Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Event-Driven

<p>Samsung's year-end dividend prospect should be very appealing as a special dividend of ₩1,450 per ordinary share is becoming more likely.</p><p>But how can we hedge for this dividend play?</p><p>Well, I guess the only option would be shorting Samsung's single-stock futures.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="600">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Single stock futures"}'>Samsung Electronics single stock futures</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Trade multiple"}'>Trade multiple</td>
<td data-sheets-value='{"1":3,"3":10}'>10</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Contract size"}'>Contract size</td>
<td data-sheets-value='{"1":2,"2":"Futures price × trade multiple (10)"}'>Futures price × trade multiple (10)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Tick (KOSPI)"}'><div>Tick</div></td>
<td data-sheets-value='{"1":2,"2":"₩100: ₩50,000 ≤ futures price &lt; ₩100,000"}'>₩100: ₩50,000 ≤ futures price &lt; ₩100,000</td>
</tr>
<tr>
<td rowspan="2" data-sheets-value='{"1":2,"2":"Settlement months"}'><div>Settlement months</div></td>
<td rowspan="2" data-sheets-value='{"1":2,"2":"A total of 9 settlement months within 3 years: 2 (March &amp; September), 2 (June), 3 (December), &amp; 2 (remaining months)"}'><div>A total of 9 settlement months within three years: 2 (March &amp; September), 2 (June), 3 (December), &amp; 2 (remaining months)</div></td>
</tr>
<tr></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Last trading day"}'>Last trading day</td>
<td data-sheets-value='{"1":2,"2":"2nd Thursday of each settlement month"}'>2nd Thursday of each settlement month</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"First trading day"}'>First trading day</td>
<td data-sheets-value='{"1":2,"2":"The following day of the last trading day"}'>The following day of the last trading day</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Trading hours - regular trading day"}'>Trading hours - regular trading day</td>
<td data-sheets-value='{"1":2,"2":"09:00~15:45 (single-price trade 08:00~09:00 / 15:35~15:45)"}'>09:00~15:45 (single-price trade 08:00~09:00 / 15:35~15:45)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Trading hours - last trading day"}'>Trading hours - last trading day</td>
<td data-sheets-value='{"1":2,"2":"09:00~15:20 (single-price trade 08:00~09:00)"}'>09:00~15:20 (single-price trade 08:00~09:00)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price ceiling"}'>Price ceiling</td>
<td data-sheets-value='{"1":2,"2":"Reference price ① ±10% ② ±20% ③ ±30% (incremental)"}'>Reference price ① ±10% ② ±20% ③ ±30% (incremental)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Customer margin (or initial margin)"}'>Customer margin (or initial margin)</td>
<td data-sheets-value='{"1":2,"2":"10~30%"}'>10~30%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Maintenance margin"}'>Maintenance margin</td>
<td data-sheets-value='{"1":2,"2":"5~20%"}'>5~20%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Margin settlement deadline"}'>Margin settlement deadline</td>
<td data-sheets-value='{"1":2,"2":"16:00 on T+1"}'>16:00 on T+1</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Final settlement price"}'>Final settlement price</td>
<td data-sheets-value='{"1":2,"2":"Closing cash price of the last trading day"}'>The closing cash price of the last trading day</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: KRX"}'><em>Source: KRX</em></td></tr>
</tbody>
</table>

Samsung's year-end dividend prospect should be very appealing as a special dividend of ₩1,450 per ordinary share is becoming more likely.But how can we hedge for this dividend play?Well, I guess the only option would be shorting Samsung's single-stock futures.





