TMT/Internet

• Hana Microelectronics (HANA TB) aims to raise up to US$105m to finance expansion of Hana’s silicon carbide strategy including PMS (Power Master Semiconductor).
• The deal scores well on our framework given the company’s strong recent performance and decent long term track record
• In this note, we will talk about the deal dynamics.

• The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
• Depending on the changes, passive trackers will need to buy between 6-28x ADV (11-50% of real float) on the inclusions and sell between 2.8-44x ADV on the deletions.
• Fast Retailing (9983 JP) could be capped at 11% of the index weight and there will be buying in Nitori Holdings (9843 JP) due to the stepwise addition.

• The Brand-Spanking New (9 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning in pairs over time, etc.
• We used to do it. We brought it back better, with lots of cool interactive tables, and charts, heat maps, and comparative data. And 50 Trade Recommendations.
• The last 9 weeks (since the start of the new Trcker and Portfolio 8 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%, +0.12%, -0.29%, -0.71%.

• TSMC and ASML will report results this week. We may get additional detail about the scope of AI-related demand as a medium-term driver for the semiconductor industry.
• Many Taiwan AI plays were top losers last week. Separately, the U.S. is expected to announce new tech restrictions for China this week.
• SK Hynix is reportedly working closely with Mediatek to integrate some of its most advanced memory in Mediatek’s flagship Dimensity chips. Mediatek was a top gainer last week.

• The 4Q23F outlook is still coming down, but it’s not as worse as we originally expected.
• Samsung is staying a very stable demand for 28nm capacity in UMC.
• Based on our estimates, the wafer ASP is clearly increasing from 2Q22 to 4Q23F, despite a decline in demand from 4Q22 until now.

• We change our stance to be a bit bullish for Mediatek Inc (2454 TT).
• In 4Q23F, MediaTek’s outlook is getting a bit stronger upside.
• The Smartphone market is turning positive, but it’s too early to claim a fully rebound.

• The trade remains Long Nifty with a watch on earnings. 
• Infosys Ltd (INFO IN) reported a beat on revenues and a miss on EPS, heading into seasonally weak quarters is the pain now consensus? 
• Other names discussed include Delta Corp Ltd (DELTA IN), HDFC Asset Management Co Ltd (HDFCAMC IN) and Avenue Supermarts Ltd (DMART IN). 

• Money Forward (3994 JP) reported 3QFY11/2023 results on Friday. 3Q revenue fell below consensus despite increasing 37.4% YoY while reported operating losses were slightly below consensus estimated operating losses.
• MF also has provided more details on its ¥12bn convertible bond issuance in August to secure funds to further grow its SaaS and fintech businesses.
• This is concerning given the huge debt in the company’s balance sheet and it seems that the company may not be able to make profits in the near-term.

• Nanya Technology’s results missed expectations last week, showing a sharp decline in margin, underperforming the recent results performance of Micron & SK Hynix.
• The company was more conservative on a pricing recovery outlook for its memory ASPs than Micron & SK, due to lacking DDR5 DRAM products and lacking High Bandwith Memory DRAM.
• Nevertheless the company is cautiously reporting an improving environment and improved customer inventory levels, hence we believe the result still implies an improving memory industry pricing environment into year end.

• Weekly summary of vol changes and moves across Global Markets
• Analysing ATM volatility and skew changes over the last 5 days
• We suggest a few trades to take advantage of the implied vol surfaces

• Braze, a leading customer engagement cloud-based platform provider, outperformed its key competitors, Adobe and Salesforce, on a year-to-date basis. 
• Braze shares massively outperformed, with shares up ~67% over the year versus a ~28% gain on the NASDAQ. However, the stock is still below the IPO price of $65/share. 
• Reported y/y revenue growth has decelerated from 58% in FY22 to 49% in FY23, and management has guided ~27% y/y revenue growth in FY24. 

