South Korea

Insiders must disclose transaction details, complete deals within 30 days, limit deviations to 30%, and submit disclosures 30 days before transactions.
Financial investors, including institutional ones, are exempt. This encompasses local pension funds (including NPS) and foreign financial investors. Deals under 1% of total shares and less than ₩5B are exempt.
Confirmation of the timeline indicates many block deals before July. We should hunt potential deals for proactive setups. Also, we should monitor basis widening in futures due to short-selling ban.

HYBE Invests Additional 104 Billion Won in SM Entertainment – Why?

After the market close, it was announced that HYBE (352820 KS) acquired a 3.7% stake (868,948 shares) in SM Entertainment Co (041510 KS) for 104.3 billion won.
HYBE’s acquisition of shares was accomplished through the exercise of a put option by SM Entertainment’s founder Lee Soo-Man. After this purchase, HYBE will own 12.6% stake in SM Entertainment.
We like SM Entertainment at current levels. Valuations are attractive and there is a strong pipeline of new music/songs to be launched by its artists in 2Q 2024.

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Feb 28

Daily Brief South Korea: Ecopro BM , Sfa Engineering, HD Hyundai , Korea Stock Exchange Kospi Index and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Ecopro BM KOSPI Transfer Listing Disclosure
Block Deal Sale of 5% Stake In SFA Engineering by Samsung Display
Ecopro BM (247540 KS): Index Impact of KOSDAQ to KOSPI Transfer
Ecopro BM: Announces It Will Switch Listing from KOSDAQ to KOSPI
Constituents of the 1st Corporate Value Up ETF in Korea
Samsung KoAct Dividend Growth Active ETF: A Look at the First Corporate Value-Up ETF

Ecopro BM KOSPI Transfer Listing Disclosure

The schedule includes submitting the transfer listing application post-EGM on March 26th. KRX approval expected in 4-6 weeks due to Ecopro BM’s financial soundness. KOSPI listing follows in 2-3 weeks.
As for KOSDAQ 150 ad-hoc change, it will be replaced with the top reserved issue. The anticipated timing for this ad-hoc change is around mid or late May.
Following Feb 7 disclosure, stock surged over 10% in 2 days. Precedents show rallies pre-shareholder meetings, but KOSPI listing brings corrections. Today’s resolution could boost Ecopro BM short term.

Block Deal Sale of 5% Stake In SFA Engineering by Samsung Display

After the market close on 27 February, Samsung Display announced that it will sell its 4.95% stake in Sfa Engineering (056190 KS) in a block deal sale.
We would take the trade. We like the relatively large block deal sale discount as well as the company’s attractive valuations.
SFA Engineering is trading at P/E of 8.3x, EV/EBITDA of 2.7x, and P/B of 0.7x in 2024, which are much lower than historical valuations.

Ecopro BM (247540 KS): Index Impact of KOSDAQ to KOSPI Transfer

Ecopro BM (247540 KS)‘s Board has approved the delisting of the stock from the KOSDAQ market and to list on the KOSPI market. The shareholder meeting is on 26 March.
Historically, the KRX has taken an average of 64 days from application to approve the listing to transfer from the KOSDAQ market to the KOSPI market.
Ecopro BM (247540 KS) will be deleted from the KOSDAQ 150 Index on its last trading day and inclusion in the KOSPI 200 Index could take place in September.

Ecopro BM: Announces It Will Switch Listing from KOSDAQ to KOSPI

After the market close on 27 February, Ecopro BM (247540 KS) announced that it will switch its listing from KOSDAQ to KOSPI.
Ecopro BM currently has a market cap of 23.1 trillion won. It is the largest stock in KOSDAQ right now and it would be the 17th largest stock in KOSPI.
Lofty valuation is one of the main reasons why we continue to be bearish on Ecopro BM. It is trading at P/E of 203x in 2024 and 71x in 2025.

Constituents of the 1st Corporate Value Up ETF in Korea

Samsung Active Management launched the first Corporate Value Up ETF called KoAct Dividend Growth Active ETF on 27 February. It also revealed some of the major constituents of this ETF.
Samsung Active Management revealed the top 20 constituents of this ETF, which comprised 73.2% of the total ETF AUM.
In the coming weeks, there will be many other Corporate Value Up related ETFs that will be created that are similar to Samsung’s KoAct Dividend Growth ETF.