Samsung Electronics single stock futures

Trade multiple
10


Contract size
Futures price × trade multiple (10)


Tick
₩100: ₩50,000 ≤ futures price &lt; ₩100,000


Settlement months
A total of 9 settlement months within three years: 2 (March &amp; September), 2 (June), 3 (December), &amp; 2 (remaining months)



Last trading day
2nd Thursday of each settlement month


First trading day
The following day of the last trading day


Trading hours - regular trading day
09:00~15:45 (single-price trade 08:00~09:00 / 15:35~15:45)


Trading hours - last trading day
09:00~15:20 (single-price trade 08:00~09:00)


Price ceiling
Reference price ① ±10% ② ±20% ③ ±30% (incremental)


Customer margin (or initial margin)
10~30%


Maintenance margin
5~20%


Margin settlement deadline
16:00 on T+1


Final settlement price
The closing cash price of the last trading day

Source: KRX



Samsung Dividend Play, Hedging-Adjusted with Futures

Samsung Electronics Pref Shares / Event-Driven

<p>The market expectation on Samsung Electronics' earnings improvement in the immediate term is growing.</p><p>The local street consensus has improved by 7% (OP-wise) since three months ago.</p><p>But if compiling only the recently revised ones, the current expectation is somewhere around ₩37T, which is a 15% improvement.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"POSCO, FY2020 (₩B)"}' data-sheets-formula='=R[-34]C[1]&amp;", FY2020 (₩B)"'>Samsung Electronics, FY2020 (₩B)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44103}' data-sheets-formula="=today()">2020. 9. 29</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"T-1M"}'>T-1M</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"T-3M"}'>T-3M</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"T-6M"}'>T-6M</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"T-1Y"}'>T-1Y</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Sales"}'>Sales</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":235569.1}' data-sheets-formula="=R[34]C[0]/10">235,569.1</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":233170.2}' data-sheets-formula="=R[34]C[0]/10">233,170.2</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":230392.4}' data-sheets-formula="=R[34]C[0]/10">230,392.4</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":249611.9}' data-sheets-formula="=R[34]C[0]/10">249,611.9</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":246984.8}' data-sheets-formula="=R[34]C[0]/10">246,984.8</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"OP"}'><strong>OP</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":34237.5}' data-sheets-formula="=R[34]C[0]/10"><strong>34,237.5</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":32553.8}' data-sheets-formula="=R[34]C[0]/10"><strong>32,553.8</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":32039.6}' data-sheets-formula="=R[34]C[0]/10"><strong>32,039.6</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":38411}' data-sheets-formula="=R[34]C[0]/10">38,411.0</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":35812.5}' data-sheets-formula="=R[34]C[0]/10">35,812.5</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"NP to controlling stake"}'>NP to controlling stake</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":25776.4}' data-sheets-formula="=R[34]C[0]/10">25,776.4</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":24626.3}' data-sheets-formula="=R[34]C[0]/10">24,626.3</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":24719.4}' data-sheets-formula="=R[34]C[0]/10">24,719.4</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":29700.3}' data-sheets-formula="=R[34]C[0]/10">29,700.3</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":27894.1}' data-sheets-formula="=R[34]C[0]/10">27,894.1</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EPS (₩)"}'>EPS (₩)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3795}' data-sheets-formula="=R[34]C[0]">3,795</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3625}' data-sheets-formula="=R[34]C[0]">3,625</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3639}' data-sheets-formula="=R[34]C[0]">3,639</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4372}' data-sheets-formula="=R[34]C[0]">4,372</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4107}' data-sheets-formula="=R[34]C[0]">4,107</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"PER (x)"}'>PER (x)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15.3}' data-sheets-formula="=R[34]C[0]">15.30</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15.3}' data-sheets-formula="=R[34]C[0]">15.30</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":14.7}' data-sheets-formula="=R[34]C[0]">14.70</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":11.1}' data-sheets-formula="=R[34]C[0]">11.10</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":11.8}' data-sheets-formula="=R[34]C[0]">11.80</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"12M PER (x)"}'>12M PER (x)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":12.38}' data-sheets-formula="=R[34]C[0]">12.38</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":12.44}' data-sheets-formula="=R[34]C[0]">12.44</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":12.28}' data-sheets-formula="=R[34]C[0]">12.28</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":10.19}' data-sheets-formula="=R[34]C[0]">10.19</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":12.52}' data-sheets-formula="=R[34]C[0]">12.52</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"TP (₩)"}'>TP (₩)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":75258}' data-sheets-formula="=R[34]C[0]">75,258</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":71592}' data-sheets-formula="=R[34]C[0]">71,592</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":65167}' data-sheets-formula="=R[34]C[0]">65,167</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":67770}' data-sheets-formula="=R[34]C[0]">67,770</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":56045}' data-sheets-formula="=R[34]C[0]">56,045</td>
</tr>
<tr><td colspan="6" rowspan="1" data-sheets-value='{"1":2,"2":"Source: FnGuide"}'><em>Source: FnGuide</em></td></tr>
</tbody>
</table><p>Then, implications for year-end dividend?</p><p>Yes, it means we now have a higher chance of enjoying other shareholder returns for this year.</p>

