TMT/Internet

• After Potentia bumped indicative terms to A$1.60/share last month, Tyro Payments (TYR AU)‘s board considered the revised terms remained below what is considered fair, and has ceased all discussions.
• Following discussions between Tyro and Potentia, the Tyro Board is now providing Potentia with a 4-week period of due diligence to “enable Potentia to develop a significantly improved proposal“.
• No indicative price was mentioned. Mike Cannon-Brookes’ Grok Ventures was open to a competing proposal of A$1.85/share. 

• How many kitchens does Intel have? Intel guided 1Q2023 revenues to $11B, down 40% YoY / 22% QoQ and 21% (!!) below consensus $14B. 
• 1Q23 gross margins ex-accounting change guided to 36%, the lowest since 1986!
• Intel’s worsening FCF means dividend cuts are on the table.

• Teradyne delivered a solid result in the last quarter as the company surpassed analyst expectations with respect to revenues as well as earnings.
• At the operating level, it cleared some supply bottlenecks that allowed the company to ship more of semiconductor test products than previously planned.
• Automation Group’s quarter revenue, in constant currency, grew.

• 2023 gameplan remains unchanged; we see limited upside from here for ACWI-US, and we expect a rangebound year of trading on ACWI-US with $93 capping upside and $75-77 capping downside
• We also remain overweight Europe/UK, we want to add exposure on pullbacks to China/Hong Kong/EM, and overweight non-U.S. equities (MSCI ACWI ex-US) relative to MSCI ACWI
• We highlight buy ideas within Technology, Communications, and Consumer Discretionary. The UK/Europe and Hong Kong/China continue to make up the majority of our buy recommendations

• After combining the Norton LifeLock and Avast businesses, the company has been renamed as Gen Digital – a corporation with the goal to develop technological solutions that will allow users to profit fully from the online environment while maintaining their privacy and confidence.
• Today, the company’s brand portfolio includes well-known brands, including Norton, Avast, LifeLock, Avira, AVG, ReputationDefender, and CCleaner.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• DocuSign delivered solid quarter results despite the challenging operating environment, surpassing Wall Street expectations in terms of both, the top and bottom lines.
• However, the company stills see healthy results with customers recognizing DocuSign high-ROI applications that are cost-effective, efficient, and easy to use.
• DocuSign is continuing its innovation on the CLM front, solidifying its execution, customer validation, and vision within the CLM space.

• Five9 delivered an all-around beat in its last result as the company stock has seen a reversal in fortunes over the past few weeks.
• The company gets leverage from its channels, ecosystem of partners, and system integrators, which helped it build its pipeline in its last result.
• Overall, we provide the stock of Five9 with a ‘Hold’ rating and a revision in the target price.

• With its results around the corner, it would be interesting to look at Cognizant’s results from the last quarter.
• The company had delivered revenue below the guidance range of the management, primarily driven by a lower billable headcount in North America.
• Cognizant has been seeing revenue growth from health services and from products and resources driven by demand for its digital services among travel and hospitality, consumer goods, automotive, and logistics clients.

• Amkor Technology delivered excellent results in the last quarter and managed an all-around beat as its end markets showed a very strong demand.
• Whereas market forecasts are weakened in some areas and the industry has been facing near-term macroeconomic headwinds, demand for the company’s advanced packaging technology stays strong, and the momentum strengthened in this quarter.
• Revenue from computing end markets increased, and the test business of the company grew.

• Lumentum Holdings delivered a strong result in the last quarter and managed an all-around beat.
• This quarter reported strong demand from customers.
• Overall, the demand for the Telecom products of Lumentum remains strong, particularly in edge networking applications.

• SenseTime Group (20 HK) was added to the Non-SDN Chinese Military-Industrial Complex Company (NS-CMIC) list on 10 December 2021. So, the stock is not a part of any global indices.
• There is a possibility that the stock is no longer restricted to U.S. investors and that could lead to multiple index inclusions over the next few months.
• Inclusion in the MSCI China Index could take place in February or May while inclusion in the FTSE All-World Index could take place in March.

• ASML and Lam Research’s latest guidance implies extremely different near-term revenue outlooks but shows an industry pulling back near-term while investing for long-term.
• Results show the much weaker situation for Memory chips vs. Logic chips, and little discussion of a recovery for Memory from the firms so far.
• Firms servicing long-term strategic, specialized demand from customers are indeed performing better than those servicing more commoditized demand.

