TMT/Internet

• Foreign investors have been selling SK Telecom (017670 KS) for over a year now. That has taken foreign room from near zero to close to 15% now.
• That could mean index inclusion for SK Telecom (017670 KS) with timing dependent on when the 15% foreign room threshold is crossed.
• SK Telecom (017670 KS) has performed in line with KT Corp (030200 KS) but trades at higher valuations on most parameters.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads  111 Inc (YI US), Chindata Group (CD US), ENM Holdings (128 HK), Estia Health (EHE AU), Poly Culture Group Corp H (3636 HK), Costa Group Holdings (CGC AU).
• Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Toyo Construction (1890 JP), Kenedix Residential Investment (3278 JP), Penguin International (PBS SP), Challenger Technologies (CHLG SP). 

• 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 – Tryt Inc (9164 JP), Alibaba (ADR) (BABA US)‘s Cainiao & Cloud Intelligence Group, J&T Global Express (1936374D CH) IPOs & Socionext (6526 JP)‘s secondary placement.
• Event-Driven developments – Chindata Group (CD US), IMAX China Holding (1970 HK), Shougang Fushan Resources (639 HK), Invocare Ltd (IVC AU), Musgrave Minerals (MGV AU). 

• TSMC: 9.9% premium, continues to stay above one standard deviation from historical median… Earnings coming this week.
• UMC: 0.0% ADR premium… Trading on par with local shares… Earnings next week.
• Chunghwa Telecom: -0.8% discount represents relatively deep discount vs. history.

• Shift reported 3QFY08/2023 results on Friday and the company’s revenues increased 34.2% YoY and OP more than doubled during the quarter. Both revenue and OP beat consensus estimates.
• Conclusion of unprofitable projects and expansion into upstream services have helped earnings to expand, and we expect full-year earnings to comfortably beat guidance and consensus estimates.
• Shift’s share price moved up by 19% following earnings announcement and has been up more than 39% YTD, and we would recommend holding on as there is further upside.

• Since mid-June, spreads have generally widened across our liquid universe (10 have widened, 8 widened, 1 at same level).
• Recommended trades long ordinary / short preferred shares: Fuchs, Henkel, Schindler, SSAB Svenska Stal.
• Recommended trades long preferred / short ordinary shares: Carlsberg, Ericsson, Media-for-Europe, Sixt, VW, Grifols, Atlas Copco.

• 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

• Founded in 2012, Unisound AI Technology is a Beijing-based pioneer in Artificial General Intelligence (AGI). The company offers easy-to-deploy AI products and solutions in China. 
• Unisound AI Technology seeks to raise capital for R&D activities, international expansion, and general working capital purposes. The company chose CICC and Haitong to tap capital markets with HK IPO. 
• I like growing brand recognition, in-house 60B-parameter LLM UniGPT, high growth in the Smart Life segment, and the opportunity to sell self-developed proprietary AI chips in China.

• ALT’s IPO price has been determined a 25,000 won, which is 22% higher than the high end of the IPO price range.
• A total of 1,937 institutional investors participated in the IPO offering with a competition demand ratio of 1,836 to 1.
• Our base case valuation of ALT is market cap of 299 billion won or 33,365 won per share, which represents 33% higher than the IPO price range of 25,000 won.

• Kinatico Ltd (ASX:KYP) is a ‘Know Your People” regtech company providing workforce compliance monitoring and management technology and services.
• KYP has announced in a flash update that it expects to report FY23 NPAT greater than $0.2m, marking its first profitable full year since listing.
• This is ahead of our FY23 NPAT forecast of $0.14m. 

• Canon Inc (7751 JP) announced a second buyback this fiscal year on 15 June. As discussed here previously, Canon buybacks are short, sharp, and sweet. 
• The recent one should be done imminently (15 May start ended 13 July). 16 June start? (Note: Canon reports buyback results at 3pm local time, and did not report today).
• This time we have a double-setup with buyback ending and a large TOPIX sell on Canon on 28 July. 

