Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>2021 has been a leapfrog year in terms of both major outbound and inbound M&amp;As in Korea.</li>
<li>Two of the biggest M&amp;A deals in 2021 include SK Hynix's acquisition of Intel's flash NAND and SSD business and Emart's purchase of Ebay Korea for $3 billion. </li>
<li>Some of the largest M&amp;A deals which could get completed in 2022 include Hanon Systems, Bodyfriend, Modern House, Hyundai LNG Shipping, and EMK.  </li>
</ul>


2021 has been a leapfrog year in terms of both major outbound and inbound M&amp;As in Korea.
Two of the biggest M&amp;A deals in 2021 include SK Hynix's acquisition of Intel's flash NAND and SSD business and Emart's purchase of Ebay Korea for $3 billion. 
Some of the largest M&amp;A deals which could get completed in 2022 include Hanon Systems, Bodyfriend, Modern House, Hyundai LNG Shipping, and EMK.  


Korea M&A Recap in 2021 - A Leapfrog Year

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.

Myoung Shin Industrial Co.,Ltd / Event-Driven

<p>Myungshin Industries is running again. Myungshin Industrial is considered a Tesla-related stock because Tesla is a major customer. As Tesla recently announced surprise earnings, the stock price of Myungshin Industrial is also moving up.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/220/951/original/1.png?1627534508" class="editor-image img-responsive" data-smartkarma-image-id="220951"></figure></section><p>In the past five trading days alone, the share price has risen more than 8%. Its current market cap has exceeded 1.7 trillion won.</p><div class="content-highlight"><p><strong>So this stock appears to offer some opportunities from an index rebalancing trading perspective as well.</strong></p></div><p>The first thing to consider is the inclusion of the KOSPI 200. In the rebalancing of last June, the stock price did not meet the market cap threshold due to the share price being drifted sideways for several months. However, in this December's rebalancing, if the current share price uptrend continues, the possibility of inclusion seems quite high.</p><p><strong>However, we can find trading opportunities in the KRX Autos sector index rebalancing, which takes place ahead of the KOSPI 200 rebalancing in December.</strong></p><p>As for KRX Autos, KODEX currently manages an ETF that tracks it, and it has recently been showing good returns, resulting in a large inflow of funds. The AUM now amounts to ₩649.0B, which isn't bad for an index containing only 17 constituents.</p><p>This is a float-adjusted market cap-weighted index with a 20% cap. Rebalancing takes place annually in September. The implementation date is the first trading day of the week following the last trading day for KOSPI 200 futures contracts. So, September 10 will be the implementation date for this year, meaning that we will see rebalancing trading at the close on September 9.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" style="width: 746px;" data-sheets-value='{"1":2,"2":"Index summary"}'>Index summary</td></tr>
<tr>
<td style="width: 281px;" data-sheets-value='{"1":2,"2":"Index name"}'>Index name</td>
<td style="width: 465px;" data-sheets-value='{"1":2,"2":"KRX Autos"}'>KRX Autos</td>
</tr>
<tr>
<td style="width: 281px;" data-sheets-value='{"1":2,"2":"ETF"}'>ETF</td>
<td style="width: 465px;" data-sheets-value='{"1":2,"2":"Samsung Kodex Autos ETF"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'><div><div>Samsung Kodex Autos ETF</div></div></td>
</tr>
<tr>
<td style="width: 281px;" data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="width: 465px;" data-sheets-value='{"1":2,"2":"091180"}' data-sheets-formula='="091180"'>091180</td>
</tr>
<tr>
<td style="width: 281px;" data-sheets-value='{"1":2,"2":"AUM"}'><strong>AUM</strong></td>
<td style="width: 465px;" data-sheets-value='{"1":3,"3":649.04425}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[1]C[0]*R[2]C[0]/1000000000"><strong>₩649.0B</strong></td>
</tr>
<tr>
<td style="width: 281px;" data-sheets-value='{"1":2,"2":"Price"}'>Price</td>
