Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<p>In this insight, we explain the recent minority shareholders upheaval of <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS). </a>We also discuss the following important issues:</p><ul>
<li>Increasing concerns about the excessive inheritance taxes and the transition of the major shareholding from the former Chairman of Celltrion Group Seo Jung-Jin to his sons</li>
<li>The timing of the merger of the three major Celltrion companies (Celltrion Inc, <a href="https://www.smartkarma.com/entities/celltrion-healthcare" target="_blank" data-smartkarma-citation="entities:23641:1" rel="noopener">Celltrion Healthcare (091990 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>
</li>
<li>Rising inventory at Celltrion Healthcare &amp; tax Issue for Founder Seo Jung-Jin</li>
</ul><p>It was reported in the<a href="http://www.sisaweek.com/news/articleView.html?idxno=147919" target="_blank" rel="noopener"> local media</a> that some of the local minority shareholders of Celltrion have formed an <em>"emergency response committee"</em> in order to prepare for an official activist stance to urge the company to improve its corporate governance. In recent months, share price of <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a> has declined significantly and this has made many minority shareholders very upset. Celltrion's share price has declined 44% since its highs in December 2020. </p><p><strong>Conclusion - </strong>There are numerous uncertainties facing Celltrion Inc right now. The two biggest uncertainties include the transfer of the controlling ownership stake from the founder Seo Jung-Jin to his two sons along with the merger of the three public Celltrion companies. A few retail minority shareholders formed an <em>emergency response committee</em> in order to raise more voice to improve corporate governance. </p><p>In the midst of these uncertainties, we believe that there could be further weakness in Celltrion Inc. Although a merger of the three public Celltrion companies could boost the share price in the short term, there remain concerns about the excessive inventory at Celltrion Healthcare/Celltrion Inc and until the financials of the three companies on a merged basis become available, there could be continued negative sentiment on the company.</p>

In this insight, we explain the recent minority shareholders upheaval of Celltrion Inc (068270 KS). We also discuss the following important issues:
Increasing concerns about the excessive inheritance taxes and the transition of the major shareholding from the former Chairman of Celltrion Group Seo Jung-Jin to his sons
The timing of the merger of the three major Celltrion companies (Celltrion Inc, Celltrion Healthcare (091990 KS), and Celltrion Pharm (068760 KS))

Rising inventory at Celltrion Healthcare &amp; tax Issue for Founder Seo Jung-Jin
It was reported in the local media that some of the local minority shareholders of Celltrion have formed an "emergency response committee" in order to prepare for an official activist stance to urge the company to improve its corporate governance. In recent months, share price of Celltrion Inc (068270 KS) has declined significantly and this has made many minority shareholders very upset. Celltrion's share price has declined 44% since its highs in December 2020. Conclusion - There are numerous uncertainties facing Celltrion Inc right now. The two biggest uncertainties include the transfer of the controlling ownership stake from the founder Seo Jung-Jin to his two sons along with the merger of the three public Celltrion companies. A few retail minority shareholders formed an emergency response committee in order to raise more voice to improve corporate governance. In the midst of these uncertainties, we believe that there could be further weakness in Celltrion Inc. Although a merger of the three public Celltrion companies could boost the share price in the short term, there remain concerns about the excessive inventory at Celltrion Healthcare/Celltrion Inc and until the financials of the three companies on a merged basis become available, there could be continued negative sentiment on the company.

Celltrion Inc - The Minority Shareholders Upheaval & Concerns About Potential Inheritance Tax Issue

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.

