Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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<p>This week in StubWorld ...</p>
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<p>When a company spins off a business, wherein shares are distributed to existing shareholders on pro-rata basis, the parent company typically declines. But <a href="https://www.smartkarma.com/entities/ecopro-co-ltd" target="_blank" data-smartkarma-citation="entities:19029:1" rel="noopener">Ecopro Co Ltd (086520 KS)</a>'s 40% decline upon relisting defies logic, even for extreme Korean Holdco structures.</p>
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<p>Preceding my comments on Ecopro are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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This week in StubWorld ...



When a company spins off a business, wherein shares are distributed to existing shareholders on pro-rata basis, the parent company typically declines. But Ecopro Co Ltd (086520 KS)'s 40% decline upon relisting defies logic, even for extreme Korean Holdco structures.



Preceding my comments on Ecopro are the weekly setup/unwind tables for Asia-Pacific Holdcos.



These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.


StubWorld: What Is Up (Or Down) With Ecopro Co?

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<p>In this insight, we discuss the trading opportunities involving <a href="https://www.smartkarma.com/entities/ecopro-co-ltd" target="_blank" data-smartkarma-citation="entities:19029:1" rel="noopener">Ecopro Co Ltd (086520 KS)</a> and Ecopro HN (383310 KS) post their split. These two stocks started trading again on 28 May. Our NAV analysis of <strong>Ecopro Co</strong> suggests an implied value of 1.1 trillion won or NAV per share of 59,528 won, representing a 25% upside from the current price.</p><p><strong>Ecopro HN</strong> is a leading, pure-play environmental service provider in Korea. At the current price of 148,700 won, this stock looks undervalued. It is currently trading at EV/EBITDA multiples of 15.5x in 2021 and 10.9x in 2022. If we apply the same EV/EBITDA multiple of 15.5x to 2022 estimates, this would represent an upside of 42% from current levels (target price of 211.451 won). </p><p>In conclusion, we believe that Ecopro HN provides higher upside than Ecopro Co at current levels. We would not necessarily go long Ecopro HN and short Ecopro Co at current levels. In addition, we believe that Ecopro HN has the potential to reach nearly 1 trillion won in market cap over the next 2-3 years which is likely to be an attractive candidate for numerous indices, especially those that like to include stocks that rank high on ESG ratings (especially for the Environment).</p>

In this insight, we discuss the trading opportunities involving Ecopro Co Ltd (086520 KS) and Ecopro HN (383310 KS) post their split. These two stocks started trading again on 28 May. Our NAV analysis of Ecopro Co suggests an implied value of 1.1 trillion won or NAV per share of 59,528 won, representing a 25% upside from the current price.Ecopro HN is a leading, pure-play environmental service provider in Korea. At the current price of 148,700 won, this stock looks undervalued. It is currently trading at EV/EBITDA multiples of 15.5x in 2021 and 10.9x in 2022. If we apply the same EV/EBITDA multiple of 15.5x to 2022 estimates, this would represent an upside of 42% from current levels (target price of 211.451 won). In conclusion, we believe that Ecopro HN provides higher upside than Ecopro Co at current levels. We would not necessarily go long Ecopro HN and short Ecopro Co at current levels. In addition, we believe that Ecopro HN has the potential to reach nearly 1 trillion won in market cap over the next 2-3 years which is likely to be an attractive candidate for numerous indices, especially those that like to include stocks that rank high on ESG ratings (especially for the Environment).

Trading Strategies for Ecopro Co & Ecopro HN Post Split

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.

