Daily BriefsTMT/Internet

TMT: Mercari Inc, United Microelectron Sp Adr, Delhivery, Microsoft Corp, Shift Inc, Ebay Inc, GTPL Hathway Limited and more

In today’s briefing:

  • Mercari – US GMV Is Downside Risk but Profitability Is a Larger Upside Risk
  • UMC (UMC.US, 2303.TT): 1Q22 Earnings Preview- Continuous Growth
  • Delhivery IPO Initiation: Can It Deliver?
  • Microsoft’s Activision Acquisition Is a Stupendous Deal
  • Microsoft – Thinking Through the ATVI Acquisition Further
  • Shift: Strong Earnings Momentum to Continue with Expanding Software Testing into Metaverse Market
  • Qoo10 Japan to Launch ¥10 Billion Fashion Mall Rival to Zozo
  • GTPL Hathway: Broadband to Be Key Growth Driver Ahead

Mercari – US GMV Is Downside Risk but Profitability Is a Larger Upside Risk

By Mio Kato

  • Mercari is down 33% since 22 November, actually underperforming the 31% decline in Mothers. 
  • YoY numbers for the US may only modestly beat the 20% growth target for the year and this reset of expectations may have been the driver of the decline. 
  • However, we expect significant upside surprises on profitability and that is our focus.

UMC (UMC.US, 2303.TT): 1Q22 Earnings Preview- Continuous Growth

By Patrick Liao

  • It is continuing to raise wafer price, and revenue/GM to reach ~NT$58billion/~39% and NT$60billion/~41.5% in 4Q21/1Q22 respectively. 
  • It will plan to add 5-8k 28nm production capacity in 12A Tainan during 2H22, and we consider it is to secure customers’ demands.
  • We do not see any sign to deteriorate for the 2nd half at this moment. 

Delhivery IPO Initiation: Can It Deliver?

By Arun George

  • Delhivery (1058656D IN) is the largest and fastest-growing 3PL express parcel delivery player in India by revenue in FY21. It has won SEBI approval to raise up to $1 billion.  
  • The fundamentals are mixed as it has been unable to leverage its leading position and strong growth to deliver profits or cash generation.  
  • Based on the draft red herring prospectus, we are cautious about this potential IPO as the negatives outweigh the positives.  

Microsoft’s Activision Acquisition Is a Stupendous Deal

By Aaron Gabin

  • A blizzard of cost synergies we conservatively estimate at $500MM from lower distribution commissions, hosting costs, and cutting ATVI’s highly paid C-Suite.
  • Multiple strategic benefits: Catalyzes Microsoft’s XCloud streaming game service and Game Pass subscription offering….potentially offers greater leverage for app store negotiations with Apple and Google.
  • Accretive on valuation alone…MSFT is paying a 10% discount to ATVI’s 23x average forward PE from last few years. MSFT’s 11x forward P/S vs. ATVI’s 5.5x revalues ATVI’s revenues 2x.

Microsoft – Thinking Through the ATVI Acquisition Further

By Mio Kato

  • Our initial thoughts on Microsoft’s bid for Activision Blizzard were on the sceptical side given various signs of trouble at the company. 
  • In contrast the majority of commentary on the deal has been somewhere between positive and euphoric though there are monopoly concerns from customers. 
  • Yet the more we examine the implications the less we like this deal for Microsoft.

Shift: Strong Earnings Momentum to Continue with Expanding Software Testing into Metaverse Market

By Shifara Samsudeen, ACMA, CGMA

  • Shift reported its 1QFY08/2022 results last week. Revenue for the quarter increased 51.5% YoY to JPY14.3bn while OP more than tripled to JPY1.95bn vs JPY548m a year ago.
  • Both Enterprise and Entertainment segments saw strong growth in revenue as well as improvement in GPM during the period.
  • Shift’s share price gained 7.4% following its earnings announcement and we expect the company’s strong earnings momentum to continue over the next few years.

Qoo10 Japan to Launch ¥10 Billion Fashion Mall Rival to Zozo

By Michael Causton

  • Qoo10 has become one of the most popular Japanese malls among young women for all things Korean, particularly cosmetics and fashion.
  • The online mall now wants to exploit this by creating a new dedicated fashion mall with better promotional opportunities for merchants of all nationalities.
  • This should bring more competition to ZOZO Inc (3092 JP) and Rakuten Inc (4755 JP).

GTPL Hathway: Broadband to Be Key Growth Driver Ahead

By ICICI Securities Limited

  • GTPL Hathway (GTPL) is a leading MSO (No. 1 in terms of subscribers) offering cable television (CATV) and broadband services
  • Expansion into new states and digitisation has led to strong topline and earnings growth of ~27% and ~86% CAGR, respectively, over FY16-21
  • We roll over to FY24 and value GTPL at Rs 290 i.e. 14x FY24E P/E
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