• Press reported (20 January) that American Tower and Brookfield are preparing to launch a takeover bid for European towerco leader Cellnex with the intention of delisting the business.
• Cellnex on 16.9x EV/22e EBITDA is trading cheaply vs AMT (21.6x) and a diversified unique asset. Its towers would come at €350,000/tower vs. recent deals at €500,000.
• Top ten shareholders own 57.41%. The last rights issue was done at €36.33/share. At what price those shareholders could be bought out? Unlikely at less than a 25% premium, €45.5/share.

• The enterprise segment has fueled revenue growth at Ubiquiti (UI) and it should remain the same in the fiscal second quarter
• Ubiquiti has expanded its product offering for enterprise customers where it includes a complete solution down to the EV charging station
• We have made several adjustments to our earnings model. We continue to assume gross margin rising sequentially due to lower costs

For FY22, MotorK reported a record Q4, driven by its focus on higher-value enterprise contracts, the launch of its SparK platform and the continued migration of acquired companies onto the platform. Annualised recurring revenue (ARR), management’s main metric for tracking performance, was €26.9m, falling short of our €28m forecast and management’s guided range of €28–30m. FY23 and beyond looks set to benefit from a large pipeline of contract opportunities, with €5.2m of additional ARR committed as at 31 December 2022. Growth should be supported by maintaining low customer churn and high net revenue retention.

• Harvest Technology Group Limited (ASX:HTG) licenses its proprietary video compression and encryption technology for low-bandwidth, high-latency applications needing secure real-time streaming video communication.
• The company delivers solutions for data transfer from anywhere via satellite or congested networks.
• Harvest offers a solution which enables real-time monitoring of remote locations, real-time feedback for field technicians, and secure video conferencing. 

discoverIE’s Q323 trading update confirmed continued good momentum, with FY23 underlying earnings tracking ahead of board expectations. The company has completed the previously announced acquisition of Magnasphere, adding a high margin sensor business to the Sensing & Connectivity division. We have upgraded our forecasts to reflect better trading and the accretive acquisition and note that gearing remains below the company’s target range, providing headroom for further M&A.

• We don’t see a way for Sea Ltd (SE US)’s e-commerce business to turn profitable in the next few years.
• For the moment, the Digital-Entertainment segment is capable of absorbing most of e-commerce losses, but we are expecting the segment profitability to fall 70% to $135m per-quarter over the-next two-years.
• Once that happens, we think it will be game over for Sea Ltd.

• Bullish sentiments doubled BABA share price post 20th Party congress, as investors look beyond a soft December quarter and focus on re-opening prospects and flashing regulatory green lights.
• Expect single-Digit GMV growth, more disciplined OPEX and hence margin recovery to generate RMB180 billion non-GAAP net profit for BABA by FY25. Materializing fundamental recovery will support continued re-rating.
• That said, we also see headwinds to multiple expansion and expect 18-20x PER (among lowest in sector) for FY25, implying 21%/28% compounded annual return over FY23-25.

• SamE PREF’s relative underperformance compared to ORD has been getting a bit worse lately. And finally, today, it went down below -2.0σ on a 20-day moving average.
• This much diversion is the first in recent months, and the pref discount is close to last year’s peak. The dividend yield difference is also the widest in recent years.
• The current diversion appears to be a byproduct of the SamE overbuying amid the recent market rally, and we should expect a quick reversion.

• Broadcom delivered a strong result in the last quarter with revenues growing 21% year-on-year, surpassing Wall Street expectations.
• This growth was driven by the company’s strong partnerships and increased R&D investments that enabled accelerated adoption of its new-generation technologies.
• In the quarter, semiconductor solution revenue and infrastructure software revenue grew.

• Juniper’s stock has seen good upward momentum with its results around the corner.
• The company had delivered better-than-expected results in the last quarter with its total revenues as well as earnings exceeding Wall Street expectations.
• The cloud business of Juniper also delivered solid quarterly result with revenue growth.

• GoDaddy delivered a mixed set of results for the last quarter.
• However, it did manage an earnings beat which was largely a result of the robust consumer retention.
• This quarter, GoDaddy launched free SSL on almost all innovative web hosting plans in its major markets.

