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

Below are KOSPI stocks that will see lockup releases in September. Four of these stocks have recently gone public.<table class="table table-striped">
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<td data-sheets-value='{"1":2,"2":"Name"}'>Name</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Share type"}'>Share type</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Release date"}'>Release date</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Release volume"}'>Release volume</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"% of SO"}'>% of SO</td>
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<td data-sheets-value='{"1":2,"2":"Ottogi Corp"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Ottogi Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"007310"}' data-sheets-formula='="007310"'>007310</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ordinary"}'>Ordinary</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44464}' data-sheets-numberformat='[null,5,"yyyy. mm. dd",1]'>2021. 09. 25</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":66744}' data-sheets-numberformat='[null,2,"#,##0",1]'>66,744</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.018176564639087185}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula='=R[0]C[-1]/googlefinance(R[0]C[-4], "shares")'>1.82%</td>
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<td data-sheets-value='{"1":2,"2":"Ajusteel Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Ajusteel</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"139990"}' data-sheets-formula='="139990"'>139990</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ordinary"}'>Ordinary</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44459}' data-sheets-numberformat='[null,5,"yyyy. mm. dd",1]'>2021. 09. 20</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2507518}' data-sheets-numberformat='[null,2,"#,##0",1]' data-sheets-formula="=sum('139990'!R[12]C[0]:R[18]C[0])+'139990'!R[24]C[0]">2,507,518</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.09479434764359199}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula='=R[0]C[-1]/googlefinance(R[0]C[-4], "shares")'>9.48%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Y2 Solution Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Y2 Solution</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"011690"}' data-sheets-formula='="011690"'>011690</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ordinary"}'>Ordinary</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44458}' data-sheets-numberformat='[null,5,"yyyy. mm. dd",1]'>2021. 09. 19</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":59000000}' data-sheets-numberformat='[null,2,"#,##0",1]'>59,000,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.40071820384082696}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula='=R[0]C[-1]/googlefinance(R[0]C[-4], "shares")'>40.07%</td>
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<td data-sheets-value='{"1":2,"2":"SK Bioscience Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>SK Bioscience</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"302440"}' data-sheets-formula='="302440"'>302440</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ordinary"}'>Ordinary</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44457}' data-sheets-numberformat='[null,5,"yyyy. mm. dd",1]'>2021. 09. 18</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":56298100}' data-sheets-numberformat='[null,2,"#,##0",1]' data-sheets-formula="='302440'!R[4]C[0]+'302440'!R[8]C[0]">56,298,100</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.7359228758169934}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula='=R[0]C[-1]/googlefinance(R[0]C[-4], "shares")'>73.59%</td>
</tr>
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<td data-sheets-value='{"1":2,"2":"Krafton Inc"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Krafton</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"259960"}' data-sheets-formula='="259960"'>259960</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ordinary"}'>Ordinary</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44449}' data-sheets-numberformat='[null,5,"yyyy. mm. dd",1]'>2021. 09. 10</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2137478}' data-sheets-numberformat='[null,2,"#,##0",1]' data-sheets-formula="=sum('259960'!R[18]C[0]:R[19]C[0])+'259960'!R[25]C[0]">2,137,478</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0436652687167866}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula='=R[0]C[-1]/googlefinance(R[0]C[-4], "shares")'>4.37%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Krafton Inc"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Krafton</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"259960"}' data-sheets-formula='="259960"'>259960</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ordinary"}'>Ordinary</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44448}' data-sheets-numberformat='[null,5,"yyyy. mm. dd",1]'>2021. 09. 09</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":90000}' data-sheets-numberformat='[null,2,"#,##0",1]'>90,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0018385565533356573}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula='=R[0]C[-1]/googlefinance(R[0]C[-4], "shares")'>0.18%</td>
</tr>
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<td data-sheets-value='{"1":2,"2":"Kakao Bank"}'>Kakao Bank</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"323410"}' data-sheets-formula='="323410"'>323410</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ordinary"}'>Ordinary</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44445}' data-sheets-numberformat='[null,5,"yyyy. mm. dd",1]'>2021. 09. 06</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3141600}' data-sheets-numberformat='[null,2,"#,##0",1]' data-sheets-formula="='323410'!R[13]C[0]">3,141,600</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.006612499332430348}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula='=R[0]C[-1]/googlefinance(R[0]C[-4], "shares")'>0.66%</td>
</tr>
<tr><td colspan="6" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX KIND"}'>Source: KRX KIND</td></tr>
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</table><hr><div class="content-highlight">In the DETAIL section below, let's take a look at the flow of the 4 recently listed stocks this month one by one.</div>