<td style="width: 465px;" data-sheets-value='{"1":3,"3":23305}' data-sheets-numberformat='[null,4,"[$₩]#,##0",1]' data-sheets-formula='=googlefinance(R[-2]C[0], "price")'>₩23,305</td>
</tr>
<tr>
<td style="width: 281px;" data-sheets-value='{"1":2,"2":"SO"}'>SO</td>
<td style="width: 465px;" data-sheets-value='{"1":3,"3":27850000}' data-sheets-numberformat='[null,2,"#,##0",1]'>27,850,000</td>
</tr>
<tr>
<td style="width: 281px;" data-sheets-value='{"1":2,"2":"Number of constituents"}'>Number of constituents</td>
<td style="width: 465px;" data-sheets-value='{"1":3,"3":17}' data-sheets-numberformat='[null,2,"#,##0",1]'>17</td>
</tr>
<tr>
<td style="width: 281px;" data-sheets-value='{"1":2,"2":"Weight type"}'>Weight type</td>
<td style="width: 465px;" data-sheets-value='{"1":2,"2":"Float-adjusted market cap"}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'><div><div>Float-adjusted market cap</div></div></td>
</tr>
<tr>
<td style="width: 281px;" data-sheets-value='{"1":2,"2":"Cap"}'>Cap</td>
<td style="width: 465px;" data-sheets-value='{"1":3,"3":0.2}' data-sheets-numberformat='[null,3,"0.00%",1]'>20.00%</td>
</tr>
<tr>
<td style="width: 281px;" data-sheets-value='{"1":2,"2":"Rebalancing cycle"}'>Rebalancing cycle</td>
<td style="width: 465px;" data-sheets-value='{"1":2,"2":"Annually"}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>Annually</td>
</tr>
<tr>
<td style="width: 281px;" data-sheets-value='{"1":2,"2":"Rebalancing month"}'><strong>Rebalancing month</strong></td>
<td style="width: 465px;" data-sheets-value='{"1":2,"2":"September"}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'><strong>September</strong></td>
</tr>
<tr>
<td style="width: 281px;" data-sheets-value='{"1":2,"2":"Announcement date"}'><strong>Announcement date</strong></td>
<td style="width: 465px;" data-sheets-value='{"1":2,"2":"One week ahead of implementation"}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'><div><div><strong>One week ahead of implementation</strong></div></div></td>
</tr>
<tr>
<td style="width: 281px;" data-sheets-value='{"1":2,"2":"Implementation date"}'><strong>Implementation date</strong></td>
<td style="width: 465px;" data-sheets-value='{"1":2,"2":"The first trading day of the week following the last trading day for KOSPI 200 futures contracts"}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'><div><div><strong>The first trading day of the week following the last trading day for KOSPI 200 futures contracts</strong></div></div></td>
</tr>
<tr>
<td style="width: 281px;" data-sheets-value='{"1":2,"2":"Next implementation date"}'><strong>Next implementation date</strong></td>
<td style="width: 465px;" data-sheets-value='{"1":2,"2":"September 10, 2021"}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'><div><div><strong>September 10, 2021</strong></div></div></td>
</tr>
<tr>
<td style="width: 281px;" data-sheets-value='{"1":2,"2":"Rebalancing trading"}'><strong>Rebalancing trading</strong></td>
<td style="width: 465px;" data-sheets-value='{"1":2,"2":"At the close on September 9, 2021"}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'><div><div><strong>At the close on September 9, 2021</strong></div></div></td>
</tr>
<tr>
<td style="width: 281px;" data-sheets-value='{"1":2,"2":"Screening base date"}'>Screening base date</td>
<td style="width: 465px;" data-sheets-value='{"1":2,"2":"The last trading day of the month preceding the date of regular rebalancing"}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'><div><div>The last trading day of the month preceding the date of regular rebalancing</div></div></td>
</tr>
<tr>
<td style="width: 281px;" data-sheets-value='{"1":2,"2":"Screening period"}'>Screening period</td>
<td style="width: 465px;" data-sheets-value='{"1":2,"2":"The three months preceding the screening base date"}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'><div><div>The three months preceding the screening base date</div></div></td>
</tr>
<tr><td colspan="2" style="width: 746px;" data-sheets-value='{"1":2,"2":"Source: KRX &amp; KODEX ETF"}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=PDF!R[-1]C[0]">Source: KRX &amp; KODEX ETF</td></tr>
</tbody>
</table>

