Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<p>In this insight, we provide the price action comparisons of <a href="https://www.smartkarma.com/entities/sk-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:393:1" rel="noopener">SK Holdings (034730 KS),</a><a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS),</a> and <a href="https://www.smartkarma.com/entities/netmarble-corporation" target="_blank" data-smartkarma-citation="entities:22839:1" rel="noopener">Netmarble Corporation (251270 KS)</a> prior to the IPOs and their bookbuilding dates of SK Biopharm, Kakao Games, and Big Hit Entertainment. </p>
<p>Unlike SK Holdings and Kakao Corp whose share price prices increased in the one and two weeks prior to the start of the bookbuilding of SK Biopharm and Kakao Games, Netmarble Corp's share price has been declining in the one and two weeks prior to the start of the bookbuilding of Big Hit Entertainment. </p>
<div class="content-highlight">
<p><strong>We believe this is a BAD sign for the Big Hit Entertainment IPO since it could signal that after analyzing the prospectus of Big Hit Entertainment IPO, many institutional investors may conclude this IPO will be disappointing. </strong></p>
</div>

In this insight, we provide the price action comparisons of SK Holdings (034730 KS),Kakao Corp (035720 KS), and Netmarble Corporation (251270 KS) prior to the IPOs and their bookbuilding dates of SK Biopharm, Kakao Games, and Big Hit Entertainment. 
Unlike SK Holdings and Kakao Corp whose share price prices increased in the one and two weeks prior to the start of the bookbuilding of SK Biopharm and Kakao Games, Netmarble Corp's share price has been declining in the one and two weeks prior to the start of the bookbuilding of Big Hit Entertainment. 

We believe this is a BAD sign for the Big Hit Entertainment IPO since it could signal that after analyzing the prospectus of Big Hit Entertainment IPO, many institutional investors may conclude this IPO will be disappointing. 


Comparison of SK Holdings, Kakao, & Netmarble Prior to IPOs of SK Biopharm, Kakao Games, & Big Hit

APAC IPOs & Placements

Zhen Zhou, Toh

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.

<div><p><a href="https://www.smartkarma.com/entities/sk-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:393:1" rel="noopener">SK Holdings (034730 KS)</a> is looking to raise around US$326m via selling 3.6% of <a href="https://www.smartkarma.com/entities/esr-cayman-ltd" target="_blank" data-smartkarma-citation="entities:27983:1" rel="noopener">ESR Cayman (1821 HK)</a>. Post-selldown, SK Holdings will still have about 7.4% stake in the company.</p></div><div><p>We covered the company's first and second listing attempt extensively, you can find links to our coverage below. </p></div><div><p>In this insight, we will briefly look at the 1H 2020 results, discuss deal dynamics and run the deal through our ECM framework.</p></div><p>June placement:</p><ul><li>
<a href="https://www.smartkarma.com/insights/esr-cayman-placement-hasn-t-done-much-since-listing-liquidity-remains-tight" target="_blank" data-smartkarma-citation="insights:40084" rel="noopener">ESR Cayman Placement - Hasn't Done Much Since Listing, Liquidity Remains Tight</a> </li></ul><div><p>Links to our earlier insights:</p></div><div><ul>
<li>Company's business model and provided an overview of its operations, <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-a-giant-in-the-making" target="_blank" rel="noopener">ESR Cayman Pre-IPO - A Giant in the Making</a>; </li>
<li>Talked about the financials and the drivers for each of the three segments, <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-earnings-and-segment-analysis" target="_blank" rel="noopener">ESR Cayman Pre-IPO - Earnings and Segment Analysis</a>.</li>
<li>Derived valuation for each of the segments: <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-first-stab-at-valuation" target="_blank" rel="noopener">ESR Cayman Pre-IPO- First Stab at Valuation</a>
</li>
<li>Provided updates from the PHIP: <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-updates-from-phip-growth-remains-on-track" target="_blank" rel="noopener">ESR Cayman Pre-IPO - Updates from PHIP - Growth Remains on Track</a>
</li>
<li>Provided an update on valuations and key risks: <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-updated-valuation-and-key-risks" target="_blank" rel="noopener">ESR Cayman Pre-IPO - Updated Valuation and Key Risks</a>
</li>
<li>Did a quick comparison with peers: <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-peer-comparison-quick-take-bigger-than-some-much-smaller-than-others" target="_blank" rel="noopener">ESR Cayman Pre-IPO - Peer Comparison Quick Take - Bigger than Some, Much Smaller than Others</a>
</li>
<li>Details of the previous listing attempt and comments on final valuations: <a href="https://www.smartkarma.com/insights/esr-cayman-ipo-richly-valued" target="_blank" rel="noopener">ESR Cayman IPO - Richly Valued</a>
</li>
<li>Updates from the re-filed application proof: <a href="https://www.smartkarma.com/insights/esr-cayman-re-pre-ipo-the-more-things-change-the-more-they-remain-the-same" target="_blank" rel="noopener">ESR Cayman Re-Pre-IPO - The More Things Change, the More They Remain the Same</a>
</li>
<li>Re-look at valuations: <a href="https://www.smartkarma.com/insights/esr-cayman-re-pre-ipo-another-stab-at-valuation" target="_blank" rel="noopener">ESR Cayman Re-Pre-IPO - Another Stab at Valuation</a>
</li>
<li>Final comment on valuations post deal launch: <a href="https://www.smartkarma.com/insights/esr-cayman-re-ipo-trying-to-hitch-a-ride-on-momentum-other-cheaper-ways-to-play-on-e-commerce" target="_blank" rel="noopener">ESR Cayman Re-IPO - Trying to Hitch a Ride on Momentum. Other Cheaper Ways to Play on E-Commerce</a>
</li>
<li>Trading update at the time of listing: <a href="https://www.smartkarma.com/insights/esr-cayman-ipo-trading-riding-higher-on-momentum-some-book-colour-privatisation-comparison" target="_blank" rel="noopener">ESR Cayman IPO Trading - Riding (Higher) On Momentum - Some Book Colour, Privatisation Comparison</a>
</li>
</ul></div>

