Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>In this insight, we highlight the pricing gap divergences of the major Korean holdcos and opcos in 4Q 2023.</li>
<li>Of the 38 pair trades, 18 of them involved holdcos outperforming opcos YTD and 20 of them involved opcos outperforming holdcos in the same period.</li>
<li>We highlight 38 pair trades that involve Korean holdcos and opcos.</li>
</ul>


In this insight, we highlight the pricing gap divergences of the major Korean holdcos and opcos in 4Q 2023.
Of the 38 pair trades, 18 of them involved holdcos outperforming opcos YTD and 20 of them involved opcos outperforming holdcos in the same period.
We highlight 38 pair trades that involve Korean holdcos and opcos.


Korean Holdcos Vs Opcos Gap Trading Opportunities in 4Q 2023

Event-Driven

<ul>
<li>There is a relatively high probability (70-80%+) that the FTCs in Europe and the United States will officially block the merger between Korean Air and Asiana Airlines in 2H 2023. </li>
<li>This could result in the Korea Development Bank (KDB) selling its 10.58% stake in Hanjin KAL Corp which could result in a fight for the control of Hanjin Kal.</li>
<li>Our NAV analysis of Hanjin Kal suggests NAV of 3.8 trillion won or implied target price of 57,259 won per share, representing 13% upside from current levels.</li>
</ul>


There is a relatively high probability (70-80%+) that the FTCs in Europe and the United States will officially block the merger between Korean Air and Asiana Airlines in 2H 2023. 
This could result in the Korea Development Bank (KDB) selling its 10.58% stake in Hanjin KAL Corp which could result in a fight for the control of Hanjin Kal.
Our NAV analysis of Hanjin Kal suggests NAV of 3.8 trillion won or implied target price of 57,259 won per share, representing 13% upside from current levels.


Hanjin Kal: Fight For Control Amid FTC Regulatory Concerns of Korean Air & Asiana Airlines Merger

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

<ul>
<li>Compared to depressed traffic from last year, outbound travel in July was up dramatically; strong M/M growth versus June suggests the outbound recovery still has legs </li>
<li>Does China's relaxation of group travel to Japan and Korea matter? We offer context and conclude the change is helpful, but not a "game-changer" for overall travel demand</li>
<li>We also review July domestic traffic and preview Trip.com's Q2 results (out Sept 4th)</li>
</ul>


Compared to depressed traffic from last year, outbound travel in July was up dramatically; strong M/M growth versus June suggests the outbound recovery still has legs 
Does China's relaxation of group travel to Japan and Korea matter? We offer context and conclude the change is helpful, but not a "game-changer" for overall travel demand
We also review July domestic traffic and preview Trip.com's Q2 results (out Sept 4th)


Monthly Chinese Tourism Tracker | July Outbound Firm | Group Tour Impact | Trip.com Q2 (August 2023)

<ul>
<li>There have been increasing local news flows about KDB's potential "Plan B" for Asiana Airlines in case the merger between Asiana Airlines and Korean Air Lines is finally cancelled.</li>
<li>The final decisions by the European and US regulators on whether to pass/block this merger are likely to take place in 4Q 2023. </li>
<li>The higher probability scenarios are for one or both of these regulators to block this deal. As such, KDB will need to come up with Plan B.</li>
</ul>


There have been increasing local news flows about KDB's potential "Plan B" for Asiana Airlines in case the merger between Asiana Airlines and Korean Air Lines is finally cancelled.
The final decisions by the European and US regulators on whether to pass/block this merger are likely to take place in 4Q 2023. 
The higher probability scenarios are for one or both of these regulators to block this deal. As such, KDB will need to come up with Plan B.


What Is KDB's Plan B for Asiana Airlines?

Thematic (Sector/Industry)

<ul>
<li>US PPI has steadily eased over the past 15 months, and lower transportation costs have helped</li>
<li>US long-distance trucking and international air freight costs have fallen dramatically from the peak, but ocean freight has surprisingly remained close to peak levels</li>
<li>We believe falling transportation costs are unlikely to provide "tailwinds" for much longer</li>
</ul>


US PPI has steadily eased over the past 15 months, and lower transportation costs have helped
US long-distance trucking and international air freight costs have fallen dramatically from the peak, but ocean freight has surprisingly remained close to peak levels
We believe falling transportation costs are unlikely to provide "tailwinds" for much longer


US PPI: Tailwinds from Transportation Price Collapse Set to Subside in H2 2023

South Korea

Hanjin KAL Corporation is a holding company. The Company, through its subsidiaries, engages in airline, hotel, and travel related services. Hanjin also invests in real estates.

Asiana Airlines, Inc. provides air cargo and passenger transportation services throughout South Korea and overseas.  The Company also offers airline catering and on-flight duty free shopping services and operates aircraft leasing business.

Jeju Air Co., Ltd. operates as an airline carrier in the aviation industry.   The Company provides air transportation services for passengers, baggage, and cargo within South Korea, Japan, and Southeastern Asian countries.

