Category

TMT/Internet

Daily Brief TMT/Internet: Blibli, Tokyo Stock Exchange Tokyo Price Index Topix, Tencent, Datadog Inc and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Blibli IPO: Trading Debut
  • Huge Gap in Awareness of Human Rights Between Japanese Companies and Investors
  • China Internet Weekly (7Nov2022): Tencent, Alibaba, Kuaishou, JD.com, Autohome, China Unicom
  • Grounding Myself in this Market Cycle

Blibli IPO: Trading Debut

By Arun George


Huge Gap in Awareness of Human Rights Between Japanese Companies and Investors

By Aki Matsumoto

  • While 80% of Japanese institutional investors place a high value on corporate respect for human rights, only 10% of companies have conducted human rights due diligence.
  • Japanese institutional investors should make it “visible” to their beneficiaries how they require companies to respect human rights in their engagement and how they encourage effective responses.
  • To ensure that the guidelines don’t end up as mere figure of speech, the government should make concrete policies to ensure that respect for human rights takes root in society.

China Internet Weekly (7Nov2022): Tencent, Alibaba, Kuaishou, JD.com, Autohome, China Unicom

By Ming Lu

  • Tencent and Alibaba are rumored to be acquired by state-owned companies.
  • Tencent charges for originally free function and JD.com re-organized to cut cost.
  • Autohome’s revenue stopped declining in 3Q22 and it is time to accumulate.

Grounding Myself in this Market Cycle

By BluSuit

  • At the moment of writing this, it’s 2:30 pm on a Sunday and I am in a ground blind. Every year at about this time of the year I take a few days off of work to unplug, have a few drinks with other family members and run off to the middle of the woods.
  • I get some of my best thinking done out here while I wait for a White Tail Buck to come by. It’s blissful.
  • Regardless of where I am or what I am doing, I am and always have been committed to maintaining my transparency, my thoughts and my investing story/process to all of you.

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Daily Brief TMT/Internet: Tencent and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • ECM Weekly (6th Nov 2022) – Giant Biogene, Blibli, Betagro, Bionote, Fusion, Medanta, Bikaji, Axis

ECM Weekly (6th Nov 2022) – Giant Biogene, Blibli, Betagro, Bionote, Fusion, Medanta, Bikaji, Axis

By Sumeet Singh

  • Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
  • On the IPO front,  a number of companies in India have launched thier IPOs recently, even as HK and rest of Asia remains dormant.
  • The only notable placement this week was the selldown in Axis Bank Ltd (AXSB IN) by Bain Capital.

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Daily Brief TMT/Internet: ROHM Co Ltd, Tencent, Meta Platforms (Facebook), Samsung Electronics, Tokyo Stock Exchange Tokyo Price Index Topix, Fishlog, Microsoft Corp, A10 Networks, Lazada Group, Alphabet Inc and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Rohm (6963): Costs Up, FX Gains Up More, Small Buyback, Cheap (And N225 Inclusion In the Distance)
  • Tencent and China Unicom Tie Up in New Joint Venture
  • Meta Platforms: Is The Hyper Growth Story Over? (11/22)
  • Launching Single-Stock ETFs in Korea: Market Flow Impact Analysis
  • Reason Behind the Difference in Management Between Family Companies and Others Is the Shareholding
  • FishLog Raises US$3.5M to Empower Cold Storage Warehouses in Indonesia to Improve Utility
  • Microsoft Inc: The Designer Visual Design App & Other Developments
  • ATEN: Steady Growth, PT to $24
  • Lazada Group Publishes First ESG Report
  • Alphabet Inc: The Alter Acquisition & Other Drivers

Rohm (6963): Costs Up, FX Gains Up More, Small Buyback, Cheap (And N225 Inclusion In the Distance)

By Travis Lundy

  • ROHM Co Ltd (6963 JP) announced salutary H1 results on Nov 1. The numbers were good, the innards suggested cost pressures. The revised forecasts suggested conservativeness, or risk of weakness.
  • The company also announced a stock buyback. It’s only about 2% of shares out, which is 5-10% of Real World Float, but the stock has a low-beta risk character.
  • And it is quite cheap on a capital construct basis. EV/EBITDA to Mar23 on conservative guidance is 4.6x. Adj EV/EBITDA Mar23e deducing securities and net receivables? 3.7x. 

Tencent and China Unicom Tie Up in New Joint Venture

By Caixin Global

  • Chinese social media giant Tencent Holdings Ltd. and state telecom operator China Unicom were cleared by the country’s antitrust regulator to set up a joint venture to develop data and cloud-related businesses.
  • The new business, one of 15 investment deals that cleared antitrust review Tuesday, will focus on content delivery networks and edge computing.
  • The partnership is another tie-up between Tencent and China Unicom after a 2017 investment in which the social media giant acquired a 5.18% stake in the telecom company.

