South Korea Daily Briefs

Nov 18

Daily Brief South Korea: SK Bioscience and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Appointment of RFK Jr as the US Health Secretary and a Book Review Of “The Real Anthony Fauci”

Appointment of RFK Jr as the US Health Secretary and a Book Review Of “The Real Anthony Fauci”

By Douglas Kim

In this insight, we provide some of the main highlights of the book “The Real Anthony Fauci”, which was written by Robert F. Kennedy Jr. (RFK Jr) in 2021.
We discuss how the appointment of RFK Jr could impact some of the major health care stocks in Korea, especially those that are involved in developing and producing vaccines.
Although the share prices of many Korean vaccines related stocks have declined materially in the past 2-3 years, RFK Jr becoming the next US Health Secretary could pose further headwinds.

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Nov 16

Daily Brief South Korea: Samsung Electronics, Samsung Electronics Pref Shares, Korea Stock Exchange KOSPI 200, LG Energy Solution and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Samsung Electronics: A Massive 10 Trillion Won Share Buyback Program
Sammy’s Massive Buyback: Play the Pref Compression, Not Outright Long
EQD | The “Landing Area” For The KOSPI 200 Is In Sight
Negative Trump Trade: Korean Rechargeable Battery Sector

Samsung Electronics: A Massive 10 Trillion Won Share Buyback Program

By Douglas Kim

Samsung Electronics (005930 KS) announced a massive share buyback program worth 10 trillion won which represents 3.1% of its market cap.
Of this total amount, about 3 trillion won will be purchased and cancelled in the next three months. This will include 50,144,628 common shares and 6,912,036 preferred shares.
We believe that this massive share buyback and cancellation is likely to boost Samsung Electronics’ share price resulting in a strong outperformance relative to KOSPI in the next 6-12 months.

Sammy’s Massive Buyback: Play the Pref Compression, Not Outright Long

By Sanghyun Park

The stock’s still below 1x PBR. But with Samsung’s tech gaps and slowdowns, going all-in on an outright long here off the back of this buyback feels way too early
The key is whether pref discounts tighten like 2015, but with a more balanced buyback this time and narrowing pref discounts, making a pref rally harder to predict short-term.
The goal’s the same as 2015—boosting the family’s control. If the remaining buyback leans pref-heavy, it could further tighten pref discounts, creating a potential opportunity to play the compression.

EQD | The “Landing Area” For The KOSPI 200 Is In Sight

By Nico Rosti

In a previous insight, on Oct 26th, we theorized 2 possible scenarios: a rally or a mini-crash for the KOSPI 200 INDEX, from the following week.
It looks like we are more in the mini-crash scenario (see chart below), at the moment, but the index is already very oversold according to our WEEKLY model.
Keep reading to find out where to buy based on our MRM WEEKLY models for the KOSPI 200.

Negative Trump Trade: Korean Rechargeable Battery Sector

By Douglas Kim

With Trump becoming the next President of the United States, we explain why the rechargeable battery sector in Korea is likely to get further battered in the coming months.
Trump administration could eliminate or significantly slash the $7,500 consumer tax credit for electric vehicle (EV) purchases, which is one of the key provisions of the Inflation Reduction Act (IRA).
We expect the sell-side to further cut their earnings estimates on the key key names in the Korean rechargeable battery sector in the coming months.

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Nov 15

Daily Brief South Korea: SK Inc, SBI FinTech Solutions, Dong Il Corp, MNC Solution and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Korea Pushes to Expand Director’s Duty of Loyalty: Focus on Hostile Takeover-Risk Conglomerates
SBI Fintech Solutions: Tender Offer and Delisting
Di Dong Il Corp: Share Cancellation of 15% of Outstanding Shares
MNC Solutions Pre-IPO – Momentum Has Been Very Strong, Although Some Corp Gov Issues to Watch For

Korea Pushes to Expand Director’s Duty of Loyalty: Focus on Hostile Takeover-Risk Conglomerates

By Sanghyun Park

A Democratic Party insider noted some proposals need legal tweaks, so the December 10 deadline may slip, but they’re set on passing the expanded director loyalty duty.
FKI analyzed top conglomerates’ shareholder structures and found four of the top 10 facing substantial risks.
We need more clarity before jumping in, but with MBK driving Korea’s hostile M&A scene and the Commercial Act amendments, local chaebols facing control battles are a key KOSPI theme.

