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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>The KRX will announce the results of the September review of the BBIG indices in August and the changes will become effective after the close of trading on 9 September.</p><p>The BBIG (secondary <strong>B</strong>attery, <strong>B</strong>io, <strong>I</strong>nternet and <strong>G</strong>aming sectors) indices were launched late last year. ETFs were subsequently launched on the 5 indices and the BBIG ETF and the Secondary Battery ETF have gathered a significant amount of assets since then.</p><p>At the September rebalance we expect the following changes:</p><ul>
<li>Secondary Battery ETF: <a href="https://www.smartkarma.com/entities/sk-ie-technology" target="_blank" data-smartkarma-citation="entities:29207:1" rel="noopener">SK IE Technology (361610 KS)</a> replaces <a href="https://www.smartkarma.com/entities/chunbo-co-ltd" target="_blank" data-smartkarma-citation="entities:27848:1" rel="noopener">Chunbo Co Ltd (278280 KS)</a>
</li>
<li>Bio ETF: <a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a> joins the index and the top 3 stocks. This moves <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals Co Ltd (326030 KS)</a> to the plus group; <a href="https://www.smartkarma.com/entities/hanmi-pharm-co-ltd" target="_blank" data-smartkarma-citation="entities:12476:1" rel="noopener">Hanmi Pharm (128940 KS)</a> joins the index and <a href="https://www.smartkarma.com/entities/seegene-inc" target="_blank" data-smartkarma-citation="entities:11483:1" rel="noopener">Seegene Inc (096530 KS)</a> and <a href="https://www.smartkarma.com/entities/green-cross-corp" target="_blank" data-smartkarma-citation="entities:2969:1" rel="noopener">Green Cross (006280 KS)</a> are deleted.</li>
<li>Internet ETF: <a href="https://www.smartkarma.com/entities/kg-inicis-co-ltd" target="_blank" data-smartkarma-citation="entities:5234:1" rel="noopener">KG Inicis Co Ltd (035600 KS)</a> replaces <a href="https://www.smartkarma.com/entities/rsupport-co-ltd" target="_blank" data-smartkarma-citation="entities:14783:1" rel="noopener">Rsupport Co Ltd (131370 KS)</a> </li>
<li>Game ETF: <a href="https://www.smartkarma.com/entities/devsisters-co-ltd" target="_blank" data-smartkarma-citation="entities:14096:1" rel="noopener">Devsisters (194480 KS)</a> replaces <a href="https://www.smartkarma.com/entities/neptune-company" target="_blank" data-smartkarma-citation="entities:28826:1" rel="noopener">Neptune Company (217270 KS)</a>.</li>
<li>BBIG ETF: <a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a> replaces <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals Co Ltd (326030 KS)</a> </li>
</ul><p>There could be more interesting changes if <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (1486402D KS)</a> lists before end July as expected.</p><p>The first rebalance of the index took place in February this year and the inclusions outperformed the exclusions by nearly 8% between announcement of the changes and implementation. So this rebalance is something worth looking at.</p>

The KRX will announce the results of the September review of the BBIG indices in August and the changes will become effective after the close of trading on 9 September.The BBIG (secondary Battery, Bio, Internet and Gaming sectors) indices were launched late last year. ETFs were subsequently launched on the 5 indices and the BBIG ETF and the Secondary Battery ETF have gathered a significant amount of assets since then.At the September rebalance we expect the following changes:
Secondary Battery ETF: SK IE Technology (361610 KS) replaces Chunbo Co Ltd (278280 KS)

Bio ETF: SK Bioscience (302440 KS) joins the index and the top 3 stocks. This moves SK Biopharmaceuticals Co Ltd (326030 KS) to the plus group; Hanmi Pharm (128940 KS) joins the index and Seegene Inc (096530 KS) and Green Cross (006280 KS) are deleted.
Internet ETF: KG Inicis Co Ltd (035600 KS) replaces Rsupport Co Ltd (131370 KS) 
Game ETF: Devsisters (194480 KS) replaces Neptune Company (217270 KS).
BBIG ETF: SK Bioscience (302440 KS) replaces SK Biopharmaceuticals Co Ltd (326030 KS) 
There could be more interesting changes if  Krafton Inc (1486402D KS) lists before end July as expected.The first rebalance of the index took place in February this year and the inclusions outperformed the exclusions by nearly 8% between announcement of the changes and implementation. So this rebalance is something worth looking at.