Myungshin Industries is running again. Myungshin Industrial is considered a Tesla-related stock because Tesla is a major customer. As Tesla recently announced surprise earnings, the stock price of Myungshin Industrial is also moving up.In the past five trading days alone, the share price has risen more than 8%. Its current market cap has exceeded 1.7 trillion won.So this stock appears to offer some opportunities from an index rebalancing trading perspective as well.The first thing to consider is the inclusion of the KOSPI 200. In the rebalancing of last June, the stock price did not meet the market cap threshold due to the share price being drifted sideways for several months. However, in this December's rebalancing, if the current share price uptrend continues, the possibility of inclusion seems quite high.However, we can find trading opportunities in the KRX Autos sector index rebalancing, which takes place ahead of the KOSPI 200 rebalancing in December.As for KRX Autos, KODEX currently manages an ETF that tracks it, and it has recently been showing good returns, resulting in a large inflow of funds. The AUM now amounts to ₩649.0B, which isn't bad for an index containing only 17 constituents.This is a float-adjusted market cap-weighted index with a 20% cap. Rebalancing takes place annually in September. The implementation date is the first trading day of the week following the last trading day for KOSPI 200 futures contracts. So, September 10 will be the implementation date for this year, meaning that we will see rebalancing trading at the close on September 9.





Index summary

Index name
KRX Autos


ETF
Samsung Kodex Autos ETF


Ticker
091180


AUM
₩649.0B


Price
₩23,305


SO
27,850,000


Number of constituents
17


Weight type
Float-adjusted market cap


Cap
20.00%


Rebalancing cycle
Annually


Rebalancing month
September


Announcement date
One week ahead of implementation


Implementation date
The first trading day of the week following the last trading day for KOSPI 200 futures contracts


Next implementation date
September 10, 2021


Rebalancing trading
At the close on September 9, 2021


Screening base date
The last trading day of the month preceding the date of regular rebalancing


Screening period
The three months preceding the screening base date

Source: KRX &amp; KODEX ETF



KRX Autos Rebalancing on September 9: Watch Myoungshin Industrial as a New Add

Equity Capital Markets

<div class="content-highlight">
<p>Iljin Hysolus reduced its IPO price range. The company announced that it will reduce the IPO price range from 30,300 won to 37,300 won previously to 25,700 won to 34,300 won, respectively. This represents a decline of 8% to 15%.</p>
<p>The IPO deal size has been revised down to US$243 million to US$325 million. The expected market cap after the IPO is from 933 billion won (low) to 1,245 billion won (high). The book building for the institutional investors starts on 19 August 2021. </p>
<p><strong>Our revised base case valuation of Iljin Hysolus is implied market cap of 940 billion won or 25,898 won per share, which represents 1% higher than the low end of the IPO price range of 25,700 won. Given the lack of upside, we continue to maintain a NEGATIVE view of this IPO and we would avoid this IPO. </strong></p>
</div><table class="table table-striped">
<colgroup>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td style="width: 240pt;">Deal Specifics of the Iljin Hysolus IPO (Revised):</td>
<td style="width: 238pt;"> </td>
</tr>
<tr>
<td style="width: 240pt;">Lead underwriters of the IPO: </td>
<td style="width: 238pt;">Mirae Asset Securities, Samsung Securities</td>
</tr>
<tr>
<td style="width: 240pt;">Expected IPO price per share: </td>
<td style="width: 238pt;">25,700 won (low)/34,300 won (high)</td>
</tr>
<tr>
<td style="width: 240pt;">Number of Shares for IPO:</td>
<td style="width: 238pt;">10.89m shares (7.26m new shares and 3.63m old shares)</td>
</tr>
<tr>
<td style="width: 240pt;">IPO base deal size: </td>
<td style="width: 238pt;">US$243 mn (low);  US$325 mn (high)</td>
</tr>
<tr>
<td style="width: 240pt;">Expected common shares outstanding, fully diluted (post-IPO):  </td>
<td style="width: 238pt;">36.31m shares</td>
</tr>
<tr>
<td style="width: 240pt;">Expected market cap after IPO:</td>
<td style="width: 238pt;">933 billion won (low)/1,245 billion won (high)</td>
</tr>
<tr>
<td style="width: 240pt;">Book open: </td>
<td style="text-align: left; width: 238pt;">19-Aug-21</td>
</tr>
<tr>
<td style="width: 240pt;">Book closed:</td>
<td style="text-align: left; width: 238pt;">20-Aug-21</td>
</tr>
<tr>
<td style="width: 240pt;">Listing date: </td>
<td style="text-align: left; width: 238pt;">TBD</td>
</tr>
<tr>
<td style="width: 240pt;">Source: Company data</td>
<td style="width: 238pt;"> </td>
</tr>
</tbody>
</table>


