Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

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<a href="https://www.smartkarma.com/entities/korea-kolmar-co-ltd" target="_blank" data-smartkarma-citation="entities:7985:1" rel="noopener">Korea Kolmar (161890 KS)</a> is the seventh company we introduce in our 'Korea Small Cap Gem' series. We define small cap as companies with market cap of less than US$1 billion. Korea Kolmar has a market cap of $0.9 billion (1 trillion won). Korea Kolmar is one of the leading cosmetics ODM companies in Korea. It was the first company in Korea to introduce the ODM business for the cosmetics industry in 1993. Korea Kolmar currently owns a 50.7% stake in a private company called HK inno.N. This company was previously called CJ HealthCare which Korea Kolmar purchased in April 2018 for 1.3 trillion won ($1.2 billion) (100% stake) from CJ Cheiljedang.
The local media have mentioned that the estimated value of HK inno.N has risen to nearly 2 trillion won. A 50.7% stake of this would be worth nearly 1 trillion won, which would represent nearly the entire market cap of Korea Kolmar.
In other words, if the assessment of the value of HK inno.N is indeed about 2 trillion won, then investors would be getting the remaining Korea Komar's core businesses for free. Over the next one year, Korea Kolmar could be a major turnaround play with improving cosmetics operations along with an increasing focus on the IPO of HK inno.N in 2021.
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Korea Kolmar (161890 KS) is the seventh company we introduce in our 'Korea Small Cap Gem' series. We define small cap as companies with market cap of less than US$1 billion. Korea Kolmar has a market cap of $0.9 billion (1 trillion won). Korea Kolmar is one of the leading cosmetics ODM companies in Korea. It was the first company in Korea to introduce the ODM business for the cosmetics industry in 1993. Korea Kolmar currently owns a 50.7% stake in a private company called HK inno.N. This company was previously called CJ HealthCare which Korea Kolmar purchased in April 2018 for 1.3 trillion won ($1.2 billion) (100% stake) from CJ Cheiljedang.
The local media have mentioned that the estimated value of HK inno.N has risen to nearly 2 trillion won. A 50.7% stake of this would be worth nearly 1 trillion won, which would represent nearly the entire market cap of Korea Kolmar.
In other words, if the assessment of the value of HK inno.N is indeed about 2 trillion won, then investors would be getting the remaining Korea Komar's core businesses for free. Over the next one year, Korea Kolmar could be a major turnaround play with improving cosmetics operations along with an increasing focus on the IPO of HK inno.N in 2021.


Korea Small Cap Gem #7: Korea Kolmar - Get the Core Cosmetics Business for Free (Ex HK Inno.N)

Cross Asset Strategy

Review of Top 10 Issues Related to Korean stock market, economy, &amp; politics in June 2020:
<ul>
<li>SK Biopharm IPO</li>
<li>SK Holdings downgrade</li>
<li>Capital gains tax on stocks and funds in Korea</li>
<li>China scraps "Han Han Ryung" (Law that Banned Korean culture-related products/services)</li>
<li>A Surge in Value of Nikola Corp</li>
<li>North Korea suspends all communication with South Korea</li>
<li>Positioning ahead of KOSPI 200 &amp; KOSDAQ 150 Rebalance in December</li>
<li>IGIS Value Plus REIT &amp; IGIS Residence REIT IPOs</li>
<li>Korean preferred shares: Bamboo trees of Korean stock market</li>
<li>Korea Small Cap Gem #3: New Tree Co</li>
</ul>

Review of Top 10 Issues Related to Korean stock market, economy, &amp; politics in June 2020:

SK Biopharm IPO
SK Holdings downgrade
Capital gains tax on stocks and funds in Korea
China scraps "Han Han Ryung" (Law that Banned Korean culture-related products/services)
A Surge in Value of Nikola Corp
North Korea suspends all communication with South Korea
Positioning ahead of KOSPI 200 &amp; KOSDAQ 150 Rebalance in December
IGIS Value Plus REIT &amp; IGIS Residence REIT IPOs
Korean preferred shares: Bamboo trees of Korean stock market
Korea Small Cap Gem #3: New Tree Co


Korea Stock Market Monthly Recap #49 (June 2020)

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Thematic (Sector/Industry)

Consumer Staples are a good inflation hedge, but only if they can pass on the increase in raw material costs to end consumers. In a scenario of high unemployment and collapsing demand this may not always be possible.We have taken a look at the change in short interest on Asian consumer staples names across Hong Kong, Korea, Taiwan and Japan to identify stocks that the market is betting on and against.There is a fair bit of variability among the HK and Taiwan stocks, short interest has been broadly lower in Korea and has been plummeting in Japan. Investors can use the data as one of the inputs in identifying stocks that could benefit from an increase in inflation in the near/medium term.

Consumer Staples are a good inflation hedge, but only if they can pass on the increase in raw material costs to end consumers. In a scenario of high unemployment and collapsing demand this may not always be possible.We have taken a look at the change in short interest on Asian consumer staples names across Hong Kong, Korea, Taiwan and Japan to identify stocks that the market is betting on and against.There is a fair bit of variability among the HK and Taiwan stocks, short interest has been broadly lower in Korea and has been plummeting in Japan. Investors can use the data as one of the inputs in identifying stocks that could benefit from an increase in inflation in the near/medium term.

