Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Capital Markets

Krafton is a game developer sporting multiple studios developing games for a variety of genres and devices, but is heavily dependent on PUBG Mobile. We see numerous risks on the horizon and detail these below. Douglas Kim and Sanghyun Park have provided significant detail on various aspects of the IPO in the following insights:<ol><li><a href="https://www.smartkarma.com/insights/krafton-ipo-preview" target="_blank" rel="noopener">Krafton IPO Preview | Smartkarma</a></li></ol><ol><li><a href="https://www.smartkarma.com/insights/krafton-ipo-9-major-risks" target="_blank" rel="noopener">Krafton IPO - 9 Major Risks | Smartkarma</a></li></ol><ol><li><a href="https://www.smartkarma.com/insights/initial-thoughts-on-the-krafton-ipo-valuation" target="_blank" rel="noopener">Initial Thoughts on the Krafton IPO Valuation | Smartkarma</a></li></ol><ol><li><a href="https://www.smartkarma.com/insights/new-games-launches-by-krafton-its-major-competitors-in-2021" target="_blank" rel="noopener">New Games Launches by Krafton &amp; Its Major Competitors in ... (smartkarma.com)</a></li></ol><ol><li><a href="https://www.smartkarma.com/insights/krafton-ipo-offering-detail-valuation-issue-index-fast-entry" target="_blank" rel="noopener">Krafton IPO: Offering Detail, Valuation Issue, &amp; Index F ... (smartkarma.com)</a></li></ol><ol><li><a href="https://www.smartkarma.com/insights/several-controversial-issues-about-krafton-ipo-valuation" target="_blank" rel="noopener">Several Controversial Issues About Krafton IPO Valuation (smartkarma.com)</a></li></ol><ol><li><a href="https://www.smartkarma.com/insights/krafton-s-strategic-intention-behind-high-offering-price-fss-correction-request-possibility" target="_blank" rel="noopener">Krafton's Strategic Intention Behind High Offering Price ... (smartkarma.com)</a></li></ol>

Krafton is a game developer sporting multiple studios developing games for a variety of genres and devices, but is heavily dependent on PUBG Mobile. We see numerous risks on the horizon and detail these below. Douglas Kim and Sanghyun Park have provided significant detail on various aspects of the IPO in the following insights:Krafton IPO Preview | SmartkarmaKrafton IPO - 9 Major Risks | SmartkarmaInitial Thoughts on the Krafton IPO Valuation | SmartkarmaNew Games Launches by Krafton &amp; Its Major Competitors in ... (smartkarma.com)Krafton IPO: Offering Detail, Valuation Issue, &amp; Index F ... (smartkarma.com)Several Controversial Issues About Krafton IPO Valuation (smartkarma.com)Krafton's Strategic Intention Behind High Offering Price ... (smartkarma.com)

Krafton IPO – The Past Present and Future of PUBG

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<div class="content-highlight">In July 2021, the Krafton and SD Biosensor are expected to complete their IPOs. We expect both of these two IPOs to be duds. The more we think about this, it appears that if indeed Krafton and SD Biosensor IPOs end up doing really poorly, this could upset the entire IPO market and change the investment sentiment for Korean IPOs which has been sizzling hot in the past 15 months.</div>In this insight, we also discuss some of the major new game launches by Krafton and its major competitors in the rest of 2021. <ul>
<li>
Krafton - <a href="https://www.livemint.com/companies/news/kraftons-battlegrounds-mobile-india-receives-over-5-mn-downloads-in-two-days-11624182233199.html" target="_blank" rel="noopener">Battlegrounds Mobile India</a> (BGMI), Battleground: New State, The Callisto Protocol</li>
<li>
Netmarble - Second Country</li>
<li>
Kakao Games - ODIN: Valhalla Rising</li>
<li>
NCsoft - Blade &amp; Soul 2, Project TL (The Lineage), Aion 2</li>
</ul>

In July 2021, the Krafton and SD Biosensor are expected to complete their IPOs. We expect both of these two IPOs to be duds. The more we think about this, it appears that if indeed Krafton and SD Biosensor IPOs end up doing really poorly, this could upset the entire IPO market and change the investment sentiment for Korean IPOs which has been sizzling hot in the past 15 months.In this insight, we also discuss some of the major new game launches by Krafton and its major competitors in the rest of 2021. 

