Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>In this insight, we discuss the potential additions and deletions in the upcoming June 2022 KOSPI200 rebalance.</li>
<li>These <strong>top 10</strong><strong>potential inclusions</strong><strong>are down on average 4.4% YTD,</strong> outperforming KOSPI which is down 10.1% YTD.</li>
<li>These <strong>top 10 potential exclusions are down on average 12.3% YTD,</strong> underperforming KOSPI which is down 10.1% YTD.</li>
</ul>


In this insight, we discuss the potential additions and deletions in the upcoming June 2022 KOSPI200 rebalance.
These top 10potential inclusionsare down on average 4.4% YTD, outperforming KOSPI which is down 10.1% YTD.
These top 10 potential exclusions are down on average 12.3% YTD, underperforming KOSPI which is down 10.1% YTD.


Initial Thoughts on the KOSPI200 Rebalance in June 2022

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>The screening results based on the average market cap for the screening period until the last closing price have seven additions/deletions.</li>
<li>LG Energy will make Fast Entry. The one to make room for LG Energy should be Dongwon F&amp;B, an additional deletion to the seven deletions through the preliminary filtering.</li>
<li>F&amp;F Holdings may fail to meet the minimum float rate. If it doesn't make KOSPI 200 this time, Hyundai Marine &amp; Fire Insurance will get to stay in the Index.</li>
</ul>


The screening results based on the average market cap for the screening period until the last closing price have seven additions/deletions.
LG Energy will make Fast Entry. The one to make room for LG Energy should be Dongwon F&amp;B, an additional deletion to the seven deletions through the preliminary filtering.
F&amp;F Holdings may fail to meet the minimum float rate. If it doesn't make KOSPI 200 this time, Hyundai Marine &amp; Fire Insurance will get to stay in the Index.


KOSPI 200 Rebalancing Screening: Prediction Likelihood, Special Issues, & Passive Impacts

<p>At 4 pm today, SK Chemicals announced that it would conduct a bonus issue.</p><p><a href="https://kind.krx.co.kr/common/disclsviewer.do?method=search&amp;acptno=20211007000382&amp;docno=&amp;viewerhost=&amp;viewerport=" target="_blank" rel="noopener">Here is the link to the regulatory filing at the KRX KIND</a>.</p><div class="content-highlight"><ul>
<li><strong>It will be a 50% capital increase ratio, which allocates 0.5 new shares per share.</strong></li>
<li><strong>The number of newly issued stocks is 5,869,384 common stocks and 656,759 preferred stocks, for a total of 6,526,143 shares.</strong></li>
<li><strong>The new stock allocation base date is October 22, and the expected listing date is November 9. </strong></li>
</ul></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/233/997/original/1.png?1633605858" class="editor-image img-responsive" data-smartkarma-image-id="233997"></figure><p></p></section><p></p><p>As a result, SK Chemicals' ordinary shares outstanding becomes 17,608,152 after the bonus issue, and the total number of preferred shares will be 1,970,278. Of course, 157,779 treasury shares (Ord: 12,628 and 1P: 145,151) are not allocated new shares.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/233/999/original/2.png?1633606196" class="editor-image img-responsive" data-smartkarma-image-id="233999"></figure><p></p></section><p>In addition, SK Chemicals has also introduced a new dividend policy.</p><p><a href="https://engkind.krx.co.kr/common/disclsviewer.do?method=search&amp;acptNo=20211007000423&amp;docno=&amp;formProcsCd=070&amp;language=english" target="_blank" rel="noopener">Here is the link to the regulatory filing at the KRX KIND</a>.</p><div class="content-highlight"><ul>
<li><strong>A dividend payout ratio of 30% from 2021 to 2023: SK Chemicals will use 30% of the de-consolidated net profit generated for three years from 2021 to 2023 for shareholder return.</strong></li>
<li><strong>In addition, SK Chemicals will actively consider interim dividends starting FY2022.</strong></li>
</ul></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/234/003/original/3.png?1633606720" class="editor-image img-responsive" data-smartkarma-image-id="234003"></figure></section>

