Category

South Korea

Jul 03
0

Daily Brief South Korea: Celltrion Inc, ABLBio, Samsung Biologics and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Alpha Generation Through Share Buybacks in Korea: Bi-Monthly (May and June 2024)
  • ABL Bio Capital Raise of 140 Billion Won
  • Samsung Biologics (207940 KS): Gaining Momentum on New Approval and Contract Wins; Hold Shares

Alpha Generation Through Share Buybacks in Korea: Bi-Monthly (May and June 2024)

By Douglas Kim

  • In this insight, we discuss the alpha generation through companies that have been buying back their shares in the Korean stock market in May and June 2024.
  • On average, the share buyback announcements for the 13 companies that announced share buybacks in Korea represented 1.7% of outstanding shares.
  • Major companies that have announced share buybacks in Korea in the past two months include Celltrion Inc (068270 KS), SK IE Technology (361610 KS), and NCSOFT Corp (036570 KS).

ABL Bio Capital Raise of 140 Billion Won

By Douglas Kim

  • On 2 July, ABL Bio (298380 KS) announced a capital raise worth 140 billion won. 
  • The capital raise involves 5.77 million new shares (10.7% of outstanding shares post capital raise) at 24,229 won per share (current price is 24,150 won).
  • The proceeds from the capital raise will be used to develop next-generation ADCs (Antibody Drug Conjugates), including bispecific antibody ADCs.

Samsung Biologics (207940 KS): Gaining Momentum on New Approval and Contract Wins; Hold Shares

By Tina Banerjee

  • Samsung Biologics (207940 KS) has signed the largest ever single CMO contract worth KRW1.46T ($1.1B) with an undisclosed U.S.-based pharmaceutical company. The contract value represents ~40% of 2023 standalone revenue.
  • Within the first half of the year, Samsung Biologics has secured order worth of KRW2.6T, compared with order win of KRW3.5T in full-year 2023.
  • Samsung Bioepis has received FDA approval for Stelara biosimilar Pyzchiva, which is expected to marketed in early 2025. So far, the FDA has approved two other biosimilars of Stelara.  

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Jul 02
0

Daily Brief South Korea: Shift Up, Hyundai Mobis, Hyundai Motor , Sanil Electric and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Shift Up IPO Book Building Results Analysis
  • Korean Holdcos Vs Opcos Gap Trading Opportunities in 3Q 2024
  • Gap Trades in Korean Prefs Vs Common Share Pairs in 3Q 2024
  • Shift Up IPO: Details, Bookbuilding & Index Inclusion
  • Sanil Electric IPO: The Bear Case

Shift Up IPO Book Building Results Analysis

By Douglas Kim

  • Shift Up reported solid IPO book building results. Shift Up’s IPO price has been determined at 60,000 won won, which is at the high end of the IPO price range.
  • According to Hankyung Business Daily, the demand ratio was 223 to 1. Shift Up will start trading on 11 July.
  • Our base case valuation of Shift Up is market cap of 5.7 trillion won or target price of 95,510 won (59% higher than the IPO price of 60,000 won).

Korean Holdcos Vs Opcos Gap Trading Opportunities in 3Q 2024

By Douglas Kim

  • In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 3Q 2024.
  • Of the 38 pair trades, 21 of them involved holdcos outperforming opcos in the past six months, suggesting increased capital allocation to Korean holdcos relative to their opcos.
  • These pairs could generate trading opportunities in terms of their pricing gaps closing reversal (Doosan Corp vs. Doosan Enerbility; Hyundai Mobis vs Hyundai Motor).

Gap Trades in Korean Prefs Vs Common Share Pairs in 3Q 2024

By Douglas Kim

  • In this insight, we discuss numerous gap trades involving Korean preferred and common shares in 3Q 2024.
  • The recent push for Korea Value Up program has helped to push up prices of numerous Korean preferred stocks including Hyundai Motor (005385 KS). 
  • On a longer timeframe (3-4 years), we believe this discount could narrow further to the 20-25% range, which provides additional opportunities for the Korean preferred shares to further make gains.

Shift Up IPO: Details, Bookbuilding & Index Inclusion

By Brian Freitas

  • Shift Up (462870 KS) will raise KRW 435bn (US$315m) in its IPO, valuing the company at KRW 3,482bn (US$2.52bn). Listing is expected later this month.
  • Competition for the shares has been fierce with institutional investors indicating demand for 226x the number of shares on offer at prices higher than the top end of the range.
  • Inclusion in the KOSPI 200 looks likely in June 2025, while inclusion in global indices is likely in December. But there could be some passive inflows in September.