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<p>Korea has three spinoff stocks entering trading suspension on April 29. The corporate action of these spinoffs are as follows:</p>
<ul>
<li>The market cap on the last trading day before the suspension will be applied in the index calculation during the trading suspension and the re-listing day.</li>
<li>The market cap on the re-listing day will be applied in the index calculation on the following trading day.</li>
</ul>
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<table class="table table-striped">
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<col width="100">
<col width="100">
</colgroup>
<tbody>
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<td style="width: 153.636px;" data-sheets-value='{"1":2,"2":"Schedule"}'>Corporate action schedule</td>
<td style="text-align: right; width: 110px;">LG Corp (003550)</td>
<td style="text-align: right; width: 80px;">F&amp;F (007700)</td>
<td style="text-align: right; width: 100.909px;">ECOPRO (086520)</td>
<td style="text-align: left; width: 195.455px;">Action</td>
</tr>
<tr>
<td style="width: 153.636px;" data-sheets-value='{"1":2,"2":"Trade suspension begins"}'>Trade suspension begins</td>
<td style="text-align: right; width: 110px;" data-sheets-value='{"1":3,"3":44315}' data-sheets-numberformat='{"1":5,"2":"m\"/\"d\"/\"yy"}'>4/29/21</td>
<td style="text-align: right; width: 80px;">4/29/21</td>
<td style="text-align: right; width: 100.909px;">4/29/21</td>
<td rowspan="3" style="text-align: left; width: 195.455px;"><strong>The market cap on the last trading day before the suspension</strong></td>
</tr>
<tr>
<td style="width: 153.636px;" data-sheets-value='{"1":2,"2":"Trade suspensino ends"}'>Trade suspensino ends</td>
<td style="text-align: right; width: 110px;" data-sheets-value='{"1":3,"3":44342}' data-sheets-numberformat='{"1":5,"2":"m\"/\"d\"/\"yy"}'>5/26/21</td>
<td style="text-align: right; width: 80px;">5/20/21</td>
<td style="text-align: right; width: 100.909px;">5/27/21</td>
</tr>
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<td style="width: 153.636px;" data-sheets-value='{"1":2,"2":"Relistnig"}'>Re-listing</td>
<td style="text-align: right; width: 110px;" data-sheets-value='{"1":3,"3":44343}' data-sheets-numberformat='{"1":5,"2":"m\"/\"d\"/\"yy"}'>5/27/21</td>
<td style="text-align: right; width: 80px;">5/21/21</td>
<td style="text-align: right; width: 100.909px;">5/28/21</td>
</tr>
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<td style="width: 153.636px;">Following trading day</td>
<td style="text-align: right; width: 110px;">5/28/21</td>
<td style="text-align: right; width: 80px;">5/24/21</td>
<td style="text-align: right; width: 100.909px;">5/31/21</td>
<td style="text-align: left; width: 195.455px;"><strong>The market cap on the re-listing day</strong></td>
</tr>
<tr>
<td colspan="4" style="width: 507.273px;" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: KRX</td>
<td style="width: 195.455px;"></td>
</tr>
</tbody>
</table>
<p>To minimize the tracking error, passive funds generally sell spinoff shares at the close price on the last trading day before the suspension and repurchase them at the close price on the re-listing day. </p>
<p>Of course, active funds do the opposite. Their rule of thumb is buying spinoff shares before the trade suspension.</p>
<p>But these aren't definite rules. More and more local passive funds have been flexible in the recent spinoffs. Similarly, local active funds do not seem to be blindly following this rule anymore.</p>
<p>So, here are three possible approaches that local <strong>passive</strong> funds may consider for spinoffs:</p>
<ol>
<li><strong>Sell all on the last trading day and repurchase the portion of an index-included company on the re-listing day.</strong></li>
<li><strong>Sell only the portion of an index-excluded company on the last trading day.</strong></li>
<li><strong>Sell only the portion of an index-excluded company on the re-listing day.</strong></li>
</ol>
<p>The local spinoffs in recent years show that the public offering funds, managing mostly ETFs, still stick to the first approach. On the other hand, the NPS index funds and the variable insurance index funds lean towards the third approach.</p>
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Korea has three spinoff stocks entering trading suspension on April 29. The corporate action of these spinoffs are as follows:

The market cap on the last trading day before the suspension will be applied in the index calculation during the trading suspension and the re-listing day.
The market cap on the re-listing day will be applied in the index calculation on the following trading day.









Corporate action schedule
LG Corp (003550)
F&amp;F (007700)
ECOPRO (086520)
Action


Trade suspension begins
4/29/21
4/29/21
4/29/21
The market cap on the last trading day before the suspension


Trade suspensino ends
5/26/21
5/20/21
5/27/21


Re-listing
5/27/21
5/21/21
5/28/21


Following trading day
5/28/21
5/24/21
5/31/21
The market cap on the re-listing day


Source: KRX




To minimize the tracking error, passive funds generally sell spinoff shares at the close price on the last trading day before the suspension and repurchase them at the close price on the re-listing day. 
Of course, active funds do the opposite. Their rule of thumb is buying spinoff shares before the trade suspension.
But these aren't definite rules. More and more local passive funds have been flexible in the recent spinoffs. Similarly, local active funds do not seem to be blindly following this rule anymore.
So, here are three possible approaches that local passive funds may consider for spinoffs:

Sell all on the last trading day and repurchase the portion of an index-included company on the re-listing day.
Sell only the portion of an index-excluded company on the last trading day.
Sell only the portion of an index-excluded company on the re-listing day.

The local spinoffs in recent years show that the public offering funds, managing mostly ETFs, still stick to the first approach. On the other hand, the NPS index funds and the variable insurance index funds lean towards the third approach.


