Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>On 26 October, a Singaporean private equity firm called Flashlight Capital Partners started to go activist on KT&amp;G demanding that the company spin-off its ginseng business to improve shareholder value.</li>
<li>While a spin-off of the ginseng business is not likely near term, the company could buyback more shares and sell more non-core assets which could soothe Flashlight Capital Partners.</li>
<li>Back in June 2022, we wrote a prescient insight called KT&amp;G Is a Prime Candidate for Corporate Activism in Korea. 
</li>
</ul>


On 26 October, a Singaporean private equity firm called Flashlight Capital Partners started to go activist on KT&amp;G demanding that the company spin-off its ginseng business to improve shareholder value.
While a spin-off of the ginseng business is not likely near term, the company could buyback more shares and sell more non-core assets which could soothe Flashlight Capital Partners.
Back in June 2022, we wrote a prescient insight called KT&amp;G Is a Prime Candidate for Corporate Activism in Korea. 



Flashlight Capital Partners Goes Activist on KT&G

<ul>
<li>In this insight, we discuss the major reasons why KT&amp;G Corporation (033780 KS) is a prime candidate for corporate activism in Korea.</li>
<li>KT&amp;G shares are up 0.6% YTD, outperforming KOSPI which is down 16.3%. We believe KT&amp;G shares are well poised to continue to outperform the market in the next 6-12 months. </li>
<li>Corporate activists may be looking to force KT&amp;G to cancel treasury shares. Also, there can be a case made to separate the non-tobacco businesses (including ginseng) from KT&amp;G. </li>
</ul>


In this insight, we discuss the major reasons why KT&amp;G Corporation (033780 KS) is a prime candidate for corporate activism in Korea.
KT&amp;G shares are up 0.6% YTD, outperforming KOSPI which is down 16.3%. We believe KT&amp;G shares are well poised to continue to outperform the market in the next 6-12 months. 
Corporate activists may be looking to force KT&amp;G to cancel treasury shares. Also, there can be a case made to separate the non-tobacco businesses (including ginseng) from KT&amp;G. 


KT&G Is a Prime Candidate for Corporate Activism in Korea

Equity Bottom-Up

<ul>
<li>
KT&amp;G is a high conviction pick in 2024.We believe KT&amp;G Corporation (033780 KS) is likely to announce cigarette price hikes in 2H 2024.
</li>
<li>Three major reasons include a) no cigarette price hikes in nearly 9 years, b) Korean legislative election will be in April 2024, and c) reduce government tax revenue shortfall.</li>
<li>We believe that the Korean government could raise cigarette prices to about 7,000 won to 8,000 won per pack from current price of 4,500 won. </li>
</ul>



KT&amp;G is a high conviction pick in 2024.We believe KT&amp;G Corporation (033780 KS) is likely to announce cigarette price hikes in 2H 2024.

Three major reasons include a) no cigarette price hikes in nearly 9 years, b) Korean legislative election will be in April 2024, and c) reduce government tax revenue shortfall.
We believe that the Korean government could raise cigarette prices to about 7,000 won to 8,000 won per pack from current price of 4,500 won. 


2024 High Conviction: [KT&G - Likely To Announce Cigarette Price Hikes in 2H24]

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

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.

Quantitative Analysis

<ul>
<li>We analyzed the changes in short interest of KRX Stocks as of Jun 28th which has an aggregated short interest worth USD5.9bn.</li>
<li>We tabulate league table for top short by value and short as multiple of ADT, as well as weekly increases &amp; decreases in short value, short as multiple of ADT.</li>
<li>We highlight short interest changes in Lg Electronics, Hyundai Motor.</li>
</ul>


We analyzed the changes in short interest of KRX Stocks as of Jun 28th which has an aggregated short interest worth USD5.9bn.
We tabulate league table for top short by value and short as multiple of ADT, as well as weekly increases &amp; decreases in short value, short as multiple of ADT.
We highlight short interest changes in Lg Electronics, Hyundai Motor.


KRX Short Interest Weekly (Jun 28th): Lg Electronics, Hyundai Motor

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

<ul>
<li>The <a href="https://www.smartkarma.com/entities/samsung-kodex-top5plus-total-return-etf" target="_blank" data-smartkarma-citation="entities:36723:1" rel="noopener">Samsung KODEX Top5Plus Total Return ETF (315930 KS)</a> tracks the FnGuide Top 5 Plus Index and has an AUM of KRW 1,357bn (~US$1bn).</li>
<li>We currently see a high probability of <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a> replacing <a href="https://www.smartkarma.com/entities/kt-g-corp" target="_blank" data-smartkarma-citation="entities:9320:1" rel="noopener">KT&amp;G Corporation (033780 KS)</a> in the index at the June rebalance.</li>
<li>There is between 1-2 days of ADV to trade on the potential add and delete and smaller flows on the other index members due to capping and funding changes.</li>
</ul>


The Samsung KODEX Top5Plus Total Return ETF (315930 KS) tracks the FnGuide Top 5 Plus Index and has an AUM of KRW 1,357bn (~US$1bn).
We currently see a high probability of Celltrion Inc (068270 KS) replacing KT&amp;G Corporation (033780 KS) in the index at the June rebalance.
There is between 1-2 days of ADV to trade on the potential add and delete and smaller flows on the other index members due to capping and funding changes.


FnGuide Top 5 Plus Index Rebalance Preview: Celltrion Could Replace KT&G

South Korea

KT&G Corporation processes, produces, and sells cigarettes and other tobacco products.  The Company, through its subsidiaries, manufactures ginseng products such as red ginseng tea and herbal medicines.  KT&G is also involved in real estate development of its former factory sites.

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KT&G Corporation (033780 KS)

Flashlight Capital Partners Goes Activist on KT&G

On 26 October, a Singaporean firm called Flashlight Capital Partners started to go activist on KT&G demanding that the company spin-off its ginseng...

Douglas Kim

KT&G Is a Prime Candidate for Corporate Activism in Korea

In this insight, we discuss the major reasons why KT&G Corporation (033780 KS) is a prime candidate for corporate activism in Korea.

Douglas Kim

2024 High Conviction: [KT&G - Likely To Announce Cigarette Price Hikes in 2H24]

KT&G is a high conviction pick in 2024. We believe KT&G is likely to announce cigarette price hikes in 2H 2024. The company has not raised...

Douglas Kim

KRX Short Interest Weekly (Jun 28th): Lg Electronics, Hyundai Motor

We analyzed KRX short interest report for the past week and highlighted short interest changes in Lg Electronics, Hyundai Motor.

Ke Yan, CFA, FRM

FnGuide Top 5 Plus Index Rebalance Preview: Celltrion Could Replace KT&G

Celltrion could replace KT&G in the FnGuide Top5 Plus Index in June. Passives will need to buy 1x ADV in Celltrion and sell 2x ADV in KT&G. There...

Brian Freitas

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