Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>More than 20 trillion won (US$16 billion) worth of deals are up for M&amp;As in 2023.</li>
<li>However, due to high interest rates and differences on valuations among buyers and sellers, the M&amp;A market in Korea is likely to continue to be weak in 2023.</li>
<li>In this insight, we discuss 24 companies that are up for M&amp;As this year in Korea, including Hanon Systems, SK Shieldus, and K Car.</li>
</ul>


More than 20 trillion won (US$16 billion) worth of deals are up for M&amp;As in 2023.
However, due to high interest rates and differences on valuations among buyers and sellers, the M&amp;A market in Korea is likely to continue to be weak in 2023.
In this insight, we discuss 24 companies that are up for M&amp;As this year in Korea, including Hanon Systems, SK Shieldus, and K Car.


Korea M&A Outlook in 2023: What's for Sale?

Equity Bottom-Up

<ul>
<li>On 17 October, the Korean government made a final official decision to have the BTS members serve in the mandatory military service.</li>
<li>We believe this will have a major negative impact on the sales and profits of HYBE in the next several years.</li>
<li>As a result of the Korean government formalizing the BTS members to enlist in the military, we believe that HYBE's share price could fall more than 50% from current levels.</li>
</ul>


On 17 October, the Korean government made a final official decision to have the BTS members serve in the mandatory military service.
We believe this will have a major negative impact on the sales and profits of HYBE in the next several years.
As a result of the Korean government formalizing the BTS members to enlist in the military, we believe that HYBE's share price could fall more than 50% from current levels.


HYBE: Korean Govt Mandates BTS Members to Enlist in Military - 50% Further Downside Risk Ahead

<ul>
<li>In this insight, we discuss a pair trade of going long on CJ ENM and going short on HYBE. </li>
<li>CJ ENM's valuations are much more attractive and offer higher value as compared to HYBE. CJ ENM shares are trading at EV/EBITDA of 2.7x versus 10.9x for HYBE in 2023. </li>
<li>The Korean government is likely to require BTS members to conscript for military service which is likely to lead to sharp decline in earnings estimates for HYBE.</li>
</ul>


In this insight, we discuss a pair trade of going long on CJ ENM and going short on HYBE. 
CJ ENM's valuations are much more attractive and offer higher value as compared to HYBE. CJ ENM shares are trading at EV/EBITDA of 2.7x versus 10.9x for HYBE in 2023. 
The Korean government is likely to require BTS members to conscript for military service which is likely to lead to sharp decline in earnings estimates for HYBE.


Korea Consumer Discretionary: A Pair Trade (Long CJ ENM and Short HYBE)

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 ETF operator (TIGER)'s index tracking conformity was high enough to create trading opportunities aimed at the rebalancing flow.</li>
<li>Flow/Price directions were mostly synched with only a few exceptions. Of particular importance is that the price impact was substantial compared to the passive flow size. </li>
<li>The yield of the tradable names suitable for a basket based on the projected passive impact size was 4.51%.</li>
</ul>


The ETF operator (TIGER)'s index tracking conformity was high enough to create trading opportunities aimed at the rebalancing flow.
Flow/Price directions were mostly synched with only a few exceptions. Of particular importance is that the price impact was substantial compared to the passive flow size. 
The yield of the tradable names suitable for a basket based on the projected passive impact size was 4.51%.


WISE Theme Indexes Rebalancing: Conformity of Passive Flow to Price Return

<ul>
<li>Today is the rebalancing trading day of WISE's three major theme indexes. The ETF operator (TIGER) is expected to start rebalancing trading after 2 pm.</li>
<li>The prediction accuracy of the top market cap stocks is relatively high. So, we should target these big boys with a flow at 0.2x or higher relative to ADTV.</li>
<li>Names in a basket trade setup: <a href="https://www.smartkarma.com/entities/ecopro-bm-co-ltd" target="_blank" data-smartkarma-citation="entities:27873:1" rel="noopener">Ecopro BM (247540 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-ie-technology" target="_blank" data-smartkarma-citation="entities:29207:1" rel="noopener">SK IE Technology (361610 KS)</a>, <a href="https://www.smartkarma.com/entities/solus-advanced-materials-co-ltd" target="_blank" data-smartkarma-citation="entities:28947:1" rel="noopener">Solus Advanced Materials (336370 KS)</a>, <a href="https://www.smartkarma.com/entities/hana-tour-service-inc" target="_blank" data-smartkarma-citation="entities:4852:1" rel="noopener">Hana Tour Service (039130 KS)</a>, &amp; <a href="https://www.smartkarma.com/entities/cj-enm" target="_blank" data-smartkarma-citation="entities:8887:1" rel="noopener">CJ ENM (035760 KS)</a>
</li>
</ul>


Today is the rebalancing trading day of WISE's three major theme indexes. The ETF operator (TIGER) is expected to start rebalancing trading after 2 pm.
The prediction accuracy of the top market cap stocks is relatively high. So, we should target these big boys with a flow at 0.2x or higher relative to ADTV.
Names in a basket trade setup: Ecopro BM (247540 KS), SK IE Technology (361610 KS), Solus Advanced Materials (336370 KS), Hana Tour Service (039130 KS), &amp; CJ ENM (035760 KS)



WISE Theme Indexes Rebalancing Today: Names in Basket Trade Setup

South Korea

CJ ENM, Ltd. retails clothes, kitchen utensils, home appliances, and jewelry.  The Company sells its merchandise through TV home shopping channels, catalogs, and the Internet shopping mall.  CJ ENM operates cable television business through a subsidiary.

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CJ ENM (035760 KS)

Korea M&A Outlook in 2023: What's for Sale?

In this insight, we discuss 24 companies that are up for M&As this year in Korea, including Hanon Systems, SK Shieldus, and K Car.

Douglas Kim

HYBE: Korean Govt Mandates BTS Members to Enlist in Military - 50% Further Downside Risk Ahead

As a result of the Korean government formalizing the BTS members to enlist in the military, we believe that HYBE's share price could fall more than...

Douglas Kim

Korea Consumer Discretionary: A Pair Trade (Long CJ ENM and Short HYBE)

In this insight, we discuss a pair trade of going long on CJ ENM and going short on HYBE. CJ ENM's valuations are much more attractive and offer...

Douglas Kim

WISE Theme Indexes Rebalancing: Conformity of Passive Flow to Price Return

This post provides the noteworthy points of the passive flow/price impact correlation from yesterday's rebalancing of WISE's three thematic indexes

Sanghyun Park

WISE Theme Indexes Rebalancing Today: Names in Basket Trade Setup

This post provides the latest flow estimations for WISE's three thematic indexes that rebalance today and suggests the tradable names in a basket...

Sanghyun Park

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