Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

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<p>Nepes Ark is getting ready to complete its IPO in November in the Korean stock market. The IPO price range is 23,400 won to 26,500 won. The IPO base deal size is from $47 million to $53 million. The company provides test equipment for semiconductor wafer and packages from chipmakers and foundries. The company's manufacturing facility is located at Cheongju, North Chungcheong Province.</p>
<p>Samsung Electronics and LG Display are key customers of Nepes Ark, which is a split-off of <a href="https://www.smartkarma.com/entities/nepes-corp" target="_blank" data-smartkarma-citation="entities:9303:1" rel="noopener">Nepes Corp (033640 KS)</a>'s semiconductor business. Nepes Corp has a 73.49% stake in Nepes Ark. The split-off &amp; establishment of Nepes Ark was effective as of 1 April 2019. <br> </p>
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Nepes Ark is getting ready to complete its IPO in November in the Korean stock market. The IPO price range is 23,400 won to 26,500 won. The IPO base deal size is from $47 million to $53 million. The company provides test equipment for semiconductor wafer and packages from chipmakers and foundries. The company's manufacturing facility is located at Cheongju, North Chungcheong Province.
Samsung Electronics and LG Display are key customers of Nepes Ark, which is a split-off of Nepes Corp (033640 KS)'s semiconductor business. Nepes Corp has a 73.49% stake in Nepes Ark. The split-off &amp; establishment of Nepes Ark was effective as of 1 April 2019.   


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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>The Korea Exchange (KRX) will announce the results of the December 2020 review of the KOSDAQ150 Index in November. The constituent changes will be effective from 11 December 2020 and the rebalancing trades will need to be done at the closing auction on 10 December 2020.</p>
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<p>At the current time, we see 11 stocks being added to and deleted from the KOSDAQ150 index.</p>
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<table class="table table-striped">
<colgroup> <col> <col> <col> <col> <col> <col> </colgroup>
<tbody>
<tr>
<td colspan="3" style="text-align: center; width: 269pt;">Expected Inclusions</td>
<td colspan="3" style="text-align: center; width: 279pt;">Expected Exclusions</td>
</tr>
<tr>
<td><strong>Code</strong></td>
<td><strong>Name</strong></td>
<td><strong>Probability</strong></td>
<td><strong>Code</strong></td>
<td><strong>Name</strong></td>
<td><strong>Probability</strong></td>
</tr>
<tr>
<td>235980.KQ</td>
<td>MedPacto Inc</td>
<td>High</td>
<td>041830.KQ</td>
<td>InBody Co Ltd</td>
<td>High</td>
</tr>
<tr>
<td>204270.KQ</td>
<td>JNTC Co Ltd</td>
<td>High</td>
<td>049950.KQ</td>
<td>MeereCompany Inc</td>
<td>High</td>
</tr>
<tr>
<td>092190.KQ</td>
<td>Seoul Viosys Co Ltd</td>
<td>High</td>
<td>023160.KQ</td>
<td>TK Corp</td>
<td>High</td>
</tr>
<tr>
<td>101490.KQ</td>
<td>S&amp;S Tech Corp</td>
<td>High</td>
<td>014620.KQ</td>
<td>Sung Kwang Bend Co Ltd</td>
<td>High</td>
</tr>
<tr>
<td>294140.KQ</td>
<td>Lemon Co Ltd</td>
<td>High</td>
<td>047310.KQ</td>
<td>Power Logics</td>
<td>Medium</td>
</tr>
<tr>
<td>290650.KQ</td>
<td>L&amp;C Bio Co Ltd</td>
<td>Medium</td>
<td>015750.KQ</td>
<td>Sungwoo Hitech Co Ltd</td>
<td>Medium</td>
</tr>
<tr>
<td>034950.KQ</td>
<td>Korea Ratings Corp</td>
<td>Medium</td>
<td>080160.KQ</td>
<td>Modetour Network Inc</td>
<td>Medium</td>
</tr>
<tr>
<td>136480.KQ</td>
<td>Harim Co Ltd</td>
<td>Medium</td>
<td>051500.KQ</td>
<td>CJ Freshway Corp</td>
<td>Medium</td>
</tr>
<tr>
<td>151910.KQ</td>
<td>Nanos Co Ltd</td>
<td>Low</td>
<td>089600.KQ</td>
<td>Nasmedia Co Ltd</td>
<td>Low</td>
</tr>
<tr>
<td>131970.KQ</td>
<td>Tesna Inc</td>
<td>Low</td>
<td>036930.KQ</td>
<td>Jusung Engineering Co Ltd</td>
<td>Low</td>
</tr>
<tr>
<td>222080.KQ</td>
<td>Creative &amp; Innovative System Corp</td>
<td>Low</td>
<td>041190.KQ</td>
<td>Woori Technology Investment Co Ltd</td>
<td>Low</td>
</tr>
</tbody>
</table>
<p><a href="https://www.smartkarma.com/entities/jntc-co-ltd" target="_blank" data-smartkarma-citation="entities:28825:1" rel="noopener">JNTC Co Ltd (204270 KS)</a>, <a href="https://www.smartkarma.com/entities/lemon-co-ltd" target="_blank" data-smartkarma-citation="entities:28841:1" rel="noopener">Lemon (294140 KQ)</a>, MedPacto and Seoul Viosys have all listed in the last 6 months and are eligible for inclusion in this review.</p>
<p>There are another 5 stocks that are very close adds or close deletes.</p>
<p>In this Insight we look at the KOSDAQ 150 index methodology, the historical performance of inclusions vs exclusions, at potential candidates for inclusion/exclusion in this review and some of the details around the names.</p>
</div>

