Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Thematic (Sector/Industry)

<ul>
<li>We believe that the nine Korean banks (on average) are likely to continue to underperform KOSPI in the next 6-12 months due to the continued rising delinquencies.</li>
<li>The major reasons for higher loans and cards delinquency ratios include higher interest rate burdens, higher inflation rates, inverted yield curve, weakening economy, and pressures on disposable income.</li>
<li>The delinquency ratios of the largest nine banks in Korea all worsened in 1Q 2023 (for both banks and credit cards).</li>
</ul>


We believe that the nine Korean banks (on average) are likely to continue to underperform KOSPI in the next 6-12 months due to the continued rising delinquencies.
The major reasons for higher loans and cards delinquency ratios include higher interest rate burdens, higher inflation rates, inverted yield curve, weakening economy, and pressures on disposable income.
The delinquency ratios of the largest nine banks in Korea all worsened in 1Q 2023 (for both banks and credit cards).


Korean Banks: Sharp Rise in Delinquency Ratios in 1Q 2023 & Inverted Yield Curve

Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

Equity Bottom-Up

Industrial Bank Of Korea / Equity Bottom-Up

<ul>
<li>In our latest South Korean banks screener; we add Industrial Bank of Korea to the buy list alongside Hana Financial; we cut KB Financial to a neutral rating</li>
<li>Industrial Bank of Korea has very attractive multiples and PEG ratio and the best pre-provision and post-provision returns of the peer group, it also has sound broad credit quality metrics</li>
<li>We introduce a broader credit quality metric to the screens and also EPS revisions over the last week and last month to give a sense of earnings momentum changes</li>
</ul>


In our latest South Korean banks screener; we add Industrial Bank of Korea to the buy list alongside Hana Financial; we cut KB Financial to a neutral rating
Industrial Bank of Korea has very attractive multiples and PEG ratio and the best pre-provision and post-provision returns of the peer group, it also has sound broad credit quality metrics
We introduce a broader credit quality metric to the screens and also EPS revisions over the last week and last month to give a sense of earnings momentum changes


South Korean Banks Screener; Highlighting Industrial Bank of Korea (024110 KS)

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/jb-financial-group-co-ltd" target="_blank" data-smartkarma-citation="entities:16104:1" rel="noopener">Jb Financial Group (175330 KS)</a> will replace <a href="https://www.smartkarma.com/entities/meritz-fire-marine-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:20468:1" rel="noopener">Meritz Fire &amp; Marine Insurance (000060 KS)</a> in 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> at the close on 27 January.</li>
<li>We estimate passive <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI2 INDEX</a> trackers will need to buy 3.494m shares (KRW 36.34bn; 4.04 days of ADV) of <a href="https://www.smartkarma.com/entities/jb-financial-group-co-ltd" target="_blank" data-smartkarma-citation="entities:16104:1" rel="noopener">Jb Financial Group (175330 KS)</a> at the close on 27 January.</li>
<li>
<a href="https://www.smartkarma.com/entities/dgb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:6138:1" rel="noopener">DGB Financial Group (139130 KS)</a> could be added to the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI2 INDEX</a> in April, replacing <a href="https://www.smartkarma.com/entities/meritz-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:19692:1" rel="noopener">Meritz Securities (008560 KS)</a> following its merger with <a href="https://www.smartkarma.com/entities/meritz-financial-group-inc" target="_blank" data-smartkarma-citation="entities:11776:1" rel="noopener">Meritz Financial Group (138040 KS)</a>. </li>
</ul>



Jb Financial Group (175330 KS) will replace Meritz Fire &amp; Marine Insurance (000060 KS) in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 27 January.
We estimate passive KOSPI2 INDEX trackers will need to buy 3.494m shares (KRW 36.34bn; 4.04 days of ADV) of Jb Financial Group (175330 KS) at the close on 27 January.

DGB Financial Group (139130 KS) could be added to the KOSPI2 INDEX in April, replacing Meritz Securities (008560 KS) following its merger with Meritz Financial Group (138040 KS). 


KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)

<ul>
<li>Six of the seven South Korean banks screen favourably on valuation versus returns metrics to June 2022; we like KB Financial, whilst Woori Financial is a wait and see story</li>
<li>KB has undemanding valuations, and one of the lowest PEG ratios; it delivers steady pre-provision returns, has sound core capital ratio of close to 13% and healthy credit quality ratios</li>
<li>Woori Financial and potentially KakaoBank are two names to review post 3Q22 results, with Woori and KakaoBank having seen their 2Q22 cost of risk rise sharply; we seek positive catalysts</li>
</ul>


Six of the seven South Korean banks screen favourably on valuation versus returns metrics to June 2022; we like KB Financial, whilst Woori Financial is a wait and see story
KB has undemanding valuations, and one of the lowest PEG ratios; it delivers steady pre-provision returns, has sound core capital ratio of close to 13% and healthy credit quality ratios
Woori Financial and potentially KakaoBank are two names to review post 3Q22 results, with Woori and KakaoBank having seen their 2Q22 cost of risk rise sharply; we seek positive catalysts


South Korean Banks Screener; KB Financial Is Our Core Pick

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<ul>
<li>WCP aims to raise around US$690m via selling a mix of primary and secondary shares in its Korean IPO.</li>
<li>WCP designs, manufactures, and sells separators, which are one of the four core materials for secondary Lithium-ion batteries</li>
<li>In this note, we talk about the recent refiling updates, peer comparison and valuations.</li>
</ul>


WCP aims to raise around US$690m via selling a mix of primary and secondary shares in its Korean IPO.
WCP designs, manufactures, and sells separators, which are one of the four core materials for secondary Lithium-ion batteries
In this note, we talk about the recent refiling updates, peer comparison and valuations.


WCP IPO - Peer Comparison and Valuation - Needs a Price Cut Not a Timeline Extension

South Korea

Industrial Bank of Korea(IBK) is a policy bank providing development finance and related banking services to support small and medium-sized enterprises in Korea. The Bank provides loans, discount bills, trade finance, deposits, foreign exchange, and payment guarantees. The company also offers services such as credit cards, insurance and smart-phone banking.

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Industrial Bank of Korea (IBK LX)

Korean Banks: Sharp Rise in Delinquency Ratios in 1Q 2023 & Inverted Yield Curve

We believe that the nine Korean banks (on average) are likely to continue to underperform KOSPI in the next 6-12 months due to the continued rising...

Douglas Kim

South Korean Banks Screener; Highlighting Industrial Bank of Korea (024110 KS)

We add deep value Industrial Bank of Korea to the buy list along with higher quality Hana Financial and we cut KB Financial to a neutral rating; we...

Victor Galliano

KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)

JB Financial will replace Meritz F&M Insurance in the KOSPI200 at the close on 27 Jan. JB is +32% in the last 13 trading days & trades at a higher...

Brian Freitas

South Korean Banks Screener; KB Financial Is Our Core Pick

Of the seven South Korean banks, we like KB Financial for its attractive valuations, and low PEG ratio; it delivers steady pre-provision returns,...

Victor Galliano

WCP IPO - Peer Comparison and Valuation - Needs a Price Cut Not a Timeline Extension

WCP aims to raise around US$690m via selling a mix of primary and secondary shares in its Korean IPO. In this note we talk about the refiling...

Sumeet Singh

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