TMT/Internet

• The JPX Nikkei 400 index rebalance will take place on Wednesday, MSIC on Thursday and HSI, HSCEI, HSTECH and HSCI on Friday.
• There are review cutoffs for the MVIS family of indices, and multiple announcements of changes to various indices during the week.
• There were inflows to mainland China ETFs, iShares India ETF (INDA), Ishares India Small-Cap (SMIN) and iShares EmergingMarkets ex China (EMXC) while there were outflows for iShares Emerging Markets (EEM).

• Why is JSR Corp (4185 JP) trading wide? FUD and Flows.
• Intouch Holdings (INTUCH TB) plumbs new 12-month lows for its implied stub, and NAV discount as the former PM returns from exile. 
• You would NOT want to short M&A Research Institute (9552 JP)  into the inclusion. But the ascension to TOPIX is not a surprise.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• ARM Holdings finally made its IPO filings public, while Doosan Robotics too kicked of its much awaited listing.
• In the placement space, Union Bank Of India (UNBK IN) managed to upsize its offering, while APA Group (APA AU) pulled off a non-accretive acquisiton.

• Gartner delivered a strong result and managed an all-around beat in the last quarter, marked by double-digit growth in revenue, along with high single-digit growth in contract value.
• Additionally, Gartner reported excellent free cash flow during the quarter.
• The company’s focus on research as its primary revenue segment was highlighted, with significant growth in research revenue during the quarter.

• Zebra Technologies’ results were a major disappointment as the company failed to meet Wall Street’s revenue and earnings expectations.
• Weaker demand and cautious consumer spending patterns throughout Zebra’s end markets impacted its second-quarter performance.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

AAC Technologies’ results were weak as expected, with the top line and gross margin both lower. Overall revenue fell 2% y-o-y to CNY 9.22 bn for H1/23. Gross profit declined 27.2% to CNY 1.3 bn, with the gross margin down 4.8 ppts to 14.1%. This was largely due to market competition for the optics and acoustics business, as well as changes in the product mix. Despite the muted sales performance, the company deleveraged further and achieved strong FCF, driven by increased CFO and reduced capex. Liquidity appears to be sound, with 4.4x LTM Cash/ST Debt. Management guided for the optical lens gross margin to be positive in Q4.

• Electronic Arts delivered a mixed set of results in the last quarter, with revenues below the analyst consensus.
• The company achieved net bookings of $1.6 billion, up 21% yearly, due to continued growth across the EA SPORTS FIFA ecosystem and the release of Star Wars Jedi: Survivor.
• Electronic Arts executed across its business during the quarter, introducing 5 new high-quality titles and offering over 145 content upgrades across 37 titles.

• Despite the uncertain financial situation around the world, Global Payments managed to exceed analyst expectations in terms of revenue as well as earnings.
• The company once again produced excellent organic growth in the Merchant Solutions business, driven by the continuous success of their companies that use technology.
• This quarter, they again achieved significant revenues, outpacing the impressive results of the previous quarter.

• SolarEdge Technologies delivered mixed results in the quarter, with revenues failing to meet analysts’ expectations but above-par earnings.
• SolarEdge’s solar business generated $947 million in revenue, while its non-solar businesses generated $44 million.
• Their solar business revenue increased due to significant revenues in Europe.

• Revu Corporation is the number one influencer platform company in Korea with the largest number of influencer members in the industry.
• The IPO price range is from 11,500 won to 13,200 won. The maximum total offering amount is 29.5 billion won. 
• The bankers used three companies including DearU, Silicon2, and Connectwave as comparable companies for Revu Corp. The average P/E of the comps is 32.6x.

• Last week (Aug. 18) we discussed the 10-year Treasury yield and DXY testing respective resistance (4.3%-4.35% and $103.50-$103.70).
• As long as no decisive breakouts in the 10-year yield or DXY, we were buyers on the pullback to $93 on MSCI ACWI (ACWI-US).
• Outside of our overweight countries (Japan, India, Taiwan, Greece), defensive Sectors continue to lag. We highlight buys in Technology, Services, Consumer Discretionary, Industrials, Materials/Energy, and Financials.

• Local press states that Samsung Electronics Pref Shares (005935 KS)sold shares as they look to invest in their future capex
• The capex amount for 2023 will be around 40-50 trillion KRW and it doesn’t seem like W3 trillion is a needle mover
• With a new 3 year shareholder return plan, I would think maybe cash is needed to secure ammunition for M&A

• Intouch Holdings (INTUCH TB) plumbs new 12-month lows for its implied stub, and NAV discount as the former PM returns from exile. 
• Preceding my comments on Intouch 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%.