Asian Consumer Staples - Inflation Hedge?

Event-Driven

Estee Lauder Companies Cl A / Event-Driven

<a href="https://www.smartkarma.com/entities/estee-lauder-companies-cl-a" target="_blank" data-smartkarma-citation="entities:8713:1" rel="noopener">Estee Lauder Companies Cl A (EL US)</a> announced on November 18th that it will purchase a 66.7% stake in Have &amp; Be Co., a leading Korean cosmetics maker which was established in 2005.Although the exact <a href="https://n.news.naver.com/article/015/0004243576" target="_blank" rel="noopener">purchase price</a> was not announced, the value of the total 100% stake in Have &amp; Be is estimated to be about 2 trillion won, which would result in the 66.7% stake in the company being valued at about 1.3 trillion ($1.1 billion). This is one of the biggest M&amp;A deals in the Korean cosmetics sector this year and it is the first major acquisition of an Asian brand cosmetics company in Asia by Estee Lauder. The company has fantastic financials backed by strong revenue growth rate and high profit margins. In 2018, Have &amp; Be achieved revenue of 469.1 billion won (up 29.3% YoY), operating profit of 111.9 billion won (up 19.5% YoY), and operating margin of 23.8%).

Estee Lauder Companies Cl A (EL US) announced on November 18th that it will purchase a 66.7% stake in Have &amp; Be Co., a leading Korean cosmetics maker which was established in 2005.Although the exact purchase price was not announced, the value of the total 100% stake in Have &amp; Be is estimated to be about 2 trillion won, which would result in the 66.7% stake in the company being valued at about 1.3 trillion ($1.1 billion). This is one of the biggest M&amp;A deals in the Korean cosmetics sector this year and it is the first major acquisition of an Asian brand cosmetics company in Asia by Estee Lauder. The company has fantastic financials backed by strong revenue growth rate and high profit margins. In 2018, Have &amp; Be achieved revenue of 469.1 billion won (up 29.3% YoY), operating profit of 111.9 billion won (up 19.5% YoY), and operating margin of 23.8%).

Korea M&A Spotlight: Estee Lauder Acquires Have & Be for More Than $1 Billion

Equity Capital Markets

Pumtech Korea Co Ltd / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/28101" target="_blank" data-smartkarma-citation="entities:28101:1">Pumtech Korea Co Ltd (251970 KS)</a>, the second largest manufacturer of cosmetics containers in Korea, is getting ready for an IPO in the next several weeks. The company's major customers include <a href="https://www.smartkarma.com/entities/6501" target="_blank" data-smartkarma-citation="entities:6501:1">Lg Household &amp; Health Care (051900 KS)</a>, <a href="https://www.smartkarma.com/entities/20854" target="_blank" data-smartkarma-citation="entities:20854:1">Amorepacific Corp (090430 KS)</a>, and Carver Korea (AHC brand). Of the 0.64 million shares sold in the IPO, 0.37 million are treasury shares, 0.14 million are shares held by private equity firms, and 0.13 million shares are held by insiders. The fact that nearly 58% of this amount is from the treasury shares are likely to be viewed positively since this would not involve shares dilution. The company's sales increased 21.1% CAGR from 2015 to 2018. In 2018, the company generated sales of 151.1 billion won (up 13.1% YoY) and operating profit of 24.5 billion won (up 27.9% YoY). The company's operating margin averaged 13.2% from 2015 to 2018.

Pumtech Korea Co Ltd (251970 KS), the second largest manufacturer of cosmetics containers in Korea, is getting ready for an IPO in the next several weeks. The company's major customers include Lg Household &amp; Health Care (051900 KS), Amorepacific Corp (090430 KS), and Carver Korea (AHC brand). Of the 0.64 million shares sold in the IPO, 0.37 million are treasury shares, 0.14 million are shares held by private equity firms, and 0.13 million shares are held by insiders. The fact that nearly 58% of this amount is from the treasury shares are likely to be viewed positively since this would not involve shares dilution. The company's sales increased 21.1% CAGR from 2015 to 2018. In 2018, the company generated sales of 151.1 billion won (up 13.1% YoY) and operating profit of 24.5 billion won (up 27.9% YoY). The company's operating margin averaged 13.2% from 2015 to 2018. 

South Korea

Cosmax, Inc. is a cosmetics manufacturer. The Company develops and produces a variety of cosmetics for men and women, such as basic and special skin care, makeup, hair care, and other beauty products. Cosmax manufactures its products on original equipment manufacturing (OEM) basis.

Cosmecca Korea Co., Ltd. develops and manufactures cosmetics. The Company specializes in research and development of cosmetics. Cosmecca Korea serves customers in Korea.

Kolmar Korea Holdings Co.,Ltd operates as a holding company. The Company through its subsidiaries, provide cosmetics manufacturing, health food manufacturing, pharmaceuticals development, and other services. Kolmar Korea Holdings offers services in Korea.