Krafton - Battlegrounds Mobile India (BGMI), Battleground: New State, The Callisto Protocol

Netmarble - Second Country

Kakao Games - ODIN: Valhalla Rising

NCsoft - Blade &amp; Soul 2, Project TL (The Lineage), Aion 2
 

New Games Launches by Krafton & Its Major Competitors in 2021

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

What is the KRX BBIG K-New Deal Index?The KRX BBIG K-New Deal Index consists of 12 stocks, each of which is a representative company in four industries, including rechargeable Batteries, Bio, Internet, and Games, which are the leading industries in the Korean stock market.It is important to note that this is a mother index, under which there are four sub-indices, like one for each sector. Each sub-index has ten constituents selected based on market capitalization.Index weight &amp; number of constituentsThe mother index is an equal-weighted index, in which each index constituent is allocated the same weight at each balancing, 1/12 = 8.33%.But the four sub-indices employ a hybrid weight system. The top-three group is given the weight of 75%, in which each stock is allocated the same weight of 25% at each rebalancing. In comparison, the plus group consisting of the remaining seven constituents is given the remaining weight of 25%, in which their float-adjusted market capitalization weights the seven stocks.Screening criteria, period, base date, &amp; implementation dateScreening for index inclusion is based on the average daily market capitalization and the average daily trading value of an eligible company over the screening period. Companies are screened over the three months preceding the screening base date.Regular rebalancings are made at the end of February and August every year. This year, February 26 and August 31 are the implementation dates of the regular rebalancing.Therefore, the screening base date is January 29 and July 30, which are the last days of the previous month.
Screening details

Criteria
Average daily market capitalization


Period
3 months preceding the screening base date


Base date

Last trading day of January and July
: January 29 and July 30 



Implementation date

Last trading day of February and August
: February 26 &amp; August 31 


Source: KRX
Current constituents &amp; index weights, as of June 18, 2021Below is the index weight of the constituent stocks of each index based on last Friday's closing price. The index weight reset on February 26 changed in proportion to the share price increase (or decrease).









KRX BBIG K-New Deal Index
Ticker
Weight
Market cap
30-day average daily trade value


LG Chem Ltd
051910
7.58%
₩58,026.9B
₩254.2B


Samsung SDI Co Ltd
006400
7.86%
₩46,347.3B
₩181.5B


SK Innovation Co Ltd
096770
8.42%
₩25,613.0B
₩228.0B


Samsung Biologics Co Ltd
207940
8.85%
₩55,313.9B
₩196.2B


Celltrion, Inc.
068270
7.19%
₩33,625.7B
₩164.3B


SK Biopharmaceuticals Co Ltd
326030
8.30%
₩9,984.9B
₩41.1B


Kakao Corp
035720
13.13%
₩68,809.1B
₩405.9B


Naver Corp
035420
8.53%
₩65,376.8B
₩245.8B


Duzon Bizon Co Ltd
012510
6.38%
₩2,530.4B
₩17.5B


NCSoft Corp
036570
7.02%
₩17,958.4B
₩74.0B


Netmarble Corp
251270
8.49%
₩11,560.7B
₩46.2B


Kakao Games Corp
293490
8.44%
₩4,305.6B
₩30.4B

Source: KRX











KRX Secondary Battery K-New Deal Index
Ticker
Weight
Market cap
30-day average daily trade value


