Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<p>In our view, there is a relatively high probability that <a href="https://www.smartkarma.com/entities/kt-corp" target="_blank" data-smartkarma-citation="entities:1112:1" rel="noopener">KT Corp (030200 KS)</a> will follow <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> in forming a holding company structure. Although the exact timing is uncertain, we think that KT could make this announcement by 2022/2023.</p><p><strong>3 Major Reasons Why KT is Likely to Change to a Holding Company Structure:</strong></p><ul>
<li>Greater importance of non-telecom business (realize higher valuations) </li>
<li>Bypass the 49% foreign ownership limit specific to the telecom business (greater importance of index investing)</li>
<li>Follow SK Telecom (less resistance from major investors)</li>
</ul><p>Despite KT's stock price rising more than 30% YTD, KT is still trading at only 0.5x P/B. By forming a holding company structure and split the company's business into telecom and non-telecom business units, we believe that there likely to be a higher value realization for the company.</p>

In our view, there is a relatively high probability that KT Corp (030200 KS) will follow SK Telecom (017670 KS) in forming a holding company structure. Although the exact timing is uncertain, we think that KT could make this announcement by 2022/2023.3 Major Reasons Why KT is Likely to Change to a Holding Company Structure:
Greater importance of non-telecom business (realize higher valuations) 
Bypass the 49% foreign ownership limit specific to the telecom business (greater importance of index investing)
Follow SK Telecom (less resistance from major investors)
Despite KT's stock price rising more than 30% YTD, KT is still trading at only 0.5x P/B. By forming a holding company structure and split the company's business into telecom and non-telecom business units, we believe that there likely to be a higher value realization for the company.

Three Major Reasons Why KT Corp Is Likely to Change to a Holding Company Structure