Hankook Cosmetics Manufacturing Co Ltd manufactures and sells a variety of cosmetics and toiletries, such as makeup, skin care, body care, and hair care products for menand women.  The Company markets its products under the brand names Calli, Idem, Elesis, Ossion, and Pamess.

Hankook Cosmetics Manufacturing (003350 KS)

NeoPharm Co., Ltd. develops and manufactures skin care goods for dried skin and atopic dermatitis.  The Company's main products include skin cleaning cream, body lotion, and skin care cosmetics.

Able C&C Co., Ltd. develops and manufactures cosmetic products. The Company's products include makeup, skin care, and hair care, and body care.

It's Hanbul Co., Ltd. manufactures and markets personal care items. The Company produces cosmetics, make-up tools, hair & body products, and skin care products.

Tonymoly Co., Ltd. manufactures, markets, and distributes beauty products.  The Company produces cosmetics, skin care, hair care, and body care products.

LG H&H Co., Ltd. manufactures and distributes cosmetics. The Company produces whoo, o hui, sum 37, basic cosmetics, color cosmetics, and other related products. LG H&H also produces toothpaste, soap, detergents, healthy, personal care, and refreshing products.

AMOREPACIFIC Group is an investment holding company. The Company, through its subsidiaries, produce cosmetics and toiletries.

Herbalife Ltd. is a global nutrition company that sells weight management, healthy meals and snacks, sports and fitness, energy and targeted nutritional products as well as personal care products. The Company distributes and sells its products through a network of independent distributors, using the direct selling channel.

USANA Health Sciences, Inc. develops, manufactures, and markets nutritionals, personal care, and weight management products.  The Company's products are sold directly to preferred customers and distributors throughout the United States, Canada, Australia, New Zealand, the United Kingdom, and Hong Kong.

Jamieson Wellness Inc., doing business as Jamieson Vitamins, develops, manufactures, and markets natural health products. The Company offers vitamins, minerals, and supplement products, as well as over-the-counter remedies and sports nutrition products. Jamieson Vitamins serves customers worldwide.

Blackmores Limited manufactures and markets vitamin, herbal, mineral supplements and natural skin and hair treatment products in Australia and New Zealand. These products are supplied to the over the counter retail market and to health care professionals. The Company also has a line of natural beauty and aromatherapy products and its products are distributed in South East Asia.

Microbio Co., Ltd. applies symbiotic fermentation technology to develop botanical drug. The Company's products include clinically proven botanical drugs, pharmaceutically active ingredients, and nutrient supplements.

Best World International Limited sources, formulates, brands, and distributes a range of health and lifestyle products under the BWL, Avance, DORS, DR's Secret, and DRs Seager brand names.  The Company also distributes a range of third-party cosmetics and skin care products under the brand C'bon.

Milbon Co., Ltd. manufactures hair care products for beauty salons.  The Company produces chemicals for permanents, hair coloring, shampoos, rinses, and hair growth stimulant products.

Noevir Holdings Co., Ltd. manufactures and sells a variety of cosmetic products. The Company's products include skin care and make-up.  Noevir also manufactures and sells medicines, nutritional supplements and apparel.

Ontex Group NV. produces disposable personal hygiene solutions. The Company's products cater to babies, women and senior adults.

EIS Eczacibasi Ilac Sanayi ve Finansal Yatirimlar Sanayi ve Ticaret A.S. produces and markets pharmaceuticals, veterinary products, hospital equipment, and cosmetics. The Company's products include cephalosporin and penicillin. The Company exports its products to the Middle East, Russian Federation, Central Asia, Eastern Europe and EU countries.

Kolmar Korea Co., Ltd. manufactures and distributes personal care products. The Company produces cosmetics. Kolmar Korea also produces medicine and healthcare products.

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Kolmar Korea (161890 KS)

Korea Small Cap Gem #7: Korea Kolmar - Get the Core Cosmetics Business for Free (Ex HK Inno.N)

Over the next one year, Korea Kolmar could be a major turnaround play with improving cosmetics operations along with an increasing focus on the IPO...

Douglas Kim

Korea Stock Market Monthly Recap #49 (June 2020)

Review of Top 10 Issues Related to Korean stock market, economy, & politics in June 2020: SK Biopharm IPO SK Holdings downgrade Capital gains...

Douglas Kim

Asian Consumer Staples - Inflation Hedge?

Consumer Staples are a good inflation hedge, but only if they can pass on the increase in raw material costs to end consumers. In a scenario of...

Brian Freitas

Korea M&A Spotlight: Estee Lauder Acquires Have & Be for More Than $1 Billion

Estee Lauder Companies Cl A (EL US) announced on November 18th that it will purchase a 66.7% stake in Have & Be Co., a leading Korean cosmetics...

Douglas Kim

Pumtech Korea IPO Preview

Pumtech Korea Co Ltd (251970 KS), the second largest manufacturer of cosmetics containers in Korea, is getting ready for an IPO in the next several...

Douglas Kim

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