Meta Platforms: Is The Hyper Growth Story Over? (11/22)

By Baptista Research

  • Meta Platforms delivered a highly disappointing set of results with a huge earnings miss.
  • The company’s ballooning costs to fund its virtual reality vision have resulted in a drop in profitability.
  • We provide the stock of Meta Platforms with a ‘Hold’ rating and a revision in the target price.

Launching Single-Stock ETFs in Korea: Market Flow Impact Analysis

By Sanghyun Park

  • The target market size that will be affected by the Default Option is estimated to be ₩92T. Up to 30% of them (₩30T) can flow into single-stock ETFs.
  • Competing against TDFs, half of this ₩30T is a conservative estimate for single-stock ETFs. Then, up to 40% of the ₩15T becomes the flow size entering the local stock market. 
  • KODEX’s Samsung Electronics single-stock ETF may dominate the market. In this case, at least ₩3-4T can flow into Samsung Electronics Ord.

Reason Behind the Difference in Management Between Family Companies and Others Is the Shareholding

By Aki Matsumoto

  • Correlation analysis of the major shareholder factor with ROE, ROA, and Tobin’s Q shows that founding family companies tend to have relatively high profitability (ROA) and high stock price valuations.
  • On board practices, companies with more than 50% ownership are generally less concerned about improving their practices, because they don’t have to worry as much about voices of minority shareholders.
  • With regard to key actions, companies with shareholders holding more than 50% interest are presumed to be proactive in growth investments.

FishLog Raises US$3.5M to Empower Cold Storage Warehouses in Indonesia to Improve Utility

By e27

  • FishLog, an ecosystem enabler for the fisheries cold chain industry in Indonesia, has closed its US$3.5 million pre-Series A round
  • FishLog was established in 2020 by Bayu Anggara, Reza Fahlepi, and Abdul Halim to solve the fragmentation in cold chain fisheries in Indonesia

  • The agritech startup improves cold storage, processor, and distribution in Indonesia’s fisheries to enable the industry to meet global supply and demand better


Microsoft Inc: The Designer Visual Design App & Other Developments

By Baptista Research

  • Microsoft delivered a good result in the last quarter surpassing Wall Street expectations on all counts.
  • Microsoft Cloud revenue surpassed $25 billion, increasing by 24% and 31% in constant currency.
  • Microsoft is getting more customers that want to grow and innovate with its existing infrastructure.

ATEN: Steady Growth, PT to $24

By Hamed Khorsand

  • ATEN continues to demonstrate its growth ability by focusing on its security first approach. ATEN reported third quarter revenue slightly more than we were projecting
  • The steady growth ATEN has experienced this year has come through the diversification of its customer base
  • ATEN’s management asserted demand has been consistent and dependent on performance. ATEN has added more customers throughout the year, which should serve as a baseline for incremental revenue in 2023

Lazada Group Publishes First ESG Report

By Tech in Asia

  • Singapore-based ecommerce giant Lazada has released its first environmental, social, and governance (ESG) report.
  • As a largely unexplored concept in Southeast Asia, the firm enlisted the help of an independent consultant to map out its ESG priorities.
  • The core tenets of the firm’s ESG framework are “empowering communities, developing a future-ready workforce, ensuring responsible stewardship, and effective governance.”

Alphabet Inc: The Alter Acquisition & Other Drivers

By Baptista Research

  • Alphabet’s stock price has undergone a strong correction after the company delivered a disappointing third-quarter financial result, failing to meet Wall Street expectations in terms of revenues as well as earnings.
  • Alphabet did have a decent underlying growth in Search and momentum in Cloud but the impact of currency conversion is reflected in their results.
  • Lapping the high growth levels from the previous year and the difficult macroeconomic environment also influenced the growth in their advertising revenues.

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Daily Brief TMT/Internet: SK Square, KDDI Corp and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Sweden’s EQT Partners to Invest Big in SK Shieldus: Impact on SK Square
  • KDDI (Buy) – Q2 22 Results Reaction: Mixed Quarter as Power Costs Accelerate

Sweden’s EQT Partners to Invest Big in SK Shieldus: Impact on SK Square

By Douglas Kim

  • On 2 November, it was reported that Sweden’s EQT Partners is to acquire a 36.87% stake in SK Shieldus. 
  • EQT Partners is expected to invest more than 2 trillion won in SK Shieldus which is expected to be valued at about 4.5 trillion won to 5.2 trillion won.
  • Our base case valuation of SK Square is NAV per share of 59,272, which is 59% higher than current price.

