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.

Event-Driven

<ul>
<li>From a trading perspective, we should pay attention to the KOSPI 200 corporate actions in Hyundai Department Group's demerger events, as both companies are KOSPI 200 constituents.</li>
<li>Hyundai Green Food's surviving company won't beat the cutoff, resulting in a KOSPI 200 constituent change on April 10. Samyang Foods will be a new addition.</li>
<li>Even the size of KOSPI 200 ETFs that will likely go into mechanical trading on April 10 will cause a significant price impact from a day trading perspective.</li>
</ul>


From a trading perspective, we should pay attention to the KOSPI 200 corporate actions in Hyundai Department Group's demerger events, as both companies are KOSPI 200 constituents.
Hyundai Green Food's surviving company won't beat the cutoff, resulting in a KOSPI 200 constituent change on April 10. Samyang Foods will be a new addition.
Even the size of KOSPI 200 ETFs that will likely go into mechanical trading on April 10 will cause a significant price impact from a day trading perspective.


KOSPI 200 Ad-Hoc Change: Hyundai Greenfood Out & Samyang Foods Fresh Buy-In on April 10

<ul>
<li>Juice for cash &amp; carry arbitrage doesn't seem like much. Several names in contango, but the basis widening isn't at a sufficiently arb-tradable level.</li>
<li>Reverse cash &amp; carry isn't all that attractive either, but it certainly does offer more juice, even with borrow fees. Ssangyong C&amp;E, SKT, Shinhan, and KB deserve our attention.</li>
<li>A bit uncertain is whether the pattern of "LONG Spot until ex-dividend and Conversion to Short" through cash &amp; carry will repeat itself this time.</li>
</ul>


Juice for cash &amp; carry arbitrage doesn't seem like much. Several names in contango, but the basis widening isn't at a sufficiently arb-tradable level.
Reverse cash &amp; carry isn't all that attractive either, but it certainly does offer more juice, even with borrow fees. Ssangyong C&amp;E, SKT, Shinhan, and KB deserve our attention.
A bit uncertain is whether the pattern of "LONG Spot until ex-dividend and Conversion to Short" through cash &amp; carry will repeat itself this time.


3Q Dividend Estimates of Those with SSF for Cash & Carry Arb in Korea

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Cross Asset Strategy

<ul>
<li>In this insight, we provide a ranking of all the KOSPI 200 stocks, in terms of their treasury shares as a percentage of total outstanding shares.</li>
<li>We highlight 29 companies whose treasury shares/outstanding shares are more than 10%. These companies' values could be improved significantly if treasury shares are cancelled. </li>
<li>The potential implementation of compulsory tender offer in the next 2-3 years is likely to put increased focus on Korean companies with especially large levels of treasury shares/total outstanding shares. </li>
</ul>


In this insight, we provide a ranking of all the KOSPI 200 stocks, in terms of their treasury shares as a percentage of total outstanding shares.
We highlight 29 companies whose treasury shares/outstanding shares are more than 10%. These companies' values could be improved significantly if treasury shares are cancelled. 
The potential implementation of compulsory tender offer in the next 2-3 years is likely to put increased focus on Korean companies with especially large levels of treasury shares/total outstanding shares. 


Treasury Shares as % of Total Outstanding Shares: Screening for Potential Activist Candidates

<ul>
<li>The KOSPI 200 June Review will have a total of 13 float rate changes: 11 increases and 2 reductions.</li>
<li>
<a href="https://www.smartkarma.com/entities/kakaobank-corp" target="_blank" data-smartkarma-citation="entities:33501:1" rel="noopener">Kakao Bank (323410)</a> will experience the biggest change, followed by <a href="https://www.smartkarma.com/entities/hmm-co-ltd" target="_blank" data-smartkarma-citation="entities:13494:1" rel="noopener">HMM (011200)</a> and <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960)</a>. The float rate of <a href="https://www.smartkarma.com/entities/hdc-hyundai-development-co-engineering-construction" target="_blank" data-smartkarma-citation="entities:27397:1" rel="noopener">HDC Hyundai Development (294870)</a> and <a href="https://www.smartkarma.com/entities/doosan-infracore-co-ltd" target="_blank" data-smartkarma-citation="entities:3982:1" rel="noopener">Doosan Infracore (042670)</a> will decrease.</li>
<li>
Kakao Bank and <a href="https://www.smartkarma.com/entities/kakao-pay-corp" target="_blank" data-smartkarma-citation="entities:29675:1" rel="noopener">Kakao Pay (377300)</a> have the most significant passive impact. And <a href="https://www.smartkarma.com/entities/lg-corp" target="_blank" data-smartkarma-citation="entities:6653:1" rel="noopener">LG Corp (003550)</a>, <a href="https://www.smartkarma.com/entities/woori-financial-group-inc" target="_blank" data-smartkarma-citation="entities:27995:1" rel="noopener">Woori Financial Group (316140)</a>, and <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960)</a> are also worth noting.</li>
</ul>


The KOSPI 200 June Review will have a total of 13 float rate changes: 11 increases and 2 reductions.

Kakao Bank (323410) will experience the biggest change, followed by HMM (011200) and  Krafton Inc (259960). The float rate of HDC Hyundai Development (294870) and Doosan Infracore (042670) will decrease.

Kakao Bank and Kakao Pay (377300) have the most significant passive impact. And LG Corp (003550), Woori Financial Group (316140), and  Krafton Inc (259960) are also worth noting.