At 4 pm today, SK Chemicals announced that it would conduct a bonus issue.Here is the link to the regulatory filing at the KRX KIND.
It will be a 50% capital increase ratio, which allocates 0.5 new shares per share.
The number of newly issued stocks is 5,869,384 common stocks and 656,759 preferred stocks, for a total of 6,526,143 shares.
The new stock allocation base date is October 22, and the expected listing date is November 9. 
As a result, SK Chemicals' ordinary shares outstanding becomes 17,608,152 after the bonus issue, and the total number of preferred shares will be 1,970,278. Of course, 157,779 treasury shares (Ord: 12,628 and 1P: 145,151) are not allocated new shares.In addition, SK Chemicals has also introduced a new dividend policy.Here is the link to the regulatory filing at the KRX KIND.
A dividend payout ratio of 30% from 2021 to 2023: SK Chemicals will use 30% of the de-consolidated net profit generated for three years from 2021 to 2023 for shareholder return.
In addition, SK Chemicals will actively consider interim dividends starting FY2022.


SK Chemicals Bonus Issue & New Shareholder Return Policy: Background & Impact

<p>SK Chemicals announced after the market close that it will improve the company's dividend policy and complete a bonus issue. According to the company, these are part of the company's increased emphasis on ESG improvements. We believe these are positive catalysts that are likely to further boost SK Chemicals' share price.</p><p>If the company pays out 30% of its net income as dividends, this could suggest DPS of nearly 10,000 won per share, which means that its DPS could surge nearly five times versus last year. This would also suggest a dividend per share of 3.4% at current prices which would be much better than last year's level.</p><p>SK Chemicals also announced a bonus issue (0.5 new shares for 1 common share). The total number of newly issued shares will be 5.86 million (common shares) and 0.66 million (preferred shares). After the bonus issue, there will be 17.63 million common shares and 2.12 million preferred shares.</p><p><strong>SK Chemicals NAV Analysis - </strong>Our base case NAV valuation of SK Chemicals suggests a valuation of 530,140 won per share, representing an 82% upside from current levels. This is based on the current market valuation of SK Bioscience (68.4% stake), 8x OP of SK Chemicals' core business, and a 50% NAV discount. </p>

SK Chemicals announced after the market close that it will improve the company's dividend policy and complete a bonus issue. According to the company, these are part of the company's increased emphasis on ESG improvements. We believe these are positive catalysts that are likely to further boost SK Chemicals' share price.If the company pays out 30% of its net income as dividends, this could suggest DPS of nearly 10,000 won per share, which means that its DPS could surge nearly five times versus last year. This would also suggest a dividend per share of 3.4% at current prices which would be much better than last year's level.SK Chemicals also announced a bonus issue (0.5 new shares for 1 common share). The total number of newly issued shares will be 5.86 million (common shares) and 0.66 million (preferred shares). After the bonus issue, there will be 17.63 million common shares and 2.12 million preferred shares.SK Chemicals NAV Analysis - Our base case NAV valuation of SK Chemicals suggests a valuation of 530,140 won per share, representing an 82% upside from current levels. This is based on the current market valuation of SK Bioscience (68.4% stake), 8x OP of SK Chemicals' core business, and a 50% NAV discount. 

