Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<p>It was announced today that Samsung's Lee Jae-Yong will get out of jail as the Korean government will release him on parole this week after he spent 18 months in prison. The total original sentence time was for 30 months so Lee will no longer need to serve the remaining one year of jail time. Lee joins 800+ other convicts who will be released from various prisons in Korea on Friday. </p><p>In our view, this could <strong>accelerate</strong> some of Samsung's major investment plans globally and could also have a positive impact on the Samsung Group companies. Lee Jae-Yong joins a long-list of Korean chaebol family members that have served some time in prison. </p><div class="content-highlight">
<p>Overall, we believe that there could be more investors' interest in Samsung C&amp;T with the release of Lee Jae-Yong from jail. Although he remains a figurehead, the persistent negative press on him will likely be relieved and there could be more pressure to improve various ESG metrics of the Samsung Group companies even further. As such, we believe this will have a positive impact on the Samsung Group companies, especially on Samsung C&amp;T. </p>
<p>Our <strong>base case NAV</strong> valuation of Samsung C&amp;T is 202,593 won per share, representing 42.2% higher than current share price. In our base case valuation, we used the current market cap/prices of its ownership in major affiliates including Samsung Electronics, Samsung Biologics, and Samsung Life Insurance. We also used a 40% holdco discount in our valuations. </p>
</div>

It was announced today that Samsung's Lee Jae-Yong will get out of jail as the Korean government will release him on parole this week after he spent 18 months in prison. The total original sentence time was for 30 months so Lee will no longer need to serve the remaining one year of jail time. Lee joins 800+ other convicts who will be released from various prisons in Korea on Friday. In our view, this could accelerate some of Samsung's major investment plans globally and could also have a positive impact on the Samsung Group companies. Lee Jae-Yong joins a long-list of Korean chaebol family members that have served some time in prison. 
Overall, we believe that there could be more investors' interest in Samsung C&amp;T with the release of Lee Jae-Yong from jail. Although he remains a figurehead, the persistent negative press on him will likely be relieved and there could be more pressure to improve various ESG metrics of the Samsung Group companies even further. As such, we believe this will have a positive impact on the Samsung Group companies, especially on Samsung C&amp;T. 
Our base case NAV valuation of Samsung C&amp;T is 202,593 won per share, representing 42.2% higher than current share price. In our base case valuation, we used the current market cap/prices of its ownership in major affiliates including Samsung Electronics, Samsung Biologics, and Samsung Life Insurance. We also used a 40% holdco discount in our valuations. 


Samsung's Lee Jae-Yong Gets Out of Jail (Again) & NAV Analysis of Samsung C&T

Research from Asian Century Stocks, Asian Century Stocks

Michael Fritzell

Research from Asian Century Stocks

Providing financial journalism in the Asia-Pacific

Asian Century Stocks

Asian Century Stocks is a newsletter providing financial journalism for companies and stocks in the Asia-Pacific. 
The Asian Century Stocks logotype “百” stands for “one hundred” or a “century”. The economic centre of gravity is moving towards Asia. Yet most global investors are missing out.

Equity Bottom-Up

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<p>I just read the book <a href="https://www.amazon.com/Samsung-Rising-Inside-Korean-Conquer-ebook/dp/B07T9WTTZC/ref=sr_1_1?dchild=1&amp;keywords=samsung+rising&amp;qid=1623743594&amp;sr=8-1" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.amazon.com/Samsung-Rising-Inside-Korean-Conquer-ebook/dp/B07T9WTTZC/ref%3Dsr_1_1?dchild%3D1%26keywords%3Dsamsung%2Brising%26qid%3D1623743594%26sr%3D8-1&amp;source=gmail&amp;ust=1624323969123000&amp;usg=AFQjCNGC2aiiwDMsNjEfaxR0gESTgnBzqg" rel="noopener">Samsung Rising</a> by Geoffrey Cain and found it enlightening.</p>
<p>Samsung is a unique company: one of the best brand names to ever come out of East Asia.</p>
<p>This post will give you a brief history of how Samsung made the journey from a post-war trading company to an international technology giant. I will then describe where Samsung is today and where it could be heading in the future.</p>




I just read the book Samsung Rising by Geoffrey Cain and found it enlightening.
Samsung is a unique company: one of the best brand names to ever come out of East Asia.
This post will give you a brief history of how Samsung made the journey from a post-war trading company to an international technology giant. I will then describe where Samsung is today and where it could be heading in the future.

Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Quantitative Analysis

<p>Since our Original on <a href="https://www.smartkarma.com/insights/asia-buyback-forecasting-which-companies-are-likely-to-raise-cut-buybacks" target="_blank" data-smartkarma-citation="insights:47196" rel="noopener">Asia Buyback Forecasting | Which Companies Are Likely to Raise/Cut Buybacks?</a>, published on Jan 31 2021, this is our first quarterly update. Below we provide updated results from our models based on latest reported fiscal year-end financials. We also discuss companies where there is notable change in our conviction level based on updated data.</p>
<p>At the webinar in March, there was also a request for conducting price movement analysis corresponding to our buyback raise/cut outlook for our back-test results. This analysis is now available. Our results show a decent outperformance/underperformance corresponding to buyback raise/cut prediction, suggesting that users of our models will benefit from guiding their investment decisions based on our buyback raise/cut outlook.</p>

Since our Original on Asia Buyback Forecasting | Which Companies Are Likely to Raise/Cut Buybacks?, published on Jan 31 2021, this is our first quarterly update. Below we provide updated results from our models based on latest reported fiscal year-end financials. We also discuss companies where there is notable change in our conviction level based on updated data.
At the webinar in March, there was also a request for conducting price movement analysis corresponding to our buyback raise/cut outlook for our back-test results. This analysis is now available. Our results show a decent outperformance/underperformance corresponding to buyback raise/cut prediction, suggesting that users of our models will benefit from guiding their investment decisions based on our buyback raise/cut outlook.

Asia Buyback Forecasting | Quarterly Update 1.0

<div>
<p>In this Smartkarma Original, we bring to you a quantitative approach for identifying Asian companies that are likely to raise/cut buyback. Applying this approach to a universe of 920+ companies listed across Asia helped us identify 40+ and 50+ companies that have a high likelihood of raising and cutting buybacks, respectively, over the next five years.</p>
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<div>
<div class="content-highlight">
<p><strong>What's Original?</strong></p>
<ul style="list-style-type: disc;">
<li>We have two separate models, one for forecasting Buyback Raise and the other for Buyback Cut.</li>
<li>Our back test results are very encouraging with &gt;85% hit rate for our Buyback Raise model and &gt;94% hit rate for our Buyback Cut model.</li>
<li>For our Buyback Raise model, we differentiate from other quantitative buyback models by incorporating competing uses of cash like inorganic acquisitions through “Goodwill as % of Total Assets” parameter. Based on our analysis, we have also determined that, contrary to usual perception, any dividend payout is not a competing use of cash vs buyback but a healthy sign of capital return discipline and have incorporated it accordingly in our model. We also use long-term ROE vs growth trends to filter companies where the cash levels maybe low but the capability to do buyback with time can grow significantly. At the same time, we ensure to weed off very high growth companies that may have high re-investment needs through our carefully selected threshold for the "Long-term Revenue CAGR" parameter. </li>
</ul>
</div>
</div>
</div>
<div>
<h3>Insight Flow</h3>
</div>
<div>
<ul style="list-style-type: disc;">
<li>Live Dashboard</li>
<li> Methodology
<ul style="list-style-type: circle;">
<li>Buyback Raise Model</li>
<li>Buyback Cut Model</li>
</ul>
</li>
<li>Universe</li>
<li>Back Test Results
<ul style="list-style-type: circle;">
<li>Buyback Raise Model</li>
<li>Buyback Cut Model</li>
</ul>
</li>
<li>Model Results
<ul style="list-style-type: circle;">
<li>Summary Statistics</li>
<li>Companies with High Probability of Buyback Raise</li>
<li>Companies with High Probability of Buyback Cut</li>
</ul>
</li>
<li>Buyback Timing</li>
<li>Model Risks &amp; Limitations</li>
<li>Conclusion</li>
</ul>
</div>


In this Smartkarma Original, we bring to you a quantitative approach for identifying Asian companies that are likely to raise/cut buyback. Applying this approach to a universe of 920+ companies listed across Asia helped us identify 40+ and 50+ companies that have a high likelihood of raising and cutting buybacks, respectively, over the next five years.




What's Original?

We have two separate models, one for forecasting Buyback Raise and the other for Buyback Cut.
Our back test results are very encouraging with &gt;85% hit rate for our Buyback Raise model and &gt;94% hit rate for our Buyback Cut model.
For our Buyback Raise model, we differentiate from other quantitative buyback models by incorporating competing uses of cash like inorganic acquisitions through “Goodwill as % of Total Assets” parameter. Based on our analysis, we have also determined that, contrary to usual perception, any dividend payout is not a competing use of cash vs buyback but a healthy sign of capital return discipline and have incorporated it accordingly in our model. We also use long-term ROE vs growth trends to filter companies where the cash levels maybe low but the capability to do buyback with time can grow significantly. At the same time, we ensure to weed off very high growth companies that may have high re-investment needs through our carefully selected threshold for the "Long-term Revenue CAGR" parameter. 





