Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

Event-Driven

<ul>
<li>Harim Holdings (003380 KS) announced that it plans to sell its 14.744 million treasury shares through an issuance of EB worth 143 billion won. </li>
<li>The EB exchange price is 9,713 won (15.6% higher than its current price). The company plans to use the EB proceeds to pay down debt and for working capital. </li>
<li>We are NEGATIVE on Harim Holdings' EB issue using its treasury shares as the main asset to be exchanged.</li>
</ul>


Harim Holdings (003380 KS) announced that it plans to sell its 14.744 million treasury shares through an issuance of EB worth 143 billion won. 
The EB exchange price is 9,713 won (15.6% higher than its current price). The company plans to use the EB proceeds to pay down debt and for working capital. 
We are NEGATIVE on Harim Holdings' EB issue using its treasury shares as the main asset to be exchanged.


Harim Holdings - EB Issue of Its Treasury Shares for 143 Billion Won

Equity Bottom-Up

<ul>
<li>In this insight, we provide 3 major fundamental criteria for screening major Korean F&amp;B companies. </li>
<li>Three major criteria include 3 years CAGR revenue growth of 5% or more, increase in net margin in 2024, and overseas sales more than 10% of total sales.</li>
<li>Of the 30 Korean F&amp;B companies mentioned in this insight, only six companies meet these criteria including Samyang Foods, Orion Corp, Hitejinro, Lotte Wellfood, Daesang Corporation, and Pulmuone.</li>
</ul>


In this insight, we provide 3 major fundamental criteria for screening major Korean F&amp;B companies. 
Three major criteria include 3 years CAGR revenue growth of 5% or more, increase in net margin in 2024, and overseas sales more than 10% of total sales.
Of the 30 Korean F&amp;B companies mentioned in this insight, only six companies meet these criteria including Samyang Foods, Orion Corp, Hitejinro, Lotte Wellfood, Daesang Corporation, and Pulmuone.


Korean F&B: Focus on Companies With Strongest Export Growth

<ul>
<li>A consortium led by the Harim Group and JKL Partners has been chosen as the preferred bidder to acquire a 57.9% stake in HMM.</li>
<li>Korea Development Bank (KDB) and the Korea Ocean Business Corporation (KOBC) are the main creditors of HMM, which is the largest shipping company in Korea.</li>
<li>Pan Ocean is expected to complete a rights offering of nearly 3 trillion won which is 136% of its current market cap. This is excessive and negative for Pan Ocean.</li>
</ul>


A consortium led by the Harim Group and JKL Partners has been chosen as the preferred bidder to acquire a 57.9% stake in HMM.
Korea Development Bank (KDB) and the Korea Ocean Business Corporation (KOBC) are the main creditors of HMM, which is the largest shipping company in Korea.
Pan Ocean is expected to complete a rights offering of nearly 3 trillion won which is 136% of its current market cap. This is excessive and negative for Pan Ocean.


Pan Ocean Considering on a Rights Offering Capital Raise of Nearly 3 Trillion Won for the HMM Deal

Thematic (Sector/Industry)

<ul>
<li>In this insight, we discuss the top six stocks in Korea which could be the biggest movers due to the 2022 FIFA World Cup. </li>
<li>Due to the large impact of the World Cup this year, these six stocks could potentially outperform the market leading into the FIFA World Cup.</li>
<li>Among these six stocks, we particularly like AfreecaTV, HiteJinro, and BGF Retail in the next six months. </li>
</ul>


In this insight, we discuss the top six stocks in Korea which could be the biggest movers due to the 2022 FIFA World Cup. 
Due to the large impact of the World Cup this year, these six stocks could potentially outperform the market leading into the FIFA World Cup.
Among these six stocks, we particularly like AfreecaTV, HiteJinro, and BGF Retail in the next six months. 


