Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>In this insight, we highlight the pricing gap divergences of the major Korean holdcos and opcos in 3Q 2023.</li>
<li>Of the 38 pair trades, 22 of them involved holdcos outperforming opcos YTD and 16 of them involved opcos outperforming holdcos in the same period.</li>
<li>We highlight 38 pair trades that involve Korean holdcos and opcos.</li>
</ul>


In this insight, we highlight the pricing gap divergences of the major Korean holdcos and opcos in 3Q 2023.
Of the 38 pair trades, 22 of them involved holdcos outperforming opcos YTD and 16 of them involved opcos outperforming holdcos in the same period.
We highlight 38 pair trades that involve Korean holdcos and opcos.


Korean Holdcos Vs Opcos Gap Trading Opportunities in 3Q 2023

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>My read of Bain's Offer last month, was a tactic to flesh out a competing Offer.  It seemed unlikely Bain would get the regulatory approval to take <strong><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> </strong>private. </li>
<li>Now state-backed China Merchants Capital Holdings International Ltd. has made a non-binding offer of $9.20/ADS, compared to $8/ADS from Bain.</li>
<li>This Offer is indicative. But an SOE taking over data centres makes a lot of sense. </li>
</ul>


My read of Bain's Offer last month, was a tactic to flesh out a competing Offer.  It seemed unlikely Bain would get the regulatory approval to take Chindata (CD US) private. 
Now state-backed China Merchants Capital Holdings International Ltd. has made a non-binding offer of $9.20/ADS, compared to $8/ADS from Bain.
This Offer is indicative. But an SOE taking over data centres makes a lot of sense. 


Chindata: Bain's Move Spurs China Merchants Into Action

<ul>
<li>SKC Co Ltd (011790 KS) announced on 29 April that it plans to change into an intermediate holding company.</li>
<li>We believe that the formation of an intermediate holding company structure could have a negative impact on SKC's share price. </li>
<li>This is because some investors may be concerned that SKC may try to complete IPOs of some of its valuable subsidiaries including SKCFT Holdings without adequate protection for SKC shareholders.</li>
</ul>


SKC Co Ltd (011790 KS) announced on 29 April that it plans to change into an intermediate holding company.
We believe that the formation of an intermediate holding company structure could have a negative impact on SKC's share price. 
This is because some investors may be concerned that SKC may try to complete IPOs of some of its valuable subsidiaries including SKCFT Holdings without adequate protection for SKC shareholders.


SKC Co: Formation of an Intermediate Holding Company

<ul>
<li>SKC announced aggressive plans to expand its rechargeable battery, semiconductor, and ecofriendly materials and it plans to invest about 5 trillion to 6 trillion won in these businesses by 2027. </li>
<li>We believe that the company will use a combination of asset sales, sale of its treasury shares, and additional debt and equity raising in the next 3-5 years. </li>
<li>While the market welcomes sale of non-core businesses such as SK Pucore and sale of treasury shares, it is likely to have greater concerns about additional debt and equity raising. </li>
</ul>


SKC announced aggressive plans to expand its rechargeable battery, semiconductor, and ecofriendly materials and it plans to invest about 5 trillion to 6 trillion won in these businesses by 2027. 
We believe that the company will use a combination of asset sales, sale of its treasury shares, and additional debt and equity raising in the next 3-5 years. 
While the market welcomes sale of non-core businesses such as SK Pucore and sale of treasury shares, it is likely to have greater concerns about additional debt and equity raising. 


SKC: Aggressive Plans to Expand Rechargeable Battery & Semiconductor Materials - But At What Price?

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

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

<ul>
<li>We should seize the arbitrage trading opportunities between SSF and subscription rights during the rights trading window. SK Innovation's SSF is highly liquid, being traded at nearly 0.5x spot.</li>
<li>The key is to catch the timing of basis widening. SK Innovation traditionally experiences significant intraday basis fluctuations, making it a crucial factor in maximizing our profitability.</li>
<li>The ex-date play, betting on the tendency for prices to close above the base price on the ex-date, may not hold significant appeal. This pattern has become less pronounced recently.</li>
</ul>


We should seize the arbitrage trading opportunities between SSF and subscription rights during the rights trading window. SK Innovation's SSF is highly liquid, being traded at nearly 0.5x spot.
The key is to catch the timing of basis widening. SK Innovation traditionally experiences significant intraday basis fluctuations, making it a crucial factor in maximizing our profitability.
The ex-date play, betting on the tendency for prices to close above the base price on the ex-date, may not hold significant appeal. This pattern has become less pronounced recently.


What Arb Trading Opportunities Should We Target in SK Innovation's Rights Offering?

South Korea

Posco DX Company Ltd. provides information and technology services. The Company provides computer systems design, computer and server merchant wholesale, computer and office machine repair and maintenance services. Posco DX also offers eic engineering, smart factory, wireless networking equipment, steel manufacturing, and digital video recorder manufacturing services.

LG Display Co., Ltd. develops and manufactures digital display products.  The Company's products include thin film transistor-liquid crystal displays (TFT-LCD) for notebook and desktop computer monitors, TVs, mobile phones, and medical equipment.  LG Display provides its products mainly to overseas markets.