Insight Flow



Live Dashboard
 Methodology

Buyback Raise Model
Buyback Cut Model


Universe
Back Test Results

Buyback Raise Model
Buyback Cut Model


Model Results

Summary Statistics
Companies with High Probability of Buyback Raise
Companies with High Probability of Buyback Cut


Buyback Timing
Model Risks &amp; Limitations
Conclusion



Asia Buyback Forecasting | Which Companies Are Likely to Raise/Cut Buybacks?

Cross Asset Strategy

<p>October continued to see sector rotation in Korea with growth-oriented stocks under performing value-oriented stocks. The following were the top 10 issues related to Korean stock market, economy, and politics in October 2020.</p><p><strong>1) DEATH OF SAMSUNG GROUP CHAIRMAN LEE KUN HEE</strong></p><p><strong>2) BIG HIT ENTERTAINMENT IPO</strong></p><p><strong>3) REGULATORS GOING AFTER THE OPTIMUS FUNDS </strong></p><p><strong>4) MAJOR POTENTIAL CHANGE IN TAX LAWS THAT COULD RESULT IN BIG SELLING BY RETAIL IN DECEMBER </strong></p><p><strong>5) LG CHEM APPROVES TO SEPARATE THE BATTERY BUSINESS </strong></p><p><strong>6) STRATEGIC PARTNERSHIP BETWEEN NAVER &amp; THE CJ GROUP</strong></p><p><strong>7) SK TELECOM SPINS OFF MOBILITY BUSINESS &amp; PARTNERS WITH UBER </strong></p><p><strong>8) PAYPAL ALLOWS TRANSACTIONS IN CRYPTOS </strong></p><p><strong>9) INCREASED NEWS FLOW ABOUT THE NEED TO RECOUNT VOTES OF 4.15 (15 April 2020) PARLIAMENTARY ELECTION </strong></p><p><strong>10) SOCAR BECOMES THE NEXT UNICORN </strong></p>

October continued to see sector rotation in Korea with growth-oriented stocks under performing value-oriented stocks. The following were the top 10 issues related to Korean stock market, economy, and politics in October 2020.1) DEATH OF SAMSUNG GROUP CHAIRMAN LEE KUN HEE2) BIG HIT ENTERTAINMENT IPO3) REGULATORS GOING AFTER THE OPTIMUS FUNDS 4) MAJOR POTENTIAL CHANGE IN TAX LAWS THAT COULD RESULT IN BIG SELLING BY RETAIL IN DECEMBER 5) LG CHEM APPROVES TO SEPARATE THE BATTERY BUSINESS 6) STRATEGIC PARTNERSHIP BETWEEN NAVER &amp; THE CJ GROUP7) SK TELECOM SPINS OFF MOBILITY BUSINESS &amp; PARTNERS WITH UBER 8) PAYPAL ALLOWS TRANSACTIONS IN CRYPTOS 9) INCREASED NEWS FLOW ABOUT THE NEED TO RECOUNT VOTES OF 4.15 (15 April 2020) PARLIAMENTARY ELECTION 10) SOCAR BECOMES THE NEXT UNICORN 

Korea Stock Market Monthly Recap #53 (October 2020)

South Korea

Samsung SDS Co., Ltd. provides information technology services, such as consulting and technical services. The Company also offers outsourcing services including application outsourcing, IT infrastructure outsourcing, and cloud computing.

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Samsung Sds (018260 KS)

Samsung's Lee Jae-Yong Gets Out of Jail (Again) & NAV Analysis of Samsung C&T

It was announced today that Samsung's Lee Jae-Yong will get out of jail as the Korean government will release him on parole this week after he...

Douglas Kim

Samsung Is In A Crucial Transition

Samsung is a unique company: one of the best brand names to ever come out of East Asia, covering Samsung's history, where it is today and its future

Asian Century Stocks

Asia Buyback Forecasting | Quarterly Update 1.0

This is our first quarterly update since our Original on Buyback Forecasting. We provide updated results based on latest year-end financials.

Ankit Agrawal, CFA

Asia Buyback Forecasting | Which Companies Are Likely to Raise/Cut Buybacks?

A predictive quantitative model for Asian companies to help determine which companies are likely to raise/cut buybacks in future.

Ankit Agrawal, CFA

Korea Stock Market Monthly Recap #53 (October 2020)

In this insight, it provides the summary of the top 10 issues related to Korean stock market, economy, and politics in October 2020.

Douglas Kim

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