<p>At 4 pm today, SK Chemicals announced that it would conduct a bonus issue.</p><p><a href="https://kind.krx.co.kr/common/disclsviewer.do?method=search&amp;acptno=20211007000382&amp;docno=&amp;viewerhost=&amp;viewerport=" target="_blank" rel="noopener">Here is the link to the regulatory filing at the KRX KIND</a>.</p><div class="content-highlight"><ul>
<li><strong>It will be a 50% capital increase ratio, which allocates 0.5 new shares per share.</strong></li>
<li><strong>The number of newly issued stocks is 5,869,384 common stocks and 656,759 preferred stocks, for a total of 6,526,143 shares.</strong></li>
<li><strong>The new stock allocation base date is October 22, and the expected listing date is November 9. </strong></li>
</ul></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/233/997/original/1.png?1633605858" class="editor-image img-responsive" data-smartkarma-image-id="233997"></figure><p></p></section><p></p><p>As a result, SK Chemicals' ordinary shares outstanding becomes 17,608,152 after the bonus issue, and the total number of preferred shares will be 1,970,278. Of course, 157,779 treasury shares (Ord: 12,628 and 1P: 145,151) are not allocated new shares.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/233/999/original/2.png?1633606196" class="editor-image img-responsive" data-smartkarma-image-id="233999"></figure><p></p></section><p>In addition, SK Chemicals has also introduced a new dividend policy.</p><p><a href="https://engkind.krx.co.kr/common/disclsviewer.do?method=search&amp;acptNo=20211007000423&amp;docno=&amp;formProcsCd=070&amp;language=english" target="_blank" rel="noopener">Here is the link to the regulatory filing at the KRX KIND</a>.</p><div class="content-highlight"><ul>
<li><strong>A dividend payout ratio of 30% from 2021 to 2023: SK Chemicals will use 30% of the de-consolidated net profit generated for three years from 2021 to 2023 for shareholder return.</strong></li>
<li><strong>In addition, SK Chemicals will actively consider interim dividends starting FY2022.</strong></li>
</ul></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/234/003/original/3.png?1633606720" class="editor-image img-responsive" data-smartkarma-image-id="234003"></figure></section>

At 4 pm today, SK Chemicals announced that it would conduct a bonus issue.Here is the link to the regulatory filing at the KRX KIND.
It will be a 50% capital increase ratio, which allocates 0.5 new shares per share.
The number of newly issued stocks is 5,869,384 common stocks and 656,759 preferred stocks, for a total of 6,526,143 shares.
The new stock allocation base date is October 22, and the expected listing date is November 9. 
As a result, SK Chemicals' ordinary shares outstanding becomes 17,608,152 after the bonus issue, and the total number of preferred shares will be 1,970,278. Of course, 157,779 treasury shares (Ord: 12,628 and 1P: 145,151) are not allocated new shares.In addition, SK Chemicals has also introduced a new dividend policy.Here is the link to the regulatory filing at the KRX KIND.
A dividend payout ratio of 30% from 2021 to 2023: SK Chemicals will use 30% of the de-consolidated net profit generated for three years from 2021 to 2023 for shareholder return.
In addition, SK Chemicals will actively consider interim dividends starting FY2022.


SK Chemicals Bonus Issue & New Shareholder Return Policy: Background & Impact

<p>SK Chemicals announced after the market close that it will improve the company's dividend policy and complete a bonus issue. According to the company, these are part of the company's increased emphasis on ESG improvements. We believe these are positive catalysts that are likely to further boost SK Chemicals' share price.</p><p>If the company pays out 30% of its net income as dividends, this could suggest DPS of nearly 10,000 won per share, which means that its DPS could surge nearly five times versus last year. This would also suggest a dividend per share of 3.4% at current prices which would be much better than last year's level.</p><p>SK Chemicals also announced a bonus issue (0.5 new shares for 1 common share). The total number of newly issued shares will be 5.86 million (common shares) and 0.66 million (preferred shares). After the bonus issue, there will be 17.63 million common shares and 2.12 million preferred shares.</p><p><strong>SK Chemicals NAV Analysis - </strong>Our base case NAV valuation of SK Chemicals suggests a valuation of 530,140 won per share, representing an 82% upside from current levels. This is based on the current market valuation of SK Bioscience (68.4% stake), 8x OP of SK Chemicals' core business, and a 50% NAV discount. </p>

SK Chemicals announced after the market close that it will improve the company's dividend policy and complete a bonus issue. According to the company, these are part of the company's increased emphasis on ESG improvements. We believe these are positive catalysts that are likely to further boost SK Chemicals' share price.If the company pays out 30% of its net income as dividends, this could suggest DPS of nearly 10,000 won per share, which means that its DPS could surge nearly five times versus last year. This would also suggest a dividend per share of 3.4% at current prices which would be much better than last year's level.SK Chemicals also announced a bonus issue (0.5 new shares for 1 common share). The total number of newly issued shares will be 5.86 million (common shares) and 0.66 million (preferred shares). After the bonus issue, there will be 17.63 million common shares and 2.12 million preferred shares.SK Chemicals NAV Analysis - Our base case NAV valuation of SK Chemicals suggests a valuation of 530,140 won per share, representing an 82% upside from current levels. This is based on the current market valuation of SK Bioscience (68.4% stake), 8x OP of SK Chemicals' core business, and a 50% NAV discount. 