KDDI (Buy) – Q2 22 Results Reaction: Mixed Quarter as Power Costs Accelerate

By Kirk Boodry

  • KDDI posted its best revenue growth since 2019 but an acceleration in power costs and expenses associated with the July network outage kept a lid on margins
  • On balance, the print is positive and management remains confident on full-year targets
  • There are sector reads from corporate sales (good), higher power costs (bad), and stable competitive intensity whilst modest erosion in roaming revenue indicates Rakuten’s rebound from peak losses is modest

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Daily Brief TMT/Internet: ReadyTech Holdings Ltd, Tata Elxsi Ltd, ARK Innovation ETF, LG Energy Solution, Pushpay Holdings, KPIT Technologies, Tokyo Stock Exchange Tokyo Price Index Topix, Ethereum and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Readytech (RDY AU): Microequities Baulks At PEP’s A$4.50/Share Indicative Offer
  • S&P BSE/​Sensex Quiddity Leaderboard Dec 22: Potential ADDs Could Outperform the Index
  • EQD | ARK Innovation (ARKK US): Is It Time to Get Back into Growth?
  • ReadyTech’s Indicative Offer of A$4.50 from Pacific Equity Partners Good Enough?
  • Close Out the Pair Trade Between LG Chem & LG Energy Solution
  • (Mostly) Asia M&A: October 2022 Roundup
  • KPIT: Strong Execution and Bullish Outlook
  • Changes in Voting Practices of Japan’s Major Investment Managements Will Take Time to Take Hold
  • DeFi Options Protocols Series (#3): Where Can the Next Phase of Growth Come From?

Readytech (RDY AU): Microequities Baulks At PEP’s A$4.50/Share Indicative Offer

By David Blennerhassett

  • Software outfit ReadyTech (RDY AU) has announced an indicative proposal from Pacific Equity Partners and affiliates, to acquire ReadyTech by way of a Scheme of Arrangement at $4.50/share.
  • Pemba Capital, with 32.01% of shares out, are in discussion with PEP as to what appears to be the PE firm rolling over shares. 
  • ReadyTech’s independent board has granted PEP non-exclusive due diligence to flesh out a firm Offer. According to media reports, Microequities, with ~13%, is not on board whatsoever.

S&P BSE/​Sensex Quiddity Leaderboard Dec 22: Potential ADDs Could Outperform the Index

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices in the December 2022 Rebalance.
  • The reference period for the trading data used for the index selection ended on 31st October 2022.
  • There have been a couple of key revisions to the index selection methodologies for SENSEX and SENSEX Next 50 which could have important consequences.

EQD | ARK Innovation (ARKK US): Is It Time to Get Back into Growth?

By Simon Harris

  • Growth Stocks have been hammered in the rising rate environment
  • Inflation may have peaked and central banks could be reaching the end of the hiking cycle
  • We look at derivative strategies on ARKK US to gain a broad exposure to the growth and tech

ReadyTech’s Indicative Offer of A$4.50 from Pacific Equity Partners Good Enough?

By Arun George

  • ReadyTech Holdings Ltd (RDY AU) confirmed that it received a conditional, non-binding indicative proposal from Pacific Equity Partners (PEP) at A$4.50 per share, a 38.9% premium to the undisturbed price.
  • PEP aims to jointly work with Pemba, the largest shareholder with a 32.01% stake, on the proposal. Microequities, the second-largest shareholder, is said to oppose the offer.
  • The offer represents an all-time price high but struck at a discount to peer multiples, suggesting room for a bump. At last close, the spread to the offer is 8.4%.

Close Out the Pair Trade Between LG Chem & LG Energy Solution

By Douglas Kim

  • On 25 October, we recommended a pair trade between LG Chem (go long) and LGES (go short). Since then, this trade has resulted in a net gain of 15.7%.
  • It is very unusual to get this kind of alpha sized gains on Korean large caps in such a short time period. 
  • Given the sharp net appreciation on this pair trade in the past week, we would close out this trade. 

(Mostly) Asia M&A: October 2022 Roundup

By David Blennerhassett

  • For the month of October, 6 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$4bn.
  • The average premium for the new deals announced (or first discussed) in October was ~56%, and a year-to-date average of 40%.
  • This compares to the average premium for all deals in 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 33%, 31%, and 31.5% respectively.

KPIT: Strong Execution and Bullish Outlook

By Ankit Agrawal, CFA

  • KPIT Technologies (KPIT) reported decent Q2FY23 earnings. Sales grew 8.3% QoQ and 27% YoY in Constant Currency (CC) terms. EBITDA and Net Profit grew 33% and 28% YoY, respectively. 
  • Led by an all-time high order pipeline, KPIT Technologies (KPITTECH IN) gave a bullish outlook and upgraded its FY23 growth guidance. KPIT’s Technica acquisition also looks very promising.
  • In terms of order pipeline, KPIT has a couple of mega deals ($100mm+) in the offing, which if realized, would be the first-ever in its history.