Iljin Hysolus reduced its IPO price range. The company announced that it will reduce the IPO price range from 30,300 won to 37,300 won previously to 25,700 won to 34,300 won, respectively. This represents a decline of 8% to 15%.
The IPO deal size has been revised down to US$243 million to US$325 million. The expected market cap after the IPO is from 933 billion won (low) to 1,245 billion won (high). The book building for the institutional investors starts on 19 August 2021. 
Our revised base case valuation of Iljin Hysolus is implied market cap of 940 billion won or 25,898 won per share, which represents 1% higher than the low end of the IPO price range of 25,700 won. Given the lack of upside, we continue to maintain a NEGATIVE view of this IPO and we would avoid this IPO. 







Deal Specifics of the Iljin Hysolus IPO (Revised):
 


Lead underwriters of the IPO: 
Mirae Asset Securities, Samsung Securities


Expected IPO price per share: 
25,700 won (low)/34,300 won (high)


Number of Shares for IPO:
10.89m shares (7.26m new shares and 3.63m old shares)


IPO base deal size: 
US$243 mn (low);  US$325 mn (high)


Expected common shares outstanding, fully diluted (post-IPO):  
36.31m shares


Expected market cap after IPO:
933 billion won (low)/1,245 billion won (high)


Book open: 
19-Aug-21


Book closed:
20-Aug-21


Listing date: 
TBD


Source: Company data
 




<p>Our base case valuation of Iljin Hysolus is implied market cap of 817.6 billion won or 22,517 won per share. This represents 26% lower than the low end of the IPO price range of 30,300 won. Given the lower target price versus the IPO price range, we would AVOID this deal. </p><div><p>Established in 2012, Iljin Hysolus is a hydrogen mobility-related parts company that provides hydrogen fuel tanks and modules based on hydrogen storage technology. The company supplied hydrogen fuel tanks for the first time in the industry to the Tucson hydrogen electric vehicle, which Hyundai Motors successfully commercialized in 2014. Since then, it has been supplying hydrogen fuel tanks to hydrogen fuel cell vehicles (FCEV) 'Nexo' and hydrogen buses. </p></div>

Our base case valuation of Iljin Hysolus is implied market cap of 817.6 billion won or 22,517 won per share. This represents 26% lower than the low end of the IPO price range of 30,300 won. Given the lower target price versus the IPO price range, we would AVOID this deal. Established in 2012, Iljin Hysolus is a hydrogen mobility-related parts company that provides hydrogen fuel tanks and modules based on hydrogen storage technology. The company supplied hydrogen fuel tanks for the first time in the industry to the Tucson hydrogen electric vehicle, which Hyundai Motors successfully commercialized in 2014. Since then, it has been supplying hydrogen fuel tanks to hydrogen fuel cell vehicles (FCEV) 'Nexo' and hydrogen buses. 