The market expectation on Samsung Electronics' earnings improvement in the immediate term is growing.The local street consensus has improved by 7% (OP-wise) since three months ago.But if compiling only the recently revised ones, the current expectation is somewhere around ₩37T, which is a 15% improvement.










Samsung Electronics, FY2020 (₩B)
2020. 9. 29
T-1M
T-3M
T-6M
T-1Y


Sales
235,569.1
233,170.2
230,392.4
249,611.9
246,984.8


OP
34,237.5
32,553.8
32,039.6
38,411.0
35,812.5


NP to controlling stake
25,776.4
24,626.3
24,719.4
29,700.3
27,894.1


EPS (₩)
3,795
3,625
3,639
4,372
4,107


PER (x)
15.30
15.30
14.70
11.10
11.80


12M PER (x)
12.38
12.44
12.28
10.19
12.52


TP (₩)
75,258
71,592
65,167
67,770
56,045

Source: FnGuide

Then, implications for year-end dividend?Yes, it means we now have a higher chance of enjoying other shareholder returns for this year.

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/semiconductor-manufacturing" target="_blank" data-smartkarma-citation="entities:14231:1" rel="noopener">Semiconductor Manufacturing (981 HK)</a>, <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>, <a href="https://www.smartkarma.com/entities/zhaojin-mining-industry-company-ltd-h" target="_blank" data-smartkarma-citation="entities:4626:1" rel="noopener">Zhaojin Mining Industry H (1818 HK)</a> and <a href="https://www.smartkarma.com/entities/longfor-properties" target="_blank" data-smartkarma-citation="entities:8149:1" rel="noopener">Longfor Properties (960 HK)</a>, while there was short covering on <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan Dianping (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (HK) (9618 HK)</a> and <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a>. Shorts increased in Information Technology and Materials and were covered in Consumer Discretionary, Communication Services and Financials.</p></div><div><p>Japan saw big increases and decreases in short interest across stocks in a short trading week with the markets closed on Monday and Tuesday. With the large increase and decrease in short interest across stocks linked to the same market participant, we would assume that there are positions linked to funding/ dividend trades being switched ahead of the September ex-dividend date.</p></div><div><p>Stocks in Korea that saw the most shorts were <a href="https://www.smartkarma.com/entities/shinpoong-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:7296:1" rel="noopener">Shinpoong Pharmaceutical (019170 KS)</a>, <a href="https://www.smartkarma.com/entities/alteogen-inc" target="_blank" data-smartkarma-citation="entities:15886:1" rel="noopener">Alteogen Inc (196170 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a> and <a href="https://www.smartkarma.com/entities/celltrion-pharm-inc" target="_blank" data-smartkarma-citation="entities:992:1" rel="noopener">Celltrion Pharm (068760 KS)</a>, while there was short covering on <a href="https://www.smartkarma.com/entities/lg-chem-ltd" target="_blank" data-smartkarma-citation="entities:3583:1" rel="noopener">LG Chem Ltd (051910 KS)</a>.