Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<p>Lee Kun-Hee's value of Samsung related shares is estimated to be <a href="https://newsis.com/view/?id=NISX20201025_0001209736&amp;cID=13001&amp;pID=13000" target="_blank" rel="noopener">18.2 trillion won</a> (US$16.2 billion) as of 23 October 2020. It is estimated that there will be about 10.6 trillion won in inheritance taxes associated with Lee Kun-Hee's holdings in public equities. This would represent 58.2% in the inheritance tax rate. </p><p>Samsung C&amp;T had a really good day today (up 13.5%). Our SoTP analysis of Samsung C&amp;T suggests that it remains highly undervalued right now. <strong>Our SoTP analysis suggests an implied price per share of 186,00 won, which is 57% higher than the current price of 118,000 won.</strong> Samsung C&amp;T's investment stakes in affiliates are worth 43 trillion won.</p>

Lee Kun-Hee's value of Samsung related shares is estimated to be 18.2 trillion won (US$16.2 billion) as of 23 October 2020. It is estimated that there will be about 10.6 trillion won in inheritance taxes associated with Lee Kun-Hee's holdings in public equities. This would represent 58.2% in the inheritance tax rate. Samsung C&amp;T had a really good day today (up 13.5%). Our SoTP analysis of Samsung C&amp;T suggests that it remains highly undervalued right now. Our SoTP analysis suggests an implied price per share of 186,00 won, which is 57% higher than the current price of 118,000 won. Samsung C&amp;T's investment stakes in affiliates are worth 43 trillion won.

Details on Inheritance Taxes & Impact on the Samsung Group Post Death of Chairman Lee

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

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Event-Driven

<p>What's clear at this point is that the Lee family has to address immense inheritance tax (at least ₩9T).</p><p>Which family member gets how much is a secondary question. What's important now is the amount of the tax that the entire family has to bear.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Wealth owned by Lee Kun-hee (₩B)"}'>Lee Kun-hee's shareholding (₩B)</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Shareholding"}'>Shareholding</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Value"}'>60D avg. value</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Samsung Electronics Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[3], "name")'>Samsung Electronics Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.04175582576286636}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Shareholding!R[7]C[2]">4.18%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15006.24664}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}' data-sheets-formula='=googlefinance(R[0]C[1], "price")*googlefinance(R[0]C[1], "shares")*R[0]C[-1]/1000000000'>15,006.2</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Samsung Life Insurance co., Ltd"}' data-sheets-formula='=googlefinance(R[0]C[3], "name")'>Samsung Life Insurance co., Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2075959}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Shareholding!R[99]C[2]">20.76%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2619.860258}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}' data-sheets-formula='=googlefinance(R[0]C[1], "price")*googlefinance(R[0]C[1], "shares")*R[0]C[-1]/1000000000'>2,619.9</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Samsung C&amp;T Corp"}' data-sheets-formula='=googlefinance(R[0]C[3], "name")'>Samsung C&amp;T Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.029032145887066426}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Shareholding!R[-19]C[2]">2.90%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":564.276232}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}' data-sheets-formula='=googlefinance(R[0]C[1], "price")*googlefinance(R[0]C[1], "shares")*R[0]C[-1]/1000000000'>564.3</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total"}'><strong>Total</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'><strong>-</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":17626.106898}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}' data-sheets-formula="=sum(R[-3]C[0]:R[-2]C[0])"><strong>17,626.1</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX FIND"}'>Source: KRX FIND</td></tr>
</tbody>
</table><section class="figure"><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Wealth owned by Lee Kun-hee (₩B)"}'>Inheritance tax (₩B)</td></tr>
<tr>
<td><p>Total shareholding value</p></td>
<td style="text-align: right;">17,626.1</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Taxable after various deductibles (70%)"}'>Taxable after various deductibles (70%)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":12432.1}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'>12,432.1</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"20% extra charge (management premium)"}'>20% extra charge (management premium)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":14918.6}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'>14,918.6</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Inheritance tax at a 60% tax rate"}'><strong>Inheritance tax at a 60% tax rate</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":8951.1}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'><strong>8,951.1</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: KRX FIND"}'>Source: KRX FIND</td></tr>
</tbody>
</table></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/167/324/original/2.png?1603665274" class="editor-image img-responsive" data-smartkarma-image-id="167324"></figure><div class="content-highlight"><p><strong>The first question that will likely hit the market must be how the family would approach this tax situation.</strong></p></div></section>

