Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>Doosan Bobcat Inc (241560 KS) announced a block deal sale of 5 million shares. representing 5% of outstanding shares.</li>
<li>There are three major reasons why we have a negative view of the block deal sale and on Doosan Bobcat. </li>
<li>Two of these reasons include an overhang associated with remaining shares which could be sold as well as a potential downturn in construction markets in North America and Europe. </li>
</ul>


Doosan Bobcat Inc (241560 KS) announced a block deal sale of 5 million shares. representing 5% of outstanding shares.
There are three major reasons why we have a negative view of the block deal sale and on Doosan Bobcat. 
Two of these reasons include an overhang associated with remaining shares which could be sold as well as a potential downturn in construction markets in North America and Europe. 


Doosan Bobcat Block Deal Sale - Overhang Remains

APAC IPOs & Placements, Aequitas Research

Ethan Aw

APAC IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Doosan Bobcat Inc / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/doosan-bobcat-inc" target="_blank" data-smartkarma-citation="entities:23592:1" rel="noopener">Doosan Bobcat Inc (241560 KS)</a> aims to sell a US$145m block. Its recent price momentum is strong but past deals have shown mixed results. </li>
<li>The deal doesn’t appear to be well flagged and is a relatively large one to digest, representing 20.9 days of its three month ADV.  </li>
<li>In this note, we will run the deal through our ECM framework and comment on other deal dynamics.</li>
</ul>



Doosan Bobcat Inc (241560 KS) aims to sell a US$145m block. Its recent price momentum is strong but past deals have shown mixed results. 
The deal doesn’t appear to be well flagged and is a relatively large one to digest, representing 20.9 days of its three month ADV.  
In this note, we will run the deal through our ECM framework and comment on other deal dynamics.


Doosan Bobcat Placement - Momentum Is Strong but past Deals Have Been a Mixed Bag

After the market close today, <a href="https://www.smartkarma.com/entities/doosan-infracore-co-ltd" target="_blank" data-smartkarma-citation="entities:3982:1" rel="noopener">Doosan Infracore (042670 KS)</a> announced that it plans to complete a rights offering worth 800 billion won, which represents nearly 70% of its current market cap of 1.15 trillion won.This rights offering will lead to a significant share dilution risk. The company has yet to provide full details of this rights offering but it is likely that the rights offering price will be priced at least 20-25% lower than current share price. Given the huge dilution risk, we believe that shares of Doosan Infracore will likely face significant weakness in the next several days. A retrace back to the 11,000 won to 12,000 won level is likely, in our view.

After the market close today, Doosan Infracore (042670 KS) announced that it plans to complete a rights offering worth 800 billion won, which represents nearly 70% of its current market cap of 1.15 trillion won.This rights offering will lead to a significant share dilution risk. The company has yet to provide full details of this rights offering but it is likely that the rights offering price will be priced at least 20-25% lower than current share price. Given the huge dilution risk, we believe that shares of Doosan Infracore will likely face significant weakness in the next several days. A retrace back to the 11,000 won to 12,000 won level is likely, in our view. 

Doosan Infracore Announces a Rights Offering Worth 70% of Its Market Cap

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

Short selling has finally resumed in Korea and it has been a busy couple of days on that front with foreign investors piling into stocks that have run up more than their peers over the last year and are potentially overvalued.Long/short pairs could be implemented in Korea during the short sell ban if you had long inventory or if there were listed single stock futures on the short leg.With short selling permitted on constituents of the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a>, we take a look at long/short pairs where both stocks are members of the index. These pairs belong to the same GICS sub-industry, are correlated and exhibit mean-reversion. We also use short sale data from the last couple of trading sessions to see which stocks are being targeted by short sellers.

Short selling has finally resumed in Korea and it has been a busy couple of days on that front with foreign investors piling into stocks that have run up more than their peers over the last year and are potentially overvalued.Long/short pairs could be implemented in Korea during the short sell ban if you had long inventory or if there were listed single stock futures on the short leg.With short selling permitted on constituents of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX), we take a look at long/short pairs where both stocks are members of the index. These pairs belong to the same GICS sub-industry, are correlated and exhibit mean-reversion. We also use short sale data from the last couple of trading sessions to see which stocks are being targeted by short sellers.