Changes in Voting Practices of Japan’s Major Investment Managements Will Take Time to Take Hold

By Aki Matsumoto

  • Because there’s nothing about addressing environmental issues that the company itself opposes because they are global issues, it’s relatively easy to vote in favor of shareholder proposals on environmental issues.
  • Governance proposal is the most sensitive because it’s directly related to election of directors. It’s challenging for domestic investment managers to vote in favor of shareholder proposals during proxy fights.
  • FSA’s tightening of oversight of ESG investment trusts has triggered shift by major Japanese investment managers toward establishing ESG-related-voting policies and exercising their voting rights in accordance with these policies.

DeFi Options Protocols Series (#3): Where Can the Next Phase of Growth Come From?

By Alec Tseung

  • DeFi options protocols’ TVL did not change much in the past three months despite the bear market we are now in.
  • Many (TradFi) institutions and institutional investors we spoke to believed the next bull market/major innovations in DeFi might be coming from protocols that offer yields from real-world assets. 
  • To drive the next phase of growth, options protocols should leverage their composability to tap into it by offering those protocols additional use cases related to options. 

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Daily Brief TMT/Internet: HPSP, Nitro Software Ltd, Hon Hai Precision Industry, Visa, AXT Inc, Netgear Inc, ATN International, Cadence Design Sys, Taiwan Semiconductor (TSMC), Tyler Technologies and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • KOSDAQ150 Index Rebalance Preview: Big Churn in IT, Healthcare Stocks
  • Nitro Attracts a Competing Offer from KKR’s Alludo
  • Foxconn / Hon Hai: Quick-Take On The Zhengzhou Outbreak; Accumulate on Weakness
  • Visa Inc: Collaboration With FTX & Other Drivers
  • AXTI: Inventory Balloon Pop
  • NTGR: Retail Headwinds Is Not the Story
  • ATNI: The Treat from Growth
  • Cadence Design Systems: Acquisition of OpenEye Scientific Software & Other Drivers
  • Taiwan Tech Weekly: Earnings Insights Emerging for Memory, Mobiles, PCs, and Autos
  • Tyler Technologies: Acquisition of Rapid Financial Solutions & Other Drivers

KOSDAQ150 Index Rebalance Preview: Big Churn in IT, Healthcare Stocks

By Brian Freitas

  • With the review period complete, we see 11 potential changes to the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
  • Most of the potential changes are high probability ones, but there are some stocks that are very close to market cap and liquidity cutoffs.
  • The impact of passive trading will be much higher on the potential deletes as compared to the potential inclusions, though trade notionals are higher for the potential adds.

Nitro Attracts a Competing Offer from KKR’s Alludo

By Arun George

  • Nitro Software Ltd (NTO AU) has received a competing proposal from Alludo. The offer is A$2.00 via a scheme or an off-market takeover at A$2.00, with a 50.1% minimum acceptance condition.
  • Unsurprisingly, the Board rejected Potentia’s A$1.80 per share off-market takeover offer. Potentia has three options – lift its offer, do nothing or sell into Alludo’s offer. 
  • While Alludo’s offer is 11.1% above Potentia’s offer, it is far from a knockout bid. Therefore, there is a good chance that Potentia returns with improved terms.

Foxconn / Hon Hai: Quick-Take On The Zhengzhou Outbreak; Accumulate on Weakness

By Vincent Fernando, CFA

  • Some workers have been fleeing Hon Hai’s largest iPhone production facility in Zhengzhou, China over the weekend, due to COVID-19 outbreak lock-downs.
  • Even a significant hit to 4Q22E earnings is unlikely to change the 2023E and 2024E financial outlook or valuation multiples for the company, in our view.
  • Even after considering that Q4 is a high production period, if we assume November is about 1/10th of annual production, then only an estimated 2% annual reduction is at risk.

Visa Inc: Collaboration With FTX & Other Drivers

By Baptista Research

  • Despite the uncertainty brought on by the pandemic, the timing of the cross-border travel rebound, inflation, the Ukraine crisis, and potential recession, Visa’s performance in 2022 has been quite solid.
  • The company delivered yet another all-around beat as it established over 400 business collaborations with fintechs worldwide this year, ranging from start-ups to established businesses.
  • Cross-border volumes in Q4 increased by 7 points from Q3 and were up 49% year over year and 130% compared to three years earlier, excluding intra-Europe.

