Category

South Korea

Apr 06
0

Daily Brief South Korea: Hanmi Science, Hanwha Aerospace and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Backstory on the Hanmi Science Showdown & KKR’s Likely Tender Offer
  • Hanmi Science: If Talks With Mum and Sister Break Down, Then KKR May Provide a Partial Tender Offer
  • Hanwha Aerospace: Spin Off of Semiconductor Equipment and Video Surveillance Units

Backstory on the Hanmi Science Showdown & KKR’s Likely Tender Offer

By Sanghyun Park

  • The victorious brothers plan to join forces with KKR to secure over 51% ownership of Hanmi Science. They aim to persuade the mother and daughter to part with their shares.
  • Should this negotiation fail, KKR is prepared to initiate a tender offer in the open market, intending to acquire an additional 10-15% of Hanmi Science’s shares.
  • KKR can target a maximum of 16%. With 10-15% aimed for, this tender offer will cause significant price impact.

Hanmi Science: If Talks With Mum and Sister Break Down, Then KKR May Provide a Partial Tender Offer

By Douglas Kim

  • The 2024 AGM of Hanmi Science is over and the two Lim brothers have control of the company. Nonetheless, the fight for the control of Hanmi Science is not over.
  • There is an increasingly probable scenario where the KKR private equity firm gets involved, joining hands with the Lim brothers.
  • If mum and sister do not sell their shares (which seems to be the higher likely scenario), then KKR may issue a tender offer to the remaining minority shareholders.

Hanwha Aerospace: Spin Off of Semiconductor Equipment and Video Surveillance Units

By Douglas Kim

  • On 5 April, Hanwha Aerospace (012450 KS) formally announced that it will spin off its semiconductor equipment and video surveillance units which contributed to about 16% of its revenue. 
  • We are Negative on Hanwha Aerospace mainly due to valuations. Its share price has risen so much in the past year that its valuations are no longer attractive.
  • Hanwha Aerospace is trading at premium valuation to Lockheed Martin on an EV/EBITDA basis. Despite its recent strong growth, Hanwha Aerospace is no Lockheed Martin. 

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Apr 05
0

Daily Brief South Korea: Hyundai Home Shopping Network, HD Hyundai Marine Solution , Hanwha Corporation, Douzone Bizon and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Hyundai Home Shopping (057050 KS)’s Partial Offer
  • HD Hyundai Marine Solution IPO – Thoughts on Valuation
  • Hanwha Group’s Restructuring to Positively Benefit Hanwha Corp but Negatively Impact Hanwha Ocean
  • Douzone Bizon: To Become the Fourth Internet Bank in Korea?

Hyundai Home Shopping (057050 KS)’s Partial Offer

By David Blennerhassett

HD Hyundai Marine Solution IPO – Thoughts on Valuation

By Ethan Aw

  • HD Hyundai Marine Solution (443060 KS) is looking to raise up to US$551m in its Korean IPO.
  • HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
  • In our previous notes, we talked about the company’s historical performance and undertook a peer comparison. In this note, we share our thoughts on valuation.

Hanwha Group’s Restructuring to Positively Benefit Hanwha Corp but Negatively Impact Hanwha Ocean

By Douglas Kim

  • We believe the new restructuring plan of the Hanwha Group is likely to have a positive impact on Hanwha Corp but could negatively impact Hanwha Ocean. 
  • Our NAV analysis of Hanwha Corp suggests NAV of 3.2 trillion won or NAV per share of 43,168 won, which is 50% higher than current share price. 
  • The biggest component of the valuation is Hanwha Corp’s 34% stake in Hanwha Aerospace which is worth 4.1 trillion won. (187% of Hanwha Corp’s market cap). 

Douzone Bizon: To Become the Fourth Internet Bank in Korea?

By Douglas Kim

  • On 4 April, Douzone Bizon (012510 KS) announced that it plans to become the fourth Internet bank in Korea. Following this news, Douzone Bizon’s share price increased by 21%. 
  • If the company succeeds in receiving the license to operate an Internet bank, this could meaningfully impact the company’s long-term sales and profits. 
  • If Douzone Bizone expands into the Internet banking services, it may need additional backing from strategic/financial partners including Bain Capital which has a 10.2% stake in Douzone Bizon. 

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Apr 04
0

Daily Brief South Korea: Hyundai Home Shopping Network, HD Hyundai Marine Solution and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Estimating Participation Rate for Hyundai HS Tender Offer, Currently at a 5% Spread
  • HD Hyundai Marine Solution IPO – Peer Comparison – Not Particularly Exciting
  • Tender Offer of 25% of Hyundai Home Shopping Shares by Hyundai GF Holdings

Estimating Participation Rate for Hyundai HS Tender Offer, Currently at a 5% Spread

By Sanghyun Park

  • It is somewhat unusual that there is still a spread of over 5%. This likely reflects concerns about the relatively high intensity of allocation risk.
  • Retail: 30%, Institutions: 16% of float shares (46%). Retailers may contribute 20%, institutions 10-15%. Total tender rate: 30-35%.
  • In that case, it means that roughly 70% of our holdings could be tendered. And at this level, it seems reasonable enough to target the current spread of 5%.

