Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>In this insight, we highlight the pricing gap divergence of the major Korean holdcos and opcos amid market carnage.</li>
<li>In general, more holdcos/quasi-holdcos have been outperforming the opcos in the past year, as compared to the previous years as more investors seek value-oriented, deep NAV discount stocks.</li>
<li>We highlight 26 pair trades that involve Korean holdcos and opcos.</li>
</ul>


In this insight, we highlight the pricing gap divergence of the major Korean holdcos and opcos amid market carnage.
In general, more holdcos/quasi-holdcos have been outperforming the opcos in the past year, as compared to the previous years as more investors seek value-oriented, deep NAV discount stocks.
We highlight 26 pair trades that involve Korean holdcos and opcos.


Korean Holdcos Vs Opcos Gap Spreads Opportunities Amid Market Carnage

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>Juice for cash &amp; carry arbitrage doesn't seem like much. Several names in contango, but the basis widening isn't at a sufficiently arb-tradable level.</li>
<li>Reverse cash &amp; carry isn't all that attractive either, but it certainly does offer more juice, even with borrow fees. Ssangyong C&amp;E, SKT, Shinhan, and KB deserve our attention.</li>
<li>A bit uncertain is whether the pattern of "LONG Spot until ex-dividend and Conversion to Short" through cash &amp; carry will repeat itself this time.</li>
</ul>


Juice for cash &amp; carry arbitrage doesn't seem like much. Several names in contango, but the basis widening isn't at a sufficiently arb-tradable level.
Reverse cash &amp; carry isn't all that attractive either, but it certainly does offer more juice, even with borrow fees. Ssangyong C&amp;E, SKT, Shinhan, and KB deserve our attention.
A bit uncertain is whether the pattern of "LONG Spot until ex-dividend and Conversion to Short" through cash &amp; carry will repeat itself this time.


3Q Dividend Estimates of Those with SSF for Cash & Carry Arb in Korea

<ul>
<li>Uni President Enterprises and President Chain Store Corp (an affiliate of Uni-President Group) have agreed to acquire a controlling 60% stake ownership of Carrefour Taiwan from Carrefour SA (CA FP).</li>
<li>We believe the acquisition of the additional 49.5% stake in Carrefour Taiwan is likely to have a positive impact on Uni President Enterprises (1216 TT).</li>
<li>Uni President Enterprises is trading at P/S multiple of 0.77x so the acquisition multiple of 0.6x would be slightly lower than Uni President Enterprises' current valuation multiple. </li>
</ul>


Uni President Enterprises and President Chain Store Corp (an affiliate of Uni-President Group) have agreed to acquire a controlling 60% stake ownership of Carrefour Taiwan from Carrefour SA (CA FP).
We believe the acquisition of the additional 49.5% stake in Carrefour Taiwan is likely to have a positive impact on Uni President Enterprises (1216 TT).
Uni President Enterprises is trading at P/S multiple of 0.77x so the acquisition multiple of 0.6x would be slightly lower than Uni President Enterprises' current valuation multiple. 


Uni President Enterprises: Positive Catalyst from Additional Stake Purchase of Carrefour Taiwan

<ul>
<li>CJ Cheiljedang (097950 KS) reported better than expected earnings in 1Q 2022 and we continue to have a POSITIVE view of this stock.</li>
<li>Bio business sales increased by 39.3% YoY to 1.08 trillion won and operating profit jumped by 128% YoY 175.8 billion won in 1Q 2022, driven by strong demand for lysine. </li>
<li>We also like a pair trade between CJ Cheiljedang and CJ Logistics at current prices. We recommend on going long on CJ Cheiljedang and going short on CJ Logistics.</li>
</ul>


CJ Cheiljedang (097950 KS) reported better than expected earnings in 1Q 2022 and we continue to have a POSITIVE view of this stock.
Bio business sales increased by 39.3% YoY to 1.08 trillion won and operating profit jumped by 128% YoY 175.8 billion won in 1Q 2022, driven by strong demand for lysine. 
We also like a pair trade between CJ Cheiljedang and CJ Logistics at current prices. We recommend on going long on CJ Cheiljedang and going short on CJ Logistics.


A Pair Trade Between CJ Cheiljedang and CJ Logistics

<ul>
<li>CJ Logistics, the largest logistics company in Korea, is facing four major headwinds which are likely to result in further downside risk for the stock in the next 6-12 months.</li>
<li>The four major headwinds include greater competition from Coupang (CPNG US), lower e-commerce demand (parcel delivery), higher fuel prices, and higher interest rates.</li>
<li>Amid the four major challenges, we believe the consensus earnings estimates are overly aggressive and they are likely to be revised down further in the next several months. </li>
</ul>


CJ Logistics, the largest logistics company in Korea, is facing four major headwinds which are likely to result in further downside risk for the stock in the next 6-12 months.
The four major headwinds include greater competition from Coupang (CPNG US), lower e-commerce demand (parcel delivery), higher fuel prices, and higher interest rates.
Amid the four major challenges, we believe the consensus earnings estimates are overly aggressive and they are likely to be revised down further in the next several months. 


CJ Logistics: Four Major Headwinds Suggests Further Downside Risk

South Korea

CJ CheilJedang Corp. manufactures processed food products.  The Company's products include refined sugar, monosodium glutamate (MSG), condiment, wheat powder, flour, cooking oil, processed meats, and animal feed.  CJ CheilJedang also manufactures pharmaceutical and household products.

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CJ Cheiljedang (097950 KS)

Korean Holdcos Vs Opcos Gap Spreads Opportunities Amid Market Carnage

In this insight, we highlight the pricing gap divergence of the major Korean holdcos and opcos amid market carnage. We highlight 26 pair trades...

Douglas Kim

3Q Dividend Estimates of Those with SSF for Cash & Carry Arb in Korea

This post provides the market consensus estimates for the 3Q dividends of those with single-stock futures in Korea and looks into the cash-and...

Sanghyun Park

Uni President Enterprises: Positive Catalyst from Additional Stake Purchase of Carrefour Taiwan

We believe the acquisition of the additional 49.5% stake in Carrefour Taiwan is likely to have a positive impact on Uni President Enterprises (1216...

Douglas Kim

A Pair Trade Between CJ Cheiljedang and CJ Logistics

CJ Cheiljedang reported better than expected earnings in 1Q 2022. We recommend going long CJ Cheiljedang and going short on CJ Logistics.

Douglas Kim

CJ Logistics: Four Major Headwinds Suggests Further Downside Risk

CJ Logistics faces four major headwinds including greater competition from Coupang (CPNG US), lower e-commerce demand (parcel delivery), higher...

Douglas Kim

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