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>SK Telecom's spin-off must obtain shareholder approval, and the shareholder meeting is scheduled for October 12. However, the general mood in the market is favorable for this split, so it should be concluded that shareholder approval is almost a certainty.</p><div class="content-highlight"><p><strong>Then, we should prepare for passive trading that occurs between trade suspension and re-listing.</strong></p></div><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Timetable"}' data-sheets-note="Sang Hyun Park: We have to buy shares until BOD+1 and hold onto them until the day immediately before the ex-rights date to be eligible to receive stock purchase rights. We then have to notify our dissenting opinion until the end of dissenting opinion notice period.">Schedule</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Shareholder approval at EGM"}'>Shareholder approval at EGM</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44481}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 10. 12</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Trade suspension begins"}'><strong>Trade suspension begins</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44495}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 10. 26</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Trade suspension ends"}'><strong>Trade suspension ends</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44526}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 11. 26</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Re-listing"}'><strong>Re-listing</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44529}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 11. 29</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><ul>
<li>Passive funds are supposed to sell at the close on the last trading day before the trading suspension period kicks in, which is October 26 in this event.</li>
<li>They then buy back at the close on the re-listing day, November 29.</li>
</ul><div><p>Of course, these aren't definite rules. In fact, local passive funds do not seem to be blindly following this rule anymore.</p></div><p>Nonetheless, local ETFs/index funds must still follow this trading pattern to minimize the tracking error. On the other hand, the NPS-managed and variable insurance index funds do not seem to engage in this adjustment actively.</p><div class="content-highlight"><p><strong>Therefore, it seems appropriate to conservatively assume that 20 trillion won of ETFs/index funds out of 80 trillion won of funds following the KOSPI 200 will execute this trading.</strong></p></div><table class="table table-striped"><tbody>
<tr><td colspan="2" style="width: 494.429px;">Breakdown of ₩80T of local passive funds tracking KOSPI 200</td></tr>
<tr>
<td style="width: 247.214px;"><strong>ETFs</strong></td>
<td style="text-align: right; width: 247.214px;"><strong>₩16T</strong></td>
</tr>
<tr>
<td style="width: 247.214px;"><strong>Index funds</strong></td>
<td style="text-align: right; width: 247.214px;"><strong>₩4T</strong></td>
</tr>
<tr><td colspan="2" style="text-align: center; width: 247.214px;"><strong> </strong></td></tr>
<tr>
<td style="width: 247.214px;">National Pension Service - Passive</td>
<td style="text-align: right; width: 247.214px;">₩42T</td>
</tr>
<tr>
<td style="width: 247.214px;">Variable Insurance Index funds</td>
<td style="text-align: right; width: 247.214px;">₩18T</td>
</tr>
<tr>
<td style="width: 247.214px;"> - Total</td>
<td style="text-align: right; width: 247.214px;">₩80T</td>
</tr>
<tr><td colspan="2" style="width: 494.429px;">Source: KG Zeroin, KRX, NPS, &amp; YONHAP INFOMAX</td></tr>
</tbody></table><p>Now, the key is whether the two companies to be split will be included in the KOSPI 200. In this regard, the following is the treatment rule of KOSPI 200 for the split event.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/232/471/original/2.png?1632869576" class="editor-image img-responsive" data-smartkarma-image-id="232471"></figure></section><div>
<p>A summary of the above rules is as follows:</p>
<ul>
<li>SK Telecom (a surviving company) is <strong>removed</strong> from KOSPI 200 if the market cap proportional to the split ratio is <strong>smaller than that of the smallest constituent company in the index by market cap</strong>.</li>
<li>SK Square (a newly spun-off company) is <strong>added</strong> to KOSPI 200 if the ranking of the market cap proportional to the split ratio is <strong>within the 80th percentile of the number of constituents</strong>.</li>
</ul>
</div><div>
<p>SK Telecom remains in the KOSPI 200 if it has a larger split ratio-based market cap than the stock with the smallest market cap among KOSPI 200 constituents. Currently, the stock's market cap with the lowest market cap is around ₩0.6T, which is significantly lower than SKT's split-based market cap of ₩13.8T.</p>
<p>In the case of SK Square, the stock's market cap currently at the 80th percentile is ₩1.4T. Since SK Square's split-based market cap is ₩8.9T, there is a 100% chance that SK Square will also be included in the KOSPI 200.</p>
<table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Market cap"}'>Market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Surviving"}'>Surviving</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"New"}'>New</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Name"}'>Name</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"SK Telecom"}'>SK Telecom</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"SK Square"}'>SK Square</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Split ratio"}'>Split ratio</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.6073625}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>60.74%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.3926375}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>39.26%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Market cap proportional to the split ratio"}'><strong>Market cap proportional to the split ratio</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":13.808371324195232}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T"}' data-sheets-formula="=R[-2]C[2]*R[-1]C[0]"><strong>₩13.81T</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":8.926603792304768}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T"}' data-sheets-formula="=R[-2]C[1]*R[-1]C[0]"><strong>₩8.93T</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART &amp; KRX"}'>Source: DART &amp; KRX</td></tr>
</tbody>
</table>
<p></p>
</div>

SK Telecom's spin-off must obtain shareholder approval, and the shareholder meeting is scheduled for October 12. However, the general mood in the market is favorable for this split, so it should be concluded that shareholder approval is almost a certainty.Then, we should prepare for passive trading that occurs between trade suspension and re-listing.





Schedule

Shareholder approval at EGM
2021. 10. 12


Trade suspension begins
2021. 10. 26


Trade suspension ends
2021. 11. 26


Re-listing
2021. 11. 29

Source: DART


Passive funds are supposed to sell at the close on the last trading day before the trading suspension period kicks in, which is October 26 in this event.
They then buy back at the close on the re-listing day, November 29.
Of course, these aren't definite rules. In fact, local passive funds do not seem to be blindly following this rule anymore.Nonetheless, local ETFs/index funds must still follow this trading pattern to minimize the tracking error. On the other hand, the NPS-managed and variable insurance index funds do not seem to engage in this adjustment actively.Therefore, it seems appropriate to conservatively assume that 20 trillion won of ETFs/index funds out of 80 trillion won of funds following the KOSPI 200 will execute this trading.
Breakdown of ₩80T of local passive funds tracking KOSPI 200

ETFs
₩16T


Index funds
₩4T

 

National Pension Service - Passive
₩42T


Variable Insurance Index funds
₩18T


 - Total
₩80T

Source: KG Zeroin, KRX, NPS, &amp; YONHAP INFOMAX
Now, the key is whether the two companies to be split will be included in the KOSPI 200. In this regard, the following is the treatment rule of KOSPI 200 for the split event.
A summary of the above rules is as follows:

SK Telecom (a surviving company) is removed from KOSPI 200 if the market cap proportional to the split ratio is smaller than that of the smallest constituent company in the index by market cap.
SK Square (a newly spun-off company) is added to KOSPI 200 if the ranking of the market cap proportional to the split ratio is within the 80th percentile of the number of constituents.


