South Korea

• Of utmost importance in these guidelines will be the framework for Value-up disclosure. Local authorities aim to encourage proactive disclosure, starting with companies that are well-prepared.
• Two companies are being closely watched as potential candidates for the first Value-up disclosure: CJ Cheiljedang (097950 KS) and Koh Young Technology (098460 KS).
• The rationale for us to actively engage in alpha trading with these two names stems from the strong probability that they will emerge as cornerstone constituents of the Value-up index

• We discuss the end of the mandatory lock-up periods for 54 stocks in Korea in May 2024, among which 4 are in KOSPI and 50 are in KOSDAQ.
• These 54 stocks on average could be subject to further selling pressures in May 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 May include EcoPro Materials, Enchem, and Gaonchips. 

• In this insight, we discuss the alpha generation through companies that announced share buybacks in Korea in March and April 2024.
• We provide a list of 30 stocks in the Korean stock market that have announced share buyback programs in the past two months.
• Major companies that have announced share buybacks in Korea in the past two months include Krafton (259960 KS), Celltrion Inc (068270 KS), and Woori Financial Group (316140 KS).

• HD Hyundai Marine Solution (443060 KS) is looking to raise KRW 742bn (US$540m) in its IPO, valuing the company at KRW 3,707bn (US$2.69bn). Listing is expected to be in early-May.
• Competition for the shares has been fierce with institutional investors indicating demand for 201x the number of shares on offer at prices higher than the top end of the range.
• Barring a doubling of the stock price, the earliest that the stock will be added to major indices is December 2024. So, no passive buying in the short-term.

• MBK Partners will launch a tender offer for ConnectWave from today to May 24th. The target volume is 16.6M shares (40% of SO) at ₩18,000 per share, a 15.6% premium.
• MBK commits to acquiring all tendered shares, regardless of subscription rates, in order to expedite the delisting process. So, there is no cancellation or allocation risk.
• ConnectWave’s retail investor base, with high entry prices, may hinder reaching 70% of the target volume. Absence of risks suggests considering buy positions for potential secondary tender offer.

• After the market close on 26 April, it was reported that MBK Partners has launched a tender offer of a 29.61% stake of Connectwave (119860 KS).
• The tender offer price is 18,000 won, which is 15.6% higher than the closing price (15,570 won) of the company on 26 April.
• The tender offer period is from 29 April to 24 May. The amount of the tender offer is about 300 billion won. 

• This insight is a book review of 주주 권리가 없는 나라 (A Country Without Shareholder Rights), which is one of the best books on the corporate governance in Korea.
• There are so much wisdom that are included in this book. The author really goes into details about numerous corporate governance problems in Korea and ways to fix them.
• This book was published in January 2024 and it was written by a famous Korean retail investor called Park Young-Ok.

• Chosun reports Korean financial authorities advance Value-up plan guidelines to May 2nd, citing momentum decline post-election. Chosun’s credibility enhances report validity.
• Companies will commence Value-up-related disclosures in alignment with the guidelines within May. A dedicated Value-up website is set to launch in May.
• The May 2nd guideline release date is crucial for Value-up momentum trading. Anticipate heightened volatility in Value-up stocks approaching this date.

• Today’s reveal includes two main parts: first, setting up internal balance management for investors; second, building the detection system to block naked short-selling.
• FSC and FSS haven’t provided a set date for system completion but suggest it may start late this year or early next year. Uncertainty remains on overseas investor participation.
• A decision on short selling is due in June, but no confirmation was given today. However, the local market anticipates short selling resuming before this system is fully operational.

• With the rise in Coupang’s market cap, it’s imperative to evaluate if the Korea Index can attain eligibility to include foreign-listed companies.
• Coupang’s 45% YTD surge nears a $41B market cap, with a 65% free-float rate equating to $27B. Yet, to meet Korea Index eligibility, an additional $23B is needed.
• Aside from Coupang, more companies are preparing for overseas listings. Also, potential stock price increases for Coupang should be considered. The combined market cap approaches the US$50B threshold.

• SK hynix earnings were announced, with a 10% Q/Q revenue increase driving a 734% increase in operating profit
• Although the company cited AI demand as the basis for this, its DRAM revenues, which are very AI dependent, increase very little
• NAND SSD demand increased significantly, with a 30% increase in revenues, largely attributable to price increases

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• SK Hynix
• Vedanta Resources

• HD Hyundai Marine Solution’s IPO price has been determined at 83,400 won per share, which is at the high end of the IPO price range. 
• A total of 2,021 institutional investors participated in this IPO book building. The demand ratio was 201 to 1. HD Hyundai Marine Solution will start trading on 8 May 2024.
• Our base case valuation of HD Hyundai Marine Solution is target price of 98,254 won per share, which represents an upside of 18% from the IPO price.

• In this insight, we review the share price performances of the top 13 IPOs (in terms of market cap) in Korea in the past 8 months. 
• We review the the share price performances over different time periods (1 day, 1 week,  and 1 month). We also analyze the demand ratios and lock-up periods of the IPOs. 
• On average, 12.7% of the IPO shares are under lockup periods for the 13 companies listed below. HD Hyundai Marine Solution IPO has 45.8% of shares under lock-up.

