TMT/Internet

• Tencent (700 HK) announced in-specie dividends of JD.com (9618 HK) (US$15bn+) in 2021 and Meituan (3690 HK) (US$20bn) in 2022.
• With the Tencent (700 HK) Board meeting on 15 November to approve Q3 results and considering the payment of a dividend, the pattern could repeat this year.
• Tencent (700 HK) owns stakes of US$1bn+ in 10 listed companies. We take a look at the stocks that could be next in line to be paid as in-specie dividends.

• After the market close on 6 November, Netmarble announced that it will sell 2.5 million shares of HYBE which represents 569 billion won in amount at current price. 
• The actual block deal amount is likely to be less than 569 billion won as there will likely be a  block deal discount rate. 
• We would avoid this deal, mainly because we think HYBE is overvalued relative to its peers. 

• Will Semiconductor Shan (603501 CH) is looking to raise US$450m in its Switzerland GDR listing. The bookrunners on the deal are UBS and JP Morgan. 
• In its base deal, the firm is offering 31m GDRs (1 GDR to 1 ordinary A-share) for sale, at a 5.4-17.2% discount to last close on its A-share leg. 
• The base deal would be a relatively small one for the firm to digest, representing just 3.8 days of three month ADV on its A-share leg.

• We believe advertising revenue will grow rapidly and game revenue will accelerate.
• We also believe EPS will decrease YoY due to high “other gains” in 3Q22.
• We expect the stock price will have an upside of 58% for year end 2024.

• All major Chinese e-commerce companies set up live broadcasting channels on Bilibili at the beginning of Singles’ Day sales.
• Kuaishou chairman’s resignation will not change the business strategy, as he stepped down from CEO two years ago.
• Baidu begins to sell ChatGPT-like service for CNY49.90 per month.

• Q323 revenues of NT$57 billion, up 1.4% QoQ but down 24.3% YoY. For 2023 YTD, revenues have amounted to NT$167,575 billion, down 20.5% YoY.
• Net income was NT$15.97, essentially flat QoQ. Gross margin came in at 35.9%, also flat QoQ. Utilisation for the quarter was 67%, down from 71% in the prior quarter.
• Utilization set to further decline to low 60% levels in Q423, the lowest since the downturn began.

• Last week global heavyweights AMD, Samsung, and Qualcomm delivered good news, including for the Memory, PC, and Smartphone industries. Taiwan company results supported their views as well.
• Looking ahead, Novatek, Asustek, and Himax are set to release in Taiwan. Combined with NXP abroad, this will provide color on display demand, automotive, and servers/PCs.
• A new Chinese memory chip maker just received major government investment, with an IPO of its related company planned.

• UI fiscal first-quarter results (September) fell short of consensus estimates, primarily due to underperforming sales in the enterprise segment.
• Our initial expectations included the anticipation of soft demand for Ubiquiti, which was compounded by our belief in the enterprise spending momentum continuing
• Ubiquiti’s fiscal first-quarter revenue came in at $463.1 million, falling short of our estimate of $547.9 million. Historically, the quarter has been a strong period, making this deviation particularly noteworthy

• Korea banned all short selling in March 2020 and resumed short selling only on KOSPI 200 and KOSDAQ 150 index constituents in May 2021.
• News reports indicate that there could be another short sell ban as soon as the coming week. Indications are that the ban could last 6 months.
• There are many implications of a total short sell ban including futures backwardation, market manipulation, and no emerging to developed market promotion.

• Lee family plans to sell additional 2.6 trillion won worth of Samsung Group companies as part of their fourth installment of inheritance taxes. 
• This inheritance tax share sale is likely to have a negative impact on Samsung Electronics, Samsung C&T, Samsung SDS, and Samsung Life Insurance. 
• This may be just a coincidence but the regulators announced today a temporary ban on stock short selling which should help the Lee family to unload their shares. 

