Julie Lee

Equity Bottom-Up

Nexon had announced in-line 3Q20 results and lackluster guidance for 4Q20 as expected. Its 4Q20 results may not be strong as its mobile game ranking has declined in Korea during 4Q20, though it can be partially offset by potentially better than expected game industry sales in Korea amid worsening COVID. However, we believe Nexon still has long-term investment value to be unlocked and a few positives may outweigh its near term weak earnings;  1) new games from Embark Studios, and 2) increasing possibility of DNF mobile launch and introduction of two new DNF IP based games. We will examine the details of these positives below.

Nexon had announced in-line 3Q20 results and lackluster guidance for 4Q20 as expected. Its 4Q20 results may not be strong as its mobile game ranking has declined in Korea during 4Q20, though it can be partially offset by potentially better than expected game industry sales in Korea amid worsening COVID. However, we believe Nexon still has long-term investment value to be unlocked and a few positives may outweigh its near term weak earnings;  1) new games from Embark Studios, and 2) increasing possibility of DNF mobile launch and introduction of two new DNF IP based games. We will examine the details of these positives below. 

Nexon (3659.T): Games from Embark Studios and Improving Chance of DNF Launch

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

The Korea Exchange (KRX) will announce the results of the June 2021 review of the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a> in May with the changes becoming effective after the close of trading on 10 June.Currently, we see <a href="https://www.smartkarma.com/entities/taihan-electric-wire-co-ltd" target="_blank" data-smartkarma-citation="entities:11551:1" rel="noopener">Taihan Electric Wire (001440 KS)</a> being included in the index and <a href="https://www.smartkarma.com/entities/taeyoung-engineering-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:18740:1" rel="noopener">Taeyoung Engineering &amp; Construction (009410 KS)</a> being deleted, with a few stocks as close adds/ deletes. <a href="https://www.smartkarma.com/entities/taeyoung-engineering-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:18740:1" rel="noopener">Taeyoung Engineering &amp; Construction (009410 KS)</a>'s expected deletion is a result of the demerger of TY Holdings (363280 KS) in September which has significantly lowered its market cap.<a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener">Krafton Inc (1486402D KS)</a>'s estimated market cap of US$26-30bn would see it included in the index as a Fast Entry if it lists before the end of April which would put <a href="https://www.smartkarma.com/entities/sebang-global-battery-co-ltd" target="_blank" data-smartkarma-citation="entities:9618:1" rel="noopener">Sebang Global Battery (004490 KS)</a> at risk of deletion. If Krafton lists by end January/ beginning February (seems unlikely at this point in time), it could be included in the KOSPI 200 in March. If it lists after mid Feb but before end April, Krafton could be included in the index at the June review.<a href="https://www.smartkarma.com/entities/taihan-electric-wire-co-ltd" target="_blank" data-smartkarma-citation="entities:11551:1" rel="noopener">Taihan Electric Wire (001440 KS)</a> has increased in price sharply over the last month and we would wait for the price to stabilize a bit before buying into the stock.

The Korea Exchange (KRX) will announce the results of the June 2021 review of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in May with the changes becoming effective after the close of trading on 10 June.Currently, we see Taihan Electric Wire (001440 KS) being included in the index and Taeyoung Engineering &amp; Construction (009410 KS) being deleted, with a few stocks as close adds/ deletes. Taeyoung Engineering &amp; Construction (009410 KS)'s expected deletion is a result of the demerger of TY Holdings (363280 KS) in September which has significantly lowered its market cap.Krafton Inc (1486402D KS)'s estimated market cap of US$26-30bn would see it included in the index as a Fast Entry if it lists before the end of April which would put Sebang Global Battery (004490 KS) at risk of deletion. If Krafton lists by end January/ beginning February (seems unlikely at this point in time), it could be included in the KOSPI 200 in March. If it lists after mid Feb but before end April, Krafton could be included in the index at the June review.Taihan Electric Wire (001440 KS) has increased in price sharply over the last month and we would wait for the price to stabilize a bit before buying into the stock.

KOSPI200 Index Rebalance Preview: IPO Fast Entry & End of Short Sell Ban Will Shake Things Up

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<div class="content-highlight">
With only three weeks remaining in 2020, we now look forward to the major IPOs in Korea in 2021. This is our 6th "Annual Edition of the Major Korean IPOs Pipeline Preview" already at Smartkarma! In this report, we have identified 50 companies that are expected to complete their IPOs in the Korean Stock Market in 2021. This year has been a big year for IPOs in Korea with many IPOs that have done really well including <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals (326030 KS)</a> and <a href="https://www.smartkarma.com/entities/kakao-games-corp" target="_blank" data-smartkarma-citation="entities:26730:1" rel="noopener">Kakao Games (293490 KS)</a>.  
In 2020, there were only three IPOs in Korea that were more than US$1 billion in market cap including SK Biopharm, Kakao Games, and Big Hit Entertainment. However, in 2021, we believe there could be more than 10 IPOs in Korea that are more than US$1 billion in market cap including the following:
<ol>
<li>LG Energy Solutions</li>
<li>Krafton</li>
<li>SK Bioscience</li>
<li>Kakao Bank</li>
<li>Kakao Page</li>
<li>Kakao Pay</li>
<li>SK IET</li>
<li>One Store</li>
<li>HK inno.N </li>
<li>Coupang</li>
</ol>
</div>