What's clear at this point is that the Lee family has to address immense inheritance tax (at least ₩9T).Which family member gets how much is a secondary question. What's important now is the amount of the tax that the entire family has to bear.







Lee Kun-hee's shareholding (₩B)
Shareholding
60D avg. value


Samsung Electronics Co Ltd
4.18%
15,006.2


Samsung Life Insurance co., Ltd
20.76%
2,619.9


Samsung C&amp;T Corp
2.90%
564.3


Total
-
17,626.1

Source: KRX FIND







Inheritance tax (₩B)

Total shareholding value
17,626.1


Taxable after various deductibles (70%)
12,432.1


20% extra charge (management premium)
14,918.6


Inheritance tax at a 60% tax rate
8,951.1

Source: KRX FIND

The first question that will likely hit the market must be how the family would approach this tax situation.

LJY's New Samsung May Begin with Sale of Financial Arm (Life)

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

<p><strong><em>*Another Poor Set Of Results Expected: </em></strong>Pre-market on November 11, 2020, AIA Group (1299.HK) [AIA] is set to release its usual limited set of results. By our calculation, AIA’s overall Value of New Business (VONB) is expected to decline 30% YOY on a constant exchange rate basis – remaining flat on a linked quarter basis, however - due largely to weaker volumes and margins;</p><p> <strong><em>*It’s More Than VONB:</em></strong> AIA’s product mix remains sub-optimal with the single premium product remaining the focus due to the COVID-19 impact on face-to-face agency sales. Equity markets where AIA operates had setbacks: Hong Kong (down 4%); Singapore (down 5%); and Thailand (down 8%). AIA’s EV also suffered an 8% impairment due to an investment portfolio challenges – which is a continued worry for us given the global economic challenges that all corporates and sovereigns are facing; and  </p><p> <strong><em>*No Hong Kong Rebound In Sight:</em></strong> The focus should remain Hong Kong, where a 60% plus YOY decline in VONB would not be out of the question as its border with mainland China continued to remain closed due to COVID-19 restrictions. This should continue to weigh on results over the next few quarters as well.</p>

*Another Poor Set Of Results Expected: Pre-market on November 11, 2020, AIA Group (1299.HK) [AIA] is set to release its usual limited set of results. By our calculation, AIA’s overall Value of New Business (VONB) is expected to decline 30% YOY on a constant exchange rate basis – remaining flat on a linked quarter basis, however - due largely to weaker volumes and margins; *It’s More Than VONB: AIA’s product mix remains sub-optimal with the single premium product remaining the focus due to the COVID-19 impact on face-to-face agency sales. Equity markets where AIA operates had setbacks: Hong Kong (down 4%); Singapore (down 5%); and Thailand (down 8%). AIA’s EV also suffered an 8% impairment due to an investment portfolio challenges – which is a continued worry for us given the global economic challenges that all corporates and sovereigns are facing; and   *No Hong Kong Rebound In Sight: The focus should remain Hong Kong, where a 60% plus YOY decline in VONB would not be out of the question as its border with mainland China continued to remain closed due to COVID-19 restrictions. This should continue to weigh on results over the next few quarters as well.

