Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>Three major positive factors for Samsung C&amp;T include deep discount NAV, capital shifting to value/holdcos, and higher commodity prices boosting trading business earnings. </li>
<li>Shanghai lockdown remains a black box event and there are some increasing concerns that the China COVID induced lockdowns could result in a potential earnings miss for Samsung Electronics.</li>
<li>Samsung C&amp;T (028260 KS) has been outperforming Samsung Electronics (005930 KS). Samsung C&amp;T is flat for the year versus Samsung Electronics which is down 13.6% YTD.</li>
</ul>


Three major positive factors for Samsung C&amp;T include deep discount NAV, capital shifting to value/holdcos, and higher commodity prices boosting trading business earnings. 
Shanghai lockdown remains a black box event and there are some increasing concerns that the China COVID induced lockdowns could result in a potential earnings miss for Samsung Electronics.
Samsung C&amp;T (028260 KS) has been outperforming Samsung Electronics (005930 KS). Samsung C&amp;T is flat for the year versus Samsung Electronics which is down 13.6% YTD.


Samsung C&T: Deep Discount NAV, Capital Shifting to Value/Holdcos, & Trading Business Boost

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.

Event-Driven

<ul>
<li>We should focus on the weight changes of the existing constituents. For this, two names really stand out: Kakao Pay (+0.44x ADTV) and LG Corp (+0.37x ADTV).</li>
<li>It is because Kakao Pay and LG Corp will undergo an increase in their float rate in the KOSPI 200 rebalancing, and these up-weights will also affect this sector index.</li>
<li>Their combined inflow size (KOSPI 200 &amp; KOSPI 200 IT) will be 1.41x and 1.16x ADTVs. This will be the most substantial, except for Kakao Bank and the new additions.</li>
</ul>


We should focus on the weight changes of the existing constituents. For this, two names really stand out: Kakao Pay (+0.44x ADTV) and LG Corp (+0.37x ADTV).
It is because Kakao Pay and LG Corp will undergo an increase in their float rate in the KOSPI 200 rebalancing, and these up-weights will also affect this sector index.
Their combined inflow size (KOSPI 200 &amp; KOSPI 200 IT) will be 1.41x and 1.16x ADTVs. This will be the most substantial, except for Kakao Bank and the new additions.


KOSPI 200 IT Sector Index Rebalancing Flow: Watch Kakao Pay & LG Corp

<ul>
<li>In this insight, we provide an updated SoTP valuation analysis of LG Corp (003550 KS) and discuss some of the key upcoming catalysts including the IPO of LG CNS.</li>
<li>Our base case valuation analysis of LG Corp suggests an implied price of 107,664 won per share, representing 45.5% upside from current levels.</li>
<li>The IPO of LG CNS is likely to be a positive catalyst in the next 6-12 months for LG Corp. </li>
</ul>


In this insight, we provide an updated SoTP valuation analysis of LG Corp (003550 KS) and discuss some of the key upcoming catalysts including the IPO of LG CNS.
Our base case valuation analysis of LG Corp suggests an implied price of 107,664 won per share, representing 45.5% upside from current levels.
The IPO of LG CNS is likely to be a positive catalyst in the next 6-12 months for LG Corp. 


LG Corp: Updated SoTP Valuation & Key Catalyst of LG CNS IPO

Equity Capital Markets

<ul>
<li>LG CNS is getting ready to complete its IPO in 2023. LG CNS is one of the largest system integration (SI) companies in Korea. </li>
<li>LG Corp owns 49.95% stake in LG CNS. Local media mentioned the LG CNS value could reach about 4 trillion won to 5 trillion won after it completes its IPO. </li>
<li>If LG CNS is valued at 5 trillion won, a 50% stake would be valued at 2.5 trillion won which is more than 12x book value on its balance sheet.</li>
</ul>


LG CNS is getting ready to complete its IPO in 2023. LG CNS is one of the largest system integration (SI) companies in Korea. 
LG Corp owns 49.95% stake in LG CNS. Local media mentioned the LG CNS value could reach about 4 trillion won to 5 trillion won after it completes its IPO. 
If LG CNS is valued at 5 trillion won, a 50% stake would be valued at 2.5 trillion won which is more than 12x book value on its balance sheet.