• How did CaiNiao turn profitable? We answer with an analysis of the company’s P&L
• We also analyze CaiNiao’s Balance Sheet, Cash Flow statement, and Operating Stats
• We conclude with a list of ten questions we would put to CaiNiao management

• The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
• The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
• In this insight, we take a look at our final expectations for the ADDs and DELs for the December 2023 and their flow implications.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Kokusai Electric (6525 JP), EcoPro Materials (ECO123 KS), Seoul Guarantee Insurance (031210 KS), Cainiao Smart Logistics (1437124D HK), J&T Global Express (1936374D CH) IPOs.
• Event-Driven developments – Eoflow (294090 KS), Nws Holdings (659 HK), Origin Energy (ORG AU), Liontown Resources (LTR AU), Estia Health (EHE AU), Pact Group Holdings (PGH AU).       

discoverIE’s trading update confirmed organic revenue growth and operating margin expansion in H124. The company expects to deliver FY24 underlying earnings in line with its recently upgraded expectations; we maintain our operating profit and EPS forecasts. As expected, the order book continues to normalise but still provides good visibility for H224, and strong design win activity provides support for growth in the medium term.

• Shinko Electric Industries (6967 JP) has been on the block. 2nd Round Bids were apparently due last month, but with “Economic Security” considerations, one wonders if that stretches a bit.
• The stock is now at the low end of its range vs Ibiden, and the timing is right for a deal which could give it a pop. 
• A “split price” takeover seems reasonable as a structure. I expect upside. Still. 

• If you’re an investor in any firm with some form of dominance in US markets, then you need to know who Ms Lina Khan is.
• Corporate misbehavior is a topic of her interest. She shows zero tolerance towards large corporations who wield outsized market power.
• FTC along with 17 US states filed a lawsuit against Amazon for illegally maintaining monopoly power. How will Amazon be impacted?

• Shift Inc (3697 JP) reported 4Q and full-year FY08/2023 results today. 4Q revenue increased 38.2% YoY while OP more than doubled during the quarter. Both revenue and OP beat consensus estimates.
• Full-Year revenues and OP increased 35.7% and 67.4% respectively beating consensus estimates by 1.2% and 67.4% respectively. Both revenue and OP were above the company’s own guidance.
• Shift’s share price has dropped by about 17% since August as market became concerned over the growth prospects, however, share price has started to move up.

• The SSE 50 and SSE180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
• In this insight, we take a look at our final expectations for potential index changes for SSE 50 and SSE 180 during the December 2023 Rebalance event.
• I currently expect 5 ADDs/DELETEs for the SSE 50 index 18 ADDs/DELs for the SSE 180 index. Some of these names are different from my previous expectations.

• RingCentral Inc. managed to surpass the revenue expectations as well as the earnings expectations of Wall Street.
• The profit increase also resulted in another quarter of significant free cash flow.
• Revenue from subscriptions increased 11% year over year to $514 million.

• Digital Turbine, Inc. delivered mixed results for the previous quarter, with revenues above the analyst consensus.
• With $146.4 million in revenue, $27 million in EBITDA, and non-GAAP earnings per share of $0.18, the company demonstrated significant improvement compared to the previous quarter.
• Continuing the multi-year partnership will enhance Digital Turbine’s rate of innovation and expand its scale to a greater extent.

• BlackBerry Limited delivered a mixed result in the recent quarter, with revenues below market expectations but it managed to surpass the analyst consensus in terms of earnings.
• In the automotive sector, QNX triumphed with 20 new design wins in the auto industry and seven in general embedded market verticals.
• This quarter, the company added acoustic middleware to its offerings, indicating a promising new market for software-defined acoustics.

• Lumentum Holdings Inc. surpassed the revenue expectations as well as the earnings expectations of Wall Street.
• Despite inventory challenges in the second half of fiscal year ’23, the company achieved a 3% increase in full-year revenue from fiscal year ’22.
• While fiscal 2024 3D sensing revenue is projected to be lower than fiscal ’23 due to market dynamics and competition, the company achieved sequential growth in Commercial lasers revenue, driven by applications in solar cell processing.