LG Chem Ltd
051910
23.22%
₩58,026.9B
₩254.2B


Samsung SDI Co Ltd
006400
24.07%
₩46,347.3B
₩181.5B


SK Innovation Co Ltd
096770
25.79%
₩25,613.0B
₩228.0B


Posco Chemical Co Ltd
003670
7.83%
₩9,117.7B
₩38.9B


SKC Co Ltd
011790
5.53%
₩5,509.8B
₩50.1B


Ecopro BM Co Ltd
247540
3.87%
₩4,546.1B
₩26.3B


Iljin Materials Co Ltd
020150
2.77%
₩3,255.4B
₩15.5B


L&amp;F Co., Ltd.
066970
2.85%
₩2,625.4B
₩41.6B


SoulBrain Co Ltd
357780
2.58%
₩2,568.5B
₩9.4B


Chunbo Co Ltd
278280
1.50%
₩1,853.0B
₩9.2B

Source: KRX











KRX Bio K-New Deal Index
Ticker
Weight
Market cap
30-day average daily trade value


Samsung Biologics Co Ltd
207940
27.57%
₩55,313.9B
₩196.2B


Celltrion, Inc.
068270
22.41%
₩33,625.7B
₩164.3B


Celltrion HealthCare Co Ltd
091990
10.79%
₩18,490.4B
₩107.9B


SK Biopharmaceuticals Co Ltd
326030
25.87%
₩9,984.9B
₩41.1B


Celltrion Pharm Inc
068760
2.39%
₩5,653.7B
₩36.5B


Hanmi Science Co Ltd
008930
1.41%
₩4,691.1B
₩15.9B


Yuhan Corp
000100
3.16%
₩4,478.3B
₩16.2B


Shinpoong Pharmaceutical Co Ltd
019170
2.66%
₩4,339.5B
₩216.5B


Green Cross Corp
006280
1.61%
₩3,728.0B
₩52.2B


Seegene Inc
096530
2.12%
₩3,352.9B
₩58.6B

Source: KRX











KRX Internet K-New Deal Index
Ticker
Weight
Market cap
30-day average daily trade value


Kakao Corp
035720
36.25%
₩68,809.1B
₩405.9B


Naver Corp
035420
23.55%
₩65,376.8B
₩245.8B


Duzon Bizon Co Ltd
012510
17.42%
₩2,530.4B
₩17.5B


KMW Co Ltd
032500
6.74%
₩2,289.7B
₩15.6B


NHN KCP Corp
060250
3.60%
₩1,450.6B
₩6.5B


AfreecaTV Co Ltd
067160
4.14%
₩1,249.5B
₩13.4B


Ace Technologies Corp.
088800
2.65%
₩852.8B
₩12.2B


Seojin System Co Ltd
178320
2.55%
₩839.0B
₩8.8B


Ahnlab Inc
053800
1.95%
₩720.0B
₩6.4B


Rsupport Co Ltd
131370
1.15%
₩470.9B
₩2.7B

Source: KRX











KRX Game K-New Deal Index
Ticker
Weight
Market cap
30-day average daily trade value


NCSoft Corp
036570
21.23%
₩17,958.4B
₩74.0B


Netmarble Corp
251270
26.10%
₩11,560.7B
₩46.2B


PearlAbyss Corp
263750
8.85%
₩4,410.4B
₩12.2B


Kakao Games Corp
293490
25.95%
₩4,305.6B
₩30.4B


Com2uS Corp
078340
4.92%
₩1,688.1B
₩31.4B


NHN Corp
181710
3.38%
₩1,543.7B
₩5.7B


Doubleu Games Co Ltd
192080
2.55%
₩1,205.2B
₩7.1B


Webzen Inc
069080
3.05%
₩1,145.8B
₩9.8B


Wemade Co Ltd
112040
2.16%
₩971.0B
₩10.1B


Neptune Co
217270
1.81%
₩819.8B
₩4.1B

Source: KRX



KRX BBIG Index Rebalancing Preview: SK IE Tech, SK Bioscience, Krafton, Kakao Games, & Pearl Abyss