Below are KOSPI stocks that will see lockup releases in September. Four of these stocks have recently gone public.










Name
Ticker
Share type
Release date
Release volume
% of SO


Ottogi Corp
007310
Ordinary
2021. 09. 25
66,744
1.82%


Ajusteel
139990
Ordinary
2021. 09. 20
2,507,518
9.48%


Y2 Solution
011690
Ordinary
2021. 09. 19
59,000,000
40.07%


SK Bioscience
302440
Ordinary
2021. 09. 18
56,298,100
73.59%


Krafton
259960
Ordinary
2021. 09. 10
2,137,478
4.37%


Krafton
259960
Ordinary
2021. 09. 09
90,000
0.18%


Kakao Bank
323410
Ordinary
2021. 09. 06
3,141,600
0.66%

Source: KRX KIND

In the DETAIL section below, let's take a look at the flow of the 4 recently listed stocks this month one by one.

September Lockup Releases on KOSPI: Looking at Each Stock's Flow Situation

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

In this insight, we discuss <a href="https://www.smartkarma.com/entities/cj-cheiljedang-corp" target="_blank" data-smartkarma-citation="entities:1970:1" rel="noopener">CJ Cheiljedang (097950 KS)</a>'s 4Q 2020 and 2020 full year results and how this company is becoming one of the chief beneficiaries of Korean food going global.<a href="https://www.smartkarma.com/entities/cj-cheiljedang-corp" target="_blank" data-smartkarma-citation="entities:1970:1" rel="noopener">CJ Cheiljedang (097950 KS)</a> has benefited from a combination of improving earnings and higher valuation multiples. The company's shares have an average P/E and P/B of 17.4x and 1.3x, respectively. The company's current P/E and P/B valuation multiples in 2021 are currently 28% and 14% below the historical average valuation multiples of the company from 2015 to 2020.One could argue that the company's valuation multiples should be higher than the historical average which would result in higher implied valuations for CJ Cheiljedang. The company's Bibigo branded foods (such as dumplings), sauces, and other food products are becoming more popular in many key countries such as in the U.S., China, and Japan.

In this insight, we discuss CJ Cheiljedang (097950 KS)'s 4Q 2020 and 2020 full year results and how this company is becoming one of the chief beneficiaries of Korean food going global.CJ Cheiljedang (097950 KS) has benefited from a combination of improving earnings and higher valuation multiples. The company's shares have an average P/E and P/B of 17.4x and 1.3x, respectively. The company's current P/E and P/B valuation multiples in 2021 are currently 28% and 14% below the historical average valuation multiples of the company from 2015 to 2020.One could argue that the company's valuation multiples should be higher than the historical average which would result in higher implied valuations for CJ Cheiljedang. The company's Bibigo branded foods (such as dumplings), sauces, and other food products are becoming more popular in many key countries such as in the U.S., China, and Japan.

Cross Asset Strategy

The big Ponzi scheme involving the disappearance of millions of dollars at the Optimus funds in South Korea has been one of the biggest news in the Korean financial markets in the past several weeks. As more details become revealed in these fraudulent funds, it turns out that hundreds of wealthy local investors as well as many publicly listed companies invested their money in the Optimus funds.

The big Ponzi scheme involving the disappearance of millions of dollars at the Optimus funds in South Korea has been one of the biggest news in the Korean financial markets in the past several weeks. As more details become revealed in these fraudulent funds, it turns out that hundreds of wealthy local investors as well as many publicly listed companies invested their money in the Optimus funds. 