• Ant’s buyback valuation of $79bn is in line with market expectation
• While 40% loss is deep for the latest round investors, earlier investors are still in the money
• Alibaba is expected to record a profit of $18bn if it decided to join the buyback

• Nanya Tech management extrapolated on their recent results call that they believe 2Q23 was the bottom for the DRAM cycle.
• We’ve updated our Nanya Tech financial model and estimates; we still see a short-term trade back to Nanya Tech’s mid-June high. However, Elan Microelectronics is a Long with more edge.
• While Nanya’s comments indicated a more delayed recovery for Memory than Micron’s recent guidance, overall the industry for Micron, SK Hynix, and Samsung appears to be turning a corner.

• We estimate Baidu’s ads revenue growth in 2Q23 will be 10.8% YoY. We largely cut our forecast of 3Q23’s ads revenue growth from 14.7% to 7.1%.
• We lower Baidu’s core other revenue growth in 2Q23 from 18.0% to 9.0% YoY. Baidu’s smart transportation AI cloud business has been affected by the contraction in local government expenses.
• We expect Baidu’s 2Q23’s rev./non-GAAP net income to be (2.3%)/ (1.9%) vs cons, also cut the TP to $162, which implies 16.5X PE in 2023.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We view Millicom’s ESG as “Adequate”, with a “Strong” score for Governance, but “Adequate” scores for the Social and Environmental pillars. Controversies are “Immaterial” and Disclosure is “Strong”.

• Peloton Interactive delivered a mixed set of results in its most recent result, with revenues above Wall Street expectations but below-par earnings.
• Their management believes they are in a considerably better situation from the cost structure standpoint.
• We give Peloton Interactive, Inc. a ‘Hold’ rating with a revised target price.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We view Globo’s ESG as “Weak”, despite its “Adequate” score in quantitative terms. The Social and Governance scores are “Weak”, while the Environmental score is “Adequate”. Controversies are “Immaterial” and Disclosure is “Weak”.
• Globo Comunicacao e Participacoes SA (Globo), privately owned and controlled by the Marinho family, is the largest media group in Brazil. It controls the country’s leading broadcast TV network and its pay-TV programmer, as well as a diversified group of publishing companies and Internet content providers.

• Zebra delivered a solid result and managed an all-around beat in the last quarter.
• Zebra adjusted its sales outlook due to softer demand in certain markets while remaining financially strong and actively managing its supply chain.
• Zebra observed cautious spending behavior among enterprise customers, resulting in a shift from large orders to smaller ones.

• Broadcom remains as one of the best-positioned semiconductors stocks.
• The recent rally, however, is factoring too optimistic scenario for the future and creates a downward risk for the share price.
• Profitability would continue to experience strong tailwinds, but this is unlikely to bring significant rewards for shareholders.

• Pure Storage managed to surpass the revenue expectations as well as the earnings expectations of Wall Street.
• Q1 operating earnings of approximately $20 million exceeded expectations, despite higher-than-expected salary expenditures and their first sales kickoff event since 2020.
• Besides, despite the positive initial reception to FlashBlade//E, Pure Storage expects a modest revenue increase in the second half of the year.

• Fadu (440110 KS) is looking to raise up to US$147m in its Korean IPO.
• 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 our previous notes, we looked at the company’s past performance and undertook a peer comparison. In this note, we talk about valuation.

• The S&P500 E-Mini (ES) is approaching a DAILY resistance level at a point in time where it could perform a quick reversal – a SHORT trade opportunity.
• Watch the 4483-4525 price area, today is the 3rd consecutive day up, the reversal could begin in that area, today or tomorrow.
• The probability for a quick reversal, after 3 days up, in the 4483-4525 price area, is between 67% to 79%, depending on the resistance levels reached.

• On 3 July 2023, the Ministry of Commerce of China announced that it will restrict exports of gallium and germanium starting next month.
• YMC is one of the key beneficiaries in Korea of China’s restriction of gallium exports. YMC makes silicon carbide which can be a substitute material for gallium.
• YMC’s valuation is relatively cheap. Given that YMC currently has a market cap of 150 billion won, this would represent P/E of 7.3x (using 2022 net profit). 

