Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<p>In this insight, we provide an updated analysis on <a href="https://www.smartkarma.com/entities/douzone-bizon-co-ltd" target="_blank" data-smartkarma-citation="entities:20161:1" rel="noopener">Douzone Bizon (012510 KS)</a>, a leading independent SaaS and cloud services provider in Korea, including valuations. We also discuss two recent events that could impact the company.</p><ul>
<li>First, includes Bain Capital acquiring Chairman's Kim's 4.8% stake in the company to become one of the top shareholders of the company on 7 March. </li>
<li>Second, Coupang is getting ready to complete an IPO this week. Coupang could become a major competitor or it could be a potential acquirer of Douzone Bizon's cloud business. </li>
</ul><div class="content-highlight"><p>Valuations of the company are not cheap and the stock has been consolidating sideways between 100,000 won and 120,000 won from May 2020 to March 2021. The stock is currently trading at 45.2x P/E (2021E) and 7.0x P/B (2021E), which are not cheap. These valuation multiples are slightly lower than the historical average valuation multiples from 2018 to 2020 but higher than the average valuation multiples over a longer range (2015 to 2020). Overall, <a href="https://www.smartkarma.com/entities/douzone-bizon-co-ltd" target="_blank" data-smartkarma-citation="entities:20161:1" rel="noopener">Douzone Bizon (012510 KS)</a> appears to be fairly valued at current levels.</p></div>

In this insight, we provide an updated analysis on Douzone Bizon (012510 KS), a leading independent SaaS and cloud services provider in Korea, including valuations. We also discuss two recent events that could impact the company.
First, includes Bain Capital acquiring Chairman's Kim's 4.8% stake in the company to become one of the top shareholders of the company on 7 March. 
Second, Coupang is getting ready to complete an IPO this week. Coupang could become a major competitor or it could be a potential acquirer of Douzone Bizon's cloud business. 
Valuations of the company are not cheap and the stock has been consolidating sideways between 100,000 won and 120,000 won from May 2020 to March 2021. The stock is currently trading at 45.2x P/E (2021E) and 7.0x P/B (2021E), which are not cheap. These valuation multiples are slightly lower than the historical average valuation multiples from 2018 to 2020 but higher than the average valuation multiples over a longer range (2015 to 2020). Overall, Douzone Bizon (012510 KS) appears to be fairly valued at current levels.

Douzone Bizon - Bain Capital Buys Chairman's Stake

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) launched 5 indices last year following the New Deal initiative that the Government launched to digitalise social infrastructure and jumpstart the transition to green energy.</p><p>The KRX created 4 indices tracking the Secondary Battery, Biotech, Internet and Gaming sectors that are expected to benefit from the New Deal initiative plus an additional index (BBIG) that includes the top 3 stocks from each sector.</p><p>All indices have performed well since then. The KRX announced changes to the 5 indices late last week and the changes become effective post the close of trading on 25 February.</p><div><p><a href="https://www.smartkarma.com/entities/kakao-games-corp" target="_blank" data-smartkarma-citation="entities:26730:1" rel="noopener">Kakao Games Corp (293490 KS)</a> replaces <a href="https://www.smartkarma.com/entities/pearl-abyss-corp" target="_blank" data-smartkarma-citation="entities:24391:1" rel="noopener">Pearl Abyss (263750 KS)</a> in the BBIG Index.</p></div><div><p>In the Secondary Battery index, <a href="https://www.smartkarma.com/entities/soulbrain-co-ltd" target="_blank" data-smartkarma-citation="entities:16883:1" rel="noopener">Soulbrain (036830 KS)</a> and <a href="https://www.smartkarma.com/entities/l-f-co-ltd" target="_blank" data-smartkarma-citation="entities:14300:1" rel="noopener">L&amp;F Co Ltd (066970 KS)</a> replace <a href="https://www.smartkarma.com/entities/doosan-solus-co-ltd" target="_blank" data-smartkarma-citation="entities:28947:1" rel="noopener">Doosan Solus Co Ltd (336370 KS)</a> and <a href="https://www.smartkarma.com/entities/foosung-co-ltd" target="_blank" data-smartkarma-citation="entities:16811:1" rel="noopener">Foosung Co Ltd (093370 KS)</a>.</p></div><div><p>In the Biotech index, <a href="https://www.smartkarma.com/entities/shinpoong-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:7296:1" rel="noopener">Shinpoong Pharmaceutical (019170 KS)</a> and <a href="https://www.smartkarma.com/entities/green-cross-corp" target="_blank" data-smartkarma-citation="entities:2969:1" rel="noopener">Green Cross (006280 KS)</a> replace <a href="https://www.smartkarma.com/entities/alteogen-inc" target="_blank" data-smartkarma-citation="entities:15886:1" rel="noopener">Alteogen Inc (196170 KS)</a> and <a href="https://www.smartkarma.com/entities/hanmi-pharm-co-ltd" target="_blank" data-smartkarma-citation="entities:12476:1" rel="noopener">Hanmi Pharm (128940 KS)</a>.</p></div><div><p>In the Internet index, <a href="https://www.smartkarma.com/entities/ace-technologies-corp" target="_blank" data-smartkarma-citation="entities:7868:1" rel="noopener">Ace Technologies (088800 KS)</a> and <a href="https://www.smartkarma.com/entities/rsupport-co-ltd" target="_blank" data-smartkarma-citation="entities:14783:1" rel="noopener">Rsupport Co Ltd (131370 KS)</a> replace <a href="https://www.smartkarma.com/entities/kg-inicis-co-ltd" target="_blank" data-smartkarma-citation="entities:5234:1" rel="noopener">KG Inicis Co Ltd (035600 KS)</a> and <a href="https://www.smartkarma.com/entities/ubiquoss-inc" target="_blank" data-smartkarma-citation="entities:14341:1" rel="noopener">Ubiquoss Holding (078070 KS)</a>.</p></div><div><p>In the Gaming index, <a href="https://www.smartkarma.com/entities/kakao-games-corp" target="_blank" data-smartkarma-citation="entities:26730:1" rel="noopener">Kakao Games Corp (293490 KS)</a> and <a href="https://www.smartkarma.com/entities/neptune-company" target="_blank" data-smartkarma-citation="entities:28826:1" rel="noopener">Neptune Company (217270 KS)</a> replace <a href="https://www.smartkarma.com/entities/neowiz-games-corp" target="_blank" data-smartkarma-citation="entities:12425:1" rel="noopener">Neowiz Games (095660 KS)</a> and Golfzon (215000 KS).</p></div>