SK Holdings (034730 KS) is looking to raise around US$326m via selling 3.6% of ESR Cayman (1821 HK). Post-selldown, SK Holdings will still have about 7.4% stake in the company.We covered the company's first and second listing attempt extensively, you can find links to our coverage below. In this insight, we will briefly look at the 1H 2020 results, discuss deal dynamics and run the deal through our ECM framework.June placement:
ESR Cayman Placement - Hasn't Done Much Since Listing, Liquidity Remains Tight Links to our earlier insights:
Company's business model and provided an overview of its operations, ESR Cayman Pre-IPO - A Giant in the Making; 
Talked about the financials and the drivers for each of the three segments, ESR Cayman Pre-IPO - Earnings and Segment Analysis.
Derived valuation for each of the segments: ESR Cayman Pre-IPO- First Stab at Valuation

Provided updates from the PHIP: ESR Cayman Pre-IPO - Updates from PHIP - Growth Remains on Track

Provided an update on valuations and key risks: ESR Cayman Pre-IPO - Updated Valuation and Key Risks

Did a quick comparison with peers: ESR Cayman Pre-IPO - Peer Comparison Quick Take - Bigger than Some, Much Smaller than Others

Details of the previous listing attempt and comments on final valuations: ESR Cayman IPO - Richly Valued

Updates from the re-filed application proof: ESR Cayman Re-Pre-IPO - The More Things Change, the More They Remain the Same

Re-look at valuations: ESR Cayman Re-Pre-IPO - Another Stab at Valuation

Final comment on valuations post deal launch: ESR Cayman Re-IPO - Trying to Hitch a Ride on Momentum. Other Cheaper Ways to Play on E-Commerce

Trading update at the time of listing: ESR Cayman IPO Trading - Riding (Higher) On Momentum - Some Book Colour, Privatisation Comparison



ESR Cayman Placement - Even More to Come Soon

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<p><a href="https://www.smartkarma.com/entities/chindata-group-holdings-adr" target="_blank" data-smartkarma-citation="entities:29274:1" rel="noopener">Chindata (CD US)</a> is a data centre operator. It is the largest carrier-neutral hyperscale data centre operator in Asia-Pacific emerging markets as measured by capacity in service, with 21.5% market share out of a total market size of 829 MW, according to Frost &amp; Sullivan. Chindata is backed by Bain Capital (57.17% shareholder), APG Strategic Real Estate Pool/Dutch pension funds (10.43%) and <a href="https://www.smartkarma.com/entities/sk-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:393:1" rel="noopener">SK Holdings (034730 KS)</a> (8.94%). It is seeking to raise up to $800 million (primary and secondary sale) through a Nasdaq IPO, according to press reports. </p><div class="content-highlight"><p>The Asia-Pacific hyperscale data centre market is a structural growth market in part due to the increasing prevalence of outsourcing data centre services, rising client demand for higher power density and scalability, and increasing compliance and regulatory requirements on data security. Overall, we think that Chindata is an attractive play on these favourable market dynamics. </p></div>

