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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

With ex-dividend date coming up in Korea on 29 December, we take a look at the dividend yield differential between the common and preferred shares and the discount on the preferred shares.We recommend buying preferred shares (and hedging with the common shares) with large dividend yield differentials versus the common shares and that are trading towards the bottom of their discount range versus the common. Apart from the dividend yield pickup we also expect to earn returns on the narrowing of the discount on the preferred shares.With short selling only permitted on <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-index" target="_blank" data-smartkarma-citation="entities:22911:1" rel="noopener">Korea Stock Exchange Kospi Index (KOSPI INDEX)</a> and <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150 Index (KOSDQ150 INDEX)</a> constituents, shorts selling on the preferred shares is not possible since they are not eligible for index inclusion.We see attractive risk/reward for the preferred shares on <a href="https://www.smartkarma.com/entities/hyundai-motor-co" target="_blank" data-smartkarma-citation="entities:155:1" rel="noopener">Hyundai Motor Co (005380 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-household-health-care" target="_blank" data-smartkarma-citation="entities:6501:1" rel="noopener">LG Household &amp; Health Care (051900 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-electro-mechanics-co" target="_blank" data-smartkarma-citation="entities:539:1" rel="noopener">Samsung Electro Mechanics Co, Ltd. (009150 KS)</a>, <a href="https://www.smartkarma.com/entities/amorepacific-group" target="_blank" data-smartkarma-citation="entities:12179:1" rel="noopener">Amorepacific Group (002790 KS)</a>, <a href="https://www.smartkarma.com/entities/s-oil-corp" target="_blank" data-smartkarma-citation="entities:1667:1" rel="noopener">S Oil Corp (010950 KS)</a>, <a href="https://www.smartkarma.com/entities/amorepacific-corp" target="_blank" data-smartkarma-citation="entities:20854:1" rel="noopener">Amorepacific Corp (090430 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-sdi-co-ltd" target="_blank" data-smartkarma-citation="entities:503:1" rel="noopener">Samsung SDI (006400 KS)</a> and <a href="https://www.smartkarma.com/entities/sk-innovation-co-ltd" target="_blank" data-smartkarma-citation="entities:1268:1" rel="noopener">SK Innovation (096770 KS)</a>.

With ex-dividend date coming up in Korea on 29 December, we take a look at the dividend yield differential between the common and preferred shares and the discount on the preferred shares.We recommend buying preferred shares (and hedging with the common shares) with large dividend yield differentials versus the common shares and that are trading towards the bottom of their discount range versus the common. Apart from the dividend yield pickup we also expect to earn returns on the narrowing of the discount on the preferred shares.With short selling only permitted on Korea Stock Exchange Kospi Index (KOSPI INDEX) and KOSDAQ 150 Index (KOSDQ150 INDEX) constituents, shorts selling on the preferred shares is not possible since they are not eligible for index inclusion.We see attractive risk/reward for the preferred shares on Hyundai Motor Co (005380 KS), LG Household &amp; Health Care (051900 KS), Samsung Electro Mechanics Co, Ltd. (009150 KS), Amorepacific Group (002790 KS), S Oil Corp (010950 KS), Amorepacific Corp (090430 KS), Samsung SDI (006400 KS) and SK Innovation (096770 KS). 

