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

<ul>
<li>KRX did not acknowledge any business relevance between SK Square and the Semicon industry, leading to its exclusion from the KRX Semicon after the GICS change.</li>
<li>We should consider the strong possibility that this same approach will be applied in the upcoming December KOSPI 200 IT rebalancing.</li>
<li>If we observe a somewhat unusual downward trend in SK Square's price from the 15th, this could be seen as a hint foretelling the announcement of SK Square's exclusion.</li>
</ul>


KRX did not acknowledge any business relevance between SK Square and the Semicon industry, leading to its exclusion from the KRX Semicon after the GICS change.
We should consider the strong possibility that this same approach will be applied in the upcoming December KOSPI 200 IT rebalancing.
If we observe a somewhat unusual downward trend in SK Square's price from the 15th, this could be seen as a hint foretelling the announcement of SK Square's exclusion.


Exploring Fresh Flow Trading Prospects for SK Square: Targeting Exclusion from KOSPI 200 IT

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>On 27 September, Maeil Business Daily reported that SK Square signed an MOU with Qoo10 to pursue a joint management of 11st. </li>
<li>It appears that Alibaba may have been reviewing this deal but it is no longer interested in pursuing 11st.</li>
<li>A deal between Qoo10 and 11st could occur, but this is not certain, which means some of the cash proceeds to FI would need to be burdened by SK Square.</li>
</ul>


On 27 September, Maeil Business Daily reported that SK Square signed an MOU with Qoo10 to pursue a joint management of 11st. 
It appears that Alibaba may have been reviewing this deal but it is no longer interested in pursuing 11st.
A deal between Qoo10 and 11st could occur, but this is not certain, which means some of the cash proceeds to FI would need to be burdened by SK Square.


SK Square: M&A of 11st - Alibaba Out and Qoo10 In?

<ul>
<li>In this insight, we provide an updated valuation analysis of SK Square (402340 KS) amid a potential sale of 11st to Alibaba (ADR) (BABA US).</li>
<li>Our NAV analysis of SK Square suggests NAV of 9.2 trillion won or NAV per share of 65,069 won, representing a 55% upside from current levels.</li>
<li>If SK Square is able to sell its stake in 11st to Alibaba, the capital inflow from the sale could be used to raise dividends and complete more share buybacks. </li>
</ul>


In this insight, we provide an updated valuation analysis of SK Square (402340 KS) amid a potential sale of 11st to Alibaba (ADR) (BABA US).
Our NAV analysis of SK Square suggests NAV of 9.2 trillion won or NAV per share of 65,069 won, representing a 55% upside from current levels.
If SK Square is able to sell its stake in 11st to Alibaba, the capital inflow from the sale could be used to raise dividends and complete more share buybacks. 


SK Square: Updated NAV Analysis Amid Potential Sale of 11st to Alibaba

<ul>
<li>Maeil Business Daily reported that Alibaba Group Holding (9988 HK) is considering on acquiring a controlling stake in 11st, which is a leading e-commerce platform owned by SK Square</li>
<li>In 2018, 11st was valued at 2.7 trillion won by financial investors. However, the current valuation of 11st is estimated to have declined to about 1 trillion won (US$760 million).</li>
<li>We estimate that the probability of Alibaba acquiring 11st is about 60-70%. </li>
</ul>


Maeil Business Daily reported that Alibaba Group Holding (9988 HK) is considering on acquiring a controlling stake in 11st, which is a leading e-commerce platform owned by SK Square
In 2018, 11st was valued at 2.7 trillion won by financial investors. However, the current valuation of 11st is estimated to have declined to about 1 trillion won (US$760 million).
We estimate that the probability of Alibaba acquiring 11st is about 60-70%. 


<ul>
<li>The most noteworthy developments include Samsung Electronics being newly added to the Semicon sector, while SK Square has been removed.</li>
<li>We must be mindful of the potential concentration of shorting flow on SK Square as most names expected to experience negative flows do not fall under the KS200/KQ150 membership.</li>
<li>Our strategic approach can take three directions: 1. aim at only those receiving positive flows, 2. heavy shorting SK Square, and 3. long-short the four with the most flow size.</li>
</ul>


The most noteworthy developments include Samsung Electronics being newly added to the Semicon sector, while SK Square has been removed.
We must be mindful of the potential concentration of shorting flow on SK Square as most names expected to experience negative flows do not fall under the KS200/KQ150 membership.
Our strategic approach can take three directions: 1. aim at only those receiving positive flows, 2. heavy shorting SK Square, and 3. long-short the four with the most flow size.


KRX Sector Index Series Rebalancing: Heavy Shorting on SK Square Is Anticipated

South Korea

LG Corp. is a holding company, which operates subsidiaries including LG Electronics, LG Household & Health Care, LG Chem Ltd., and Dacom Corp. The Company's main business areas are electronics, chemicals, and household products manufacturing and telecommunications services.

Doosan Co., Ltd operates as a diversified manufacturing and service company. The Company conducts electronic components production, logistics equipment manufacturing, information technology consulting, and other businesses. Doosan provides services worldwide.

CJ Corp. is an investment holding company.  The Company, through its subsidiaries, manufactures processed food products.  The subsidiaries' products include refined sugar, monosodium glutamate (MSG), condiment, wheat powder, flour, cooking oil, processed meats, and animal feed.

ALUKO Co., Ltd. manufactures window frames, balconies, and ventilators made of aluminum.  The Company provides various colors and types of aluminum window frames and sashes.  ALUKO also produces steel furniture.