SK Chemicals - Announces A Big Improvement in Dividends and Bonus Issue

<p>SK Discovery is a pure holding company and consists of two major subsidiaries: </p><ul>
<li>
<a href="https://www.smartkarma.com/entities/sk-chemicals-co-ltd-new" target="_blank" data-smartkarma-citation="entities:26190:1" rel="noopener">SK Chemicals Co Ltd/New (285130 KS)</a> </li>
<li><a href="https://www.smartkarma.com/entities/sk-gas-ltd" target="_blank" data-smartkarma-citation="entities:4088:1" rel="noopener">SK Gas Ltd (018670 KS)</a></li>
</ul><p>Since the stake value of these two subsidiaries is almost the same at this point, SK Discovery's share price should be affected by the share price of these two subsidiaries in a 5:5 ratio.</p><table class="table table-striped">
<colgroup>
<col width="70">
<col width="70">
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Holdings"}'>Holdings</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Stake"}'>Stake</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Value"}'>Value</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"SK Chemicals Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'><strong>SK Chemicals Co Ltd</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"285130"}' data-sheets-numberformat='[null,2,"#,##0",1]' data-sheets-formula='="285130"'><strong>285130</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.3345}' data-sheets-numberformat='[null,3,"0.00%",1]'><strong>33.45%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1132.082485056}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula='=googlefinance(R[0]C[-2], "price")*googlefinance(R[0]C[-2], "shares")*R[0]C[-1]/1000000000'><strong>₩1,132.1B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"SK Gas Ltd."}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'><strong>SK Gas Ltd.</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"018670"}' data-sheets-numberformat='[null,2,"#,##0",1]' data-sheets-formula='="018670"'><strong>018670</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.722}' data-sheets-numberformat='[null,3,"0.00%",1]'><strong>72.20%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1139.584384728}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula='=googlefinance(R[0]C[-2], "price")*googlefinance(R[0]C[-2], "shares")*R[0]C[-1]/1000000000'><strong>₩1,139.6B</strong></td>
</tr>
<tr><td colspan="4"><strong> </strong></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Huvis Corp"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Huvis Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"079980"}' data-sheets-numberformat='[null,2,"#,##0",1]' data-sheets-formula='="079980"'>079980</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.255}' data-sheets-numberformat='[null,3,"0.00%",1]'>25.50%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":91.933875}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula='=googlefinance(R[0]C[-2], "price")*googlefinance(R[0]C[-2], "shares")*R[0]C[-1]/1000000000'>₩91.9B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Other - unlisted"}'>Other - unlisted</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,2,"#,##0",1]'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,3,"0.00%",1]'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":186.394}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=186.394">₩186.4B</td>
</tr>
<tr><td colspan="4" data-sheets-value='{"1":2,"2":"Source: KRX &amp; DART"}'>Source: KRX &amp; DART</td></tr>
</tbody>
</table><table class="table table-striped">
<colgroup>
<col width="70">
<col width="70">
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Assets"}'>Assets</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"% NAV"}'>% NAV</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"% GAV"}'>% GAV</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"% Holdings"}'>% Holdings</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"SK Chemicals Co Ltd"}' data-sheets-formula="=R[0]C[5]"><strong>SK Chemicals Co Ltd</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4642058632163233}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[7]/R13C[-3]"><strong>46.42%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4439548306409918}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[6]/R8C[-4]"><strong>44.40%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4439548306409918}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[5]/SUM(R2C[5]:R5C[5])"><strong>44.40%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"SK Gas Ltd."}' data-sheets-formula="=R[0]C[5]"><strong>SK Gas Ltd.</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4672819869608142}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[7]/R13C[-3]"><strong>46.73%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.44689675814391905}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[6]/R8C[-4]"><strong>44.69%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.44689675814391905}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[5]/SUM(R2C[5]:R5C[5])"><strong>44.69%</strong></td>
</tr>
<tr><td colspan="4"><strong> </strong></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Huvis Corp"}' data-sheets-formula="=R[0]C[5]">Huvis Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.037697115154189074}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[7]/R13C[-3]">3.77%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.03605257429963345}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[6]/R8C[-4]">3.61%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.03605257429963345}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[5]/SUM(R2C[5]:R5C[5])">3.61%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Other - unlisted"}' data-sheets-formula="=R[0]C[5]">Other - unlisted</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.07643010894569513}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[7]/R13C[-3]">7.64%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.07309583691545556}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[6]/R8C[-4]">7.31%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.07309583691545556}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[5]/SUM(R2C[5]:R5C[5])">7.31%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Operation"}' data-sheets-formula="=R[6]C[0]">Operation</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[6]C[2]/R13C[-3]">0.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[6]C[1]/R8C[-4]">0.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,3,"0.00%",1]'>-</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Holdco net cash/debt (deconsolidated)"}' data-sheets-formula="=R[6]C[0]">Holdco net cash/debt (deconsolidated)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.022470519277573812}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[6]C[2]/R13C[-3]">-2.25%</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,3,"0.00%",1]'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,3,"0.00%",1]'>-</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of pref shares"}' data-sheets-formula="=R[4]C[-3]">Value of pref shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.023144554999447935}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=-R[4]C[-3]/R13C[-3]">-2.31%</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,3,"0.00%",1]'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,3,"0.00%",1]'>-</td>
