TMT/Internet

• ARM Holdings (1822695D US) has launched a roadshow for its IPO. Softbank Group (9984 JP) offers 95.5 million ADSs (over-allotment option of 7.0 million ADS) at US$47.00-51.00 per ADS.
• We previously discussed the IPO in ARM Holdings IPO: The Bull Case, ARM Holdings IPO: The Bear Case and ARM Holdings IPO: Valuation Insights. 
• The IPO price range values ARM at a premium to peers’ multiples. DCF sensitivity analysis suggests a need for ambitious forecasts to justify the price range.

• Softbank Group (9984 JP) aims to raise around US$8-10bn via selling some of its stake in ARM Holdings‘ US IPO.
• ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
• In our earlier note, we looked at Arm’s past performance and undertook a peer comparison. In this note, we talk about valuations.

• Globalfoundries may be considering filing a complaint regarding TSMC’s recently announced European JV with three of their customers, Bosch, Infineon and NXP
• Yet they just inked their own deal for a JV with ST Micro in France. What gives?
• In conjunction with their recent CFO hiring fiasco, one wonders if all is well with the GF leadership team. 

• VNG (VinaGame) (VNG US) is Vietnam’s leading, homegrown digital ecosystem. VNG has filed for a Nasdaq listing to raise US$300 million.    
• VNG is the number one mobile games publisher in Vietnam. VNG’s Zalo, Zing MP3 and Bao Moi applications are Vietnam’s leading messaging, music streaming and online news applications. 
• The bull case rests on the core games business’ improving KPIs, return to growth, good revenue visibility, and reducing dependence on critical partners combined with VNG’s improving margin.

• The IPO price range of Shinsung ST is from 22,000 won to 25,000 won and the expected IPO offering amount is from 44 billion won to 50 billion won.
• Shinsung ST produces busbars that connect currents of electric components in secondary battery batteries for EVs and ESSs, and module cases that protect battery cells from external shocks.
• The total order backlog of the company’s products reached 1.5 trillion won at the end of 2022. Order backlog ratio is 14x, which is very high. 

• Tower Semi will pay Intel $300 million to acquire and own equipment and other fixed assets to be installed in the New Mexico facility
• Intel’s termination fee on the failure of the proposed Tower Semi acquisition was $353 million
• It’s quite the clever move and doesn’t require China’s approval…

• Our base case valuation is implied price per share of 51,050 won, which is 104% higher than the high end of the IPO price range of 25,000 won. 
• We estimate Shinsung ST to generate sales of 133.9 billion won (up 25.7% YoY) and operating profit of 15.4 billion won (up 94.6% YoY) in 2023. 
• Our valuation sensitivity analysis suggests an IPO price range of 41,351 won to 61,771 won per share.

• Softbank Group (9984 JP) aims to raisebetween US$4.5-4.9bn via selling some of its stake in ARM Holdings‘ US IPO.
• ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
• In our previous notes, we looked at the company’s past performance. In this note, we talk about valuation.

• Kinatico Ltd (ASX:KYP) is a ‘Know Your People” regtech company providing workforce compliance monitoring and management technology and services.
• KYP has reported FY23 NPAT of $0.237m, an increase of 116% on the previous corresponding period (pcp), the company’s best-ever result.
• On an adjusted basis (for non-cash items), NPAT was $0.75m, a turnaround of $1.5m on the prior period while the gross margin and EBITDA margin hit record levels of 65.7% and 11.2% respectively. 

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• China Vanke
• Lenovo
• Vedanta Resources
• Yuexiu Property

• Today, somewhat earlier than expected), the Nikkei Index Team announced the changes to the Nikkei 225.
• Lasertec Corp (6920 JP), Mercari (4385 JP), and Nitori Holdings (9843 JP) are added. Nippon Sheet Glass (5202 JP), Mitsui E&S Holdings (7003 JP), and Matsui Securities (8628 JP) removed.
• That triggers flows of about ¥480bn a side, and some big, big changes. The announcement helps understand new process better.

• Softbank Group (9984 JP) aims to raise around US$8-10bn via selling some of its stake in ARM Holdings’ US IPO.
• ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
• In our earlier note, we looked at Arm’s past performance. In this note, we undertake a peer comparison.