• Chindata Group (CD US)’s US$8.60 per ADS offer from Bain Capital is conditional on dissenting shareholders representing less than 12% of outstanding shares. 
• Oasis Management, an activist fund, recently disclosed a shareholding representing 65.9 million ordinary shares, 8.99% of outstanding shares and 1.24% of voting interest. 
• Precedent transactions where the dissent condition was exceeded suggest two possibilities – the offeror waives the condition or persuades sufficient shareholders to withdraw as dissenters.

• Considering year-end dividends, it appears likely that the trading timing might extend beyond this year. In the previous case, the trade execution timing was one month before the contract expired.
• Short selling is prohibited. However, all four companies offer single-stock futures, which provide instruments for proactive positioning. Nevertheless, aspects to consider are likely to increase regarding trading convenience and liquidity.
• The potential for inadequate liquidity might increase the discounts for these deals, potentially offering us fresh trading opportunities. We should proactively prepare trading setups that consider these contextual conditions.

• Wacom splits its pen-tablet business into “Branded Business” and “Technology Solutions” which is not dissimilar to simply splitting based on customer type. TS is doing well. BB is not.
• But BB is doing better than it was, which means a rebound in profit this year. After Q2 there is new guidance, probably soft. And there is a BIG buyback.
• The buyback is large enough to take notice, even though practically it will be smaller than the headline. And a read of the MTMP “Wacom Chapter 3” is highly recommended.

• We should consider the complete prohibition of short selling for the next six months as practically finalized.
• Following the individual stock short selling ban, both position hedging and short demand will inevitably shift to the futures market, consequently inducing unavoidable immediate backwardation.
• We should design a setup that not only actively seizes sell arbitrage opportunities but also effectively capitalizes on the downward price pressure stemming from spot selling.

• Q323 revenues of KRW 67.4 trillion, up 12.3% QoQ but still down 7% YoY. 
• Operating profit KRW 2.4 trillion, a big improvement on the KRW 0.67 trillion in the second quarter but a far cry from the KRW 10.85 trillion in the year-ago quarter
• While Memory has turned the corner, yet further productions cuts are still required

• KPIT raised its full-year FY24 revenue growth guidance to 37%+ from 27-30% earlier, led by a strong Q2FY24 performance. EBITDA margin guidance has been also raised to 20%+ from 19-20%.
• Despite wage hike impact of 250bp, EBITDA margin came in at 20%, at the upper end of the 19-20% FY24 guidance. Operating leverage and realization improvement helped offset the impact.
• With the strong Q2 performance, we are upgrading our FY24 PAT estimate to INR 580cr+ vs INR 550cr+ earlier and FY25 PAT of INR 730cr+ vs INR 700cr+ earlier.

• Our trading thesis is to go long JinkoSolar Holding (JKS US) and go short JA Solar Technology (002459 CH) in the next 3-6 months.
• The three major reasons include higher momentum for JinkoSolar post 3Q 2023 results, much higher EBITDA growth for JinkoSolar from 2022 to 2024, and relative valuations. 
• Some of the factors driving lower share price of Chinese solar stocks this year include higher US tariffs, excessive manufacturing capacity, and declining prices of solar wafers and panels.

• WeWork appears to be approaching bankruptcy; we expect SoftBank’s exposure to be at least USD1.4bn including credit lines
• Arm Holdings post-IPO performance has been lacklustre, but we continue to believe that it remains dangerously over-valued against peers – and Arm provides 30% of the group’s equity value
• We believe that JPY depreciation has supported SoftBank Group’s share price (given the high share of USD-denominated portfolio assets); in addition, we still see risks to current private company valuations

CLIQ Digital continues to deliver good progress as it focuses on conversions through its customer base through its bundled content offering. In 9M23, revenue and EBITDA grew by 25% year-on-year to €242m and €39m respectively, at a maintained margin of 15.9%. CLIQ’s focus on acquiring more profitable customers with a higher lifetime value is delivering progress against key performance indicators, including growth of 21% in the customer base value. Our estimates remain unchanged, while management has reiterated its FY23 and mid-term FY25 guidance. CLIQ continues to trade at a significant discount to our peer group across EV/sales and EV/EBITDA multiples. Our implied share price comes to €62, reflecting continuing upside to the current price on our estimates.