Korean Spinoffs Trade Ideas Amid Trade Suspension on April 29

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<p>It seems to be spin-off season in Korea.</p><p>Three <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> and <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150 Index (KOSDQ150 INDEX)</a> constituents will be suspended from trading from 29 April - <a href="https://www.smartkarma.com/entities/lg-corp" target="_blank" data-smartkarma-citation="entities:6653:1" rel="noopener">LG Corp (003550 KS)</a>, <a href="https://www.smartkarma.com/entities/f-f-co-ltd" target="_blank" data-smartkarma-citation="entities:15983:1" rel="noopener">F&amp;F Co Ltd (007700 KS)</a> and <a href="https://www.smartkarma.com/entities/ecopro-co-ltd" target="_blank" data-smartkarma-citation="entities:19029:1" rel="noopener">Ecopro Co Ltd (086520 KS)</a> due to a spin-off of its businesses.</p><p><a href="https://www.smartkarma.com/entities/f-f-co-ltd" target="_blank" data-smartkarma-citation="entities:15983:1" rel="noopener">F&amp;F Co Ltd (007700 KS)</a> will resume trading on 21 May, <a href="https://www.smartkarma.com/entities/lg-corp" target="_blank" data-smartkarma-citation="entities:6653:1" rel="noopener">LG Corp (003550 KS)</a> will resume trading on 27 May, and <a href="https://www.smartkarma.com/entities/ecopro-co-ltd" target="_blank" data-smartkarma-citation="entities:19029:1" rel="noopener">Ecopro Co Ltd (086520 KS)</a> will resume trading on 28 May.</p><p><a href="https://www.smartkarma.com/entities/lg-corp" target="_blank" data-smartkarma-citation="entities:6653:1" rel="noopener">LG Corp (003550 KS)</a> will remain in 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> and its spinoff will be added to the index, <a href="https://www.smartkarma.com/entities/f-f-co-ltd" target="_blank" data-smartkarma-citation="entities:15983:1" rel="noopener">F&amp;F Co Ltd (007700 KS)</a> will remain in 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> but the spinoff will not be added to the index, <a href="https://www.smartkarma.com/entities/ecopro-co-ltd" target="_blank" data-smartkarma-citation="entities:19029:1" rel="noopener">Ecopro Co Ltd (086520 KS)</a> will continue to be a <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150 Index (KOSDQ150 INDEX)</a> constituent though its spinoff will not be included in the index.</p><p>In this Insight, we look at the index treatment, the impact of passive flow on the stocks, and the impact of the changes on the June rebalance 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>. </p>

It seems to be spin-off season in Korea.Three Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) and KOSDAQ 150 Index (KOSDQ150 INDEX) constituents will be suspended from trading from 29 April - LG Corp (003550 KS), F&amp;F Co Ltd (007700 KS) and Ecopro Co Ltd (086520 KS) due to a spin-off of its businesses.F&amp;F Co Ltd (007700 KS) will resume trading on 21 May, LG Corp (003550 KS) will resume trading on 27 May, and Ecopro Co Ltd (086520 KS) will resume trading on 28 May.LG Corp (003550 KS) will remain in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) and its spinoff will be added to the index, F&amp;F Co Ltd (007700 KS) will remain in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) but the spinoff will not be added to the index, Ecopro Co Ltd (086520 KS) will continue to be a KOSDAQ 150 Index (KOSDQ150 INDEX) constituent though its spinoff will not be included in the index.In this Insight, we look at the index treatment, the impact of passive flow on the stocks, and the impact of the changes on the June rebalance of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX). 

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

MSCI Emerging Markets Index / Technical Analysis

<p>Price and RS uptrends for the MSCI EM index continues to underpin our bullish outlook for emerging market equities -- remain overweight. We continue to attribute much of EM’s outperformance to the intact downtrend in the US dollar (DXY). As long as weakness in the DXY persists we believe EM’s outperformance is likely to continue.</p>

Price and RS uptrends for the MSCI EM index continues to underpin our bullish outlook for emerging market equities -- remain overweight. We continue to attribute much of EM’s outperformance to the intact downtrend in the US dollar (DXY). As long as weakness in the DXY persists we believe EM’s outperformance is likely to continue.

EM Remains Global Leadership -- Remain Overweight

South Korea

Ecopro Co., Ltd. specializes in developing chemical absorbent and NDC (Nano Carbon Ball) in the field of environmental materials for the prevention of air pollution.  The Company's products include environment-related chemical filters, second battery materials, and CO catalyst.

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Ecopro Co Ltd (086520 KS)

StubWorld: What Is Up (Or Down) With Ecopro Co?

The current share price of Ecopro Co appears unsubstantiated here. I would set up a Long Ecopro Co versus Short Ecopro BM.

David Blennerhassett

Trading Strategies for Ecopro Co & Ecopro HN Post Split

In this insight, we discuss the trading opportunities involving Ecopro Co Ltd (086520 KS) and Ecopro HN (383310 KS) post their split.

Douglas Kim

Korean Spinoffs Trade Ideas Amid Trade Suspension on April 29

This post is intended to help formulate trade ideas on the three spinoff stocks in Korea before the trade suspension begins on April 29.

Sanghyun Park

Korea Spin-Offs: Index Treatment

LG Corp, F&F and Ecopro will be suspended from trading on 29 April due to their spin offs. Passive funds will sell stock at the close on 28 April...

Brian Freitas

EM Remains Global Leadership -- Remain Overweight

Price and RS uptrends for the MSCI EM index continues to underpin our bullish outlook for emerging market equities -- remain overweight.

Vermilion Research

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