• Samsung Biologics (207940 KS) reported mixed 1Q24 result, with revenue beating and operating profit missing estimates. Despite robust revenue growth, profitability is under pressure.
• With accumulated orders exceeding $12.5B (vs $12B at the end of 2023), the outlook remains strong. A gradual increase in Plant 4 operations is expected to drive sequential revenue growth.
• On April 23, Samsung Bioepis received marketing approval from European Commission (EC) for Pyzchiva, a biosimilar of Stelara, thereby becoming an early mover in a potential €2.5B market.

• Despite this pattern persisting for years, there has still been a significant price impact each time it surfaces. Therefore, we should pay attention to the upcoming CB conversion schedule.
• A consistent observation is that the price impact is most significant at the announcement of early redemption requests.
• The anticipated announcement dates for the forthcoming early redemption requests are: around May 20th (195th conversion), around September 20th (196th conversion), and around March 20th of next year (197th conversion).

• At the end of 2023, Chokwang Leather owned 190.3 billion won worth of Berkshire Hathaway shares, which represents 56% of Chokwang Leather’s market cap. 
• Chokwang Leather also has 3.1 million treasury shares (46.6% of outstanding shares). It has the highest levels of treasury shares as a percentage of outstanding shares among Korean stocks.
• Chokwang Leather is likely to be one of the key companies to be targeted to improve its corporate governance as part of the Corporate Value Up program. 

• HK inno.N (195940 KS) is expected to see significant improvement in operating profit margin this year to 10.9% (vs. 8% in 2023).
• Growing sales of flagship drug K-CAB, increasing capacity utilization in new IV fluids plant, and improving profitability of health and beauty products segment, will be three important margin drivers.
• With accelerating global presence, HK inno is on track to achieve its target of entering 100 countries by 2028 and achieve global sales of KRW2 trillion ($1.4 billion) by 2030.

• SK Square is looking to raise around US$198m via selling 2.1% of Krafton (259960 KS).
• The stock has been doing well over the past few months and its earnings and price momentum remain strong.
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• After the market close on 22 April, it was reported that SK Square plans to sell 2.2% stake in Krafton in a block deal sale worth about 270 billion won. 
• The estimated block deal sales price range is from 243,000 won to 251,000 won, representing a 3.1% to 6.2% discount to the closing price of 259,000 won on 22 April.
• We would take the deal. The company’s valuations remain attractive and it has been successful in expanding its sales and profits. 

• The Deputy Prime Minister Choi Sang Mok reaffirmed the Corporate Value Up program, pushing up the major value driven/low PBR stocks in Korea today.
• Deputy Prime Minister Choi emphasized that as part of Corporate Value Up program, corporate tax benefits to companies that have made efforts to strengthen shareholder return policy will be provided.
• The Korean government also plans to revise the law to separate taxation on the dividend income of shareholders of companies that expand dividends.

• A nasty power struggle between ADOR CEO Min Hee-Jin and HYBE has erupted which is likely to continue to negatively impact HYBE’s share price in the next several months.
• ADOR CEO Min Hee-Jin owns an 18% stake in ADOR which was founded in 2021. HYBE owns the controlling 80% stake in ADOR.
• Given the nasty fight between ADOR and HYBE, it is likely that the two companies (including ADOR’s CEO Min Hee-Jin) are likely to part their ways.

• The KOSPI 200 INDEX has closed down for 3 consecutive weeks (CC=-3), it is WEEKLY oversold.
• If the index rallies this week, it could reach >362 (Q2 resistance) and that could be enough to end the bounce.
• Our hypothesis is that the index will pull back again, after the bounce, next week (if this week ends with a positive WEEKLY close).

• Deputy PM Choi Sang-mok commits to aggressively pursue separate taxation of dividend income, marking a shift towards concrete action for value-up policies.
• Ever since the introduction of the Value-up policy earlier this year, the primary incentive championed by the local capital market has been the separate taxation of dividend income.
• Hence, the government’s official commitment to this marks a crucial step in reshaping the Value-up momentum.

• KOSPI 200 is a Korean blue-chip index that tracks the 200 largest and most-liquid names listed in the KOSPI section of the Korea Exchange (KRX).
• In this insight, we take a look at the names leading the race to become ADDs and DELs during the upcoming semiannual review in June 2024.
• We expect up to four changes in the KOSPI 200 index during the June 2024 index rebal event (down from 5 expected last month)  based on the latest available data.

• The prospect of this IPO mirroring the post-listing rallies seen with Ecopro Materials is what keeps local institutions fixated on this IPO despite valuation issues.
• The key factors are speculative trading frenzy among local retail investors and subsequent passive inflows through early entry into KOSPI 200/MSCI Standard.
• Considering two factors is vital. Hyundai Marine Solution’s IPO size is twice Ecopro Materials’, potentially limiting speculative buying. Sector-wide rallies, crucial for Ecopro Materials, haven’t been as prominent in shipbuilding.