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>Kakao has begun talks with potential buyers for Kakao Games, with Krafton leading discussions directly using its own investment team.</li>
<li>Despite official denials, it's viewed as procedural. Local markets anticipate the deal due to no direct refutation beyond formal announcements.</li>
<li>A three-month compliance period from disclosure makes this quarter challenging, but completion announcement potential exists by Q4 this year.</li>
</ul>


Kakao has begun talks with potential buyers for Kakao Games, with Krafton leading discussions directly using its own investment team.
Despite official denials, it's viewed as procedural. Local markets anticipate the deal due to no direct refutation beyond formal announcements.
A three-month compliance period from disclosure makes this quarter challenging, but completion announcement potential exists by Q4 this year.


Exploring the Kakao Corp and Krafton Deal Potential for Kakao Games

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

Equity Bottom-Up

<ul>
<li>As a result of the arrest of Kim Beom-Su, the near term impact on the Kakao companies (including Kakao Corp, Kakao Bank, Kakao Pay, and Kakao Games) is clearly negative.</li>
<li>Given that this is a highly publicized event, it is likely that this legal case will be PROLONGED and finally decided by the Supreme Court which could take several years.</li>
<li>Some of the scenarios include Kakao Group selling partial stakes in Kakao Bank and SM Entertainment but this is likely to get dragged on, resulting in further uncertainty.</li>
</ul>


As a result of the arrest of Kim Beom-Su, the near term impact on the Kakao companies (including Kakao Corp, Kakao Bank, Kakao Pay, and Kakao Games) is clearly negative.
Given that this is a highly publicized event, it is likely that this legal case will be PROLONGED and finally decided by the Supreme Court which could take several years.
Some of the scenarios include Kakao Group selling partial stakes in Kakao Bank and SM Entertainment but this is likely to get dragged on, resulting in further uncertainty.


Kakao Group Founder Kim Beom-Su Gets Arrested - What's Next?

<ul>
<li>One of the biggest risks facing Kakao Games is nearly 500 billion won that it may need to pay to investors that exercise their put options on CB.</li>
<li>The full exercise of the put options on CBs (500 billion won) could represent nearly 24% of Kakao Games' market cap at current prices. </li>
<li>The worst case for Kakao Games would be for the company to pay nearly 500 billion won at once by the end of March. </li>
</ul>


One of the biggest risks facing Kakao Games is nearly 500 billion won that it may need to pay to investors that exercise their put options on CB.
The full exercise of the put options on CBs (500 billion won) could represent nearly 24% of Kakao Games' market cap at current prices. 
The worst case for Kakao Games would be for the company to pay nearly 500 billion won at once by the end of March. 


Kakao Games: Put Options on CB Likely to Drive Lower Share Price

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<ul>
<li>Multiple new agencies have been reporting that <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> plans to trim its investment portfolio over the remainder of the year. </li>
<li>The reports have been coming in since the second half of the year and the company has been duly denying these rumors.</li>
<li>In this note, we look at Tencent’s shareholding in various companies to try and gauge which ones it could sell out of and how.</li>
</ul>


Multiple new agencies have been reporting that Tencent (700 HK) plans to trim its investment portfolio over the remainder of the year. 
The reports have been coming in since the second half of the year and the company has been duly denying these rumors.
In this note, we look at Tencent’s shareholding in various companies to try and gauge which ones it could sell out of and how.


Tencent Investee Selldown - The US$120bn Global Overhang

<ul>
<li>Com2Us's net cash (including long-term financial investments) is 151% of its market cap. It is trading at P/B ratio of only 0.45x. </li>
<li>The company paid out 2,600 won in DPS in FY23. If we assume the same DPS, this would suggest a dividend yield of 6.7% at current price of 38,900 won. </li>
<li>Com2Us is a turnaround story. It had an operating profit of 1.2 billion won in 1Q 2024, improving from an operating loss of 13.3 billion won in 1Q 2023. </li>
</ul>


Com2Us's net cash (including long-term financial investments) is 151% of its market cap. It is trading at P/B ratio of only 0.45x. 
The company paid out 2,600 won in DPS in FY23. If we assume the same DPS, this would suggest a dividend yield of 6.7% at current price of 38,900 won. 
Com2Us is a turnaround story. It had an operating profit of 1.2 billion won in 1Q 2024, improving from an operating loss of 13.3 billion won in 1Q 2023. 


South Korea

Kakao Games Corp. operates as a multiply platform gaming company. The Company provides mobile games, computer games, virtual reality games, and other related products. Kakao Games markets its products worldwide.

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Kakao Games (293490 KS)

Exploring the Kakao Corp and Krafton Deal Potential for Kakao Games

This post delves into the potential deal between Kakao Corp and Krafton for Kakao Games, focusing on the timing of the deal and its structure,...

Sanghyun Park

Kakao Group Founder Kim Beom-Su Gets Arrested - What's Next?

As a result of the arrest of Kim Beom-Su, the near term impact on the Kakao companies (including Kakao Corp, Kakao Bank, Kakao Pay, and Kakao...

Douglas Kim

Tencent Investee Selldown - The US$120bn Global Overhang

There have been multiple reports that Tencent (700 HK) plans to trim its investment portfolio over the remainder of the year. We look at Tencent's...

Sumeet Singh

Korea Small Cap Gem #29: Com2Us

Com2Us's net cash (including long-term financial investments) is 151% of its market cap. Com2Us is a turnaround story. It had an operating profit...

Douglas Kim

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