The Korea Exchange (KRX) will announce the results of the December 2020 review of the KOSDAQ150 Index in November. The constituent changes will be effective from 11 December 2020 and the rebalancing trades will need to be done at the closing auction on 10 December 2020.

At the current time, we see 11 stocks being added to and deleted from the KOSDAQ150 index.



       


Expected Inclusions
Expected Exclusions


Code
Name
Probability
Code
Name
Probability


235980.KQ
MedPacto Inc
High
041830.KQ
InBody Co Ltd
High


204270.KQ
JNTC Co Ltd
High
049950.KQ
MeereCompany Inc
High


092190.KQ
Seoul Viosys Co Ltd
High
023160.KQ
TK Corp
High


101490.KQ
S&amp;S Tech Corp
High
014620.KQ
Sung Kwang Bend Co Ltd
High


294140.KQ
Lemon Co Ltd
High
047310.KQ
Power Logics
Medium


290650.KQ
L&amp;C Bio Co Ltd
Medium
015750.KQ
Sungwoo Hitech Co Ltd
Medium


034950.KQ
Korea Ratings Corp
Medium
080160.KQ
Modetour Network Inc
Medium


136480.KQ
Harim Co Ltd
Medium
051500.KQ
CJ Freshway Corp
Medium


151910.KQ
Nanos Co Ltd
Low
089600.KQ
Nasmedia Co Ltd
Low


131970.KQ
Tesna Inc
Low
036930.KQ
Jusung Engineering Co Ltd
Low


222080.KQ
Creative &amp; Innovative System Corp
Low
041190.KQ
Woori Technology Investment Co Ltd
Low



JNTC Co Ltd (204270 KS), Lemon (294140 KQ), MedPacto and Seoul Viosys have all listed in the last 6 months and are eligible for inclusion in this review.
There are another 5 stocks that are very close adds or close deletes.
In this Insight we look at the KOSDAQ 150 index methodology, the historical performance of inclusions vs exclusions, at potential candidates for inclusion/exclusion in this review and some of the details around the names.