</tr>
<tr><td colspan="4" data-sheets-value='{"1":2,"2":"Source: DART &amp; KRX"}'>Source: DART &amp; KRX</td></tr>
</tbody>
</table><p>However, a significant price divergence has recently occurred between SK Discovery and them. Even with SK Chemicals' recent price fluctuations caused by the activist fund (Metrica), SK Discovery did not fully synchronize. However, what is more striking is that SK Discovery's share price is not at all in sync with the recent surge in SK Gas's share price.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/230/636/original/1.png?1632009568" class="editor-image img-responsive" data-smartkarma-image-id="230636"></figure></section><p>SK Discovery is currently at a 61% discount to NAV. Of course, this discount rate is at a historic high.</p><table class="table table-striped">
<colgroup>
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"NAV"}' data-sheets-note="Sang Hyun Park: Cases when a company's net cash position and the value of its publically traded interests are worth more than its market cap create the opportunity of a stub trade, in which investors can take a view that the company's core business will rise by shorting the minority stakes whilst going long the underlying. Such an opportunity has arisen in the wake of the Alibaba listing which has seen early investing company Yahoo trade at a discount to the value of its stake in Alibaba.">NAV</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of listed holdings"}'>Value of listed holdings</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2363.600744784}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=SUM(R[0]C[10]:R[2])">₩2,363.6B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - % of Holdco market cap"}'>- % of Holdco market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2.4633468515379344}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[-1]C[0]/((R[3]C[-3]*R[0]C[-3])/1000000000)">246.33%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of unlisted holdings"}'>Value of unlisted holdings</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":186.394}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=SUM(R[1]C[10])">₩186.4B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stub value"}'>Stub value</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-1590.4868527840001}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=(R[1]C[-3]*R[-2]C[-3]/1000000000)-R[-3]C[0]-R[-1]C[0]">-₩1,590.5B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stub value per share"}'>Stub value per share</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-83543.3851546826}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]*1000000000/R[-3]C[-3]">-₩83,543</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of operating assets"}'>Value of operating assets</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=SUM(R[5]C[5])">₩0.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"GAV"}'>GAV</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2549.9947447840004}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-6]C[0]+R[-4]C[0]+R[-1]C[0]">₩2,550.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"GAV per share"}'>GAV per share</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":134028.83112132747}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]/R[4]C[-3]*1000000000">₩134,029</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Discount to GAV (excl. treasury shares)"}'>Discount to GAV (excl. treasury shares)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.6239615045633263}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-1]C[0]-R[-4]C[-3])/R[-1]C[0]">62.40%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Holdco net cash/debt (de-consolidated)"}'>Holdco net cash/debt (de-consolidated)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-54.8}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[2]C[5]">-₩54.8B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of pref shares"}'>Value of pref shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":56.44380525}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=(R[-5]C[-3]*R[-2]C[-3]+R[-5]C[-2]*R[-2]C[-2])/1000000000">₩56.4B</td>
</tr>
<tr><td colspan="2"></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"NAV"}'><strong>NAV</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2438.7509395340003}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-5]C[0]+R[-2]C[0]-R[-1]C[0]"><strong>₩2,438.8B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"NAV per share (excl. treasury shares)"}'><strong>NAV per share (excl. treasury shares)</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":128181.80840975358}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]/R[-1]C[-3]*1000000000"><strong>₩128,182</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Discount to NAV"}'><strong>Discount to NAV</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.606808480662963}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-1]C[0]-R[-9]C[-3])/R[-1]C[0]"><strong>60.68%</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: KRX &amp; DART","6":1}'>Source: KRX &amp; DART</td></tr>
</tbody>
</table><p>The sigma on a 20-day moving average calculated by synthesizing these two affiliates at 50:50 is -1.35 at present, and the relative price ratio compared to this synthesis has diverged sharply over the past two weeks.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/230/640/original/image_9329493321632010559259.png?1632010561" class="editor-image img-responsive" data-smartkarma-image-id="230640"></figure>