• Dell and HP’s latest results indicate an improving PC industry environment in 2H23E, though weaker than expected China demand has softened initial expectations.
• A key take-away is that a major AI PC upgrade cycle is indeed on the horizon, with additional clarity now provided as to when and how it will unfold.
• A ‘step-change’ AI PC upgrade cycle will make the strength of the current near-term cycle recovery less relevant, and isn’t yet priced-in by the market.

• The Chinese economy looks weak according to the data from the statistics bureau.
• However, many big Chinese internet companies began to recover in Q2 as we mentioned in August.
• Here we list five recovering companies that investors may not pay attention to.

• Elastic NV (ESTC US) delivered a high quality beat and raise and reported a modest upside to revenue and profitability. The start of the fiscal year looked strong.
• The leading provider of search engine for enterprises and SMBs guided FY24 ahead of consensus estimates. I reiterate our Overweight rating on ESTC.
• The 1Q print was outstanding, with +17% y/y revenue growth, a record non-GAAP Op Margin of ~10% and FCF margin of ~13%.

• BILL Holdings Inc. managed to exceed analyst expectations in terms of revenue and earnings.
• The company demonstrated robust growth in total revenue and core revenue, reflecting the success of its various services.
• In the fourth quarter, BILL Holdings continued to exhibit impressive growth, reporting a significant increase in total revenue and attaining non-GAAP net income.

• Applied Materials delivered an all-around beat in the most recent quarterly result.
• Applied Materials’s strategic focus on the IoT AI era yielded substantial growth and innovation within the semiconductor industry.
• This transition aligns with Applied’s strengths in materials engineering and allows the company to offer comprehensive solutions to manage complexity.

• Money continues to flow into mainland China ETFs taking the total inflows since 18 July to over US$25bn. This has likely helped stabilise the market and prevent a bigger fall.
• The inflows continue to be largest on ETFs tracking headline indices – CSI 300, STAR50, CSI1000, CSI 500, SSE50, ChiNext. Plus there are inflows on some sectoral and thematic ETFs.
• The skew between stocks gaining 20%+ over the period vs those dropping -20% or more has improved significantly over the last week.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• O-Net Technologies (Group)

• Marginal float helped fuel the VinFast (VFS US) bubble. Then it popped. 
• The Prosus (PRX NA)/Naspers (NPN SJ) Circularity Detour and subsequent unwind created the B-Share construct which means they can maintain the voting control in South Africa without maintaining economic control.
• The backlash against Star CM Holdings (6698 HK) calls into question the broader Chinese entertainment industry, and how it strikes a balance between viewership/profitability and ethical boundaries.

• 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, we primarily looked at Doosan Robotics, Tuhu Car and VNG (VNG US). 
• There were placements in AIA NZ , Ventia (VNT AU), FIVESTAR IN and Daiwa House Reit. ZOMATO IN also had large blocks post its acquisition led lockup release.

• In our two previous Int’l Compass reports (Aug. 18 & 24) we discussed that we were buyers on the pullback to the major $93 support level on MSCI ACWI (ACWI-US).
• $93 on ACWI is 1+ year base support and a level that coincides with the 10-month uptrend. We remain bullish as long as the ACWI-US is above $93.
• $93 on ACWI-US is likely the low for this pullback as long as the 10-year Treasury yield and DXY can stay below respective resistance levels (4.3%-4.35% and $103.70-$105.70).

• We discuss the end of the mandatory lock-up periods for 49 stocks in Korea in September 2023, among which 7 are in KOSPI and 42 are in KOSDAQ.
• These 49 stocks on average could be subject to further selling pressures in September and could underperform relative to the market. 
• Among these 49 stocks, top five market cap stocks include Kakao Games (293490 KS), SK Oceanplant (100090 KS), Korea Zinc (010130 KS), Fadu (440110 KS), and Vaxcell-Bio Therapeutics (323990 KS). 

• Delta Electronics and Wiwynn Corp among 6 Taiwan stocks at their highest levels of fund ownership among active Emerging Market funds.
• The combined weight in these 6 stocks has aggressively moved higher to 1.2% from less than 30bps in 2018.
• All stocks enter the top 15 most widely held companies in Taiwan, but potential for further buying is clearly there.

