TMT/Internet

• We believe that Kuaishou’s outsized bottom-line beat for 1H23 was driven by stronger advertising and e-commerce business and cost reduction than the street expected.
• However, the market’s muted response suggests that investors are looking beyond 1H23 or even FY23 to price in a mature growth outlook.
• Kuaishou is trading at ~40x our FY23 estimate against 24% earnings CAGR from 2023 to 2025 which represents a hefty valuation premium over other China tech giants.

• 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, Concord Biotech Ltd (658823Z IN) and  SBFC Finance Limited (1547353D IN) opened their respective IPO bookbuilds this week.
• On the Placements front, India began picking up steam post-earnings seasons.

• ZHD reported F1Q/C2Q23 top-line, non-GAAP operating profit and non-GAAP net profit in-line, in-line and (32%) vs. consensus, respectively. Earnings miss was driven by wider tax expense.  
• ZHD’s B2C e-commerce platform GMV continued to decline, which we suspect is due to the continued impact of STAT, especially Shein.
• We maintain SELL and raise TP to JPY 340 due to improved ads-spending, but we expect the transient ad spend increase to be offset by loss of ecommerce customers. 

• Net of HKT Ltd (6823 HK), PCCW Ltd (8 HK) recorded negative EBITDA of HK$378mn in the 1H23.
• This is the largest six-month negative EBITDA figure since the EBITDA loss of HK$427mn in 2H22, and the third largest in the past decade. 
• PCCWs current discount to NAV is at an unsustainable 5%.

• In a surprising move, SK Inc confirmed the interim dividend amount (₩1,500) on July 26, and the ex-dividend date is set for August 10.
• As a result, this enables risk-free dividend arb trading in Korea as SK Inc carries single-stock futures, whose liquidity level is around 70% of the spot since July 26.
• The backwardation level has not yet pushed this arbitrage to a profitable level. Nevertheless, it’s still possible to observe the basis spread moving to a meaningful extent before the ex-date.

• Fadu (440110 KS) raised US$151m in its Korean IPO, after the deal was priced at KRW31,000/share, the top end of its IPO price range.
• Fadu is a South Korean fabless semiconductor maker mainly engaged in flash storage technology innovation. Its core products are Enterprise Solid State Drive (SSD) and Enterprise SSDs. 
• In this note, we will talk about the demand for the deal and other trading dynamics.

• Naver Corp (035420 KS) is planning to complete an IPO of Naver Webtoon on NASDAQ in 2024.
• Naver Webtoon generated sales of 548.9 billion won (up 54.5% YoY) and net profit of 68.6 billion won (up 17.1% YoY) in 2022.
• Naver Corp’s Contents unit which includes the Naver Webtoon business posted solid revenue growth of 40.1% YoY to reach 420.4 billion won in 2Q 2023.

• 3P, subscription, and AWS grew by mid to high teen while ad segment increased by 20%+
• The mix-shift from product to services in Amazon continues as services mix increased from ~40% in 2018 to ~60% in 2023.
• Let’s start more segment level discussion with AWS.

• Ideanomics had a strong quarter.
• Solectrac and Energica, in particular, demonstrated strong growth and demand in the agriculture and motorcycle markets.
• Ideanomics remains committed to its capital investment for future profitability, with an optimistic outlook driven by the increasing demand for the company’s products and services.

• Salmon, a consumer fintech company based in the Philippines, has secured a US$20 million debt facility from US emerging-markets specialist investment firm Argentem Creek Partners.
• This will allow Salmon to scale its lending operations across the country further.
• The fintech firm will expand its loan book, leveraging its existing point-of-sale and cash loan lending, and launch new products in the second half of 2023.

• The recent rally in growth stocks has supported the share price, but this trend may not last for long.
• In spite of the company’s strong pricing power, margins are under pressure and risks related to capital allocation remain.
• The company’s stock has performed well but this is not reflective of its actual business performance.