SBI Fintech Solutions: Tender Offer and Delisting

By Douglas Kim

After the market close on 14 November, SBI Fintech Solutions announced that the Japanese financial group SBI is pushing for a tender offer and delisting of SBI Fintech Solutions.
The tender offer price is 5,000 won per share, which is 36% higher than the closing price on 14 November. The tender offer size amount is about 26 billion won.
Given the relatively solid upside, we believe SBI Holdings is likely to successfully complete this tender offer and take the company private.

Di Dong Il Corp: Share Cancellation of 15% of Outstanding Shares

By Douglas Kim

On 14 November, Di Dong Il Corp (001530 KS) announced that it plans to cancel 3.78 million treasury shares (representing 15% of outstanding shares) on 29 November.
The company currently has 5.84 million outstanding shares. Thus, the share cancellation of 3.78 million shares represent 65% of its treasury shares.
The company is facing an investigation due to suspicions that it conducted a loan transaction with its largest shareholder, the Jung-Hun Foundation, without board approval.

MNC Solutions Pre-IPO – Momentum Has Been Very Strong, Although Some Corp Gov Issues to Watch For

By Clarence Chu

MNC Solution (MNC KS) MNC Solutions is looking to raise US$200m in its upcoming Korea IPO.
MNC Solutions (MNC) supplies high-precision control components for maritime and aviation weaponry, and travel devices for stabilization to the defense industry.
In this note, we look at the firm’s past performance.

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Nov 14

Daily Brief South Korea: Hyundai Engineering & Construction and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Trump Trade: Korean Construction Vs Military Stocks Amid Potential End of War in Ukraine?

Trump Trade: Korean Construction Vs Military Stocks Amid Potential End of War in Ukraine?

By Douglas Kim

Although it is UNCERTAIN when the wars in Ukraine and the Middle East will end, if these wars indeed come to an end, this could POSITIVELY IMPACT Korean construction sector.
The end of the wars in Ukraine and the Middle East is likely to NEGATIVELY IMPACT the Korean military/defense sector.
The major Korean construction companies have low valuation multiples. On the other hand, the major Korean military/defense companies have high valuation multiples.

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Oct 24

Daily Brief South Korea: Samsung Electronics, Korea Zinc, Orum Therapeutics, Samsung Biologics and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Surging Buzz Around the Potential Split of Samsung Electronics
Korea Zinc: Remaining Free Float Post Tender and a Margin Call for Choi on Young Poong Precision?
Orum Therapeutics IPO Valuation Analysis
Samsung Biologics (207940 KS): 3Q Result Beat Expectation; Guidance Raise Amid Increasing Order Book

Surging Buzz Around the Potential Split of Samsung Electronics

By Sanghyun Park

We’re starting to see some local market players getting ready and setting up trades that bet on a potential split for Samsung Electronics.
Samsung could leverage the buzz around spinning off its foundry business to split key units—foundry, memory chips, and others—into two or three separate companies at the shareholder meeting.
Additionally, the valuation gap between Samsung Electronics and Biologics has narrowed more than it has in the last decade, making it an even more attractive opportunity.

Korea Zinc: Remaining Free Float Post Tender and a Margin Call for Choi on Young Poong Precision?

By Douglas Kim

According to Korea Zinc, it plans to disclose the treasury shares tender offer results on 28 October.
We discuss the remaining free float after the tender offer and the probabilities of share price decline or even a share price squeeze post announcement of the tender offer results.
All in all, this M&A fight for Korea Zinc remains tight with a slight advantage to MBK/Young Poong alliance.

