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

I added three new single-subsidiary holding companies to my Korea stub list. They are Green Cross Holdings, Hitejinro Holdings, and Seah Holdings.







Korea stubs (single-subsidiary)

Holdco
Ticker
Subsidiary
Ticker


Amorepacific Group
002790
Amorepacific Corp
090430


BGF Co Ltd
027410
BGF Retail Co Ltd
282330


Halla Holdings Corp
060980
Mando Corp
204320


Hanjin Kal
180640
Korean Air Lines Co Ltd
003490


Hankook &amp; Company Co Ltd
000240
Hankook Tire &amp; Technology Co Ltd
161390


HANSAE YES24 HOLDINGS CO., LTD.
016450
Hansae Co., Ltd.
105630


HDC Holdings Co Ltd
012630
HDC Hyundai Development Co
294870


Nexen Corporation
005720
Nexen Tire Corp
002350


Nongshim Holdings Co Ltd
072710
Nongshim Co Ltd
004370


ORION Holdings Corp
001800
Orion Corp
271560


Poongsan Holdings Corporation
005810
POONGSAN CORPORATION
103140


Youngone Holdings Co Ltd
009970
Youngone Corporation
111770


* Green Cross Holdings
005250
* Green Cross Corp
006280


* Hitejinro Holdings Co Ltd
000140
* HiteJinro Co Ltd
000080


* Seah Holdings Corp
058650
* Seah Besteel Corporation
001430

Source: KRX

Halla Holdings and Seah Holdings have the widest discount to their respective NAV, 66.50% and 63.26%, respectively. Nongshim Holdings and BGF closely follow. Hanjin Kal








Korea stubs (single-subsidiary)
NAV discount
Single subsidiary weight in NAV
Single subsidiary weight in GAV


Amorepacific Group
15.23%
95.10%
92.71%


BGF Co Ltd
58.33%
71.57%
84.19%


Halla Holdings Corp
66.50%
70.10%
50.91%


Hanjin Kal
-10.55%
83.08%
83.96%


Hankook &amp; Company Co Ltd
15.04%
89.41%
97.86%


HANSAE YES24 HOLDINGS CO., LTD.
41.51%
75.59%
67.16%


HDC Holdings Co Ltd
37.19%
63.29%
55.47%


Nexen Corporation
46.91%
73.79%
73.89%


Nongshim Holdings Co Ltd
58.79%
69.97%
70.45%


ORION Holdings Corp
45.25%
96.61%
87.61%


Poongsan Holdings Corporation
53.23%
82.21%
86.59%


Youngone Holdings Co Ltd
51.42%
81.28%
86.72%


Green Cross Holdings
48.90%
174.03%
91.25%


Hitejinro Holdings Co Ltd
16.99%
104.18%
82.30%


Seah Holdings Corp
63.26%
57.92%
52.84%

Source: KRX



Korea Stubs Status Check: 15 in Total Incl. 3 New Ones

SeAH Steel Corporation (003030 KS), which is one of Korea's mid-sized conglomerates, recently became Korea's latest one to embark on holding company conversion. Due to its smaller size, it hasn't received much attention from the market. But thanks to the recent profit-taking opportunities provided by the HDC holdco conversion, there has been 'locally' a growing interest in this SeAH Steel holdco conversion event. So, here is a summary of this event. The official spinoff date is Sep 1, 2018. The divestiture will be finalized at OGM scheduled for July 27, 2018. SeAH Steel Corporation (003030 KS) shares will be suspended for trade from Aug 30 to Oct 4, 2018. New shares will be re-listed on Oct 5, 2018.Important eventsBoard resolutionApr 9, 2018Divestiture finalization at EGMJuly 27, 2018 * Shareholder registry closure for EGMApr 30, 2018Divestiture registrationSep 1, 2018Stock trade suspension periodAug 30 - Oct 4, 2018Re-listing (for both entities)Oct 5, 2018Source: DARTThis is basically a two-way split. SeAH Steel Corporation (003030 KS) is scheduled to be split into holdco (SeAH Steel Holdings) and opco (SeAH Steel) based on a spinoff ratio of 0.5272833 to 0.4727167. SeAH Steel Holdings is going to be a surviving entity, whereas SeAH Steel is going to be a new entity. The holdco is going to take all the subsidiaries stakes while the opco is going to operate as a pure stand-alone business. As shown below, the holdco is going to directly manage the opco along with the two other subsidiaries, SeAH International and SeAH CM. Then, all other subsidiaries are going to be placed under SeAH International.Entity nameBusiness roleSpinoff methodEntity statusSpinoff ratioSeAH Steel HoldingsHoldcoEquity spinoffSurviving entity0.5272833SeAH SteelOpcoEquity SpinoffNew entity0.4727167Source: DART(SeAH Steel's current governance structure - Source: DART)(SeAH Steel's post demerger governance structure - Source: DART)Spinoff ratio was determined based on FY17 4Q financials. Spinoff ratio calculation is as follows:As of Dec 2017 (₩ mil)Pre demergerSeAH Steel HoldingsHoldco - surviving entitySeAH SteelOpco - new entityEquity1,161,274612,320550,070Split ratio1.0000000.52728330.4727167Split ratio calculation-612,320/1,161,274550,070/1,161,274Source: DART, Sanghyun ParkAs of Dec 2017 (₩ mil)Pre demergerSeAH Steel HoldingsHoldco - surviving entitySeAH SteelOpco - new entityAssets1,749,526669,0241,081,618Current assets574,58075,450499,130Non-current assets1,174,946593,574582,488Liabilities588,25256,704531,548Current liabilities378,48741,587336,900Non-current liabilities209,76515,117194,648Equity1,161,274612,320550,070Capital30,00015,81914,182Other paid-in capital58,707-476,065535,888Earnigns surplus1,028,5331,028,533-Other44,03444,034-Split ratio based on equity-0.52728330.4727167Source: DARTThe major shareholder side (the owner family) currently has a combined 47.64% stake in SeAH Steel. With 3.19% treasury shares, their total stake amounts to 50.83%. Among the institutional investors, NPS and Bearing have 10.36% and 6.46%, respectively.SeAH Steel - shareholding structureAPAC Investors * 78.0% owned by Lee Soon-hyeong and 20.1% owned by Lee Ju-seong750,43212.51%Lee Ju-seong700,84911.68%Lee Soon-hyeong680,55611.34%Lee Tae-seong252,0114.20%SeAH Haeam Academic Scholarship Foundation162,7572.71%SeAH Lee Won-hyeong Cultural Foundation137,2432.29%Kim Hae-young96,6581.61%Lee Joo-hyun36,9600.62%LEE ALEXIS JENNIFERES32,0000.53%Huh In-hong4,3000.07%Huh Eun-hong4,3000.07%Lee Hui-ryeong5000.01%Total owned by the major shareholder and the special affiliate persons2,858,56647.64%Treasury shares191,5073.19%Source: FnGuideSeAH Steel - major institutional investorsNPS621,72810.36%Bearing Asset387,8546.46%Mirae-1.21%KIM-0.85%Samsung-0.83%NH-Amundi-0.67%Shinyoung-0.48%KB-0.32%Hanwha-0.32%Kyobo-AXA-0.08%Shinhan BNP Paribas-0.08%Source: FnGuide

