Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Thematic (Sector/Industry)

In this report, we highlight the key reports on Japan and Korea that have been published on Smartkarma in the past two weeks. We also provided a summary and a couple of surprises in the third summit between Moon Jae-In and Kim Jong-Un in Pyeongyang as well their trip to Mount Baektu. 
YTD, S&amp;P 500 is up 9.0%, TOPIX is up 0.3%, and KOSPI is down 5.2%. The US stock markets have been rebounding in the past few months surpass the previous peak in January 2018. KOSPI has been rebounding slightly since July. There have been some increasing concerns about a major "double-top" formations in many major stock markets indices including KOSPI. 
Please refer to <a href="https://www.smartkarma.com/profiles/381" target="_blank" data-smartkarma-citation="accounts:381">Thomas Schroeder</a>'s latest note <a href="https://www.smartkarma.com/insights/s-p-macro-peak-in-sight-on-projection-support-and-rotation-synergy" target="_blank" data-smartkarma-citation="insights:24454">S&amp;P Macro Peak in Sight on Projection, Support and Rotation Synergy</a>. Thomas is toning down his macro bull view made in early 2016 as breadth, rotation and projection synergy turn risk to reward less favorable and will turn negative in early 2019.
The top three reports (in terms of views) on Smartkarma that are relevant for Japan and Korea in the past two weeks were as follows:
<ul>
<li><a href="https://www.smartkarma.com/insights/asahi-intecc-7747-jp-tse1-finally-and-a-big-topix-inclusion" target="_blank" data-smartkarma-citation="insights:24389">Asahi Intecc (7747 JP) TSE1 (Finally) And a BIG TOPIX Inclusion</a></li>
<li><a href="https://www.smartkarma.com/insights/adeka-bid-for-control-of-nihon-nohyaku-runs-into-controversy" target="_blank" data-smartkarma-citation="insights:24264">ADEKA Bid for Control of Nihon Nohyaku Runs Into Controversy</a></li>
<li><a href="https://www.smartkarma.com/insights/samsung-c-t-placement-finally-first-step-towards-a-legit-holding-company" target="_blank" data-smartkarma-citation="insights:24330">Samsung C&amp;T Placement: Finally First Step Towards a Legit Holding Company</a></li>
</ul>

In this report, we highlight the key reports on Japan and Korea that have been published on Smartkarma in the past two weeks. We also provided a summary and a couple of surprises in the third summit between Moon Jae-In and Kim Jong-Un in Pyeongyang as well their trip to Mount Baektu. 
YTD, S&amp;P 500 is up 9.0%, TOPIX is up 0.3%, and KOSPI is down 5.2%. The US stock markets have been rebounding in the past few months surpass the previous peak in January 2018. KOSPI has been rebounding slightly since July. There have been some increasing concerns about a major "double-top" formations in many major stock markets indices including KOSPI. 
Please refer to Thomas Schroeder's latest note S&amp;P Macro Peak in Sight on Projection, Support and Rotation Synergy. Thomas is toning down his macro bull view made in early 2016 as breadth, rotation and projection synergy turn risk to reward less favorable and will turn negative in early 2019.
The top three reports (in terms of views) on Smartkarma that are relevant for Japan and Korea in the past two weeks were as follows:

Asahi Intecc (7747 JP) TSE1 (Finally) And a BIG TOPIX Inclusion
ADEKA Bid for Control of Nihon Nohyaku Runs Into Controversy
Samsung C&amp;T Placement: Finally First Step Towards a Legit Holding Company


Smartkarma’s Week That Was in JP/​​​KR: Photo Sessions on Mt. Baektu, Samsung C&T, and Asahi Intecc

