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

Equity Capital Markets

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

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

In this insight, we discuss our initial thoughts on the Krafton IPO. According to the bankers' valuation, the expected market cap of the company is expected to be from 23.7 trillion won to 28.8 trillion won (IPO price range of 458,000 won to 557,000 won).<div class="content-highlight">Our base case valuation of Krafton is an implied market cap of 24.1 trillion won or 465,055 won per share. Our valuation sensitivity suggests a valuation range from 18.3 trillion won to 30.6 trillion won. Our base case valuation of 465,055 won is close to the low end of the IPO price range of 458,000 won to 557,000 won. Given the lack of upside, we would PASS on this IPO deal. </div>

In this insight, we discuss our initial thoughts on the Krafton IPO. According to the bankers' valuation, the expected market cap of the company is expected to be from 23.7 trillion won to 28.8 trillion won (IPO price range of 458,000 won to 557,000 won).Our base case valuation of Krafton is an implied market cap of 24.1 trillion won or 465,055 won per share. Our valuation sensitivity suggests a valuation range from 18.3 trillion won to 30.6 trillion won. Our base case valuation of 465,055 won is close to the low end of the IPO price range of 458,000 won to 557,000 won. Given the lack of upside, we would PASS on this IPO deal. 

Initial Thoughts on the Krafton IPO Valuation

<div class="content-highlight">In this insight, we discuss the 9 major risks (excluding valuation issues) for Krafton. Overall, we believe these significant risk factors could result in much lower than expected demand for the Krafton IPO shares, especially among the institutional investors unless the IPO price range is lowered significantly. </div>1) Too much dependent on one game PUBG2) Krafton's big political risk with China (Game for Peace)3) Political risks of operating PUBG in overseas countries such as India  4) Company's sales growth in 2020 helped by COVID-195) Declining sales and profit growth in 1Q 20216) Comparable companies' worsening sales and profit trend in 1Q 20217) Potential acquisitions may not add value8) Expansion into other entertainment related business may involve execution risks9) Insiders are selling too much in this IPO

In this insight, we discuss the 9 major risks (excluding valuation issues) for Krafton. Overall, we believe these significant risk factors could result in much lower than expected demand for the Krafton IPO shares, especially among the institutional investors unless the IPO price range is lowered significantly. 1) Too much dependent on one game PUBG2) Krafton's big political risk with China (Game for Peace)3) Political risks of operating PUBG in overseas countries such as India  4) Company's sales growth in 2020 helped by COVID-195) Declining sales and profit growth in 1Q 20216) Comparable companies' worsening sales and profit trend in 1Q 20217) Potential acquisitions may not add value8) Expansion into other entertainment related business may involve execution risks9) Insiders are selling too much in this IPO 

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)

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

Initial Thoughts on the Krafton IPO Valuation

Our base case valuation of Krafton is an implied market cap of 24.1 trillion won or 465,055 won per share. Given the lack of upside relative to the...

Douglas Kim

Krafton IPO - 9 Major Risks

We discuss the 9 major risks (excluding valuation issues) for Krafton. Overall, we believe these significant risk factors could result in much...

Douglas Kim

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