Category

South Korea

Dec 10
0

Daily Brief South Korea: ASICLAND and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Recap of Our IPO Research in 2023

Recap of Our IPO Research in 2023

By Douglas Kim

  • In this report, we review our IPO investment research in 2023, including the performance of our calls.
  • The accuracy rate of our calls on IPOs this year was 76% (16 calls right, 5 calls wrong), slightly below our average accurate rate of 77% from 2017 to 2022.
  • The average accuracy rate of our calls from 2017 to 2023 is 77%. We made 42 investment calls in 2020, 37 in 2021, 19 in 2022, and 21 in 2023.

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Dec 08
0

Daily Brief South Korea: Mini Kospi 200 Futures, LG CNS, Korean Air Lines and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KOSPI 200 Futures Calendar Spread Trading: Latest on Year-End Dividend Record Date Changes
  • 2024 Major IPOs Pipeline in Korea
  • Korean Air: European Merger Review Decision Not Expected Until Mid-February

KOSPI 200 Futures Calendar Spread Trading: Latest on Year-End Dividend Record Date Changes

By Sanghyun Park

  • It would be prudent to anticipate that a considerable portion of these 636 companies will indeed adjust their dividend record dates, effective from this year’s year-end dividends.
  • One notable setup gaining attention is calendar spread trading for the KOSPI 200 futures in anticipation of an upward trend in the KOSPI 200 futures market towards the year’s end.
  • This entails buying the near-month and selling the far-month, liquidating when the price difference reverts. Traders pay attention to potential far-month divergence due to the shift in dividend record dates.

2024 Major IPOs Pipeline in Korea

By Douglas Kim

  • This is our 9th “Annual Edition of the Major Korean IPOs Pipeline Preview” at Smartkarma.
  • This insight will feature 50 of the biggest potential IPOs in Korea in 2024.
  • These 50 IPOs in Korea are likely to represent more than 80% of all capital raised through IPOs in Korea next year.

Korean Air: European Merger Review Decision Not Expected Until Mid-February

By Neil Glynn

  • The European Commission has confirmed it aims to make a preliminary decision on the proposed Korean Air/Asiana merger by 14 February.
  • Plans to sell Asiana Cargo may struggle to find a buyer, while the US has also highlighted concerns regarding the merger, and Japan has yet to provide approval.
  • We continue to highlight there is a strong argument for Korean Air continuing alone, as Asiana continues to struggle to achieve profitability, with a stretched balance sheet.

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Dec 07
0

Daily Brief South Korea: Eoflow and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Eoflow Vs Insulet: Round II

Eoflow Vs Insulet: Round II

By Douglas Kim

  • This insight provides a detailed analysis of Eoflow’s appellant brief (released on 4 December) on Insulet Corp (PODD US)’s lawsuit. 
  • We provide the following three major reasons why we believe Eoflow will win versus Insulet in this lawsuit.
  • One of the most important arguments on Eoflow’s appellant brief is the DTSA three years statute of limitations.

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Dec 06
0

Daily Brief South Korea: Eoflow, Hankook & Company and more

By | Daily Briefs, South Korea

In today’s briefing:

  • EOFLOW/Medtronic Tender: Appeals Brief Is All Bark, No Bite
  • Navigating the Potential of Hankook & Company’s Revised Tender Offer

EOFLOW/Medtronic Tender: Appeals Brief Is All Bark, No Bite

By Arun George

  • Eoflow (294090 KS) filed a 117-page appeal against the amended preliminary injunction (PI), sparking a 16% share price rally. Insulet Corp (PODD US) is required to respond by 14 December.
  • Eoflow argues that the Massachusetts District Court committed legal errors. However, Eoflow’s arguments are rehashed from those that the district court has already dismissed with balanced counterarguments. 
  • The appeal is Eoflow’s last roll of the dice. Eoflow’s appeal brief worryingly notes that the PI profoundly imperils both the Medtronic transaction and its status as a going concern.

Navigating the Potential of Hankook & Company’s Revised Tender Offer

By Sanghyun Park

  • With the price almost 10% above ₩20,000, it’s practically fair to regard MBK’s tender offer as effectively canceled, raising the question of the proxy battle’s potential continuation.
  • There is a significant likelihood that MBK has prepared a next-phase plan involving an upward adjustment of the offering price, considering the tight situation of successfully securing the target volume.
  • Essentially, there’s a high likelihood that the situation will resemble the earlier battle between HYBE and Kakao Corp over S.M. Entertainment Co at the start of this year.

