Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Cross Asset Strategy

The Korea Exchange announced its KOSDAQ150 and KRX300 indices rebalances today. There were 17 new additions and 17 deletions for KOSDAQ150. Most of the stocks that were expected to be included in KOSDAQ 150 were officially included in the rebalance. However there were a few surprises. For example <a href="https://www.smartkarma.com/entities/nanos-co-ltd" target="_blank" data-smartkarma-citation="entities:16796:1" rel="noopener">Nanos Co Ltd (151910 KS),</a>which was one of the stocks that was expected to be included in KOSDAQ150, did not get included in this indext this time. On the other hand, the following stocks including <a href="https://www.smartkarma.com/entities/sang-a-frontec-co-ltd" target="_blank" data-smartkarma-citation="entities:20692:1" rel="noopener">Sang A Frontec (089980 KS)</a>, Novarex (194700 KS(, CIS (222080 KS), MedPacto (215980 KS), <a href="https://www.smartkarma.com/entities/koreacenter-com-co-ltd" target="_blank" data-smartkarma-citation="entities:28329:1" rel="noopener">Koreacenter.com Co Ltd (290510 KS)</a>, and Soulbrain (357780 KS) which were not on the top of the lists of getting selected into the KOSDAQ150 index by the locals, were formally selected be part of the new KOSDAQ150 inclusions.  The Korea Exchange also made changes to the KRX300 index. Although the KRX300 index is not currently as important as KOSPI200 and KOSDAQ150 indices, it is increasingly gaining in importance among the local institutional investors. The KRX300 had 33 new additions and 35 deletions.

The Korea Exchange announced its KOSDAQ150 and KRX300 indices rebalances today. There were 17 new additions and 17 deletions for KOSDAQ150. Most of the stocks that were expected to be included in KOSDAQ 150 were officially included in the rebalance. However there were a few surprises. For example Nanos Co Ltd (151910 KS),which was one of the stocks that was expected to be included in KOSDAQ150, did not get included in this indext this time. On the other hand, the following stocks including Sang A Frontec (089980 KS), Novarex (194700 KS(, CIS (222080 KS), MedPacto (215980 KS), Koreacenter.com Co Ltd (290510 KS), and Soulbrain (357780 KS) which were not on the top of the lists of getting selected into the KOSDAQ150 index by the locals, were formally selected be part of the new KOSDAQ150 inclusions.  The Korea Exchange also made changes to the KRX300 index. Although the KRX300 index is not currently as important as KOSPI200 and KOSDAQ150 indices, it is increasingly gaining in importance among the local institutional investors. The KRX300 had 33 new additions and 35 deletions. 

KOSDAQ150 and KRX300 Indices Rebalances (Overlapping Additions & Deletions)

Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Event-Driven

Hankook Tech Group is currently at a -2.6σ on a 20D MA, the widest in a long time.The price ratio is -10% from the 120D mean and now down almost in line with the 2-yr mean.





% of sigma

Today
-258.23%


T-1
-137.67%


T-2
73.60%


T-3
24.81%


T-4
6.13%


T-5
-34.48%

Source: KRX








Price ratio

Today
0.44118
-


20D MA
0.47580
-


σ
0.01341
-


+1 σ
0.48921
-


-1 σ
0.46239
-


120D mean
0.49160
-10.26%


120D median
0.49204
-10.34%


120D high
0.56522
-21.95%


120D low
0.39822
10.79%


1Y mean
0.46713
-5.56%


1Y median
0.46230
-4.57%


1Y high
0.56522
-21.95%


1Y low
0.39822
10.79%


2Y mean
0.45410
-2.85%


2Y median
0.45524
-3.09%


2Y high
0.56522
-21.95%


2Y low
0.36667
20.32%

Source: KRX

We can safely say that it is a single-sub holding company. Hankook Tire (161390) is nearly 90% of the subsidiary stakes.The NAV discount now sits at 40%, a level widely accepted as the average for the local holding companies.








Assets
% NAV
% GAV
% Holdings


Hankook Tire &amp; Technology Co Ltd
55.90%
60.55%
87.53%


Hankook AtlasBX Co Ltd
6.47%
7.01%
10.13%


Macquarie Korea Infrastructure Fund
0.26%
0.28%
0.40%


LB Semicon Co Ltd
0.10%
0.11%
0.15%


HK Automotive
0.76%
0.82%
1.19%


emFrontier
0.38%
0.42%
0.60%


Brand royalty
17.60%
19.07%
-


Real-estate
10.86%
11.76%
-


Holdco net cash/debt (de-consolidated)
7.67%
-
-


Value of pref shares
0.00%
-
-

Source: DART &amp; KRX







NAV (₩B)

Value of listed holdings
1,488.7


- % of holding company market cap
101.61%


Value of unlisted holdings
27.1


Stub value
-50.7


Stub value per share
-₩545


Value of operating assets
675.4


GAV
2,191.2


GAV per share
₩23,896


Discount to GAV (excl. treasury shares)
34.09%


Holdco net cash/debt (de-consolidated)
182.0


Value of pref shares
0.0


NAV
2,373.2


NAV per share (excl. treasury shares)
₩25,881


Discount to NAV
39.14%

Source: KRX &amp; DART



Hankook Tire Stub At -2.6σ with a 40% NAV Disc. Reversion Should Follow Here

<div class="content-highlight">It has been reported in the past few days that <a href="http://www.koreaninvestors.com/?p=12175" target="_blank" rel="noopener">NPS</a> is likely to put a greater emphasis on ESG (environmental, social, &amp; governance) based investing for Korean stocks and bonds starting 2021. NPS has currently given a mandate to a company to help NPS to apply ESG based investment system. The ESG evaluations are expected to aid NPS to actively exercise shareholder rights and also to carry out negative screening of stocks.</div><h3>Implications of NPS Incorporating More ESG Criteria on Domestic Investments (Bonds &amp; Stocks)</h3><ul>
<li>Negative Impact on VICE industries </li>
<li>Positive Impact on Renewable Energy Industries</li>
<li>Negative Impact on Coal &amp; Oil Industries</li>
<li>Greater Representation of Women in Senior Management Team/BOD</li>
</ul>