This insight summarizes what was going on inside Krafton and the reactions of local IPO fund managers reported in various media articles after Krafton's securities filing submission.Therefore, please note that this insight does not provide an investment opinion.<hr><h2>Inside Krafton ahead of the IPO prospectus submission</h2>The major shareholder of Krafton is a person with a lot of experience in the financial industry who has managed venture capital for a long time. Since he knows the operating structure of the local IPO market better than other CEOs, he seems to have a strong will to get everything he can get from this IPO.For example, it is said that Krafton demanded a higher IPO price from the bankers rather than achieving the so-called Double Crown. Because doing a double crown meant that they could have raised more money through an IPO but couldn't. So instead, Krafton's major shareholder intends to increase the amount of money flowing into the company as much as possible.<div class="content-highlight">Double Crown: a base price set at a +200% premium to the offering price and a further +30% premium to the base price for the closing price</div>The recent trend in the local IPO market has clearly been to set the IPO price low and then increase the opportunity for investors to realize profits. However, Krafton wants to be the first recent example of going against this market trend.This can mean two things.<ul>
<li>The first is that Krafton is confident that the price is convincing enough.</li>
<li>If not, Krafton is confident that it will attract investors even at this price.</li>
</ul>

This insight summarizes what was going on inside Krafton and the reactions of local IPO fund managers reported in various media articles after Krafton's securities filing submission.Therefore, please note that this insight does not provide an investment opinion.Inside Krafton ahead of the IPO prospectus submissionThe major shareholder of Krafton is a person with a lot of experience in the financial industry who has managed venture capital for a long time. Since he knows the operating structure of the local IPO market better than other CEOs, he seems to have a strong will to get everything he can get from this IPO.For example, it is said that Krafton demanded a higher IPO price from the bankers rather than achieving the so-called Double Crown. Because doing a double crown meant that they could have raised more money through an IPO but couldn't. So instead, Krafton's major shareholder intends to increase the amount of money flowing into the company as much as possible.Double Crown: a base price set at a +200% premium to the offering price and a further +30% premium to the base price for the closing priceThe recent trend in the local IPO market has clearly been to set the IPO price low and then increase the opportunity for investors to realize profits. However, Krafton wants to be the first recent example of going against this market trend.This can mean two things.
The first is that Krafton is confident that the price is convincing enough.
If not, Krafton is confident that it will attract investors even at this price.


Krafton's Strategic Intention Behind High Offering Price & FSS Correction Request Possibility

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

The KRX will announce the results of the September review of the BBIG indices in August and the changes will become effective after the close of trading on 9 September.The BBIG (secondary Battery, Bio, Internet and Gaming sectors) indices were launched late last year. ETFs were subsequently launched on the 5 indices and the BBIG ETF and the Secondary Battery ETF have gathered a significant amount of assets since then.At the September rebalance we expect the following changes:<ul>
<li>Secondary Battery ETF: <a href="https://www.smartkarma.com/entities/sk-ie-technology" target="_blank" data-smartkarma-citation="entities:29207:1" rel="noopener">SK IE Technology (361610 KS)</a> replaces <a href="https://www.smartkarma.com/entities/chunbo-co-ltd" target="_blank" data-smartkarma-citation="entities:27848:1" rel="noopener">Chunbo Co Ltd (278280 KS)</a>
</li>
<li>Bio ETF: <a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a> joins the index and the top 3 stocks. This moves <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals Co Ltd (326030 KS)</a> to the plus group; <a href="https://www.smartkarma.com/entities/hanmi-pharm-co-ltd" target="_blank" data-smartkarma-citation="entities:12476:1" rel="noopener">Hanmi Pharm (128940 KS)</a> joins the index and <a href="https://www.smartkarma.com/entities/seegene-inc" target="_blank" data-smartkarma-citation="entities:11483:1" rel="noopener">Seegene Inc (096530 KS)</a> and <a href="https://www.smartkarma.com/entities/green-cross-corp" target="_blank" data-smartkarma-citation="entities:2969:1" rel="noopener">Green Cross (006280 KS)</a> are deleted.</li>
<li>Internet ETF: <a href="https://www.smartkarma.com/entities/kg-inicis-co-ltd" target="_blank" data-smartkarma-citation="entities:5234:1" rel="noopener">KG Inicis Co Ltd (035600 KS)</a> replaces <a href="https://www.smartkarma.com/entities/rsupport-co-ltd" target="_blank" data-smartkarma-citation="entities:14783:1" rel="noopener">Rsupport Co Ltd (131370 KS)</a> </li>
<li>Game ETF: <a href="https://www.smartkarma.com/entities/devsisters-co-ltd" target="_blank" data-smartkarma-citation="entities:14096:1" rel="noopener">Devsisters (194480 KS)</a> replaces <a href="https://www.smartkarma.com/entities/neptune-company" target="_blank" data-smartkarma-citation="entities:28826:1" rel="noopener">Neptune Company (217270 KS)</a>.</li>
<li>BBIG ETF: <a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a> replaces <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals Co Ltd (326030 KS)</a> </li>
</ul>There could be more interesting changes if <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (1486402D KS)</a> lists before end July as expected.The first rebalance of the index took place in February this year and the inclusions outperformed the exclusions by nearly 8% between announcement of the changes and implementation. So this rebalance is something worth looking at.

