Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: Shinsei Bank, Huifu Payment, Vedanta, Cardinal Resources, Jih Sun Finance

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

Myoung Shin Industrial Co.,Ltd / Equity Bottom-Up

Myoungshin Industrial (009900 KS) has been one of the hottest IPOs in Korea in 2020. It completed its IPO on 7 December at the IPO price of 6,500 won.  The stock price has surged nearly 7x in 11 trading days to 51,800 won as of 21 December. Its market cap has exploded to 2.1 trillion won ($1.9 billion). This surge is mostly driven by retail money and it reflects a retail madness of crowds in terms of FOMO (fear of missing out). Tesla's inclusion date for S&amp;P 500 index is on 21 December. We believe this is a significant date for Tesla as well as many of its suppliers such as Myoungshin Industrial as well as for the entire overall EV value chain. Although we do not claim to foretell how Tesla will perform post this date, we do believe there have been a big chunk of investors who have been positioning to buy Tesla and its related suppliers leading into this S&amp;P 500 index inclusion and selling them after the inclusion. Our high end case for Myoungshin Industrial assumed a net profit estimate of 45.7 billion won (an average of 2020 and 2021) and applied a 12.2x P/E (which is about 33% premium to the average P/E of the comps in 2020). At the current market cap of 2.1 trillion won, Myoungshin Industrial is trading at a 46x P/E using the high end of our net profit estimate of 45.7 billion won. Although Myoungshin Industrial has a solid technology for hot stamping products, is this really that special to warrant this very high valuation multiples? We do not believe so.

Myoungshin Industrial (009900 KS) has been one of the hottest IPOs in Korea in 2020. It completed its IPO on 7 December at the IPO price of 6,500 won.  The stock price has surged nearly 7x in 11 trading days to 51,800 won as of 21 December. Its market cap has exploded to 2.1 trillion won ($1.9 billion). This surge is mostly driven by retail money and it reflects a retail madness of crowds in terms of FOMO (fear of missing out). Tesla's inclusion date for S&amp;P 500 index is on 21 December. We believe this is a significant date for Tesla as well as many of its suppliers such as Myoungshin Industrial as well as for the entire overall EV value chain. Although we do not claim to foretell how Tesla will perform post this date, we do believe there have been a big chunk of investors who have been positioning to buy Tesla and its related suppliers leading into this S&amp;P 500 index inclusion and selling them after the inclusion. Our high end case for Myoungshin Industrial assumed a net profit estimate of 45.7 billion won (an average of 2020 and 2021) and applied a 12.2x P/E (which is about 33% premium to the average P/E of the comps in 2020). At the current market cap of 2.1 trillion won, Myoungshin Industrial is trading at a 46x P/E using the high end of our net profit estimate of 45.7 billion won. Although Myoungshin Industrial has a solid technology for hot stamping products, is this really that special to warrant this very high valuation multiples? We do not believe so. 

Myoungshin Industrial - Best Performing IPO in Korea in 2020 (Retail FOMO Madness of Crowds)

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

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Hyundai Motor used to give out ₩1,000 in quarterly dividends, and ₩3,000 at year-end.This year, it skipped the quarterly dividend. So, the year-end div will likely be ₩4,000.









Hyundai Motor Co
2017
2018
2019
2020E


Sales
96,376.1
96,812.6
105,746.4
104,141.4


- YoY
2.91%
0.45%
9.23%
-1.52%


OP
4,574.7
2,422.2
3,605.5
2,879.4


- YoY
-11.91%
-47.05%
48.85%
-20.14%


NP
4,546.4
1,645.0
3,185.6
2,240.9


- YoY
-20.51%
-63.82%
93.65%
-29.66%


NP to controlling stake
4,032.8
1,508.1
2,980.0
1,812.3


EPS (₩)
14,127
5,352
10,761
6,544


BPS (₩)
247,807
249,619
258,478
261,290


DPS (₩)
4,000
4,000
4,000
4,000


Div. yield
2.56%
3.38%
3.32%
2.15%


PER (x)
11.04
22.14
11.20
28.88


PBR (x)
0.63
0.47
0.47
0.72

Source: FnGuide

At the current prices, Ord has a 2.15% div yield, whereas 1P enjoys 4.62%. 2PB features a 4.49% yield.