LG Innotek Co., Ltd. develops and produces cellular phone parts such as mini vibration motors, LCD modules, light emitting diode (LED), camera modules, protection circuit modules. The Company also manufactures liquid crystal displays (LCD) and plasma display panels (PDP) parts such as inverters, intelligent power modules, multi chip modules, and tuners.

Samsung SDS Co., Ltd. provides information technology services, such as consulting and technical services. The Company also offers outsourcing services including application outsourcing, IT infrastructure outsourcing, and cloud computing.

Samsung Electro-Mechanics Co., Ltd. manufactures a variety of electronic components used in computers, audio and video products, industrial electronics, and telecommunication equipment. The Company's products include multi-layer boards and capacitors, optical Pick Ups, deflection yokes (DY), keyboards, speakers, and light emitting diode (LED) products.

Samsung Electro Mechanics Co, Ltd. (009150 KS)

IsuPetasys Co., Ltd. manufactures printed circuit boards (PCBs) specializing in high multilayer PCBs.  The Company exports its products to Cisco Systems, Brocade Communications Systems, and Sun Microsystems in the United States.

NCSOFT Corporation develops and markets on-line games that enable users to play over the Internet and computer software, such as web editing software.  The Company also designs and constructs databases, Intranet, and commercial Internet access systems.

COSMOAM&T Co., Ltd. manufactures, sells, and exports blank video & audio recording tapes including back-coated tapes, high speed recordable tapes, and video head cleaners.  The Company also produces recordable and rewritable optical discs, such as compact discs (CD), mini discs (MD), and digital video discs (DVD).

LEENO Industrial Inc. develops and manufactures various testers.  The Company's products include integrated circuit (IC) test sockets, test probe pins used in semiconductor industry.

Hyundai Autoever Corp. provides information technology services. The Company offers system integration, system management, information system development, and other services. Hyundai Autoever offers services worldwide.

Zhejiang Chint Electrics Co., Ltd. manufactures low voltage electric appliances. The Company's products include high, Medium and low voltage electrical apparatus, power transmission and distribution equipment, and measuring meters and instruments.

Mercury Systems, Inc. designs, manufactures, and markets real-time digital signal processing computer systems.  The Company's systems transform sensor generated data into information which can be displayed as images for human interpretation or subjected to additional computer analysis.  Products are marketed to the defense electronics and medical diagnostic imaging businesses.

Xinte Energy Co., Limited solar-grade polysilicon producer and PV project contractor. The Company provides polysilcon production, sales of electricity, engineering and construction contracting, inverter manufacturing, and PV wafer and module manufacturing.

SUMCO Corporation manufactures silicon wafers for the semiconductor industry. The Company produces silicon wafers used to produce solar batteries as well as ultra-high purity quartz used to produce vessels for silicon manufacturing process. SUMCO markets its products worldwide.

Yandex NV operates an Internet website in Russia.  The Company's website offers an Internet search engine, news, shopping information, blogs, photographs and videos.  Yandex earns its revenues from online advertising.

Kingsoft Corporation Ltd. develops and markets computer software.  The Company develops role-playing computer games and security, word processing, and spreadsheet software.

Technology One Limited is an Australian-based company that is engaged in the development, marketing, sales, implementation, support, and distribution of financial management and enterprise software solutions. The Company has operations in New Zealand, the United Kingdom, the South Pacific, and Malaysia.

Axcelis Technologies, Inc. manufactures components for the semiconductor industry. The Company designs, manufactures and services ion implantation, dry strip, thermal processing and curing equipment used in the fabrication of semiconductor chips. Axcelis Technologies sells their products to semiconductor chip manufacturers worldwide.

MA-COM Technology Solutions Holdings Inc. provides high performance analog semiconductor solutions. The Company supplies semiconductors, active and passive components, and sub-assemblies for use in radio frequency, microwave, and millimeter wave applications. MA-COM Technology Solutions serves customers throughout the United States.

GMO Payment Gateway, Inc. provides credit card transaction services for electronic commerce firms.

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)

Korean Holdcos Vs Opcos Gap Trading Opportunities in 3Q 2023

In this insight, we highlight the pricing gap divergences of the major Korean holdcos and opcos in 3Q 2023. We highlight 38 pair trades that...

Douglas Kim

Chindata: Bain's Move Spurs China Merchants Into Action

A unit of China Merchants is the right vehicle for this Offer. Trading at a 13.1% gross spread to terms, which is indicative of the non-binding...

David Blennerhassett

SKC Co: Formation of an Intermediate Holding Company

This insight provides additional details of SKC which has announced highly aggressive investment plans to expand its rechargeable batteries and...

Douglas Kim

SKC: Aggressive Plans to Expand Rechargeable Battery & Semiconductor Materials - But At What Price?

While the market welcomes SKC's sale of non-core businesses such as SK Pucore and sale of treasury shares, it is likely to have greater concerns...

Douglas Kim

What Arb Trading Opportunities Should We Target in SK Innovation's Rights Offering?

This post delves into potential arbitrage trading prospects that could be capitalized upon through SK Innovation's ₩1T rights offering.

Sanghyun Park

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