SK Telecom remains in the KOSPI 200 if it has a larger split ratio-based market cap than the stock with the smallest market cap among KOSPI 200 constituents. Currently, the stock's market cap with the lowest market cap is around ₩0.6T, which is significantly lower than SKT's split-based market cap of ₩13.8T.
In the case of SK Square, the stock's market cap currently at the 80th percentile is ₩1.4T. Since SK Square's split-based market cap is ₩8.9T, there is a 100% chance that SK Square will also be included in the KOSPI 200.








Market cap
Surviving
New


Name
SK Telecom
SK Square


Split ratio
60.74%
39.26%


Market cap proportional to the split ratio
₩13.81T
₩8.93T

Source: DART &amp; KRX





SK Telecom Trade Suspension/Relisting: KOSPI 200 Treatment Schedule

<p>SKT, which paid a quarterly dividend for the first time in the second quarter of this year, is preparing for a second quarterly dividend.</p><p>Through a regulatory filing, as shown below, SKT has set the record date for shareholders entitled to receive dividends in the third quarter as September 30. So this Wednesday (29th) is the ex-dividend date.</p><div class="content-highlight"><p>Whether to pay dividends and the dividend amount will be decided by the board of directors at a later date. However, as it confirmed that it would pay a quarterly dividend, it is safe to say that there is little chance that it will not pay a dividend this quarter.</p></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/232/027/original/1.png?1632721163" class="editor-image img-responsive" data-smartkarma-image-id="232027"></figure></section><p>As for the second quarter dividend, SKT announced on July 23 that it had decided to pay a quarterly dividend of 2,500 won per ordinary share. The dividend yield was 0.77%, and the total dividend was 177.9 billion won. The deadline for dividend payment was August 11.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/232/031/original/2.png?1632721763" class="editor-image img-responsive" data-smartkarma-image-id="232031"></figure></section><p>SKT said it would keep the total dividend per share this year at the same level as last year. In addition, it would pay the unpaid quarterly dividend of this year (the first quarter) retroactively in the fourth quarter. Therefore, the third quarter dividend is also expected to be ₩2,500 per share, and the rest is highly likely to be paid out in the fourth quarter.</p><div class="content-highlight"><p><strong>A quarterly dividend of ₩2,500 provides a dividend yield of 0.78% based on the current share price.</strong></p></div>

SKT, which paid a quarterly dividend for the first time in the second quarter of this year, is preparing for a second quarterly dividend.Through a regulatory filing, as shown below, SKT has set the record date for shareholders entitled to receive dividends in the third quarter as September 30. So this Wednesday (29th) is the ex-dividend date.Whether to pay dividends and the dividend amount will be decided by the board of directors at a later date. However, as it confirmed that it would pay a quarterly dividend, it is safe to say that there is little chance that it will not pay a dividend this quarter.As for the second quarter dividend, SKT announced on July 23 that it had decided to pay a quarterly dividend of 2,500 won per ordinary share. The dividend yield was 0.77%, and the total dividend was 177.9 billion won. The deadline for dividend payment was August 11.SKT said it would keep the total dividend per share this year at the same level as last year. In addition, it would pay the unpaid quarterly dividend of this year (the first quarter) retroactively in the fourth quarter. Therefore, the third quarter dividend is also expected to be ₩2,500 per share, and the rest is highly likely to be paid out in the fourth quarter.A quarterly dividend of ₩2,500 provides a dividend yield of 0.78% based on the current share price.