KOSPI 200 Constituents with a Float Rate Change: 11 Increases & 2 Reductions

Equity Bottom-Up

HDC Hyundai Development Co-Engineering & Construction / Equity Bottom-Up

HDC Hyundai Development Co-Engineering & Construction

<ul>
<li>On 28 January, the government (Ministry of Land, Infrastructure and Transport) announced that it has recommended the heaviest punishment of the cancellation of the construction license for HDC Hyundai Development.</li>
<li>Seoul city government said it will make a decision on the fate of HDC Hyundai Development within six months.</li>
<li>Rather than a complete, permanent cancellation of the company's business license, a more likely scenario is about 6 to 12 months of temporary business operation suspension, in our view. </li>
</ul>


On 28 January, the government (Ministry of Land, Infrastructure and Transport) announced that it has recommended the heaviest punishment of the cancellation of the construction license for HDC Hyundai Development.
Seoul city government said it will make a decision on the fate of HDC Hyundai Development within six months.
Rather than a complete, permanent cancellation of the company's business license, a more likely scenario is about 6 to 12 months of temporary business operation suspension, in our view. 


HDC Hyundai Development: Permanent Business License Cancellation or Temporary Business Suspension?

South Korea

Cuckoo Holdings Co.,Ltd manufactures and distributes electric home appliances. The Company produces electronic pressure cookers, humidifiers, vacuum cleaners, and air purifiers. Cuckoo Holdings markets its products throughout South Korea.

Topfield Co., Ltd. manufactures digital set top boxes.  The Company's products include free to air receivers, personal video recorders, and common interface receivers.  Topfield provides its products mainly to overseas market.

Ace Bed Co., Ltd. manufactures and markets bed mattresses, bed frames, and other wooden furniture.  The Company exports some of its products to Indonesia and China.

Zinus Inc. wholesales and distributes household furniture. The Company wholesales and distributes bed frames, sofas, platform beds, mattresses, and other related products. Zinus markets its products worldwide.

Hyundai Livart Co Ltd designs and manufactures furniture.  The Company produces a variety of furniture, such as bed, chair, desk, and closet used in bedroom, living room, and office.

Iriver Ltd. develops, designs, manufactures, and markets audio equipment, such as MP3 players.  The Company's products include CD type, flash memory type, and hard disk type MP3 players.  In addition, Iriver produces and sells accessories for mobile communication devices.

Paseco Co., Ltd. manufactures and markets household appliances, such as oil stoves, electric heaters, dishwashers, dish dryers, and refrigerators.

Anam Electronics Co., Ltd. specializes in manufacturing audio and video products, such as wide screen televisions, video cassette recorders, and DVD players.  The Company also produces digital set-top boxes that receive satellite broadcasting programs.

Shinil Industrial Co., Ltd. manufactures electric fans, ovens, rice pots, small refrigerators, pagers, electric heaters, and other household appliances.

Thinkware Systems Corp. designs, manufactures, and markets navigational devices. The Company' products include portable navigation devices, hand-held navigation, and navigation software.  Thinkware Systems also provides location based services (LBS) through mobile networks which enables users to identify location of other users and obtain live traffic information, etc.

Q TECHNOLOGY (GROUP) Company Limited is a PRC-based camera module manufacturer focusing on mid-to-high end camera module market for Chinese branded smartphone, tablet and PC manufacturers.

Jiangsu Tongrun Equipment Technology Co., Ltd. manufactures tool cabinets, steel furniture, other sheet metal products and sheet metal machines.

Xilinmen Furniture Company Limited designs, develops, manufactures and sells mattresses, soft beds and other furniture products. The Company's main product is mattresses.

Miyakoshi Holdings, Inc. operates as a holding company. The company, through its subsidiaries, manufactures, markets, and sells audio & visual equipment. Its products include TVs, DVD players, and multimedia players. The Company is also engaged in the wholesale of pharmaceutical and medical equipment products.

Shenzhen New Nanshan Holding Group Co., Ltd manufactures and designs pre-fabricated houses, products include construction sites offices and houses, special houses for energy or mining projects, urban municipal settlement houses, houses for municipal, tourism, sports exhibition and large commercial activities, and houses for military uses.

Whirlpool China Co Ltd manufactures and markets washing machines and microwave ovens.

Tama Home Co Ltd operates in the home construction industry. The Company designs and constructs single-family homes, and offers real estate sales. Tama Home also operates in the insurance agency business.

Nagawa Co. Ltd. manufactures, sells, and rents prefabricated offices and stores. The Company builds prefabricated storage sheds. Nagawa also sells construction machinery and construction materials.

Vatti Corporation Ltd. manufactures and markets household appliances. The Company's products include gas stoves, kitchen ventilators and water heater.

ES-CON JAPAN Ltd. plans and organizes apartment construction works in Osaka and Kyoto area.  The Company also provides real estate consulting services for land owners and developers.

Hanssem Co., Ltd. manufactures kitchen furniture.  The Company's products include kitchen sinks, kitchen cabinets, dining tables and chairs, and kitchen accessories.  Hanssem also designs and manufactures interior products, such as sofas, bedsteads, closets, drawers, lamps, bathroom and office furniture.

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Hanssem Co Ltd (009240 KS)

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3Q Dividend Estimates of Those with SSF for Cash & Carry Arb in Korea

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Treasury Shares as % of Total Outstanding Shares: Screening for Potential Activist Candidates

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KOSPI 200 Constituents with a Float Rate Change: 11 Increases & 2 Reductions

This post summarizes all the KOSPI 200 constituents, which will likely change their respective float rate in the June Review.

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HDC Hyundai Development: Permanent Business License Cancellation or Temporary Business Suspension?

On 28 January, the Ministry of Land, Infrastructure and Transport announced that it has recommended the heaviest punishment of the cancellation of...

Douglas Kim

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