AXTI: Inventory Balloon Pop

By Hamed Khorsand

  • AXTI slightly beat its downward adjusted third quarter guidance but issued fourth quarter forecast showing further deterioration in the business
  • During the third quarter AXTI experienced a significant delay in orders from customers causing revenue to decline by approximately 11 percent sequentially
  • The spill over of weakness into the fourth quarter should not be a surprise given the pace of decline in revenue in the third quarter

NTGR: Retail Headwinds Is Not the Story

By Hamed Khorsand

  • NTGR reported third quarter results showcasing continued growth in its SMB and service provider product lines while the retail channel remained challenged. 
  • NTGR has been transitioning away from the lower end of the Wi-Fi router market, but a contracting market has extended out the timeframe of depleting channel inventory
  • NTGR’s growth driver are primarily its Pro AV switches and 5G hotspots, which continue to outperform our expectations

ATNI: The Treat from Growth

By Hamed Khorsand

  • ATNI has grown the number of subscribers within its portfolio businesses resulting in revenue rising faster than expected
  • ATNI’s steady progress with its network expansion is expected to help cash flow from operations in future quarters
  • Each of the operating businesses are growing revenue and at a state where management believes there would be positive free cash flow if it was not for investing for growth

Cadence Design Systems: Acquisition of OpenEye Scientific Software & Other Drivers

By Baptista Research

  • Cadence deliver a good result in Q3 surpassing Wall Street expectations on all fronts, driven by its technological leadership, solid execution, diverse customer base, and robust business model.
  • Despite the current macroeconomic uncertainty, it is evident that long-term sustained design activity is being driven by generational drivers like 5G, hyperscale computing, and AI/ML where Cadence is a key player.
  • Cadence also added the revolutionary Verisium AI verification tool and the JedAI data platform to their portfolio in Q3.

Taiwan Tech Weekly: Earnings Insights Emerging for Memory, Mobiles, PCs, and Autos

By Vincent Fernando, CFA

  • Last week saw a wave of major tech companies report earnings with significance toward the semiconductor and technology space in Taiwan.
  • Memory chip takeaways – SK Hynix, Samsung see better supply/demand in 2023E. PC market — Recent results discuss slight decline, potential stabilization in 2023E.
  • Mobile phones — Relative strength in high-end vs. low-end. Auto & Industrial — Relative strength seen continuing. AMD, Qualcom, Elan, CHIPMos, Acer, Globalwafers results ahead.

Tyler Technologies: Acquisition of Rapid Financial Solutions & Other Drivers

By Baptista Research

  • Tyler Technologies delivered yet another all-around beat that was a result of its 3% organic growth in this quarter, excluding COVID-related revenues of approximately 9%.
  • It reflects both company’s accelerating shift to the cloud and growth in transaction-based revenues.
  • Overall, we provide the stock of Tyler Technologies with a ‘Hold’ rating and a revision in the target price.

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Daily Brief TMT/Internet: Keyence Corp, Seiko Epson, LX Semicon, Intel Corp, Nitro Software Ltd, Delta Electronics, Mediatek Inc, Servicenow Inc, Texas Instruments and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Keyence(6861 JP) | The Rise of the Phoenix – A Company like No Other
  • Seiko Epson(6724 JP)| Neutral 2Q Earnings; Negative Outlook – Remain Bearish
  • LX Semicon KOSPI Migration & KOSDAQ 150 Special Change
  • Intel Vs. TSMC/​​​​​UMC Long/​​​​​Short Monitor: Intel Results Drive Share Spike, Still Can Re-Rate
  • Nitro Software Rejects Potentia, Again, And Engages With KKR
  • Delta Taiwan Vs. Thailand Monitor: Delta Taiwan Reports Better Margin Trend, Rel Valuation Reverts
  • Mediatek Results Takeaways — Inventory Correction Bottom Potential 4Q22, Mobile, TV Recovery 1H23?
  • ServiceNow Inc: Acquisition of Era Software
  • Texas Instruments: Production At New Facility & Other Drivers

Keyence(6861 JP) | The Rise of the Phoenix – A Company like No Other

By Mark Chadwick

  • Keyence reported record 2Q Sales and OP, thoroughly beating street expectations. The company recorded high double-digit growth in all regions – even in Europe. 
  • Pricing power is on display 10-35% price hikes to shore up the dip in GPM to 81.3%, depressed on higher raw material costs.  Sets up for future earnings growth.
  • The share price has underperformed the TOPIX -26%YTD. Valuations at the bottom of the recent range. We expect a share price recovery and are bullish.

