Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>In this insight, we highlight the pricing gap divergence of the major Korean holdcos and opcos amid market carnage.</li>
<li>In general, more holdcos/quasi-holdcos have been outperforming the opcos in the past year, as compared to the previous years as more investors seek value-oriented, deep NAV discount stocks.</li>
<li>We highlight 26 pair trades that involve Korean holdcos and opcos.</li>
</ul>


In this insight, we highlight the pricing gap divergence of the major Korean holdcos and opcos amid market carnage.
In general, more holdcos/quasi-holdcos have been outperforming the opcos in the past year, as compared to the previous years as more investors seek value-oriented, deep NAV discount stocks.
We highlight 26 pair trades that involve Korean holdcos and opcos.


Korean Holdcos Vs Opcos Gap Spreads Opportunities Amid Market Carnage

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>The acquisition will be carried out through a third-party allocation rights offering. DSME will issue 104M new shares, solely allocated to Hanwha's six affiliates, which will own a combined 49.3%</li>
<li>This DSME acquisition will likely raise Hanwha's holding ratio, potentially to more than 50%. What preemptive measures Hanwha will take will likely become a noteworthy subject from an investment perspective.</li>
<li>Hanwha Aerospace and Hanwha Systems will likely proceed with a capital increase. As their current cash capacity is quite limited, liquidity concerns will likely be raised in the market.</li>
</ul>


The acquisition will be carried out through a third-party allocation rights offering. DSME will issue 104M new shares, solely allocated to Hanwha's six affiliates, which will own a combined 49.3%
This DSME acquisition will likely raise Hanwha's holding ratio, potentially to more than 50%. What preemptive measures Hanwha will take will likely become a noteworthy subject from an investment perspective.
Hanwha Aerospace and Hanwha Systems will likely proceed with a capital increase. As their current cash capacity is quite limited, liquidity concerns will likely be raised in the market.


A Detailed Summary of Hanwha's DSME Acquisition Deal

<ul>
<li>There is no unlocking of treasury shares, so a flow betting on dramatic value accretion will not occur. For tendering, the proration risk appears to be relatively high.</li>
<li>Passive trackers will sell at the close on February 24 and repurchase (likely only for Solutions) at the close on March 31. The flow size would be around 5.5x ADTV.</li>
<li>ECO risk wouldn't be a concern as the new rule will grant appraisal/preemptive rights to the existing shareholders. Also, Hanwha hinted at the possibility of choosing private placement over ECO.</li>
</ul>


There is no unlocking of treasury shares, so a flow betting on dramatic value accretion will not occur. For tendering, the proration risk appears to be relatively high.
Passive trackers will sell at the close on February 24 and repurchase (likely only for Solutions) at the close on March 31. The flow size would be around 5.5x ADTV.
ECO risk wouldn't be a concern as the new rule will grant appraisal/preemptive rights to the existing shareholders. Also, Hanwha hinted at the possibility of choosing private placement over ECO.


A Detailed Summary of Hanwha Solutions Demerger & Tender Offer

<ul>
<li>Hanwha Group announced another large-scale reorganization directly involving Hanwha Corp, Hanwha Aerospace, and Hanwha Impact. Several deal contracts arise, two of which require shareholder approval. However, none grants appraisal rights.</li>
<li>The market responded quite positively to this. Direct parties to the reorganization were Hanwha Corp and Hanwha Aerospace, up 7.83% and 19.93%, respectively, on Friday.</li>
<li>This event has little room for event trading for its size. We have no choice but to approach this event with outright momentum trading, which inevitably increases the risk-reward ratio.</li>
</ul>


Hanwha Group announced another large-scale reorganization directly involving Hanwha Corp, Hanwha Aerospace, and Hanwha Impact. Several deal contracts arise, two of which require shareholder approval. However, none grants appraisal rights.
The market responded quite positively to this. Direct parties to the reorganization were Hanwha Corp and Hanwha Aerospace, up 7.83% and 19.93%, respectively, on Friday.
This event has little room for event trading for its size. We have no choice but to approach this event with outright momentum trading, which inevitably increases the risk-reward ratio.


Compact Summary of Hanwha Group Reorganization

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>
<a href="https://www.smartkarma.com/entities/genting-bhd" target="_blank" data-smartkarma-citation="entities:14210:1" rel="noopener">Genting Bhd (GENT MK)</a> gains 10.3% following the completion of TauRx's Alzheimer's drug trial. That's an RM1.9bn lift in its market cap, or US$0.43bn.</li>
<li>Preceding my comments on Genting, <a href="https://www.smartkarma.com/entities/hanwha-solutions" target="_blank" data-smartkarma-citation="entities:8656:1" rel="noopener">Hanwha Solutions (009830 KS)</a>, and <a href="https://www.smartkarma.com/entities/semirara-mining-and-power-corporation" target="_blank" data-smartkarma-citation="entities:18925:1" rel="noopener">Semirara Mining And Power Corp (SCC PM)</a> are the current setup/unwind tables for Asia-Pacific Holdcos. </li>
<li>These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation &gt;20%.</li>
</ul>



Genting Bhd (GENT MK) gains 10.3% following the completion of TauRx's Alzheimer's drug trial. That's an RM1.9bn lift in its market cap, or US$0.43bn.
Preceding my comments on Genting, Hanwha Solutions (009830 KS), and Semirara Mining And Power Corp (SCC PM) are the current setup/unwind tables for Asia-Pacific Holdcos. 
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation &gt;20%.


StubWorld: Genting's TauRx Boost. Also Hanhwa Solutions, Semirara Mining

South Korea

Hanwha Corporation imports and exports petrochemicals, machinery, automotives, electronics, and steel.  The Company also produces explosives for the defense and construction industries.  In addition, Hanwha manufactures automotive airbag inflators and telecommunication equipment, such as wireless phones and provides financial services through its subsidiaries.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Hanwha Corporation (000880 KS)

Korean Holdcos Vs Opcos Gap Spreads Opportunities Amid Market Carnage

In this insight, we highlight the pricing gap divergence of the major Korean holdcos and opcos amid market carnage. We highlight 26 pair trades...

Douglas Kim

A Detailed Summary of Hanwha's DSME Acquisition Deal

This post details the terms, shareholdings, and schedule of Hanwha's DSME acquisition deal and touches on the thinking points from a trading...

Sanghyun Park

A Detailed Summary of Hanwha Solutions Demerger & Tender Offer

This post details the demerger and tender offer of Hanwha Solutions, filed last Friday. And it discusses trading angles resulting from this event.

Sanghyun Park

Compact Summary of Hanwha Group Reorganization

This post compactly summarizes the large-scale reorganization of Hanwha Group, directly involving Hanwha Corp, Hanwha Aerospace, and Hanwha Impact.

Sanghyun Park

StubWorld: Genting's TauRx Boost. Also Hanhwa Solutions, Semirara Mining

Genting Bhd (GENT MK) gains ~10% following the completion of TauRx's Alzheimer's drug trial. That's an RM1.9bn lift in its market cap, or US$0.43bn.

David Blennerhassett

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)