Daily Brief TMT/Internet: Pony AI, Taiwan Semiconductor (TSMC) – ADR, Next Generation Technology Group, Sakura Kcs Corp, Fibocom Wireless , Park Systems, A&D Company Ltd and more

• Pony AI (PONY US) plans to raise around US$1bn in its secondary listing in Hong Kong.
• The company won HK listing approval and filed its PHIP on 17th October 2025. It will look to launch its secondary offering soon.
• In this note, we’ll take a look at the deal and talk about the impact of the raising.

• Federal Reserve expected to reduce interest rates amid labor market weakness and inflation concerns
• Fed officials divided on future rate cuts, with market anticipating continued easing cycle and potential changes in personnel influencing decisions

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• TSMC: +22.1% Premium; Continue to View 24% or Higher as Level to Short From
• UMC: +0.4% Premium; Results Coming… Wait for More Extreme Spread Levels
• ASE: +0.4% Premium; Near Good Level to Go Long the ADR Spread

• Serial Acquirer Focused on a Niche Market: Next Generation Technology Group operates as a serial acquirer, focusing on profitable small and medium-sized manufacturing enterprises (SMEs) in Japan facing succession issues. This strategy provides access to a steady stream of acquisition targets at potentially attractive valuations.
• Value Creation Playbook Drives Growth: The company implements a proprietary value creation program, the ‘NGTG Growth Program’ (NGP), across its portfolio companies to improve operational efficiency, enhance profitability, and drive organic growth post-acquisition.
• Experienced Management and Disciplined M&A: The management team has a background in finance and manufacturing, with a stated focus on disciplined M&A, acquiring companies with high profitability and technologies that are difficult to replace.

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• Profitability Over Growth Strategy: Sakura Kcs is demonstrating a clear strategy of prioritizing profitability over revenue growth. The company has successfully increased net income and expanded margins over the past three years by withdrawing from low-margin projects, despite a concurrent decline in overall revenue.
• Alarming Cash Flow Disconnect: A significant red flag is the stark divergence between reported net income and cash flow generation. While net income has grown robustly, operating and free cash flow turned sharply negative in the most recent fiscal year, raising questions about earnings quality and the sustainability of its dividend growth.
• Positioned for Digital Transformation Tailwinds: The company is well-positioned within the growing Japanese IT services market, which is benefiting from a nationwide push for digital transformation (‘Japan DX’). Its focus on financial, public, and industrial sectors aligns with key areas of technology investment, and recent investments in a new AI-capable data center could be a future growth driver.

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• Fibocom Wireless (300638 CH)  raised US$380m in its upcoming Hong Kong IPO.
• It was founded in Nov 1999, and is a leading wireless communication module provider. The firm’s module products include i) data transmission modules, ii) smart modules, and iii) AI modules.
• We have covered various aspects of the deal in our previous note. In this note, we will talk about the demand and trading dynamics.

• Technology Leader in a Growing Niche Market: Park Systems is the global market leader in the Atomic Force Microscopy (AFM) industry, a critical segment for nanoscale metrology. The company’s growth is propelled by secular tailwinds, including semiconductor miniaturization and increasing R&D in life sciences and materials science.
• Founder-Led with Deep Expertise: The company is led by its founder, Dr. Sang-il Park, a pioneer who was part of the Stanford team that invented the AFM and who commercialized the world’s first AFM. This deep technical expertise forms the foundation of the company’s innovative product development and competitive edge.
• Strong Financial Performance with a Robust Outlook: Park Systems has demonstrated an impressive track record of high-growth, with a 5-year revenue CAGR of 27.5% and a 5-year net income CAGR of 38.2%. The outlook remains positive, supported by strategic acquisitions and expansion into new applications, though valuation appears full, reflecting high expectations.

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• A&D Company Ltd is a well-established Japanese manufacturer of precision measurement and medical equipment, operating in stable, growing industries.
• The company has demonstrated a strong track record of profitability and impressive long-term growth in net income and free cash flow, supporting consistent dividend payments.
• While the company’s valuation appears attractive relative to peers and its own historical performance, future growth may be tempered by slowing revenue forecasts and increasing competition in its key markets.

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