• Yesterday, Kyocera Corp (6971 JP) announced Q2 results and lowered its full-year forecast. Then the CEO said it was “reconsidering” what to do with KDDI shares (after an AGM disaster).
• The company had already planned to borrow ¥500bn against the KDDI stake to return capital to shareholders. That was in the price 5+ months ago. 
• The new hope is that Kyocera just got Corporate Governance Religion. I have my doubts, and even if it did, you have to look carefully at their ambitious plans.

• Tesla is facing a dilemma whether to aggressively cut price to boost shipment but lose margins or to keep price stable with a more moderated shipment growth like 10-20% y/y.
• Three challenges ahead: 1. Collapsing margin vs. rising margin for key competitors? 2. Cybertruck is selling at a loss, more margin downside? 3. Valuation reset for lower sales CAGR?
• Cautious on Tesla as its sales/earnings CAGR is falling below 20% with a rich valuation until we see cost cut on Cybertruck, FSD AI breakthrough, and low price model introduction.

• Revenue was up 14.5% QoQ and down 31% YoY in 3Q23, but it could see an increase of about 17% QoQ and 3% YoY in 4Q23F. 
• Silergy Corp (6415 TT) needs to increase another place to its Foundry source out of China and Taiwan.
• The Automotive segment is expected to show significant growth and is likely to reach double digits by the end of 2024F.

• The sickness in Silicon Carbide started at On semi.
• Let’s look through the results and see the drivers, the big deal, and what we should do about it.
• The market freaked out about Silicon Carbide, specifically On semiconductor, saying that automotive demand for the year will be weaker.

• Duolingo shares have outperformed in 2023, with shares up ~115% over the year versus ~26% gain on the Nasdaq. The company priced its IPO at $102 a share in 2021.
• EdTech unicorn achieved the highest-ever MAUs and DAUs in 2QFY23, while paid subscribers reached 5.2M, ~7% of MAUs. Management raised top-line and profitability guidance for FY23. 
• With a market cap of ~$7.4B on a fully diluted basis, Duolingo shares trade at ~13x and ~10x EV/Rev on my FY23/FY24 estimates, a significant premium to comparable companies.

SenSen’s Q1 update signals positive momentum following record FY23 results. Q1 saw customer receipts exceed operating costs on a trailing 12-month basis, a key milestone towards its target to reach profitability this year. Encouraging FY24 lead indicators include a recent tender announcement, potentially one of SenSen’s most significant smart cities deals yet, and the settlement of the Angel dispute, which marks SenSen’s gaming exit. Proceeds from Angel’s investment in SenSen and the ongoing rights issue should support the company to more actively pursue the much larger smart cities opportunity, which is now the group’s sole focus.

Bharti Airtel’s Q2/23-24 results were robust in our view, with solid revenue and earnings growth across the Indian and African businesses. Operational stats were healthy, with strong increases in user bases and ARPU (particularly the 5G customer base). The financial risk profile remains stable. Liquidity is adequate.

• QYOU Media has posted nine consecutive quarters of YoY growth, representing a 33% CAGR using its repeatable content strategy.
• QYOU Media (QYOU:TSXV) produces and distributes broadcast and digital media content featuring leading social media influencers in India and the U.S.
• Across its platforms, QYOU’s content is viewed by over 125M people each week, providing major brands access to loyal fanbases.

• AEM (AEM SP) will report 3Q23 results on 10/11/23. This will be the first loss-making quarter since 4Q14.
• We expect a loss as AEM will have to recognize the 26.7M SGD arbitration expense to settle with Advantest Corp (6857 JP). 
• Investors will be looking for an early read on the FY24 outlook to determine if AEM’s stock has bottomed.

