South Korea

SK Group plans to merge SK Innovation and 90%-owned SK E&S by month-end. Chosun Ilbo’s report solidifies market confidence due to its credibility and likely intentional leak by SK Group.
Initially considered but deemed lower priority than SK IE Technology sale; SK Group opts for this alternative due to challenging market conditions for SKITE sale.
SK Innovation and SKIET rise with hopes of resolving liquidity issues and avoiding sacrifice. SK Inc is negatively impacted by concerns over valuation double counting from this merger.

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Jun 20

Daily Brief South Korea: Hyundai Motor, Webtoon Entertainment, Innospace, Eoflow and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Hyundai Motor’s Special Shareholder Return Plan Likely Unveiled in August IR Event
Webtoon Entertainment IPO – Further Thoughts on Valuation – Acquisitions, Buyouts
Innospace IPO Bookbuilding Results Analysis
Another Major Win for Eoflow [U.S. Federal Appeals Court Issues a Decision]

Hyundai Motor’s Special Shareholder Return Plan Likely Unveiled in August IR Event

Hyundai’s IR team appears to have communicated that a new shareholder return policy would be unveiled at the rescheduled CEO Investor Day in August.
Hyundai aims to boost shareholder returns above 30% by canceling ₩800B to ₩1T in shares annually. The new dividend strategy won’t debut in August; last year’s three-year plan stands.
Equal cancellation ratios apply to common and three types of preferred shares. August’s timing, with ISA tax reforms potentially favoring preferred shares, may enhance prefs’ price impact relative to ords.

Webtoon Entertainment IPO – Further Thoughts on Valuation – Acquisitions, Buyouts

Webtoon Entertainment (WBTN US) is looking to raise up to US$315m in its US IPO, down from an earlier reported float of US$500m.
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 share additional thoughts on valuation.

Innospace IPO Bookbuilding Results Analysis

Innospace reported solid IPO bookbuilding results. Innospace’s IPO price has been determined at 43,300 won won, which is at the high end of the IPO price range.
Our base case valuation of Innospace is target price of 51,481 won per share (12 month view), which is 19% higher than the IPO price.
Innospace is involved in the satellite launch vehicle production and launch service business.

Another Major Win for Eoflow [U.S. Federal Appeals Court Issues a Decision]

On 19 June, Eoflow announced that the U.S. Federal Appeals Court issued a decision to overturn the provisional injunction.
In other words, the U.S. federal court ordered the first trial’s preliminary injunction banning overseas sales of Eoflow to be overturned.
A jury trial is set at end of November 2024. Depending on the ruling, either side may appeal and a second trial may follow or there may be a settlement.

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Jun 19

Daily Brief South Korea: Hyundai Motor , Webtoon Entertainment, E&D Co Ltd, LS Materials and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Pref-Centred Dividend Plays with Expanded ISA Tax Benefits in Value-Up Context
Webtoon Entertainment (WBTN US) IPO: Valuation Insights
KOSDAQ150 Adhoc Index Rebalance: Eco&Dream to Replace Paradise Co
LS Materials: A Sharp Increase in Short Selling Post Block Deal Sale
Webtoon Entertainment IPO – Thoughts on Valuation

Pref-Centred Dividend Plays with Expanded ISA Tax Benefits in Value-Up Context

Local stock market focuses on ISA tax benefits expansion; political push for higher tax-exempt limits seen as pivotal event.
Investors expect dividend stocks to outperform due to ISA tax advantages: tax exemptions within limits and lower 9.9% taxation on excess amounts, boosting ISA-based equity investments.
ETF influence declining; ISA tax benefits may boost dividend plays, heightening interest in preferred stocks tied to efforts to redeem them, impacting equity costs.

Webtoon Entertainment (WBTN US) IPO: Valuation Insights

By Arun George

Webtoon Entertainment (WBTN US) is a global storytelling platform. Webtoon has launched a Nasdaq IPO to raise US$270-315 million at a US$18.00 to US$21.00 price range.
We previously discussed the IPO in Webtoon Entertainment IPO: The Bull Case and Webtoon Entertainment (WBTN US) IPO: The Bear Case.
In this note, we outline our forecasts and valuation. Our valuation analysis suggests that Webtoon is attractively valued at the IPO price range.

KOSDAQ150 Adhoc Index Rebalance: Eco&Dream to Replace Paradise Co

By Brian Freitas

Paradise Co Ltd (034230 KS) will move from the KOSDAQ Market to the KOSPI Market from the open of trading on 24 June.
E&D Co Ltd (101360 KS) will be added to the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 21 June to replace Paradise Co Ltd (034230 KS).
Paradise Co Ltd (034230 KS) belongs to the Consumer Discretionary sector and there is a possibility of inclusion to the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) in December.