The Korea Exchange (KRX) launched 5 indices last year following the New Deal initiative that the Government launched to digitalise social infrastructure and jumpstart the transition to green energy.The KRX created 4 indices tracking the Secondary Battery, Biotech, Internet and Gaming sectors that are expected to benefit from the New Deal initiative plus an additional index (BBIG) that includes the top 3 stocks from each sector.All indices have performed well since then. The KRX announced changes to the 5 indices late last week and the changes become effective post the close of trading on 25 February.Kakao Games Corp (293490 KS) replaces Pearl Abyss (263750 KS) in the BBIG Index.In the Secondary Battery index, Soulbrain (036830 KS) and L&amp;F Co Ltd (066970 KS) replace Doosan Solus Co Ltd (336370 KS) and Foosung Co Ltd (093370 KS).In the Biotech index, Shinpoong Pharmaceutical (019170 KS) and Green Cross (006280 KS) replace Alteogen Inc (196170 KS) and Hanmi Pharm (128940 KS).In the Internet index, Ace Technologies (088800 KS) and Rsupport Co Ltd (131370 KS) replace KG Inicis Co Ltd (035600 KS) and Ubiquoss Holding (078070 KS).In the Gaming index, Kakao Games Corp (293490 KS) and Neptune Company (217270 KS) replace Neowiz Games (095660 KS) and Golfzon (215000 KS).

KRX BBIG K-NewDeal Index Rebalance: First Set of Changes Announced

Equity Capital Markets

<p>Kingsoft Cloud is one of the best cloud computing stocks in China. Since completing its IPO in May 2020 at an IPO price of $17 per share, Kingsoft Cloud's share price has risen 90% to $32.29. Kingsoft Cloud is the largest independent cloud service provider and the third-largest internet cloud service provider in China.  On 21 September, Kingsoft Cloud announced another equity offering and many investors did not like this move and they pushed down the stock price by 12.5% on Tuesday, 22 September. <strong>Now, Kingsoft Cloud's share price is now down 25% from the 52 weeks high and we believe this is a good opportunity to pick up shares of this company. </strong></p><div class="content-highlight">
<p><strong>Kingsoft Cloud's Enterprise Cloud business has been experiencing a surging growth in the past three years. The company's Enterprise Cloud Services revenues increased by 415% YoY in 2019 and by 183% YoY in 1H 2020. The Enterprise Cloud Services accounted for 1.2% of total revenues in 2017, and this ratio increased to 14.6% in 1H 2020. </strong></p>
<p>In this insight, we provide a comparison of Kingsoft Cloud to Amazon AWS. This is a good framework to compare Kingsoft Cloud since it gives a greater amount of confidence that once the company's annual sales reach about $2 billion to $3 billion, then the probability increases that Kingsoft Cloud may also start to generate positive operating profits. In terms of time frame,<strong> 2022 to 2023</strong> could be a<strong> "sweet spot"</strong> for the company in reaching an annual revenue of $2 billion to $3 billion and achieve positive operating profit. </p>
</div>

