In today’s briefing:
- Softbank (9984 JP): Relying on Arm Strength and JPY Weakness
- A/H Premium Tracker (To 9 Feb 2024): Liquid AH Premia Near Multi-Yr Wides, Narrow AH Premia Wider
- Quiddity HSTECH Mar 24 Flow Expectations: US$415mn One-Way if the Low-Conviction Change Takes Place
- Silicon Motion Memory Readthrough: NAND Flash to Remain In Shortage; Up-Cycle to Persist
- HK Connect SOUTHBOUND Flows (To 9 Feb 2024); Net Tech Selling STILL, Net SOE Buying, STILL
- ARM: Short Squeeze
- UI: Inventory & Free Cash Flow
- Gen Digital Inc: Product Portfolio
- Charter Communications: The Reasons Behind Their Stagnant Growth and What It Means for Your Internet! – Major Drivers
Softbank (9984 JP): Relying on Arm Strength and JPY Weakness
- We believe that Arm is now valued as a “growth at any price” stock; with nearly half of SoftBank group’s equity value reliant on Arm, NAV downside risk is rising
- The risk of JPY appreciation is real, whilst SVF2 remains very exposed to financing costs, with 85% of its equity value in private companies
- Softbank shares trade at a 55%+ discount to the estimated NAV; yet the downside risks to Arm’s valuation, along with the potential JPY appreciation, should keep the discount wide
A/H Premium Tracker (To 9 Feb 2024): Liquid AH Premia Near Multi-Yr Wides, Narrow AH Premia Wider
- The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- SOUTHBOUND and NORTHBOUND flows net positive. AH premia on average rose so Hs underperformed As by 1.75%. Narrow premia pairs saw AH premia rise most.
- Watch the SOE stock price KPI space. Wouldn’t be short SOEs vs Privates on H/A basis. Low-hanging fruit with some SOEs having large cash balances.
Quiddity HSTECH Mar 24 Flow Expectations: US$415mn One-Way if the Low-Conviction Change Takes Place
- The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
- The index changes for HSTECH index for the March 2024 index rebal event will be announced on 16th February 2024.
- In this insight, we take a final look at the expected index changes and our latest flow expectations.
Silicon Motion Memory Readthrough: NAND Flash to Remain In Shortage; Up-Cycle to Persist
- Silicon Motion reported results last week that beat consensus; Moreover, the company expects strong growth not just in 2024E, but also in 2025E.
- The company’s growth will significantly exceed PC and mobile phone market growth thanks to strong memory demand trends within these segments.
- The company sees NAND Flash in shortage into 2025E based on visibility into its client ecosystem. We continue to view SIMO as a next-wave play on the Memory recovery.
HK Connect SOUTHBOUND Flows (To 9 Feb 2024); Net Tech Selling STILL, Net SOE Buying, STILL
- A bad week for HK and Chinese shares. National Team buying seems lighter into the waning days of the Year of the Rabbit.
- Net SOUTHBOUND buying was HK$4.0bn in the shortened pre-holiday week.
- Remarkable this past week, again, was the tendency to net sell names which were down hard, and net buy names which have been performing well.
ARM: Short Squeeze
- ARM’s stock is up 110% YTD. We wrote about ARM a few months ago and reckoned that intrinsic value for ARM is a bit lower than the IPO price.
- In hindsight, it was perhaps a limitation of our imagination than anything else.
- We should have added the following in our analysis but did not: “Masa son understands capital markets.
UI: Inventory & Free Cash Flow
- Ubiquiti (UI) reported fiscal second quarter (December) results showing sequential improvement in enterprise revenue while service provider remains a headwind for the business
- Ubiquiti introduced several products in the December quarter which started to gain customer traction. There could be momentum in the March quarter as customers become familiar with the new products
- The year over year revenue performance has been challenged with Ubiquiti lapping the initial customer enthusiasm about the Company having product in stock
Gen Digital Inc: Product Portfolio
- Gen Digital, like all businesses, experienced both ups and downs in its third quarter of 2024.
- Their fiscal year marked a tremendous opportunity for consumer cybersafety, with Genesis Digital consistently executing towards their goal.
- They reported cybersafety bookings growing to $1 billion, up by 4%, cybersafety revenue up 3%, and their 18th consecutive quarter of growth.
Charter Communications: The Reasons Behind Their Stagnant Growth and What It Means for Your Internet! – Major Drivers
- In Q4 2023, Charter Communications witnessed a modest addition of 155,000 Internet customers and a notable increase of nearly 2.5 million Spectrum Mobile lines, boasting a growth close to 50%.
- Despite these figures, the company’s revenue uplift was a meager 1%, with EBITDA inching up by just 1.3%—a figure that barely reaches 2.5% even when advertising dollars are set aside.
- The endeavor to expand its Internet business within its current territory was met with significant hurdles, largely due to the relentless pressure from fixed wireless and wireline overbuild activities.
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