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Dec 05
0

Daily Brief South Korea: Hankook & Company, Celltrion Inc and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Elder Brother Cho Hyun-Sik Joins Hands With MBK Partners to Tender Offer Hankook & Co. Shares
  • Alpha Generation Through Share Buybacks in Korea: October & November 2023

Elder Brother Cho Hyun-Sik Joins Hands With MBK Partners to Tender Offer Hankook & Co. Shares

By Douglas Kim

  • Cho Hyun-Sik has joined hands with MBK Partners to make a tender offer for shares of Hankook & Co for a minimum of 20.35% and maximum of 27.32% stake.
  • The tender offer price is 20,000 won which is 18.9% higher than the closing price of 16,820 won on Monday.
  • Chairman Cho Hyun-Bum may try to find a strategic ally to launch his own tender offer of Hankook & Co shares at even higher tender offer price than 20,000 won.

Alpha Generation Through Share Buybacks in Korea: October & November 2023

By Douglas Kim

  • In this insight, we discuss the alpha generation through companies that announced share buybacks in Korea in October and November 2023.
  • We provide a list of 24 stocks in the Korean stock market that have announced share buyback programs in October and November 2023.
  • The top five market cap stocks that have announced share repurchases include Celltrion Inc, Celltrion Healthcare, Shinhan Financial, Amore Pacific Corp, and Mirae Asset Securities. 

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Dec 04
0

Daily Brief South Korea: Kia Corp, Samsung KODEX Top5Plus Total Return ETF and more

By | Daily Briefs, South Korea

In today’s briefing:

  • FnGuide Top10 Equal Weight Index Rebalance Preview: Kia Corp Could Replace Posco Future M
  • Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea

FnGuide Top10 Equal Weight Index Rebalance Preview: Kia Corp Could Replace Posco Future M

By Brian Freitas

Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea

By Sanghyun Park

  • Korea’s financial authorities prompted LPs to refrain from providing liquidity to ETFs through short-selling. This has resulted in a significant increase in both the frequency and magnitude of tracking errors.
  • Therefore, it’s time to actively explore this from an arbitrage trading standpoint. ETF arbitrage involves straightforward steps: purchasing and redeeming ETFs, followed by selling the underlying shares in the market.
  • The focus should be particularly directed towards sector ETFs that include a select few large-cap stocks carrying single-stock futures.

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Dec 01
0

Daily Brief South Korea: LS Materials and more

By | Daily Briefs, South Korea

In today’s briefing:

  • LS Materials IPO Bookbuilding Results Analysis

LS Materials IPO Bookbuilding Results Analysis

By Douglas Kim

  • LS Materials IPO price has been determined at 6,000 won per share, which is higher than the high end of the IPO price range (5,500 won). 
  • A total 2,025 institutional investors participated in this IPO book building. The demand ratio was 396.8 to 1. The IPO offering amount is 87.8 billion won. 
  • We believe that its share price is likely to trade higher than the high end of our valuation range (7,953 won per share) post IPO. 

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Nov 30
0

Daily Brief South Korea: Celltrion Healthcare , SK Square , KB Financial, Korean Air Lines, CJ Cheiljedang and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Spread Trade Opportunities Arising from KQ150/KS200 Passive Flows in the Celltrion Merger
  • SK Square: Drag Along Rights To Be Exercised to Sell 11 Street + Merger of TVing and Wavve
  • ELS Losses for HSCEI Index Could Result in Lowering Dividend Expectations for Korean Banks in 2024
  • Korean Air (003490 KS): Cheap, but a Value Trap
  • CJ Cheiljedang Pref: Profits to Turn Around with Moderating Inflation + Big Discount to Common

Spread Trade Opportunities Arising from KQ150/KS200 Passive Flows in the Celltrion Merger

By Sanghyun Park

  • KOSDAQ 150’s passive outflow occurs on December 14th for Celltrion Healthcare, whereas it would be January 11th for Celltrion with KOSPI 200.
  • The estimated passive flow size (x ADTV) on their respective rebalancing trading days is anticipated to be approximately -2.79x (Celltrion Healthcare) and +1.76x (Celltrion).
  • We should monitor the potential expansion of the swap spread on December 14th. Additionally, contemplating an outright approach for Celltrion, akin to the Hanwha Ocean scenario, could be worth considering.

SK Square: Drag Along Rights To Be Exercised to Sell 11 Street + Merger of TVing and Wavve

By Douglas Kim

  • SK Square announced it will not exercise the call option to repurchase minority stake in 11 Street. This is likely to have a positive impact on the company. 
  • SK Square does not need to pay 500 billion won plus 3.5% annualized interest to the financial investors of 11 Street. This will also accelerate sale of 11 Street.
  • In addition, SK Square announced the merger of TVing and Wavve OTT services. 