• SunPower delivered an all-around beat in the last quarter as the value of the company’s storage and solar systems continues to rise with the rise in utility rates.
• Consumer demand in the quarter continues to be quite strong and it added 23,1000 new customers this quarter which displays a persistent level of robust consumer demand for residential solar, particularly SunPower.
• We provide the stock of SunPower with an ‘Outperform’ rating and a revision in the target price.

• Recent developments highlighted the strategic significance of Wechat Channels (微信视频号) that Tencent’s management attached to the company’s future.
• Counter-Intuitively, while backing of the social giant saves Wechat Channels’ efforts for traffic acquisition, it also limits the product’s potential to develop into a content ecosystem rivaling Douyin.
• Our base case values the product at $29 billion, or 6% of Tencent’s market cap as of January 20th.

• The review period for the March rebalance ends on 31 January, the changes will be announced towards end February and implemented at the close of trading on 9 March.
• We forecast one add/delete for the Game Index, and a couple of adds/deletes for the BBIG Index. There will be a lot of capping changes.
• The largest inflows are expected on Posco Chemical (003670 KS) and Douzone Bizon (012510 KS); the largest outflows are expected on SK Innovation (096770 KS) and KMW (032500 KS).

• In our January 10th Compass, we discussed a break above 3910 on SPX would signal a tradable rally, with 4100-4165 our target, the top-end of our expected 2023 trading range.
• We believe equities are still in the midst of a rally/short squeeze, but that the rally is likely to fizzle in the 4100-4165 area.
• After being underweight Communications (XLC) since Nov 2021, sidestepping 20% underperformance vs. SPX, we now see signs of price and RS bottoms, and we are upgrading to market weight. Buy.

• ADP had a great start to fiscal 2023 and delivered an all-around beat in its last result.
• The company overcame elevated expense growth over the first quarter of last year and ongoing investments in the business by delivering 30 basis points of adjusted EBIT margin expansion.
• In contrast, the start of bookings growth in the foreign business was slower than the management had anticipated.

• ON Semiconductor Corporation delivered another all-around beat in its last result.
• The company is a well-known provider of intelligent sensing and power solutions and has established a good market position within its niche in the semiconductor market.
• More and more companies are considering ON Semiconductors as their long-term strategic partners as the company walks according to an amazing foresight.

WANdisco’s deal flow momentum continues, with a $9m contract with a European consumer goods and manufacturing company. This win is notable in that it is the company’s first deployment for migrating a manufacturing company’s process data to the cloud. The manufacturing sector is increasingly producing large sets of data and has therefore been identified as a strategic target market for WANdisco. The deal provides early support to our recently upgraded 2023 estimates.

• Qualys delivered a strong set of results for the previous quarter, surpassing Wall Street expectations in terms of revenues as well as earnings.
• It was another quarter of steady VMDR (Vulnerability, Management, Detection, Response) adoption that has developed 45% of the company’s customers worldwide.
• VMDR applications of the company saw an increasing number of vendors and Qualys managed to build a high positioning in the recent market.

• Schrole Group Ltd (ASX:SCL) is an Australian software company focused on providing human resource technology solutions to the international education and training sector.
• Schrole has developed a suite of five HR Software-as-a-Service (SaaS) offerings including the core product, Schrole Connect, a SaaS-based staff recruitment platform.
• Schrole Group has reported its best- ever quarterly cash receipts and operating cashflow which respectively increased 38% and 138% over the same period in CY21.

• Like most of its tech peers, Twilio has also taken a beating in the markets even though its last results were not too bad.
• In fact, the company delivered an all-around beat in the previous quarter and has had some interesting developments.
• Given the current macro-economic climate, we are neutral on Twilio and give it a ‘Hold’ rating with a revised target price.

• Appian Corp delivered a mixed result in the last quarter with revenues exceeding Wall Street expectations largely driven by the growth in cloud subscription revenue.
• In every category, the revenue growth is healthy and setting records in the quarter.
• While a large part of the tech industry has been retrenching, Appian went ahead and hired 221 employees in the last quarter.

• The authorities approved three of Tencent’s games in January 2023 after five in December 2022.
• Tencent closed its XR business and terminated a property rental contract.
• NetEase refused to extend service for Activision Blizzard for additional six months.

• New China semiconductor restrictions could be announced by the Netherlands and Japan by end-January.
• Realtek 4Q22 results — Signals weakness for companies serving the PC market, and could get worse in 1Q23E.
• Western Digital & Kioxia could merge NAND flash units to create a rival to Samsung.