• Back on the 22 September, Superloop Ltd (SLC AU) lobbed a best and final cash/scrip NBIO for Symbio Holdings (SYM AU) with an implied price of A$2.85/share.
• Aussie Broadband Pty Ltd (ABB AU) then tabled a cash/scrip Offer, with an implied price of  A$3.151/share. Symbio was supportive, if terms were firmed. Superloop’s Offer subsequently lapsed.
• ABB returned with a reduced cash/scrip Offer of A$2.99-$3.04/share. Symbio has unanimously recommended the Offer (at A$3.011/share) and they entered into a Scheme agreement. A partially/fully franked dividend is permitted.

• Q323 revenues of $5.8 billion, $100 million above midpoint, up 7.5% QoQ and up 4% YoY. Net income of $299 million, significantly up from $27 million in the second quarter.
• Forecasted Q423 revenues of $6.1 billion at the midpoint, up ~5% QoQ
• MI300 forecasted to hit > $2 billion in 2024 making it the fastest product ramp to $1 billion in the company’s history

• Symbio Holdings (SYM AU)‘s binding proposal with Aussie Broadband Pty Ltd (ABB AU) is at A$2.26 cash and 0.192 ABB shares per SYM share, 3.2% lower than its earlier proposal.
• The key condition is shareholder approval. The scheme booklet will be despatched on 22 December, with a scheme meeting in early February 2024.
• While the offer is light compared to long-term historical prices and multiples, there seem to be no signs of dissent from institutional or retail investors. 

• Fiserv, Inc. managed to exceed analyst expectations in terms of revenue as well as earnings.
• These impressive results were fueled by the acceleration of organic revenue growth in both the Merchant Acceptance and Fintech segments, reaching 20% and 6%, respectively.
• In the third quarter, Fiserv continued its impressive streak of double-digit organic revenue growth, focusing on five powerful opportunities to sustain this momentum.

• In March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split I suggested Socionext (6526 JP) needed a stock split to get in.
• Today after the close, Socionext reported H1, guided up full-year earnings (still too conservative), raised its div, and announced a 5:1 stock split for Jan1 2024. 
• DISCO Corp (6146 JP) is now likely to be a top 75, which leaves the question of which Consumer Goods stock would likely be added. 

• SK Hynix reported Q323 revenues of 9.066 trillion won, up 24% QoQ but still down 17% YoY
• Net income was -2.185 trillion won, a 27% improvement on the losses in the prior quarter.
• While DRAM has turned profitable, NAND remains stubbornly loss making and is likely to remain so for the foreseeable future

• It was reported in numerous local media in Korea that FSS is investigating Kakao Mobility for a potential accounting fraud. 
• There are suspicions that Kakao Mobility may have artificially inflated its sales from 2020 to 2023 to enhance the value of the company prior to its IPO listing. 
• Given that the regulators are unlikely to make a final decision on this matter until next year, this is likely to be negative on both Kakao Mobility and Kakao Corp. 

• We discuss the end of the mandatory lock-up periods for 48 stocks in Korea in November 2023, among which 6 are in KOSPI and 42 are in KOSDAQ.
• These 48 stocks on average could be subject to further selling pressures in November and could underperform relative to the market.
• Among these 48 stocks, top five market cap stocks include Doosan Robotics, Fadu, CanariaBio, Enchem, and Gigavis. 

• We believe Mr. Su’s resignation as chairman is not a concern, because Mr. Cheng, the CEO, has been operating the company for two years.
• We believe the 3Q23 YoY growth will be lower, as 2Q23 had a lower comparison base.
• We believe the operating margin can be negative in 3Q23 as Q3 is always a weak season, but operating profit will break even for 2023.