<p>Iljin Hysolus is getting ready to complete its IPO in Korea in August. Iljin Hysolus is a company specializing in eco-friendly hydrogen fuel storage solutions of the Iljin Group. The company is offering 10.89 million shares, of which 7.26 million is for new shares and 3.63 million is for the old shares. </p><p>The IPO price range is from 30,300 won to 37,300 won. The IPO base deal size is from $289 million to $356 million. According to the bankers' valuation, the expected market cap of the company is from 1.1 trillion won to 1.35 trillion won. The book building for the institutional investors starts on August 8th. Mirae Asset Securities and Samsung Securites are the lead bankers on this deal. </p><table class="table table-striped">
<colgroup>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td style="width: 240pt;"><div><strong>Deal Specifics of the Iljin Hysolus IPO:</strong></div></td>
<td style="width: 238pt;"> </td>
</tr>
<tr>
<td>Lead underwriters of the IPO: </td>
<td style="width: 238pt;">Mirae Asset Securities, Samsung Securities</td>
</tr>
<tr>
<td><strong>Expected IPO price per share: </strong></td>
<td style="width: 238pt;"><strong>30,300 won (low)/37,300 won (high)</strong></td>
</tr>
<tr>
<td>Number of Shares for IPO:</td>
<td style="width: 238pt;">10.89m shares (7.26m new shares and 3.63m old shares)</td>
</tr>
<tr>
<td>IPO base deal size: </td>
<td style="width: 238pt;">US$289 mn (low);  US$356 mn (high)</td>
</tr>
<tr>
<td>Expected common shares outstanding, fully diluted (post-IPO):  </td>
<td style="width: 238pt;">36.31m shares</td>
</tr>
<tr>
<td><strong>Expected market cap after IPO:</strong></td>
<td style="width: 238pt;"><strong>1,100 billion won (low)/1,354 billion won (high)</strong></td>
</tr>
<tr>
<td>Book open: </td>
<td style="text-align: left; width: 238pt;">8-Aug-21</td>
</tr>
<tr>
<td>Book closed:</td>
<td style="text-align: left; width: 238pt;">9-Aug-21</td>
</tr>
<tr>
<td>Listing date: </td>
<td style="text-align: left; width: 238pt;">TBD</td>
</tr>
<tr>
<td>Source: Company data</td>
<td style="width: 238pt;"> </td>
</tr>
</tbody>
</table>

Iljin Hysolus is getting ready to complete its IPO in Korea in August. Iljin Hysolus is a company specializing in eco-friendly hydrogen fuel storage solutions of the Iljin Group. The company is offering 10.89 million shares, of which 7.26 million is for new shares and 3.63 million is for the old shares. The IPO price range is from 30,300 won to 37,300 won. The IPO base deal size is from $289 million to $356 million. According to the bankers' valuation, the expected market cap of the company is from 1.1 trillion won to 1.35 trillion won. The book building for the institutional investors starts on August 8th. Mirae Asset Securities and Samsung Securites are the lead bankers on this deal. 






Deal Specifics of the Iljin Hysolus IPO:
 


Lead underwriters of the IPO: 
Mirae Asset Securities, Samsung Securities


Expected IPO price per share: 
30,300 won (low)/37,300 won (high)


Number of Shares for IPO:
10.89m shares (7.26m new shares and 3.63m old shares)


IPO base deal size: 
US$289 mn (low);  US$356 mn (high)


Expected common shares outstanding, fully diluted (post-IPO):  
36.31m shares


Expected market cap after IPO:
1,100 billion won (low)/1,354 billion won (high)


Book open: 
8-Aug-21


Book closed:
9-Aug-21


Listing date: 
TBD


Source: Company data
 




South Korea

Hanon Systems manufactures a variety of automotive air control equipment.  The Company's products include air conditioners, heaters, cooling modules, compressors, radiators, fans, evaporators, and condensers. Hanon Systems distributes its products on an original equipment manufacturing (OEM) basis.

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Hanon Systems (018880 KS)

Korea M&A Recap in 2021 - A Leapfrog Year

2021 has been a leapfrog year in terms of major M&As in Korea. Some of the largest M&A deals in 2022 could include Hanon Systems, Bodyfriend,...

Douglas Kim

KRX Autos Rebalancing on September 9: Watch Myoungshin Industrial as a New Add

Myungshin Industrial, which is almost certain to be included in the KRX Autos Sector Index rebalancing, will receive an index weight of 2.09%, and...

Sanghyun Park

Iljin Hysolus Reduces IPO Price Range

Iljin Hysolus reduced its IPO price range. The company announced that it will reduce the IPO price range to 25,700 won to 34,300 won. We continue...

Douglas Kim

Iljin Hysolus IPO Valuation Analysis

Our base case valuation of Iljin Hysolus is implied market cap of 817.6 billion won or 22,517 won per share. Given the lower target price versus...

Douglas Kim

Iljin Hysolus IPO Preview

Iljin Hysolus is getting ready to complete its IPO in Korea in August. The IPO base deal size is from $289 million to $356 million.

Douglas Kim

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