• 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 this note, we compare its recent performance versus its performance prior to its privatisation and discuss the changes since then.

• ARM Holdings (1822695D US) is the world’s most widely licensed and deployed processor. Softbank Group (9984 JP) is seeking to raise about US$6-10 billion by listing ARM on Nasdaq.   
• Softbank Privatised ARM for US$32bn in 2016 and unsuccessfully tried to sell it to NVIDIA Corp (NVDA US) for US$40bn in 2022. In August, Softbank acquired Vision Fund’s ARM stake.
• The bull case rests on the growth in licensees, high customer switching costs, rising royalty rates, strong revenue visibility and a highly profitable and cash-generative business model.

• Nvidia, in characteristic fashion, murdered EPS estimates.
• Revenue was $2 billion ahead of the guide, and the guide was another $4 billion ahead of consensus for the next quarter.
• Going into the print, many people were concerned that positioning was bad, i.e., everyone was bullish and expectations were too high. Well, they did not disappoint.

• Western Digital Corporation delivered an all-around beat in the quarter, with total revenue of $2.7 billion.
• In the fourth quarter, cloud comprised 37% of all revenue at $1 billion, down 18% from the previous quarter and 53% from the previous year.
• Shipments of nearline bits were 59 exabytes, a 26% sequential decline driven by persistent difficulties among cloud clients.

• IQ reported 2Q23 revenue and non-GAAP net income 0.2%/28.5% vs cons.
• We cut our projections for 3Q23’s membership services revenue, but increased estimations for online ads services revenue, and raised margin forecasts for 2023.  
• We maintain our US$ 6.25 TP, implying 16.2X PE in 2023.

• Major memory names have fallen with the recent market concerns and only staged a small reboound due to Nvidia’s bullish results.
• NAND and DRAM price declines have stabilized. Demand for DRAM from servers is expected to exceed that from mobile devices, driven by AI usage.
• We see relative value in Micron vs. Nanya Technology and SK Hynix. SK Hynix is ahead of the game for AI, and Nanya offers focused DRAM exposure however.

• Monolithic Power Systems managed to exceed the revenue expectations as well as the earnings expectations of Wall Street.
• Storage and computing revenue increased in the quarter.
• Industrial revenue for the second quarter of 2023 also increased due to higher equipment sales for power sources and industrial meter applications.

• Market depth is a widely used measure of liquidity, commonly calculated across the order books of cryptocurrency pairs on centralized exchanges (CEXes).
• It provides the amount of bids and asks at varying distances from the mid-price, encompassing a range from -0.1% to 10%.
• This chart shows cumulative ETH-USDT bid and ask volumes at various levels on the ten largest CEXes.

• Nvidia will report its earnings today U.S.-time, we outline the key Taiwan AI supply chain names to watch around the earnings.
• TSMC has maintained its full-year revenue guidance despite media reports questioning whether a further downgrade was coming.
• Hon Hai produces over 50% of Nvidia’s AI hardware according to media reports.

• Baring aims to raise around US$900m by selling its remaining 26.6% stake in Coforge (COFORGE IN) .
• Baring has been paring down its stake since 2020 and hence, the selldown is somewhat well flagged.
• In this note, we run the deal through our ECM framework and talk about the deal dynamics.

• Alibaba (ADR) (BABA US)‘s New Retail strategy stumbled, prompting the company to revert to its e-commerce origins with a renewed emphasis on social commerce.
• Creating a social media platform could be relatively simple, yet turning it into a prosperous venture amid established social media giants could be challenging.
• Branching out from social media to e-commerce might be straightforward, but Alibaba Group Holding (9988 HK)‘s unprecedented reverse path could present unique challenges.

• Five plus years ago, Toshiba Corp (6502 JP) sold down a 26% stake in small cap Shibaura Mechatronics (6590 JP) to get to a consolidated 13%-ish stake. 
• This was discussed in Toshiba Selldown of Shibaura Mechatronics (6590) back then. Yesterday, we got news Toshiba would sell out its remaining stake. And there’s a buyback. Maybe.
• The stock has reacted badly on Day 1, despite a lack of dilution. Shareholder structure matters. 

• While Softbank is trying to complete the IPO of Arm in the next several weeks, many investors are likely to have concerns about valuations. 
• Arm Holdings generated sales of US$2.7 billion (down 0.9% YoY) and net profit of US$524 million (down 22.5% YoY) in FY 2023.
• In order for the valuation of Arm to reach US$60 billion, this would imply a significant premium multiple to the comps. 