KRX BBIG Index Rebalance Preview: Worth a Look

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.

Equity Capital Markets

Offering price &amp; sizeSD Biosensor lowered its IPO price from ₩66,000~85,000 to ₩45,000~52,000. This is a nearly 40% decrease from the previous price band. The newly adjusted price band now implies a market cap range at ₩4.57~5.28T.









Indicative price band
Low, previous
High, previous
Low, adjusted
High, adjusted


Price
₩66,000
₩85,000
₩45,000
₩52,000


Offering value
₩1,026.5B
₩1,322.0B
₩559.9B
₩647.0B


- Institutional allotment
₩564.6B
₩727.1B
₩307.9B
₩355.8B


Implied market cap
₩6,843.3B
₩8,813.3B
₩4,572.6B
₩5,283.9B

Source: DART

We also see a substantial decrease in the offering size, nearly halving the total offering value to ₩560~647B.







Offering size
Previous
Adjusted


Pre-IPO SO
93,317,753
93,317,753


Offering
15,552,900
12,442,200


- % of SO
16.67%
13.33%


Institutional allotment
55.00~75.00%
55.00~75.00%


Primary
10,368,600
8,294,800


- % of the total offering
66.67%
66.67%


Secondary
5,184,300
4,147,400


 - % of the total offering
33.33%
33.33%


Post-IPO shares outstanding
103,686,353
101,612,553


Capital increase rate
11.11%
8.89%


Dilution
10.00%
8.16%

Source: DART

ScheduleThe IPO schedule has also been delayed by a month. The company will open the book on July 5 to finalize the offering price on July 7. Then, SD Biosensor proceeds with the subscription on July 8.





Timetable

Book open
2021. 7. 5


Book close
2021. 7. 6


Subscription
2021. 7. 8


Payment
2021. 7. 13


Listing
TBA

Source: DART

ValuationSD Biosensor added local peers (Humasis, Labgenomics, and Bioneer) with relatively low PERs to the valuation comps. This led to a reduction of the offering price by up to 40%. As a result, the adjusted average PER is 14.64x, down 23.31% from the previous average PER of 19.09x.











Valuation peers
Seegene Inc
Thermo Fisher Scientific Inc.
PerkinElmer, Inc.
Humasis Co Ltd
Labgenomics Co Ltd
Bioneer Corp


Ticker
096530
TMO
PKI
205470
084650
064550


Currency
KRW
USD
USD
KRW
KRW
KRW


FY20 earnings (in millions)
₩503,147
$6,375
$728
₩20,937
₩42,764
₩59,188


Total shares
52,225,994
393,793,362
112,061,794
34,194,111
11,322,125
25,211,579


EPS
₩9,634
$16.19
$6.50
₩612
₩3,777
₩2,348


Reference share price
₩61,600
$441.00
$138.80
₩12,000
₩21,695
₩17,540


PER
6.39x
27.24x
21.37x
19.60x
5.74x
7.47x


Average PER
14.64x

Source: DART

Applying the adjusted earnings multiple of 14.64x to SD Biosensor's FY2020 earnings gives an ₩87,635 price per share, putting the indicative price band discount at 40.66~48.65%.





