In today’s briefing:
- TOPIX Inclusions: Who Is Ready (Feb 2023)
- China Telcos: Send In The Clouds
- Kuaishou（1024.HK）4Q22 Preview: Competition and Restructure Are Pending Issues
- Naver (2023 High Conviction Update): Turbo-Charged by Expected Launch of Korean Version of ChatGPT
- Nitro Software (NTO AU): Potentia Finally Secures Due Diligence
- UBTech Robotics IPO Preview
- Nitro Software: Potentia Still In The Mix As DD Granted
- IIJ (Buy) – Q3 22 Results Reaction: Solid Quarter as Recurring Sales Expand
- Fujifilm: Robust Quarter; Recent M&A to Drive Healthcare and Materials Biz Further
- ATEN: The Inevitable Push Out
TOPIX Inclusions: Who Is Ready (Feb 2023)
- Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
- This insight is a follow-up to TOPIX Inclusions: Who Is Ready (Jan 2023)
- Our top pick from the last insight CELSYS (3663 JP) (previously known as Artspark) has gained ~14% in roughly a month.
China Telcos: Send In The Clouds
- The rapid adoption of cloud computing has led to China boasting the world’s second-largest cloud computing market.
- This migration to the cloud is in lock-step with global customer needs: scale, greater efficiency, and availability; together with a reduction in capex and infrastructure complexity.
- The big three PRC telcos are firmly in the mix, with each announcing 100%+ growth in revenue for their cloud businesses in 1H22. Expect that trend to continue.
Kuaishou（1024.HK）4Q22 Preview: Competition and Restructure Are Pending Issues
- We expect that Kuaishou’s 4Q22 top line and bottom line would be 0.2%/3.7% vs cons, as major business lines are recovering with stimuli of CNY promotion campaigns.
- However, we estimate that its 2023 top line/bottom line would miss cons. by (0.9%)/(14.2%) due to our concerns of increasing competition and internal restructuring.
- Maintain SELL rating but raise TP to HK$ 56 to reflect on-track recovering trend as the macro improves.
Naver (2023 High Conviction Update): Turbo-Charged by Expected Launch of Korean Version of ChatGPT
- Naver plans to launch its own Korean version of ChatGPT in 1H 2023.
- We believe that this will act as an important catalyst that is likely to further fuel Naver’s share price higher.
- Naver has been our high conviction call in 2023 and we continue to have a Positive view of Naver.
Nitro Software (NTO AU): Potentia Finally Secures Due Diligence
- Nitro Software Ltd (NTO AU) has finally granted Potentia due diligence access until 22 February. Subject to satisfactory due diligence, Potentia could increase its offer from A$2.00 to A$2.20-2.30 per share.
- Alludo’s A$2.15 off-market takeover offer is its best and final offer. Alludo’s offer is subject to a 50.1% minimum acceptance condition (currently at 12.53%) and closes on 3 March.
- Potentia’s dogged pursuit despite the Board’s stonewalling suggests a desire to get a deal done. At the last close, the gross spread to Potentia’s potential offer is 2.3% to 7.0%.
UBTech Robotics IPO Preview
- UBTech Robotics is trying to complete its IPO in Hong Kong in the coming weeks. UBTech Robotics is a leading artificial intelligence based robotics company headquartered in China.
- UBTech Robotics received very fat valuations in the past couple of years. Back in January 2021, it was reported that the company’s valuation reached as high as $7 billion.
- In China’s smart education robot based solution market, UBTech Robotics is the number one player.
Nitro Software: Potentia Still In The Mix As DD Granted
- Adobe rival Nitro Software Ltd (NTO AU) has granted Potentia Capital due diligence through to the 22 February on the possibility it sweetens its Offer to A$2.20-A$2.30/share.
- Alludo’s hands are tied to its A$2.15/share Offer price, which it has declared ‘best and final’ and will not be increased – even if a superior proposal emerges.
- But Potentia pitching an Offer A$0.01/share above Alludo’s Offer won’t be sufficient for Alludo and other shareholders to tender.
IIJ (Buy) – Q3 22 Results Reaction: Solid Quarter as Recurring Sales Expand
- IIJ delivered double-digit revenue growth for a third consecutive quarter as corporate demand for digitization remains robust
- In addition the expected expansion of cloud (+15%) and security service (+21%) sales, mobile sales grew 9% as IIJ moved clearly past the impact of industrywide rate reductions
- Quarterly EBITDA reached a record high even with modest margin contraction YoY
Fujifilm: Robust Quarter; Recent M&A to Drive Healthcare and Materials Biz Further
- FUJIFILM Holdings (4901 JP) delivered 3QFY03/2023 results today. Revenue and OP increased 13.5% and 4.1% YoY respectively to JPY744.4bn (consensus JPY717.1bn) and JPY81.8bn (consensus JPY80.0bn).
- Covid-19 related projects running its course had a slight impact on healthcare segment but we would not be too worried as new product launches and markets will offset that decline.
- Market continues to value Fujifilm as an image company and not a healthcare stock and there is more than 30% upside to the current share price.
ATEN: The Inevitable Push Out
- ATEN reported better than expected fourth quarter results, but it was the lack of quantitative revenue guidance that garnering all the attention
- We had highlighted increased macro risks in our January update leading to 2023 becoming dependent on the second half of the year.
- The first quarter is seasonally the slowest period of the year for ATEN, which could be the reason for management taking a conservative approach with 2023 guidance.
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