HD Hyundai Marine Solution IPO – Peer Comparison – Not Particularly Exciting

By Ethan Aw

  • HD Hyundai Marine Solution (443060 KS) is looking to raise up to US$555m in its Korean IPO.
  • HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
  • In our previous note, we talked about the company’s historical performance. In this note, we talk about peer comparison.

Tender Offer of 25% of Hyundai Home Shopping Shares by Hyundai GF Holdings

By Douglas Kim

  • On 3 April, it was reported that Hyundai G.F. Holdings will be conducting a tender offer of 3 million shares of Hyundai Home Shopping (25% of outstanding shares). 
  • The tender offer price is 64,200 won. The main reason for this tender offer is to meet the regulatory requirement of a holding company by 2025. 
  • We are positive on the tender offer of a 25% stake in Hyundai Home Shopping by Hyundai G.F. Holdings.

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Apr 03
0

Daily Brief South Korea: SK Square , HD Hyundai Marine Solution , KT Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • SK Square: Higher NAV Driven by Its Holding in SK Hynix
  • HD Hyundai Marine Solutions IPO: Valuation Insights
  • Hyundai Motor Group Becomes the Largest Shareholder of KT Corp

SK Square: Higher NAV Driven by Its Holding in SK Hynix

By Douglas Kim

  • SK Square owns a 20.07% stake in SK Hynix which is now worth 27.2 trillion won. SK Square’s market cap is only 39% of SK Square’s stake in SK Hynix.
  • SK Square has benefited from increased capital allocation to low P/B stocks in Korea due to the Corporate Value Up program. SK Square is trading at P/B of 0.7x. 
  • Amid the tremendous demand for Nvidia’s AI related chips, this has also benefited several Korean companies including SK Hynix and SK Square. 

HD Hyundai Marine Solutions IPO: Valuation Insights

By Arun George

Hyundai Motor Group Becomes the Largest Shareholder of KT Corp

By Douglas Kim

  • Hyundai Motor Group has become the largest shareholder of KT Corp, as the National Pension Service has recently reduced its stake in KT from 8.53% previously to 7.51%. 
  • Despite this recent change in the largest shareholder status of KT Corp, this requires the approval from the Korean Ministry of Science and ICT. 
  • Although the Hyundai Motor Group (HMG) has become the largest owner in KT Corp, the most likely scenario is for HMG to remain a passive investor in KT.

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Apr 02
0

Daily Brief South Korea: HYBE , Amorepacific Corp, HDC Hyundai Development Co-Engineering & Construction and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KRX Imposes a 20% Cap on Weight Ceiling in Sector ETFs with Few Constituents
  • Gap Trades in Korean Prefs Vs Common Share Pairs in 2Q 2024
  • Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 2024

KRX Imposes a 20% Cap on Weight Ceiling in Sector ETFs with Few Constituents

By Sanghyun Park

  • KRX limits individual stock weight to 20% in ETFs with few constituents. KRX confirms working on it, with an official announcement expected soon.
  • Excludes index ETFs like KOSPI 200. KRX hasn’t finalized criteria for constituent number but expected to involve fewer than 30 stocks.
  • This could open new passive trading opportunities. Sector ETF cap at 30%, large AUM ones offer noteworthy trading potential.

Gap Trades in Korean Prefs Vs Common Share Pairs in 2Q 2024

By Douglas Kim

  • In this insight, we discuss numerous gap trades involving Korean preferred and common shares in 2Q 2024.
  • Although the discount on the preferred shares versus the common shares has been gradually narrowing in the past decade, this discount increased from end of 2021 to 1 April 2024.
  • 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.

Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 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 2Q 2024.
  • Of the 38 pair trades, 26 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. [CJ Corp vs CJ Cheiljedang & Hanjin KAL Corp vs Korean Air Lines].

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Apr 01
0

Daily Brief South Korea: HD Hyundai Marine Solution and more

By | Daily Briefs, South Korea

In today’s briefing:

  • HD Hyundai Marine Solutions IPO: The Investment Case

HD Hyundai Marine Solutions IPO: The Investment Case

By Arun George

  • HD Hyundai Marine Solution (443060 KS), the ship after-service subsidiary of HD Hyundai (267250 KS), aims to raise up to US$550 million.   
  • The international book-building will run from 8 to 22 April, while the domestic book will open from 16 to 22 April. Pricing will be announced on 24 April.
  • The investment case rests on solid top-line growth, a healthy order book, rising margins, cash generation, and modest leverage.

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Mar 31
0

Daily Brief South Korea: Samsung C&T and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Samsung C&T: Why Is Lee Seo-Hyun Returning as the President?

Samsung C&T: Why Is Lee Seo-Hyun Returning as the President?