</p></div><div><p>Stocks in Taiwan that saw the highest increase in shorts were <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a>, <a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a>, <a href="https://www.smartkarma.com/entities/genius-electronic-optical-co-ltd" target="_blank" data-smartkarma-citation="entities:9632:1" rel="noopener">Genius Electronic Optical (3406 TT)</a> and <a href="https://www.smartkarma.com/entities/shin-kong-financial-holding" target="_blank" data-smartkarma-citation="entities:15351:1" rel="noopener">Shin Kong Financial Holding (2888 TT)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/chung-hsin-electric-machinery-mfg-corp" target="_blank" data-smartkarma-citation="entities:3380:1" rel="noopener">Chung Hsin Electric &amp; Machinery Mfg (1513 TT)</a>, <a href="https://www.smartkarma.com/entities/macronix-international" target="_blank" data-smartkarma-citation="entities:3247:1" rel="noopener">Macronix International (2337 TT)</a>, <a href="https://www.smartkarma.com/entities/yageo-corporation" target="_blank" data-smartkarma-citation="entities:13212:1" rel="noopener">Yageo Corporation (2327 TT)</a> and <a href="https://www.smartkarma.com/entities/nan-ya-printed-circuit-board-corporation" target="_blank" data-smartkarma-citation="entities:2699:1" rel="noopener">Nan Ya Printed Circuit Board (8046 TT)</a>.</p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Semiconductor Manufacturing (981 HK), Ping An Insurance (H) (2318 HK), Zhaojin Mining Industry H (1818 HK) and Longfor Properties (960 HK), while there was short covering on Alibaba Group (9988 HK), Meituan Dianping (3690 HK), JD.com (HK) (9618 HK) and Xiaomi Corp (1810 HK). Shorts increased in Information Technology and Materials and were covered in Consumer Discretionary, Communication Services and Financials.Japan saw big increases and decreases in short interest across stocks in a short trading week with the markets closed on Monday and Tuesday. With the large increase and decrease in short interest across stocks linked to the same market participant, we would assume that there are positions linked to funding/ dividend trades being switched ahead of the September ex-dividend date.Stocks in Korea that saw the most shorts were Shinpoong Pharmaceutical (019170 KS), Alteogen Inc (196170 KS), Samsung Electronics (005930 KS) and Celltrion Pharm (068760 KS), while there was short covering on LG Chem Ltd (051910 KS).Stocks in Taiwan that saw the highest increase in shorts were TSMC (2330 TT), Evergreen Marine Corp (2603 TT), Genius Electronic Optical (3406 TT) and Shin Kong Financial Holding (2888 TT) while shorts were covered on Chung Hsin Electric &amp; Machinery Mfg (1513 TT), Macronix International (2337 TT), Yageo Corporation (2327 TT) and Nan Ya Printed Circuit Board (8046 TT).

Asia Short Interest Weekly: SMIC, Zhaojin, Longfor, JD, Shinpoong, Alteogen, Japan Dividend Ex-Date

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Capital Markets

Kioxia Holdings  / Equity Capital Markets

<p>While Kioxia’s value lies in its through-cycle earnings generation, disclosed financials have a limited history. As such, we have combined Kioxia’s financials with those of Toshiba’s Electronic Devices and Storage Solutions segment to get a longer-term perspective on likely forward profitability and how the company has done compared to peers.</p>

While Kioxia’s value lies in its through-cycle earnings generation, disclosed financials have a limited history. As such, we have combined Kioxia’s financials with those of Toshiba’s Electronic Devices and Storage Solutions segment to get a longer-term perspective on likely forward profitability and how the company has done compared to peers.