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<div class="content-highlight">
Trading Opportunity for the Rights Offering - For the short term investors, we think that there could be an attractive trading opportunity regarding Cosmax. Given the relatively high upside (current price vs expected rights offering price), we would participate in the rights offering.
We also think that there is a relatively solid probability of the COVID-19 cases declining in Korea in the next several weeks and that Xi Jinping could come to South Korea sometime in August/September. As a result, we believe that there is a good chance that the Korean cosmetics stocks continue to outperform in the 2-3 months. 
</div>In this insight, we discuss the details of the <a href="https://www.smartkarma.com/entities/cosmax-inc" target="_blank" data-smartkarma-citation="entities:4491:1" rel="noopener">Cosmax Inc (192820 KS)</a> rights offering details and potential trading opportunities. Cosmax is one of the top five listed cosmetics companies in Korea. It currently has a market cap of 1.3 trillion won ($1.2 billion).On 26 April 2021 (after market close), Cosmax announced that it will issue 1.3 million shares to raise 144.3 billion won. After this announcement, the stock fell 11.5% on the following day. Since then, the stock price has recovered nicely. From 26 April to 8 June 2021, Cosmax's share price is down 3%. The expected rights offering price is 103,000 won and based on the current price of 130,000 won, it represents a 26.2% upside. Given this solid upside and the recent recovery of the stock price, there is likely to be relatively solid demand for this rights offering. The rights offering subscription dates for the existing shareholders are from 17 to 18 June 2021. The new shares listing date is on 8 July. There is a 11.5% shares dilution associated with this rights offering. Currently, Cosmax BTI is the largest controlling shareholder with a 26.2% in <a href="https://www.smartkarma.com/entities/cosmax-inc" target="_blank" data-smartkarma-citation="entities:4491:1" rel="noopener">Cosmax Inc (192820 KS)</a>.


Trading Opportunity for the Rights Offering - For the short term investors, we think that there could be an attractive trading opportunity regarding Cosmax. Given the relatively high upside (current price vs expected rights offering price), we would participate in the rights offering.
We also think that there is a relatively solid probability of the COVID-19 cases declining in Korea in the next several weeks and that Xi Jinping could come to South Korea sometime in August/September. As a result, we believe that there is a good chance that the Korean cosmetics stocks continue to outperform in the 2-3 months. 
In this insight, we discuss the details of the Cosmax Inc (192820 KS) rights offering details and potential trading opportunities. Cosmax is one of the top five listed cosmetics companies in Korea. It currently has a market cap of 1.3 trillion won ($1.2 billion).On 26 April 2021 (after market close), Cosmax announced that it will issue 1.3 million shares to raise 144.3 billion won. After this announcement, the stock fell 11.5% on the following day. Since then, the stock price has recovered nicely. From 26 April to 8 June 2021, Cosmax's share price is down 3%. The expected rights offering price is 103,000 won and based on the current price of 130,000 won, it represents a 26.2% upside. Given this solid upside and the recent recovery of the stock price, there is likely to be relatively solid demand for this rights offering. The rights offering subscription dates for the existing shareholders are from 17 to 18 June 2021. The new shares listing date is on 8 July. There is a 11.5% shares dilution associated with this rights offering. Currently, Cosmax BTI is the largest controlling shareholder with a 26.2% in Cosmax Inc (192820 KS). 

Cosmax Rights Offering Details & Trading Opportunities

CEO, A. Stotz Investment Research

Dr. Andrew Stotz, CFA

Quantamental Investing to beat Benchmarks

A. Stotz Investment Research

We pick stocks. We construct portfolios. All our effort is focused on how to better pick stocks and construct portfolios. We serve fund management companies, family offices, and high net worth individuals.

Thematic (Sector/Industry)

We highlight 14 stocks in Asia that look interesting to us based upon our FVMR Methodology. Our research team constantly reviews the Asian markets to try to find interesting ideas based on Fundamentals or Valuation or Momentum or Risk or some combination thereof.

We highlight 14 stocks in Asia that look interesting to us based upon our FVMR Methodology. Our research team constantly reviews the Asian markets to try to find interesting ideas based on Fundamentals or Valuation or Momentum or Risk or some combination thereof.

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.

I added three new single-subsidiary holding companies to my Korea stub list. They are Green Cross Holdings, Hitejinro Holdings, and Seah Holdings.