• Huawei Technologies Co. Ltd. launched a new flagship smartphone on Tuesday, in a discreet fashion and ahead of schedule, said to be powered by a self-developed chip that can rival the speed of 5G handsets, as the tech giant tries to shrug off the impact of U.S. sanctions and capitalize on robust quarterly sales growth in China.
• The company began offering the Mate 60 Pro at 6,999 yuan ($962) in its stores and online around noon, without prior advertisement other than an open letter that cited the early launch as a celebration of its Mate series reaching 100 million units in cumulative shipments.
• The company gave no detail about what kind of system-on-a-chip (SoC) the smartphone uses and whether the handset is compatible with 5G wireless networks.

• Alibaba Group Holding Limited managed to exceed expectations in terms of revenue and earnings.
• Their team’s efforts to create a thriving ecosystem and realize technology-driven innovation methods also show promising results.
• The overall sales growth for the Alibaba International Digital Commerce Group was 41%, and the retail division had revenue growth of 60% year over year.

• AppLovin Corporation managed to exceed the revenue and earnings expectations of Wall Street.
• The Software Platform sector achieved significant revenue of $406 million, which reflects an increase of 28% over the previous year.
• With $334 million in sales from apps and $61 million in adjusted EBITDA for the second quarter, the company had an 18% margin.

• Users are enthusiastic about the return of 5G Huawei smartphones, and thus we expect sales volume of Huawei devices to improve. 
• If the combined share of Huawei+ Honor can reach 30/32% we estimate Xiaomi’s current 12.5% share of the China smartphone market could decline 0.8/1.3ppts, respectively.
• We maintain Xiaomi’s SELL and HK$ 8.2 TP, implying 26x FY23 PE. The increase in CY23 EPS reflects lowered OPEX, improved gross margin due to the impact of IC oversupply.

• Singapore-based IoT transaction platform, Beep, has announced the launch of what it claims to be Southeast Asia’s largest electric vehicle roaming (eRoaming) network.
• Hyundai Motor Group Innovation Centre in Singapore (HMGICS), Tribecar, EVFY, Singapore Electric Vehicles, and Quantum Mobility are among the initial entities to use the network.
• Beep also announced the successful completion of its seed funding round, led by GGV Capital and Wing Vasiksiri.

• Cisco Systems delivered an all-around beat in the previous quarter, accomplishing the company’s financial and operational goals.
• Additionally, Cisco produced solid margins, a significant operational cash flow, and solid shareholder value, returning $10.6 billion through share repurchases and rising cash dividends.
• Cisco Systems generated approximately $57 billion in sales, up 11% from the previous year and the fastest annual revenue growth rate in more than ten years.

• Roblox Corporation delivered disappointing results as the company could not meet the revenue and earnings expectations of Wall Street.
• Bookings reached $780 million, a 22% increase year on year.
• The initiative has been developed to transform brand innovation and establish a self-sustaining, worldwide advertising ecosystem within the Roblox platform.

• Snap delivered mixed results for the previous quarter, with revenues well below analyst expectations but managed an earnings beat.
• The user base continued to grow steadily, and Snap introduced innovative features like My AI, an AI-powered chatbot, to enhance the user experience.
• Despite temporary disruptions caused by changes in the ad platform, Snap remains optimistic about future growth.

• STAR CM Holdings (6698 HK), a variety program intellectual property creator and operator, was listed last December and promptly gained 475% by early August. All good so far.
• Shares cratered on the 18 August (-23.4%) and are currently 76% adrift from its recent high. The reason? A viral clip from late pop diva Coco Lee discussing unfair treatment.
• The music competition show, in which Coco appeared, pushed back on any impropriety; however, its broadcaster has temporarily suspended the program. This is no easy fix.

• Telkom Indonesia (TLKM IJ)‘s 1H2023 results looked solid but drilling down 2Q2023 looked a lot more encouraging in terms of growth and higher ARPUs for Telkomsel.  
• Ongoing digital initiatives are yielding positive results and Indihome continues to register positive results, with its merger with Telkomsel underlining convergence strategy. Data centre consolidation looks like a future spin-off. 
• Telkom continues to enrich its digital ecosystem with services and make it more accessible to less affluent subscribers. Valuations remain attractive at less than 5.0x forward EV/EBITDA

• Huawei’s new Mate 60 Pro phone has made many wonder if it has worked around U.S. technology restrictions to produce a 5G-capable chip domestically.
• Nvidia hits new all-time highs… Taiwan AI-supply chain stocks are surging again.
• Dell will report earnings — Look for PC upgrade cycle color and AI PC comments. SEMICON Taiwan is coming soon, we will attend.