• My read of Bain’s Offer last month, was a tactic to flesh out a competing Offer.  It seemed unlikely Bain would get the regulatory approval to take Chindata (CD US) private. 
• Now state-backed China Merchants Capital Holdings International Ltd. has made a non-binding offer of $9.20/ADS, compared to $8/ADS from Bain.
• This Offer is indicative. But an SOE taking over data centres makes a lot of sense. 

• Ant Group Co. Ltd. has offered to buy back some shares at a whopping 70% discount to the unrealized valuation for its ill-fated IPO, shortly after regulators hit the fintech giant with an almost $1 billion fine.
• Ant Group announced Saturday that it had proposed to repurchase as much as 7.6% at a price that values the company at approximately 567 billion yuan ($78 billion).
• The offer represents a roughly 40% discount to the approximate 960 billion yuan figure achieved in Ant Group’s last fundraising round in 2018, and is around 70% cheaper than the 2.1 trillion yuan valuation touted in its planned 2020 IPO.

• On 10 July, it was reported in the Hankyung Business Daily that Posco DX (022100 KS) could switch its listing from KOSDAQ to KOSPI by the end of 2023.
• One of the key reasons for the change in the listing venue from KOSDAQ to KOSPI is that POSCO Group believes this could lead to improved valuations for the company.
• We believe the valuations of Posco DX have become too high. Therefore, we have a Negative View of Posco DX at current prices. 

• Rorze’s stock price has risen 35% since we became bullish on the stock in August
• Q1 sales and operating profits big miss versus analyst consensus due to slowing semicon capex cycle
• We would be buying into any stock weakness with an eye on recovery in 2H23 into 2024

• Fadu (440110 KS) is looking to raise up to US$147m in its Korean IPO.
• 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 our previous notes, we looked at the company’s past performance. In this note, we talk about peer comparison.

• NTGR has spent the last two years adjusting to a consumer spending environment post pandemic and should begin to show greater benefits of the new business strategy 
• The inventory rebalancing at NTGR’s main retailers is mostly sorted out and NTGR has been putting greater emphasis on its super premium wireless systems
• NTGR’s ability to generate free cash flow this year should improve investor sentiment in owning the stock.

• We expect that Tencent’s 2Q23’s rev./non-IFRS net income to be 0.2%/5.2% vs cons. 
• We raise Tencent’s ads growth in 2Q23 from 18.2% to 28.4% YoY per our recent checks with ads agencies. 
• There is an increasing possibility that “DNF Mobile” could be launched in the next several quarters. We raise the TP to $450, which implies 20.1X PE in 2023.

• SS&C Technologies delivered a mixed set of results for the previous quarter with revenues above analyst expectations but below-par earnings.
• With a focus on innovation and investment in key areas, SS&C Technologies saw growth in various segments, including alternatives, global investor and distribution services, retirement, and the Institutional and Investment Manager segment.
• SS&C Technologies’ strong financial performance and customer satisfaction are anticipated to position the company as a trusted partner in the financial services sector.

• SunPower delivered a mixed set of results for the previous quarter with revenues above the analyst consensus estimates.
• Despite challenges like unfavorable weather conditions in California and increased costs, its management remains confident in achieving its financial goals.
• SunPower added many new customers, with revenue experiencing notable growth driven by price increases.

• Since the announcement of the US$1.9 billion secondary placement, Socionext (6526 JP)’s shares are down -25.0% from the undisturbed price of JPY21,950 per share (5 July).
• So far, Socionext’s shares have mostly followed the pattern of previous large placements. Investors participating in previous large Japanese placements tend to secure positive returns.
• The offering will likely be priced on 11 July. Due to the steep share price decline, Socionext is trading at an undemanding multiple compared to global SoC peers.  