SK Chemicals - Announces A Big Improvement in Dividends and Bonus Issue

<p>SK Discovery is a pure holding company and consists of two major subsidiaries: </p><ul>
<li>
<a href="https://www.smartkarma.com/entities/sk-chemicals-co-ltd-new" target="_blank" data-smartkarma-citation="entities:26190:1" rel="noopener">SK Chemicals Co Ltd/New (285130 KS)</a> </li>
<li><a href="https://www.smartkarma.com/entities/sk-gas-ltd" target="_blank" data-smartkarma-citation="entities:4088:1" rel="noopener">SK Gas Ltd (018670 KS)</a></li>
</ul><p>Since the stake value of these two subsidiaries is almost the same at this point, SK Discovery's share price should be affected by the share price of these two subsidiaries in a 5:5 ratio.</p><table class="table table-striped">
<colgroup>
<col width="70">
<col width="70">
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Holdings"}'>Holdings</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Stake"}'>Stake</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Value"}'>Value</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"SK Chemicals Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'><strong>SK Chemicals Co Ltd</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"285130"}' data-sheets-numberformat='[null,2,"#,##0",1]' data-sheets-formula='="285130"'><strong>285130</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.3345}' data-sheets-numberformat='[null,3,"0.00%",1]'><strong>33.45%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1132.082485056}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula='=googlefinance(R[0]C[-2], "price")*googlefinance(R[0]C[-2], "shares")*R[0]C[-1]/1000000000'><strong>₩1,132.1B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"SK Gas Ltd."}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'><strong>SK Gas Ltd.</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"018670"}' data-sheets-numberformat='[null,2,"#,##0",1]' data-sheets-formula='="018670"'><strong>018670</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.722}' data-sheets-numberformat='[null,3,"0.00%",1]'><strong>72.20%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1139.584384728}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula='=googlefinance(R[0]C[-2], "price")*googlefinance(R[0]C[-2], "shares")*R[0]C[-1]/1000000000'><strong>₩1,139.6B</strong></td>
</tr>
<tr><td colspan="4"><strong> </strong></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Huvis Corp"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Huvis Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"079980"}' data-sheets-numberformat='[null,2,"#,##0",1]' data-sheets-formula='="079980"'>079980</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.255}' data-sheets-numberformat='[null,3,"0.00%",1]'>25.50%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":91.933875}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula='=googlefinance(R[0]C[-2], "price")*googlefinance(R[0]C[-2], "shares")*R[0]C[-1]/1000000000'>₩91.9B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Other - unlisted"}'>Other - unlisted</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,2,"#,##0",1]'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,3,"0.00%",1]'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":186.394}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=186.394">₩186.4B</td>
</tr>
<tr><td colspan="4" data-sheets-value='{"1":2,"2":"Source: KRX &amp; DART"}'>Source: KRX &amp; DART</td></tr>
</tbody>
</table><table class="table table-striped">
<colgroup>
<col width="70">
<col width="70">
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Assets"}'>Assets</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"% NAV"}'>% NAV</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"% GAV"}'>% GAV</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"% Holdings"}'>% Holdings</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"SK Chemicals Co Ltd"}' data-sheets-formula="=R[0]C[5]"><strong>SK Chemicals Co Ltd</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4642058632163233}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[7]/R13C[-3]"><strong>46.42%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4439548306409918}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[6]/R8C[-4]"><strong>44.40%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4439548306409918}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[5]/SUM(R2C[5]:R5C[5])"><strong>44.40%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"SK Gas Ltd."}' data-sheets-formula="=R[0]C[5]"><strong>SK Gas Ltd.</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4672819869608142}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[7]/R13C[-3]"><strong>46.73%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.44689675814391905}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[6]/R8C[-4]"><strong>44.69%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.44689675814391905}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[5]/SUM(R2C[5]:R5C[5])"><strong>44.69%</strong></td>
</tr>
<tr><td colspan="4"><strong> </strong></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Huvis Corp"}' data-sheets-formula="=R[0]C[5]">Huvis Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.037697115154189074}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[7]/R13C[-3]">3.77%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.03605257429963345}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[6]/R8C[-4]">3.61%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.03605257429963345}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[5]/SUM(R2C[5]:R5C[5])">3.61%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Other - unlisted"}' data-sheets-formula="=R[0]C[5]">Other - unlisted</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.07643010894569513}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[7]/R13C[-3]">7.64%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.07309583691545556}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[6]/R8C[-4]">7.31%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.07309583691545556}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[5]/SUM(R2C[5]:R5C[5])">7.31%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Operation"}' data-sheets-formula="=R[6]C[0]">Operation</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[6]C[2]/R13C[-3]">0.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[6]C[1]/R8C[-4]">0.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,3,"0.00%",1]'>-</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Holdco net cash/debt (deconsolidated)"}' data-sheets-formula="=R[6]C[0]">Holdco net cash/debt (deconsolidated)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.022470519277573812}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[6]C[2]/R13C[-3]">-2.25%</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,3,"0.00%",1]'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,3,"0.00%",1]'>-</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of pref shares"}' data-sheets-formula="=R[4]C[-3]">Value of pref shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.023144554999447935}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=-R[4]C[-3]/R13C[-3]">-2.31%</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,3,"0.00%",1]'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,3,"0.00%",1]'>-</td>
