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

This weekend, several local media published articles stating that all major domestic financial holding companies are positively reviewing interim dividends this year. These media said that they had heard so from insiders in the local financial sector.Hana Financial Group has paid interim dividends every year. Although the other financial holding companies are able to pay interim dividends under the articles of incorporation, they have never done so.<div class="content-highlight">The FSC conducted a stress test on banks and financial holding companies this month, and as all of them passed, the recommendation to limit dividends came to an end at the end of this month.</div>Therefore, it is highly likely that each financial holding company will hold a board meeting to determine an interim dividend after the 2Q earnings release. As dividends were limited at the beginning of this year by the financial authorities, all of them will likely pay interim dividends.

This weekend, several local media published articles stating that all major domestic financial holding companies are positively reviewing interim dividends this year. These media said that they had heard so from insiders in the local financial sector.Hana Financial Group has paid interim dividends every year. Although the other financial holding companies are able to pay interim dividends under the articles of incorporation, they have never done so.The FSC conducted a stress test on banks and financial holding companies this month, and as all of them passed, the recommendation to limit dividends came to an end at the end of this month.Therefore, it is highly likely that each financial holding company will hold a board meeting to determine an interim dividend after the 2Q earnings release. As dividends were limited at the beginning of this year by the financial authorities, all of them will likely pay interim dividends.

Interim Div Yield Projections of Korean Financial Holdcos Ahead of June 29 Ex-Div Date

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

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In this insight, we provide an update of Kakao Bank which is getting ready to release its IPO prospectus in the coming days. Even without the prospectus, the company has already provided a lot of the the company's financials, industry analysis, and other materials in its annual and quarterly earnings filings. In this insight, we try to provide some of our key findings from its financial filings of Kakao Bank, but excluding the bankers' valuation assessment which is not yet available. 
Kakao Bank is expected to be one of the largest IPOs in Korea in 2021. In the gray market, it is currently trading at 96,500 won per share or 39.5 trillion won. The two largest banks in Korea are <a href="https://www.smartkarma.com/entities/kb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:718:1" rel="noopener">KB Financial (105560 KS)</a> and <a href="https://www.smartkarma.com/entities/shinhan-financial-group-ltd" target="_blank" data-smartkarma-citation="entities:6978:1" rel="noopener">Shinhan Financial (055550 KS),</a> which have market caps of 22.9 trillion won and 20.6 trillion won, respectively. As a result, Kakao Bank's market cap (in the gray market) is close to the combined market caps of KB Financial and Shinhan Financial (43.5 trillion won) which is quite remarkable. 
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In this insight, we provide an update of Kakao Bank which is getting ready to release its IPO prospectus in the coming days. Even without the prospectus, the company has already provided a lot of the the company's financials, industry analysis, and other materials in its annual and quarterly earnings filings. In this insight, we try to provide some of our key findings from its financial filings of Kakao Bank, but excluding the bankers' valuation assessment which is not yet available. 
Kakao Bank is expected to be one of the largest IPOs in Korea in 2021. In the gray market, it is currently trading at 96,500 won per share or 39.5 trillion won. The two largest banks in Korea are KB Financial (105560 KS) and Shinhan Financial (055550 KS), which have market caps of 22.9 trillion won and 20.6 trillion won, respectively. As a result, Kakao Bank's market cap (in the gray market) is close to the combined market caps of KB Financial and Shinhan Financial (43.5 trillion won) which is quite remarkable. 


Founder/CEO of ROK Advisory, ROK Advisory LLC

Ken S. Kim

Founder/CEO of ROK Advisory

ROK Advisory LLC

ROK is an independent research advisory firm. We guide you to minimize the information gap between foreign and local investors in Northeast Asia with a focus in Korea, Taiwan and Japan.

Independent Research Advisory Firm

Thematic (Sector/Industry)

Does holding company ("holdco") discount in Korea apply to the likes of <a href="https://www.smartkarma.com/entities/sk-telecom-co-ltd-bbccd86c-474d-4a4d-946d-10e911a225a2" target="_blank" data-smartkarma-citation="entities:395:1" rel="noopener">SK Telecom (017670 KS)</a> , <a href="https://www.smartkarma.com/entities/sk-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:393:1" rel="noopener">SK Holdings (034730 KS)</a> (now Inc), <a href="https://www.smartkarma.com/entities/osstem-implant-co-ltd" target="_blank" data-smartkarma-citation="entities:1450:1" rel="noopener">Osstem Implant (048260 KS)</a> , <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> , <a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a> , <a href="https://www.smartkarma.com/entities/fila-holdings-corp" target="_blank" data-smartkarma-citation="entities:10699:1" rel="noopener">Fila Holdings (081660 KS)</a> and others? To answer that question I think we need to know the history of the holdco in Korea.

Does holding company ("holdco") discount in Korea apply to the likes of SK Telecom (017670 KS) , SK Holdings (034730 KS) (now Inc), Osstem Implant (048260 KS) , LG Chem Ltd (051910 KS) , Kakao Corp (035720 KS) , Fila Holdings (081660 KS) and others? To answer that question I think we need to know the history of the holdco in Korea.

The Holding Company Dilemma in Korea -  What's the Right Discount?

The measures recommended by the financial authorities to pay dividends to banks within 20% of their net profit will likely end at the end of this month. Korea's financial holding companies will prepare for a semi-annual or quarterly dividend as soon as they pass a stress test (financial soundness assessment) to be implemented by the financial authorities soon.In this connection, the attention is being on Shinhan Financial Group, which laid the groundwork for a quarterly dividend by amending the articles of incorporation at the general shareholders' meeting earlier this year. Accordingly, Shinhan Financial Group plans to review quarterly dividends at the earliest possible.

