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>For KOSDAQ 150, SillaJen and WCP made it to the index. As for deletions, Intron Biotechnology, Ebest I&amp;S, and Devsisters are additional names to leave the index through regular review.</li>
<li>Lotte Confectionery and Samyang Holdings do not have sizeable DTV. And they were fully expected. Nevertheless, the passive impact is so significant that the LONG/SHORT approach still seems valid.</li>
<li>We should focus on KOSDAQ 150 inclusions whose return has been high due to the inflow to secure a borrow pool for short-selling on top of the preemptive rebalancing flow.</li>
</ul>


For KOSDAQ 150, SillaJen and WCP made it to the index. As for deletions, Intron Biotechnology, Ebest I&amp;S, and Devsisters are additional names to leave the index through regular review.
Lotte Confectionery and Samyang Holdings do not have sizeable DTV. And they were fully expected. Nevertheless, the passive impact is so significant that the LONG/SHORT approach still seems valid.
We should focus on KOSDAQ 150 inclusions whose return has been high due to the inflow to secure a borrow pool for short-selling on top of the preemptive rebalancing flow.


KOSPI 200 & KOSDAQ 150 Constituent Changes: Several Surprises

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>We discuss end of the mandatory lock-up periods for 40 stocks in Korea in June 2022, among which 5 are in KOSPI and 35 are in KOSDAQ.</li>
<li>These 40 stocks on average could be subject to further selling pressures in June and could underperform relative to the market. </li>
<li>Among these 40 stocks, <a href="https://www.smartkarma.com/entities/hybe-co-ltd" target="_blank" data-smartkarma-citation="entities:28959:1" rel="noopener">HYBE (352820 KS) and </a><a href="https://www.smartkarma.com/entities/koreacenter-com-co-ltd" target="_blank" data-smartkarma-citation="entities:28329:1" rel="noopener">Koreacenter.com Co Ltd (290510 KS) </a>could face further selling pressures in the coming weeks.</li>
</ul>


We discuss end of the mandatory lock-up periods for 40 stocks in Korea in June 2022, among which 5 are in KOSPI and 35 are in KOSDAQ.
These 40 stocks on average could be subject to further selling pressures in June and could underperform relative to the market. 
Among these 40 stocks, HYBE (352820 KS) and Koreacenter.com Co Ltd (290510 KS) could face further selling pressures in the coming weeks.


End of Mandatory Lock-Up Periods for 40 Companies in Korea in June 2022

Equity Capital Markets

<div class="content-highlight">
<p><strong>Our base case valuation of Silicon2 Co is implied market cap of 436.5 billion won or 41,975 won per share, which is 54% higher than the high end of the IPO price range of 27,200 won per share. Given the attractive upside, we have a POSITIVE view of the Silicon2 Co IPO and we would subscribe to the IPO deal. </strong></p>
<p>Our base case valuation is based on 28.6x our estimated net profit of 15.3 billion won for the company in 2022. Our valuation multiple of 28.6x P/E is based on the average P/E valuation multiple of the peers in 2022. Our valuation sensitivity analysis suggests a low-high value of 30,222 won per share to 55,407 won per share.</p>
<p>Silicon2 Co has better metrics than its peers for operating margins, ROE, and sales growth. As such, one could make the case of higher valuation multiple for the company as compared to its peers. </p>
</div><div><p></p></div>


Our base case valuation of Silicon2 Co is implied market cap of 436.5 billion won or 41,975 won per share, which is 54% higher than the high end of the IPO price range of 27,200 won per share. Given the attractive upside, we have a POSITIVE view of the Silicon2 Co IPO and we would subscribe to the IPO deal. 
Our base case valuation is based on 28.6x our estimated net profit of 15.3 billion won for the company in 2022. Our valuation multiple of 28.6x P/E is based on the average P/E valuation multiple of the peers in 2022. Our valuation sensitivity analysis suggests a low-high value of 30,222 won per share to 55,407 won per share.
Silicon2 Co has better metrics than its peers for operating margins, ROE, and sales growth. As such, one could make the case of higher valuation multiple for the company as compared to its peers. 


<p>Silicon2, a company specializing in K-beauty ("Korean beauty") e-commerce platforms, is trying to complete its IPO in the KOSDAQ market in September. Established in 2001, Silicon2 operates 'stylekorean.com' which is a global online shopping mall that sells beauty products. It sells mostly cosmetics to more than 1 million customers in 100 countries around the world, including North America, Japan, Europe, and Southeast Asia. The company actively uses social media sites such as Facebook, Instagram, and Youtube to advertise and market its products. </p><p>The company is offering 1.65 million shares in this IPO offering. The IPO price range is from 23,800 won to 27,200 won per share. At the high end of the IPO price range, IPO offering will be 45 billion won. According to the bankers' valuation, the expected market cap after the IPO is from 248 billion won to 283 billion won. The book building for the institutional investors starts on 9 September. The lead bankers include Samsung Securities and Mirae Asset Securities.</p><div class="content-highlight"><p>The bankers used three companies including <a href="https://www.smartkarma.com/entities/koreacenter-com-co-ltd" target="_blank" data-smartkarma-citation="entities:28329:1" rel="noopener">Koreacenter.com Co Ltd (290510 KS)</a>, BrandX Corp, and <a href="https://www.smartkarma.com/entities/revolve-group-inc" target="_blank" data-smartkarma-citation="entities:27748:1" rel="noopener">Revolve Group Inc (RVLV US)</a> as comps to value Silicon2 Co. The bankers took the net profit of the comps in 1H 2021 and annualized them to derive an average P/E of 44.7x (taking into account recent prices). The bankers then took the annualized net profit of Silicon2 Co in 1H 2021 and applied P/E of 44.7x to derive an implied market cap of 469 billion won (45,061 won per share), pre IPO discount. <strong>After taking into the IPO discount of 39.6% - 47.2%, the company derived the IPO price range of 23,800 - 27,200 won per share.</strong></p></div>