• SHEN Continued to add subscribers to the Glo Fiber service. The rate of subscriber growth has steadily increased with the expansion in the number of homes passed
• We are upgrading our rating to Neutral in reflection of the progress SHEN has made 
• SHEN is planning to reach approximately 500 thousand homes passed by 2026 from approximately 183 thousand currently

• Gimo, an earned-wage access player in Vietnam, has raised US$17.1 million in its series A round led by TNB Aura.
• Participating investors also include Y Combinator, Integra Partners, ThinkZone Ventures, AlteriQ Global, among others. 
• This series A round was closed just five months after the company secured US$5.1 million in the first tranche.

• Bringing yields from real-world assets on-chain is one of the major themes for DeFi, given the high interest rate environment.
• The natural extension to that would be bringing yields from real-world risks on-chain, a space that has not been explored extensively yet. 
• DeFi options protocols could look to cover these real-world risks as they seek further growth. 

• Intel Corporation delivered a positive result and managed an all-around beat last quarter, demonstrating ongoing financial improvement and validating its market approach.
• As per the management, Intel’s ability to successfully implement all of its process and product roadmaps is restoring consumer trust in the company.
• We give Intel Corporation a ‘Hold’ rating with a revised target price.

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks. The Asia Monthly is intended to broaden investors’ understanding of the Asian USD high-yield market.

• Singapore-headquartered climate-tech startup Zuno Carbon has secured US$2.5 million in seed funding led by Wavemaker Partners. SEEDS Capital and Blue InCube Ventures also participated.
• This brings the total funds raised by Zuno Carbon in the past 12 months to over US$3 million and follows a pre-seed round in June last year.
• The money will be used to ramp up Zuno Carbon’s sales and marketing efforts, launch new features to simplify compliance and catalyse decarbonisation with real, tangible actions.

• Strategic shifts continue to reap rewards–IDHoldings’Q1 FY3/2024 performance demonstrated a continuation of the robust results experienced in FY3/2023, with DX remaining the core demand driver.
• Business segment sales in System Management, IT Infrastructure, and Cybersecurity, Consulting, and Training grew strongly YoY, demonstrating that the company’s efforts to remodel its business have been successful to better support and serve its customers.
• We have kept our earnings estimates unchanged for FY3/2024 and beyond, with the expectation that high-margin DX demand will continue, driving continued profitability improvements in the business.

• Mastercard managed to exceed analyst expectations in terms of revenue and earnings.
• The broader labor market is still robust, with pay growth included, and credit and savings continue to support consumers.
• They introduced Mastercard Receivables Manager with Billtrust on the supplier side and MasterCard Multi-Token Network in the blockchain.

• T-Mobile delivered a mixed set of results for the previous quarter, with revenues below the analyst consensus.
• Additionally, free cash flow increased and the free cash flow to service revenue margin was the greatest among their competitors year to date.
• The company also enjoyed a significant quarter for T-Mobile for Business, with its lowest phone churn and best-ever phone net additions.

• Itochu Corp (8001 JP) today announced it had agreed with 61%-owned Itochu Techno Solutions (4739 JP) sub to take over CTC and squeeze out minorities. 
• The stock released earnings mid-day, somehow, but not on TDNet until post-close. The stock jumped in the last two hours. The Tender Offer is at a 10% premium to close.
• Growth will be up, and there are lots of financial assets and net receivables so this is 8+x March 2025. Itochu is not overpaying. But there will be no counter.

• Itochu Techno Solutions (4739 JP) has recommended Itochu Corp (8001 JP)’s tender offer of JPY4,325 per share, an 18.7% premium to the undisturbed price (1 August).
• The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 5.43% ownership ratio.
• The minimum acceptance condition requires a 14% minority acceptance rate. This is doable as the tender price is attractive and equals the 20-year share price high.