Orum Therapeutics IPO Valuation Analysis

By Douglas Kim

Our base case target price for Orum Therapeutics is 35,170 won per share, which is within the IPO price range of 30,000 won to 36,000 won per share.
Given the lack of upside relative to the target price, we have a Negative View of this IPO.
FSS has requested correction to the company’s IPO prospectus. As a result, it now appears the IPO could be delayed.

Samsung Biologics (207940 KS): 3Q Result Beat Expectation; Guidance Raise Amid Increasing Order Book

By Tina Banerjee

In 3Q24, Samsung Biologics (207940 KS) reported 15% YoY revenue growth to KRW1,187B, driven by the contribution of Plant 4, the full utilization of Plants 1–3, and biosimilar products.
The company has raised 2024 annual revenue growth guidance to 15–20% YoY from 10–15% earlier, driven by successful ramp-up of Plant 4 and favorable Fx movement.
The company has signed record-breaking CMO contract with an Asian pharmaceutical company, thereby bringing the company’s total new contract value for the year to more than $3.3B.

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Oct 23

Daily Brief South Korea: POSCO Holdings, Doosan Bobcat Inc and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

KRX’s Final Call on Value-Up ETF Launch & December Rebalancing Preview
New Reorganization Plan Increases Overhang Risk for Doosan Bobcat

KRX’s Final Call on Value-Up ETF Launch & December Rebalancing Preview

By Sanghyun Park

Despite feedback from ETF managers, KRX is moving forward with the simultaneous listing of 12 ETFs tracking the Value-Up Index on November 4th.
Government-Backed organizations are launching a 200 billion KRW Value-Up Fund for the Value-Up Index stocks, targeting an AUM boost to over 1 trillion KRW by year-end.
For new additions in the December rebalancing, the safest bets are POSCO Holdings, JB Financial Group, and HK inno.N.

New Reorganization Plan Increases Overhang Risk for Doosan Bobcat

By Douglas Kim

Our overall assessment of the new reorganization plan by the Doosan Group continues to be Negative, because Doosan has not given up trying to eventually merge Bobcat and Robotics.
Doosan Group’s new reorganization plan is the opposite of KISS strategy, involving several moving parts and complicated deal structure.
We have also provided three main recommendations on how to raise the valuation of Doosan Bobcat without rushing to merge Bobcat and Robotics.

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Oct 22

Daily Brief South Korea: Korea Zinc, Doosan Robotics , Hyundai Motor India and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Entry Opportunities from Delisting Risk Due to Korea Zinc’s Post-Buyback Volume Drying Up
Doosan’s Tweaked Restructuring Play: My Take on Hitting Robotics’ 13% Spread
Hyundai Motor India IPO Trading – Set for a Tricky Start
Hyundai Motor India IPO: Little Downside. Low Retail Interest-Myopia, Misguidance, Misinterpretation
Hyundai Motor India IPO: How Far to Fast Entry?
Korea Zinc: Court Dismisses the Second Injunction Filed by MBK

Entry Opportunities from Delisting Risk Due to Korea Zinc’s Post-Buyback Volume Drying Up

By Sanghyun Park

Korea Zinc’s delisting daily trading volume cutoff is 20K, about 0.12% of the total. We might see volumes plummet, making it tough to maintain even that 20K level.
Keep an eye on trading opportunities; we have some time with delisting risks, but low trading volume could lead to being booted from the KOSPI 200 and Global Index.
This sell-off could spike short-term volatility and create great entry points for trading, especially after the court approved the buyback tender, denying MBK’s injunction.

Doosan’s Tweaked Restructuring Play: My Take on Hitting Robotics’ 13% Spread

By Sanghyun Park

The big question is how to cash in on the dissenters’ rights spread for Robotics. The main concern is cancellation risk, but the FSS doesn’t seem too negative on approval.
To sustain nuclear momentum, Enerbility needs heavy borrowing for facility investments, requiring a lower debt ratio. Offloading debt-heavy Bobcat is a move shareholders might support.
With NPS unlikely to ignore the government’s nuclear push, Robotics’ spread could narrow quickly. Despite cancellation risk and no hedge, the remaining juice makes an outright position worth considering.