LS Materials: A Sharp Increase in Short Selling Post Block Deal Sale

On 14 June, KeiStone Partners sold 2.51 million shares (3.7% of outstanding shares) of LS Materials at the block deal sales price of 26,350 won per share.
In the next several weeks/months, there will likely be increased concerns about additional selling of LS Materials by KeiStone Partners.
Due to recent block deal sale, higher short selling volume, and concerns about additional selling by Keistone Partners, LS Materials shares could face further weakness in the next 6-12 months.

Webtoon Entertainment IPO – Thoughts on Valuation

Webtoon Entertainment (WBTN US) is looking to raise up to US$315m in its US IPO, down from an earlier reported float of US$500m.
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 and undertook a peer comparison. In this note, we share our thoughts on valuation.

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Jun 18

Daily Brief South Korea: Hyundai Motor India and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Hyundai Motor India IPO Preview

Hyundai Motor India IPO Preview

Hyundai Motor India is getting ready to complete its IPO in 2H 2024. Hyundai Motor India plans to offer up to 142.2 million shares (17.5% stake) to investors.
Hyundai Motor (005380 KS) currently owns a 100% stake in Hyundai Motor India. The IPO of Hyundai Motor India could raise as much as US$3 billion.
If Hyundai Motor India (HMI) is valued at US$25 billion and HMC sells a 17.5% stake in the company, HMC’s remaining stake in HMI would be worth nearly US$21 billion.

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Jun 17

Daily Brief South Korea: Samsung C&T, Webtoon Entertainment and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Unexpected Inheritance Tax Rate Reduction Included in July Tax Reform: Impact on Value-Up Trading
Webtoon Entertainment (WBTN US) IPO: The Bear Case

Unexpected Inheritance Tax Rate Reduction Included in July Tax Reform: Impact on Value-Up Trading

Senior Presidential Secretary said this morning that a tax reform, including reducing inheritance tax rates to the OECD average, will be disclosed in late July with the tax reform plan.
Stocks sensitive to reduced inheritance tax, notably Hyundai Motor Group subsidiaries like Hyundai Glovis and Hyundai Motor, could see significant attention amid governance restructuring efforts under Chung Eui-sun.
Retroactive application and its extent may impact markets, potentially affecting groups like Samsung, influencing diverse investment strategies based on specifics.

Webtoon Entertainment (WBTN US) IPO: The Bear Case

By Arun George

Webtoon Entertainment (WBTN US), a global storytelling platform, seeks to raise up to US$500 million through a Nasdaq IPO.
In Webtoon Entertainment 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 declining organic revenue, declining Korean paying ratio, a peaking Japan growth driver, optimistic market sizing, and unsustainable low marketing spending.

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Jun 16

Daily Brief South Korea: Jeisys Medical and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

(Mostly) Asia-Pac M&A: Fancl, Jeisys Medical, A8 New Media, Bapcor, Helios Techno,Tatsuta Electric

(Mostly) Asia-Pac M&A: Fancl, Jeisys Medical, A8 New Media, Bapcor, Helios Techno,Tatsuta Electric

By David Blennerhassett

I tally 50 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Three new deals discussed this week: Fancl (4921 JP)‘s Tender offer, A8 New Media (800 HK)‘s Scheme, and Jeisys Medical (287410 KS)‘s delisting offer. Bain also approached Bapcor (BAP AU).
Key updates took place on: Sigma Healthcare (SIG AU), Alumina (AWC AU), Greatview Aseptic Packaging (468 HK), Helios Techno (6927 JP), and Tatsuta Electric Wire & Cable (5809 JP).

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Jun 15

Daily Brief South Korea: Hyundai Mobis, EcoPro Materials, Shift Up, Webtoon Entertainment, Enchem and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

The Latest on the Rumors Surrounding the Death of Chung Mong-Koo of Hyundai Motor Group
Another Block Deal Sale of Ecopro Materials
Shift Up IPO – Refiling and Other Updates, Not Ranked at the Top Anymore
Clarifying BRV’s Post-Block Deal Lockup Conditions Involving Ecopro Materials
Webtoon Entertainment Pre-IPO – Peer Comparison – Relatively Small in Operating Scale as a Platform
Block Deal Sale of 3.6% Shares of Enchem
Enchem Placement- Easily Digestible but a Punt at Best

The Latest on the Rumors Surrounding the Death of Chung Mong-Koo of Hyundai Motor Group

Early this morning, rumors spread that Hyundai’s honorary chairman Chung Mong-koo was hospitalized and died, causing stock prices to surge, but Hyundai denied this news.
Control of Hyundai hinges on increasing the stake in Mobis. Chung Eui-sun aims to keep Mobis’s stock low, but Chung Mong-koo’s health complicates timing and strategy.
Mobis’s trading point depends on Chung Mong-koo’s health. Three scenarios: he’s healthy, critically ill, or deceased. Current rumors’ price impacts are unlikely to subside soon.