Div yield
2017
2018
2019
2020E


Ord DPS (₩)
4,000
4,000
4,000
4,000


Div yield
2.56%
3.38%
3.32%
2.15%


1P DPS (₩)
4,050
4,050
4,050
4,050


Div yield
4.32%
5.77%
5.65%
4.62%


2PB DPS (₩)
4,100
4,100
4,100
4,100


Div yield
4.02%
5.32%
5.16%
4.49%

Source: KRX &amp; FnGuide









Hyundai Motor shares

Name
Hyundai Motor Co
Hyundai Motor S1 Pref Shs
Hyundai Motor S2 Pref Shs


Ticker
005380
005385
005387


Record date
FY/FQ closing date
FY/FQ closing date
FY/FQ closing date


FYE
December
December
December


Notation
Ord
1P
2PB


Restriction
-
Registered
Registered


Participation
-
Non-participating
Participating


Cumulation
-
Non-cumulative
Cumulative


Duration
-
Perpetual
Perpetual


Class
-
A
B


Min. dividend rate
-
Ord + 1% FV
Ord + 2% FV


Face value
-
₩5,000
₩5,000


Voting right
Yes
No
No

Source: DART

The div yield differences between Ord and the two prefs are at the highest since 2017.









Div yield diff
2017
2018
2019
2020E


1P/Ord
1.76%p
2.39%p
2.33%p
2.47%p


2PB/Ord
1.46%p
1.95%p
1.84%p
2.34%p


1P/2PB
0.30%p
0.44%p
0.48%p
0.13%p

Source: KRX &amp; FnGuide



Hyundai Motor Div Play: 1P & 2PB at 3% Gain with Short Hedge on Ord Futures

Travis Lundy

The S&amp;P DJI Global Indices team <a href="https://www.spglobal.com/spdji/en/documents/indexnews/announcements/20201211-1277389/1277389_tes15aircaivspindnkn4.pdf?force_download=true" target="_blank" rel="noopener">confirmed</a> Friday night that <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> would join the S&amp;P500 and the S&amp;P100 at the close of trading on 18 December, with <a href="https://www.smartkarma.com/entities/apartment-invt-mgmt-co-a" target="_blank" data-smartkarma-citation="entities:2193:1" rel="noopener">Apartment Invt &amp; Mgmt Co A (AIV US)</a> coming out of S&amp;P500 and its 14 December spin-out Apartment Income REIT replacing <a href="https://www.smartkarma.com/entities/dunkin-brands-group-inc" target="_blank" data-smartkarma-citation="entities:15866:1" rel="noopener">Dunkin' Brands Group (DNKN US)</a> in the S&amp;P Midcap 400, and <a href="https://www.smartkarma.com/entities/occidental-petroleum-corp" target="_blank" data-smartkarma-citation="entities:17075:1" rel="noopener">Occidental Petroleum (OXY US)</a> coming out of the S&amp;P100 but staying in the S&amp;P500. When the S&amp;P announced on the 16th of November that Tesla would be joining the S&amp;P500 in December, it said the pro-forma inclusion weight would be ~1.01% (without measuring what would come out). S&amp;P also said that it would update the pro-forma inclusion weight and trading value impact when the Deletion was announced, but they did not. My calc suggests it is 1.47% as of Friday's close. And the two-way trading value based on the S&amp;P's original US$51bn number is, as of today, ~US$152bn.Which is a lot.The arithmetic, and an explanation of why it matters, follow.

The S&amp;P DJI Global Indices team confirmed Friday night that Tesla Motors (TSLA US) would join the S&amp;P500 and the S&amp;P100 at the close of trading on 18 December, with Apartment Invt &amp; Mgmt Co A (AIV US) coming out of S&amp;P500 and its 14 December spin-out Apartment Income REIT replacing Dunkin' Brands Group (DNKN US) in the S&amp;P Midcap 400, and Occidental Petroleum (OXY US) coming out of the S&amp;P100 but staying in the S&amp;P500. When the S&amp;P announced on the 16th of November that Tesla would be joining the S&amp;P500 in December, it said the pro-forma inclusion weight would be ~1.01% (without measuring what would come out). S&amp;P also said that it would update the pro-forma inclusion weight and trading value impact when the Deletion was announced, but they did not. My calc suggests it is 1.47% as of Friday's close. And the two-way trading value based on the S&amp;P's original US$51bn number is, as of today, ~US$152bn.Which is a lot.The arithmetic, and an explanation of why it matters, follow.

Tesla Into S&P - Rebal Details, and Implications for Vol and Active Portfolio Reconstruction

Managing Director

Elan Gore

TMI Data Science

TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade & traditional media.  Our proprietary software, TMI Machine, is a text-mining platform designed with the buy-side & capital markets professional in mind, text-mining the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income & individual equities.  TMI provides custom leading indicators and systematic trading strategies, operating at the nexus of linguistics & statistics drawing on vast experience in investment banking and hedge fund settings in senior quantitative and fundamental roles.  