Hyundai Motor India IPO Trading – Set for a Tricky Start

By Sumeet Singh

Hyundai Motor (005387 KS) raised around US$3.3bn via listing its India unit, Hyundai Motor India. HMI is a wholly owned subsidiary of the Hyundai Motor Group.
HMI primarily manufactures and sells four-wheeler passenger vehicles and parts. Currently its vehicle portfolio includes 13 passenger vehicle models across sedans, hatchbacks, SUVs and battery EVs.
In our previous notes, we looked at the company’s past performance and valuations. In this note, we will talk about the trading dynamics.

Hyundai Motor India IPO: Little Downside. Low Retail Interest-Myopia, Misguidance, Misinterpretation

By Devi Subhakesan

Hyundai Motor India is expected to close flat or slightly positive today, as low retail participation and modest expectations for gains on listing day could limit selling pressure.
Many retail investors skipped the IPO, influenced by ‘finfluencers’ who had largely advised against it based on misinterpreted valuation comparison with Maruti Suzuki India (MSIL IN) .
Hyundai Motor India’s meaningful discount to Maruti Suzuki on operating profit based valuation multiples suggest room for outperformance in the medium term.

Hyundai Motor India IPO: How Far to Fast Entry?

By Brian Freitas

Hyundai Motor (005380 KS) raised INR 279bn (US$3.3bn) by selling some of its stake in Hyundai Motor India (1342Z IN), valuing Hyundai India at INR 1,593bn (US$18.95bn).
The anchor investor book was fully subscribed. The non-institutional and retail books were undersubscribed, so institutions got more stock. And that changes the free float estimates for one global index.
Even with the higher float, Hyundai Motor India (1342Z IN) is unlikely to get Fast Entry to one global index later this month. Index inclusions should commence in February 2025.

Korea Zinc: Court Dismisses the Second Injunction Filed by MBK

By Douglas Kim

The Seoul Central District Court dismissed the second injunction filed by MBK Partners and Young Poong to suspend the share buyback/tender offer by Korea Zinc Chairman Choi and his allies.
As a result of the court dismissing the second injunction filed by MBK, the M&A fight for Korea Zinc is likely to continue until the AGM in March 2025.
Depending upon Korea Zinc’s tender offer subscription, there is a possibility of MBK buying more shares directly from the market if the subscription falls below the proposed amounts.

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Oct 21

Daily Brief South Korea: Shinhan Financial, Legochem Biosciences and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Korea Value-Up Index: Estimated Passive Flows as ETF Launches Coming
Legochem Biosciences (141080 KS): New ADC Deal Enhances Confidence on ConjuAll Technology Platform

Korea Value-Up Index: Estimated Passive Flows as ETF Launches Coming

By Brian Freitas

The KRX announced the 100 constituents of the much-awaited Korea Value-Up Index on 24 September. There were hits and misses but broad consensus was that the index is a miss.
Following market feedback, the KRX could conduct a special rebalance of the index in December. But this could be after the launch of ETFs tracking the index.
With a big overlap and similar characteristics as the KOSPI 200 Index, there could be limited assets benchmarked to the Korea Value-Up Index in the short-term.

Legochem Biosciences (141080 KS): New ADC Deal Enhances Confidence on ConjuAll Technology Platform

By Tina Banerjee

Legochem Biosciences (141080 KS) entered into a license agreement with Ono Pharmaceutical for LCB97, a pre-clinical stage ADC targeting solid tumors for an upfront and milestone payment of $700M.
Legochem is now pursuing high-value package deals, combining platform and product deals or multi-target product deals. The above-mentioned deal with Ono is the first such package deal.
Legochem’s ADC technology platform is seeing rising demand as number of providers decreased (due to recent M&A deals) while big pharmaceutical companies are rapidly expanding their ADC businesses.