Seiko Epson(6724 JP)| Neutral 2Q Earnings; Negative Outlook – Remain Bearish

By Mark Chadwick

  • 2Q Earnings Neutral; Mainly FX driven. The company sidestepped the worse of what we are seeing in broader printer market (See XEROX; Canon)
  • The outlook remains Negative. Macro conditions set to be worse in H2 vs H1. Core Home & Office Printing Business key IJP unit sales struggling with severe margin pressures.
  • Ongoing share buyback mildly supportive but unlikely to be a game changer with falling earnings.  Target-based 0.8x PBR implying ¥1700 TP.  

LX Semicon KOSPI Migration & KOSDAQ 150 Special Change

By Sanghyun Park

  • LX Semicon (108320 KS) will be traded on KOSPI from November 3rd. This event has no trade suspension. So, it will be traded on KOSDAQ until November 2nd.
  • Nextin (348210 KS) will replace LX Semicon for KOSDAQ 150. Again, the effective date is November 3rd. So, the index trackers will rebalance-trade at the close on November 2nd.
  • LX Semicon will see an outflow of -1.91x ADTV, whereas Nextin will enjoy an inflow of 3.93x ADTV. This Special Change will likely save AptaBio Therapeutics (293780 KS) from deletion.

Intel Vs. TSMC/​​​​​UMC Long/​​​​​Short Monitor: Intel Results Drive Share Spike, Still Can Re-Rate

By Vincent Fernando, CFA

  • Intel’s 3Q22 earnings beat expectations, and the shares reacted positively, rising 10.7%.
  • The company announced $3bn of cost savings for 2023E and $8-10bn in annual cost savings by 2025E. 2023E earnings guidance will be provided at the company’s February Investor Day.
  • Intel has outperformed TSMC and UMC since our pre-Intel Innovation Conference catalyst piece. Intel could still re-rate further relative to the companies into its next earnings.

Nitro Software Rejects Potentia, Again, And Engages With KKR

By David Blennerhassett

  • On the 28 October, Potentia announced an improved (and final) off-market Offer of A$1.80/share for Nitro (NTO AU), a 13.9% improvement over its initial proposal on the 30 August. 
  • Nitro has now concluded the Potentia Takeover Bid undervalues Nitro. The Offer, however, is still proceeding, and will open in two weeks.
  • Separately, KKR’s Alludo has pitched a non-binding – subject to due diligence – Offer by way of  a Scheme (or off-market takeover) at A$2.00/share. Nitro is supportive of this Offer.

Delta Taiwan Vs. Thailand Monitor: Delta Taiwan Reports Better Margin Trend, Rel Valuation Reverts

By Vincent Fernando, CFA

  • Delta Electronics (2308 TT) reported its earnings on October 28th, after its subsidiary Delta Electronics Thai (DELTA TB) had reported on October 25th.
  • Sales grew 33% YoY and gross margin expanded sequentially, which outperformed Delta Thailand’s margin performance.
  • Delta Taiwan shares have outperformed Delta Thailand since having dropped to a historically-extreme relative market cap below 1.0x. However, Delta Taiwan remains historically cheap on a relative basis.

Mediatek Results Takeaways — Inventory Correction Bottom Potential 4Q22, Mobile, TV Recovery 1H23?

By Vincent Fernando, CFA

  • Mediatek’s business continues to grow YoY, albeit slower than earlier expected. Management comments provided insight into the inventory cycle.
  • Management expects to see the worst impact of the inventory correction cycle in 4Q22E, but then in 1H23E sees potential for a turn around.
  • We are still developing a conviction view, however we see the latest results as net-positive for the shares given signs of a turn around ahead and the stock’s laggard status.

ServiceNow Inc: Acquisition of Era Software

By Baptista Research

  • Service Now had a solid third quarter and the company delivered another all-around beat.
  • Considering the solid organic growth and market demand of the company, it is expected that there will be 750 million new applications built by 2025.
  • The company focused on improving customer service experience and expanding its market by acquiring other software companies which is why it closed the acquisition of Era Software.

Texas Instruments: Production At New Facility & Other Drivers

By Baptista Research

  • Texas Instruments had a good third quarter, with revenue increasing by 13% year over year to $5.2 billion, surpassing Wall Street expectations.
  • After two years of construction, the company’s new semiconductor chip facility has begun producing chips.
  • The management anticipates Texas Instruments’ fourth-quarter revenue to be in the $4.4 billion to $4.8 billion range.