• TSMC: 9.2% premium — Trending down, can consider shorting the ADR vs. the local.
• ASE: 10.5% premium is historically high — Short the ADR vs. the local.
• ChipMOS: -0.4% discount, ADRs have lagged Taiwan shares — Long ADR vs. local.

• We visited Yageo’s headquarters to learn more about the business and strategy. We expect revenue quality to improve, margins to rise through 2025E, and possible accretive acquisitions.
• The company is a heavily shorted stock based on our short model — This implies short squeeze potential we believe. The company has over US$1.5bn of dry powder for acquisitions.
• We rate Yageo as a Structural Long with a NT$690 target price. Potential upside catalysts outnumber downside catalysts in our view.

• Vietnamese tech start-up VNG (VinaGame) (VNG US) has filed for an IPO in the US and according to news media outlets, the company plans to raise proceeds of around US$300-400m.
• VNG’s business model resembles that of China’s Tencent (700 HK) with games accounting for most of VNG’s revenues. Other business segments are in early stages of monetisation.
• Our analysis suggests that VNG’s businesses have strong potential and the company could further reduce its operating losses with scale and further financial discipline.

• Keep Inc (3650 HK) , the largest online fitness platform in China, announced interim results for the six months ended Jun-23. The overall revenue growth is slowing down. 
• The company completed its Hong Kong IPO of ~10.8M shares at HK$28.92 (bottom of the range) and raised ~HK$192M (~$25M) of net proceeds. CICC led the offering.
• Keep appears well capitalized to outperform despite China’s temporary slowdown in fitness activities. I remain cautious on Keep stock after a downsized IPO, but I like the long-term fitness story. 

• It may take some time before shareholders can see how Kahoot’s significant investments in market share and business growth pay off in a positive bottom line.
• GS AM already has c.59% and the current extension lasts until 8 September. Spread is 2.9%/15.4% (gross/annualised, assuming settlement by 13 November).
• Taking a NOK 31.2 break, the last closing share price implies just 74% probability of deal completion, however I believe the spread will close following. I’d be long the shares.

• Elan is positioned to win from a coming PC upgrade cycle, which has been indicated by companies such as Micron, Microsoft, Intel, and Asustek among others.
• Elan is one of the institutionally most-underheld shares in our universe based on our analysis. Windows 11 adoption has been rising and will accelerate with a PC upgrade cycle.
• We’ve updated our Elan model, we continue to rate the shares Outperform and have a NT$142 target price. Moreover, the stock’s past all time remains 65% above current share price.

• CHOYS, a SaaS insurtech platform for corporate employees in Southeast Asia, has closed a US$1.1 million seed funding round with investors, including Wing Vasiksiri, Foremast, Antler, and Fintech Nation Fund. 
• The company will use the money for its go-to-market strategy across Southeast Asia and to bolster its product development initiatives.
• Founded by Sharon Li and Vanessa Chen, CHOYS aims to make work life more meaningful and humanised.

• Vng (VNG US), Vietnam’s leading internet platform, aims to raise up to US$300m in its US IPO.
• VNG is Vietnam’s leading homegrown digital ecosystem, as per the company, with diverse product offerings across games, communications and media, fintech and other opportunities
• In this note, we talk about the positive aspects of the deal.

• Yesterday (28 August) software provider Energy One Ltd (EOL AU)  announced an indicative Offer, by way of a Scheme, from STG at A$5.85/share, a solid 44% premium to last close. 
• Energy One has granted STG due diligence on an exclusive basis and the board is supportive if terms are firmed. All looks good. However …
• … Vaughan Busby, a NED and founding CEO of Energy One, is not aligned with the board. And he holds ~14%. 