SD Biosensor PER valuation

Ticker
137310


Currency
KRW


FY20 earnings (in millions)
₩615,636


Total shares
102,818,553


EPS
₩5,988


Reference share price
₩87,635


PER
14.64x


 - The indicative band discount
40.66~48.65%

Source: DART



SD Biosensor Offering Price/Size Adjustment & Valuation Re-Review

CEO, A. Stotz Investment Research

Dr. Andrew Stotz, CFA

Quantamental Investing to beat Benchmarks

A. Stotz Investment Research

We pick stocks. We construct portfolios. All our effort is focused on how to better pick stocks and construct portfolios. We serve fund management companies, family offices, and high net worth individuals.

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<p>We highlight 14 stocks in Asia that look interesting to us based upon our FVMR Methodology. Our research team constantly reviews the Asian markets to try to find interesting ideas based on Fundamentals or Valuation or Momentum or Risk or some combination thereof.</p>

We highlight 14 stocks in Asia that look interesting to us based upon our FVMR Methodology. Our research team constantly reviews the Asian markets to try to find interesting ideas based on Fundamentals or Valuation or Momentum or Risk or some combination thereof.

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<div class="content-highlight"><p>Our base case valuation of SD Biosensor is 82,021 won, which is 4% lower than the high end of the IPO price range of 85,000 won. Given the lack of upside, we would pass on this IPO. Our base case valuation also represents an implied market cap of 8.6 trillion won, which is based on 15.4x P/E using our estimated net profit of 560 billion won in 2022. Our P/E multiple of 15.4x assumes a 50% premium to <a href="https://www.smartkarma.com/entities/seegene-inc" target="_blank" data-smartkarma-citation="entities:11483:1" rel="noopener">Seegene Inc (096530 KS)</a>'s P/E multiple next year. </p></div><p>We have used only Seegene as a comp to SD Biosensor. We have chosen to exclude other companies such as Thermo Fisher Scientific and Perkin Elmer which the bankers included in their valuation assessment. We do not believe these latter two US based companies are appropriate comps to SD Biosensor mainly because SD Biosensor has only a couple of years of sizable sales and profits whereas Thermo Fisher Scientific and Perkin Elmer have many decades of generating billion dollar plus in sales. </p>

Our base case valuation of SD Biosensor is 82,021 won, which is 4% lower than the high end of the IPO price range of 85,000 won. Given the lack of upside, we would pass on this IPO. Our base case valuation also represents an implied market cap of 8.6 trillion won, which is based on 15.4x P/E using our estimated net profit of 560 billion won in 2022. Our P/E multiple of 15.4x assumes a 50% premium to Seegene Inc (096530 KS)'s P/E multiple next year. We have used only Seegene as a comp to SD Biosensor. We have chosen to exclude other companies such as Thermo Fisher Scientific and Perkin Elmer which the bankers included in their valuation assessment. We do not believe these latter two US based companies are appropriate comps to SD Biosensor mainly because SD Biosensor has only a couple of years of sizable sales and profits whereas Thermo Fisher Scientific and Perkin Elmer have many decades of generating billion dollar plus in sales. 