SKT Is on the Move Ahead of Quarterly Ex-Dividend: Expected Div Yield-Based Valuation

<p>This morning, SK E&amp;S, the major shareholder of Busan City Gas, announced that it would conduct a tender offer to all remaining outstanding shares of Busan City Gas (2,595,597 shares, 23.60%). The tender offer price is 85,000 won per share, and the purchase period is from today to the 15th of the next month. SK E&amp;S plans to apply for delisting of Busan City Gas.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/230/029/original/3.png?1631755933" class="editor-image img-responsive" data-smartkarma-image-id="230029"></figure></section><p>The total number of issued shares of Busan City Gas is 11,000,000. SK E&amp;S, the largest shareholder, owns 67.23%. And the number of treasury shares is 999,000 (9.08%). Therefore, the total remaining shares are 2,595,597 (23.60%), and SK E&amp;S plans to purchase all of these shares through a tender offer.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Shareholding"}'>Shareholding</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Shares"}'>Shares</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"%"}'>%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total shares"}'>Total shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":11000000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-6]C[-1]">11,000,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R8C2">100.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"SK E&amp;S"}'>SK E&amp;S</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7405403}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>7,405,403</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.6732184545454546}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R8C2">67.32%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Treasury shares"}'>Treasury shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":999000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>999,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.09081818181818181}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R8C2">9.08%</td>
</tr>
<tr><td colspan="3"></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"ESOP"}'><strong>ESOP</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1075}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>1,075</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.00009772727272727273}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R8C2"><strong>0.01%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"KISWIRE"}'><strong>KISWIRE</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1266279}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>1,266,279</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.11511627272727273}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R8C2"><strong>11.51%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Other minority shareholders"}'><strong>Other minority shareholders</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1328243}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-5]C[0]-sum(R[-4]C[0]:R[-1]C[0])"><strong>1,328,243</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.12074936363636364}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R8C2"><strong>12.07%</strong></td>
</tr>
<tr><td colspan="3" data-sheets-value='{"1":2,"2":"Source: FnGuide &amp; KRX FIND"}'>Source: FnGuide &amp; KRX FIND</td></tr>
</tbody>
</table><p>From today to the 15th of next month is the tendering period, and SK E&amp;S pays cash. The cash payment date is October 20th. The tendering price is 85,000 won, a whopping 37.54% premium from yesterday's closing price. This is a premium of over 40% compared to the average price for the past 1 month and 3 months.</p><table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Pricing"}'>Pricing</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering price"}'>Offering price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":85000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'>₩85,000</td>
</tr>
<tr><td colspan="2"></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Last close"}'>Last close</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":61800}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'>₩61,800</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Premium"}'><strong>- Premium</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.37540453074433655}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R2C2-R[-1]C[0])/R[-1]C[0]"><strong>37.54%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"1W average"}'>1W average</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":61300}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula='=average(index(googlefinance(R[-2]C[1], "price", today()-5, today()), 0, 2))'>₩61,300</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Premium"}'><strong>- Premium</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.3866231647634584}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R2C2-R[-1]C[0])/R[-1]C[0]"><strong>38.66%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"1M average"}'>1M average</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":59659.09090909091}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula='=average(index(googlefinance(R[-4]C[1], "price", today()-30, today()), 0, 2))'>₩59,659</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Premium"}'><strong>- Premium</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4247619047619047}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R2C2-R[-1]C[0])/R[-1]C[0]"><strong>42.48%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"3M average"}'>3M average</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":60069.354838709674}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula='=average(index(googlefinance(R[-6]C[1], "price", today()-90, today()), 0, 2))'>₩60,069</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Premium"}'><strong>- Premium</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4150310125392692}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R2C2-R[-1]C[0])/R[-1]C[0]"><strong>41.50%</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART &amp; KRX"}'>Source: DART &amp; KRX</td></tr>
</tbody>
</table><div class="content-highlight"><p><strong>SK E&amp;S plans to pursue delisting after acquiring shares through a tender offer. According to the stock market listing regulations, if the largest shareholder owns more than 95% of the total issued stock of a target company, they can apply for voluntary delisting.</strong></p></div>

This morning, SK E&amp;S, the major shareholder of Busan City Gas, announced that it would conduct a tender offer to all remaining outstanding shares of Busan City Gas (2,595,597 shares, 23.60%). The tender offer price is 85,000 won per share, and the purchase period is from today to the 15th of the next month. SK E&amp;S plans to apply for delisting of Busan City Gas.The total number of issued shares of Busan City Gas is 11,000,000. SK E&amp;S, the largest shareholder, owns 67.23%. And the number of treasury shares is 999,000 (9.08%). Therefore, the total remaining shares are 2,595,597 (23.60%), and SK E&amp;S plans to purchase all of these shares through a tender offer.







