Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

After the market close today, <a href="https://www.smartkarma.com/entities/doosan-infracore-co-ltd" target="_blank" data-smartkarma-citation="entities:3982:1" rel="noopener">Doosan Infracore (042670 KS)</a> announced that it plans to complete a rights offering worth 800 billion won, which represents nearly 70% of its current market cap of 1.15 trillion won.This rights offering will lead to a significant share dilution risk. The company has yet to provide full details of this rights offering but it is likely that the rights offering price will be priced at least 20-25% lower than current share price. Given the huge dilution risk, we believe that shares of Doosan Infracore will likely face significant weakness in the next several days. A retrace back to the 11,000 won to 12,000 won level is likely, in our view.

After the market close today, Doosan Infracore (042670 KS) announced that it plans to complete a rights offering worth 800 billion won, which represents nearly 70% of its current market cap of 1.15 trillion won.This rights offering will lead to a significant share dilution risk. The company has yet to provide full details of this rights offering but it is likely that the rights offering price will be priced at least 20-25% lower than current share price. Given the huge dilution risk, we believe that shares of Doosan Infracore will likely face significant weakness in the next several days. A retrace back to the 11,000 won to 12,000 won level is likely, in our view. 

Doosan Infracore Announces a Rights Offering Worth 70% of Its Market Cap

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

Short selling has finally resumed in Korea and it has been a busy couple of days on that front with foreign investors piling into stocks that have run up more than their peers over the last year and are potentially overvalued.Long/short pairs could be implemented in Korea during the short sell ban if you had long inventory or if there were listed single stock futures on the short leg.With short selling permitted on constituents of the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a>, we take a look at long/short pairs where both stocks are members of the index. These pairs belong to the same GICS sub-industry, are correlated and exhibit mean-reversion. We also use short sale data from the last couple of trading sessions to see which stocks are being targeted by short sellers.

Short selling has finally resumed in Korea and it has been a busy couple of days on that front with foreign investors piling into stocks that have run up more than their peers over the last year and are potentially overvalued.Long/short pairs could be implemented in Korea during the short sell ban if you had long inventory or if there were listed single stock futures on the short leg.With short selling permitted on constituents of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX), we take a look at long/short pairs where both stocks are members of the index. These pairs belong to the same GICS sub-industry, are correlated and exhibit mean-reversion. We also use short sale data from the last couple of trading sessions to see which stocks are being targeted by short sellers.

Korea Pair Trades: High Risk/Reward Names with Short Sell Screen

On 19 March, <a href="https://www.smartkarma.com/entities/doosan-infracore-co-ltd" target="_blank" data-smartkarma-citation="entities:3982:1" rel="noopener">Doosan Infracore (042670 KS)</a> announced that it will split the operating division (surviving company) and the investment division (Newco company that is being split off). The split off Newco will then be merged with <a href="https://www.smartkarma.com/entities/doosan-heavy-industries-construction" target="_blank" data-smartkarma-citation="entities:7389:1" rel="noopener">Doosan Heavy Industries &amp; Construction (034020 KS)</a>. Need to Repay Doosan Infracore Shorts - As of 18 March, there were 12.56 million shares shorts outstanding for Doosan Infracore, representing 3.4% of total outstanding shares. At the current price of 9,880 won, this represents 124 billion won. There were 61 million shares of Doosan Infracore that were traded on Monday, 21 March and probably a good chunk of these shorted shares were covered. According to Korean regulations, prior to the Newco being formed, the investors that were shorted on the company need to repay them and this was one of the main reasons why Doosan Infracore's shares jumped 21% on Monday. <div class="content-highlight">The Insight has been marked Bullish since we expect the split off and merger of Doosan Infracore's investment assets to DHIC is likely to result in a higher re-rating of the company's core operating business (construction equipment). There are also signs that the overseas construction business is rebounding in China, which should have a positive impact on Doosan Infracore. In addition, the creation of the Newco (and the getting rid of the previous company's shareholders' list) results in the need for the Doosan Infracore's shorts to cover. </div>

On 19 March, Doosan Infracore (042670 KS) announced that it will split the operating division (surviving company) and the investment division (Newco company that is being split off). The split off Newco will then be merged with Doosan Heavy Industries &amp; Construction (034020 KS). Need to Repay Doosan Infracore Shorts - As of 18 March, there were 12.56 million shares shorts outstanding for Doosan Infracore, representing 3.4% of total outstanding shares. At the current price of 9,880 won, this represents 124 billion won. There were 61 million shares of Doosan Infracore that were traded on Monday, 21 March and probably a good chunk of these shorted shares were covered. According to Korean regulations, prior to the Newco being formed, the investors that were shorted on the company need to repay them and this was one of the main reasons why Doosan Infracore's shares jumped 21% on Monday. The Insight has been marked Bullish since we expect the split off and merger of Doosan Infracore's investment assets to DHIC is likely to result in a higher re-rating of the company's core operating business (construction equipment). There are also signs that the overseas construction business is rebounding in China, which should have a positive impact on Doosan Infracore. In addition, the creation of the Newco (and the getting rid of the previous company's shareholders' list) results in the need for the Doosan Infracore's shorts to cover. 