South Korea

Poongsan Holdings Corporation is an investment holding company.  The company, through its subsidiaries, manufactures non-ferrous metal and defense-related products.

KISCO Corp. provides a wide range of steel products. The Company produces deformed bars including high tensile steel bars for nuclear power plants and low-allow steel bars for liquefied natural gas underground storage facilities.

SeAH Steel Corporation operates as a steel products manufacturing company. The Company produces and sells carbon steel pipes, stainless steel pipes, titanium tubes, galvanized color steel sheets, and other products. SeAH Steel markets its products primarily throughout Korea with limited overseas.

Dongkuk Industries Co., Ltd. manufactures cold rolled low carbon steel, hot-dip galvanized steel, pickled & oiled coil, ceramics, ferrite and refractories.  The Company also operates international trading and construction services.

KISWIRE Ltd. manufactures secondary steel products, such as wire ropes and wire strands for electric wire and springs.  The Company markets to the shipbuilding and construction industries, and exports products to overseas markets.  KISWIRE also has a financial subsidiary.

Husteel Co., Ltd. manufactures and markets a variety of steel pipes such as line pipes, structural pipes, PFP pipes, and polyethylene-coated steel pipes.  The Company's products apply to convey liquid, gas, or vapor, and to complement buildings.  Husteel supplies its products mainly to automobile, and construction industries.

Hyundai BNG Steel Co., Ltd. manufactures cold rolled stainless steel sheets, special steel bars, and seamless steel tubes.

Choil Aluminum Co., Ltd. manufactures and markets aluminum sheets, plates, ingots, foils. and fins.  The Company supplies its products to the construction materials, electric, electronic, shipbuilding, automobile, and packaging industries.

Dongkuk Steel Mill Co., Ltd. manufactures a variety of steel products.  The Company's products include rod steel for reinforced concrete, shape steel, and steel sheet for the construction and shipbuilding industries.

KISCO Holdings Co., Ltd. manufactures a variety of steel products. The Company's products include steel plates, steel pipes, reinforcing bars, steel channels, hot rolled steel bars, steel angles, and forged steel bars.

New Pacific Metals Corp. is a Canadian Mining Issuer, in the business of exploring and developing precious metal properties in Bolivia. The Company's flagship project is the silver sand project in the potosi department of Bolivia.

Changchun Gas Co., Ltd. produces metallurgical coke and distributes gas for commercial or residential use in Changchun and Yanji, China. The Company also provides gas pipe installation service.

Nippon Denko Co., Ltd. produces ferroalloy, silicon metals, and industrial chemicals.  The Company imports ferrochromium from a joint venture in South Africa.  Nippon Denko is a member of the Nippon Steel Group.

Neturen Co., Ltd. produces induction hardening equipment, steel products, and automobile parts.  The Company also operates real estate business.

Catalyst Metals Ltd. operates as a mineral exploration company. The Company explores for and mines molybdenum. Catalyst Metals serves customers in Australia.

Pennar Industries Limited manufactures metal products for the infrastructure, construction, railways, automotive and general engineering sectors.

Philex Mining Corporation produces copper concentrates, containing copper, gold, and silver. The Company was incorporated in 1955.

Grange Resources Limited is a mining and exploration company. The Company explores for iron ore and pellets. Grange Resources serves customers in Australia and Asia.

BGRIMM Magnetic Materials & Technology Co., Ltd. produces and develops permanent magnetic ferrite materials, adhesive permanent magnet, and permanent magnetic ferrite sintered devices.

Sovereign Metals Ltd. explores and mines for copper and gold.

SeAH Holdings Corporation is a holding company.  The Company, through its subsidiaries, fabricates metal products, manufactures automotive parts, distributes natural gas, provides information technology services, and offers inland transportation services.

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Seah Holdings (058650 KS)

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SeAH Steel Holdco Conversion Summary

SeAH Steel Corporation (003030 KS), which is one of Korea's mid-sized conglomerates, recently became Korea's latest one to embark on holding...

Sanghyun Park

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