Samsung KoAct Dividend Growth Active ETF: A Look at the First Corporate Value-Up ETF

The Samsung KoAct Dividend Growth Active ETF (476850F.KS) raised around US$7.4m and started trading on 27 February.
There are 45 stocks in the ETF and the aim is to beat the Korea Stock Exchange Kospi Index (KOSPI INDEX) by employing an active management strategy.
Financials, Consumer Discretionary and Industrials stocks make up nearly two-thirds of the ETF, the dividend yield of the underlying basket is 4% and the forward dividend yield is slightly higher.

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Feb 27

Daily Brief South Korea: APR, Hyundai Electric & Energy and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Trading Strategy of APR on the First Day of IPO
KOSPI Size Indices – Potential Migrations as Focus Is on Price to Book

Trading Strategy of APR on the First Day of IPO

In this insight, we discuss a trading strategy for APR (278470 KS) which starts trading on 27 February. APR is the most anticipated IPO in Korea so far in 2024.
Our base case (6 months – 1 year) target price of APR is 370,809 won, which is 48% higher than the IPO price.
We recommend investors to take some profits off the table (30%-50%) if the share price shoots higher by 100% to 200%+ from the IPO price on the first day.

KOSPI Size Indices – Potential Migrations as Focus Is on Price to Book

The review period for the March rebalance of the KOSPI Size Indices started 1 December and will end 29 February. The changes will be implemented at the close 14 March.
We see 3 migrations from MidCap to LargeCap, 4 new adds to LargeCap, 7 migrations from LargeCap to MidCap, and 11 migrations from SmallCap to MidCap.
On average, stocks migrating from SmallCap to MidCap have the lowest price to book value and have historically outperformed stocks migrating between other categories.

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Feb 26

Daily Brief South Korea: Hyosung Corporation, Korea Stock Exchange KOSPI 200 and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Hyosung Corp (004800 KS): Spin-Off & KOSPI200 Index Implications
Details of Korea Value-Up Initiatives & Index, Announced This Morning

Hyosung Corp (004800 KS): Spin-Off & KOSPI200 Index Implications

Hyosung Corporation (004800 KS) has announced that it is spinning off part of its business holdings to Hyosung New Holding Corporation in a 0.818:0.182 ratio.
The stock will remain suspended from late June to late July. We expect Hyosung Corporation (004800 KS) to maintain its index membership while the New Entity will not be added.
The dynamics between listed ETFs and non-listed passive trackers differ and we take a look at the potential index flows.

Details of Korea Value-Up Initiatives & Index, Announced This Morning

The rollout of the Korea Value-Up Index has encountered a minor delay. Completion of the index is slated for 3Q, with ETFs scheduled for release in 4Q.
The government will encourage the National Pension Service to utilize it as a benchmark.
Dividend payout ratio, dividend yield, PER, and cash flow will be included as screening factors for this index, in addition to the already known factors of PBR and ROE.

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Feb 25

Daily Brief South Korea: Hyosung Corporation, Youngone Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Hyosung Corp Split: Potential Mirror of December 2021 LX-LG Block Deal
Asian Dividend Gems: Youngone Holdings

Hyosung Corp Split: Potential Mirror of December 2021 LX-LG Block Deal

Hyosung Corp’s split diverges from usual Korean market splits. No tender offer is expected post-new holding company formation, reducing value accretion opportunities.
Sibling separation in Hyosung Corp’s split mandates shares cross-transfers. Hence, block deals among siblings are plausible.
This scenario resembles the case in December 2021 when LX Koo Bon-joon disposed of LG Corp shares through a block deal instead of a swap, causing an 8% drop.

Asian Dividend Gems: Youngone Holdings

Youngone Holdings is an attractive deep value stock. Net cash (including short term investments) was 1.1 trillion won at the end of 3Q 2023 (79% of market cap).
Youngone Holdings is the holding company of Youngone Group. Youngone Corp is best known for its OEM apparel business for major branded companies such as The North Face and Patagonia.
We found Youngone Holdings using Smartkarma’s Smart Score Screener system.