• Last week I wrote about another situation, noting Equity Offering Into TOPIX Inclusion is a standard construct. Here we have another. 
• DX and HR Support company Core Concept Technologies Inc (4371 JP) today announced a large (it ups Real World Float by 64%, and is 33 days of ADV) secondary offering.
• The “reason” for the offering mentions a desire to move to TSE Prime in future.

• Our NAV valuation of Zeus Co suggests an implied price target of 32,991 won, which is 13% lower than current share price. 
• Given the lack of upside, we would avoid Zeus shares at current prices.
• Currently, JET Co is listed on Tokyo PRO Market Exchange. JET Co is expected to switch its listing to the Tokyo Standard Market Exchange. 

• Zeus Co Ltd (079370 KS), a maker of semiconductor equipment, flat panel display equipment, and facility automation solutions, intends to spin off 95%-held J.E.T. Co (6228 JP) next month.
• J.E.T., a  semiconductor etching equipment play, will list on the 25 September. Pricing is expected around the 5 September. 
• Zeus’ share price has fallen 33% in the past month. That may be justified. 

• ARM Holdings (1822695D US) is the world’s most widely licensed and deployed processor. Softbank Group (9984 JP) seeks to raise about US$6-10 billion by listing ARM on Nasdaq.
• We previously discussed the IPO in ARM Holdings IPO: The Bull Case and ARM Holdings IPO: The Bear Case. 
• Our valuation analysis suggests that the rumoured target valuation of US$60-70 billion is unjustified. Our base-case DCF valuation is US$44.0 billion. 

• We analyze the most shorted stocks in Taiwan and highlight notable AI supply chain stocks who have have some of the highest short interest vs. float in the market.
• Gigabyte Technology (2376 TT) , Global Unichip (3443 TT) , Gold Circuit Electronics (2368 TT) , Inventec Corp (2356 TT) , Mitac Holdings (3706 TT) – high short squeeze risk.
• Some Apple (AAPL US) supply chain stocks, Display-related, and Memory-related stocks are also heavily shorted.

• In this insight, we take a look at the potential ADDs/DELs for Thailand’s SET50 index rebalance in December 2023.
• At present, I see JMT Network Services (JMT TB) as an expected ADD and Central Plaza Hotel (CENTEL TB) as an expected DEL.
• Separately, Delta Electronics Thai (DELTA TB) is two trading days away from skipping the MSM list in August 2023 and avoiding deletion in the December 2023 rebalance.

• VNG (VinaGame) (VNG US), Vietnam’s leading internet platform, aims to raise up to US$300m in its US IPO.
• VNG is Vietnam’s leading homegrown digital ecosystem, as per the company, with diverse product offerings across games, communications and media, fintech and other opportunities
• In this note, we talk about the not-so-positive aspects of the deal.

• We spoke to Gogoro (GGR US), a beaten-down and under-covered Taiwan EV play listed in the US — As part of a hunt for contrarian plays.
• The company has faced headwinds recently, with hardware sales relatively weak vs. its local market. The battery swapping business is compelling and steadily growing however.
• We find the company fairly valued unless it can show more growth — We value it as two parts, a EV 2-wheeler hardware business and an infrastructure-like battery swapping business. 

• Nearly US$20bn has flowed into mainland China listed ETFs since 18 July and could be driven by the National Team supporting the market.
• Most of the inflows have been focused on large cap indices including CSI 300, STAR50, CSI 500, SSE50, ChiNext and other sectoral and thematic ETFs.
• The largest impact has been on the SSE STAR50 (STAR50 INDEX) constituents, but that has not stopped the slide in the stocks.

• Vietnam’s tech giant, VNG, filed for US listing last week (valuation TBC).
• Given the country’s current foreign ownership restriction, the listing will be done via an offshore entity that effectively controls the company through contractual agreements.
• Investors should be aware of the risk, esp. after previous market concerns surrounding Chinese tech companies’ VIE structure.

• NVIDIA Q2’CY23 revenues of $13.51 billion, up 88% QoQ, up 101% YoY, blowing way past the $11 billion guidance midpoint.
• Current quarter revenue is expected to be $16.00 billion. This will be a roughly 2.7x increase YoY 
• Are we in the middle of witnessing a bubble of dot.com era proportions?