• E Guardian Inc (6050 JP) has announced a partial tender offer and third-party allotment with Change Inc (3962 JP). CHANGE will subscribe for 1.5 million shares at JPY2,099 per share.
• The tender offer is for a minimum of 3.7 million and a maximum of 4.3 million shares at JPY3,000 per share, a 42.9% premium to the undisturbed price.
• The tender offer is reasonable. The minimum acceptance condition requires a 37% minority acceptance rate. A 100% minority participation rate implies a minimum proration is 42.39%. 

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
• Stocks mentioned in this regular insight include Flat Glass (6865 HK), Arts Optical Intl Hldgs (1120 HK), and Sky Light Holdings Ltd (3882 HK).

• We expect Hua Hong to report C1Q23 top-line and non-IFRS net income in-line and (24%) vs. cons., respectively, missing mainly due to one-time costs. 
• Hua Hong’s post-A share IPO valuation is cheap at 0.7x P/B, but we expect that weakening industrials demand and a slow recovery to hamper shipments.
• We maintain BUY but cut Hua Hong’s TP to HK$ 34 reflecting lowered wafer shipments estimates for FY24/25. Our TP implies 15x FY24 PE.

• Halodoc, the Indonesia-based healthtech firm, raked in US$100 million in series D funding in a round led by returning investor Astra Digital International, according to a statement.
• This boosts Astra’s total investments in the company to US$135 million. In 2021, the local conglomerate also led the US$80 million series C round of Halodoc.
• With the new capital, Halodoc has raised at least US$258 million, according to Tech in Asia data.

• Today, Change Inc (3962 JP) (30%-owned by SBI Holdings (8473 JP)) announced a Tender Offer to buy 32-36.9% of E-Guardian, followed by a third-party placement to get them to 45-49%.
• Small cap E-Guardian does internet services support, ad processing, cyber security (their fastest growing segment) and top line has been growing.
• The partial offer is big enough to matter, and up 50%. It is worth a look for people who like small cap special sits.

• Singapore-based startup Bunker, which provides a modern financial analytics platform for SMEs, has secured over US$5 million over two funding rounds.
• The investors include January Capital, Alpha JWC, GFC, Northstar Group, Money Forward, Alpine Ventures, and Patamar Capital.
• Angel investors, namely Chris Lin, Rosemary DeAaragon, Tiger Fang, Gaurav Gupta, Christian Sutardi, Warren Tseng, Jonathan Wong, Nakul Malhotra, and Shaun Hon, also participated.

• Q2’23 revenues of $12.9 billion, down 15% YoY but up ~10% QoQ and handily beating the guided midpoint of $12 billion.
• Q3 outlook for $13.4 billion at the midpoint, up 3.8% sequentially
• Mr Gelsinger envisages a centrino-like era of AI-enabled PCs, starting with Meteor Lake in H2’23. Is this realistic?

• Teradyne delivered an all-around beat in the previous quarter.
• The company’s performance met expectations, but segment-wise, the test business showed more strength, while robotics faced challenges with softer demand.
• Teradyne also recently introduced the Teradyne Archimedes analytics solution, an open architecture that brings real-time analytics to semiconductor testing.

• Broadband provider Superloop Ltd (SLC AU)  has made an indicative Offer, by way of a Scheme, for cloud communication software outfit Symbio Holdings (SYM AU).
• Under the proposal, Symbio shareholders would receive A$1.425 (cash) and 2.14 new Superloop shares for each Symbio share held, for an implied price of A$2.85/share, a 20% premium to undisturbed.
• A four-week period of reciprocal exclusivity has been agreed to further progress the proposal.

• Symbio Holdings (SYM AU) has disclosed a non-binding indicative proposal from Superloop Ltd (SLC AU) at A$1.425 cash per share and 2.14 SLC shares per SYM share. 
• The implied offer price of A$2.85 per share is a 19.7% premium to the undisturbed price of A$2.38 per share. A 4-week reciprocal exclusivity period starts on 1 August.
• The offer is not close to being a knockout bid. Superloop states that it will progress the transaction on “a disciplined basis“, suggesting some risk towards a binding proposal.