• Accenture plc delivered a mixed set of results in its most recent results, with revenues falling short of Wall Street expectations but above-par earnings.
• Accenture now boasts a roster of 300 Diamond clients, underscoring its extensive capabilities and the trust these clients place in its services.
• The company is poised to leverage opportunities in cloud migration, modern ERP, data and AI, and the emerging Gen AI space.

• Peloton Interactive, Inc. delivered a mixed set of results for the previous quarter with revenues above the analyst consensus.
• The company has witnessed a remarkable surge in engagement with Generation Z, successfully capturing individuals at the outset of their fitness journeys.
• The introduction of Peloton for Business has been a notable success, contributing positively to the company’s momentum.

• Kokusai Electric (6525 JP) has trimmed its IPO price from JPY1,890 to JPY1,830-1,840 per share to raise up to US$727 million. The IPO price will be determined on 16 October.
• We previously discussed the IPO in Kokusai Electric IPO: The Bull Case, Kokusai Electric IPO: The Bear Case and Kokusai Electric IPO: Valuation Insights. 
• Our base-case DCF valuation is JPY2,058 per share. Peers have modestly re-rated, and a lower IPO price range helps increase the IPO’s attractiveness.

• Posco DX (022100 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 in the next two months.
• That means a deletion from the KOSDAQ 150 Index (KOSDQ150 INDEX) and inclusion in the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX). But the timeline is important. 

1Spatial’s H124 results show robust revenue growth and continued improvement in the revenue mix, with recurring revenue growing by 24%. Investment in sales resource, inflationary pressures and FX compressed margins, but a strong pipeline for both renewals and SaaS products could drive revenues and margins in H2 and beyond. In particular, the market opportunity for both 1Streetworks and NG9-1-1 has the potential to be transformative. We have upgraded our revenue forecast but leave earnings largely unchanged. Good conversion of the SaaS pipeline could justify further revisions, which may not be reflected in the current valuation.

• Kokusai Electric announced its pricing range today, setting it rather tightly at ¥1,830-1,840. 
• This is slightly below the initial indicative price of ¥1,890 pointing to modest demand. 
• That is a rather more tepid response than we initially expected given that this is the first sizable offering in some time.

• KKR is looking to raise around US$730m via selling a stake in Kokusai Electric (6525 JP) (KE) in its Japan IPO.
• KE main business activities consist of the manufacturing, sales and maintenance service of semiconductor manufacturing equipment.
• In our previous notes we have looked at the company’s past performance and undertook a peer comparison. In this note, we talk about valuations.

• A new electric car powered by Huawei’s autonomous driving technology has hit the market with a bang, attracting tens of thousands of orders in less than a month and giving the telecom-equipment giant a confidence boost as it pushes further into China’s highly competitive auto market.
• As of Friday, more than 50,000 orders have been placed for the upgraded version of the Aito M7 SUV since it was launched on Sept. 12, said Richard Yu, chairman of Huawei’s smart car unit, in a social media post Saturday.
• For each order, customers paid a non-refundable deposit of 5,000 yuan ($695), according to information provided by Aito — a premium electric-vehicle (EV) brand co-developed by Huawei Technologies Co. Ltd. and automaker Seres Group Co. Ltd.

• Singapore-based e-commerce aggregator Rainforest has raised US$21.5 million in a convertible note round from existing investors, including Canopy Tropics, Monks Hill Ventures, Insignia Venture Partners, and January Capital.
• This brings the company’s total funding (debt and equity) to over US$100 million.
• Rainforest plans to use the funds to acquire new e-commerce brands, improve the platform capabilities to accelerate channel expansion, and for geographical expansion and product development.

• For many who don’t hold powerful passports, securing a travel visa often comes with cumbersome paperwork, prolonged waiting periods, and substantial costs, thus posing a significant barrier to international travel.
• One startup is bidding to solve this problem. Launched in 2021, Atlys allows users to apply for visas from anywhere in the world through its platform.
• Aside from unifying the process in one place, the platform helps predict visa processing time while reducing rejection rates.