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Daily Brief TMT/Internet: Nanya Technology, Nitro Software Ltd, Nextin, Pushpay Holdings and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Nanya Tech: SK Hynix & Samsung Results Supportive for Memory Chip Industry 2023E Outlook
  • Nitro’s Carrot-And-Stick A$1.80 Takeover Offer from Potentia
  • KOSDAQ150 Ad Hoc Index Rebalance: LX Semicon OUT, Nextin IN
  • Pushpay Enters a SID with Sixth Street/BGH at NZ$1.34
  • Pushpay: BGH/Sixth Street Keep The Faith With $1.34/Share Tilt

Nanya Tech: SK Hynix & Samsung Results Supportive for Memory Chip Industry 2023E Outlook

By Vincent Fernando, CFA

  • SK Hynix and Samsung both released their latest earnings last week. The companies are the leading players for Nanya Tech’s memory chip industry.
  • SK Hynix’s latest gross margin performance confirms Nanya Tech performing in-line with the industry leaders.
  • Guidance from both SK Hynix and Samsung indicates a likely improvement in supply/demand dynamics in 2023E for the memory chip space.

Nitro’s Carrot-And-Stick A$1.80 Takeover Offer from Potentia

By Arun George

  • Nitro Software Ltd (NTO AU) entered a trading halt in response to Potentia’s off-market takeover offer of A$1.80 per share, a 13.9% premium to its previous rejected offer of A$1.58.
  • Potentia will block rival schemes and not accept competing takeover offers. This move will make it hard for the Board to convince a rival bidder to table an offer.
  • Potentia wants a friendly offer and placed majority Board support as a condition. The offer is unattractive but Potentia has hinted at improved terms if provided due diligence access. 

KOSDAQ150 Ad Hoc Index Rebalance: LX Semicon OUT, Nextin IN

By Brian Freitas


Pushpay Enters a SID with Sixth Street/BGH at NZ$1.34

By Arun George

  • Pushpay Holdings (PPH NZ) entered a scheme implementation deed (SID) with Sixth Street/BGH at NZ$1.34 per share, a 30.1% premium to the undisturbed price (12.6% premium to the last close).
  • The key conditions are shareholder and regulatory (OIO & US antitrust) approvals. The scheme meeting is in 1Q23. 
  • The offer is light. A concentrated shareholder register and signs of retail opposition are risks. A 75% deal probability, implies buying up to NZ$1.27 per share.

Pushpay: BGH/Sixth Street Keep The Faith With $1.34/Share Tilt

By David Blennerhassett

  • Church donor management tech play Pushpay (PPH NZ) has been fielding expressions of interest since April. Earlier this month,  Pushpay announced it had received another proposal, reportedly from BGH/Sixth Street.
  • On the 28 October, Puspay announced it had entered into a Scheme Implementation Agreement at NZ$1.34/share with BGH/Sixth Street, which collectively hold 20.34%. This is  a 30.1% premium to undisturbed.
  • The offer is subject to shareholder and regulatory approval, with a possible completion date in early 2Q23. 

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Daily Brief TMT/Internet: Tencent, Softbank Group, Intel Corp, Micron Technology, BlackBerry Ltd and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Shanghai/​​​​​​​​​​​​​​​​​​Shenzhen Southbound Connect: Weekly Moves (28 October 2022)
  • Softbank Group (9984 JP) – Defying Gravity into 4Q 2022
  • Intel 3Q22: Still Too Optimistic
  • Micron Technology: The New York Mega Fab & Other Drivers
  • BlackBerry Ltd: Major Drivers

Shanghai/​​​​​​​​​​​​​​​​​​Shenzhen Southbound Connect: Weekly Moves (28 October 2022)

By David Blennerhassett


Softbank Group (9984 JP) – Defying Gravity into 4Q 2022

By Victor Galliano

  • Softbank Group’s share price has been supported by the share buyback programme since late September, but 2Q FY2022 results are likely act as a negative catalyst for Softbank shares
  • Alibaba and its core listed holdings in the Vision Funds have seen market values go lower in recent months; see the diverging market price chart trends in this report
  • In addition, valuations among the unlisted holdings are also under pressure into October, so 2Q results may not capture the full extent of the down rounds

Intel 3Q22: Still Too Optimistic

By Aaron Gabin

  • Intel put forth a significant cost cutting program to generate $3B in savings in 2023 and $8-10B by 2025.
  • CEO Gelsinger’s PC forecasting track record is horrendous, we wouldn’t bet on a down MSD 2023 market.
  • Datacenter…which once carried near 60% margins hit breakeven this quarter… an astonishing fall.

Micron Technology: The New York Mega Fab & Other Drivers

By Baptista Research

  • Micron delivered a mixed set of results for the previous quarter, missing out on the revenue expectations of Wall Street but managing an earnings beat.
  • As a result, demand is being reduced for the other parts of the supply chain, which already have more than enough inventory, because the servers cannot be built.
  • Therefore, although the overall demand for clouds is generally healthy, this is one factor that is having an impact on it.