Big Ponzi Schemes at Optimus Funds - Where Did the Millions of Dollars Disappear?

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

<div>
<a href="https://www.smartkarma.com/profiles/devi-subhakesan" target="_blank" data-smartkarma-citation="accounts:1913" rel="noopener">Devi Subhakesan</a> mentioned in her report in <a href="https://www.smartkarma.com/insights/indofood-cbp-icbp-ij-us-3bn-acqsn-of-affiliate-dizzy-valuation-earnings-dilution" target="_blank" data-smartkarma-citation="insights:39793" rel="noopener">Indofood CBP (ICBP IJ): US$ 3Bn Acqsn. Of Affiliate - Dizzy Valuation, Earnings Dilution</a> that the deal is not exactly value-accretive for the shareholders due to the expensive multiples that the company pays and the overleveraged in the balance sheet that further burden the net income. The flip side is that as <a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" data-smartkarma-citation="accounts:937" rel="noopener">Angus Mackintosh</a> mentioned in <a href="https://www.smartkarma.com/insights/indofood-cbp-sukses-icbp-ij-going-global-with-instant-noodles" target="_blank" data-smartkarma-citation="insights:41873" rel="noopener">Indofood CBP Sukses (ICBP IJ) - Going Global with Instant Noodles</a> is that it has expanded its horizon to outside Indonesia and becomes an Emerging Market Consumer Staple play. </div>
<div></div>
<div>Compared to other Asian noodle makers, Indofood is the second cheapest in PER (after Ottogi), second-highest gross margin (after Nissin Foods), highest EBITDA, and Net income margin. While</div>
<div>
compared to the EM consumer stocks, Indofood CBP is 48% cheaper in PER, 60% cheaper in EV/EBITDA, 72% cheaper in PBR, 4% higher in gross margin, 23% higher in EBITDA margin although net income margin is 3% lower. 
The fact that Indofood CBP will be on the radar for Global EM consumer fund managers and potentially some ETFs at a cheaper valuation to the peers could bring some inflow, driving the multiples higher. 
Indofood CBP is still trading at lower share price to pre-COVID-19 and still undervalued versus the other noodle makers and global EM staple peers by a wide margin. Buy. 
</div>


Devi Subhakesan mentioned in her report in Indofood CBP (ICBP IJ): US$ 3Bn Acqsn. Of Affiliate - Dizzy Valuation, Earnings Dilution that the deal is not exactly value-accretive for the shareholders due to the expensive multiples that the company pays and the overleveraged in the balance sheet that further burden the net income. The flip side is that as Angus Mackintosh mentioned in Indofood CBP Sukses (ICBP IJ) - Going Global with Instant Noodles is that it has expanded its horizon to outside Indonesia and becomes an Emerging Market Consumer Staple play. 

Compared to other Asian noodle makers, Indofood is the second cheapest in PER (after Ottogi), second-highest gross margin (after Nissin Foods), highest EBITDA, and Net income margin. While

compared to the EM consumer stocks, Indofood CBP is 48% cheaper in PER, 60% cheaper in EV/EBITDA, 72% cheaper in PBR, 4% higher in gross margin, 23% higher in EBITDA margin although net income margin is 3% lower. 
The fact that Indofood CBP will be on the radar for Global EM consumer fund managers and potentially some ETFs at a cheaper valuation to the peers could bring some inflow, driving the multiples higher. 
Indofood CBP is still trading at lower share price to pre-COVID-19 and still undervalued versus the other noodle makers and global EM staple peers by a wide margin. Buy. 