The KRX will announce the results of the September review of the BBIG indices in August and the changes will become effective after the close of trading on 9 September.The BBIG (secondary Battery, Bio, Internet and Gaming sectors) indices were launched late last year. ETFs were subsequently launched on the 5 indices and the BBIG ETF and the Secondary Battery ETF have gathered a significant amount of assets since then.At the September rebalance we expect the following changes:
Secondary Battery ETF: SK IE Technology (361610 KS) replaces Chunbo Co Ltd (278280 KS)

Bio ETF: SK Bioscience (302440 KS) joins the index and the top 3 stocks. This moves SK Biopharmaceuticals Co Ltd (326030 KS) to the plus group; Hanmi Pharm (128940 KS) joins the index and Seegene Inc (096530 KS) and Green Cross (006280 KS) are deleted.
Internet ETF: KG Inicis Co Ltd (035600 KS) replaces Rsupport Co Ltd (131370 KS) 
Game ETF: Devsisters (194480 KS) replaces Neptune Company (217270 KS).
BBIG ETF: SK Bioscience (302440 KS) replaces SK Biopharmaceuticals Co Ltd (326030 KS) 
There could be more interesting changes if  Krafton Inc (1486402D KS) lists before end July as expected.The first rebalance of the index took place in February this year and the inclusions outperformed the exclusions by nearly 8% between announcement of the changes and implementation. So this rebalance is something worth looking at.

KRX BBIG Index Rebalance Preview: Worth a Look

South Korea

Krafton, Inc. operates as a game development company. The Company develops console games, mobile games, computer games, and other related products. Krafton markets its products throughout South Korea.

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Krafton (259960 KS)

Krafton IPO – The Past Present and Future of PUBG

Krafton is heavily dependent on PUBG Mobile and we see numerous risks on the horizon to this key title due to prior tailwinds turning into headwinds.

Mio Kato

New Games Launches by Krafton & Its Major Competitors in 2021

We discuss the major new game launches by Krafton and its major competitors in the rest of 2021. We also discuss how poor IPOs of Krafton and SD...

Douglas Kim

KRX BBIG Index Rebalancing Preview: SK IE Tech, SK Bioscience, Krafton, Kakao Games, & Pearl Abyss

This post previews the KRX BBIG Index (including 4 sub-indices) scheduled for August 31, 2021. The notable names include SK Bioscience, SK IE...

Sanghyun Park

Krafton's Strategic Intention Behind High Offering Price & FSS Correction Request Possibility

This insight summarizes what was going on inside Krafton and the reactions of local IPO fund managers reported in various media articles after...

Sanghyun Park

KRX BBIG Index Rebalance Preview: Worth a Look

There are lots of changes expected to the KRX BBIG indices at the September review. With a large amount of assets tracking the indices, some of the...

Brian Freitas

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