<ul>
<li>The KOSPI 200 June Review will have a total of 13 float rate changes: 11 increases and 2 reductions.</li>
<li>
<a href="https://www.smartkarma.com/entities/kakaobank-corp" target="_blank" data-smartkarma-citation="entities:33501:1" rel="noopener">Kakao Bank (323410)</a> will experience the biggest change, followed by <a href="https://www.smartkarma.com/entities/hmm-co-ltd" target="_blank" data-smartkarma-citation="entities:13494:1" rel="noopener">HMM (011200)</a> and <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960)</a>. The float rate of <a href="https://www.smartkarma.com/entities/hdc-hyundai-development-co-engineering-construction" target="_blank" data-smartkarma-citation="entities:27397:1" rel="noopener">HDC Hyundai Development (294870)</a> and <a href="https://www.smartkarma.com/entities/doosan-infracore-co-ltd" target="_blank" data-smartkarma-citation="entities:3982:1" rel="noopener">Doosan Infracore (042670)</a> will decrease.</li>
<li>
Kakao Bank and <a href="https://www.smartkarma.com/entities/kakao-pay-corp" target="_blank" data-smartkarma-citation="entities:29675:1" rel="noopener">Kakao Pay (377300)</a> have the most significant passive impact. And <a href="https://www.smartkarma.com/entities/lg-corp" target="_blank" data-smartkarma-citation="entities:6653:1" rel="noopener">LG Corp (003550)</a>, <a href="https://www.smartkarma.com/entities/woori-financial-group-inc" target="_blank" data-smartkarma-citation="entities:27995:1" rel="noopener">Woori Financial Group (316140)</a>, and <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960)</a> are also worth noting.</li>
</ul>


The KOSPI 200 June Review will have a total of 13 float rate changes: 11 increases and 2 reductions.

Kakao Bank (323410) will experience the biggest change, followed by HMM (011200) and  Krafton Inc (259960). The float rate of HDC Hyundai Development (294870) and Doosan Infracore (042670) will decrease.

Kakao Bank and Kakao Pay (377300) have the most significant passive impact. And LG Corp (003550), Woori Financial Group (316140), and  Krafton Inc (259960) are also worth noting.


KOSPI 200 Constituents with a Float Rate Change: 11 Increases & 2 Reductions

South Korea

Doosan Co., Ltd operates as a diversified manufacturing and service company. The Company conducts electronic components production, logistics equipment manufacturing, information technology consulting, and other businesses. Doosan provides services worldwide.

CJ Corp. is an investment holding company.  The Company, through its subsidiaries, manufactures processed food products.  The subsidiaries' products include refined sugar, monosodium glutamate (MSG), condiment, wheat powder, flour, cooking oil, processed meats, and animal feed.

Samsung C&T Corporation conducts diversified business support services and resort operation activities. The Company offers a range of services in areas including clothing retail, construction, energy, real estate, food service, and resort accommodations. Samsung C&T also operates a resort with amusement rides, a zoo, water park, golf clubs, and restaurants.

ALUKO Co., Ltd. manufactures window frames, balconies, and ventilators made of aluminum.  The Company provides various colors and types of aluminum window frames and sashes.  ALUKO also produces steel furniture.

Samsung Heavy Industries Co., Ltd. manufactures crude oil tankers, container vessels, bulk carriers, cruisers, and passenger ferries.  The Company also produces steel and bridge structures, and material handling equipment.  In addition, Samsung Heavy Industries provides civil engineering, architectural, and plant construction services.

Hanwha Aerospace Co., Ltd. operates as an aircraft parts manufacturing company. The Company produces and sells aircraft gas turbine engine products, aircraft compressors, low pressure turbines, and other products. Hanwha Aerospace markets its products worldwide.

Posco International Corporation is a general trading company.  The Company exports and imports steel, cement, crude oil, heavy machinery, automobile parts, and textiles.  Daewoo also manufactures synthetic fabrics for footwear, garments, and car seats, and operates a department store in Masan.

Posco International Corporation (047050 KS)

HD Korea Shipbuilding & Offshore Engineering Co., Ltd. operates as a shipbuilding and offshore company. The Company provides industrial plant engineering, special and naval shipbuilding, marine engine and machinery, industrial machinery and energy services. HD Korea Shipbuilding & Offshore Engineering markets its products worldwide.