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Feb 24

Daily Brief South Korea: Alteogen Inc, Korea Stock Exchange KOSPI 200 and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Alteogen (196170 KS): Modified License Agreement For Major Platform Technology Is A Hard Catalyst
EQD | Where to BUY the KOSPI On The Upcoming Pullback

Alteogen (196170 KS): Modified License Agreement For Major Platform Technology Is A Hard Catalyst

By Tina Banerjee

Alteogen Inc (196170 KS) has modified the existing license agreement with Merck. Revised terms of the agreement grant Merck exclusive global right to ALT-B4 for a specific product group, pembrolizumab.
Under the terms of the revised agreement, Alteogen will receive an upfront payment of $20M from Merck. Alteogen will also receive additional milestone payment of up to $432M.
Approval of Alteogen’s first proprietary product, Tergase (expected in early 2024) will be the next major catalyst for the company.

EQD | Where to BUY the KOSPI On The Upcoming Pullback

By Nico Rosti

The KOSPI 200 INDEX has been rallying since January 2022, roughly up +22.5%, the rally can continue, but soon there could be a pullback, possibly this coming week.
If the index falls from its current highs, where are the best support levels to go LONG again?
The price area between 355 and 345 is where the index could find support and resume the uptrend.

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Feb 23

Daily Brief South Korea: Samsung C&T, Jusung Engineering, Celltrion Inc, Woori Financial Group , Hyundai Rotem Company and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

The Launch of 1st Corporate Value Up ETF on 27 February – Focus on Low PBR and Cash Flow
FnGuide Semiconductor Top10 Index Rebalance Preview: One Change Likely; Close Among Potential Adds
FnGuide Top10 Equal Weight Index Rebalance Preview: Celltrion Could Replace Samsung SDI
South Korean Banks; Woori Financial (316140 KS) Added to Buy List, Joining KB Financial (105560 KS)
Hyundai Rotem: Passage of Export-Import Bank Act To Support Korean Defense Companies

The Launch of 1st Corporate Value Up ETF on 27 February – Focus on Low PBR and Cash Flow

Samsung Asset Management announced today that it will be launching the first Corporate Value Up ETF on 27 February. It will focus on low PBR and positive cash flow generators.
This ETF which will be called KoAct Dividend Growth Active ETF. There are about 45 stocks that are expected to be included in this ETF.
Among the 92 companies in KOSPI 200 that are trading at less than 1x PBR, those that generate positive free cash flow are outperforming significantly.

FnGuide Semiconductor Top10 Index Rebalance Preview: One Change Likely; Close Among Potential Adds

ISC Co Ltd (095340 KS) could replace Wonik Ips (240810 KS) in the FnGuide Semiconductor Top10 Index at the April rebalance.
Jusung Engineering (036930 KS) is ranked just behind ISC Co Ltd (095340 KS) and could be added to the index instead depending on relative price performance.
Shorts on ISC Co (095340 KS) have been stable over the last few months while there has been big covering on Wonik Ips (240810 KS) and Jusung Engineering (036930 KS).

FnGuide Top10 Equal Weight Index Rebalance Preview: Celltrion Could Replace Samsung SDI

The Samsung KODEX Fn Top10 Equal Weight ETF (395170 KS) tracks the FnGuide Top 10 Equal Weight Index and has an AUM of US$241m.
We expect Celltrion Inc (068270 KS) will replace Samsung SDI (006400 KS) in the index at the March rebalance.
There will be 0.26x ADV to buy in Celltrion Inc (068270 KS) while passives will need to sell 0.17x ADV of Samsung SDI (006400 KS).

South Korean Banks; Woori Financial (316140 KS) Added to Buy List, Joining KB Financial (105560 KS)

By Victor Galliano

In our latest South Korean banks screener; we add Woori Financial to existing buy KB Financial as our preferred Korean banks picks
Delinquency ratios continued to worsen QoQ, with only Woori bucking the 4Q23 NPL trend; Woori has lagged in terms of returns, but we expect CoR control to support 2024 returns
KB has a low PBV ratio relative to its ROE, it delivers rising post-provision returns, it has a high CET1 ratio and it maintains a healthy LDR

Hyundai Rotem: Passage of Export-Import Bank Act To Support Korean Defense Companies

On 21 February, it was announced that the long awaited amendment to the Export-Import Bank Act was passed by the Korean National Assembly.
As a result of this passage, the capital limit of the Export-Import Bank of Korea will be raised from the current 10 trillion won to 25 trillion won.
The revision of this law is expected to benefit major defense companies in Korea including Hyundai Rotem, Hanwha Aerospace, LIG Nex1, and Korea Aerospace Industries.