Korea Pair Trades: High Risk/Reward Names with Short Sell Screen

On 19 March, <a href="https://www.smartkarma.com/entities/doosan-infracore-co-ltd" target="_blank" data-smartkarma-citation="entities:3982:1" rel="noopener">Doosan Infracore (042670 KS)</a> announced that it will split the operating division (surviving company) and the investment division (Newco company that is being split off). The split off Newco will then be merged with <a href="https://www.smartkarma.com/entities/doosan-heavy-industries-construction" target="_blank" data-smartkarma-citation="entities:7389:1" rel="noopener">Doosan Heavy Industries &amp; Construction (034020 KS)</a>. Need to Repay Doosan Infracore Shorts - As of 18 March, there were 12.56 million shares shorts outstanding for Doosan Infracore, representing 3.4% of total outstanding shares. At the current price of 9,880 won, this represents 124 billion won. There were 61 million shares of Doosan Infracore that were traded on Monday, 21 March and probably a good chunk of these shorted shares were covered. According to Korean regulations, prior to the Newco being formed, the investors that were shorted on the company need to repay them and this was one of the main reasons why Doosan Infracore's shares jumped 21% on Monday. <div class="content-highlight">The Insight has been marked Bullish since we expect the split off and merger of Doosan Infracore's investment assets to DHIC is likely to result in a higher re-rating of the company's core operating business (construction equipment). There are also signs that the overseas construction business is rebounding in China, which should have a positive impact on Doosan Infracore. In addition, the creation of the Newco (and the getting rid of the previous company's shareholders' list) results in the need for the Doosan Infracore's shorts to cover. </div>

On 19 March, Doosan Infracore (042670 KS) announced that it will split the operating division (surviving company) and the investment division (Newco company that is being split off). The split off Newco will then be merged with Doosan Heavy Industries &amp; Construction (034020 KS). Need to Repay Doosan Infracore Shorts - As of 18 March, there were 12.56 million shares shorts outstanding for Doosan Infracore, representing 3.4% of total outstanding shares. At the current price of 9,880 won, this represents 124 billion won. There were 61 million shares of Doosan Infracore that were traded on Monday, 21 March and probably a good chunk of these shorted shares were covered. According to Korean regulations, prior to the Newco being formed, the investors that were shorted on the company need to repay them and this was one of the main reasons why Doosan Infracore's shares jumped 21% on Monday. The Insight has been marked Bullish since we expect the split off and merger of Doosan Infracore's investment assets to DHIC is likely to result in a higher re-rating of the company's core operating business (construction equipment). There are also signs that the overseas construction business is rebounding in China, which should have a positive impact on Doosan Infracore. In addition, the creation of the Newco (and the getting rid of the previous company's shareholders' list) results in the need for the Doosan Infracore's shorts to cover. 

Doosan Infracore: Investco Split Off & Merger Ratio Announced

South Korea

Bobcat Company specializes in design, manufacture, marketing and distribution of compact equipment for construction, rental, landscaping, agriculture, grounds maintenance, government, utility, industry and mining.

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Doosan Bobcat Inc (241560 KS)

Doosan Bobcat Block Deal Sale - Overhang Remains

Two main reasons why we are negative on the Doosan Bobcat block deal sale include an overhang associated with remaining shares held by brokers and...

Douglas Kim

Doosan Bobcat Placement - Momentum Is Strong but past Deals Have Been a Mixed Bag

Doosan Bobcat Inc (241560 KS) aims to sell a US$145m block. Its recent price momentum is strong but past deals have shown mixed results.

Ethan Aw

Doosan Infracore Announces a Rights Offering Worth 70% of Its Market Cap

After the market close today, Doosan Infracore announced that it plans to complete a rights offering worth 800 billion won, which represents nearly...

Douglas Kim

Korea Pair Trades: High Risk/Reward Names with Short Sell Screen

With the resumption of short selling in Korea, we highlight correlated pairs from the same GICS sub-industry that are near reversion points and...

Brian Freitas

Doosan Infracore: Investco Split Off & Merger Ratio Announced

We expect the split off and merger of Doosan Infracore's investment assets to DHIC is likely to result in a higher re-rating of the company's core...

Douglas Kim

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