Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Thematic (Sector/Industry)

<ul><li>Because construction and real estate represent such a large component of the total economy in Korea, we have noticed that there tends to me much "better and more positive" news surrounding various government initiatives to jump start government infrastructure projects as well as promises to lift various regulations surrounding construction activities PRIOR to the election of the National Assembly, which is held in April every four years. </li><li>Our analysis suggests that based on the past four National Assembly Elections (2012, 2008, 2004, and 2000), these four major Korean construction stocks were on average down 21% three months after the National Assembly election dates. These four construction stocks were on average down 3% if you purchased them three months ahead of the National Assembly election dates. </li><li>We think that it would be prudent to become more cautious on the Korean construction sector, especially AFTER the National Assembly election this April. The logic behind our analysis  is simple. There tends to be "more good news" surrounding the domestic construction sector in the three months PRECEDING the National Assembly election in Korea which is held every four years in April. The four major Korean stocks have on average have under-performed relative to KOSPI in ALL FOUR  of the past National Assembly election years (3 months after the election date). We recognize that just because this has happened in each of the past four election periods does not mean that it will occur again. But we want to put probabilities on our side. </li></ul>

Because construction and real estate represent such a large component of the total economy in Korea, we have noticed that there tends to me much "better and more positive" news surrounding various government initiatives to jump start government infrastructure projects as well as promises to lift various regulations surrounding construction activities PRIOR to the election of the National Assembly, which is held in April every four years. Our analysis suggests that based on the past four National Assembly Elections (2012, 2008, 2004, and 2000), these four major Korean construction stocks were on average down 21% three months after the National Assembly election dates. These four construction stocks were on average down 3% if you purchased them three months ahead of the National Assembly election dates. We think that it would be prudent to become more cautious on the Korean construction sector, especially AFTER the National Assembly election this April. The logic behind our analysis  is simple. There tends to be "more good news" surrounding the domestic construction sector in the three months PRECEDING the National Assembly election in Korea which is held every four years in April. The four major Korean stocks have on average have under-performed relative to KOSPI in ALL FOUR  of the past National Assembly election years (3 months after the election date). We recognize that just because this has happened in each of the past four election periods does not mean that it will occur again. But we want to put probabilities on our side. 

National Assembly 4 Year Cycles & Its Impact on Korean Construction Stocks

<ul><li>We highlight 27 Korean companies that are seeking to find new owners through M&amp;A in 2016. Key sectors of M&amp;A in Korea in 2016 include financials, shipbuilding, and logistics.&nbsp;Our analysis is based on publicly available information.&nbsp;</li><li>To recap the M&amp;A market in Korea last year, 427 M&amp;A deals were struck in 2015 worth nearly US$65 billion. 2016 is likely to fare even better.&nbsp;</li><li>Korea Inc. is becoming less of an octopus and more of a shark. Korea is still dominated by the chaebols but several chaebols such as the Samsung Group are clearly trying to become more of a shark (greater focus on key industries such as tech) and less of an octopus, being diversified in so many different industries.</li><li>Korean companies' top&nbsp;300 largest companies by market capitalization had cash of about 128 trillion won at end of 2015, up&nbsp;33% YoY.&nbsp;</li><li>Among the various M&amp;A sectors in Korea in 2016, we find logistics and securities sectors to be quite interesting. In the logistics sector, Coupang (private company) is really revolutionizing the entire competitive structure of the industry. The companies that have been competing in this&nbsp;old, dull industry of packing products in boxes and delivering them must compete effectively against Coupang and catch up to them in terms of customer service, speed, and execution or else exit the industry.</li><li>In the securities sector, the recent acquisition of KDB Securities by Mirae Asset Securities, should lead to greater consolidation of this industry. In addition, despite the weak brokerage market, the IPO and M&amp;A markets in Korea should flourish this year, barring severe economic distress. The Korean government is also trying to accelerate the M&amp;A market in Korea this year.&nbsp;The Korean National Assembly passed the revisions to the Commercial Code in November 2015 (effective March 2016) which should help to facilitate companies&rsquo; restructuring and investment through M&amp;A.</li></ul>

We highlight 27 Korean companies that are seeking to find new owners through M&amp;A in 2016. Key sectors of M&amp;A in Korea in 2016 include financials, shipbuilding, and logistics.&nbsp;Our analysis is based on publicly available information.&nbsp;To recap the M&amp;A market in Korea last year, 427 M&amp;A deals were struck in 2015 worth nearly US$65 billion. 2016 is likely to fare even better.&nbsp;Korea Inc. is becoming less of an octopus and more of a shark. Korea is still dominated by the chaebols but several chaebols such as the Samsung Group are clearly trying to become more of a shark (greater focus on key industries such as tech) and less of an octopus, being diversified in so many different industries.Korean companies' top&nbsp;300 largest companies by market capitalization had cash of about 128 trillion won at end of 2015, up&nbsp;33% YoY.&nbsp;Among the various M&amp;A sectors in Korea in 2016, we find logistics and securities sectors to be quite interesting. In the logistics sector, Coupang (private company) is really revolutionizing the entire competitive structure of the industry. The companies that have been competing in this&nbsp;old, dull industry of packing products in boxes and delivering them must compete effectively against Coupang and catch up to them in terms of customer service, speed, and execution or else exit the industry.In the securities sector, the recent acquisition of KDB Securities by Mirae Asset Securities, should lead to greater consolidation of this industry. In addition, despite the weak brokerage market, the IPO and M&amp;A markets in Korea should flourish this year, barring severe economic distress. The Korean government is also trying to accelerate the M&amp;A market in Korea this year.&nbsp;The Korean National Assembly passed the revisions to the Commercial Code in November 2015 (effective March 2016) which should help to facilitate companies&rsquo; restructuring and investment through M&amp;A.

2016 Korea M&A Market Outlook - What's For Sale?

South Korea

CJ Corp. is an investment holding company.  The Company, through its subsidiaries, manufactures processed food products.  The subsidiaries' products include refined sugar, monosodium glutamate (MSG), condiment, wheat powder, flour, cooking oil, processed meats, and animal feed.

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CJ Corp (001040 KS)

National Assembly 4 Year Cycles & Its Impact on Korean Construction Stocks

Because construction and real estate represent such a large component of the total economy in Korea, we have noticed that there tends to me much...

Douglas Kim

2016 Korea M&A Market Outlook - What's For Sale?

We highlight 27 Korean companies that are seeking to find new owners through M&A in 2016. Key sectors of M&A in Korea in 2016 include...

Douglas Kim

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