• EQT offers €16/share to delist SUSE (SUSE GR) (split into consideration and interim dividend) and merge it into a Luxembourg SA. On 24 August, EQT published the offer document.
• There will be no squeeze-out. The multiples offered (4.8x EV/NTM Fwd Revenue, 14x EV/Fwd NTM EBITDA, source: IBES) are generally consistent with European software companies.
• With the stock trading at a 3% gross spread, I see limited upside from here and no interloper risk. Annualised spread is 33.4%. Long and tender.

• Following takeover rumors surrounding New Relic Inc (NEWR US) , private equity firms finally agreed to acquire a US-based low-cost observability provider for ~$6.5B.
• American private equity firm Francisco Partners and global alternative asset manager TPG offered $87 per New Relic Inc (NEWR US) share in an all-cash transaction.
• The New Relic Inc (NEWR US) Board of Directors approved the buyout deal, and is expected to close in late 2023 or early 2024.

• Paycom Software managed to exceed analyst expectations in terms of revenue and earnings.
• The company’s initiative to simplify clients’ experiences was evident by introducing tools like Everyday and the Client Action Center.
• As Paycom continues to execute its strategies and capitalize on its expanding market opportunities, its potential for sustained success remains promising.

• Pinterest delivered an all-around beat in the most recent quarterly result.
• The company’s strategic focus on core differentiators and visual discovery led to increased user engagement and expansion of the user base.
• Despite challenges in the advertising environment, Pinterest achieved consistent year-on-year revenue growth and margin expansion.

• Amidst whispers of significant financial moves, BlackBerry Ltd, the erstwhile leader in business mobile technology, has become a focal point for Veritas Capital, a major private equity player.
• This frenzy was not entirely unpredictable; BlackBerry had hinted at major strategic shifts in May, even suggesting possible diversification of its business segments.
• The company, once synonymous with smartphones, ceased its phone production and even pondered over selling its iconic mobile patents.

• Comms Group Ltd (ASX:CCG) has reported FY23 earnings and provided a more detailed and narrower range for both revenue and EBITDA guidance in FY24.
• The result was largely in-line with expectations and with guidance already provided.
• Revenue increased 27% and adjusted EBITDA ~17% as the onPlatinum acquisition contributed for a full 12-months and investment was made in the Global business for future growth. 

• Forrest Li: “Look How They Massacred My Boy” When CEO Forrest Li announced SEA Ltd’s Q2 results in mid-August, he was probably expecting a pat on the back.
• After all, the team at SEA Ltd had slogged through fire and brimstone over the past year trying to bring the company back to profitability.
• After all, the team at SEA Ltd had slogged through fire and brimstone over the past year trying to bring the company back to profitability.

• As expected, the index committee has used a 6-month minimum listing history and that results in two changes to the SSE STAR50 (STAR50 INDEX) in September.
• Piotech (688072 CH) and Hwatsing Technology (688120 CH) will replace Suzhou Nanomicro Technology (688690 CH) and Zhuhai CosMX Battery (688772 CH) in the index.
• One-Way turnover is estimated at 2.83% and will result in a one-way trade of CNY 3,562m. There does not appear to be a lot of pre-positioning on the stocks.

• ARM Holdings (1822695D US) is the world’s most widely licensed and deployed processor. Softbank Group (9984 JP) seeks to raise about US$6-10 billion by listing ARM on Nasdaq.
• In ARM Holdings IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The bear case rests on the deteriorating annualized contract value trajectory, declining ARM-powered chip shipments and revenue, ARM China overhang and red flag transactions involving SoftBank.

• Nvidia blew the doors off Street expectations last week, but the market reacted with semiconductor stocks turning red on the day. Is the relief rally over?
• We conclude from our review of technical conditions that while breadth indicators argue for a deeper correction, that day may not have arrived just yet.
• Sentiment is too bearish and should put a floor on stock prices in the short term. The relief rally probably has further room to run.

• NetEase’s 2Q rev. miss cons. by (3.08%) and non-GAAP net income beat cons by 50.6%.
• We anticipate that former legacies will continue to be under pressure. However, the 3Q23 is expected to show strong performance with new titles like “Justice Mobile” and “Racing Master.”
• We have raised our annual revenue expectations for “Justice Mobile” and maintain an optimistic view of NetEase’s upcoming pipeline. We increased to TP US$ 105, implying 17x PE in 2023