HD Korea Shipbuilding & Offshore Engineering (009540 KS)

HD Korea Shipbuilding & Offshore Engineering

Hanwha Ocean Co., Ltd. operates as a shipbuilding and offshore company. The Company provides floating structure construction, steel wire drying, commercial vessels, specialty vessels, gas carrier, tanker, containership, ro ro, bulk carrier, submarine, warship, auxiliaries, cruise ships, and ferries manufacturing services. Hanwha Ocean also offers onshore plants services.

Hyundai Electric & Energy Systems (HE&E), which makes various electric equipment including transformers, switchgear, motors, low & medium voltage circuit breakers, power electronics, and power electronics & control systems.

Keppel Corporation Limited's core businesses are offshore and marine, infrastructure, property investment and development, telecommunications and transportation, energy, and engineering.

Sembcorp Industries Ltd provides utilities and integrated services for industrial sites such as power, gas, steam, water, wastewater treatment and other on-site services. The Company's businesses also include marine & offshore engineering and urban development comprising industrial parks and business, commercial and residential spaces.

Jardine Matheson Holdings Limited is a multinational enterprise with a portfolio of businesses focused on the Asia-Pacific region. The Group's activities include financial services, supermarkets, consumer marketing, engineering and construction, automobile trading, insurance broking, property investment, and hotels.

DCC PLC is a sales, marketing, distribution and business support services Group. The Group operates in the following sectors; energy, IT & entertainment products, healthcare, environmental services and food & beverage. DCC's strategy is to grow a sustainable, diversified business.

Smiths Group plc is a global technology company.  The company delivers products and services for the threat & contraband detection, medical devices, energy and communications market worldwide.

Enka Insaat ve Sanayi AS provides construction and construction related services worldwide. The Company builds infrastructure, commercial projects and factories. The manufacturing subsidiaries produce construction materials, steel pipes, windows and hand tools. The Group also imports and distributes industrial machinery in Turkey.

Jardine Matheson Holdings Limited operates as a holding company. The Company, through its subsidiaries, focuses on motor vehicles, property investment and development, food retailing, health and beauty, home furnishings, engineering and construction, transport services, restaurants, luxury hotels, financial services, heavy equipment, mining, energy, and agribusiness.

Icahn Enterprises L.P., a master limited partnership, is a diversified holding company engaged in nine primary business segments: Automotive, Investment, Energy, Gaming, Railcar, Food Packaging, Metals, Real Estate and Home Fashion.

Seibu Holdings Inc. offers diversified operation. The Company through its subsidiary companies operates transportation, construction, hotel, leisure facilities, and real estate business. Seibu Holdings provides group enterprises strategy planning, operation management, asset management and supply, and business promotions.

Toshiba Corporation manufactures and markets electrical and electronic products. The Company's products include digital products such as PCs and televisions, NAND flash memories, and system LSIs (large-scale integrated), as well as social infrastructures such as power generators, medical equipment, and home appliances.

LG Corp. is a holding company, which operates subsidiaries including LG Electronics, LG Household & Health Care, LG Chem Ltd., and Dacom Corp. The Company's main business areas are electronics, chemicals, and household products manufacturing and telecommunications services.

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LG Corp (003550 KS)

Samsung C&T: Deep Discount NAV, Capital Shifting to Value/Holdcos, & Trading Business Boost

Three major positive factors for Samsung C&T include deep discount NAV, capital shifting to value/holdcos, and higher commodity prices boosting...

Douglas Kim

KOSPI 200 IT Sector Index Rebalancing Flow: Watch Kakao Pay & LG Corp

This post highlights the two names that will see the most substantial passive inflow on the rebalancing trading day, June 9, for the KOSPI 200 IT...

Sanghyun Park

LG Corp: Updated SoTP Valuation & Key Catalyst of LG CNS IPO

In this insight, we provide an updated SoTP valuation analysis of LG Corp (003550 KS) and discuss some of the key upcoming catalysts including the...

Douglas Kim

Initial Thoughts on the LG CNS IPO

LG CNS is getting ready to complete its IPO in 2023. LG Corp owns 49.95% stake in LG CNS. Local media mentioned LG CNS value could reach 4 trillion...

Douglas Kim

KOSPI 200 Constituents with a Float Rate Change: 11 Increases & 2 Reductions

This post summarizes all the KOSPI 200 constituents, which will likely change their respective float rate in the June Review.

Sanghyun Park

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