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Feb 22

Daily Brief South Korea: Korea Stock Exchange Kospi Index, Hanwha Corporation and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Korea NPS Abruptly Joins Corporate Value Up Program: According to Document Obtained from NPS
NPS Plans to Select Three Asset Management Companies For “Corporate Value Up” Program

Korea NPS Abruptly Joins Corporate Value Up Program: According to Document Obtained from NPS

NPS abruptly joins ‘Corporate Value Up Program’, plans to select three asset managers. Deadline: this month’s 29th; results: March 19th, possibly linked to Korea Premium Index ETF launch in mid-May.
The document outlines guidelines, allocating 90-100% to value stocks, with KOSDAQ under 20%. While benchmarked to the internally-built index, it will likely focus on Korea Premium Index and KOSDAQ Global.
The fund size is crucial. NPS will disclose details later. But still, there is considerable room to this year’s ceiling for local equity; a significant amount could flow into this.

NPS Plans to Select Three Asset Management Companies For “Corporate Value Up” Program

On 21 February, NPS announced that it will select three domestic asset management companies to manage funds that will be allocated to the “corporate value up” program.
NPS plans to accept proposals from the local asset management and investment advisory companies from 21 to 29 February. NPS is likely to finalize the selected candidates sometime in March.
We provide a list of 34 companies where the NPS has at least 5% ownership stake, with PBR of 0.5x or less, and included in KOSPI 200.

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Feb 21

Daily Brief South Korea: Taihan Electric Wire and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Monitoring LG Display’s Stock Rights Trading

Monitoring LG Display’s Stock Rights Trading

LG Display’s tight stock rights trading prompts a need to assess potential trading opportunities. Taihan Electric Wire’s concurrent capital increase warrants close observation.
Watch for a potentially wider spread in Taihan Electric Wire’s stock rights trading from the 22nd, given local institutional demand focus on LG Display may create a buying vacuum.
Observers speculate on a CJ CGV-like pattern at LG Display. With no current market movements, predicting such a scenario is difficult. Nonetheless, I’ll monitor closely and share any developments.

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Feb 20

Daily Brief South Korea: Korea Gas, Naver Corp, LG Display, Mirae Asset Securities, Hugel Inc and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Inclusion of ‘Shareholder Value Improvement’ Mgmt Evaluation Reforms for Listed Govt Enterprises
Initial Thoughts on the Webtoon Entertainment IPO
Practical Issues with English Disclosure Sites in Korea (Feat. LG Display) & FSC’s Latest Solutions
WeBull In Discussions With Financial Authorities to Enter the Korean Retail Stock Brokerage Market
Hugel Inc (145020 KS): Achieves Record High Revenue and Operating Profit in 4Q23

Inclusion of ‘Shareholder Value Improvement’ Mgmt Evaluation Reforms for Listed Govt Enterprises

It was reported today in numerous local media that there will be an inclusion of ‘shareholder value improvement’ management evaluation criteria for listed government enterprises.
Some of these listed government enterprises rallied strongly today (KEPCO – up 10%; KOGAS – up 12.7%; Korea District Heating – Up 30%).
The detailed evaluation criteria for management evaluation of government enterprises will include the appropriateness of dividend levels, protection of minority shareholders, and compliance with best practices for ESG improvement.

Initial Thoughts on the Webtoon Entertainment IPO

Naver Corp (035420 KS) is trying to complete the IPO of its affiliate Webtoon Entertainment in the US stock market as early as June 2024.
The expected value of Webtoon Entertainment (post IPO) is about US$3 billion to US$4 billion. Webtoon Entertainment is seeking to raise about US$500 million in this IPO.
The IPO of Webtoon Entertainment in the US is likely to have a positive impact on Naver Corp (035420 KS).

Practical Issues with English Disclosure Sites in Korea (Feat. LG Display) & FSC’s Latest Solutions

Foreign traders face challenges in LG Display’s rights offering. While LG Display provides updates through English disclosures, detailed schedule information exclusive to the Korean prospectus is missing.
To ensure access to all Korean disclosures, use the DART English service. DART imports English disclosures from KIND and provides English titles for Korean-only disclosures. Use translation tools like ChatGPT.
FSC enhances services to address practical issues. For lengthy documents, only English titles are available. FSC will provide English for subtitles, tables, and charts, using an automatic translation system.

WeBull In Discussions With Financial Authorities to Enter the Korean Retail Stock Brokerage Market