Shareholding
Shares
%


Total shares
11,000,000
100.00%


SK E&amp;S
7,405,403
67.32%


Treasury shares
999,000
9.08%



ESOP
1,075
0.01%


KISWIRE
1,266,279
11.51%


Other minority shareholders
1,328,243
12.07%

Source: FnGuide &amp; KRX FIND

From today to the 15th of next month is the tendering period, and SK E&amp;S pays cash. The cash payment date is October 20th. The tendering price is 85,000 won, a whopping 37.54% premium from yesterday's closing price. This is a premium of over 40% compared to the average price for the past 1 month and 3 months.





Pricing

Offering price
₩85,000



Last close
₩61,800


- Premium
37.54%


1W average
₩61,300


- Premium
38.66%


1M average
₩59,659


- Premium
42.48%


3M average
₩60,069


- Premium
41.50%

Source: DART &amp; KRX

SK E&amp;S plans to pursue delisting after acquiring shares through a tender offer. According to the stock market listing regulations, if the largest shareholder owns more than 95% of the total issued stock of a target company, they can apply for voluntary delisting.

Busan City Gas Tender Offer at a Whopping 40% Premium by SK E&S:

<p>In this insight, we discuss the combination of the end of the lock-up period for Coupang on September 7th and the start of the Amazon Global Store Korea will likely to put further negative pressures on <a href="https://www.smartkarma.com/entities/coupang-inc" target="_blank" data-smartkarma-citation="entities:28425:1" rel="noopener">Coupang (CPNG US)</a>'s shares in the coming days. Starting September 7th, there is a whopping <strong>83% of outstanding shares</strong> that could be sold due to the end of the lock-down period.</p>
<div class="content-highlight">
<p>In our view, Softbank may try to sell as much of $3 billion in Coupang shares over the next 6-12 months, which represents nearly 5.8% of current market cap. We do believe that Softbank will try to recoup at least its original investment of nearly $3 billion.</p>
<p>A $3 billion investment is a big amount of money.<strong> If we assume a 30% per annum ROI required by Softbank (taking into consideration the time value of money of the two investments made in 2015 and 2018), this means that AT MINIMUM, Coupang's market cap would need to be $28 billion (which would suggest $16 per share).</strong> <em>At $16 per share, this would represent a further 46% lower levels than the current price of $29.65.</em></p>
</div>

In this insight, we discuss the combination of the end of the lock-up period for Coupang on September 7th and the start of the Amazon Global Store Korea will likely to put further negative pressures on Coupang (CPNG US)'s shares in the coming days. Starting September 7th, there is a whopping 83% of outstanding shares that could be sold due to the end of the lock-down period.

In our view, Softbank may try to sell as much of $3 billion in Coupang shares over the next 6-12 months, which represents nearly 5.8% of current market cap. We do believe that Softbank will try to recoup at least its original investment of nearly $3 billion.
A $3 billion investment is a big amount of money. If we assume a 30% per annum ROI required by Softbank (taking into consideration the time value of money of the two investments made in 2015 and 2018), this means that AT MINIMUM, Coupang's market cap would need to be $28 billion (which would suggest $16 per share). At $16 per share, this would represent a further 46% lower levels than the current price of $29.65.


End of Lock Up Period + Start of Amazon Global Store Korea = Lower Share Price Likely for Coupang

South Korea

SK Telecom Co., Ltd. is a Korean mobile and telecommunications operator. The Company provides cellular voice, wireless data, and wireless internet services. SK Telecom also offers fixed line services and platform services.

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SK Telecom (SKM US)

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