• Kuaishou Technology (1024 HK) reported 2Q2023 results yesterday which beat consensus estimates. The company reported an OPM of 4.7% with net profits for the first time.
• The company’s domestic business continues to see improvement in operating profits while losses of the overseas business have reduced significantly over the last few quarters.
• Though livestreaming growth has decelerated, the company’s online marketing and e-commerce businesses continue to expand driving Kuaishou’s earnings.

• 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 this note, we talk about the not-so-positive aspects of the deal.

• Doosan Robotics is getting ready to complete its IPO in Korea in September. The expected IPO price range is 21,000 won to 26,000 won.
• The company estimates its sales to surge from 67 billion won in 2023 to 766.3 billion won in 2027, representing 83.9% CAGR from 2023 to 2027.
• One of the major reasons why local investors will have a positive view of Doosan Robotics is due to Samsung’s investment in Rainbow Robotics whose share price increased 232% YTD. 

Sunny Optical has released H1/23 numbers that were worse than expected in our view, with revenues and earnings below street estimates. Revenues declined 15.9% y-o-y to CNY 14.3 bn. Meanwhile, gross profit dropped 39.5% to CNY 2.1 bn, with a margin of 14.9%. Net profit plunged 68% to CNY 437 mn. A detailed cash-flow statement was not provided. Positively, the financial risk profile and liquidity remain healthy, supported by a large net cash position. Gross Debt/EBITDA rose to 3.9x, which is too high for a Baa1 credit in our view. We note that this has crossed Moody’s 2.0x negative rating trigger, which should cause downgrade pressure to build up.

• Baidu reported 2Q23 revenue/non-GAAP net income 2.3%/38.1% vs cons., Baidu core’s online marketing revenues and other revenues grew 7.1%/13.0% YoY, respectively. 
• We expect that Baidu’s ads growth will continue into 2H23, supported by recovery of key advertisers. 
• We slightly increase FY23 EPS estimates and maintain our TP of US$162, which implies 17.8X PE.

• 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 this note, we talk about the positive aspects of the deal.

• The total revenue growth rate accelerated significantly to 28% YoY in 2Q23.
• The high-margin businesses grew more rapidly than the low margin business.
• Gross Merchandise Value and Active user base still increased strongly.

• In this insight, we take a look at the names leading the race to become ADDs/DELs for the DAX, MDAX, and SDAX Indices in the September 2023 Rebalance.
• Software AG (SOW GR) was deleted from the MDAX index triggering a couple of interim changes in the last week of July 2023.
• Currently, I do not expect any changes for the DAX or MDAX indices in September 2023 but I expect one change for the SDAX index.

• The review period for the September rebalance of the KOSPI Size Indices started 1 June and will end 31 August. The changes will be implemented at the close 7 September.
• We see 7 migrations from MidCap to LargeCap, 6 migrations from LargeCap to MidCap, 7 new adds to MidCap, and 17 migrations from SmallCap to MidCap.
• Historically, stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.

• IQiyi failed to give its share price a lift with  stronger-than-expected 2Q results except for slight miss in paying subscribers .
• We believe that investors are expecting the end of its remarkable turnaround story and embracing a stable and moderate growth stage.
• While iQiyi trades at ~10x our FY23 earnings, the cheap valuation by itself doesn’t stand out among China internet peers as a group. We would wait for better entry points.

• Activation Group (9919 HK) unveiled its first-half financial results for 2023 on August 10th, 2023.
• In this article, we will provide an overview of Activation’s performance during this period and share thoughts on its future prospects.
• The Experiential Marketing segment recorded a full recovery, reaching RMB 280 million, surpassing the 2021 H1 level of RMB 276 million.

• Arista Networks managed to surpass the revenue and earnings expectations of Wall Street.
• The company generated $1.46 billion in revenue for the quarter and $1.58 in non-GAAP earnings per share.
• Arista is adjusting to these developments and increasing its investments in AI as its biggest cloud customers reassess their conventional cloud and AI networking plans.

• When this was launched, it traded more volume than expected on the first day, then again on the second day. Since then it has traded cheap vs initial estimates.
• A week after the launch, two separate Large Shareholder Filings came out. Those bear scrutiny.
• The back end trade is still an interesting one in my opinion.

• There should be 4 changes to the Yuanta/​P-Shares Taiwan Top 50 ETF and 1 deletion for the Yuanta/​P-Shares Taiwan Dividend Plus ETF in September.
• The potential adds are driven by the AI-frenzy that has swept the market for the last few months. Most potential deletions are shipping stocks that are way off their highs.
• Short interest on the potential deletions is high in terms of days of ADV and free float. The rise in shorts on the potential adds is being rapidly covered.