• ATNI is in the last stretch of its capital expenditure spending plan and subscriber count is beginning to support the larger and faster network
• ATNI has grown the number of high-speed broadband and mobile customers, which is fueling the efficiency in the operating model.
• The transition away from wholesale wireless roaming to network management should further improve the operating structure of the business.

• Lam Research delivered a positive result and managed an all-around beat in the last quarter.
• Additionally, Lam Research experienced a decline in memory spending, particularly in the NAND segment, impacting its revenue concentration.
• Lam Research also announced its plans to advance India’s semiconductor workforce development goals.

• Fiserv delivered a positive result and managed an all-around beat in the last quarter.
• With the continued success of their market-leading cloud-based operating system, Clover, and the unified commerce offering, Carat, Fiserv expects future growth acceleration.
• Other growth areas include digital payments and digital banking, expansion in Latin America, and opportunities presented by the cloud-native core banking system, Finxact.

• Last week the best show in semiconductors was the Maxlinear and SIMO merger news. I will catalog the entire saga and outline my thoughts on where things go.
• Before we talk about SIMO, let’s talk about Maxlinear’s acquisitions. MaxLinear acquired an asset in April 2020 that was almost the perfect fit.
• As Intel shed assets, they sold their home gateway platform, which makes the semiconductors that go in-home modems and routers.

• MicroStrategy is currently overvalued and has a potential downside of up to 75%, making it an unwise investment for Bitcoin exposure.
• Analyst at TD Cohen makes a bullish call on MicroStrategy as a Bitcoin play, but author disagrees.
• MicroStrategy (NASDAQ:MSTR) is set to release its second quarter earnings.

• PingSafe, a Singapore-based cybersecurity firm, has raised US$3.3 million in a seed funding round led by Surge, the scale-up program of Peak XV Partners (formerly Sequoia Capital India & SEA). The round also saw participation from Tanglin Ventures and several angel investors.
• The company will use the fresh funds to expand its business across Southeast Asia and North America.
• Founded in 2022 by CEO Anand Prakash and CTO Nishant Mittal, PingSafe provides a cloud security platform that protects companies’ data and apps from cyber attacks.

• AT&T delivered a mixed set of results for the previous quarter, with revenues well below analyst expectations but managed an earnings beat.
• The last quarter for AT&T showcased the company’s strong execution of its strategic vision, resulting in continued growth and progress toward its objectives.
• Their fiber business has also succeeded, substantially increasing AT&T Fiber net adds, driving higher penetration rates and broadband revenues.

• The 2023 Version of JAPAN PASSIVE: Who Owns What? where we break down the major (and minor) passive tracking indices and which category of investor owns how much of each. 
• Even if you do not “play” index changes, understanding impact is important. Advantest is up 100% in 3mos. Existing passive ownership and new passive buying were crucial to that performance.
• Understanding the nature of the ownership and flows is crucial to understanding how to trade certain stocks in Japan. 

• The review period for the Nikkei 225 (NKY) September rebalance ended yesterday. There should be three index changes, potential stepwise inclusion, no Fast Retailing capping and a big funding trade.
• There appears to be decent positioning on the potential adds, while it is the close adds that are spiking along with a big increase in traded volumes.
• If the three changes are on expected lines, estimated one-way turnover at the rebalance is 2.01% resulting in a one-way trade of JPY 461bn (US$3.24bn). 

• Apple will report its earnings on August 3rd, 14:00 PDT. We highlight two potential trades into the Apple earnings event.
• Quanta Computer has massively outperformed Apple due to investors latching on to its AI-server growth story. One can consider to Long Apple / Short Quanta into the Apple earnings event.
• Hon Hai, Flexium, and Zhen Ding have all lagged Apple’s shares yet generate significant revenue from Apple. One can Long a basket of the three into Apple’s earnings.