• Jabil Inc. delivered a mixed set of results in its most recent quarter with revenues falling short of Wall Street expectations but above-par earnings.
• The core margins increased by 40 basis points to 5%, accompanied by a 12% growth in earnings and a 13% growth in earnings per share.
• Remarkably, Jabil generated over $1 billion in free cash flows, highlighting the resilience of their business model in the face of market fluctuations.

• In the second quarter, GoDaddy delivered on-par revenues and below-par earnings while continuing to offer diverse solutions to a global customer base.
• Their robust business health is evidenced by their acquisition of high-quality customers, strong retention rates, and improved attachment rates.
• Customers are increasingly bundling new solutions, reflecting the company’s innovation and driving higher monetization through attachment and pricing while ensuring strong retention rates.

• Motorola Solutions, Inc. managed to surpass the revenue and earnings expectations of Wall Street, showcasing robust growth and financial stability.
• The company had a 12% surge in revenue, surpassing initial guidance, with double-digit growth evident across all segments, regions, and technologies.
• This growth was primarily driven by increased earnings and improved working capital, though offset to some extent by higher cash taxes.

• Oracle managed to exceed the revenue expectations as well as the earnings expectations of Wall Street, with total revenue at $12.4 billion, an 8% increase, excluding Cerner.
• Total cloud services and license support revenue for the quarter amounted to $9.5 billion, up 12%, driven by strategic cloud applications, the Autonomous Database, and Gen2 Oracle Cloud Infrastructure (OCI).
• Infrastructure subscription revenues, including license support, reached $5.1 billion, up 14%, with Infrastructure Cloud services revenue growing by 64%.

• Aampe, an AI-native user engagement platform for consumer mobile apps, has secured a US$7.5 million pre-Series A funding round led by Matrix Partners India and Peak XV Partners.
• This brings the US- and Singapore-based startup’s total funding raised to date to US$9.3 million.
• The new capital will support product development and fuel growth.

• Posco DX (022100), Kum Yang (001570), SK Telecom (017670), Lotte Energy Materials (020150), Kakao Games (293490), Pan Ocean (028670), BGF retail (282330), Netmarble (251270) have been on investors/traders radars recently.
• There could be liquidity events in some of the stocks next month as passive index trackers look to buy/sell the stocks.
• Foreign investors have sold Lotte Energy Materials (020150 KS), Kakao Games (293490 KS), Pan Ocean (028670 KS) and Netmarble (251270 KS) while buying BGF retail (282330 KS). 

• Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
• Since my last insight, CellSource (4880 JP) and Kasumigaseki Capital (3498 JP) have confirmed they will move to TSE Prime which means they will be included in TOPIX at end-November.
• FP Partner (7388 JP) and I-NE (4933 JP) will get included in TOPIX at the end of October.

• Zhongsheng Group (881 HK) is in deletion zone and could be deleted. China Unicom Hong Kong (762 HK) could be added to the index as the highest ranked non-index constituent.
• Estimated one-way turnover at the rebalance is 2.14% resulting in a one-way trade of HK$1.38bn. Meituan (3690 HK), Alibaba Group (9988 HK) and Tencent (700 HK) will be capped higher.
• China Unicom Hong Kong (762 HK) is supported on its 50/100 day moving averages and could move higher. Zhongsheng Group (881 HK) has been trading below its moving averages.

• Tianju Dihe Technology, more commonly known as Juhe Data, filed to go public in Hong Kong. The company provides standard API services through its APIHub marketplace in China. 
• Tianju Dihe Technology plans to trade on the HKSE, and CITIC Securities is leading the IPO. The company was backed by JD Technology, a fintech unit of JD.com. 
• With a market leadership position and a mission to empower the digital economy with data technologies, I have no doubt that Tianju Dihe Technology will have a successful IPO.