Tway Air Co., Ltd operates as an airline company. The Company offers flight, hotel, car booking services. Tway Air also provides reissuance of ticket, baggage, airport, and in-flight services. Tway Air serves customers worldwide.

Jin Air Co.,Ltd. provides air transportation services. The Company offers passenger and freight air transportation services, aviation equipment maintenance, aircraft leasing services, and other services. Jin Air also provides ticket and hotel booking and consulting services.

Air Busan Co., Ltd. operates as an airline company. The Company offers international and domestic flight, hotel, and car booking services. Air busan also provides reissuance of ticket, baggage, airport, and in flight services. Air busan offers services worldwide.

Hyundai Glovis Co., Ltd. provides domestic and international logistic services. The Company's services include domestic transportation, storage, packaging, vehicle logistic, and logistic consulting.  GLOVIS also runs automobile auction market for used vehicle.

HMM Co., Ltd. provides marine transportation services.  The Company commands different types of vessels including full container vessels, oil tankers, car carriers, LNG carriers, bulk carriers, and tramps.

Pan Ocean Co., Ltd. is a Korean shipping company that engages in marine transportation business. The Company provides bulk cargo carrier, pure car and truck carrier, container and tanker services.

CJ Logistics Corporation provides logistics services. The Company provides land transportation, maritime transportation, harbor unloading, cargo storage, international logistics processing, and other services. CJ Logistics also provides internet home shopping services. CJ Logistics serves customers worldwide.

Cathay Pacific Airways Limited operates scheduled airline services. The Company also provides related services, including airline catering, aircraft handling, and engineering.

Qantas Airways Limited provides transportation of passengers through two airlines including Qantas (full service carrier) and Jetstar (low cost carrier), operating international, domestic and regional services. The Company also includes Qantas Frequent Flyer and Qantas Freight which generates diverse revenue streams and adds value for customers and investors.

China Southern Airlines Company Limited provides commercial airline services throughout China, Southeast Asia and other parts of the world.  The Company also provides other airline related services including aircraft maintenance and air catering.

China Eastern Airlines Corporation Limited, together with its subsidiaries, operates in the civil aviation industry. It offers passenger, cargo, mail delivery, ground, cargo handling, and other extended transportation services.

Japan Airlines Co. Ltd. provides air transportation services. The Company offers a variety of scheduled  flights and unscheduled flights throughout the world as well as offers air courier services. Japan Airlines also provides tickets, resort hotels, and travel agencies services.

American Airlines Group Inc. operates an airline that provides scheduled passenger, freight, and mail service throughout North America, the Caribbean, Latin America, Europe, and the Pacific.  The Company also provides connecting service throughout the United States, Canada, and the Caribbean.

China Airlines Limited provides scheduled international air transportation for passengers and cargo freight throughout cities in Europe, America, Asia, and Australia.

Alaska Air Group, Inc. is an airline holding company. The Company, through its subsidiaries, provides air service to passengers in multiple destinations. Alaska Air also provide freight and mail services, primarily to and within the state of Alaska and on the West Coast.

EVA Airways Corp. is an air carrier that transports passengers and cargos. The Company operates primarily in Taiwan and serves international route networks in North America, Asia, Europe, and Australasia.

easyJet plc, a low-cost passenger airline, conducts operations throughout the United Kingdom and mainland Europe.  The Company sells the majority of its tickets through its Web site.

Korean Air Lines Co., Ltd. operates air transportation services.  The Company's services include passenger and cargo transportation, aircraft maintenance, and air catering.  Korean Air Lines provides domestic and international airline services.

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Korean Air Lines (003490 KS)

Korean Holdcos Vs Opcos Gap Trading Opportunities in 4Q 2023

In this insight, we highlight the pricing gap divergences of the major Korean holdcos and opcos in 4Q 2023. We highlight 38 pair trades that...

Douglas Kim

Hanjin Kal: Fight For Control Amid FTC Regulatory Concerns of Korean Air & Asiana Airlines Merger

Hanjin Kal's shares rose 27% today to 52,500 won yesterday. Some investors believe that FTCs in Europe and the United States will officially block...

Douglas Kim

Monthly Chinese Tourism Tracker | July Outbound Firm | Group Tour Impact | Trip.com Q2 (August 2023)

The recovery in outbound Chinese tourism remained strong in July. In this insight we also look at relaxation of Chinese group travel to Japan and...

Tracking Traffic

What Is KDB's Plan B for Asiana Airlines?

There have been increasing local news flows about KDB's potential "Plan B" for Asiana Airlines in case the merger between Asiana Airlines and...

Douglas Kim

US PPI: Tailwinds from Transportation Price Collapse Set to Subside in H2 2023

Falling costs for multiple modes of transportation have provided a strong "tailwind" to US PPI, which has declined steadily over the past 15...

Tracking Traffic

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