Chindata (CD US) is a data centre operator. It is the largest carrier-neutral hyperscale data centre operator in Asia-Pacific emerging markets as measured by capacity in service, with 21.5% market share out of a total market size of 829 MW, according to Frost &amp; Sullivan. Chindata is backed by Bain Capital (57.17% shareholder), APG Strategic Real Estate Pool/Dutch pension funds (10.43%) and SK Holdings (034730 KS) (8.94%). It is seeking to raise up to $800 million (primary and secondary sale) through a Nasdaq IPO, according to press reports. The Asia-Pacific hyperscale data centre market is a structural growth market in part due to the increasing prevalence of outsourcing data centre services, rising client demand for higher power density and scalability, and increasing compliance and regulatory requirements on data security. Overall, we think that Chindata is an attractive play on these favourable market dynamics. 

Chindata Group IPO Initiation: Where the Cloud Meets the Ground

Equity Bottom-Up

<div class="content-highlight">
<p>In this insight, we discuss the clear signs of overshooting of <a href="https://www.smartkarma.com/entities/netmarble-corporation" target="_blank" rel="noopener" data-smartkarma-citation="entities:22839:1">Netmarble Corporation (251270 KS)</a> whose share price has more than doubled in the past three months, jumping to the 17th largest stock in KOSPI with a market cap of 16.7 trillion won ($14.2 billion). In the past two months, this stock's share price has surged 83%. Netmarble Corp has been one of the best performing stocks in KOSPI in the past two months.</p>
<p>All in all, it is very difficult to make a convincing Buy argument for Netmarble Corp at current levels and investors should take a more prudent approach to waiting until the stock price comes down to more reasonable levels. Given the tremendous recent outperformance of Netmarble Corp, we believe this is a good time to take some profits on this stock. <a href="https://www.smartkarma.com/entities/sk-holdings-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:393:1"></a></p>
</div><p>The following are the major reasons why we think Netmarble Corp is overshooting and the risk/reward of going long on this stock no longer is attractive. </p><ul>
<li><strong>Upcoming IPO of Big Hit Entertainment in October</strong></li>
<li><strong>Strong turnaround of its core game business</strong></li>
<li><strong>Improving operations of Coway affiliate</strong></li>
</ul>


In this insight, we discuss the clear signs of overshooting of Netmarble Corporation (251270 KS) whose share price has more than doubled in the past three months, jumping to the 17th largest stock in KOSPI with a market cap of 16.7 trillion won ($14.2 billion). In the past two months, this stock's share price has surged 83%. Netmarble Corp has been one of the best performing stocks in KOSPI in the past two months.
All in all, it is very difficult to make a convincing Buy argument for Netmarble Corp at current levels and investors should take a more prudent approach to waiting until the stock price comes down to more reasonable levels. Given the tremendous recent outperformance of Netmarble Corp, we believe this is a good time to take some profits on this stock. 
The following are the major reasons why we think Netmarble Corp is overshooting and the risk/reward of going long on this stock no longer is attractive. 
Upcoming IPO of Big Hit Entertainment in October
Strong turnaround of its core game business
Improving operations of Coway affiliate