• Asicland completed an excellent IPO book building results. IPO price has been determined at 25,000 won which is 17% higher than the high end of the IPO price range.
• A total of 1,906 institutional investors participated in this IPO book building results. The IPO demand ratio was 490 to 1. Asicland IPO will start trading on 13 November. 
• Our base case valuation of Asicland is implied market cap of 434 billion won or target price of 40,571 won per share, which is 62% higher than the IPO price.

• The public holding company SEPI, controlled by the Spanish Treasury, has confirmed to the CNMV that it is studying the possibility of acquiring a stake in Telefonica SA (TEF SM).
• Market speculates with a 5% stake to counterbalance the current 4.9% stake of STC (which could execute an option to acquire another 5% pending Government authorisation).
• At current market prices, it is equivalent to 22.04 trading sessions. Q3 results and Capital Markets Day, the first major strategic update in years, will take place on 8 November. 

• SAP SE delivered a disappointing set of results as the company could not meet the revenue and earnings expectations of Wall Street.
• In Q3, SAP achieved impressive cloud growth.
• The transformative potential of business AI, driven by SAP, is just beginning and promises to reshape the business world.

Solid State has made an excellent start to FY24 with strong continuing organic growth in H124 enhanced by a full period contribution from Custom Power. As a result, management anticipates better-than-expected revenues and PBT for the full year with market consensus rising by c 5% to £155m and £12.5m, respectively.

• Texas Instruments Incorporated delivered a disappointing set of results as the company was unable to meet the revenue and earnings expectations of Wall Street.
• Despite these challenges, Texas Instruments maintained its effective capital management, with substantial cash reserves and a resilient balance sheet.
• While the company faced headwinds in revenue and profitability during the quarter, Texas Instruments’ strategic focus on economic resilience and efficient capital management remains evident.

• Nippon Electric Glass (5214 JP) is going through a rebuilding year. Lots of restructuring expenses and I expect there will be more.
• The company today announced the outline of its next Mid-Term Management Plan for the 5 years to 2028. It will announce details in early Feb 2024 with results. 
• In that, there is ¥50bn of buybacks through Dec2026, of which ¥20bn will be made in the next 4mos. That is about 11-14% of ADV assuming the price jumps.

• Two thirds of the way through the review period, we see one change for the SET 50 Index in December with KCE Electronics (KCE TB) replacing Ngern Tid Lor (TIDLOR TB). 
• There is one close change where I-TAIL (ITC TB) could replace Srisawad Power 1979 (SAWAD TB) in the index.
• Delta Electronics Thailand (DELTA TB) is unlikely to be deleted while Berli Jucker (BJC TB) fails liquidity and is unlikely to be added.

• Intel’s results last week beat expectations by a wide margin, with margins recovering better than expected by the Street and guided to keep improving through 4Q23E.
• New Meteor Lake chips for PCs, branded as ‘Intel Core Ultra’ will officially launch December 14th and are expected to drive demand for new AI-optimized PCs in 2024E.
• Intel said that the PC industry completed its inventory digestion in 1H23, drove sequential demand growth in 3Q23, and this is expected to continue into 4Q23E.

• TSMC’s manufacturing value only accounts for 1/4 of H100 HGX bill of materials but HBM3 accounts for more than half;
• ABF substrate, SXM5 module, UBB and CCL vendors should be benefited, especially for Ibiden Co Ltd (4062 JP) on ABF substrate/OAM and Elite Material (2383 TT) on OAM/UBB CCL;
• Nvidia AI GPU likely doubling each year in next two years; Our estimates on Nvidia 2025 AI GPU EPS contribution are exceeding Bloomberg consensus earnings estimates, suggesting room to raise.

• Our base case valuation of LS Materials IPO is target price of 6,628 won per share, which is 21% higher than the high end of the IPO price range.
• We estimate LS Materials to generate sales of 155.5 billion won (down 4% YoY) and 197.2 billion won (up 26.8% YoY) in 2024. 
• LS Materials is one of the largest players globally in the large-size ultracapacitors, which stabilize power supply and are used to replace and supplement primary batteries and lithium-ion batteries.