</tr>
<tr><td colspan="4" data-sheets-value='{"1":2,"2":"Source: DART &amp; KRX"}'>Source: DART &amp; KRX</td></tr>
</tbody>
</table><p>However, a significant price divergence has recently occurred between SK Discovery and them. Even with SK Chemicals' recent price fluctuations caused by the activist fund (Metrica), SK Discovery did not fully synchronize. However, what is more striking is that SK Discovery's share price is not at all in sync with the recent surge in SK Gas's share price.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/230/636/original/1.png?1632009568" class="editor-image img-responsive" data-smartkarma-image-id="230636"></figure></section><p>SK Discovery is currently at a 61% discount to NAV. Of course, this discount rate is at a historic high.</p><table class="table table-striped">
<colgroup>
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"NAV"}' data-sheets-note="Sang Hyun Park: Cases when a company's net cash position and the value of its publically traded interests are worth more than its market cap create the opportunity of a stub trade, in which investors can take a view that the company's core business will rise by shorting the minority stakes whilst going long the underlying. Such an opportunity has arisen in the wake of the Alibaba listing which has seen early investing company Yahoo trade at a discount to the value of its stake in Alibaba.">NAV</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of listed holdings"}'>Value of listed holdings</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2363.600744784}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=SUM(R[0]C[10]:R[2])">₩2,363.6B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - % of Holdco market cap"}'>- % of Holdco market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2.4633468515379344}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[-1]C[0]/((R[3]C[-3]*R[0]C[-3])/1000000000)">246.33%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of unlisted holdings"}'>Value of unlisted holdings</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":186.394}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=SUM(R[1]C[10])">₩186.4B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stub value"}'>Stub value</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-1590.4868527840001}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=(R[1]C[-3]*R[-2]C[-3]/1000000000)-R[-3]C[0]-R[-1]C[0]">-₩1,590.5B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stub value per share"}'>Stub value per share</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-83543.3851546826}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]*1000000000/R[-3]C[-3]">-₩83,543</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of operating assets"}'>Value of operating assets</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=SUM(R[5]C[5])">₩0.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"GAV"}'>GAV</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2549.9947447840004}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-6]C[0]+R[-4]C[0]+R[-1]C[0]">₩2,550.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"GAV per share"}'>GAV per share</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":134028.83112132747}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]/R[4]C[-3]*1000000000">₩134,029</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Discount to GAV (excl. treasury shares)"}'>Discount to GAV (excl. treasury shares)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.6239615045633263}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-1]C[0]-R[-4]C[-3])/R[-1]C[0]">62.40%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Holdco net cash/debt (de-consolidated)"}'>Holdco net cash/debt (de-consolidated)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-54.8}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[2]C[5]">-₩54.8B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of pref shares"}'>Value of pref shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":56.44380525}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=(R[-5]C[-3]*R[-2]C[-3]+R[-5]C[-2]*R[-2]C[-2])/1000000000">₩56.4B</td>
</tr>
<tr><td colspan="2"></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"NAV"}'><strong>NAV</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2438.7509395340003}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-5]C[0]+R[-2]C[0]-R[-1]C[0]"><strong>₩2,438.8B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"NAV per share (excl. treasury shares)"}'><strong>NAV per share (excl. treasury shares)</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":128181.80840975358}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]/R[-1]C[-3]*1000000000"><strong>₩128,182</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Discount to NAV"}'><strong>Discount to NAV</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.606808480662963}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-1]C[0]-R[-9]C[-3])/R[-1]C[0]"><strong>60.68%</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: KRX &amp; DART","6":1}'>Source: KRX &amp; DART</td></tr>
</tbody>
</table><p>The sigma on a 20-day moving average calculated by synthesizing these two affiliates at 50:50 is -1.35 at present, and the relative price ratio compared to this synthesis has diverged sharply over the past two weeks.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/230/640/original/image_9329493321632010559259.png?1632010561" class="editor-image img-responsive" data-smartkarma-image-id="230640"></figure>

SK Discovery is a pure holding company and consists of two major subsidiaries: 

SK Chemicals Co Ltd/New (285130 KS) 
SK Gas Ltd (018670 KS)
Since the stake value of these two subsidiaries is almost the same at this point, SK Discovery's share price should be affected by the share price of these two subsidiaries in a 5:5 ratio.