Kioxia – Examining the Long-Term Margin Trends and Where Fair Value May Lie

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<p><a href="https://www.smartkarma.com/entities/kioxia" target="_blank" data-smartkarma-citation="entities:29243:1" rel="noopener">Kioxia (6600 JP)</a> is the world’s second-largest player in the NAND flash memory market. Kioxia was spun off from <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> and acquired by KK Pangea, a special purpose company formed by a consortium led by Bain Capital for JPY2 trillion ($18 billion). Kioxia announced a tentative price range of JPY2,800-3,500 a share, materially below the JPY3,960 indicative price announced in August. The shares will list on the Tokyo Stock Exchange on 6 October. </p><p>In <a href="https://www.smartkarma.com/insights/kioxia-ipo-initiation-not-just-a-flash-in-the-pan" target="_blank" rel="noopener">our initiation note</a>, we stated that for investors willing to play the cycle, we think that Kioxia's fundamentals offer more positives than negatives. However, lead indicators suggest that NAND demand particularly in servers has considerably weakened since August. Also, Kioxia warned that the recent US restrictions on <a href="https://www.smartkarma.com/entities/huawei-technologies-co-ltd" target="_blank" data-smartkarma-citation="entities:8231:1" rel="noopener">Huawei Technology (40978Z CH)</a> may have an impact on the business. For more details, we direct readers to the panel discussion in <a href="https://www.smartkarma.com/insights/smartkarma-flash-webinar-kioxia-ipo-how-solid-is-it" target="_blank" data-smartkarma-citation="insights:43475" rel="noopener">Smartkarma Flash Webinar | Kioxia IPO: How Solid Is It?</a>.  </p><div class="content-highlight"><p>As the memory business is infamously volatile, we value Kioxia on through-cycle earnings number. Our analysis suggests that Kioxia trades at a substantial premium to peers' through-cycle multiples at the IPO price range. Consequently, while the fundamentals are attractive, we would give the IPO a pass due to the rich valuation. </p></div>

Kioxia (6600 JP) is the world’s second-largest player in the NAND flash memory market. Kioxia was spun off from Toshiba Corp (6502 JP) and acquired by KK Pangea, a special purpose company formed by a consortium led by Bain Capital for JPY2 trillion ($18 billion). Kioxia announced a tentative price range of JPY2,800-3,500 a share, materially below the JPY3,960 indicative price announced in August. The shares will list on the Tokyo Stock Exchange on 6 October. In our initiation note, we stated that for investors willing to play the cycle, we think that Kioxia's fundamentals offer more positives than negatives. However, lead indicators suggest that NAND demand particularly in servers has considerably weakened since August. Also, Kioxia warned that the recent US restrictions on Huawei Technology (40978Z CH) may have an impact on the business. For more details, we direct readers to the panel discussion in Smartkarma Flash Webinar | Kioxia IPO: How Solid Is It?.  As the memory business is infamously volatile, we value Kioxia on through-cycle earnings number. Our analysis suggests that Kioxia trades at a substantial premium to peers' through-cycle multiples at the IPO price range. Consequently, while the fundamentals are attractive, we would give the IPO a pass due to the rich valuation. 

South Korea

Samsung Electronics Co., Ltd. manufactures a wide range of consumer and industrial electronic equipment and products such as semiconductors, personal computers, peripherals, monitors, televisions, and home appliances including air conditioners and microwave ovens. The Company also produces Internet access network systems and telecommunications equipment including mobile phones.

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Samsung Electronics (005930 KS)

Samsung Dividend Play, Hedging-Adjusted with Futures

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Sanghyun Park

Samsung Year-End Dividend Play Situation

Samsung Electronics'

Sanghyun Park

Asia Short Interest Weekly: SMIC, Zhaojin, Longfor, JD, Shinpoong, Alteogen, Japan Dividend Ex-Date

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong...

Brian Freitas

Kioxia – Examining the Long-Term Margin Trends and Where Fair Value May Lie

While Kioxia’s value lies in its through-cycle earnings generation, disclosed financials have a limited history. As such, we have combined Kioxia’s...

Mio Kato

Kioxia IPO: Valuation Insights

Kioxia (6600 JP) is the world’s second-largest player in the NAND flash memory market. TMC was spun off from Toshiba Corp (6502 JP) and acquired by...

Arun George

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