Sanil Electric IPO: The Bear Case

By Arun George

  • Sanil Electric (062040 KS), a Korean industrial transformer manufacturer, is seeking to raise up to US$165 million.
  • In Sanil Electric IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
  • The bear case rests on rapidly slowing growth, high customer concentration, mid-tier revenue growth and mid-tier FCF margin compared to peers.

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Jul 01
0

Daily Brief South Korea: Hyundai Glovis and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Potential Recurrence of Local Flow Trade Patterns in Hyundai Glovis’s Stock Dividend Event

Potential Recurrence of Local Flow Trade Patterns in Hyundai Glovis’s Stock Dividend Event

By Sanghyun Park

  • Finding a trading entry point during a stock dividend event is tough, but locally, stock prices often rise post-ex-rights date and stabilize after listing, over 70% of the time.
  • There’s speculation that local flow trading, mainly driven by local prop traders, might target this pattern in Glovis’s stock dividend as well.
  • While I wouldn’t recommend banking on this probabilistic trading setup, it’s important to be aware that this could significantly impact stock movements from the ex-rights date to the listing date.

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Jun 30
0

Daily Brief South Korea: Lunit , Sanil Electric, SK Bioscience and more

By | Daily Briefs, South Korea

In today’s briefing:

  • End of Mandatory Lock-Up Periods for 55 Companies in Korea in July 2024
  • Sanil Electric IPO: The Bull Case
  • SK Bioscience (302440 KS): Acquiring Majority Stake in IDT Biologika- A Step Toward ‘Globalization’

End of Mandatory Lock-Up Periods for 55 Companies in Korea in July 2024

By Douglas Kim

  • We discuss the end of the mandatory lock-up periods for 55 stocks in Korea in July 2024, among which 6 are in KOSPI and 49 are in KOSDAQ.
  • These 55 stocks on average could be subject to further selling pressures in July and could underperform relative to the market.
  • The top three market cap stocks including those of which at least 1% of outstanding shares could be sold in July include Lunit, Mezzion Pharma, and DS Dansuk.

Sanil Electric IPO: The Bull Case

By Arun George

  • Sanil Electric (062040 KS), a Korean industrial transformer manufacturer, is seeking to raise up to US$165 million.    
  • The IPO is a pure primary raise of 7.6 million shares at an IPO price range of KRW24,000-30,000. Book building will run from 9 to 15 July.
  • The bull case rests on US-led rapid revenue growth, high barriers to entry, good revenue visibility, improving margins, top-quartile margin performance and modest leverage.

SK Bioscience (302440 KS): Acquiring Majority Stake in IDT Biologika- A Step Toward ‘Globalization’

By Tina Banerjee

  • SK Bioscience (302440 KS) secures 60% stake in IDT Biologika, a global CDMO company with state-of-the-art manufacturing facilities in Germany, for KRW339B ($244M). The valuation seems reasonable.
  • The transaction paves the way for SK bioscience to strengthen its global presence, notably in Europe and the U.S., and to diversify its business by expanding into bulk drug substances.
  • Based on the existing CDMO contracts, IDT Biologika’s outlook remains positive. SK bioscience aims to more than double its revenue and stabilize operating profit margins at 20%+.

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Jun 29
0

Daily Brief South Korea: SK Networks, Sanil Electric and more

By | Daily Briefs, South Korea

In today’s briefing:

  • SK Square + SK Networks Merger Swap: A Guide to Pre-Merger Arb Spread Calculations
  • Sanil Electric IPO Industry Analysis

SK Square + SK Networks Merger Swap: A Guide to Pre-Merger Arb Spread Calculations

By Sanghyun Park

  • SK Square’s market cap exceeds SK Networks’ by over 10 times, qualifying this merger as small-scale. Thus, only SK Networks needs shareholder approval and grants appraisal rights solely to shareholders.
  • The current arbitrage spread for SK Networks’ appraisal rights is 1.95%, and for the swap, it’s 4.16%. These are nominal values excluding trading costs and taxes.
  • Today’s SK Square and SK Networks prices reflect arbitrage spreads. Yesterday’s 8% spread widened, focusing on narrowing appraisal rights and swap spreads, essential before next week’s announcement.