Kingsoft Cloud is one of the best cloud computing stocks in China. Since completing its IPO in May 2020 at an IPO price of $17 per share, Kingsoft Cloud's share price has risen 90% to $32.29. Kingsoft Cloud is the largest independent cloud service provider and the third-largest internet cloud service provider in China.  On 21 September, Kingsoft Cloud announced another equity offering and many investors did not like this move and they pushed down the stock price by 12.5% on Tuesday, 22 September. Now, Kingsoft Cloud's share price is now down 25% from the 52 weeks high and we believe this is a good opportunity to pick up shares of this company. 
Kingsoft Cloud's Enterprise Cloud business has been experiencing a surging growth in the past three years. The company's Enterprise Cloud Services revenues increased by 415% YoY in 2019 and by 183% YoY in 1H 2020. The Enterprise Cloud Services accounted for 1.2% of total revenues in 2017, and this ratio increased to 14.6% in 1H 2020. 
In this insight, we provide a comparison of Kingsoft Cloud to Amazon AWS. This is a good framework to compare Kingsoft Cloud since it gives a greater amount of confidence that once the company's annual sales reach about $2 billion to $3 billion, then the probability increases that Kingsoft Cloud may also start to generate positive operating profits. In terms of time frame, 2022 to 2023 could be a "sweet spot" for the company in reaching an annual revenue of $2 billion to $3 billion and achieve positive operating profit. 


Kingsoft Cloud - Oversold on Equity Offering; Annual Revenues in 2020 Similar to AWS 9 Years Ago

<p>"A huge leap forward for South Korea" is how President Moon described the New Deal initiative that the Government launched to digitalise social infrastructure and jumpstart the transition to green energy.</p>
<p>The expected spend of KRW 160 trillion (US$134.45bn) over 5 years will be financed by the Government (KRW 114.1 trillion) and from local Governments and the private sector (KRW 46 trillion) and is expected to create 1.9m jobs over the period based on the Digital New Deal and the Green New Deal that look to strengthen employment and the social safety net.</p>
<p>The KRX has created 4 new indices tracking the secondary <strong>B</strong>attery, <strong>B</strong>io, <strong>I</strong>nternet and <strong>G</strong>aming sectors that are expected to benefit from the New Deal initiative plus an additional index (BBIG) that includes the top 3 stocks from each sector. While the BBIG is an equal weighted index, the sector indices allocate 75% of the index weight equally among the top 3 stocks while the remaining 25% weight is allocated to the rest of the stocks based on free float market cap. This will create some very interesting trades <strong>if </strong>ETFs that are launched on these indices gather a lot of assets.</p>
<p>Some stocks that have been included in these indices have already started to run up in anticipation of index flows and investors will need to monitor ETF asset gathering in determining entry/exit trades on these stocks. There are existing ETFs that track these sectors so it is hard to fathom why ETFs on the new indices would gather a lot of assets especially with a skewed weighting scheme.</p>

"A huge leap forward for South Korea" is how President Moon described the New Deal initiative that the Government launched to digitalise social infrastructure and jumpstart the transition to green energy.
The expected spend of KRW 160 trillion (US$134.45bn) over 5 years will be financed by the Government (KRW 114.1 trillion) and from local Governments and the private sector (KRW 46 trillion) and is expected to create 1.9m jobs over the period based on the Digital New Deal and the Green New Deal that look to strengthen employment and the social safety net.
The KRX has created 4 new indices tracking the secondary Battery, Bio, Internet and Gaming sectors that are expected to benefit from the New Deal initiative plus an additional index (BBIG) that includes the top 3 stocks from each sector. While the BBIG is an equal weighted index, the sector indices allocate 75% of the index weight equally among the top 3 stocks while the remaining 25% weight is allocated to the rest of the stocks based on free float market cap. This will create some very interesting trades if ETFs that are launched on these indices gather a lot of assets.
Some stocks that have been included in these indices have already started to run up in anticipation of index flows and investors will need to monitor ETF asset gathering in determining entry/exit trades on these stocks. There are existing ETFs that track these sectors so it is hard to fathom why ETFs on the new indices would gather a lot of assets especially with a skewed weighting scheme.

