Daily Brief TMT/Internet: Canon Electronics, Hang Seng Index, Hexing Electrical Co Ltd, Open Text , Shenzhen Sinovatio Technology, Silicon Motion Technology, Tejas Networks Limited and more

• Friday post-close, parent Canon Inc (7751 JP) announced a buyout of subsidiary Canon Electronics (7739 JP). The ¥3,650/share offer is supported and recommended (to shareholders) by Target Co management. 
• This is the least surprising of parent-subsidiary buyout situations, but it took some time. I expect there are some funds already long a basket of these, including this one.
• This is not a very fair procedure. The result is therefore, unfair. And no synergies to boot. But it is a 30+% premium to last, and Canon already owns 55%.

• HSI recovered from last week’s sharp drop, helped by stronger breadth and steady but slower activity ahead of the U.S. holiday.
• Implied vols were broadly lower against the back drop of quiet market action.
• Materials sector names, with high implied percentiles and recent vol declines, may offer useful starting points for short vol candidates.

• Hexing Electrical is a prominent China-based manufacturer of smart meters and power distribution solutions, capitalizing on the global trend of grid modernization and smart city development.
• The company has demonstrated a robust financial track record, characterized by strong revenue and net income growth, expanding margins, and significant operating and free cash flow generation over the past three years.
• Positioned to benefit from sustained global demand for Advanced Metering Infrastructure (AMI) and renewable energy integration, Hexing’s growth is propelled by government mandates for energy efficiency and investments in smart grid infrastructure worldwide.

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• Open Text Corporation has reported its financial results for the first quarter of fiscal 2026, demonstrating resilience and growth amidst a strategic shift.
• The company’s total revenues reached $1.3 billion, a year-overyear increase of 1.5%, surpassing expectations due to strong demand in its Cloud and License segments.
• Specifically, the Cloud segment, which generated $485 million in revenue, experienced a 6% growth year-overyear, primarily driven by the Content product category.

• Shenzhen Sinovatio Technology is a specialized provider of network security and data analytics solutions, primarily serving government and enterprise clients in China.
• The company has demonstrated a strong financial turnaround, with significant growth in revenue, net income, and cash flow in 2023 and 2024 following a substantial loss in 2022. However, its long-term growth record remains inconsistent.
• Valuation appears elevated with high P/E and EV/EBITDA multiples, suggesting the market has priced in high expectations for future growth, which is subject to risks from intense competition and technological shifts.

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• Four growth drivers ramping simultaneously: PCIe5 targeting 40% market share, NAND makers increased outsourcing of controller design, automotive segment approaching 10% of revenue, and datacenter products approaching 5-10% of revenue.
• Near-Term catalysts compelling as memory supply tightness drives controller outsourcing and gross margins approach 49-50%.
• 19x 2026E PER represents good value if company hits targets. While stock carries market pullback risk, we nevertheless maintain our Structural Long rating due to multi-year growth in view.

• Tejas Networks is poised for significant growth, driven by a substantial contract from BSNL to supply 4G/5G Radio Access Network (RAN) equipment for 100,000 sites, which has led to a more than threefold increase in annual revenue.
• The company is a key beneficiary of the Indian government’s ‘Make in India’ and Production-Linked Incentive (PLI) schemes, which promote domestic manufacturing of telecom equipment and aim to reduce reliance on imports.
• Despite the massive revenue ramp-up, the company faces significant risks related to customer concentration, negative operating and free cash flows, and high working capital requirements, leading to increased short-term borrowings.

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