• Wave of earnings this week — AMD, Qualcomm, Apple internationally… and Delta, Advantech, Innolux, Winbond, Realtek, plus others in Taiwan.
• We visited Micron’s A3 fab in Taiwan; SK Hynix gives strongest comments yet on Memory turn-around; Long Nanya Tech on DRAM turn-around.
• Intel results readthrough: PC cycle improving and could be accelerated by AI-demand… We continue to see Elan Micro as a laggard play on rallying PC names.

• We expect SMIC to report C1Q23 top-line and non-IFRS net income 2% and 16% vs. consensus, respectively.
• We suggest SMIC’s ability to supply sanctioned firms with 14/7nm nodes provides it with significant pricing power. We expect the decline in SMIC’s wafer ASP to slow.
• We expect overall 2H demand to improve due to (1) normalizing fabless inventory levels, and (2) stabilized smartphone demand. We maintain BUY rating and raise our TP to HK$ 26.

• High earnings visibility – Q1 FY3/2024 results indicate a robust start to the year with record-high quarterly sales, orders, and backlog.
• We believe the company exhibits robust earnings visibility, which can be attributed to its adeptness in delivering high-value-added services within a highly competitive market, with its high-quality workforce and sufficient capacity.

• Aiming for long-term sustainable growth –whilst strong results are appealing, we are encouraged by the following which we believe will allow the business the sustain long-term growth

MotorK reported double-digit H123 revenue growth, with committed annual recurring revenue (ARR) and a pipeline of contracts providing visibility for H223. The migration of acquired Dapda customers to the SparK platform drove a substantial rise in average contract value (ACV) and creates opportunities if this success can be replicated with other acquisitions. Short-term cost impacts drove higher year-on-year losses in the period, which has affected our FY23 profit forecasts, but not our FY24 assumptions.

• About a year ago, right as crypto trade volumes started to slump in the aftermath of the Celsius and Terra collapses, Binance vastly expanded its zero-fee trading promotions to 13 BTC pairs.
• This practice, though not new, had never been implemented on such a large scale.
• However, just nine months later the exchange decided to reverse this strategy and adopt a more selective approach.

• Today, with Q1 earnings, which I found less than great, KDDI Corp (9433 JP) announced a Tender Offer Buyback to repurchase up to 64,102,500 shares for up to ¥250.03175bn.
• The Tender Offer – at ¥3900/share vs Last at ¥4,271/share (designed for cross-holding unwinds) – goes from 31-July through 28-August. It fills the 83.3% of the buyback programme announced 11-May.
• Toyota Motor (7203 JP) has announced it would sell ¥250bn of shares into this Tender Offer. This is less interesting than it looks. The whole thing is.

• The review period for the September rebalance ends today. The changes could be announced on 25 August with the implementation taking place after the close on 8 September.
• The upcoming launch of the STAR100 Index could result in the index committee continuing to use a 6-month minimum listing history resulting in two changes to the index.
• One way turnover is estimated at 2.3% resulting in a one-way trade of CNY 2,658m. The impact on the deletions will be much larger than that on the inclusions.

• Intel’s latest results imply a potential bottoming of its business & nascent turn-around; however the greater take-away is that the PC industry is heading into a major AI-driven up-cycle.
• PC industry inventories are now “healthy” and Intel’s Client Computing segment (PCs) showed the strongest QoQ revenue growth. Management is guiding for continued improvement next quarter.
• Edge AI will drive a major upgrade cycle for PCs worldwide and Intel’s new Meteor Lake chip could be a catalyst. Invest ahead of AI PCs having their “ChatGPT Moment”.

• TSMC’s premium is trading at a historically high level after its recent results release, while ADR short interest has remained subdued.
• ASE’s ADR premium is at one of its highest levels in history, appears precarious in our view.
• ChipMOS premium near middle of range; the company will report results this week.