• Price Movements: BTC gained another 10% this week despite news that Genesis had filed for bankruptcy, with a reported $5bn in liabilities.
• Market Liquidity: Trade volume on the largest Asia-based exchanges fell to multi-year lows amid a tough regulatory environment in the region. 
• Derivatives: BTC open interest has dropped 25% as a short squeeze hits derivatives traders.

• We estimate that TME’s 4Q22 topline/bottom line would be (2.5%)/3.8% vs cons., because of disturbance in its social entertainment and ads business.
• We forecast net income would only slightly beat cons by 6.1%, due to likely expense rebound and no major improvement on main businesses.
• Reiterate SELL rating but raise TP to US$ 6.7 to reflect margin beat and improvement of macro environment. Our TP implies 12.3X PE in 2023.

• While BILI’s top line in 4Q22/2023 would be in line, we suggest that its bottom line in 4Q22/2023 would beat cons. by 6%/18% due to cost-savings and optimized monetization efficiency. 
• BILI’s adjusted net loss would be significantly narrowed to (3.2)bn RMB in 2023, per our estimation. However, we still have concerns about some of BILI’s fundamentals.
• Maintain SELL but raise TP to US$ 16.4, implying 1.8X PS in 2023.

• We expect BEKE C4Q22 revenue and non-GAAP NI to be 9% and 64% above consensus. The bottom line beat is a result of earning leverage;
• We expect the market monthly EH/NH transaction volume to turn positive growth in C1H23, with resumed offline activities and continuing policy support as main drivers
• We raise TP by US$1 to US$20: 1) dialling up GTV in 4Q22, 2) faster pace transaction recovery in 2023, and 3) rebase FX from 7.05 to 6.77 in valuation.

• 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

• Adobe managed a decent result in the last quarter meeting the revenue expectations of Wall Street and managing an earnings beat.
• The company delivered 15% growth in the top-line for the 2022 fiscal with $17.61 billion in revenue.
• We remain confident in their long-term strategies and give Adobe a ‘Hold’ rating with a revised target price.

• Cirrus delivered a decent quarterly result with an all-around beat, driven by greater smartphone unit volumes linked to its customers’ new product launches, resulting in revenue over the high end of its target range.
• Furthermore, with the development of Cirrus’ 22-nm codec, audio sensing and other signal processing use cases will benefit from increased performance and power efficiency.
• The management has been working with several customers to design their first amplifier created especially for this market.

• Oracle had a strong quarter and saw its revenue increase by 25%.
• Even with Cerner excluded, total revenue increased by 9% in constant currency, exceeding Q1 and surpassing revenue from the same period last year.
• Oracle’s liquidity is also solid as it held over $7.4 billion in cash and marketable securities at the end of the quarter.

• IPG Photonics delivered a mixed result in the last quarter, as it failed to meet Wall Street expectations in terms of revenues but managed an earnings beat.
• Sales in high-power cutting applications suffered from a decline in general industrial demand in China and Europe.
• As this business required extra investment and was noncore to IPG, the management announced they would sell it to Lumentum.

• The Hang Seng Tech Index (HSTECH INDEX) represents the 30 largest technology companies listed in Hong Kong which have high business exposure to certain technology themes.
• This index was launched in 2020 and has gained significant passive tracking over the last two years.
• In this insight, we take a brief look at the selection criteria and the historical price performance of past Rebalance Events.

• We discuss the potential inclusions and exclusions in the next MSCI Korea Index rebalance announcement (10 February) that are being highlighted by the locals. 
• The potential candidates for inclusion in the MSCI Korea Index emphasized by locals in February 2023 include Kakao Pay and Hanwha Aerospace. 
• The potential exclusion candidates in the MSCI Korea Index emphasized by locals include S-1 Corp, Celltrion Pharm, and Cheil Worldwide. 

• China’s gaming regulator granted publishing licenses to 88 video games including three licenses to Tencent (for Undawn, Alchemy Stars and Yuan Meng Zhi Xing) and one for NetEase (for Badlanders).
• In December, NPPA gave approvals to 84 new domestic games and 44 imported games suggesting the 18-month long crackdown on the sector is nearing an end.
• Tencent’s online games revenue declined YoY for three consecutive quarters with regulatory hurdles and drop in ranking of key titles but we expect an improvement going into 2023.

