South Korea

• This is our 10th “Annual Edition of the Major Korean IPOs Pipeline Preview” at Smartkarma.
• This insight will feature 50 of the biggest potential IPOs in Korea in 2025.
• These 50 IPOs in Korea are likely to represent more than 80% of all capital raised through IPOs in Korea next year.

• In this insight, we review the major rights offerings/capital raises that were announced in Korea in 2024.
• In general, the major rights offerings/capital raises tend to result in lower share prices one month, three months, and over a longer time frame. 
• There are some exceptions. Peptron and ABL Bio experienced higher share prices even after their capital raise announcements, especially after a longer time frame (3 months or more).

• ISU Petasys is betting the FSS chief, tied to the current administration, won’t have much market power due to the impeachment drama—and that gamble looks likely to pay off.
• ISU Petasys’ rights offering still offers solid trade potential, with 97% stockholder allocation and only 21% from the major shareholder, increasing the chance of significant unclaimed shares hitting the market.
• Our plan is to grab stock rights cheap, ride the 15% discount, and capitalize on stock pullbacks, though lack of futures limits short hedging. Still, an unhedged setup looks promising.

• According to our valuation analysis, it suggests a base case implied market cap of 7.9 trillion won for LG CNS, representing target price of 81,095 won per share.
• Therefore, our base case valuation target price of 81,095 won is 31% higher than the high end of the IPO price range.
• We estimate LG CNS to generate sales of 5.99 trillion won (up 6.8% YoY) and net profit of 356.1 billion won (up 7.1% YoY) in 2024.

• The impact of South Korea’s political turmoil on the KOSPI 200 and implied volatility has been limited. Implied volatility has risen, and the skew steepened but not to extreme levels.
• The shape of the skew, in combination with the interplay between index and skew change, open up an opportunity for opportunistic option trades, in particular short otm calls and/or puts.
• KOSPI 200 (KOSPI2 INDEX) risk is probably skewed to the downside favoring short calls. Choice of strike and expiry is guided by quantitative analysis, option liquidity, and risk-return potential.

• If stocks close above the appraisal prices on the 10th, NPS will support the merger; otherwise, they’ll abstain to secure their appraisal rights.
• Due to cancellation risk hitting the ceiling, NPS will likely exercise half its position and start buybacks after the results.
• With both stocks heavily weighted in KOSPI 200, NPS is likely to opt for a tight buyback window, boosting chances for upward price action on Doosan’s shares in that period.

• In the next several days, it is likely that the Doosan Group is likely to cancel its restructuring plan involving Doosan Enerbility, Doosan Bobcat, and Doosan Robotics.
• As a result of the sharp decline in share prices of major Doosan Group companies, the cost of appraisal rights may be too much for the Doosan Group.
• Despite the negative impact of recent political events in Korea, a cancellation of  Doosan Group restructuring plan could have a near-term positive impact on all the major Doosan Group companies.

• JB Financial is a Korean regional bank involved in traditional banking services such as mortgage loans, auto loans, and asset management
• The bank has a stable performance with a 10-12% return on common equity and a strong 12.5% CET1 ratio, but trades at a low valuation of .56xTBV and 4-5x earnings
• Activist fund Align Partners has influenced JB’s capital allocation decisions, advocating for buybacks and higher capital returns, while the bank offers a significant 6.6% dividend that has been growing at a double-digit rate

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Korea Zinc’s free float is dropping from 52% to 31%, a 21%p cut.
• Despite rising volume, retail still dominates. With this trend continuing, the 80,000-share sell volume is unlikely to get buried without triggering noticeable price moves.
• Ahead of big one-day flow events, shorts are loaded, causing a dip. On rebalance day, traders buy back, triggering a bounce. This event is likely to follow the same pattern.

• This has been a difficult year for the global IPO market including in Korea. In this insight, we review our IPO research in 2024.
• Using the criteria that the Aequitas Research uses (see below), the accuracy rate of our calls on the IPOs this year was 86%. 
• There some sizeable IPOs that are expected to be completed in Korea in 2025 including LG CNS, Sono International, K Bank, and Bithumb.

• Our previously posted view on an upcoming KOSPI 200‘s rally has not been changed by the attempted political coup. The market pulled back a bit, no big deal.
• The index is in the process of bottoming, as we will see from the analysis of our QUANTCHARTS / models.
• Even if the index suddenly crashes, we have identified an area for support in that event (keep reading).