• Delta Thailand has surged 22% in NT$ terms since our last piece, while Delta Taiwan rose only 6%. We see two potential trades here.
• Delta Thailand reported its results on 27 July and beat expectations by 22%. Delta Taiwan will release its results on August 1st with its analyst call at 15:00 Taiwan time.
• 1) Potential Long Delta Taiwan event trade into Taiwan earnings 2) Long Delta Taiwan vs. Short Delta Thailand based on the relative prices reverting back to their end June ratio.

• Unisound AI Technology, a Beijing-based AI unicorn, filed to go public in Hong Kong. I used a diverse peer group of domestic AI companies to come up with IPO valuation. 
• From a peer group perspective, I arrived at an IPO valuation close to ~RMB12b (or ~$1.7B), using a ~15x EV/CY22 Revenue to my 2023 revenue estimate of RMB780m (+30% y/y).
• However, I believe SaaS valuation multiples may appear rich for the stock, keeping in mind non-recurring revenue and the high hardware cost in the total cost of sales and services.

• Cadence exceeded the revenue and earnings expectations of Wall Street for the second quarter of 2023, resulting in year-over-year 14% revenue growth and 19% non-GAAP EPS growth.
• In terms of Generative AI, the customers of Cadence are adopting its chip, Generative AI portfolio, system, board, and package as they are achieving exceptional productivity benefits and quality results with these solutions.
• We give Cadence Design Systems a ‘Hold’ rating with a revised target price.

• We visited Micron’s advanced A3 semiconductor fab in Taichung, Taiwan last Friday. Micron is committed to expanding leading edge capacity in Taiwan.
• Memory names rallied sharply at the end of last week after SK Hynix affirmed that 1Q23 was the cycle bottom and AI-driven DRAM demand was accelerating its recovery.
• We reiterate our Nanya Long trade and believe it can now run further given improving industry signals. Nanya presents pure-play exposure to a DRAM turn-around accelerated by AI demand.

• ServiceNow managed to exceed the revenue and earnings expectations of Wall Street.
• It beat expectations for every key performance metric.
• Also, it has introduced an innovative ServiceNow AI Lighthouse customer program along with Accenture and NVIDIA.

• Meta Platforms managed to exceed analyst expectations in terms of revenue as well as earnings.
• On Facebook, engagement trends have been stronger than the company’s management anticipated.
• We give Meta Platforms a ‘Hold’ rating with a revised target price.

• SK Hynix’s Q2’23 revenue increased ~50% QoQ with bit shipment growth of ~35% for DRAM, ~50% for NAND
• AI-Driven demand for DDR5 & HBM pushed DRAM QoQ ASP growth into positive territory for the first time in 9 months. 
• But it’s still stormy weather ahead as mainstream DRAM, along with NAND ASPs continue their downward slide

• NTT (9432 JP) will likely buy back more shares than previously expected as the government sells shares down. Buy dips vs peers KDDI and Softbank Corp. This is a long-term tilt.
• There are some doubts over the fate of Delta Electronics Thai (DELTA TB)‘s SET50 membership, at present, but it should escape deletion in December 2023. 
• Don’t punt Fortescue Metals (FMG AU) on the off-chance of a change of control in the wake pf the Forrest split. If anything, there might be a leakage of shares.

• 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, the coming week will see Cinema XXI listing.
• Given that we are in the middle of earnings season, there were no new placements this week.

• Global Fund exposure in NVIDIA Corp (NVDA US) has moved to record levels after a doubling of the share price this year.
• New positions from UniNachhaltig Global, JP Morgan Global Focus  and BNY Mellon Global Equity (3.36%) were among a total of 14 funds who opened exposure to NVIDIA Corp in 2023.
• Growth and Aggressive Growth funds are at maximum levels of ownership, whilst Value managers are showing some hesitancy here.