AIA Group – 3Q Results Will Remain Very Challenging

Samsung Electronics Pref Shares / Event-Driven

<p>Samsung Group officially announced that Samsung Electronics Chairman Lee Kun-hee had passed away early today (October 25) after being hospitalized due to AMI for more than six years since May 2014.</p><p>Now, let's take a look at potential immediate impacts on Samsung companies and the Lee family.</p><p><a href="https://www.koreatimes.co.kr/www/nation/2020/10/121_298148.html" target="_blank" rel="noopener">Here is the link to the Korea Times obituary.</a></p>

Samsung Group officially announced that Samsung Electronics Chairman Lee Kun-hee had passed away early today (October 25) after being hospitalized due to AMI for more than six years since May 2014.Now, let's take a look at potential immediate impacts on Samsung companies and the Lee family.Here is the link to the Korea Times obituary.

The Passing of Samsung Lee Kun-Hee: Checking Immediate Issues

Equity Capital Markets

APlus Asset Advisor / Equity Capital Markets

<p>Established in 2007, APlus Asset Advisor is getting ready to complete its IPO in the Korean stock market in November. Aplus Asset Advisory is the Korean market leader in the independent corporate insurance agency (GA) business that compares and analyzes various products of insurance companies and provides optimal insurance and financial services to its customers. </p>
<p>The IPO price range is from 10,500 won to 12,300 won. The IPO base deal size is from $26 million to $30 million. According to the bankers' valuation, the expected market cap after the IPO is from 237 billion won to 278 billion won. NH Investment Securities is the lead underwriter of this IPO. The book-building for the institutional investors starts on 5 November. </p>
<p>Aplus Asset Advisor generated revenue of 269.4 billion won (up 16% YoY) and an operating profit of 20.9 billion won (up 24.9% YoY) in 2019. The company's operating margin averaged 7.1% from 2016 to 1H 2020. From 2016 to 2019, the company's sales increased at a CAGR of 9.3%.</p>

Established in 2007, APlus Asset Advisor is getting ready to complete its IPO in the Korean stock market in November. Aplus Asset Advisory is the Korean market leader in the independent corporate insurance agency (GA) business that compares and analyzes various products of insurance companies and provides optimal insurance and financial services to its customers. 
The IPO price range is from 10,500 won to 12,300 won. The IPO base deal size is from $26 million to $30 million. According to the bankers' valuation, the expected market cap after the IPO is from 237 billion won to 278 billion won. NH Investment Securities is the lead underwriter of this IPO. The book-building for the institutional investors starts on 5 November. 
Aplus Asset Advisor generated revenue of 269.4 billion won (up 16% YoY) and an operating profit of 20.9 billion won (up 24.9% YoY) in 2019. The company's operating margin averaged 7.1% from 2016 to 1H 2020. From 2016 to 2019, the company's sales increased at a CAGR of 9.3%.

South Korea

Samsung Fire & Marine Insurance Co., Ltd. provides insurance services. The Company offers auto, fire, marine, casualty, health, leisure, and retirement products and services. Samsung Fire & Marine Insurance serves customers in South Korea.

Samsung Fire & Marine Insurance (000810 KS)

Dongbu Insurance Co., Ltd. provides a variety of non-life insurance services such as auto, long-term casualty and property, pension and retirement, fire and marine, and leisure insurance products.

Hanwha Life Insurance Co., Ltd. offers life insurance services and reinsurance services.  The Company also does insurance against loss business, beverages business, real estate rental, and securities investment business through its subsidiaries.

Hyundai Marine & Fire Insurance Co., Ltd. (HDMF) is a property and casualty insurer.  The Company's products include auto, fire, marine, general liability, leisure, travel, pension, and medical insurances.

Hyundai Marine & Fire Insurance Co., Ltd (001450 KS)

Korean Reinsurance Company is a reinsurer which underwrites life and non-life insurance.  The Company's products include life, fire, marine, auto, casualty, guarantee, pension, long-term, and foreign reinsurance.

Tongyang Life Insurance offers life insurance services. The Company markets its products through individuals and groups.

Lotte Non-Life Insurance Company Ltd. provides a variety of non-life insurance services, such as auto, fire, marine, long-term casualty and property, pension, and retirement insurance products. The Company also operates a foreign reinsurance business.