• The local market is increasingly convinced that Samsung Electronics’ quarterly dividends for the latter half of this year will experience a reduction.
• Samsung Electronics plans to apply the updated regulations from the 2024 1st quarter dividends, following the conclusion of the capital market law revision at the end of this year.
• It might be prudent to refrain from trading that bets on a reduction in the 1P discount in the first half of this year.

• Taobao and Tmall have implemented two major reforms: 1) The launch of the Wanxiangtai Platform Unlimited Edition; 2) Changing the rules for displaying merchant sales volume from monthly to annual.
• Although the new Wanxiangtai differs from PDD’s “Fangxintui” and “Quanzhantui” , the idea is to simplify and automate merchant promotion. We anticipate that this change will boost the take rate.
• We increased our core e-commerce take rate estimate for BABA in FY24/FY25 to 3.85%/4.0%, respectively, and raised our TP to US$ 127.

• Infineon’s big news is that they, too, will be building one of the largest Silicon Carbide fabs in the world. This makes Wolfspeed’s Siler City look puny in comparison.

• Infineon is now looking to be number three in the Silicon Carbide device game, targeting ~500 million in 2023.
• So given the impressive growth, Infineon is a bit late but plans to spend 5 billion dollars over five years for the factory in Kulim.

• Dynatrace Inc. delivered a strong result and managed an all-around beat in the quarter.
• With a new CRO and a strong vision for the future, Dynatrace is in a good position in the cloud-based software landscape.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• Unity Software Inc. delivered a mixed set of results in its most recent result, with revenues above Wall Street expectations but below-par earnings.
• The company ended the quarter with a strong acceleration in revenue growth, impressive margin improvements, and positive cash flow generation.
• The company’s core subscription growth is robust, and its product portfolio continues to expand with new offerings, such as Unity 2022 LTS, Unity PolySpatial, and Unity Cloud.

• I remain bullish on the stock and reiterate a $37 PT. Confluent (CFLT US) delivered upside to total revenue, gross margin, and non-GAAP operating margin estimates.
• The company raised guidance for CY23 total revenue and profitability. There were plenty of positives, including cloud momentum and customer demand.
• The US-based data streaming pioneer appears well positioned to outperform my estimates, and I see a path to profitability (non-GAAP) in CY24 at the earliest.

• The Sep 23 review results for the Hang Seng Tech Index were announced on Friday 18 August after the close.
• East Buy Holding (1797 HK) (formerly Koolearn) was an ADD. AAC Technologies Holdings (2018 HK) is a DELETE. 
• AAC is a significant flow event, and worth looking at. There are a few odds and ends too.

• We have seen a general easing in ADR premiums since end-July, coming down as global markets have fallen.
• TSMC’s premium is easing down from the highs of June.
• UMC and ChipMos ADR discounts appear to be bottoming given their historical range.

• The TSE and Government are pressuring low-PBR companies to DO SOMETHING to raise their PBR to >1.0x. The easiest way to do that is raise ROE.
• Raising R requires customers “agree” (buying more, paying a higher price, etc). Lowering E means buying back shares or paying big special dividends. That’s easier for a company.
• So buybacks have been increasing in number, and breadth, and to some degree in size. This insight describes the mechanics/details of how buybacks work in Japan.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• The IPO space saw a few pops this week, some were somewhat justifiable in SBFC Finance Limited and Concord Biotech while one was reminisent of the 2020-21 frenzy,  Vinfast. 
• In the placement space, the selldown for InterGlobe Aviation Ltd (INDIGO IN) materialised as expected but despite that the deal didn’t do much.

• BILI reported 2Q23 top-line in-line and non-GAAP net profit 7% better than consensus.  However, gaming revenue was weak, causing BILI to revise down its full-year revenue guidance.
• We believe e-commerce ads could become a new near-term driving force, but the rapid growth of game-related ads might fade post-Q3. 
• Also, the significant consolidation of ACG games could affect BILI’s future game performance. We maintain our US$ 12.3 TP and SELL rating.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Sino-Ocean Group
2. Adani Ports & Special Economic Zone
3. Road King Infrastructure
4. China Jinmao Holdings
5. Geely Auto

and more…

• Airalo, an e-SIM marketplace, has secured US$60 million in a Series B investment round from a clutch of investors, its Co-Founder Ahmet Bahadir Ozdemir said in a LinkedIn post.
• The investors participating in the round are Etisalat’s e& capital, Liberty Global, Singtel Innov8, Orange Ventures, Deutsche Telekom’s T.Capital, KPN Ventures, and Telefonica.
• Existing investors Antler, Rakuten Ventures, Peak XV Partners’s Surge, and I2BF Global Ventures also joined.