Korea stubs (single-subsidiary)

Holdco
Ticker
Subsidiary
Ticker


Amorepacific Group
002790
Amorepacific Corp
090430


BGF Co Ltd
027410
BGF Retail Co Ltd
282330


Halla Holdings Corp
060980
Mando Corp
204320


Hanjin Kal
180640
Korean Air Lines Co Ltd
003490


Hankook &amp; Company Co Ltd
000240
Hankook Tire &amp; Technology Co Ltd
161390


HANSAE YES24 HOLDINGS CO., LTD.
016450
Hansae Co., Ltd.
105630


HDC Holdings Co Ltd
012630
HDC Hyundai Development Co
294870


Nexen Corporation
005720
Nexen Tire Corp
002350


Nongshim Holdings Co Ltd
072710
Nongshim Co Ltd
004370


ORION Holdings Corp
001800
Orion Corp
271560


Poongsan Holdings Corporation
005810
POONGSAN CORPORATION
103140


Youngone Holdings Co Ltd
009970
Youngone Corporation
111770


* Green Cross Holdings
005250
* Green Cross Corp
006280


* Hitejinro Holdings Co Ltd
000140
* HiteJinro Co Ltd
000080


* Seah Holdings Corp
058650
* Seah Besteel Corporation
001430

Source: KRX

Halla Holdings and Seah Holdings have the widest discount to their respective NAV, 66.50% and 63.26%, respectively. Nongshim Holdings and BGF closely follow. Hanjin Kal








Korea stubs (single-subsidiary)
NAV discount
Single subsidiary weight in NAV
Single subsidiary weight in GAV


Amorepacific Group
15.23%
95.10%
92.71%


BGF Co Ltd
58.33%
71.57%
84.19%


Halla Holdings Corp
66.50%
70.10%
50.91%


Hanjin Kal
-10.55%
83.08%
83.96%


Hankook &amp; Company Co Ltd
15.04%
89.41%
97.86%


HANSAE YES24 HOLDINGS CO., LTD.
41.51%
75.59%
67.16%


HDC Holdings Co Ltd
37.19%
63.29%
55.47%


Nexen Corporation
46.91%
73.79%
73.89%


Nongshim Holdings Co Ltd
58.79%
69.97%
70.45%


ORION Holdings Corp
45.25%
96.61%
87.61%


Poongsan Holdings Corporation
53.23%
82.21%
86.59%


Youngone Holdings Co Ltd
51.42%
81.28%
86.72%


Green Cross Holdings
48.90%
174.03%
91.25%


Hitejinro Holdings Co Ltd
16.99%
104.18%
82.30%


Seah Holdings Corp
63.26%
57.92%
52.84%

Source: KRX



Korea Stubs Status Check: 15 in Total Incl. 3 New Ones

With short-selling in full action now, the attention is growing on the local single-subsidiary holding company stocks. I track the following 12 pairs. Currently, three holding companies are at a negative sigma on a 20-day moving average.







Holdco
Subsidiary
Sigma (σ) on a 20-day moving average


Amorepacific Group
Amorepacific Corp
1.04


BGF Co Ltd
BGF Retail Co Ltd
0.24


Halla Holdings Corp
Mando Corp
0.62


Hanjin Kal
Korean Air Lines Co Ltd
-1.64


Hankook &amp; Company Co Ltd
Hankook Tire &amp; Technology Co Ltd
0.69


HANSAE YES24 HOLDINGS CO., LTD.
Hansae Co., Ltd.
-1.57


HDC Holdings Co Ltd
HDC Hyundai Development Co
1.52


Nexen Corporation
Nexen Tire Corp
-0.71


Nongshim Holdings Co Ltd
Nongshim Co Ltd
1.16


ORION Holdings Corp
Orion Corp
1.24


Poongsan Holdings Corporation
POONGSAN CORPORATION
1.07


Youngone Holdings Co Ltd
Youngone Corporation
1.16

Source: KRX

In a longer horizon (180-days), Hanjin Kal (again), Hankook &amp; Co, and Nexen appear to be in an undervalued territory relative to their respective counterpart.








