart
• In short, Spotify is on a quest to capture the opportunity provided by an industry that is rapidly expanding in all directions

• SenseTime Group (20 HK), Li Auto (2015 HK) and XPeng (9868 HK) replace Autohome (2518 HK), Weimob Inc. (2013 HK) and Tongcheng-Elong Holdings Ltd (780 HK) in the HSTECH INDEX. 
• A few changes have been made from the way stocks are treated to ensure the inclusion of Li Auto (2015 HK) and XPeng (9868 HK) in the index.
• SenseTime Group (20 HK) has been included at a much higher float than what it should be and this could take the stock higher in the next couple of weeks.

• Japan-Based AI company Appier Group Inc (4180 JP) announced they had resolved to prepare to apply to change its listing on the Tokyo Stock Exchange to the Prime Market.
• Appier has confirmed that it meets the criteria for the TSE Growth Market but if they move to the Prime Market, that would trigger a TOPIX Inclusion Event.
• Below is a look at Appier’s potential to satisfy the Section Transfer Requirements and the upside potential of this event.

• This piece continues our series to show how to use the least amount of codes to create practical solutions for investors
• With 20 lines of codes, we show how to create charts using crypto, equities, and other macro indicators and their relative performances
• We also illustrate how to construct ratio charts for mean reversion pair trading between similar securities like Microstrategy Inc Cl A (MSTR US) and Bitcoin (XBTUSD CURNCY) 

• Safie reported 2021 results on Monday and beat slightly with revenue 1.6% above guidance and an operating loss of ¥76m, better than guidance of a ¥225m loss. 
• The stock is rated neutral by the sell side despite offering perhaps the best growth prospects in Japan and demonstrating numerous signs of exceptional management.
• We consider the name to be potentially Japan’s best growth story in the small cap space.

• The world’s largest electric-vehicle battery maker Contemporary Amperex Technology Co. Ltd. (CATL) has announced that it’s considering building more factories overseas
• The news came as CATL (300750.SZ +0.72%), based in East China’s Fujian province, has been trying to ease investor concerns about the recent sell-off of its stock
• The statement also disclosed that the company has been talking with U.S. clients about the possibility of building production lines in the country to bring supplies of CATL products closer to home

• Latent View Analytics is the leading pure play data analytics services companies in India.
• It provides expertise on the entire value chain of data analytics from data and analytics consulting to business analytics and insights
• It engages to provide services to blue chip companies in technology, BFSI, CPG & retail, industrials and other industries

• TCS Buyback: An Opportunity For Retail Investors.

• Gungho on Monday announced results, with both revenues and earnings up.
• They also announced a buyback, which at current price means about 2.8% of shares out. 
• That doesn’t sound like a lot, but context matters. It may matter a great deal. 

• Pan Jit International (2481 TT) appears to have launched an unsolicited/hostile partial Tender for 5.0-30.0% of the shares out of power management IC maker Champion Microelectronic Corp (3257 TT). 
• The price is near but not at a medium-term (and all-time) high, and is made “for investment purposes but hoping for more.”
• Insiders officially hold ~13.7% of the target. It would seem done, which means a defence effort and/or white knight is not out of the question. We will watch it develop.

• Delhivery is looking to raise US$1bn in its upcoming India IPO, the company is backed by a host of financial investors, the largest being Softbank.
• Delhivery is an online logistics service provider which covers express parcel delivery, heavy goods delivery, part truckload (PTL) freight, truckload (TL) freight, supply chain solutions, cross border solutions etc.
• In this note, we talk about the positive aspects of the deal.

• Appier reported 4Q21 results on Monday with revenue beating consensus by 5% and EBITDA beating by 323%. 
• The company guided for ¥17.5bn in revenue, above consensus at ¥16.2bn but significantly below our guesstimate of ¥20.8bn. 
• However, a close look at trends in the US suggest that our initial estimate remains reasonable enough.

• Revenue growth is slowing and would require additional capacity and new products to re-accelerate core segment growth
• Gross margin expectations are high, leaving very little margin of error
• The near-term revenue growth visibility and medium-term demand outlook remain robust

• BILI’s stock price has plunged significantly over the past year.
• We believe the revenue growth will be stable in 4Q21.
• We believe all business lines remains promising except for advertising.

• Transaction is expected to be immediately accretive to Intel’s non-GAAP EPS. The stock market reacted exciting for Tower raised 42% to reach $47.07 and Intel raised with ~1.8% respectively.
• Tower Semiconductor is emphasized on analog semiconductor specialty foundries. Namely, it’s different from TSMC, UMC and GlobalFoundries, which are focusing on digital products original, and expand into analog afterward. 
• Intel wants to march into foundry business and have to count on Tower to bring in such operation know-hows, but Intel has to tolerate a completely different system.

• Green World FinTech Service (6763 TT) is one of the leading third-party payment solution providers in Taiwanese market.
• The Covid-19 pandemic has accelerated digitisation of the payments industry in Taiwan. This has helped strong growth in top line and margin improvements for the company.
• Though the company seems fairly valued compared to regional and global players, we think further upside is possible given its strong market dominance and demand for fintech in Taiwan.