Indofood (ICBP): Undervalued and Will Attract New Types of Investors

<div class="content-highlight">
It was reported in the local <a href="https://finance.naver.com/item/news_read.nhn?article_id=0004410596&amp;office_id=008&amp;code=007310&amp;sm=title_entity_id.basic" target="_blank" rel="noopener">media</a> after the market close that the <a href="https://www.smartkarma.com/entities/ottogi-corporation" target="_blank" data-smartkarma-citation="entities:6735:1" rel="noopener">Ottogi Corporation (007310 KS)</a> chairman Ham Young-Joon (born in 1959) sold a 7.48% stake in Ottogi Ramen for 23 billion won ($19 million).
The earnings and business outlook of Ottogi Corp remain rock-solid this year. Corporate governance, on the other hand, has been relatively poor for the company. However, this announcement of Chairman Ham selling a 7.48% stake in Ottogi Ramen for 23 billion won should have a mild positive boost on the potential for improved corporate transparency and share price of Ottogi Corp.
</div>Valuations - Ottogi Corp currently has an EV of 2.1 trillion won. The company's EBIT averaged 150 billion won. The company's EBIT increased 8% YoY in 1Q 2020 and it is reasonable to estimate an EBIT of 160 billion won to 165 billion won in 2020, which would suggest an EV/EBIT ratio of 13x. On an EBITDA basis, Ottogi shares are trading at about 8x EV/EBITDA (2020E).Capital has clearly been flowing into the top Korean F&amp;B stocks pushing up share prices of Ottogi, CJ Cheiljedang, Nongshim, Orion Corp, and Samyang F&amp;B this year. This strategy of overweighing on the F&amp;B sector in the midst of the global COVID-19 pandemic has been a safe and sound strategy for many fund managers.


It was reported in the local media after the market close that the Ottogi Corporation (007310 KS) chairman Ham Young-Joon (born in 1959) sold a 7.48% stake in Ottogi Ramen for 23 billion won ($19 million).
The earnings and business outlook of Ottogi Corp remain rock-solid this year. Corporate governance, on the other hand, has been relatively poor for the company. However, this announcement of Chairman Ham selling a 7.48% stake in Ottogi Ramen for 23 billion won should have a mild positive boost on the potential for improved corporate transparency and share price of Ottogi Corp.
Valuations - Ottogi Corp currently has an EV of 2.1 trillion won. The company's EBIT averaged 150 billion won. The company's EBIT increased 8% YoY in 1Q 2020 and it is reasonable to estimate an EBIT of 160 billion won to 165 billion won in 2020, which would suggest an EV/EBIT ratio of 13x. On an EBITDA basis, Ottogi shares are trading at about 8x EV/EBITDA (2020E).Capital has clearly been flowing into the top Korean F&amp;B stocks pushing up share prices of Ottogi, CJ Cheiljedang, Nongshim, Orion Corp, and Samyang F&amp;B this year. This strategy of overweighing on the F&amp;B sector in the midst of the global COVID-19 pandemic has been a safe and sound strategy for many fund managers. 

Ottogi Corp Chairman Ham Young-Joon Sells a 7.5% Stake in Ottogi Ramen

South Korea

Ottogi Corporation manufactures food seasonings and instant food, such as mayonnaise, ketchup, salad dressing, sesame and cooking oils, and instant curry. The Company also produces frozen salads, fruit preservatives, instant noodles, and canned tuna.

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Ottogi Corporation (007310 KS)

September Lockup Releases on KOSPI: Looking at Each Stock's Flow Situation

This post lists the KOSPI stocks that will see lockup releases in September. This post then examines the flow situation of the four recently listed...

Sanghyun Park

CJ Cheiljedang - Korean Food Goes Global

In this insight, we discuss CJ Cheiljedang (097950 KS)'s 4Q 2020 and 2020 full year results and how this company is becoming one of the chief...

Douglas Kim

Big Ponzi Schemes at Optimus Funds - Where Did the Millions of Dollars Disappear?

The big Ponzi scheme involving the disappearance of millions of dollars at the Optimus funds in South Korea has been one of the biggest news in the...

Douglas Kim

Indofood (ICBP): Undervalued and Will Attract New Types of Investors

Devi Subhakesan mentioned in her report in Indofood CBP (ICBP IJ): US$ 3Bn Acqsn. Of Affiliate - Dizzy Valuation, Earnings Dilution that the deal...

Henry Soediarko

Ottogi Corp Chairman Ham Young-Joon Sells a 7.5% Stake in Ottogi Ramen

It was reported in the local media after the market close that the Ottogi Corporation (007310 KS) chairman Ham Young-Joon (born in 1959) sold a...

Douglas Kim

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