Holdco
%Δ to 180-day mean
%Δ to 180-day high
%Δ to 180-day low


Amorepacific Group
-3.76%
-16.86%
9.99%


BGF Co Ltd
24.29%
-5.08%
47.30%


Halla Holdings Corp
-8.97%
-32.41%
22.01%


Hanjin Kal
-42.64%
-65.21%
2.65%


Hankook &amp; Company Co Ltd
-12.17%
-32.20%
9.18%


HANSAE YES24 HOLDINGS CO., LTD.
-1.84%
-30.55%
38.10%


HDC Holdings Co Ltd
-1.41%
-15.67%
18.40%


Nexen Corporation
-15.93%
-25.30%
3.63%


Nongshim Holdings Co Ltd
11.01%
-0.72%
32.78%


ORION Holdings Corp
38.24%
-1.97%
72.32%


Poongsan Holdings Corporation
3.45%
-24.96%
14.58%


Youngone Holdings Co Ltd
-1.02%
-15.07%
20.33%

Source: KRX

Unfortunately, their NAV discount tells a different story. High-NAV discount holdco stocks are BGF, Halla Holdings, Nongshim Holdings, and Youngone Holdings. In contrast, Hanjin Kal and Hankook &amp; Co still have substantial room for further deflation relative to their local peers in NAV discount.* FYI, only Halla Holdings has significant operating operations. 









Holdco
Subsidiary
NAV discount
Single subsidiary weight in NAV
Single subsidiary weight in GAV


Amorepacific Group
Amorepacific Corp
11.39%
94.87%
92.47%


BGF Co Ltd
BGF Retail Co Ltd
53.56%
68.45%
82.11%


Halla Holdings Corp
Mando Corp
67.04%
68.92%
49.55%


Hanjin Kal
Korean Air Lines Co Ltd
-1.76%
81.57%
82.50%


Hankook &amp; Company Co Ltd
Hankook Tire &amp; Technology Co Ltd
17.91%
89.46%
97.87%


HANSAE YES24 HOLDINGS CO., LTD.
Hansae Co., Ltd.
34.88%
74.72%
64.86%


HDC Holdings Co Ltd
HDC Hyundai Development Co
43.85%
62.61%
55.20%


Nexen Corporation
Nexen Tire Corp
48.07%
73.44%
73.67%


Nongshim Holdings Co Ltd
Nongshim Co Ltd
61.52%
68.01%
68.49%


ORION Holdings Corp
Orion Corp
45.33%
95.84%
87.02%


Poongsan Holdings Corporation
POONGSAN CORPORATION
49.59%
80.11%
84.91%


Youngone Holdings Co Ltd
Youngone Corporation
52.20%
79.12%
85.07%

Source: KRX



Korea Single-Subsidiary Holdcos NAV Discount & Short Interest: Quick Thoughts on Trade

South Korea

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

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Amorepacific Group (002790 KS)

Korea Preferred Shares - Trade Ideas

With dividend ex-date coming up in just over 2 months, we highlight preferred shares that trade at a big discount to the common shares and at a...

Brian Freitas

Cosmax Rights Offering Details & Trading Opportunities

In this insight, we discuss the details of the Cosmax Inc (192820 KS) rights offering details and potential trading opportunities.

Douglas Kim

The Stocks to Own in Asia – Vol. 33

Since its inception, our FVMR Asia strategy has generated a before-fee total return of 95% versus the MSCI Asia ex Japan of 97%.

A. Stotz Investment Research

Korea Stubs Status Check: 15 in Total Incl. 3 New Ones

This post examines the current status of Korea's 15 stubs (3 new ones added to the list), having a single subsidiary accounting for at least 60% of...

Sanghyun Park

Korea Single-Subsidiary Holdcos NAV Discount & Short Interest: Quick Thoughts on Trade

This post tracks the NAV discount of all 12 Korean single-subsidiary holding companies and check their short interest at this point. Also, this...

Sanghyun Park

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)