Samsung Heavy Industries Co., Ltd. manufactures crude oil tankers, container vessels, bulk carriers, cruisers, and passenger ferries.  The Company also produces steel and bridge structures, and material handling equipment.  In addition, Samsung Heavy Industries provides civil engineering, architectural, and plant construction services.

Hanwha Aerospace Co., Ltd. operates as an aircraft parts manufacturing company. The Company produces and sells aircraft gas turbine engine products, aircraft compressors, low pressure turbines, and other products. Hanwha Aerospace markets its products worldwide.

Posco International Corporation is a general trading company.  The Company exports and imports steel, cement, crude oil, heavy machinery, automobile parts, and textiles.  Daewoo also manufactures synthetic fabrics for footwear, garments, and car seats, and operates a department store in Masan.

Posco International Corporation (047050 KS)

HD Korea Shipbuilding & Offshore Engineering Co., Ltd. operates as a shipbuilding and offshore company. The Company provides industrial plant engineering, special and naval shipbuilding, marine engine and machinery, industrial machinery and energy services. HD Korea Shipbuilding & Offshore Engineering markets its products worldwide.

HD Korea Shipbuilding & Offshore Engineering (009540 KS)

HD Korea Shipbuilding & Offshore Engineering

Hanwha Ocean Co., Ltd. operates as a shipbuilding and offshore company. The Company provides floating structure construction, steel wire drying, commercial vessels, specialty vessels, gas carrier, tanker, containership, ro ro, bulk carrier, submarine, warship, auxiliaries, cruise ships, and ferries manufacturing services. Hanwha Ocean also offers onshore plants services.

Hyundai Electric & Energy Systems (HE&E), which makes various electric equipment including transformers, switchgear, motors, low & medium voltage circuit breakers, power electronics, and power electronics & control systems.

Keppel Corporation Limited's core businesses are offshore and marine, infrastructure, property investment and development, telecommunications and transportation, energy, and engineering.

Sembcorp Industries Ltd provides utilities and integrated services for industrial sites such as power, gas, steam, water, wastewater treatment and other on-site services. The Company's businesses also include marine & offshore engineering and urban development comprising industrial parks and business, commercial and residential spaces.

Jardine Matheson Holdings Limited is a multinational enterprise with a portfolio of businesses focused on the Asia-Pacific region. The Group's activities include financial services, supermarkets, consumer marketing, engineering and construction, automobile trading, insurance broking, property investment, and hotels.

DCC PLC is a sales, marketing, distribution and business support services Group. The Group operates in the following sectors; energy, IT & entertainment products, healthcare, environmental services and food & beverage. DCC's strategy is to grow a sustainable, diversified business.

Smiths Group plc is a global technology company.  The company delivers products and services for the threat & contraband detection, medical devices, energy and communications market worldwide.

Enka Insaat ve Sanayi AS provides construction and construction related services worldwide. The Company builds infrastructure, commercial projects and factories. The manufacturing subsidiaries produce construction materials, steel pipes, windows and hand tools. The Group also imports and distributes industrial machinery in Turkey.

Jardine Matheson Holdings Limited operates as a holding company. The Company, through its subsidiaries, focuses on motor vehicles, property investment and development, food retailing, health and beauty, home furnishings, engineering and construction, transport services, restaurants, luxury hotels, financial services, heavy equipment, mining, energy, and agribusiness.

Icahn Enterprises L.P., a master limited partnership, is a diversified holding company engaged in nine primary business segments: Automotive, Investment, Energy, Gaming, Railcar, Food Packaging, Metals, Real Estate and Home Fashion.

Seibu Holdings Inc. offers diversified operation. The Company through its subsidiary companies operates transportation, construction, hotel, leisure facilities, and real estate business. Seibu Holdings provides group enterprises strategy planning, operation management, asset management and supply, and business promotions.

Beijing Enterprises Holdings Ltd. is a diversified company.  The Company brews beer; distributes natural gas through pipelines; invests in, designs, constructs and operates water supply and wastewater treatment plants; operates toll roads; disposes of hazardous waste; and offers electronic payment systems.

SK Square Co., Ltd. operates as an investment company. The Company invests in semiconductors, information and communications technologies, and other industries. SK Square conducts businesses in South Korea.

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SK Square (402340 KS)

Exploring Fresh Flow Trading Prospects for SK Square: Targeting Exclusion from KOSPI 200 IT

The post delves into new flow trading opportunities for SK Square, with a focus on its possibility of being excluded from KOSPI 200 IT in December.

Sanghyun Park

SK Square: M&A of 11st - Alibaba Out and Qoo10 In?

On 27 September, Maeil Business Daily reported that SK Square signed an MOU with Qoo10 to pursue a joint management of 11st.

Douglas Kim

SK Square: Updated NAV Analysis Amid Potential Sale of 11st to Alibaba

If SK Square is able to sell its stake in 11st to Alibaba, the capital inflow from the sale could be used to raise dividends and complete more...

Douglas Kim

SK Square: Will Alibaba Acquire 11st?

Maeil Business Daily reported that Alibaba Group Holding (9988 HK) is considering on acquiring a controlling stake in 11st, which is a leading e...

Douglas Kim

KRX Sector Index Series Rebalancing: Heavy Shorting on SK Square Is Anticipated

This post highlights KRX Sector Index Series rebalancing and explores three trading approaches, with a focus on SK Square, ahead of the September...

Sanghyun Park

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