• Key Results This Week: Delta, Elan, ChipMOS, Nuvoton, AU Optronics in Taiwan… Plus Samsung, AMD, and Qualcomm.
• Positive signs for the PC & mobile space have come from recent Intel, UMC, Mediatek results.
• Top Losers: Macronix Slumps on Weak Results and Outlook, Hon Hai Slumps on China Tax & Land Probe

• Our earnings coverage continues for the second edition and is expected to continue for one more week.
• At the bottom, we provide a consolidated view of all earnings tracked so far (Bullish / Bearish) and would be happy to engage on any of them.
• We also highlight the earnings of some of the global companies that have significant operations or growth in India.

• Travelsky Technology Ltd H (696 HK) share price was unjustly sold off due to flows rather than operational performance.
• The key business is processing flights for domestic tourism, with a lesser correlation to geopolitical issues.
• Due to the strong earnings growth, PER is adjusted from 60x to 25x. 

• Impinj reported third quarter results affirming the slowdown in sales volume for endpoint ICs with hopes the current softness comes to an end by the first quarter of 2024
• Concurrent with the decline in demand is the increase in endpoint IC availability from competitors
• We continue to believe the near-term fundamentals are not as strong as the stock depicts and the business is vulnerable to further headwinds, especially related to endpoint IC pricing.

• Wrkr Ltd (ASX: WRK) offers compliance solutions for Australian super annuation contributions and payroll including member onboarding, super payments, messaging and employee validation.
• The company has released its Q1 FY24 activities report, with key highlights including 43% growth in cash receipts on the previous corresponding period (pcp), 42% growth in revenue, and a cash burn runway of eight quarters before any R&D tax rebates or new customer transactions are considered.
• Revenue has been boosted by development and planning work for major customers ART and Link Group respectively. 

• L&F Co Ltd (066970 KS) has applied to the KRX for a transfer from the KOSDAQ market to the KOSPI market.
• Based on history, the approval for the transfer and the listing change could take place some time in December.
• L&F (066970 KS) will not be short-sell eligible for 6 months or longer. That means short covering prior to index deletion and a possible overshoot in the stock price.

• Q323 revenues of $2.40 billion, at the upper end of the guidance range, up 2% QoQ but down 12.5% YoY
• Current quarter revenue forecast of $2.45 billion, essentially flat sequentially
• Services revenue on track for ~8% YoY growth despite overall revenues tracking to an 8.6% YoY decline..

• This is the somewhat-brand-spanking-new Quiddity Mainland Connect NORTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor.
• The same five names continue at the top of the gross flows list – Kweichow Moutai, Contemporary Amperex, Wuliangye Yibin, Foxconn Industrial, and BYD. Nets are dropping.
• Overall net NORTHBOUND selling this week was small at RMB 445mm. Foxconn Industrial Internet (601138 CH) was net bought every day despite the investigation news the previous weekend.

• The coming week has a lot of review periods ending – KOSPI 200, KOSDAQ 150, CSI 300, CSI 500, SSE50, STAR50, ChiNext and SENSEX, among others.
• The TOPIX rebalance will be implemented on Monday while the Global X Lithium & Battery Tech ETF (LIT US) and IDX indices will rebalance at the close on Tuesday.
• There were outflows from Emerging Market ETFs including iShares Emerging Markets (EEM), iShares Core Emerging Mar (IEMG), Schwab Emerging Markets Equi (SCHE) and IShares Edge Min Vol Emerging Markets ETF (EEMV).

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• In the IPO space, Kokusai Electric (6525 JP) provided some relief in the ECM space, even as J&T Global Express (1519 HK) didn’t do much.
• Given the earnings seasons, there weren’t any placement during the week. We did look at Singapore Airlines (SIA SP)‘s upcoming placement lockup expiry.