• The SoftBank share price rally is, in our view, based on optimism around the Arm IPO, the Yen’s relative weakness and recovering share prices of public companies in the portfolio
• Nvidia’s emergence as a potential anchor investor in the Arm IPO has boosted SoftBank shares, yet there is still a big disparity between groups in terms of Arm’s potential valuation
• Aside from a recovery in public tech companies’ shares, Yen weakness has supported SoftBank’s asset values; monetary policy moves now indicate the prospect of a stronger Yen versus the USD

• UK Fund exposure in Softcat PLC has reached new highs.  The percentage of UK funds invested in Softcat now stands at a record 17.3% with average holding weights of 0.21%
• Softcat PLC moves to the 5th most widely held Technology stock in the UK, sharing similar ownership characteristics to Spirent Communications, Halma PLC and Oxford Instruments.
• With Softcat approaching the boundaries of FTSE 100 inclusion, it’s not hard to envisage investment levels moving higher from here.

SK Hynix has reported weak Q2/23 results as expected. While the Q2 results registered a recovery on account of an improvement in the memory semiconductor market, the recovery was from a very low base in Q1. Performance remained abysmal compared to last year, with revenue falling by half y-o-y and EBITDA plunging 92%. The financial risk profile continued to be very weak, with large negative FCF, fast-increasing debt and soft earnings.

We believe there is a high level of optimism in AI-related companies, including SK Hynix. Despite the weak results (with some signs of recovery from a low base), the company’s share price surged yesterday.

We maintain our forecasts. Considering the industry downturn, we expect FY 2023 EBITDA to decline c. 80-85% y-o-y, with significantly negative FCF. Moreover, debt should spike c. 50% to cover the negative FCF and fund the USD 2 bn payment for Solidigm. This will likely bring Debt/EBITDA to stressed levels (e.g. 7-8x) at year-end. That said, we expect improvement from FY 2024, on the back of an industry recovery.

We see a high likelihood of downgrades by the agencies in the next 1.5 years. SK Hynix is rated Baa2 (negative)/BBB- (negative)/BBB (stable) by Moody’s/S&P/Fitch. We expect the company to hit the negative rating triggers, given the industry decline and debt-funded acquisition of Solidigm.

• Impinj warned revenue would decline sequentially in the third quarter due to weaker than expected demand from retail apparel customers. The shortfall started  towards the end of the second quarter
• Impinj increased inventory in the first quarter and more so in the second quarter. Inventory within the channel has also increased compared to the first quarter
• Impinj’s stock continues to price the downward revenue scenario as a short-term event. Previous downturns have lasted more than one quarter

• SAP delivered a mixed set of results in its most recent result with revenues above Wall Street expectations but below-par earnings.
• RISE with SAP and GROW with SAP have been well-received offerings, driving significant cross and upsell opportunities across their portfolio.
• SAP’s approach with SAP Business AI is unmatched in the industry, delivering relevant, reliable, and responsible AI solutions to customers, with plans to introduce new premium RISE offerings and an uplift of up to 30% in the fall.

• Taiwan Semiconductor managed to exceed analyst expectations in terms of revenue as well as earnings.
• Despite the cyclical downturn, the company continued investing in R&D to support the development of its N3 and N2 technologies.
• We give Taiwan Semiconductor Manufacturing a ‘Hold’ rating with a revised target price.

• Texas Instruments delivered a positive result and managed an all-around beat last quarter.
• The decline in gross profit from the prior year was principally brought on by reduced revenue, higher capital expenses, and the shifting of LFAB-related costs to the cost of revenue.
• For the third quarter, Texas Instruments’ team anticipated the sale to be in the $4.36 billion to $4.74 billion range, with $1.68 to $1.92 earnings per share.

• Visa managed to exceed analyst expectations in terms of revenue as well as earnings.
• The quarterly payments volume in the U.S. increased mostly due to a slower inflation rate.
• With the introduction of Visa Business Credit for their 28 million client base, PagSeguro, a significant Brazilian fintech client, will expand in the commercial area.