• Indosat (ISAT IJ) 2Q2023 saw the benefit of surging seasonal demand driving data usage coupled with its stronger network post the 3 integration. 
• The company saw a further increase in subscribers in 2Q2023 to over 100m, along with higher ARPUs, which rose by +8.6% YoY in 2Q2023 helping to improve returns.
• Indosat (ISAT IJ) continues to invest in maintaining the quality of its network as well as offering new value-added products to customers, boosting retention and profitability.

• MaxLinear’s acquisition of Silicon Motion has been abandoned, with both sides threatening arbitration. 
• It is difficult to understand why the acquisition would have resulted in the synergies projected by management.  The businesses are very different.
• Assuming the companies go different ways, expect for SiMo to perform as it has in the past.

• ADP delivered an all-around beat in the previous quarter.
• The HCM demand environment remained healthy, and the company’s worldwide sales and marketing team delivered exceptional results, exceeding expectations with double-digit overall growth in Employer Services and new business Bookings.
• With a focus on innovation, client service, and expanding its reach, ADP aims to capitalize on the growth opportunities in the HCM industry.

• STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
• Recently, I discussed the historical price and volume performance of STAR 50 rebalance events in Quiddity Primer for STAR 50 Index Rebalance Events. 
• In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the December 2023 Rebalance event.

• Sea (SE US) 2Q2023 results reflected some underlying slowdown but beneath the surface, the company’s core marketplace business saw accelerated growth, as it stepped up investment, and margins improved concurrently. 
• The company invested in live streaming, bringing on 1m influencers in 2Q2023, likely stemming the impact of TikTok. The gaming business showed meaningful signs of recovery QoQ in 2Q2023.
• Sea (SE US) grew its cash reserves in 2Q2023 to US$7.7bn signifying the success of its business model. The short-term sell-off looks overdone possibly triggered by talk of quarterly losses.

• Back on the 13 June, cybersecurity firm Tesserent Ltd (TNT AU) announced a Scheme with France’s Thales SA (HO FP). Thales is offering A$0.13/share, a 165% premium to last close. 
• The Scheme Doc has been despatched with Tesserent shareholders voting on the 18 September. Tesserent’s board (holding 9.23%) and the IE are supportive. Implementation expected on the 4 October.
• The Offer is also subject to FIRB signing off. New Zealand’s OIO gave the green light on the 18 July.

• State investors including China’s biggest government-backed chip investment fund agreed to pour 12.6 billion yuan ($1.7 billion) into a wafer production project in Shenzhen as the country strives to boost its domestic chipmaking capacity.

• Shanghai-listed China Resources Microelectronics Ltd. (CR Micro) said in an exchange filing Tuesday that its board has approved a plan for its Shenzhen subsidiary Runpeng Semiconductors to sell shares to several investors.

• The deal, still pending approval by shareholders, will expand Runpeng’s registered capital from 2.4 billion yuan to 15 billion yuan, with a capital injection from the National Integrated Circuit Industry Investment Fund Co. Ltd., known as the “Big Fund,” and four other government-backed investment funds.

• The growth rate of advertising revenue rose to 36% YoY in 2Q23 from 22% YoY in 1Q23.
• Bilibili continued to cut costs and expenses by dismissing employees in a game studio.
• The share price has fallen enough, and we believe it is time to Buy.

• Tencent reported 2Q23 revenue/non-IFRS net income (2.5%)/2.3% vs cons. Gaming was weaker than the street expected, while online advertising beat.
• We expect gaming growth will improve slightly while advertising growth will decelerate in 3Q. 
• We maintain BUY but cut TP to HK$ 402 to reflect online gaming weakness.

• BintanGo, which provides tools for digital content creators in Indonesia, has raised US$2.2 million in a seed extension round joined by Investible, Contents Technologies, and other investors.
• This brings its total funds raised to US$4.8 million so far. The startup closed a US$500,000 pre-seed round in June 2021 and a US$2.1 million seed round in April 2022.
• With the latest investment, BintanGo plans to extend its services to live commerce platforms, said CEO and co-founder Jason Lee in a statement.

CentralNic’s H123 results showed continuing revenue growth and margin expansion, with growth now being driven more organically and across both operating segments. Partnerships could be key to unlocking growth from underutilised brands, with management winning several notable deals during the period. Our operational forecasts remain unchanged, with increases in EPS and net debt reflecting the recent £30m uplift to the share buyback programme. We believe that the current rating does not reflect the company’s cash generative mode and diverse growth prospects.

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.

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