Sanil Electric IPO Industry Analysis

By Douglas Kim

  • With the development of new and renewable energy, transmission and distribution network bottlenecks are worsening in many countries, and there is a strong demand for new transmission and distribution networks.
  • China is virtually excluded from competition for the US market. This situation has resulted in increased new orders for companies such as Sanil Electric. 
  • Our base case valuation of Sanil Electric is target price of 58,593 won, which is 95% higher than the high end of the IPO price range (30,000 won).

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Jun 28
0

Daily Brief South Korea: LG Electronics, Ilooda, Webtoon Entertainment, Kolmar Korea Holdings and more

By | Daily Briefs, South Korea

In today’s briefing:

  • LG Electronics’ Indian Subsidiary Is Gearing up for an IPO on the Indian Stock Market
  • Arb Spread Has Opened Today in Classys & Ilooda Merger Swap: Checking Trade Feasibility
  • Webtoon Entertainment IPO Trading – Not Cheap Given the Lack of Growth
  • Kolmar Holdings: Aggressive Plans to Cancel Outstanding Shares + Improving Returns to Shareholders

LG Electronics’ Indian Subsidiary Is Gearing up for an IPO on the Indian Stock Market

By Sanghyun Park

  • LG Electronics’ Indian subsidiary, fully owned, saw 2023 sales grow 17% to ₩3.3T and net profit rise 14% to ₩231.3B, driven by strong appliance demand.
  • LG Electronics aims for a ₩5T-₩6T valuation, planning to sell 15-20% of their Indian subsidiary to raise at least $500M.
  • LG Electronics plans to invest the $500M raised into their EV components business, moving quickly with the IPO due to urgent funding needs in the downturn-hit sector.

Arb Spread Has Opened Today in Classys & Ilooda Merger Swap: Checking Trade Feasibility

By Sanghyun Park

  • The spread is appealing, and Classys’ shorting instrument’s liquidity issue shouldn’t be critical with a manageable position size. The concern is shareholder approval and the stock purchase cost under ₩30B.
  • Despite cancellation risks, there are reasons to stay interested. Bain Capital aims to merge with Ilooda to boost Classys’ valuation, suggesting the merger may proceed even if ₩30B is exceeded.
  • The deadline for dissenting votes and appraisal rights at Ilooda’s meeting is July 8th, ex-rights date July 9th. Shareholders’ meeting: August 13th; rights exercise: August 13th to September 2nd.

Webtoon Entertainment IPO Trading – Not Cheap Given the Lack of Growth

By Ethan Aw

  • Webtoon Entertainment (WBTN US) raised around US$315m in its US IPO, after pricing the deal at the top of the range at US$21/share.
  • Webtoon Entertainment is a global storytelling platform where a community of creators and users discover, create and share new content.
  • In our previous notes, we talked about the company’s historical performance, undertook a peer comparison and shared our thoughts on valuation. In this note, we talk about the trading dynamics.

Kolmar Holdings: Aggressive Plans to Cancel Outstanding Shares + Improving Returns to Shareholders

By Douglas Kim

  • On 26 June, Kolmar Holdings announced it plans to cancel 2.5 million treasury shares (6.7% of outstanding shares) as part of its participation in the corporate value-up program.
  • Previously, Kolmar Holdings announced that it would return more than 50% of its net profit to shareholders in accordance with the shareholder return policy announced in July 2023. 
  • According to our NAV analysis, it suggests an implied NAV of 555 billion won or NAV per share of 15,088 won, which represents a 39% upside from current price.

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Jun 27
0

Daily Brief South Korea: Sanil Electric, Classys, Coupang and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Sanil Electric IPO – Strong Profitability Growth, but Highly Dependent on Its Top Customers
  • Merger Between Classys and Ilooda Likely to Reduce Local Competition
  • Coupang Inc.: Artificial Intelligence Integration & 5 Major Growth Drivers

Sanil Electric IPO – Strong Profitability Growth, but Highly Dependent on Its Top Customers

By Ethan Aw

  • Sanil Electric (062040 KS) is looking to raise up to US$164m in its Korean IPO.
  • Sanil Electric is a specialized company that manufactures and sells reactors, transformers, railway vehicle parts, and switchboards.  As an industrial transformer manufacturer, the company mainly manufactures power and distribution transformers.
  • In this note, we talk about the company’s historical performance.

Merger Between Classys and Ilooda Likely to Reduce Local Competition

By Douglas Kim

  • On 25 June, Classys (214150 KS) announced a merger with Ilooda (164060 KS). The merger ratio is set at 0.1405237 to 1 for Classys and Ilooda.
  • This merger aims to combine Classys’ expertise in high-intensity focused ultrasound (HIFU) with Ilooda’s in micro-needle radio frequency (RF) and laser technologies.
  • We have a positive view of this merger between Classys and Ilooda. This merger is likely to reduce the overall competition in the aesthetics devices market in Korea.