Another Block Deal Sale of Ecopro Materials

Shares of EcoPro Materials are down 16% today to 112,300 won, due to another block deal sale of by BRV Capital in the after hours trading on 13 June.
After the second block deal sale on 14 June, BRV’s stake declined further from 21.2% to 18.2%.
This block deal sale at a big discount is likely to raise overhang concerns about further block deal sales by BRV Capital in the coming months/years.

Shift Up IPO – Refiling and Other Updates, Not Ranked at the Top Anymore

By Sumeet Singh

Shift Up (462870 KS) plans to raise up to US$320m in its South Korean IPO.
Shift Up is a South Korean games developer, which as released three games so far for the global markets.
We have looked at the company’s performance, undertaken a peer comparison and talked about valuations in our past notes. In this note, we talk about the refiling and other updates.

Clarifying BRV’s Post-Block Deal Lockup Conditions Involving Ecopro Materials

In Korea, the lockup period for block deals is set by the seller and underwriters, not by law, and can be adjusted if both parties agree.
BRV obtained consent from Goldman, UBS, and KB for a second block deal after assessing that many initial buyers had sold their shares.
Understanding this lockup structure provides key insights into predicting when the next block deal might occur.

Webtoon Entertainment Pre-IPO – Peer Comparison – Relatively Small in Operating Scale as a Platform

Webtoon Entertainment (WBTN US) is looking to raise up to US$500m in its US IPO.
Webtoon Entertainment is a global storytelling platform where a community of creators and users discover, create and share new content.
In our previous note, we talked about the company’s historical performance. In this note, we undertake a peer comparison.

Block Deal Sale of 3.6% Shares of Enchem

After the market close on 14 June, it was reported that Woori PE/other investors will be selling 705,384 shares of Enchem in a block deal, representing 3.6% of outstanding shares.
The block deal discount rate ranges from 6.9% to 8.92%, resulting in potential block deal sale price of 270,500 won to 276,500 won.
We would not subscribe to this block deal and we are concerned about the valuations of Enchem after a sharp share price appreciation this year.

Enchem Placement- Easily Digestible but a Punt at Best

Woori PE, NH PE and KDB Capital seek to raise around KRW195bn (US$141m) through a secondary block deal, selling 0.71m shares (3.64% of TSO) of Enchem (348370 KS).
The deal is a small one to digest at only 1.1 days of three-month ADV.
In this note, we will talk about the placement and run the deal through our ECM framework.

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Jun 14

Daily Brief South Korea: Korea Stock Exchange Kospi Index, Webtoon Entertainment and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Specifics of Korea’s Official Short-Selling Regulations, Announced This Morning
Webtoon Entertainment IPO: The Bull Case

Specifics of Korea’s Official Short-Selling Regulations, Announced This Morning

Limiting extensions to four times after a 90-day repayment and mandating repayment after 12 months increases short-selling costs. The revision omits limits on position-holding cycles, disappointing retail investors.
Today’s release did not set a timeline for short-selling resumption. The ruling party has requested it after March 2025, with key officials present suggesting next year March resumption.
Regarding the electronic system implementation, core content aligns with the draft, but newly revealed institution numbers add a new perspective. Uncertainties remain on integrating overseas stock borrowing into the system.

Webtoon Entertainment IPO: The Bull Case

By Arun George

Webtoon Entertainment (WBTN US), a global storytelling platform, seeks to raise up to US$500 million through a Nasdaq IPO.
Webtoon is the leading web-comic player in all its major geographies, including Korea, the US and Japan. Naver Corp (035420 KS) and LY (4689 JP) are the primary shareholders.
The bull case rests on a large TAM, rising monthly active users, strong constant currency growth supported by monetisation initiatives, a shift to profitability, and cash generation.

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Jun 13

Daily Brief South Korea: SK Telecom, Samsung C&T and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Proposed Merger Between Rebellions and Sapeon – To Challenge Nvidia
Changes in Law for Allocation of Treasury Shares as New Shares Post Spin-Offs in Korea in 2H 2024

Proposed Merger Between Rebellions and Sapeon – To Challenge Nvidia

On 12 June, SK Telecom (017670 KS) confirmed that its affiliate Sapeon plans to merge with its competitor Rebellions by end of this year.
Sapeon and Rebellions’ largest global competitor is Nvidia. A key aim of the merger is to challenge Nvidia and try to take away its global dominance in AI chips.
If the combined Sapeon and Rebellion can take away just 1% market share resulting in 1% of Nvidia’s market cap, this would suggest valuation of US$31 billion.

Changes in Law for Allocation of Treasury Shares as New Shares Post Spin-Offs in Korea in 2H 2024