Silicon2, a company specializing in K-beauty ("Korean beauty") e-commerce platforms, is trying to complete its IPO in the KOSDAQ market in September. Established in 2001, Silicon2 operates 'stylekorean.com' which is a global online shopping mall that sells beauty products. It sells mostly cosmetics to more than 1 million customers in 100 countries around the world, including North America, Japan, Europe, and Southeast Asia. The company actively uses social media sites such as Facebook, Instagram, and Youtube to advertise and market its products. The company is offering 1.65 million shares in this IPO offering. The IPO price range is from 23,800 won to 27,200 won per share. At the high end of the IPO price range, IPO offering will be 45 billion won. According to the bankers' valuation, the expected market cap after the IPO is from 248 billion won to 283 billion won. The book building for the institutional investors starts on 9 September. The lead bankers include Samsung Securities and Mirae Asset Securities.The bankers used three companies including Koreacenter.com Co Ltd (290510 KS), BrandX Corp, and Revolve Group Inc (RVLV US) as comps to value Silicon2 Co. The bankers took the net profit of the comps in 1H 2021 and annualized them to derive an average P/E of 44.7x (taking into account recent prices). The bankers then took the annualized net profit of Silicon2 Co in 1H 2021 and applied P/E of 44.7x to derive an implied market cap of 469 billion won (45,061 won per share), pre IPO discount. After taking into the IPO discount of 39.6% - 47.2%, the company derived the IPO price range of 23,800 - 27,200 won per share.

Cross Asset Strategy

<p>The Korea Exchange announced its KOSDAQ150 and KRX300 indices rebalances today. There were 17 new additions and 17 deletions for KOSDAQ150. </p><p>Most of the stocks that were expected to be included in KOSDAQ 150 were officially included in the rebalance. However there were a few surprises. For example <a href="https://www.smartkarma.com/entities/nanos-co-ltd" target="_blank" data-smartkarma-citation="entities:16796:1" rel="noopener">Nanos Co Ltd (151910 KS),</a>which was one of the stocks that was expected to be included in KOSDAQ150, did not get included in this indext this time. On the other hand, the following stocks including <a href="https://www.smartkarma.com/entities/sang-a-frontec-co-ltd" target="_blank" data-smartkarma-citation="entities:20692:1" rel="noopener">Sang A Frontec (089980 KS)</a>, Novarex (194700 KS(, CIS (222080 KS), MedPacto (215980 KS), <a href="https://www.smartkarma.com/entities/koreacenter-com-co-ltd" target="_blank" data-smartkarma-citation="entities:28329:1" rel="noopener">Koreacenter.com Co Ltd (290510 KS)</a>, and Soulbrain (357780 KS) which were not on the top of the lists of getting selected into the KOSDAQ150 index by the locals, were formally selected be part of the new KOSDAQ150 inclusions.  </p><p>The Korea Exchange also made changes to the KRX300 index. Although the KRX300 index is not currently as important as KOSPI200 and KOSDAQ150 indices, it is increasingly gaining in importance among the local institutional investors. The KRX300 had 33 new additions and 35 deletions. </p>

The Korea Exchange announced its KOSDAQ150 and KRX300 indices rebalances today. There were 17 new additions and 17 deletions for KOSDAQ150. Most of the stocks that were expected to be included in KOSDAQ 150 were officially included in the rebalance. However there were a few surprises. For example Nanos Co Ltd (151910 KS),which was one of the stocks that was expected to be included in KOSDAQ150, did not get included in this indext this time. On the other hand, the following stocks including Sang A Frontec (089980 KS), Novarex (194700 KS(, CIS (222080 KS), MedPacto (215980 KS), Koreacenter.com Co Ltd (290510 KS), and Soulbrain (357780 KS) which were not on the top of the lists of getting selected into the KOSDAQ150 index by the locals, were formally selected be part of the new KOSDAQ150 inclusions.  The Korea Exchange also made changes to the KRX300 index. Although the KRX300 index is not currently as important as KOSPI200 and KOSDAQ150 indices, it is increasingly gaining in importance among the local institutional investors. The KRX300 had 33 new additions and 35 deletions. 

KOSDAQ150 and KRX300 Indices Rebalances (Overlapping Additions & Deletions)

South Korea

Koreacenter.Com Co., Ltd. was founded in 2000. The company's line of business includes providing computer programming services.

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Koreacenter.com (290510 KS)

KOSPI 200 & KOSDAQ 150 Constituent Changes: Several Surprises

This post details the constituent changes of the KOSPI 200 and KOSDAQ 150 and highlights several surprises along with the passive flow estimations.

Sanghyun Park

End of Mandatory Lock-Up Periods for 40 Companies in Korea in June 2022

We discuss end of the mandatory lock-up periods for 40 stocks in Korea in June 2022, among which 5 are in KOSPI and 35 are in KOSDAQ.

Douglas Kim

Silicon2 Co IPO Valuation Analysis

Our base case valuation of Silicon2 Co is implied market cap of 436.5 billion won or 41,975 won per share, which is 54% higher than the high end of...

Douglas Kim

Silicon2 Co IPO Preview

Silicon2, a company specializing in K-beauty e-commerce platforms, is trying to complete its IPO. Silicon2 operates 'stylekorean.com' which sells...

Douglas Kim

KOSDAQ150 and KRX300 Indices Rebalances (Overlapping Additions & Deletions)

We highlight the KOSDAQ150 and KRX300 indices rebalances. There are some interesting new names, especially among those that are over lapping in...

Douglas Kim

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