BlackBerry Ltd: Major Drivers

By Baptista Research

  • BlackBerry had a mediocre quarterly, beating profitability estimates of Wall Street while delivering revenue aligned with forecasts.
  • The best performer continues to be QNX design base revenue.
  • Royalty revenue increased on the production side, but it is still below pre-pandemic levels, mostly because of supply chain challenges.

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Daily Brief TMT/Internet: GoTo, Trina Solar Co Ltd, Elmo Software, Silicon Motion Technology, Spotify, Factset Research Systems Inc, Verizon Communications and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • GoTo: Lock-Up Expiry and a Coordinated Secondary Offering – Further Downside to Share Price Likely
  • SSE50 Index Rebalance Preview: Sector Shift as IT and Financials Drop
  • Elmo Software Enters a SID with K1 at A$4.85
  • MergerTalk:Market Turbulence/Wide Spreads-Spotlight On MaxLinear’s Acquisition Of Silicon Motion
  • Spotify 3Q22: Another TikTok Victim?
  • FactSet Research Systems: Alternative Data Services & Other Drivers
  • Verizon Communications: Enterprise Intelligence Campaign & Other Drivers

GoTo: Lock-Up Expiry and a Coordinated Secondary Offering – Further Downside to Share Price Likely

By Shifara Samsudeen, ACMA, CGMA

  • GoTo on Monday confirmed that it’s currently working with pre-IPO shareholders to explore a coordinated secondary offering of shares held by these shareholders when their lock-up expires on 30 November.
  • Following IPO, most shareholders agreed to hold onto their shares for a period of 8-months, and the lock-up period for around 90% of outstanding shares will expire next month.
  • As we continue to highlight in our previous insights, growth in top line does not necessarily mean profits for GoTo, and the company continues to burn cash to fuel growth.

SSE50 Index Rebalance Preview: Sector Shift as IT and Financials Drop

By Brian Freitas

  • The review period nearly complete, we see 7 potential adds and 9 potential deletes at the December rebalance. However, there can be a maximum of 5 changes at a rebalance.
  • We estimate a one-way turnover of 4.28% at the December rebalance leading to a one-way trade of CNY 3.42bn. Index arb activity could add to the impact on the stocks.
  • The potential adds have dropped over the last month while the potential deletes have moved higher over the last couple of weeks.

Elmo Software Enters a SID with K1 at A$4.85

By Arun George

  • Elmo Software (ELO AU) entered a scheme implementation deed (SID) with K1 at A$4.85 per share, a 100.4% premium to the undisturbed price.
  • The key conditions are a shareholder and regulatory (FIRB & US antitrust) approvals. The scheme meeting is likely in early 1Q23. 
  • While not a knockout bid, it is attractive in the context of current conditions. Key shareholders will vote in favour. At the last close, the gross spread is 4.8%.

MergerTalk:Market Turbulence/Wide Spreads-Spotlight On MaxLinear’s Acquisition Of Silicon Motion

By Robert Sassoon

  • Turbulent markets can  widen merger spreads arbitrarily creating attractive  arb opportunities with the potential for outsized IRRs
  • Among the several live transactions indicating unusually high spreads, none looks more alluring than the prospective MaxLinear (MX US) acquisition of Silicon Motion (SIMO US) in the semiconductor sector
  • The combination of an exceptionally wide spread driven by unsupported skepticism that the merger will not pass muster with China’s SAMR and historically low valuations make SIMO’s risk-reward profile  enticing

Spotify 3Q22: Another TikTok Victim?

By Aaron Gabin

  • MAUs beat, margins miss, guidance weak. Where / when is the operating leverage?
  • Podcasting business took a restructuring charge this quarter, not bullish for the business meant to expand gross margins.
  • TikTok reportedly readying a new streaming music app… not good.

FactSet Research Systems: Alternative Data Services & Other Drivers

By Baptista Research

  • After many quarters of consistently beating Wall Street expectations on all counts, FactSet delivered a mixed result in the last quarter exceeded revenue expectations of analysts but missing out on earnings.
  • The company finished fiscal 2022 with organic ASV plus professional services growth of $158 million, accelerating by approximately 200 basis points year over year to over 9%.
  • With private company coverage throughout their content refinery, workflow solutions for private equity and venture capital companies, and seamless linked workstation integration, the team is progressing with its private market strategy.

Verizon Communications: Enterprise Intelligence Campaign & Other Drivers

By Baptista Research

  • Verizon ended the quarter with a wireless service revenue increase of 10% over the prior year and 2% over the previous quarter, surpassing Wall Street expectations.
  • With consumers responding well to the company’s new offerings and thus increasing store traffic, its Consumer segment has begun to gather traction.
  • Their Welcome plan also enhanced customers’ perceptions of cost, which helped to increase consumer phone gross adds year over year.

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