TMI Data Science was founded by Elan Gore, an award-winning Senior Global Basic Materials Equity Analyst & China Economist with 15 years of experience in North American hedge funds & institutional managers; and Alessandro Porrino, Ph.D., an Algorithmic Trading Analyst and Programmer with 10 years of front-office experience ranging from complex FX option pricing to auto-hedging strategies at Bank of America Merrill Lynch and Standard Chartered.  Mr. Gore holds an MBA in Finance from New York University Stern School of Business, and Mr. Porrino holds a Ph.D. in Systems Engineering from Brunel University London.

Cross Asset Strategy

<ul>
<li>While short-term data has been out of favour as the market envisions a post-vaccine supercycle, our text-mining detects greater relative concern on Korean in the financial media over KRW strength and COVID case counts in recent weeks</li>
<li>Japan, for example, saw similar concerns emerge on surging case counts, but news sentiment has been supported by the recent 40tr JPY stimulus package vs. limited Korean measures</li>
<li>KRW/USD's +10% move is equivalent +2x STDEVs, similar to the magnitude of CNY appreciation in the same period, vs. low single-digit moves in JPY and TWD</li>
<li>Consensus suggests foreign inflows associated with a strong KRW are likely to push the KOSPI higher even if exporter earnings (and exports) are hampered by the currency</li>
<li>While we acknowledge the macro impact of COVID resurgence is merely transitory, a key driver in our recent news attribution is the sharp decline in Korean credit card spending as reported by Shinhan for the second half of November</li>
<li>Less transitory is the KRW, and 801 Korean exporters recent polled by the Korea International Trade Association (KITA) suggested the currency is already beyond their pain threshold</li>
</ul><div class="content-highlight">TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </div>


While short-term data has been out of favour as the market envisions a post-vaccine supercycle, our text-mining detects greater relative concern on Korean in the financial media over KRW strength and COVID case counts in recent weeks
Japan, for example, saw similar concerns emerge on surging case counts, but news sentiment has been supported by the recent 40tr JPY stimulus package vs. limited Korean measures
KRW/USD's +10% move is equivalent +2x STDEVs, similar to the magnitude of CNY appreciation in the same period, vs. low single-digit moves in JPY and TWD
Consensus suggests foreign inflows associated with a strong KRW are likely to push the KOSPI higher even if exporter earnings (and exports) are hampered by the currency
While we acknowledge the macro impact of COVID resurgence is merely transitory, a key driver in our recent news attribution is the sharp decline in Korean credit card spending as reported by Shinhan for the second half of November
Less transitory is the KRW, and 801 Korean exporters recent polled by the Korea International Trade Association (KITA) suggested the currency is already beyond their pain threshold
TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Snapshot:  Text-Mining Detects Potential Pullback in Korea Sentiment on KRW Rally & COVID Surge

South Korea

Hyundai Motor Company manufactures, sells, and exports passenger cars, trucks, and commercial vehicles. The Company also sells various auto parts and operates auto repair service centers throughout South Korea. Hyundai Motor provides financial services through its subsidiaries.

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Hyundai Motor (005387 KS)

Last Week in Event SPACE: Shinsei Bank, Huifu Payment, Vedanta, Cardinal Resources, Jih Sun Finance

The weekend is upon us - pour yourself some coffee (or mulled wine) and sift through a brief summary of insights on various events discussed during...

David Blennerhassett

Myoungshin Industrial - Best Performing IPO in Korea in 2020 (Retail FOMO Madness of Crowds)

Myoungshin Industrial has been the best performing IPO in Korea in 2020, driven by its supplier relationship to Tesla. This surge reflects a major...

Douglas Kim

Hyundai Motor Div Play: 1P & 2PB at 3% Gain with Short Hedge on Ord Futures

Hyundai Motor 1P/2PB now offers a juicy div play opportunity with a short hedge on Ord futures. Short-term risk on the price ratio should be minimal.

Sanghyun Park

Tesla Into S&P - Rebal Details, and Implications for Vol and Active Portfolio Reconstruction

The TSLA S&P500 inclusion involves $150bn of direct flows and perhaps another $200-300bn indirect flows. It really is a MAMMOTH trade. And index...

Travis Lundy

TMI Snapshot: Text-Mining Detects Potential Pullback in Korea Sentiment on KRW Rally & COVID Surge

Our text-mining detects a potential pullback in Korea macro sentiment on rapid KRW appreciation and the COVID surge impacting credit card spending,...

Elan Gore

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