SK Discovery is a pure holding company and consists of two major subsidiaries: 

SK Chemicals Co Ltd/New (285130 KS) 
SK Gas Ltd (018670 KS)
Since the stake value of these two subsidiaries is almost the same at this point, SK Discovery's share price should be affected by the share price of these two subsidiaries in a 5:5 ratio.








Holdings
Ticker
Stake
Value


SK Chemicals Co Ltd
285130
33.45%
₩1,132.1B


SK Gas Ltd.
018670
72.20%
₩1,139.6B

 

Huvis Corp
079980
25.50%
₩91.9B


Other - unlisted
-
-
₩186.4B

Source: KRX &amp; DART










Assets
% NAV
% GAV
% Holdings


SK Chemicals Co Ltd
46.42%
44.40%
44.40%


SK Gas Ltd.
46.73%
44.69%
44.69%

 

Huvis Corp
3.77%
3.61%
3.61%


Other - unlisted
7.64%
7.31%
7.31%


Operation
0.00%
0.00%
-


Holdco net cash/debt (deconsolidated)
-2.25%
-
-


Value of pref shares
-2.31%
-
-

Source: DART &amp; KRX

However, a significant price divergence has recently occurred between SK Discovery and them. Even with SK Chemicals' recent price fluctuations caused by the activist fund (Metrica), SK Discovery did not fully synchronize. However, what is more striking is that SK Discovery's share price is not at all in sync with the recent surge in SK Gas's share price.SK Discovery is currently at a 61% discount to NAV. Of course, this discount rate is at a historic high.





NAV

Value of listed holdings
₩2,363.6B


- % of Holdco market cap
246.33%


Value of unlisted holdings
₩186.4B


Stub value
-₩1,590.5B


Stub value per share
-₩83,543


Value of operating assets
₩0.0B


GAV
₩2,550.0B


GAV per share
₩134,029


Discount to GAV (excl. treasury shares)
62.40%


Holdco net cash/debt (de-consolidated)
-₩54.8B


Value of pref shares
₩56.4B



NAV
₩2,438.8B


NAV per share (excl. treasury shares)
₩128,182


Discount to NAV
60.68%

Source: KRX &amp; DART

The sigma on a 20-day moving average calculated by synthesizing these two affiliates at 50:50 is -1.35 at present, and the relative price ratio compared to this synthesis has diverged sharply over the past two weeks.

SK Discovery in a Massive Price Divergence Vs. The Synthetic Involving SK Gas

South Korea

Huchems Fine Chemical Corp. develops and provides fine chemical products. The main products include polyurethane, ammonium nitrate, nitric acid, and ammonia.

Korea Petrochemical Ind Co., Ltd. manufactures chemical products such as high density polyethylene and polypropylene.  The Company also produces basic organic chemicals including ethylene, propylene, and mixed C4s.  Korea Petrochemical supplies its products to the industrial and home appliances, film, pipe, toy, electric wire, and medical instrument manufacturers.

Foosung Co., Ltd. manufactures and sells chemical compounds and also car accessories such as car mats.

Chunbo Co.,Ltd manufactures and sells chemical materials. The Company produces and sells display, semiconductor, and secondary battery application materials, as well as pharmaceutical intermediates and specialty chemicals. Chunbo markets its products worldwide.

Cosmochemical Co., Ltd. manufactures and markets titanium dioxide used in synthetic resins, rubber, paper, paint, and TV cathode-ray tubes.  The Company also produces titanium dioxide byproducts, ferrous sulfate, koferis, ferosol for wastewater treatment agent uses, and sports equipment.