• Delhivery is looking to raise US$1bn in its upcoming India IPO, the company is backed by a host of financial investors, the largest being Softbank.
• Delhivery is an online logistics service provider which covers express parcel delivery, heavy goods delivery, part truckload (PTL) freight, truckload (TL) freight, supply chain solutions, cross border solutions etc.
• In this note, we talk about the not so positive aspects of the deal.

• The stock price declined to a very low level before the market fell.
• The Chinese e-commerce market is still promising despite of the high comparison base last year.
• We believe the stock has an upside of 68% for March 2023.

• The spotlight is back on Sea Ltd (SE US) after its game FreeFire was named as one of 54 apps of Chinese origin to be banned in India.
• The ban on FreeFire comes despite Sea Ltd‘s recent move to reduce the influence from Tencent by scaling back its ownership of voting shares 
• We see the recent price weakness as an opportunity to accumulate Sea Ltd given the growth story remains intact although investors may not pay the same multiple premium over peers.

• Sea Ltd dropped 18% yesterday following India’s decision to ban its battle royale game, Free Fire and 53 other Chinese apps from the Google Play and App Store in India.
• India’s Free Fire ban could deliver a double whammy to Sea Ltd (SE US) with lower Digital Entertainment profitability limiting Sea’s ability to bankroll Shopee’s expansion.
• With the macro-outlook for growth stocks not looking great, we wouldn’t be surprised to see “Sea” breaking the bottom end of the EV/Sales range towards the end of the year.

• A 266% premium to last close. That is what Murata Manufacturing (6981 JP) is Offering for 4.2%-held Resonant (RESN US).
• The $4.50/share Offer price was last exceeded a little under a year ago. Shares have rolled over 84% since last February following an exuberant, meteoric spike over Resonant’s RF capabilities. 
• The Offer is conditional on attaining ownership of 50% of shares out, including Murata’s stake.  

• Indian IT giant Tata Consultancy Svcs (TCS IN) released their public announcement document for their latest buyback after market close on 14th February 2022. 
• The company is planning to spend up to INR180bn (~US$2.4bn) which is one of the largest amounts spent in Tender Offer-style Buybacks in India.
• Below is a closer look at the details of this Buyback.

• Among Korea’s local metaverse ETFs, the Big Three have significant AUMs. At yesterday’s closing prices, their AUMs are ₩0.41T, ₩0.40T, and ₩0.20T, respectively. Their total is now 1 trillion won.
• Those on which we can perform stable momentum trading are the 14 stocks included in all three ETFs. Passive funds account for +3% of MC in half of these names.
• Weighting adjustment uses keyword relevance. So, estimation is not easy. Nevertheless, since the absolute value does not change significantly, we can reduce the error by using the previous rebalancing weighting.

• Novatek had reported a flattish sales outlook in 1Q22, and all of revenue, GM and OPM were expected to NT$35.8~36.8bn, 48~51% and 34~37% respectively, while revenue was at -1.92~+0.82% QoQ. 
• We think the high inventory days of supply chain is giving a good chance to expand into China foundry for production, especially SMIC.
• We think Novatek would maintain its solid dividend policy for EPS NT$63.87 in 2021, and it’s pay-out ratio is 80% in the past.

• There are 17 adds and 8 deletes for the Asia Pacific region. Most of the changes were expected, but there are a few surprises.
• China Resources Microelectronics-A (688396 CH), Grab (GRAB US) and Lufax Holdings (LU US) have been added, while Qinghai Salt Lake (000792 CH) and Pop Mart International (9992 HK) have not.
• The last tranche of Sea‘s inclusion in the SIMSCI INDEX will take place at the QIR. With the inclusion of GRAB, there will be two foreign listings in the SIMSCI.

• Despite increasing popularity and market cap, most crypto tokens are not supported by mainstream terminals like Bloomberg, which makes data analysis inaccessible to many
• However, with a bit of coding knowledge, it’s very easy to generate extensive analytics on any cryptocurrency 
• With only 10 lines of code, we show how anyone can perform analytics like volatility, Sharpe, drawdowns on any token. We used Terra (LUNA CURNCY) as an example here.

• This MBO is designed to for the 77-year-old Founder to take the company private.
• The evolution of the balance sheet the last 12-18 months has been a little strange, and may not be benign. It has certainly changed the fair value lower. 
• The question, as always, is whether someone will take this up.

• Renesas’ 4Q results were strong as revenue came in well above guidance as we predicted, beating even our ¥310bn estimate at ¥314.4bn. 
• EBITDA of ¥119.4bn was up 15.7% QoQ and should rise further thanks to a hefty backlog. 
• We said previously that 2022 EBITDA could be on the order of ¥500-550bn rather than the ¥391bn which consensus projects… for reasons which escape us.