It has been reported in the past few days that NPS is likely to put a greater emphasis on ESG (environmental, social, &amp; governance) based investing for Korean stocks and bonds starting 2021. NPS has currently given a mandate to a company to help NPS to apply ESG based investment system. The ESG evaluations are expected to aid NPS to actively exercise shareholder rights and also to carry out negative screening of stocks.Implications of NPS Incorporating More ESG Criteria on Domestic Investments (Bonds &amp; Stocks)
Negative Impact on VICE industries 
Positive Impact on Renewable Energy Industries
Negative Impact on Coal &amp; Oil Industries
Greater Representation of Women in Senior Management Team/BOD


NPS - Greater Emphasis of ESG Based Investing for Korean Stocks & Bonds Starting 2021

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Last Week In Event SPACE: Keisei/Oriental Ld, Nat'l Storage, Sembcorp, Leyou, Accordia Golf, Samba

It was reported after the market close yesterday that the Hankook Technology Group's Chairman Cho Yang-Rae sold his 23.59% stake to his 2nd son Cho Hyun-Bum in a block deal. As a result, the 2nd son Cho Hyun-Bum's stake in <a href="https://www.smartkarma.com/entities/hankook-technology-group" target="_blank" data-smartkarma-citation="entities:19369:1" rel="noopener">Hankook Technology Group (000240 KS)</a> will increase from 19.3% previously to 42.9%.  
In the Korean stock market, in cases like this (typically, but not always) when there is a major transfer of ownership of this scale, the company where the Chairman transfers his stake to his children tends to do well as many investors perceive that there is less incentive for the major insiders to keep the share price "low" on purpose after the transfer.
The control over the fate of the Hankuk Technology Group does not appear to be over by any means. This is mainly due to the big ownership of the sister Cho Hye-Won who has a 10.82% stake in the company. One of the scenarios is that the older brother Cho Hyun-Sik could partner with his sister to potentially fight against the control of the company.
Our NAV valuation analysis of Hankook Technology Group suggests that this stock is undervalued right now. Our NAV analysis suggests an implied market cap of 1.6 trillion won or implied price per share of 17,555 won which represents a 27% upside from current levels.

It was reported after the market close yesterday that the Hankook Technology Group's Chairman Cho Yang-Rae sold his 23.59% stake to his 2nd son Cho Hyun-Bum in a block deal. As a result, the 2nd son Cho Hyun-Bum's stake in Hankook Technology Group (000240 KS) will increase from 19.3% previously to 42.9%.  
In the Korean stock market, in cases like this (typically, but not always) when there is a major transfer of ownership of this scale, the company where the Chairman transfers his stake to his children tends to do well as many investors perceive that there is less incentive for the major insiders to keep the share price "low" on purpose after the transfer.
The control over the fate of the Hankuk Technology Group does not appear to be over by any means. This is mainly due to the big ownership of the sister Cho Hye-Won who has a 10.82% stake in the company. One of the scenarios is that the older brother Cho Hyun-Sik could partner with his sister to potentially fight against the control of the company.
Our NAV valuation analysis of Hankook Technology Group suggests that this stock is undervalued right now. Our NAV analysis suggests an implied market cap of 1.6 trillion won or implied price per share of 17,555 won which represents a 27% upside from current levels. 

Hankook Technology Group:  Chairman's 2nd Son Takes Over But It Is Not Over Yet!

South Korea

Hankook & Company Co., Ltd. operates as a holding company. The Company operates batteries manufacturing, leasing, management consulting, tires production, and other businesses. Hankook provides services worldwide.

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Hankook & Company (000240 KS)

KOSDAQ150 and KRX300 Indices Rebalances (Overlapping Additions & Deletions)

We highlight the KOSDAQ150 and KRX300 indices rebalances. There are some interesting new names, especially among those that are over lapping in...

Douglas Kim

Hankook Tire Stub At -2.6σ with a 40% NAV Disc. Reversion Should Follow Here

Hankook Tire stub is at -2.6σ, the widest in a long time, with a 40% NAV discount. I expect a reversion at this level for three reasons.

Sanghyun Park

NPS - Greater Emphasis of ESG Based Investing for Korean Stocks & Bonds Starting 2021

It has been reported in the past few days that NPS is likely to put a greater emphasis on ESG (environmental, social, & governance) based...

Douglas Kim

Last Week In Event SPACE: Keisei/Oriental Ld, Nat'l Storage, Sembcorp, Leyou, Accordia Golf, Samba

Last Week in Event SPACE ... With Tokyo Disneyland opening this past Wednesday, Keisei Electric Railway Co (9009 JP) was coming up "expensive"....

David Blennerhassett

Hankook Technology Group: Chairman's 2nd Son Takes Over But It Is Not Over Yet!

It was reported after the market close yesterday that the Hankook Technology Group's Chairman Cho Yang-Rae sold his 23.59% stake to his 2nd son Cho...

Douglas Kim

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