With only three weeks remaining in 2020, we now look forward to the major IPOs in Korea in 2021. This is our 6th "Annual Edition of the Major Korean IPOs Pipeline Preview" already at Smartkarma! In this report, we have identified 50 companies that are expected to complete their IPOs in the Korean Stock Market in 2021. This year has been a big year for IPOs in Korea with many IPOs that have done really well including SK Biopharmaceuticals (326030 KS) and Kakao Games (293490 KS).  
In 2020, there were only three IPOs in Korea that were more than US$1 billion in market cap including SK Biopharm, Kakao Games, and Big Hit Entertainment. However, in 2021, we believe there could be more than 10 IPOs in Korea that are more than US$1 billion in market cap including the following:

LG Energy Solutions
Krafton
SK Bioscience
Kakao Bank
Kakao Page
Kakao Pay
SK IET
One Store
HK inno.N 
Coupang



<a href="https://www.smartkarma.com/entities/kakao-games-corp" target="_blank" data-smartkarma-citation="entities:26730:1" rel="noopener">Kakao Games (1404796D KS)</a> is down almost 9% today due to the expiry of the 1 month lock up on IPO shares. Of the institutional allotment, there were 4.36m shares that were locked in for 1 month and are eligible for sale today. Volume traded so far today has already crossed 4.7m shares.With the review period for changes to the KOSDAQ150 index in the December review ending on 30 October, this is a crucial phase that will determine if <a href="https://www.smartkarma.com/entities/kakao-games-corp" target="_blank" data-smartkarma-citation="entities:26730:1" rel="noopener">Kakao Games (1404796D KS)</a> makes the cut for inclusion in the index.Based on current prices, the stock easily makes the case for index inclusion and only a very steep fall over the next 2 weeks would take the stock out of the list of probable inclusions.In this Insight, we look at the Kakao Games IPO, the criteria for inclusion in the KOSDAQ150 Index, and the impact on the stock if it is included in the index.

Kakao Games (1404796D KS) is down almost 9% today due to the expiry of the 1 month lock up on IPO shares. Of the institutional allotment, there were 4.36m shares that were locked in for 1 month and are eligible for sale today. Volume traded so far today has already crossed 4.7m shares.With the review period for changes to the KOSDAQ150 index in the December review ending on 30 October, this is a crucial phase that will determine if Kakao Games (1404796D KS) makes the cut for inclusion in the index.Based on current prices, the stock easily makes the case for index inclusion and only a very steep fall over the next 2 weeks would take the stock out of the list of probable inclusions.In this Insight, we look at the Kakao Games IPO, the criteria for inclusion in the KOSDAQ150 Index, and the impact on the stock if it is included in the index.

Kakao Games - KOSDAQ150 December Inclusion and Lock Up Expiry

Private Capital Markets

In this insight, we provide the top 100 unicorns in Asia (including summaries), broken down by the major countries in Asia. China, India, and Korea lead the Asian countries in having the most number of Asian unicorns. We used the standard definition of a unicorn which refers to a privately held startup company valued at over $1 billion.
Clearly, one of the key differences in the global markets now as compared to a decade or two decades ago is the fact that the world's biggest venture capital and private equity firms are willing to invest a greater amount of capital in attractive Unicorns and "Pre-Unicorns" which has resulted in many of these private companies delaying their potential exit to IPO at later stages of their businesses. 
There has been so much money made from the first generation tech giants such as Google, Facebook, Amazon, Netflix, Alibaba, and Tencent. Many of these companies were not profitable in their early stages of growth but later gained tremendous economies of scale. Therefore, many investors in the Asian unicorns that have seen the progress of the first-generation tech giants are willing to invest in promising, young companies without profitability now to see their business development take place which could potentially reward them with outstanding returns later on.

In this insight, we provide the top 100 unicorns in Asia (including summaries), broken down by the major countries in Asia. China, India, and Korea lead the Asian countries in having the most number of Asian unicorns. We used the standard definition of a unicorn which refers to a privately held startup company valued at over $1 billion.
Clearly, one of the key differences in the global markets now as compared to a decade or two decades ago is the fact that the world's biggest venture capital and private equity firms are willing to invest a greater amount of capital in attractive Unicorns and "Pre-Unicorns" which has resulted in many of these private companies delaying their potential exit to IPO at later stages of their businesses. 
There has been so much money made from the first generation tech giants such as Google, Facebook, Amazon, Netflix, Alibaba, and Tencent. Many of these companies were not profitable in their early stages of growth but later gained tremendous economies of scale. Therefore, many investors in the Asian unicorns that have seen the progress of the first-generation tech giants are willing to invest in promising, young companies without profitability now to see their business development take place which could potentially reward them with outstanding returns later on. 

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)

Nexon (3659.T): Games from Embark Studios and Improving Chance of DNF Launch

Nexon still has investment value to be unlocked. A few positives may outweigh near term weakness; 1) new games from Embark Studios, and 2) DNF...

Julie Lee

KOSPI200 Index Rebalance Preview: IPO Fast Entry & End of Short Sell Ban Will Shake Things Up

We just just one addition and deletion to the KOSPI200 index in the June 2021 review. The end of the short sell ban in March will bring a lot more...

Brian Freitas

2021 Major IPOs Pipeline in Korea

This is our 6th "Annual Edition of the Major Korean IPOs Pipeline Preview" already at Smartkarma! In this report, we have identified 50 companies...

Douglas Kim

Kakao Games - KOSDAQ150 December Inclusion and Lock Up Expiry

After rising 239% from its IPO price, the stock has dropped 40% from there. Today's 9% drop is due to lock up expiry and a KOSDAQ150 inclusion...

Brian Freitas

Top 100 Asian Unicorns

A unicorn is a term in business world to indicate a privately held startup company valued at over $1 billion.

Douglas Kim

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