Holdings
Ticker
Stake
Value


SK Chemicals Co Ltd
285130
33.45%
₩1,132.1B


SK Gas Ltd.
018670
72.20%
₩1,139.6B

 

Huvis Corp
079980
25.50%
₩91.9B


Other - unlisted
-
-
₩186.4B

Source: KRX &amp; DART










Assets
% NAV
% GAV
% Holdings


SK Chemicals Co Ltd
46.42%
44.40%
44.40%


SK Gas Ltd.
46.73%
44.69%
44.69%

 

Huvis Corp
3.77%
3.61%
3.61%


Other - unlisted
7.64%
7.31%
7.31%


Operation
0.00%
0.00%
-


Holdco net cash/debt (deconsolidated)
-2.25%
-
-


Value of pref shares
-2.31%
-
-

Source: DART &amp; KRX

However, a significant price divergence has recently occurred between SK Discovery and them. Even with SK Chemicals' recent price fluctuations caused by the activist fund (Metrica), SK Discovery did not fully synchronize. However, what is more striking is that SK Discovery's share price is not at all in sync with the recent surge in SK Gas's share price.SK Discovery is currently at a 61% discount to NAV. Of course, this discount rate is at a historic high.





NAV

Value of listed holdings
₩2,363.6B


- % of Holdco market cap
246.33%


Value of unlisted holdings
₩186.4B


Stub value
-₩1,590.5B


Stub value per share
-₩83,543


Value of operating assets
₩0.0B


GAV
₩2,550.0B


GAV per share
₩134,029


Discount to GAV (excl. treasury shares)
62.40%


Holdco net cash/debt (de-consolidated)
-₩54.8B


Value of pref shares
₩56.4B



NAV
₩2,438.8B


NAV per share (excl. treasury shares)
₩128,182


Discount to NAV
60.68%

Source: KRX &amp; DART

The sigma on a 20-day moving average calculated by synthesizing these two affiliates at 50:50 is -1.35 at present, and the relative price ratio compared to this synthesis has diverged sharply over the past two weeks.

SK Discovery in a Massive Price Divergence Vs. The Synthetic Involving SK Gas

<p>On 13 September, <a href="https://www.smartkarma.com/entities/sk-chemicals-co-ltd-new" target="_blank" data-smartkarma-citation="entities:26190:1" rel="noopener">Sk Chemicals Co Ltd/New (285130 KS)</a> announced after the market close that it will be spinning off its utility business that makes industrial boilers and power generation facilities that produce electricity.</p><div class="content-highlight">
<p>Overall, we believe this spin-off of the utility business will have a positive impact on the company. The utility business is a non-core business of the company and it can realize higher value for this business as it separates this operation into a stand-alone unit.</p>
<p><em>With the six months lock-up ending on September 18th for SK Bioscience shares, investors will be watching carefully to see if indeed SK Chemicals partially sells its shares of SK Bioscience. There are still four trading days left this week and it is likely that investors will likely drive up price of SK Chemicals while drive down the share price of SK Bioscience this week.</em></p>
</div>

On 13 September, Sk Chemicals Co Ltd/New (285130 KS) announced after the market close that it will be spinning off its utility business that makes industrial boilers and power generation facilities that produce electricity.
Overall, we believe this spin-off of the utility business will have a positive impact on the company. The utility business is a non-core business of the company and it can realize higher value for this business as it separates this operation into a stand-alone unit.
With the six months lock-up ending on September 18th for SK Bioscience shares, investors will be watching carefully to see if indeed SK Chemicals partially sells its shares of SK Bioscience. There are still four trading days left this week and it is likely that investors will likely drive up price of SK Chemicals while drive down the share price of SK Bioscience this week.


SK Chemicals - Spinning Off Its Utility Business & Creating Higher Value

South Korea

SK Chemicals Co.,Ltd manufactures environmentally friendly materials. The Company produces and sells composites, high-performance materials, energy saving materials, and other products. SK Chemicals also offers total healthcare solutions services. SK Chemicals serves customers worldwide.

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SK Chemicals (285130 KS)

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