South Korea

• Unlike typical Korean stock rights arbitrage, LG Display’s significant equity offering and active stock futures trading anticipate a spread opening, akin to the recent Hanwha Ocean scenario.
• In contrast to Hanwha Ocean, the absence of major sellers, like KDB, sets this event apart. LG Electronics, the major shareholder with a 37.9% stake, intends to participate.
• Despite differences from Hanwha Ocean, LG Display’s high retail shareholder presence implies a substantial likelihood of stock rights overhang, even without players like KDB.

• It was reported in numerous local media that Viva Republica has sent several RFPs to several large domestic securities companies to be underwriters of a potential IPO in 2024. 
• Viva Republica is one of the largest Korean fintech companies. Market value of Viva Republica is estimated at more than 9 trillion won.
• E World, Hanwha Securities, Hana Financial, and Korea Electronic Certification Co are major public companies that should benefit from the listing of Viva Republica. 

• A consortium led by the Harim Group and JKL Partners has been chosen as the preferred bidder to acquire a 57.9% stake in HMM.
• Korea Development Bank (KDB) and the Korea Ocean Business Corporation (KOBC) are the main creditors of HMM, which is the largest shipping company in Korea.
• Pan Ocean is expected to complete a rights offering of nearly 3 trillion won which is 136% of its current market cap. This is excessive and negative for Pan Ocean.

• The Cho brothers are currently sparring over control of Hankook & Company (000240 KS), and in turn, its 30.7% stake in Hankook Tire (161390 KS).
• After the honorary chairman of Hankook backed the younger son (& chairman of Hankook), PE-outfit MBK, aligned with the elder son, bumped its public tender Offer by 20% to ₩24,000/share.
• Hankook is currently trading 27.3% adrift of the revised terms. That pretty much sums up the situation. The public tender closes on December 25. However, December 23-25 are holidays.

• LG Display announced today that it will conduct a rights offering capital raise worth 1.36 trillion won. 
• The rights offering capital raise involves 142 million shares, which represent 39.7% of its existing outstanding shares. 
• We believe this rights offering will have a negative impact on LG Display’s share price as it will significantly dilute existing shareholders. 

• The data is crucial for year-end dividend arbitrage. We can strategically target Single-stock futures’ spread basis widening due to information timeliness disparities, focusing on companies with high dividend yields.
• Furthermore, it offers valuable insights into assessing the December-March spread levels, potentially leading to a rollover distortion in KOSPI 200 futures’ calendar spread trading.
• Postponed yearend dividend record dates to March may clash with first-quarter dividends, offering a new trading opportunity. this unique situation could significantly impact spot and futures prices.

• Last week, Taihan Electric Wire announced a rights offering of 50% of its outstanding shares.  The company is expected to raise 526 billion won. 
• Taihan Electric Wire is expected to use the rights offering proceeds to mostly expand its submarine cable production.
• With the share price falling 21% since the announcement of the rights offering last week, Taihan Electric Wire looks more attractive.

• MBK Partners has increased its Hankook & Company (000240 KS) partial tender offer to KRW24,000 per share, 20.0% and 51.4% above its previous offer and the last close, respectively.
• While the offer is attractive, we estimate that the minimum acceptance condition of 19.3 million shares (20.35% of outstanding shares) requires an 84.3% minority acceptance rate. 
• The minority acceptance rate is challenging unless MBK can secure a ruling preventing share purchases from Cho Yang-rai, who disclosed a 2.72% stake on 14 December and opposes the tender. 

• Critical now is estimating MBK’s achievable volume in the tender offer, a key indicator for assessing cancellation risk. Evidence suggests few allies for Cho Hyun-beom, prompting MBK’s strategic persistence.
• MBK can secure 23.58%, but NPS’s involvement is pivotal. If neutral, MBK aims for 19.55%, below the minimum. MBK proceeds with a revised offering price, anticipating NPS participation.
• Though the FSS investigation may favor MBK, a successful tender offer depends on achieving 87% participation. The higher-than-expected likelihood of success hints at a strong upward stock adjustment from Monday.

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.

• JSW Infrastructure
• Lippo Malls Indonesia Retail Trust
• SK Hynix

• In 3Q23, Boryung Pharmaceutical (003850 KS) reported 15% YoY growth in revenue to KRW208B, driven by 7% YoY growth in prescription drugs, the slowest growth in the last three years.
• Prescription drug revenue growth slowed due to the huge shortfall in revenue from the diabetes drug Trulicity caused by supply shortage. We expect slowdown in Trulicity revenue is temporary.  
• Despite losing patent protection in February 2023 on ARB monotherapy, Kanarb drug family is showing no fatigue due to increasing preference for combination drugs in the market.  