ELS Losses for HSCEI Index Could Result in Lowering Dividend Expectations for Korean Banks in 2024

By Douglas Kim

  • The equity linked securities (ELS) losses related to Hang Seng China Enterprises Index (HSCEI INDEX) could lower dividend expectations for Korean banks in 2024. 
  • On average, if H-Index declines below 5,699, then the majority of the investors on these H-Index could start to incur major losses starting 1Q 2024. 
  • Amid challenges of lower interest rates expectations and higher losses from ELS products, major Korean banks could be more hesitant on share buybacks and increasing their dividends in 1H 2024.

Korean Air (003490 KS): Cheap, but a Value Trap

By Mohshin Aziz

  • Korean Air Lines (003490 KS) is cheap, against peers and its own history. The impending merger with Asiana Airline is a major overhang  
  • Business is good, with steady passenger loads and yields, and cargo showing decent signs of recovery. Lower fuel prices could surprise on the upside 
  • Target Price KRW23,868 based on FY24 P/BV of 0.81x (1SD below mean). Too little upside for the level of uncertainty. PASS   

CJ Cheiljedang Pref: Profits to Turn Around with Moderating Inflation + Big Discount to Common

By Douglas Kim

  • We have a positive view of both CJ Cheiljedang (097950 KS) and CJ Cheiljedang Pref (097955 KS). 
  • We think that the company’s business is likely to turn around in 2024, with more moderate inflation rates and raw material costs leading to improving earnings next year.
  • CJ Cheiljedang Pref is trading at a 58% discount to CJ Cheiljedang common shares, which we believe to be excessive. CJ Cheiljedang Pref also has higher dividend yield (4.2%).

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Nov 29
0

Daily Brief South Korea: Modhaus and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Modhaus bags new money to blend K-pop with blockchain

Modhaus bags new money to blend K-pop with blockchain

By Tech in Asia

  • Seoul-based Modhaus, an entertainment agency using blockchain for fan engagement, has raised US$8 million in its series A funding round led by US-based investment firm Sfermion.
  • The new round pushes the company’s total funds raised to US$12 million.
  • Founded in December 2021, Modhaus operates a blockchain platform called Cosmo, which helps fans participate in the decision-making processes of their favorite idol groups

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Nov 28
0

Daily Brief South Korea: Korea Stock Exchange Kospi Index, EcoPro Materials, Korea Stock Exchange KOSPI 200, Dentium and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Breaking Down Korean Regulators’ Official Details on New Short Selling System
  • Ecopro Materials: Overshooting Share Price and Upcoming End of Lockup in December
  • EQD | KOSPI 200 Stalling: Where to Go LONG on the Pullback?
  • Dentium (145720 KS): Economic Health of China Is the Key to Bring Back Smiles

Breaking Down Korean Regulators’ Official Details on New Short Selling System

By Sanghyun Park

  • Concerning the newly imposed 90-day mandatory repayment period for institutional investors, the elimination of the recall risk during this period is not included in this improvement plan.
  • The right to re-establish the same short-selling position after the 90-day repayment period is unlimited. We should pay attention to the potential of this creating new trading events.
  • Institutions borrowing stocks from overseas are not subject to the 105% collateral ratio. However, everyone is subject to the 90-day repayment period, even for investors who borrow stocks from overseas.

Ecopro Materials: Overshooting Share Price and Upcoming End of Lockup in December

By Douglas Kim

  • In this insight, we discuss the upcoming end of lockup in December for Ecopro Materials and why we believe Ecopro Materials’ share price will be much lower in 6-12 months. 
  • A combination of the potential inclusion in KOSPI Fast Entry plus the temporary ban on short selling of stocks in Korea has helped to push up Ecopro Materials’ share price.
  • However, despite this sharp share price run-up, we think the risk-reward is horrible on this stock in terms of bigger downside risk in the next 6-12 months. 

EQD | KOSPI 200 Stalling: Where to Go LONG on the Pullback?

By Nico Rosti

  • The KOSPI 200 INDEX has been rising for 4 weeks, it’s OVERBOUGHT and may soon perform a quick pullback, followed possibly by another rally.
  • The upcoming pullback is likely to be short-lived, in this insight we analyze where the pullback can reach, and where it should be possible to go LONG again.
  • The price area to watch is 330-326: if the index reaches there, the LONG trade odds will be good (assuming the uptrend will continue into the end of the year).

Dentium (145720 KS): Economic Health of China Is the Key to Bring Back Smiles

By Tina Banerjee

  • Dentium (145720 KS) earns more than 50% of its total revenue from China. The company’s revenue from China reported a CAGR of 32% during 2018–2022.
  • Despite concern over China slowdown and lower ASP due to VBP, in 3Q23, Dentium reported 12% YoY revenue growth in China, similar growth rate reported in 2Q23, driven by volume.
  • Economic slowdown is lingering over the global as well as Chinese dental implant sector, especially the premium brands. Dentium is positioned at the upper price portion within the value segment.  

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