Coupang Inc.: Artificial Intelligence Integration & 5 Major Growth Drivers

By Baptista Research

  • Coupang has commenced 2024 with a notable performance that underscores both strengths and areas in need of meticulous attention.
  • During the first quarter, Coupang reported a robust 28% year-over-year growth in revenues in constant currency terms, attributed primarily to increased spending across customer cohorts, including its longest-standing customers.
  • This points to successful customer retention and the appealing nature of its offerings.

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Jun 26
0

Daily Brief South Korea: NCSOFT Corp, Sanil Electric and more

By | Daily Briefs, South Korea

In today’s briefing:

  • NCSoft: Corporate Split-Off of Two Divisions
  • Sanil Electric IPO Valuation Analysis

NCSoft: Corporate Split-Off of Two Divisions

By Douglas Kim

  • On 24 June, NCSoft announced a corporate split-off of two divisions called named NC QA Company and NC IDS Company.
  • NCSoft plans to hold a shareholders meeting where to vote on the split off decision on 14 August. Effective date of the company split is scheduled for 1 October 2024.
  • The consensus estimates sales of 2.0 trillion won (up 19.2% YoY) and operating profit of 272 billion won (up 155.2% YoY) in 2025.

Sanil Electric IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation of Sanil Electric is market cap of 1.8 trillion won or target price of 58,593 won (95% higher than the high end of the IPO price).
  • Sanil Electric has higher sales growth, operating margins, and ROE than the comps. 
  • We estimate Sanil Electric to generate sales of 283.4 billion won (up 32.1% YoY) and operating profit of 79 billion won (up 69.6% YoY) in 2024. 

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Jun 25
0

Daily Brief South Korea: Lotte Non Life Insurance Co and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Chronic Insider Trading in the Korean Tender Offer Market & Time Positions for Short-Term Targets

Chronic Insider Trading in the Korean Tender Offer Market & Time Positions for Short-Term Targets

By Sanghyun Park

  • There is a high likelihood of information leaking through the lead securities firm when the tender offer prospectus is provided to branches about three days before the disclosure.
  • With the FSS’s stricter stance, tender offer candidates may act swiftly before new regulations, prompting attention to potential surges in tender offers.
  • Our approach is clear: identify short-term tender offer candidates, monitor trading volumes for spikes, and use the three-day pre-disclosure surge to time our positions effectively.

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Jun 24
0

Daily Brief South Korea: Korea Stock Exchange KOSPI 200, LS Electric, Webtoon Entertainment and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Local Capital Market Movements Targeting July Implementation of Block Deal Pre-Disclosure Rule
  • Sanil Electric IPO Preview
  • ECM Weekly (24th June 2024)-Webtoon, Guzman, Black Ses, Johor Plant, Bajaj Housing, Infratil, Mizuho

Local Capital Market Movements Targeting July Implementation of Block Deal Pre-Disclosure Rule

By Sanghyun Park

  • The new pre-disclosure rule starting July 24th will reshape business practices. Local institutions are now preparing by launching dedicated block deal funds, targeting 40 to 80 deals annually.
  • No rule bars short-sellers from block deals post-pre-disclosure. Local institutions are planning to exploit this, anticipating sellers favoring club deals under new July rules, potentially stabilizing prices for hedge strategies.
  • Access to club deals will be crucial post-July in Korea’s block deal market. Effective short-selling instruments are also vital with the ban extended until March next year.

Sanil Electric IPO Preview

By Douglas Kim

  • Sanil Electric is getting ready to complete its IPO in late July in KOSPI. The IPO price range is from 24,000 won to 30,000 won per share. 
  • The company is planning is raise between 182.4 billion won and 228 billion won in this IPO. The book building for the institutional investors lasts from 9 to 15 July. 
  • Sanil Electric is best known for making special transformers used for special purposes in environments with severe weather changes, such as offshore wind power, solar power, and offshore plants. 

ECM Weekly (24th June 2024)-Webtoon, Guzman, Black Ses, Johor Plant, Bajaj Housing, Infratil, Mizuho

By Sumeet Singh

  • Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
  • On the IPO front, Guzman provided some hope to the Australian market, while Webtoon Entertainment (WBTN US) and Allied Blenders & Distillers will soon test their respective markets.
  • There was no dearth of placement this week, with large deals in Hong Kong, New Zealand and India.

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