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/27459" target="_blank" data-smartkarma-citation="entities:27459:1">Plakor (032340 KS)</a> is an IPO in Korea which is expected to be completed in the Korean stock market in October. Established in 1967, Plakor makes auto parts. Its main products include bumper and instrument panel molds, gas injection molding bumpers, and air bags. The company is trying to raise between US$19 million to US$31 million. </li>
<li>The bankers used <a href="https://www.smartkarma.com/entities/3963" target="_blank" data-smartkarma-citation="entities:3963:1">Sungwoo Hitech (015750 KS)</a>, <a href="https://www.smartkarma.com/entities/20088" target="_blank" data-smartkarma-citation="entities:20088:1">Pyeong Hwa Automotive (043370 KS)</a>, and <a href="https://www.smartkarma.com/entities/3864" target="_blank" data-smartkarma-citation="entities:3864:1">Sambo Motors (053700 KS)</a> as comparable companies to Plakor. The average P/E of the comps was 10.3x. After applying additional IPO discount of 46% to 66%, the bankers derived the IPO price range of 7,000 won to 11,000 won. Notice how huge the IPO discount range is in this deal - 46% to 66%! Typically, the IPO deals in Korea include IPO discount that range 20-30%. It is very unusual to see the high end of the IPO discount range in the 66% levels.</li>
<li>The company's sales increased 17.4% CAGR from 2014 to 2017. However, its sales growth declined materially to 2.3% YoY in 1H18. The company's business has been plagued with declining gross and operating margins. Its operating margin declined from 4.1% in 2014 to 2.4% in 2017. Basically, what has been happening is that its major customers including Hyundai Motor and Kia Motors have been putting greater margin pressure on their numerous suppliers, including Plakor in the past several years. </li>
</ul>



Plakor (032340 KS) is an IPO in Korea which is expected to be completed in the Korean stock market in October. Established in 1967, Plakor makes auto parts. Its main products include bumper and instrument panel molds, gas injection molding bumpers, and air bags. The company is trying to raise between US$19 million to US$31 million. 
The bankers used Sungwoo Hitech (015750 KS), Pyeong Hwa Automotive (043370 KS), and Sambo Motors (053700 KS) as comparable companies to Plakor. The average P/E of the comps was 10.3x. After applying additional IPO discount of 46% to 66%, the bankers derived the IPO price range of 7,000 won to 11,000 won. Notice how huge the IPO discount range is in this deal - 46% to 66%! Typically, the IPO deals in Korea include IPO discount that range 20-30%. It is very unusual to see the high end of the IPO discount range in the 66% levels.
The company's sales increased 17.4% CAGR from 2014 to 2017. However, its sales growth declined materially to 2.3% YoY in 1H18. The company's business has been plagued with declining gross and operating margins. Its operating margin declined from 4.1% in 2014 to 2.4% in 2017. Basically, what has been happening is that its major customers including Hyundai Motor and Kia Motors have been putting greater margin pressure on their numerous suppliers, including Plakor in the past several years. 


South Korea

SAMBO MOTOS Co., Ltd. produces and markets auto parts, such as transmission components, engine parts, and fuel parts.

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Sambo Motors (053700 KS)

Smartkarma’s Week That Was in JP/KR: Photo Sessions on Mt. Baektu, Samsung C&T, and Asahi Intecc

In this report, we highlight the key reports on Japan and Korea that have been published on Smartkarma in the past two weeks. We also provided a...

Douglas Kim

Plakor IPO Preview (Part 1)

Plakor (032340 KS) is an IPO in Korea which is expected to be completed in the Korean stock market in October. Established in 1967, Plakor makes...

Douglas Kim

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52-week Range

Market Cap (USDm)

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Smartkarma’s Week That Was in JP/​​​KR: Photo Sessions on Mt. Baektu, Samsung C&T, and Asahi Intecc

In this report, we highlight the key reports on Japan and Korea that have been published on Smartkarma in the past two weeks. We also provided a...

Douglas Kim

Plakor IPO Preview (Part 1)

Plakor (032340 KS) is an IPO in Korea which is expected to be completed in the Korean stock market in October. Established in 1967, Plakor makes...

Douglas Kim

Smartkarma’s Week That Was in JP/KR: Photo Sessions on Mt. Baektu, Samsung C&T, and Asahi Intecc