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

Event-Driven

<ul>
<li>On 7 September, Hyundai Motor (005380 KS) announced a major stock swap with KT Corp (030200 KS). </li>
<li>KT will exchange about 750 billion won (7.7%) of KT's treasury stock for 445.6 billion won (1.04%) of Hyundai Motor shares and 300.3 billion won (1.46%) of Hyundai Mobis shares.</li>
<li>This stock swap is likely to have a bigger positive impact on KT versus Hyundai Motor and Hyundai Mobis. </li>
</ul>


On 7 September, Hyundai Motor (005380 KS) announced a major stock swap with KT Corp (030200 KS). 
KT will exchange about 750 billion won (7.7%) of KT's treasury stock for 445.6 billion won (1.04%) of Hyundai Motor shares and 300.3 billion won (1.46%) of Hyundai Mobis shares.
This stock swap is likely to have a bigger positive impact on KT versus Hyundai Motor and Hyundai Mobis. 


Major Stock Swap Between Hyundai Motor Group and KT Corp

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.

<ul>
<li>Hyundai Mobis said it was considering a split but had not yet made a decision. This kind of response is generally seen as an ACKNOWLEDGMENT.</li>
<li>The eventual goal should be to liquidate the Chung family's Mobis stake via spin-off/merger and swap it with Kia Motors' Mobis stake. It implies that this will be a spin-off.</li>
<li>This aspect serves as an opportunity to use today's Mobis price drop as a swing trading entry point. I would consider building a Long/Short setup with HMC at this point.</li>
</ul>


Hyundai Mobis said it was considering a split but had not yet made a decision. This kind of response is generally seen as an ACKNOWLEDGMENT.
The eventual goal should be to liquidate the Chung family's Mobis stake via spin-off/merger and swap it with Kia Motors' Mobis stake. It implies that this will be a spin-off.
This aspect serves as an opportunity to use today's Mobis price drop as a swing trading entry point. I would consider building a Long/Short setup with HMC at this point.


Looking at Hyundai Mobis Spin-Off from a Swing Trading Perspective

<ul>
<li>On 12 August, it was reported in numerous local media that Hyundai Mobis (012330 KS) plans to spin off its auto parts and module business units into two separate entities. </li>
<li>Hyundai Mobis has not formally announced these spin offs although local media mentioned that these spin off plans have recently been finalized. </li>
<li>These spin-offs by Hyundai Mobis also are likely to be preludes to the Hyundai Mobis/Hyundai Motor Group reorganization. We remain positive on Hyundai Mobis. </li>
</ul>


On 12 August, it was reported in numerous local media that Hyundai Mobis (012330 KS) plans to spin off its auto parts and module business units into two separate entities. 
Hyundai Mobis has not formally announced these spin offs although local media mentioned that these spin off plans have recently been finalized. 
These spin-offs by Hyundai Mobis also are likely to be preludes to the Hyundai Mobis/Hyundai Motor Group reorganization. We remain positive on Hyundai Mobis. 


Hyundai Mobis: Plans to Spin Off Parts & Module Units

Cross Asset Strategy

<ul>
<li>We believe that there is a relatively high probability that the Korean government will lower the highest corporate tax rate bracket from 25% to 22% starting next year.</li>
<li>A 3% change in corporate tax rate should result in about 4% higher net profit for Korean companies.</li>
<li>Among the top 30 companies in Korea, we believe the companies with the biggest impact on lowering their tax rates include LG Electronics, Naver, Kakao Corp, SK Innovation, and KT&amp;G. </li>
</ul>


We believe that there is a relatively high probability that the Korean government will lower the highest corporate tax rate bracket from 25% to 22% starting next year.
A 3% change in corporate tax rate should result in about 4% higher net profit for Korean companies.
Among the top 30 companies in Korea, we believe the companies with the biggest impact on lowering their tax rates include LG Electronics, Naver, Kakao Corp, SK Innovation, and KT&amp;G. 


Lower Corporate Tax Rate in Korea Could Be an Extra Alpha Kicker

South Korea

Hyundai Mobis Co., Ltd. manufactures and markets automotive parts and equipment, such as  automotive service components, modules, and systems. The Company also contractsenvironmental projects, including sewage treatment plant and industrial waste water treatment plant construction.

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Hyundai Mobis (012330 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

Major Stock Swap Between Hyundai Motor Group and KT Corp

On 7 September, Hyundai Motor Group announced a major stock swap with KT Corp (030200 KS) worth about 750 billion won, which is likely to have a...

Douglas Kim

Looking at Hyundai Mobis Spin-Off from a Swing Trading Perspective

This post looks at the Hyundai Mobis spin-off situation from a swing trade perspective, specifically a pair trade with Hyundai Motor.

Sanghyun Park

Hyundai Mobis: Plans to Spin Off Parts & Module Units

On 12 August, it was reported in numerous local media that Hyundai Mobis (012330 KS) plans to spin off its auto parts and module business units...

Douglas Kim

Lower Corporate Tax Rate in Korea Could Be an Extra Alpha Kicker

We believe that there is a relatively high probability that the Korean government will lower the highest corporate tax rate bracket from 25% to 22%...

Douglas Kim

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