Netmarble Corp - Clear Signs of Overshooting

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

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Event-Driven

<p>The KRX officially announced the fast entry of SK Biopharm to the following KRX indices in the form of Fast Entry.</p><figure class="editor-figure mceNonEditable"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/151/527/original/11.png?1596988381" class="editor-image img-responsive" data-smartkarma-image-id="151527"></figure><p></p></figure><div>
<hr>
<div class="content-highlight"><h2>KOSPI 200 Fast-Entry</h2></div>
<p>If an IPO stock stays in the top 50 ordinary shares on KOSPI by market cap for 15 trading days from the listing day, it will be subject to index inclusion before regular biannual rebalancing.</p>
</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/151/523/original/2.png?1596987628" class="editor-image img-responsive" data-smartkarma-image-id="151523"></figure><p>For SK Biopharm, the calculation period was July 2 (listing) to 21.</p><p>The average MC was ₩14.9tril, which was comfortably above the threshold.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/151/524/original/7.png?1596988136" class="editor-image img-responsive" data-smartkarma-image-id="151524"></figure><p>At the last close, SK Biopharm is worth ₩14.0tril, putting it at the 22nd place on KOSPI by market cap.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/151/525/original/3.png?1596988159" class="editor-image img-responsive" data-smartkarma-image-id="151525"></figure><div>
<p>Then, the float requirement? The KRX sets the minimum float at 10%. But it doesn't count those voluntary lock-ups by minority shareholders.</p>
<p>So, the index float should be 21.88%, which again satisfies the float requirement.</p>
</div><div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/151/528/original/12.png?1596988974" class="editor-image img-responsive" data-smartkarma-image-id="151528"></figure></div><div>
<div>
<p><strong>Exclusion</strong></p>
<div><p><span>SK Biopharm replaces a constituent that has the smallest market capitalization in the index as of the recent rebalancing.</span></p></div>
<div><p>The KRX officially confirms that it is Kiswire (002240) that leaves the KOSPI 200. Outflow impact wouldn't be small. At the current 30D DTV, 8.8x DTV will likely flow out.</p></div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/151/529/original/8.png?1596990365" class="editor-image img-responsive" data-smartkarma-image-id="151529"></figure><p></p>
<p><strong>Lastly, the effective date</strong></p>
<p>It will be the trading day following the last trading day of the nearest month KOSPI 200 futures contract that is the first to arrive after 15 trading days since the listing day.</p>
</div>
<div>
<p>In this case, the nearest month is September.</p>
<p>Hence, September 11 will be the day when SK Biopharm's inclusion and Kiswire's exclusion will officially take place.</p>
</div>
</div>

The KRX officially announced the fast entry of SK Biopharm to the following KRX indices in the form of Fast Entry.

KOSPI 200 Fast-Entry
If an IPO stock stays in the top 50 ordinary shares on KOSPI by market cap for 15 trading days from the listing day, it will be subject to index inclusion before regular biannual rebalancing.
For SK Biopharm, the calculation period was July 2 (listing) to 21.The average MC was ₩14.9tril, which was comfortably above the threshold.At the last close, SK Biopharm is worth ₩14.0tril, putting it at the 22nd place on KOSPI by market cap.
Then, the float requirement? The KRX sets the minimum float at 10%. But it doesn't count those voluntary lock-ups by minority shareholders.
So, the index float should be 21.88%, which again satisfies the float requirement.


Exclusion
SK Biopharm replaces a constituent that has the smallest market capitalization in the index as of the recent rebalancing.
The KRX officially confirms that it is Kiswire (002240) that leaves the KOSPI 200. Outflow impact wouldn't be small. At the current 30D DTV, 8.8x DTV will likely flow out.

Lastly, the effective date
It will be the trading day following the last trading day of the nearest month KOSPI 200 futures contract that is the first to arrive after 15 trading days since the listing day.


In this case, the nearest month is September.
Hence, September 11 will be the day when SK Biopharm's inclusion and Kiswire's exclusion will officially take place.



Fast Entry of SK Biopharmaceuticals to KRX Indices, Incl. KOSPI 200

South Korea

SK Holdings Co., Ltd. is a holdings company that is engaged in various industries including energy, chemicals, information technology, semiconductors, marketing, and services businesses in South Korea and internationally.

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SK Inc (034730 KS)

Comparison of SK Holdings, Kakao, & Netmarble Prior to IPOs of SK Biopharm, Kakao Games, & Big Hit

We believe this is a BAD sign for the Big Hit Entertainment IPO since it could signal that after analyzing the prospectus of Big Hit Entertainment...

Douglas Kim

ESR Cayman Placement - Even More to Come Soon

A group of shareholders, including Warburg Pincus, aim to raise around US$177m via selling 2.7% of ESR Cayman (1821 HK). We had covered the...

Zhen Zhou, Toh

Chindata Group IPO Initiation: Where the Cloud Meets the Ground

Chindata is a data centre operator. It is the largest carrier-neutral hyperscale data centre operator in Asia-Pacific emerging markets as measured...

Arun George

Netmarble Corp - Clear Signs of Overshooting

In this insight, we discuss the clear signs of overshooting of Netmarble Corporation (251270 KS) whose share price has more than doubled in the...

Douglas Kim

Fast Entry of SK Biopharmaceuticals to KRX Indices, Incl. KOSPI 200

The KRX officially announced the fast entry of SK Biopharm to the following KRX indices in the form of Fast Entry. KOSPI 200 Fast-Entry If an IPO...

Sanghyun Park

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