• The KRW 5T-6T valuation and 13x-16x PER look solid compared to local peers like SDS and Hyundai AutoEver, with CNS possibly getting a premium due to its smaller captive stake.
• Instos probably won’t push hard for lock-ups but will aggressively target pricing to secure larger allotments, knowing the company is likely to stick with a market-friendly price.
• On a separate note, I wouldn’t expect much of a NAV discount reduction for LG Corp, as LG CNS’s stake isn’t significant enough to move the needle.

• The long awaited IPO of LG CNS is finally getting ready to be completed in February 2025. The IPO price range is 53,700 won to 61,900 won.
• Expected market cap is between 5.2 trillion won to 6.0 trillion won. At the high end of the IPO price range, the total IPO offering would involve 1.2 trillion won.
• The bankers used three companies including Samsung Sds, Hyundai Autoever, and NTT Data Corp as comps. This is expected to be one of the largest IPOs in Korea in 2025

• MNC Solution reported its IPO book building results. The IPO price has been determined at 65,000 won, which is 18.8% lower than the low end of the IPO price range. 
• A total of 198 institutional investors participated in the IPO demand forecast. The competition rate was low at 8.2 to 1. 
• Our base case valuation of MNC Solution is target price of 92,842 won per share, which is 43% higher than the IPO price of 65,000 won.

• The key point is Saturday—watch if eight ruling party lawmakers defect. Hahn Dong-hoon may push for an early election, with 15 loyalists backing him, so it’s definitely possible.
• I’d bet on the ruling party leader pivoting, accepting impeachment, and pushing for an early election. Time to scout beneficiaries and set up an aggressive trading play.
• Short-Term, I’m eyeing Kakao affiliates, under-the-radar IT stocks, and those likely to benefit from corporate governance changes. Low birth rate-related sectors are also set for strong upside.

• Eight months after shareholders approved the transfer from the KOSDAQ to the KOSPI market, Ecopro BM (247540 KS) has submitted the application for section transfer to the KRX.
• Given historical precedent, the transfer could take place in February. Ecopro BM‘s deletion will mean an inclusion to the KOSDAQ150 Index to maintain the number of index constituents at 150.
• Ecopro BM (247540 KS) will be deleted from the KOSDAQ 150 Index leading to passive selling and some short covering. Then will come the inclusion to the KOSPI 200 Index.

• The KOSPI 200 is in a steady bear market with political turmoil further depressing the outlook. Volatility increased in the near term, leading to an inverted term structure.
• The Nifty 50 is approaching its 50-day average from below. Call options profit from low implied volatility and present an attractive opportunity to profit on the upside.
• The Hang Seng continues to stand out as the index with positive correlation between implied volatility and index performance. Interestingly, the relationship is not symmetric between up- and down moves.

• Martial law has been declared 11 times since 1945, but this is the first since Korea’s post-‘90 democratization.
• The Martial Law Command’s first proclamation blocks parliament, raising legal questions about its constitutionality and making any immediate attempt to end martial law uncertain.
• Defense and telecom stocks could outperform short-term due to martial law, making them strong trading targets to watch.

• In this insight, we review the major tender offers of Korean companies in 2024. The tender offers have mostly been profitable for the investors in these targeted companies.
• What is also impressive is that even after the 1st day of trading (post tender offer announcement), there have been extra alpha for the following week and month.
• The number of tender offers in Korea increased from 6 in 2020 to 12 in 2021, 7 in 2022, 18 in 2023, and 28 in 2024.

• The EGM for Korea Zinc (010130 KS) is expected to be held on 23 January 2025. Accordingly, the shareholder registry is expected to be closed around 19 – 23 December. 
• By better analyzing the timeline of the M&A of SM Entertainment, we may be able to get better clues to Korea Zinc’s price movement in the next several weeks. 
• Notice the double top share price formation of SM Entertainment in 2023 versus the potential double top formation of Korea Zinc in 2024. These trading formations look eerily similar.

• In this insight, we provide an early look at the potential additions and deletions to KOSPI200 rebalance in June 2025.
• These seven potential inclusion candidates are up on average 8.9% from end of Sept 2024 to 2 December 2024 versus KOSPI which is down 5.4% in the same period. 
• The potential additions include IPOs in 2024 such as HD Hyundai Marine Solution (443060 KS), Shift Up (462870 KS), and Sanil Electric (062040 KS). 

• Nearly four years have passed since Korean Air first proposed a merger with Asiana Airlines in November 2020. Despite repeated delays, it appears that this merger could finally occur.
• There is now a higher probability of Korean Air and Asiana Airlines receiving the final merger approval from the United States Department of Justice. 
• Combined with attractive valuations, better balance sheet, and improved profitability from the merged entity, we believe that Korean Air shares could continue to outperform KOSPI in the next 12 months.