Mirae Asset Life Insurance Co., Ltd. provides life insurance and related products.  The Company offers a wide range of services including retirement pension, non-saving products, individual savings, bank assurance, and other financial consulting services.

Mirae Asset Life Insurance Co., (085620 KS)

Hanwha General Insurance Co., Ltd. provides a variety of non-life insurance services, such as fire, marine, auto, long term casualty and property, pension and retirement, leisure, and air products.

HungKuk Fire & Marine Insurance Co., Ltd. provides a variety of non-life insurance services, such as fire, marine, long term casualty and property, auto, pension and retirement, and leisure insurance.

Heungkuk Fire & Marine Insurance (000540 KS)

New China Life Insurance Company Limited provides life insurance in local and foreign currencies, acts as an insurance agent, provides checks, claims and insurance consulting. The Company's main products include life insurance, accident insurance, health insurance products and services.

The People's Insurance Company (Group) of China Limited, through its subsidiaries, offers a range of property and casualty insurance products. The Company also offers asset management services for a variety of customers throughout China.

Insurance Australia Group Limited (IAG) is an Australian-based international general insurance group with operations in Australia, New Zealand, and Asia. The Group provides a range of personal and commercial insurance products, primarily motor vehicle and home insurance.

Unum Group provides group disability and special risk insurance.  The Company provides disability insurance, group life insurance, and payroll-deducted voluntary benefits offered to employees at their worksites.

T&D Holdings, Inc. is a holding company established through the merger of Taiyo Life Insurance, Daido Life Insurance, and T&D Financial Life Insurance. The Company manages life insurance operations for its subsidiaries.

Suncorp Group Ltd. offers retail and business banking, life and general insurance, superannuation and funds management services.  The Company's services include personal banking and loans, personal insurance products, credit cards, pension savings accounts, term deposits, property development finance, commercial lending, investments and lease financing.

CNA Financial Corporation operates as an insurance holding company. The Company, through its subsidiaries, provides commercial property and casualty coverages such as risk management, information services, warranty, and claims administration. CNA Financial serves clients throughout the United States.

American Financial Group, Inc. provides multi-line property and casualty insurance.  The Company also sells tax-deferred annuities and certain life and supplemental health insurance products.  American Financial operates in the United States.

Great Eastern Holdings Limited operates in the life insurance business. The Company provides fund management services including retirement plans and endowments as well as life and health insurance, personal accident insurance, and general insurance

RenaissanceRe Holdings Ltd. is a global provider of reinsurance and insurance. The Company's business primarily consists of catastrophe reinsurance, specialty reinsurance, and individual risk business.

Samsung Life Insurance Co., Ltd. provides insurance services. The Company offers life and health insurance services. Samsung Life Insurance serves customers in South Korea.

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Samsung Life Insurance (032830 KS)

Details on Inheritance Taxes & Impact on the Samsung Group Post Death of Chairman Lee

Our SoTP analysis of Samsung C&T suggests that it remains highly undervalued right now with an implied price per share of 186,00 won, which is 57%...

Douglas Kim

LJY's New Samsung May Begin with Sale of Financial Arm (Life)

LJY's new Samsung may begin by selling the financial arm. The family needs to liquidate the Life shareholding for inheritance tax, but also...

Sanghyun Park

AIA Group – 3Q Results Will Remain Very Challenging

AIA GROUP: Previewing 3Q Results, We Note VONB Challenges And Other Risks - Hong Kong Not Rebounding, Weak Equity Markets, and Further Investment...

Thomas J. Monaco

The Passing of Samsung Lee Kun-Hee: Checking Immediate Issues

This post checks the immediate issues resulting from the passing of Lee Kun-hee: 1. inheritance tax calculations, 2. immediate-term market...

Sanghyun Park

APlus Asset Advisor IPO Preview

APlus Asset Advisor is getting ready to complete its IPO in the Korean stock market in November. This is the Korean market leader in the...

Douglas Kim

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