Doosan Infracore: Investco Split Off & Merger Ratio Announced

Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Equity Capital Markets

Doosan Fuel Cell   / Equity Capital Markets

Doosan Fuelcell also announced a new rights issuance of its own.
It offers 10M shares at an indicative price of ₩34,200, which puts the total value at ₩342bil.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/157/358/original/22.png?1599412597" class="editor-image img-responsive" data-smartkarma-image-id="157358"></figure>
As a result, we have a capital increase rate of 13.92% with a 12.22% dilution.
The stockholder allocation is 93.73%, thereby giving a per share allocation of 0.130471.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/157/350/original/12.png?1599411438" class="editor-image img-responsive" data-smartkarma-image-id="157350"></figure>
The first round pricing is a bit earlier than Heavy. It is October 9, followed by the ex-rights on October 13.
The subscription rights will be trading on November 20~26, followed by the final pricing on December 2.
The subscription falls on December 7, and the payment on December 15.
The new shares will get listed on December 29.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/157/351/original/13.png?1599411455" class="editor-image img-responsive" data-smartkarma-image-id="157351"></figure>
This one also carries a usual 20% discount.
Everything else is pretty much in line with the local standard.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/157/352/original/15.png?1599411466" class="editor-image img-responsive" data-smartkarma-image-id="157352"></figure>

Doosan Fuelcell also announced a new rights issuance of its own.
It offers 10M shares at an indicative price of ₩34,200, which puts the total value at ₩342bil.

As a result, we have a capital increase rate of 13.92% with a 12.22% dilution.
The stockholder allocation is 93.73%, thereby giving a per share allocation of 0.130471.

The first round pricing is a bit earlier than Heavy. It is October 9, followed by the ex-rights on October 13.
The subscription rights will be trading on November 20~26, followed by the final pricing on December 2.
The subscription falls on December 7, and the payment on December 15.
The new shares will get listed on December 29.

This one also carries a usual 20% discount.
Everything else is pretty much in line with the local standard.


Doosan Fuelcell Rights Offer: Terms & Situation

Doosan Enerbility / Equity Capital Markets

Doosan Heavy finally announced a well-anticipated (publicly mentioned in June) but still massive rights offer.
The offering volume is 121.5M shares, which is a 48% capital increase rate. 20% will go to the ESOP. So, per share allocation for the stockholders is 0.38398.
At the indicative price of ₩10,700, the total value is ₩1.3tril.
<figure class="editor-figure mceNonEditable">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/157/359/original/21.png?1599412716" class="editor-image img-responsive" data-smartkarma-image-id="157359"></figure>
</figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/157/344/original/2.png?1599411337" class="editor-image img-responsive" data-smartkarma-image-id="157344"></figure>
October 12 will be introductory pricing, with the ex-rights falling on October 14.
Then, we will trade subscription rights on November 18~24. The final pricing will be November 30, followed by subscription on December 3 and payment on December 11.
Listing will be December 24.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/157/345/original/3.png?1599411350" class="editor-image img-responsive" data-smartkarma-image-id="157345"></figure>
We have a usual 20% discount for the pricing.
Just, this is a massive offering (47.99% capital increase), so the level of overall discount is higher, suggesting that potential room for short-term trading can be larger.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/157/346/original/5.png?1599411379" class="editor-image img-responsive" data-smartkarma-image-id="157346"></figure>

Doosan Heavy finally announced a well-anticipated (publicly mentioned in June) but still massive rights offer.
The offering volume is 121.5M shares, which is a 48% capital increase rate. 20% will go to the ESOP. So, per share allocation for the stockholders is 0.38398.
At the indicative price of ₩10,700, the total value is ₩1.3tril.




October 12 will be introductory pricing, with the ex-rights falling on October 14.
Then, we will trade subscription rights on November 18~24. The final pricing will be November 30, followed by subscription on December 3 and payment on December 11.
Listing will be December 24.

We have a usual 20% discount for the pricing.
Just, this is a massive offering (47.99% capital increase), so the level of overall discount is higher, suggesting that potential room for short-term trading can be larger.


Doosan Heavy Industries Rights Offer: Terms & Situation

South Korea

Bobcat Company specializes in design, manufacture, marketing and distribution of compact equipment for construction, rental, landscaping, agriculture, grounds maintenance, government, utility, industry and mining.

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Doosan Bobcat Inc (241560 KS)

Doosan Infracore Announces a Rights Offering Worth 70% of Its Market Cap

After the market close today, Doosan Infracore announced that it plans to complete a rights offering worth 800 billion won, which represents nearly...

Douglas Kim

Korea Pair Trades: High Risk/Reward Names with Short Sell Screen

With the resumption of short selling in Korea, we highlight correlated pairs from the same GICS sub-industry that are near reversion points and...

Brian Freitas

Doosan Infracore: Investco Split Off & Merger Ratio Announced

We expect the split off and merger of Doosan Infracore's investment assets to DHIC is likely to result in a higher re-rating of the company's core...

Douglas Kim

Doosan Fuelcell Rights Offer: Terms & Situation

Doosan Fuelcell also announced a new rights issuance of its own. It offers 10M shares at an indicative price of ₩34,200, which puts the total value...

Sanghyun Park

Doosan Heavy Industries Rights Offer: Terms & Situation

Doosan Heavy finally announced a well-anticipated (publicly mentioned in June) but still massive rights offer. The offering volume is 121.5M...

Sanghyun Park

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