The measures recommended by the financial authorities to pay dividends to banks within 20% of their net profit will likely end at the end of this month. Korea's financial holding companies will prepare for a semi-annual or quarterly dividend as soon as they pass a stress test (financial soundness assessment) to be implemented by the financial authorities soon.In this connection, the attention is being on Shinhan Financial Group, which laid the groundwork for a quarterly dividend by amending the articles of incorporation at the general shareholders' meeting earlier this year. Accordingly, Shinhan Financial Group plans to review quarterly dividends at the earliest possible.

Shinhan Financial Quarterly Dividends: Procedural Issues, Stress Test, & Payment Size

Korea's financial regulators, the Financial Services Commission, had advised the local banks and bank holding companies to keep a dividend payout ratio below 20%. The purpose was clear. It was to secure a sufficient capital buffer to absorb potential losses resulting from COVID-19.This recommendation for the 20% cap is effective until the end of this month.The market widely expects the FSC to not renew this 20% dividend cap after this month amid the fast-rebounding economy.

Korea's financial regulators, the Financial Services Commission, had advised the local banks and bank holding companies to keep a dividend payout ratio below 20%. The purpose was clear. It was to secure a sufficient capital buffer to absorb potential losses resulting from COVID-19.This recommendation for the 20% cap is effective until the end of this month.The market widely expects the FSC to not renew this 20% dividend cap after this month amid the fast-rebounding economy.

Korea Banks 20% Dividend Cap Scrapping: Projected Div Payout & Yield of 8 Bank Stocks

South Korea

KB Financial Group Inc. (the "Company"), in accordance with Financial Holding Companies Act, was established on September 29, 2008, through stock transfer with the former shareholders of its subsidiaries including Kookmin Bank in order to provide management services and financing to associated companies. The headquarters are located at Seoul, Korea

Hana Financial Group Inc., in accordance with Financial Holding Companies Act, was established on December 1, 2005, through stock transfer with the former shareholders of its subsidiaries in order to provide management services and financing to associated companies.

Industrial Bank of Korea(IBK) is a policy bank providing development finance and related banking services to support small and medium-sized enterprises in Korea. The Bank provides loans, discount bills, trade finance, deposits, foreign exchange, and payment guarantees. The company also offers services such as credit cards, insurance and smart-phone banking.

Woori Financial Group Inc. provides commercial banking services. The Company offers deposit services, loan services, bill services, settlement services, credit card, international, online banking, and other related services. Woori Financial Group also operates banking and retail banking businesses.

BNK Financial Group Inc. a holding company, provides a full range of consumer and commercial banking-related financial services. The Company's main businesses include banking, trust banking, and assets management to individuals, businesses, and other financial institutions.

JB Financial Group Co. Ltd., a holding company, provides a full range of consumer and commercial banking-related financial services.

DGB Financial Group Inc., a financial holding company, provides a full range of consumer and commercial banking-related financial services.  The Company operates and controls its financial subsidiaries such as Daegu Bank, Daegu Credit Information, and DBG Capital.

Jeju Bank is a regional commercial bank that provides banking, foreign exchange, trust account, and other related retail banking services.

Pureun Mutual Savings Bank provides financial services, such as loans, deposits, savings accounts, bills discounts, installment accounts, and foreign exchange.

Hang Seng Bank Limited and its subsidiaries provide banking and related financial services.

CIMB Group Holdings Berhad provides commercial banking and related financial services. The Company and its subsidiaries, operate as a regional universal bank offering a full range of financial products and services, covering corporate and investment banking, consumer banking, treasury, insurance and asset management.

Standard Chartered PLC is an international banking group operating principally in Asia, Africa, and the Middle East. The Company offers its products and services in the personal, consumer, corporate, institutional and treasury areas.

CTBC Financial Holding Company Ltd. is a holding company.  Through its subsidiaries, the Company provides a variety of banking and financial services, including deposit, loan, guarantee, international banking, trust banking, credit card, investment banking, safety deposit box, and Internet banking services.

Punjab National Bank provides financial services such as corporate and personal banking, industrial finance, agricultural finance, financing of trade and international banking. The Company provides services to domestic conglomerates, medium and small industrial units, exporters, non-resident Indians and multinational companies.

Bank of Baroda owns and operates commercial banks in India.  The Group's banks provide the traditional forms of banking services, including CD's, Credit Card services and a variety of car loans, in addition to gold banking and a range of insurance services.  The Group also owns IBU International Finance Limited, an international banking company in Hong Kong.

Public Bank Berhad provides a range of banking and financial services which include leasing and factoring, stock and futures broking, financing for the purchase of licensed public vehicles, and other financial services. The Group's overseas operations include branches in Hong Kong, Sri Lanka, Laos, Cambodia, and Vietnam.

Malayan Banking Berhad operates as a bank. The Company provides financial services such as insurance, asset management, stock broking, nominee services, venture capital, leasing, and Internet banking. Malayan Banking Berhad serves customers in South East Asia.

Bank of Nanjing Co., Ltd. operates commercial banking businesses. The Company offers deposits, loans, settlement, discounting, financial bond issuance, government bond underwriting, bank guarantee, and other related financial services. Bank of Nanjing provides services for enterprises and individuals.

E.Sun Financial Holding Company Ltd. is a holding company.  Through its subsidiaries, the Company provides banking, brokerage and dealer services.

Shinhan Financial Group Co., Ltd., a holding company, provides a full range of consumer and commercial banking-related financial services.  The company's main businesses include banking, securities brokerage, trust banking, and assets management to individuals, businesses, and other financial institutions.

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Shinhan Financial (055550 KS)

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Korea's financial regulators will likely scrap the 20% dividend payout ratio cap this month. This post investigates the projected dividend payout...

Sanghyun Park

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