Korean New Deal Fund - Could This Be a BBIG Deal?

Cross Asset Strategy

<div class="content-highlight">
<p>In this insight, we provide the details and controversies of the Korean New Deal Funds which were initially <a href="https://n.news.naver.com/article/005/0001358758" target="_blank" rel="noopener">announced</a> on September 3rd. The total amount of the Korean New Deal is expected to be nearly 170 trillion won over five years. The Korean New Deal funds will be divided into three major areas including <strong>Policy (정책)</strong>, <strong>Infrastructure (인프라)</strong>, and<strong> Private (민간)</strong>.</p>
<p>Of the 170 trillion won, nearly 100 trillion won will be provided by the government and 70 trillion won will be provided by the private financial institutions. Because of the huge size of these funds, NPS and other major pension funds and biggest financial institution companies in Korea are expected to participate in the Korean New Deal funds.</p>
</div><p><strong>A Bubble Forming in the Korean New Deal Funds Related Stocks? </strong>In our view, a most likely view is that there could be a bubble forming in the Korean New Deal Funds related stocks in the coming weeks. Many of these stocks such as LG Chem, Samsung SDI, Naver, Kakao, Douzone Bizon, and Samsung Biologics have already performed very well since their lows in March and they could run further in the weeks ahead. </p>


In this insight, we provide the details and controversies of the Korean New Deal Funds which were initially announced on September 3rd. The total amount of the Korean New Deal is expected to be nearly 170 trillion won over five years. The Korean New Deal funds will be divided into three major areas including Policy (정책), Infrastructure (인프라), and Private (민간).
Of the 170 trillion won, nearly 100 trillion won will be provided by the government and 70 trillion won will be provided by the private financial institutions. Because of the huge size of these funds, NPS and other major pension funds and biggest financial institution companies in Korea are expected to participate in the Korean New Deal funds.
A Bubble Forming in the Korean New Deal Funds Related Stocks? In our view, a most likely view is that there could be a bubble forming in the Korean New Deal Funds related stocks in the coming weeks. Many of these stocks such as LG Chem, Samsung SDI, Naver, Kakao, Douzone Bizon, and Samsung Biologics have already performed very well since their lows in March and they could run further in the weeks ahead. 

A Bubble Forming in the Korean New Deal Funds Related Stocks? Details & Controversies

South Korea

Douzone Bizon Co., Ltd. develops and markets computer software.  The company develops MIS, ERP, e-Business Solutions, EFIS, SEM(Strategic Enterprise Management), BPS(Business Process Management), and ERM(Enterprise Risk Management). The Company's products target small and medium-sized enterprises.

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Douzone Bizon (012510 KS)

Douzone Bizon - Bain Capital Buys Chairman's Stake

Overall, Douzone Bizon (012510 KS) appears to be fairly valued at current levels. We also discuss the implications of Bain Capital taking a 4.8%...

Douglas Kim

KRX BBIG K-NewDeal Index Rebalance: First Set of Changes Announced

The KRX has announced changes to the KRX New Deal indices that will be effective after the close of trading on 25 February. Pearl Abyss is...

Brian Freitas

Kingsoft Cloud - Oversold on Equity Offering; Annual Revenues in 2020 Similar to AWS 9 Years Ago

Kingsoft Cloud is the largest independent cloud service provider and the third-largest internet cloud service provider in China.

Douglas Kim

Korean New Deal Fund - Could This Be a BBIG Deal?

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Brian Freitas

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52-week Range

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Douzone Bizon - Bain Capital Buys Chairman's Stake

Overall, Douzone Bizon (012510 KS) appears to be fairly valued at current levels. We also discuss the implications of Bain Capital taking a 4.8%...

Douglas Kim

KRX BBIG K-NewDeal Index Rebalance: First Set of Changes Announced

The KRX has announced changes to the KRX New Deal indices that will be effective after the close of trading on 25 February. Pearl Abyss is...

Brian Freitas

Kingsoft Cloud - Oversold on Equity Offering; Annual Revenues in 2020 Similar to AWS 9 Years Ago

Kingsoft Cloud is the largest independent cloud service provider and the third-largest internet cloud service provider in China.

Douglas Kim

Korean New Deal Fund - Could This Be a BBIG Deal?

f

Brian Freitas

A Bubble Forming in the Korean New Deal Funds Related Stocks? Details & Controversies

In this insight, we provide the details and controversies of the Korean New Deal Funds which were initially announced on September 3rd. The total...

Douglas Kim