• One third of the way through the review period, we forecast 10 changes for the ChiNext Index (SZ399006 INDEX EQUITY) and 5 changes for the ChiNext 50 Index in December.
• Passive trackers are estimated to trade around +/-0.5 days ADV on most of the potential adds/deletes, though there are some deletes that will have over 1 day ADV to sell.
• The potential inclusion to one or both indices have outperformed the potential deletes by a huge margin in the 5 months. We’d wait for a pullback to re-enter positions.

• China Merchants Capital (CMC) disclosed a competing preliminary non-binding proposal to acquire Chindata Group (CD US) at US$9.20 per ADS, a 15.0% premium to Bain Capital’s US$8.00 per ADS offer.
• Astonishingly, Chindata did not publicly disclose the CMC offer, which was sent to the special committee on 9 June, i.e., 34 days ago.
• CMC must get Bain Capital’s support due to its 92.34% voting rights. The presence of a credible competing proposal will require Bain Capital to match CMC’s offer.

• TSMC winning with Nvidia’s business, beating Samsung due to TSMC’s advanced packaging technology; this highlights the rising importance and complexity of chip packaging.
• China export restrictions for rare earths used in semiconductors highlight opportunity for U.S. and Australian rare earths producers. We identify two potential plays.
• Nanya Technology Earnings: DRAM market has bottomed, sees industry improvement ahead. We see a trading Long opportunity.

• Posco DX has begun the selection process for its lead underwriter for its transfer to the KOSPI market and plans to complete the transfer listing within this year.
• Considering the recent retail insanity witnessed in most local large-cap battery stocks, Posco DX will likely experience further intensified short-term price fluctuations with this new development as a catalyst.
• The likely replacement for Posco DX’s KOSDAQ 150 spot is Konan Technology, which has become a top reserved issue in Posco DX’s GICS sector (Information Technology) in the previous review.

• PhilEnergy IPO will start trading this Friday on 14 July. We believe that PhilEnergy’s share price will surge higher on the first day of trading.
• We believe PhilEnergy’s shares could OVERSHOOT by more than 200% versus the IPO price on the first day of trading, which would be more than 102,00 won or more.
• Our trading strategy on PhilEnergy on the first day of trading would be to take partial profits (30-50%) if its price overshoots higher (by 200% or more than IPO price).

• We expect BABA to report C2Q23 (F1Q24) top-line and non-IFRS net income 2% and 21.5% vs. consensus. For C2Q23, we raised (1) Taobao/Tmall GMV/CMR estimates due to return of merchants, 
• (2) International Commerce and Cainiao revenue estimates, and (3) EBITA margin estimates for all groups except cloud. We maintain our BUY rating and raise TP to US$ 116 TP, 
• Due to 1) merchants return to Taobao/Tmall;  2) independent listing of groups; and 3) improved incentive structure after the organizational change.

• Oddity Tech, the owner of popular and fastest-growing global brands IL MAKIAGE and SpoiledChild, set terms for an upcoming IPO. The company offers ~10.5M Class A shares. 
• Selling shareholders (private equity firm L. Catterton and Oran Holtzman, Co-founder & CEO) offer ~8.77M Class A shares, while Oddity Tech offers ~1.75M Class A shares.
• The net proceeds from the sale of Class A shares will be ~$41M. Oddity Tech will not receive any proceeds from the sale of shares by the selling shareholders. 

• HEROZ is an AI technology company that provides advanced AI development expertise to both B2C and B2B sectors.
• With a strategic focus on AI SaaS, it has embarked on a ‘buy-to-build’ strategy to develop profitable recurring revenue streams and accelerate earnings growth.
• In September 2022, it consolidated VarioSecure (4494), a subsidiary offering network security services, and in August 2022 acquired Strategit, a SaaS integration development support business.

• Jabil delivered a strong result and managed an all-around beat in the last quarter.
• The company’s growth was driven by improved profitability in electric vehicles, healthcare, renewable energy infrastructure, and cloud sectors.
• The healthcare sector also presents opportunities for Jabil, with increasing interest from OEMs seeking outsourcing manufacturing solutions.