• Bukalapak (BUKA IJ) continues to expand the range of products it offers to its Mitras including logistics services and financial products but it is now extending more service to merchants.
• The platform’s Storefront offering aims to enable merchants which often operate through social commerce channels to improve their ability to attract and maintain customers and to facilitate payments and logistics.
• The Allo Bank stake was bought at 1.7x PBV and will grow through an ecosystem of 100m potential customers. Bukalapak (BUKA IJ) looks like value with positive newsflow. 

• GOGOX is China’s second largest online intra-city logistics platform with operations in Hong kong, Singapore, Korea and India.
• The company’s application for a HK listing has been approved and according to news media outlets, will raise US$200-300m through the IPO.
• GOGOX’s overseas business has continued growth despite the pandemic, however, China business has been deteriorating due to intense competition.

• Sumco’s 4Q results were on the strong side with revenue beating by 2.3% and OP beating by 2.0%. 
• 1Q guidance was also bullish with revenue guidance of ¥99bn 5.3% higher than consensus while OP guidance of ¥21bn was 12.8% higher. 
• Guidance is still a touch conservative in our view, particularly on the margin side.

• Hope we could be wrong, but the outlook of 1Q22 could be a bit bearish since we believe ASE Holding (ASEH) revenue/GM will reach ~NT$165bn/19.4% and ~NT$150bn/19.5% in 4Q21/1Q22 respectively. 
• China has massive local efforts on OSAT business because of low entry barrier. In our views, China can exist very well in lower profit margin to compete.
• The worldwide OSAT (Outsourced Semiconductor Assembly and Testing) companies of scale are majorly centered in Asia Pacific area.

• Analyst meeting came out with negative tone regarding 22E outlook.We cut our TP by 7% to Bt95.8,derived from 38.4xPE’22E (+1SD of 5Y trading average), to factor in earnings downgrade. But
• Recent drop in share price factored in concern on rising material costs and delay in launching new factory which should be a short-term issue and should provide opportunity share accumulation
• We cut our 22E earnings forecast down by 7% to factor in lower margin due to rising copper material costs and lower revenue due to delay in launching new factory.

• Toshiba Tec is one of our favourite small caps in Japan with a strong fundamental story and upside event risks from the Toshiba soap opera. 
• The name was up 14.3% today despite middling earnings released mid-day on its designation as non-core by parent Toshiba. 
• That puts it at an all-time high and within a whisker of ¥5,000 with the event risk now clearly visible.

• There are finally signs of stabilization as crypto price action is turning positive, despite the negative headlines that we’ve witnessed over the past weeks. We investigate the events below.
• Negative Event One – Convicted felon 0xSifu held control over USD800mn of Wonderland user treasury
• Negative Event Two – A bridge protocol, Wormhole, suffered the second-largest Defi hack and lost $320mn

• Adtran lowered the minimum acceptance threshold from 70% to 60%; the condition was thus fulfilled by the end of the initial acceptance period. Additional acceptance period runs until 14 February. 
• The consummation of the offer continues to be subject to closing conditions not yet fulfilled, especially foreign direct investment approval in Germany.
• A 15% increase in the ADVA share price since the threshold condition was fulfilled has caused the spread to become negative (-3.4%). If you were already long, recommendation is tender.

• The SPAC market has been down and out in 2022, with few high-quality deals.
• However, things appear to be changing, with rumours surfacing that three SPACs are fighting to take the words largest EdTech startup public.
• If the company makes a debut at a $50 billion valuation, there will be very little room for error, leaving room for far more downside than upside.

• We initiate coverage of Money Forward, Inc. (3994, Money Forward, the company) with a target price of 5,650 yen and a Hold rating.

• We forecast sales of 20.6bn yen for FY11/22 (+32.1% YoY) and 26.4bn yen for FY11/23 (+27.7% YoY)

• Our target price is based on a target EV/Sales multiple of 10.5x for FY11/23

• UI continues to face supply chain challenges in meeting demand. Ubiquiti reported fiscal second quarter (December) results missing our estimates while inventory continued to increase
• First, service provider revenue declined further after what we thought was a depressed level in the September quarter. Second, freight expenses caused gross margin to decline faster 
• Even though enterprise revenue rose sequentially in the quarter, it was not enough to offset the erosion in service provider revenue

• eClerx Services (eClerx) provides business process management, automation and analytics services.
• It caters to financial services, communications, retail, media, manufacturing, travel and technology companies
• We continue to remain positive and retain our BUY rating on the stock Target Price and Valuation: We value eClerx at Rs 3,000 i.e. 20x P/E on FY24E EPS.

• In our estimate, Vanguard’s 4Q21 revenue/GM is NT$12.6bn/46.3%, and 1Q22 revenue/GM is NT$12.3bn/46.1% respectively.
• Vanguard has about 30% capacity utilized by TSMC’s foundry products. In technology deliverables, Vanguard also competes with TSMC for manufacturing excellence, which creates an internal competition.
• Vanguard has dealt with their clients to share the expansion cost. Certainly, there is almost no such trust-worthy partnership, except Vanguard who has TSMC to back up.