By Douglas Kim

  • On 29 March, it was reported that Lee Seo-Hyun has been appointed as the President of Samsung C&T (028260 KS), returning to the company after more than five years.
  • Lee Seo-Hyun is the third child of the late Samsung Chairman Lee Kun-Hee. She will be in charge of the overall strategic planning of Samsung C&T.
  • Many investors will likely to question this move, since they may question her ability to make strategic decisions that are in the best interests of all the minority investors. 

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Mar 30
0

Daily Brief South Korea: Samsung C&T, Angel Robotics and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Lee Seo-Hyun’s Unexpected Return: Implications for Samsung’s Conglomerate Dynamics
  • End of Mandatory Lock-Up Periods for 46 Companies in Korea in April 2024

Lee Seo-Hyun’s Unexpected Return: Implications for Samsung’s Conglomerate Dynamics

By Sanghyun Park

  • Today, Lee Seo-hyun returned as the top executive at Samsung C&T, which officially announced her as the head of its Strategic Planning Division.
  • Her return to Samsung C&T might not just be a simple comeback – it could be seen as a setup for some big changes within the company.
  • Considering Samsung C&T’s Value-up Momentum, aligning with Lee Seo-hyun’s return, we must position for potential price impact, focusing on portfolio streamlining.

End of Mandatory Lock-Up Periods for 46 Companies in Korea in April 2024

By Douglas Kim

  • We discuss the end of the mandatory lock-up periods for 46 stocks in Korea in April 2024, among which 6 are in KOSPI and 40 are in KOSDAQ.
  • These 46 stocks on average could be subject to further selling pressures in April 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 April include APR, Angel Robotics, and Samhyun. 

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Mar 29
0

Daily Brief South Korea: HD Hyundai Marine Solution , Kum Yang and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Local Color on HD Hyundai Marine Solution’s Excessive IPO Valuation
  • HD Hyundai Marine Solution IPO – Strong Profitability Growth but Lacking in Disclosures
  • Kum Yang: Auditor Raises Flags on Viability as a Going Concern + Chairman Ryu Could Sell Shares

Local Color on HD Hyundai Marine Solution’s Excessive IPO Valuation

By Sanghyun Park

  • Valuation controversy arises from comparing HD Hyundai Marine Solution, a ship AS specialist, with diverse global companies, leading to a target market cap of ₩5T.
  • HD KSOE’s inclusion worsens the valuation controversy. Applying HD KSOE’s last year PER without adjusting for a significant one-off profit seems to inflate HD Hyundai Marine Solution’s PER.
  • Currently, major local IPO funds see HD Hyundai Marine’s valuation nearing ₩4T as excessive, despite the industry’s revival and potential growth in eco-friendly ship conversions, impacting the upcoming bookbuilding process.

HD Hyundai Marine Solution IPO – Strong Profitability Growth but Lacking in Disclosures

By Ethan Aw

  • HD Hyundai Marine Solution (443060 KS) is looking to raise up to US$555m in its Korean IPO.
  • HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship. 
  • In this note, we talk about the company’s historical performance.

Kum Yang: Auditor Raises Flags on Viability as a Going Concern + Chairman Ryu Could Sell Shares

By Douglas Kim

  • On 28 March, the external auditor of Kum Yang (Samil PriceWaterhouseCoopers) raised warnings about the viability of Kum Yang as a going concern. 
  • The auditor also mentioned increasing probability of Chairman Ryu of Kum Yang potentially selling a portion of his shares to raise further capital.
  • It is RARE for an auditor to raise concerns about a company’s viability of the entity as a going concern. This is likely to negatively impact Kum Yang’s share price. 

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Mar 28
0

Daily Brief South Korea: Alteogen Inc, Lotte Tour Development Co, Ltd. and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Alteogen: Block Deal Sale of About 3% of Shares
  • Lotte Tour Development: A Major Asset Revaluation Resulting in More Than 8X Increase in Equity

Alteogen: Block Deal Sale of About 3% of Shares

By Douglas Kim

  • On 27 March, Alteogen announced that Jeong Hye-shin, former Alteogen Chief Strategy Officer (CSO), sold 1.6 million shares of Alteogen stock in after-hours trading in block deal sale. 
  • The block deal sale price was 197,770 won. Alteogen’s share price declined by 10.9% today to 195,600 won. Block deal sale amount was about 316 billion won. 
  • This block deal sale combined with the sharp recent, share price increase are likely to result in a near-term consolidation of its share price in the next several months.

Lotte Tour Development: A Major Asset Revaluation Resulting in More Than 8X Increase in Equity

By Douglas Kim

  • Lotte Tour Development announced that it will conduct a major asset revaluation which could positively impact its share price. 
  • The company’s assets will increase to 2.39 trillion won and equity will increase to 569.3 billion won (up more than 8x) at end of 1Q 2024 due to asset revaluation.
  • As a result of the asset revaluation, the company’s balance sheet will improve significantly and this likely result in many investors taking another look at the company for potential investments. 

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