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Oct 19

Daily Brief South Korea: K Bank, Korea Zinc, Doosan Bobcat Inc and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

K-Bank’s IPO Cancellation: What Led to This Move and Plan for a Comeback
Need a Game Plan to Tackle Korea Zinc’s Buyback Tender with a 20% Proration Risk
Align Partners Goes Activist on Doosan Bobcat

K-Bank’s IPO Cancellation: What Led to This Move and Plan for a Comeback

By Sanghyun Park

The institutional demand forecasts were much worse than expected, leading to the company’s blunt admission in the latest filing that the book-building flopped, prompting them to cancel the IPO.
Bankers NH and KB suggested an offering price below 8,500 KRW, but pre-IPO backers like Bain Capital and MBK strongly opposed, unhappy with shrinking proceeds, pushing for cancellation.
K-Bank plans to regroup and adjust the heavy 50% secondary share portion to retry the IPO in six months before their prelim review window expires.

Need a Game Plan to Tackle Korea Zinc’s Buyback Tender with a 20% Proration Risk

By Sanghyun Park

NPS is now viewing their voting rights on Korea Zinc purely from a returns angle, shifting from earlier expectations of siding with Choi due to political pressure.
We need a tendering strategy for a 20% proration risk, focusing on when MBK will buy that extra 3.7% stake to cut losses on untendered shares.
MBK will aim to buy leftover shares cheaply. Their approach depends on the progress of Choi and Trafigura’s talks

Align Partners Goes Activist on Doosan Bobcat

By Douglas Kim

On 18 October, a local activist fund Align Partners Asset Management started its “corporate activism” on Doosan Bobcat Inc (241560 KS).
Align Partners sent a shareholder proposal letter requesting a significant increase in the shareholder return rate, including dividends and selling off non-core assets.
We believe that Align Partners’ corporate activism on Doosan Bobcat is likely to have a positive impact on Doosan Bobcat’s share price.

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Oct 18

Daily Brief South Korea: K Bank, Kum Yang , Korea Zinc, CK Solution and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

K Bank IPO Bookbuilding: To Price Lower than Low IPO Price Range or Even Potential Cancellation
Connecting the Dots Between Kum Yang’s Rights Offer & Global Index November Review
Korea Zinc’s 2.4% Treasury Shares – Devil Is In the Legal Loophole
CK Solution IPO Preview

K Bank IPO Bookbuilding: To Price Lower than Low IPO Price Range or Even Potential Cancellation

By Douglas Kim

Chosun Business Daily mentioned that K Bank IPO book building results among institutional investors have been very poor so far.
As a result, the bankers and K Bank are currently considering on potentially reducing the IPO price to about 8,500 won or even cancelling the IPO altogether.
Our base case valuation of K Bank is target price of 9,151 won per share. Even if the IPO is priced at 8,500 won, we would pass on this IPO.

Connecting the Dots Between Kum Yang’s Rights Offer & Global Index November Review

By Sanghyun Park

Personally, the key trading angle is Kum Yang’s exit, which could slash entry costs for the capital raise, with the review announcement dropping as stock rights trading starts.
Along with the usual hit to the pricing from index trackers unloading for rebalancing, there’s a strong chance their sell orders might also include stock rights.
From an entry cost perspective, this November review could trigger a sharp, short-term drop in costs due to stock rights dumping, similar to what we saw with CJ CGV.

Korea Zinc’s 2.4% Treasury Shares – Devil Is In the Legal Loophole

By Douglas Kim

Devil is in the legal loophole. Issuing treasury shares to employees as bonuses is an exception that is not bound by the condition of ‘6 months after treasury shares acquisition.
It would be nearly impossible for Korea Zinc to sell 2.4% of its treasury stock to an external friendly force and transform it into a friendly stake by February 2025.
Although MBK/Young Poong Alliance has the advantage right now in this M&A battle for Korea Zinc, it is by no means over.

CK Solution IPO Preview

By Douglas Kim

CK Solution is getting ready to complete its IPO in KOSPI in November. Its IPO price range is from 15,700 won to 18,000 won.
The IPO offering amount ranges from 49.4 billion won to 56.6 billion won. The book building for the institutional investors lasts from 4 to 8 November.
CK Solution specializes in dry room system for the rechargeable batteries manufacturing process. Rechargeable battery sector accounted for 92.9% of total sales in 1H 2024 followed by semiconductor (3.1%).

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