• Three shareholders of Socionext (6526 JP) aim to raise around US$1.4bn via selling all of their shares in Socionext.
• We have covered the background of the deal in our earlier note, Socionext Placement – A US$1.8bn Cleanup, Will Have to Give up Some of Its 6x Listing Gains.
• In this note, we talk about the updates and look at the performance of some of the past Japan deals.

• 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 – Tryt Inc (9164 JP), Alibaba (ADR) (BABA US)‘s Cainiao & Cloud Intelligence Group, J&T Global Express (1936374D CH) IPOs & Socionext (6526 JP)‘s secondary placement.
• Event-Driven developments – Costa Group Holdings (CGC AU), Musgrave Minerals (MGV AU), Yachiyo Industry (7298 JP), Metro Pacific Investments Co (MPI PM), Healthway Medical Corp (HMED SP). 

• Meituan’s food delivery has taken 20% of the Hong Kong market share in its first month’s operations.
• The authorities suggests that they will not further restrict financial apps such as AliPay of Ant Group.
• Tencent’s WeChat Pay charged a money transfer commission, but it exempted university campus the next day.

• 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

• Last year was pivotal for Yahoo Japan: despite record group performance, GTVs in e-commerce actually fell despite continued strong growth in the sector 
• In a recent survey, Amazon was the most frequently used e-commerce mall at 49.6%, followed by Rakuten (32%), but Yahoo was far, far below at just 9.8%.
• Yahoo Shopping is now not only less popular with consumers, even merchants are dissatisfied – which is saying something when the service is essentially free.

• We cut our revenue estimations for 2H23, mainly due to increased uncertainty surrounding the launch of “Uma Musume.” 
• We also lower our estimations for live streaming due to concerns about macro factors. We slightly raise our estimations for BILI’s advertising business…
• …as we anticipate that it will benefit from gaming and e-commerce. Our rev./non-GAAP net income are 1.0% and (6.4%) vs cons in 2Q23. Cut TP to $12.3, maintaining “Sell” rating.

• Our base case valuation of ALT is 33,365 won per share, which represents 63% higher than the high end of the IPO price range of 20,500 won.
• We estimate the company to generate sales of 69.7 billion won (up 57.3% YoY) in 2023 and 92.2 billion won (up 32.3% YoY) in 2024.
• ALT’s main business is in the testing of non-memory semiconductor value chain products including Display Drive IC, CMOS image sensor, and Power Management IC.

• 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, Tryt Inc (9164 JP) announced a somewhat reasonable pricing range, while Fadu (440110 KS) looks to open up the Korean market for larger IPOs again.
• On the placement front,  Socionext (6526 JP) found itself in the eye of a storm after its stupendous 6x increase since listing.

• Chinese autonomous driving chip maker (SoCs) Black Sesame Technologies (BLACKSES HK) has filed for HKEx IPO and plans to raise around US$200m which will be spent on R&D and  commercialisation.
• According to Frost & Sullivan, Black Sesame was ranked the third largest provider of automotive- grade high computing power SoCs, based on shipment in 2022.
• The company is in early stages of commercialisation, and the top line has expanded significantly in 2022 with launch of SoCs in 2021. Black Sesame’s earnings show significant growth potential.

• RoboSense Technology, one of the leading providers of LiDAR sensor systems and AI perception software, filed for a Hong Kong IPO with J.P. Morgan and China Renaissance leading the offering.
• RoboSense Technology is a high-growth mass producer of LiDAR products with mounting operating losses. The company is growing revenue in double digits and still has heavy losses.  
• I believe RoboSense Technology IPO is risky due to the company’s high cash burn rate, fierce competition, pricing pressure and unhealthy fundamentals. Moreover, LiDAR stocks continue to underperform.

• Amazon has significantly underperformed the broader equity market, in spite of the recent rally.
• The narrative for generative AI is strong, but the share price is currently driven by other factors.
• Margin improvements are being priced-in, which significantly limits any potential upside, without monetary conditions becoming supportive.