KOSDAQ150 Index Rebalance Preview - Momentum Driving Changes

Global TMT, Consumer, Korea, Deep Fundamental

Julian Yoon

Equity Bottom-Up

<ul><li><strong>In sweet spot of semiconductor equipment spending. </strong>More than 50% of wafer fabrication equipment ('WFE') spending is in deposition and etch, which are the company's core segments.   <a href="https://www.smartkarma.com/entities/1116" target="_blank" data-smartkarma-citation="entities:1116:1">Lam Research Corp (LRCX US)</a> is a key beneficiary of explosive NAND memory demand.  </li><li><strong>Long term secular industry growth</strong>.  Company is leveraged to exponential growth in semiconductor content including mobile, cloud, IoT/5G, automotive, virtual/augmented reality, robotics and machine learning/artificial intelligence.</li><li><strong>Large and growing market</strong>.  The total market size for wafer fabrication equipment ('WFE') was $36 billion in 2016 according to Gartner and is expected to grow at a CAGR of 5% through 2019.  While overall industry growth is expected to remain strong, LRCX also benefits from increasing share of the overall WFE spending pie.  Company's servable addressable market ('SAM') as a percent of overall WFE spending has increased from 26.5% in 2013 to 34% in 2016.  This is due to the increasing complexity of making ever smaller transistors which is increasing the demand for the company's products.        </li><li><strong>Increasing capital intensity</strong>.  Moore's Law states that number of electronic components which can be crammed into an integrated circuit doubles every two years.  However, as Moore's law reaches its limitation as we approach atomic level scale, capital intensity is increasing in order to achieve ever smaller microchips benefitting semiconductor equipment players, especially those with good technology.         </li><li><strong>Track record of top-line growth and margin expansion</strong>.   Company has grown revenue at a CAGR of 23% from 2012 to 2015 and expanded operating margin by 11.5%p during the same time period.  </li><li><strong>Substantial excess cash balance / foreign cash repatriation.  </strong>Company has significant excess cash that can be utilized to enhance shareholder return.    </li><li><strong>Upside from capital management.  </strong>Company's commitment to enhanced shareholder return supported by high free cash flow yield.    </li><li><strong>Attractive relative valuation</strong>.  Discount to peers and overall market on both forward P/E and P/E ex-cash basis.  </li></ul>

In sweet spot of semiconductor equipment spending. More than 50% of wafer fabrication equipment ('WFE') spending is in deposition and etch, which are the company's core segments.   Lam Research Corp (LRCX US) is a key beneficiary of explosive NAND memory demand.  Long term secular industry growth.  Company is leveraged to exponential growth in semiconductor content including mobile, cloud, IoT/5G, automotive, virtual/augmented reality, robotics and machine learning/artificial intelligence.Large and growing market.  The total market size for wafer fabrication equipment ('WFE') was $36 billion in 2016 according to Gartner and is expected to grow at a CAGR of 5% through 2019.  While overall industry growth is expected to remain strong, LRCX also benefits from increasing share of the overall WFE spending pie.  Company's servable addressable market ('SAM') as a percent of overall WFE spending has increased from 26.5% in 2013 to 34% in 2016.  This is due to the increasing complexity of making ever smaller transistors which is increasing the demand for the company's products.        Increasing capital intensity.  Moore's Law states that number of electronic components which can be crammed into an integrated circuit doubles every two years.  However, as Moore's law reaches its limitation as we approach atomic level scale, capital intensity is increasing in order to achieve ever smaller microchips benefitting semiconductor equipment players, especially those with good technology.         Track record of top-line growth and margin expansion.   Company has grown revenue at a CAGR of 23% from 2012 to 2015 and expanded operating margin by 11.5%p during the same time period.  Substantial excess cash balance / foreign cash repatriation.  Company has significant excess cash that can be utilized to enhance shareholder return.    Upside from capital management.  Company's commitment to enhanced shareholder return supported by high free cash flow yield.    Attractive relative valuation.  Discount to peers and overall market on both forward P/E and P/E ex-cash basis.  

Semi-Equipment Top Pick:  Long Term Secular Winner

South Korea

Doosan Tesna Inc. provides wafer probe test, final test and backend service supporting a full range of semiconductor testing.

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Doosan Tesna Inc. (131970 KS)

Nepes Ark IPO Preview

Nepes Ark is getting ready to complete its IPO in November in the Korean stock market. The IPO price range is 23,400 won to 26,500 won. The IPO...

Douglas Kim

KOSDAQ150 Index Rebalance Preview - Momentum Driving Changes

The Korea Exchange (KRX) will announce the results of the December 2020 review of the KOSDAQ150 Index in November. The constituent changes will be...

Brian Freitas

Semi-Equipment Top Pick: Long Term Secular Winner

In sweet spot of semiconductor equipment spending. More than 50% of wafer fabrication equipment ('WFE') spending is in deposition and etch, which...

Julian Yoon

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52-week Range

Market Cap (USDm)

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