Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<div class="content-highlight"><p>On December 3rd, the SK Group announced that SK Telecom's current <a href="http://koreabizwire.com/sk-telecom-ceo-to-double-as-sk-hynix-vice-chairman/176008" target="_blank" rel="noopener">CEO Park Jung-Ho</a> will be promoted to be the Vice Chairman of <a href="https://www.smartkarma.com/entities/sk-hynix-inc" target="_blank" data-smartkarma-citation="entities:16955:1" rel="noopener">SK Hynix (000660 KS) </a>while also maintaining his current position as the CEO of SK Telecom. <strong>This is a bit unusual. </strong>The CEO of position of SK Telecom is difficult on its own. Why would the SK Group try to tact on another senior position of the Vice Chairman position of SK Hynix on the SK Telecom CEO Park Jung-Ho? <strong>In our view, this is a PRELUDE to SK Telecom becoming an INTERMEDIATE HOLDCO of the SK Group. </strong></p></div>

On December 3rd, the SK Group announced that SK Telecom's current CEO Park Jung-Ho will be promoted to be the Vice Chairman of SK Hynix (000660 KS) while also maintaining his current position as the CEO of SK Telecom. This is a bit unusual. The CEO of position of SK Telecom is difficult on its own. Why would the SK Group try to tact on another senior position of the Vice Chairman position of SK Hynix on the SK Telecom CEO Park Jung-Ho? In our view, this is a PRELUDE to SK Telecom becoming an INTERMEDIATE HOLDCO of the SK Group. 

SK Telecom's CEO Park Jung-Ho Becomes Vice Chairman of SK Hynix: Prelude to an Intermediate Holdco?

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.

Equity Capital Markets

HBM Holdings Limited / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/harbour-biomed-holdings-limited" target="_blank" data-smartkarma-citation="entities:29717:1" rel="noopener">Harbour Biomed (HMD HK)</a> is a biopharmaceutical company with a focus on discovering, developing and commercialising differentiated antibody therapeutics in immunology and oncology disease areas. Harbour is backed by Legend Capital, GIC, CDH Investments, <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>, OrbiMed, Octagon Capital and Sage Partners. The Series C round in July 2020 raised $102.8 million at a post-money valuation of $780 million. </p><div class="content-highlight"><p>Harbour is seeking to raise $300 million through a Hong Kong IPO, according to press reports. Harbour’s three antibody platforms (HCAb Platform, HBICE Platform and H2L2 Platform) are a key source of differentiation. Overall, we believe that Harbour’s clinical assets are attractive. </p></div>

Harbour Biomed (HMD HK) is a biopharmaceutical company with a focus on discovering, developing and commercialising differentiated antibody therapeutics in immunology and oncology disease areas. Harbour is backed by Legend Capital, GIC, CDH Investments, SK Holdings (034730 KS), OrbiMed, Octagon Capital and Sage Partners. The Series C round in July 2020 raised $102.8 million at a post-money valuation of $780 million. Harbour is seeking to raise $300 million through a Hong Kong IPO, according to press reports. Harbour’s three antibody platforms (HCAb Platform, HBICE Platform and H2L2 Platform) are a key source of differentiation. Overall, we believe that Harbour’s clinical assets are attractive. 

HBM Holdings (Harbour Biomed) IPO Initiation: Making Resistance Futile

Cross Asset Strategy

<p>One of the most important developments arising in Korea is the potential <strong>amendment of the</strong><strong><a href="https://n.news.naver.com/article/009/0004680246?cds=news_edit" target="_blank" rel="noopener">Fair Trade Act</a>,</strong> especially on the clause involving (일감몰아주기), which includes taking strict actions against excessive intra-affiliate transactions among large business groups. </p>
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<p>Overall, it appears that the potential changes to the Fair Trade Act could be very disruptive for so many top Korean companies. Plus, although the incumbent party (Democratic Party of Korea) has a lot of power in the National Assembly, it remains uncertain whether the government will actually be able to make the amendments since the changes in regulations could be so burdensome on so many top business groups in Korea. In addition, even if they pass the amendments, it is not all sure if the controlling shareholders will reduce their ownership in their companies. </p>
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One of the most important developments arising in Korea is the potential amendment of theFair Trade Act, especially on the clause involving (일감몰아주기), which includes taking strict actions against excessive intra-affiliate transactions among large business groups. 

Overall, it appears that the potential changes to the Fair Trade Act could be very disruptive for so many top Korean companies. Plus, although the incumbent party (Democratic Party of Korea) has a lot of power in the National Assembly, it remains uncertain whether the government will actually be able to make the amendments since the changes in regulations could be so burdensome on so many top business groups in Korea. In addition, even if they pass the amendments, it is not all sure if the controlling shareholders will reduce their ownership in their companies. 


Will SK Holdings Required to Sell a 25% Stake in SK Biopharm Due to Changes in the Fair Trade Act?

<div><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 which 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%). Chindata has launched its IPO at a price range of $11.50-13.50 per ADS. There is also a $135 million concurrent private placement with <a href="https://www.smartkarma.com/entities/country-garden-holdings-co" target="_blank" data-smartkarma-citation="entities:5225:1" rel="noopener">Country Garden Holdings Co (2007 HK)</a> ($65 million), Sequoia Capital ($40 million) and Mr Hui Wing Mau, Chairman of Shimao Group ($30 million). At the mid-point of the IPO price range and along with the concurrent private placement, Chindata will raise net proceeds of $597 million. </p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/chindata-group-ipo-initiation-where-the-cloud-meets-the-ground" target="_blank" rel="noopener">our initiation note</a>, we stated that Chindata is an attractive play on the favourable Asia-Pacific hyperscale data centre market dynamics. Overall, we would be inclined to participate in the IPO at the proposed price range. </p></div></div></div>

Chindata (CD US) is a data centre operator which 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%). Chindata has launched its IPO at a price range of $11.50-13.50 per ADS. There is also a $135 million concurrent private placement with Country Garden Holdings Co (2007 HK) ($65 million), Sequoia Capital ($40 million) and Mr Hui Wing Mau, Chairman of Shimao Group ($30 million). At the mid-point of the IPO price range and along with the concurrent private placement, Chindata will raise net proceeds of $597 million. In our initiation note, we stated that Chindata is an attractive play on the favourable Asia-Pacific hyperscale data centre market dynamics. Overall, we would be inclined to participate in the IPO at the proposed price range. 

<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>
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<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>
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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

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)

SK Telecom's CEO Park Jung-Ho Becomes Vice Chairman of SK Hynix: Prelude to an Intermediate Holdco?

The fact that Park Jung-Ho will now be the CEO of SK Telecom and the Vice Chairman of SK Hynix at the same time would suggest a PRELUDE of SK...

Douglas Kim

HBM Holdings (Harbour Biomed) IPO Initiation: Making Resistance Futile

Harbour is seeking to raise $300 million through a Hong Kong IPO. Harbour’s three antibody platforms are a key source of differentiation. Overall,...

Arun George

Will SK Holdings Required to Sell a 25% Stake in SK Biopharm Due to Changes in the Fair Trade Act?

One of the most important developments arising in Korea is the potential amendment of the Fair Trade Act, which includes taking strict actions...

Douglas Kim

Chindata Group IPO: Valuation Insights

Ming Yuan Cloud Group (MYCG HK) is the leading software solution provider for property developers in China with a market share of 18.5% as...

Arun George

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

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