• With recent surges in EcoPro Materials and Doosan Robotics, it’s crucial for their potential inclusion in the February Global Index review. No other names approach the threshold.
• Depending on classification, Ecopro Materials may get a free-float rate from 15% to 20%, while Doosan Robotics may receive a rate from 20% to 30%.
• With max free-float rates (20% and 30%), both meet Cutoffs. At minimum rates, Doosan Robotics needs over a 20% increase, while Ecopro Materials slightly exceeds Cutoffs.

• After market close on 15 December, MBK Partners raised the tender offer price of Hankook & Company by 20% to 24,000 won, which is now 51.4% higher than current price. 
• With Cho Yang-Rae’s recent acquisition of shares, Cho Hyun-beom, Cho Yang-rae, and related parties now own about 45.6% of Hankook & Co, up from 42.9% previously. 
• MBK Partners has requested an official investigation by the FSS, claiming that Cho Yang-rae and HY have violated the Capital Markets Act by recently purchasing shares of Hankook & Co.

• On 14 December, it was reported that US based Whitebox Advisors has started an activist campaign on Samsung C&T (028260 KS).
• Whitebox estimates that Samsung C&T’s stock price is about 68% undervalued compared to its NAV.
• In addition to Whitebox, there are two other foreign investors including Palliser Capital and City of London Investment Management that have requested Samsung C&T to improve corporate governance.

• 3 main APAC markets (Nifty, Kospi 200 and ASX200) are very OVERBOUGHT.
• A WEEKLY pullback (1 week down) is expected this coming week, or the next.
• The pullback should be short-lived and last just 1 week, then the rally should resume.

• DS Dansuk reported solid bookbuilding results. DS Dansuk IPO price has been determined at 100,000 won per share, which is 12.4% higher than high end of the IPO price range.
• A total of 1,843 institutional investors participated in this IPO book building. The demand ratio was 342 to 1. DS Dansuk IPO will start trading on 22 December.
• Given the strong IPO bookbuilding results, we believe shares of DS Dansuk are likely to trade above the high end of the IPO sensitivity analysis (137,877 won). 

• The KRX has preliminarily approved Posco DX (022100 KS)‘s listing transfer from the KOSDAQ Market to the KOSPI Market.
• Posco DX (022100 KS) has announced that its stock will start trading on the KOSPI Market from the open on 2 January.
• We expect Temc (425040 KS) to replace Posco DX (022100 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 28 December.

• EcoPro Materials and Doosan Robotics, recent IPOs, join the Large category. Their inclusion signals at least two Large stocks, CS Wind Corp and BGF Retail, shifting to Mid.
• There’s a chance three Mid-stocks will transition to Large: Ssangyong Cement, Hyundai Electric, and LOTTE Corp. Conversely, LS Corp, Hotel Shilla, and Kepco E&C will move from Large to Mid.
• With ample time left in the screening period, cautious monitoring is essential. Still, Large→Mid candidates, with a notable gap from the ₩2.95T cutoff, warrant a focus on proactive setups.

• KT&G is a high conviction pick in 2024.We believe KT&G Corporation (033780 KS) is likely to announce cigarette price hikes in 2H 2024.
• Three major reasons include a) no cigarette price hikes in nearly 9 years, b) Korean legislative election will be in April 2024, and c) reduce government tax revenue shortfall.
• We believe that the Korean government could raise cigarette prices to about 7,000 won to 8,000 won per pack from current price of 4,500 won. 

• We review the major tender offers of Korean companies in 2023. Some of the major M&A tender offers that have closed this year include Osstem Implant and SM Entertainment.
• Among the 15 companies targeted for tender offers, there are 5 companies including Osstem Implant, SM Entertainment, Lutronic Corp where the purpose of the tender offers is for M&A. 
• There were a total of 18 companies that submitted tender offer results announcements in 2023 (as of 11 December), up 157% YoY.

• The prevailing sentiment in Yeouido signals a shift of companies, originally preparing for EB issuances, toward block deals. Local brokerages are competing to identify potential block deals involving major issuers.
• The local market anticipates LG Chem opting for a short-term block deal, considering the potential reduction of the LG Energy stake below 80% to alleviate global minimum corporate tax burdens.
• Timing is a challenge, but based on corrections before July’s EB issuance, we could proactively plan for January. Abundant liquidity in LG Energy’s futures eases trading instrument concerns.