2022 FIFA World Cup in Qatar: Top 6 Potential Winners in the Korean Stock Market

Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

The Seoul Bankruptcy Court and Anjin Accounting Corporation (the M&amp;A advisory) are scheduled to hold a main bid for the sale of Eastar Jet on June 14. Preliminary bidders who have completed the preliminary due diligence by June 7 are eligible to participate in the main bid. Then, we will likely see the name of a bid winner about a week later, around June 21.Harim Group also issued a letter of intent (LOI). In the case of Harim, Pan Ocean will be an acquiring company.Eastar Jet is a low-cost airline, which has been in financial trouble. It has been undergoing corporate rehabilitation since February this year. Well, Eastar Jet had once found a new owner back in 2019. Aekyung Group won the bid to take over Eastar Jet. However, Aekyung abandoned the acquisition of Eastar Jet last year due to financial insolvency and COVID-19.Harim must acquire a 39.64% controlling stake owned by Eastar Holdings. The sale price of Eastar Jet is about ₩150B. However, the actual cost is estimated to be over ₩300B. Eastar Jet's total debt is about ₩219B, of which 65B is unpaid wages, suggesting that the actual debt that the acquirer has to bear is around ₩200B.<table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Eastar Jet financials, as of 1Q21"}'>Eastar Jet quarterly financials, as of 1Q21</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Sales"}'>Sales</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":90.8}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩90.8B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Operating profit"}'>Operating profit</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-35.9}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>-₩35.9B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Net profit"}'>Net profit</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-41}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>-₩41.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Cash holding"}'>Cash holding</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩1.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total liabilities"}'>Total liabilities</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":218.7}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩218.7B</td>
</tr>
<tr>
<td> - Unpaid wages</td>
<td style="text-align: right;">₩64.9B</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>Harim plans to use Pan Ocean, a shipping company, as the main vehicle to acquire Eastar Jet. Pan Ocean is the second-largest shipping company in Korea in terms of sales. As of the end of the first quarter, its cash equivalent assets stood at ₩150B. However, Harim is said to be seeking a FI (financial investor).What is Harim's big picture here, business-wise? Pan Ocean can expand its aviation logistics business by leveraging Eastar Jet's aviation resources. Harim plans to grow into a more comprehensive logistics company that encompasses sea and air.

The Seoul Bankruptcy Court and Anjin Accounting Corporation (the M&amp;A advisory) are scheduled to hold a main bid for the sale of Eastar Jet on June 14. Preliminary bidders who have completed the preliminary due diligence by June 7 are eligible to participate in the main bid. Then, we will likely see the name of a bid winner about a week later, around June 21.Harim Group also issued a letter of intent (LOI). In the case of Harim, Pan Ocean will be an acquiring company.Eastar Jet is a low-cost airline, which has been in financial trouble. It has been undergoing corporate rehabilitation since February this year. Well, Eastar Jet had once found a new owner back in 2019. Aekyung Group won the bid to take over Eastar Jet. However, Aekyung abandoned the acquisition of Eastar Jet last year due to financial insolvency and COVID-19.Harim must acquire a 39.64% controlling stake owned by Eastar Holdings. The sale price of Eastar Jet is about ₩150B. However, the actual cost is estimated to be over ₩300B. Eastar Jet's total debt is about ₩219B, of which 65B is unpaid wages, suggesting that the actual debt that the acquirer has to bear is around ₩200B.





Eastar Jet quarterly financials, as of 1Q21

Sales
₩90.8B


Operating profit
-₩35.9B


Net profit
-₩41.0B


Cash holding
₩1.0B


Total liabilities
₩218.7B


 - Unpaid wages
₩64.9B

Source: DART

Harim plans to use Pan Ocean, a shipping company, as the main vehicle to acquire Eastar Jet. Pan Ocean is the second-largest shipping company in Korea in terms of sales. As of the end of the first quarter, its cash equivalent assets stood at ₩150B. However, Harim is said to be seeking a FI (financial investor).What is Harim's big picture here, business-wise? Pan Ocean can expand its aviation logistics business by leveraging Eastar Jet's aviation resources. Harim plans to grow into a more comprehensive logistics company that encompasses sea and air.

Harim Holdings Stub with Pan Ocean: Eastar Jet Takeover Situation

South Korea

Harim Co., Ltd manufactures and distributes poultry products such as fresh and processed meat.  The Company's products inclulde canned chicken breasts, nuggets, frozen wings, chicken sticks, chicken sausages, and salad dressings.

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Harim Co Ltd (136480 KS)

Harim Holdings - EB Issue of Its Treasury Shares for 143 Billion Won

Harim Holdings (003380 KS) announced that it plans to sell its 14.744 million treasury shares through an issuance of EB worth 143 billion won.

Douglas Kim

Korean F&B: Focus on Companies With Strongest Export Growth

We provide 3 fundamental criteria for screening Korean F&B companies including 3-years CAGR revenue growth of 5% or more, higher net margin in...

Douglas Kim

Pan Ocean Considering on a Rights Offering Capital Raise of Nearly 3 Trillion Won for the HMM Deal

In order to pay for the HMM deal, Pan Ocean is expected to complete a rights offering capital raise of nearly 3 trillion won in 1H 2024 which is...

Douglas Kim

2022 FIFA World Cup in Qatar: Top 6 Potential Winners in the Korean Stock Market

In this insight, we discuss the top six stocks in Korea which could be the biggest movers due to the 2022 FIFA World Cup.

Douglas Kim

Harim Holdings Stub with Pan Ocean: Eastar Jet Takeover Situation

This post looks into the Harim Stub with Pan Ocean as the main subsidiary amid the Eastar Jet acquisition from a stub trade angle.

Sanghyun Park

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