Taekwang Industrial Co., Ltd. manufactures synthetic yarns, petrochemical products, and textiles.  The Company's products include acrylic yarns, nylons, spandex, carbon fibers, spun yarns, polyester materials, and blankets.  Taekwang also produces electric equipment, such as audio equipment, and cordless telephones.  In addition, The Company operates real estate business.

PI Advanced Materials Co., Ltd. manufactures and sells plastics films. The Company produces and sells polyimide films and other products. PI Advanced Materials conducts businesses in South Korea.

Unid Co., Ltd. manufactures and sells chemicals and timber products.  The Company's chemicals include potassium carbonate, hydrochloric acid, and caustic potash.  Unid also produces board and timber products, such as medium density fiberboard (MDF) and timber boards and formalin for construction uses.

Hankuk Carbon Co., Ltd. develops, produces, and sells carbon products. The Company manufactures LNG panelling, sporting goods, aircraft parts, glass paper and other related carbon products. Hankuk Carbon offers its products to customers in Southeast Asia and Europe.

Aekyung Chemical Co., Ltd manufactures basic organic chemicals such as pht halic anhydride and plasticizers. The Company also produces maleic anhydride, itaconic acid, polyol and bio-diesel. Aekyung Chemical markets its products primarily throughout Korea with limited overseas.

USI Corporation manufactures and markets polyethylene resins, a raw material used in the manufacture of plastic. The Company's products are low density polyethylene (LDPE), ethylene vinyl acetate copolymers (EVA), high density polyethylene (HDPE), and linear low density polyethylene (LLDPE).

Suzhou Kingswood Printing Ink Company Limited produces and sells offset printing inks, researches and develops modified polymer materials and vegetable oils for the production of printing inks. The Company's major products are environmentally friendly offset printing inks.

LSB Industries, Inc., through its subsidiaries, manufactures and sells chemical products for the mining, agricultural, and industrial markets.  The Company also manufactures and sells commercial and residential climate control products, as well as provides specialized engineering services and other activities.

Jiangsu Huifeng Agrochemical Co., Ltd. develops and produces chemical pesticide. The Company's products include prochloraz-manganese chloride, bromoxynial octanoate, ioxynil octanoate, and diflufenican.

Jiangsu Huifeng Agrochemical Co (002496 CH)

Oriental Union Chemical Corporation manufactures and markets chemicals. The Company produces ethylene glycol, ethylene oxide, ethylene gas, and diethylene glycol.

INEOS Styrolution India Limited manufactures ABS resins, ABS sheets and SAN resins. The Company's products are used in a wide range of industries, including personal care, consumer durables, automobiles and telecommunications. Styrolution ABS sells its products in India and abroad.

INEOS Styrolution India Limited (INEOS IN)

MEC COMPANY LTD. manufactures and markets chemicals and equipment for printed circuit boards.  The Company has sales/manufacturing subsidiaries in Taiwan, Hong Kong, Belgium, and US.

International CSRC Investment Holdings Co., Ltd. produces carbon black used for the manufacture of tire and other rubber products and operates a co-generation system to generate electricity and super heated steam.  The Company also manufactures pharmaceutical products and gelatin.

International CSRC Investment Holdings Co., Ltd. (2104 TT)

International CSRC Investment Holdings Co., Ltd.

Bharat Rasayan Ltd. manufactures and distributes pesticides and agrochemicals for crop protection and pharmaceutical intermediates. The Company has manufacturing facilities located throughout India.

ASAHI ORGANIC CHEMICALS INDUSTRY CO., LTD. produces polyvinyl chloride resin valves & pipes, phenol resin products, and resin-coated sand. The Company develops semiconductor-related products as well as housing-related products such as flooring materials.

SK Discovery Co.,Ltd. wholesales and distributes natural gas. The Company wholesales and distributes propylene, propane, and other natural gas SK Discovery markets its products throughout South Korea.

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Sk Discovery (006120 KS)

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