• Agriculture – including forestry and fisheries – is one of the most important sectors in the Philippines.
• In 2021, it accounted for US$32.4 billion or 9.6% of the country’s gross domestic product and 24% of its working population.

• In 2019, Mayani was established by several serial entrepreneurs to digitalize the system. The company provides a marketplace to connect farmers with individual and enterprise customers.

• Singapore-based cybersecurity firm Blackpanda, which specialises in incident response and digital forensics, has secured US$15 million in its Series A funding round.
• The company will use the capital to expand its technology-enabled cybersecurity services, including digital forensics and incident response.
• It will also develop its underlying Artificial Intelligence and Machine Learning cybersecurity insurtech platform.

Esker’s Q422 revenue update confirmed that the company hit the mid-point of its revenue guidance for FY22, despite the already flagged slowdown in volumes processed. The company continued to see strong bookings intake, with the annual recurring value (ARR) of contracts for Q422 up 21% y-o-y in constant currency (cc) and up 19% cc for FY22. This provides support for management’s FY23 guidance; our FY23 estimates are within the guidance range and we maintain our forecasts pending FY22 results on 23 March.

• In this note, we will take a look at broker performance for HK IPOs from 2019-2022. 
• The following dataset includes all HK IPOs above US$100m for the period of Calendar Years 2019-2022, which amounted to a total of 173 deals. 
• The deals you see in this note are based on our historical IPO tracker. Feel free to drop us a message for additional information on any of these IPOs.

• ChatGPT is a mind boggling advancement in AI-human communication. I recommend EVERY reader of this insight to try out this service.
• This insight on ChatGPT has three parts: First, I discuss the basics of ChatGPT and valuations. Second, I provide 13 examples of questions or requests that I made to ChatGPT.
• Third, I discuss some key investment opportunities that could capitalize on all the “buzz” surrounding ChatGPT at this moment. 

• Some shareholders of Anycolor (5032 JP) are looking to raise US$151.5m via an International Only Follow-on offering. 
• The deal is a relatively small one to digest in terms of ADV, representing only 4 days of three-month ADV.  Although, it is still 10% of current mcap. 
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• China just announced game approval for January batch. The number of games approved is slightly higher than the previous three months.
• Pace of China game approval stays flattish, at a much slower pace than pre-tightening.
• Both Tencent and Netease received approval for one game each. Overall Tencent is still behind its peers since the approval resumed.

• IQiyi announced a follow-on equity offering of 76.5m ADS priced at $5.90 per ADS (at a 11% discount to previous close) and will raise approx. $442.3m through the issuance.
• Each ADS represents seven Class A ordinary shares and the new equity offering of 76.5m ADS will account for approx. 8.5% of iQiyi’s extended share capital post offering.
• Following the announcement, the company’s shares fell 16.4% and we think the upside is limited here.

• In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices in the June 2023 Rebalance.
• Adani Enterprises (ADE IN) could be added and Wipro Ltd (WPRO IN) could be deleted from the SENSEX Index. There could be multiple changes for BSE 100, 200, and 500.
• Below is a look at our estimated rankings for potential ADDs/DELs, their recent price performance vs peers, and potential trading opportunities.

• Visa continues to outperform the market and fully capitalize on the prolonged business cycle.
• The company’s share price appears fairly valued both relative to peers and to its historical business fundamentals, according to the company’s stock price.
• The share price seems fairly valued and to the historical business fundamental, says the company.

• Big declines in NAVER Corp holdings among active Asia Ex-Japan investors in 2022
• Allocation drop part of broader rotation out of South Korea, but NAVER Corp the most aggressively sold.
• Current exposure close to the lowest on record, but past trends suggests this could represent a turning point.

• IQIYI Inc (IQ US) aims to raise net proceeds of US$442.3 million through the placement of 76.5 million ADS at US$5.90 per ADS.
• The net proceeds will be used for working capital purposes, including serving its existing debt obligations. The placement closes on 19 January. 
• The placement price is fair vs peers and is an opportunity to play iQiyi’s expected topline recovery which is supported by ongoing margin improvement and declining cash burn. 

• Hewlett Packard Enterprise’s quantitative operating features are a mess, with its EBITDA margin, inventory turnover, and NOPAT all in decline.
• Yet, we might witness a slowdown in 2023 as corporate earnings could stagnate.
• The stock provides a desirable dividend, but its price return prospects are glum.