<div class="content-highlight"><p><a href="https://www.smartkarma.com/entities/sd-biosensor-inc" target="_blank" data-smartkarma-citation="entities:33333:1" rel="noopener">SD Biosensor (SDBIOZ KS)</a> is getting ready for an IPO in Korea next month. SD Biosensor will be one of the largest IPOs in Korea in 2021. The IPO price range is from 66,000 won to 85,000 won. At the high end of the IPO price range, the company will raise 1.3 trillion won. The bookbuilding for the institutional investors starts on 10 June. According to the bankers' valuation, at the high end of the IPO price range, the company would be valued at 8.9 trillion won ($7.9 billion). The lead underwriters of this IPO include NH Investment &amp; Securities and Korea Investment &amp; Securities. </p></div><p>Established in 2010, SD Biosensor is a bio-diagnostic company that provides in vitro diagnostic products. This is one of the biggest companies in Korea in the field of in-vitro diagnostic products. According to the company, it exported <a href="https://www.edaily.co.kr/news/read?newsId=03634246629015792&amp;mediaCodeNo=257&amp;OutLnkChk=Y" target="_blank" rel="noopener">400 million COVID-19 diagnostic kit</a> related products from 2020 to January 2021.</p><p>The company's sales surged from 73 billion won in 2019 to 1,686.2 billion won in 2020. Operating profit also jumped from 1.5 billion won in 2019 to 738.3 billion won in 2020.</p><table class="table table-striped">
<colgroup>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td style="width: 212pt;">Deal Specifics of the SD Bioscience IPO:</td>
<td style="width: 409pt;"> </td>
</tr>
<tr>
<td>Lead underwriters of the IPO: </td>
<td style="width: 409pt;">NH Investment &amp; Securities, Korea Investment &amp; Securities</td>
</tr>
<tr>
<td>Expected IPO price per share: </td>
<td style="width: 409pt;">66,000 won (low)/85,000 won (high)</td>
</tr>
<tr>
<td>Number of Shares for IPO:</td>
<td style="width: 409pt;">15.55m shares (10.37m new shares; 5.18m old shares)</td>
</tr>
<tr>
<td>IPO base deal size: </td>
<td style="width: 409pt;">US$908m (low);  US$1,170m (high)</td>
</tr>
<tr>
<td>Expected common shares outstanding, fully diluted (post-IPO):  </td>
<td style="width: 409pt;">104.89m shares</td>
</tr>
<tr>
<td>Expected market cap after IPO:</td>
<td style="width: 409pt;">6,923 billion won (low)/8,916 billion won (high)</td>
</tr>
<tr>
<td>Book open: </td>
<td style="text-align: left; width: 409pt;">10-Jun-21</td>
</tr>
<tr>
<td>Book closed:</td>
<td style="text-align: left; width: 409pt;">11-Jun-21</td>
</tr>
<tr>
<td>Listing date: </td>
<td style="text-align: left; width: 409pt;">TBD</td>
</tr>
<tr>
<td>Source: Company data</td>
<td style="width: 409pt;"> </td>
</tr>
</tbody>
</table>

SD Biosensor (SDBIOZ KS) is getting ready for an IPO in Korea next month. SD Biosensor will be one of the largest IPOs in Korea in 2021. The IPO price range is from 66,000 won to 85,000 won. At the high end of the IPO price range, the company will raise 1.3 trillion won. The bookbuilding for the institutional investors starts on 10 June. According to the bankers' valuation, at the high end of the IPO price range, the company would be valued at 8.9 trillion won ($7.9 billion). The lead underwriters of this IPO include NH Investment &amp; Securities and Korea Investment &amp; Securities. Established in 2010, SD Biosensor is a bio-diagnostic company that provides in vitro diagnostic products. This is one of the biggest companies in Korea in the field of in-vitro diagnostic products. According to the company, it exported 400 million COVID-19 diagnostic kit related products from 2020 to January 2021.The company's sales surged from 73 billion won in 2019 to 1,686.2 billion won in 2020. Operating profit also jumped from 1.5 billion won in 2019 to 738.3 billion won in 2020.






Deal Specifics of the SD Bioscience IPO:
 


Lead underwriters of the IPO: 
NH Investment &amp; Securities, Korea Investment &amp; Securities


Expected IPO price per share: 
66,000 won (low)/85,000 won (high)


Number of Shares for IPO:
15.55m shares (10.37m new shares; 5.18m old shares)


IPO base deal size: 
US$908m (low);  US$1,170m (high)


Expected common shares outstanding, fully diluted (post-IPO):  
104.89m shares


Expected market cap after IPO:
6,923 billion won (low)/8,916 billion won (high)


Book open: 
10-Jun-21


Book closed:
11-Jun-21


Listing date: 
TBD


Source: Company data
 




South Korea

Seegene, Inc. manufactures In Vitro Diagnostic (IVD) products mainly through molecular diagnostic method.  The Company provides diagnostic & screening products for cancer, sepsis, influenza and virus infection.

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