• Money Forward’s share price dipped 20% post-Q2 results, but strong operational performance and upward sales revisions make it appealing.
• We expect 42% YoY sales growth in Q3 and believe long-term growth prospects remain exceptional against the market size.
• Management to deliver profitability next FY, meeting investor demands to “show me the money” – we remain bullish

• Nearing the end of the review period, we forecast 8 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in December.
• Given stock selection uses liquidity as a major input, the impact of passive trading will be much larger on the deletions as compared to the additions.
• The potential adds have outperformed the potential deletes, but relative performance has been drifting lower over the last few months. There are stocks that will have flows from other indices.

• Micron Technology, Inc. delivered a positive result and managed an all-around beat last quarter.
• Their management has provided insights into the ongoing underutilization charges and inventory write-downs that have impacted the company’s financials.
• This rise in underutilization has led to corresponding charges in the fourth quarter, which are expected to continue into fiscal year 2024.

• Key milestone in FDA approval. On October 6, Marizyme, Inc. (MRZM) announced a key milestone in its growth strategy, with FDA approval of its flagship DuraGraft (DG) technology for the US market.

• Improved outcomes when used in cardiac care. DG has been proven to result in significantly improved outcomes and lower costs for cardiac surgery through multiple clinical trials as well as utilization in selected markets in Europe and Asia where adoption has recently accelerated.

• Reflecting that, YTD DG-driven revenue is already more than double the level of 2022.

• Paychex, Inc. managed to exceed analyst expectations in terms of revenue as well as earnings.
• The company has commenced fiscal year 2024 with robust results, including a 7% growth in total revenue and an 11% increase in adjusted diluted earnings per share.
• Strong new sales revenue growth was driven by continued demand for HR technology and advisory solutions.

• FactSet Research Systems Inc. delivered a mixed result in the quarter, with revenues above market expectations but failed to surpass the analyst consensus regarding earnings.
• The success in 2023 stemmed from the growth of enterprise offerings, leading to significant strategic wins across various workflows.
• Besides that, their content refinery, extensive data offerings, and innovations in user experience, including conversational interfaces and generative AI, position FactSet Research Systems for continued growth.

• Over 90% of the way through the review period, we see 9 potential adds/10 potential deletes in December. However, there can be a maximum of 5 changes at a review.
• We estimate a one-way turnover of 6.1% at the December rebalance leading to a one-way trade of CNY 5.27bn. Index arb balances could increase the impact on the stocks.
• The adds have outperformed the deletes this year though there has been a deterioration in performance over the last few months.

• Vanguard’s order visibility is about two months, and its order backlog is also about two months now.
• Vanguard’s goal is to establish a 12″ wafer Fab, which we estimate will likely be viable around 2026F.
• We believe that technology nodes below 28nm HKMG, specifically 40nm and below, would be suitable for transfer.

• Samsung Electronics and Nanya Technology will report their results this week. Samsung could reportedly increase NAND prices this month, giving a potential hint to the memory outlook they will provide.
• Hon Hai will begin mass production of its Model C electric car in 4Q23E in Taiwan. This will provide a proof point for Hon Hai’s global EV platform business model.
• Top gainers recently have included rebounding AI names — One can consider using the bounce to find AI shorts to pair against an Nvidia long.

• Monex (8698 JP) and Docomo announced an agreement. It is not clear ANY of this has to happen at prices favourable to minorities. But equally, it won’t be egregiously bad.
• People’s Insurance (PICC) (1339 HK)‘s implied stub is at a lifetime low. The market is assigning HK$35.6bn less for its steady and profitable life/health insurance stub ops, year-to-date.
• JMDC (4483 JP) is a growth stock, growing organically. It is a rare enough thing. If you want to buy the back end, wait until it gets here.

• Aequitas Reserach 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, Doosan Robotics (454910 KS) lived up to its hype, while JSW Infrastructure continued India’s strong run.
• In the placement space, IDFC First Bank Limited (IDFCBK IN) launched its well flagged QIP, while CALB Group (3931 HK)‘s shareholders were released from their IPO lockup.