• Microsoft delivered an all-around beat in the most recent quarterly result.
• Microsoft Cloud reached $110 billion in yearly revenue, with Azure accounting for more than 50% of the total.
• Customers are moving their current workloads to Azure and investing in new workloads, causing Azure to gain market share.

• On 27 July, SK Telecom announced a sizeable share buyback worth 300 billion won (including shares cancellation of 200 billion won) and quarterly dividend of 181 billion won. 
• SK Telecom will pay a quarterly DPS of 830 won, which represents 1.8% of its current price of 45,900 won. 
• SK Telecom is trying to boost its share price which has been negatively impacted by the regulators’ pressure to cut telecom tariff rates and also increase competition. 

• The chances of SKT’s inclusion in the August MSCI Review seem slim. SKT narrowly missed meeting the 15% threshold on both Day 1 and Day 2 during this review.
• SK Telecom’s buyback completion can be accelerated to align with the MSCI November Review period, just like the previous case of KT Corp back in April.
• The estimated size of passive funds flowing into SKT is approximately ₩160 billion, which is expected to be around 5.5 times the average daily trading volume (ADTV).

• We expect Shopee’s competitive landscape deteriorated in 2Q23, due to increased pressure from TikTok/Lazada in ASEAN, Coupang in Taiwan, and Shein in Brazil. Temu is a large swing factor.
• Shopee has been pushing live streaming and its full-management (or consignment) mode. In our view, these will drag down its profit margins and may not be effective in gaining share.
• We estimate 2Q23 revenue and non-GAAP net income are 2.5% and (24%) vs cons. We have revised down Shopee’s growth expectations for the next 3 years.

• Google, Microsoft, and Facebook reported earnings.
• Let’s discuss their capex plans and what that means for our new data center champion, Nvidia.
• I think it’s pretty straightforward that Nvidia has revenue beats for the foreseeable future.

• Elon Musk has killed Twitter’s last and greatest value by renaming it X. As in, fill in whatever the heck it is now. 
• Twitter’s strong, globally recognized brand worth had been worth much as $20 billion—its last and only valuable asset.
• Incredibly, it gets worse. Hundreds of other companies already own rights to the X name and logo—including META and Microsoft. 

• LGES provided a lower sales guidance in 3Q 2023 due to slower sales in Europe. LGES expects its sales in 3Q 2023 to decline in a QoQ basis.
• The share prices of the top 12 rechargeable battery names in Korea are down on average 13.9% in the past two trading days.
• We believe that the overall sentiment on the rechargeable battery sector in Korea has started to turn sour which could have a further negative impact on companies such as LGES. 

• The board of SoftwareONE Holding (SWON SW) rejected on 24 July a revised CHF 19.50-20.50 offer from Bain Capital and said it began a strategic review to seek the best value.
• CHF 19.5 represents a 40% premium, Gross spread to the low point of the range is 4.2%. 0x EV/NTM EBITDA and 19.5 Fwd P/E.
• This could trigger upwards revisions and would justify the Board asking for a higher offer. I’d hold on to the shares as Bain Capital could increase the offer a bit.

The Asia HY Trade Book for July 2023 includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds across Asia (ex-Japan) HY and crossover credits.

• Facebook exceeded 3 Bn MAU for the first time, and MAP is now approaching 4 Bn.
• DAU/MAU engagement looks steady across all regions.
• While ARPU exhibited considerable strength, please note the material weakness in YoY comparison.

• Verizon’s share price continues to fall amid speculations and low interest in slow-growth businesses.
• The business is stabilizing and on-track to deliver much needed top and bottom line growth, according to the company.
• No matter how you look at it, being bullish on Verizon Communications Inc. (NYSE:VZ) takes a real contrarian view with ability to endure pain and keep a long-term focus.