Category

South Korea

Jun 30
0

Daily Brief South Korea: Lunit , Sanil Electric, SK Bioscience and more

By | Daily Briefs, South Korea

In today’s briefing:

  • End of Mandatory Lock-Up Periods for 55 Companies in Korea in July 2024
  • Sanil Electric IPO: The Bull Case
  • SK Bioscience (302440 KS): Acquiring Majority Stake in IDT Biologika- A Step Toward ‘Globalization’

End of Mandatory Lock-Up Periods for 55 Companies in Korea in July 2024

By Douglas Kim

  • We discuss the end of the mandatory lock-up periods for 55 stocks in Korea in July 2024, among which 6 are in KOSPI and 49 are in KOSDAQ.
  • These 55 stocks on average could be subject to further selling pressures in July and could underperform relative to the market.
  • The top three market cap stocks including those of which at least 1% of outstanding shares could be sold in July include Lunit, Mezzion Pharma, and DS Dansuk.

Sanil Electric IPO: The Bull Case

By Arun George

  • Sanil Electric (062040 KS), a Korean industrial transformer manufacturer, is seeking to raise up to US$165 million.    
  • The IPO is a pure primary raise of 7.6 million shares at an IPO price range of KRW24,000-30,000. Book building will run from 9 to 15 July.
  • The bull case rests on US-led rapid revenue growth, high barriers to entry, good revenue visibility, improving margins, top-quartile margin performance and modest leverage.

SK Bioscience (302440 KS): Acquiring Majority Stake in IDT Biologika- A Step Toward ‘Globalization’

By Tina Banerjee

  • SK Bioscience (302440 KS) secures 60% stake in IDT Biologika, a global CDMO company with state-of-the-art manufacturing facilities in Germany, for KRW339B ($244M). The valuation seems reasonable.
  • The transaction paves the way for SK bioscience to strengthen its global presence, notably in Europe and the U.S., and to diversify its business by expanding into bulk drug substances.
  • Based on the existing CDMO contracts, IDT Biologika’s outlook remains positive. SK bioscience aims to more than double its revenue and stabilize operating profit margins at 20%+.

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Jun 29
0

Daily Brief South Korea: SK Networks, Sanil Electric and more

By | Daily Briefs, South Korea

In today’s briefing:

  • SK Square + SK Networks Merger Swap: A Guide to Pre-Merger Arb Spread Calculations
  • Sanil Electric IPO Industry Analysis

SK Square + SK Networks Merger Swap: A Guide to Pre-Merger Arb Spread Calculations

By Sanghyun Park

  • SK Square’s market cap exceeds SK Networks’ by over 10 times, qualifying this merger as small-scale. Thus, only SK Networks needs shareholder approval and grants appraisal rights solely to shareholders.
  • The current arbitrage spread for SK Networks’ appraisal rights is 1.95%, and for the swap, it’s 4.16%. These are nominal values excluding trading costs and taxes.
  • Today’s SK Square and SK Networks prices reflect arbitrage spreads. Yesterday’s 8% spread widened, focusing on narrowing appraisal rights and swap spreads, essential before next week’s announcement.

Sanil Electric IPO Industry Analysis

By Douglas Kim

  • With the development of new and renewable energy, transmission and distribution network bottlenecks are worsening in many countries, and there is a strong demand for new transmission and distribution networks.
  • China is virtually excluded from competition for the US market. This situation has resulted in increased new orders for companies such as Sanil Electric. 
  • Our base case valuation of Sanil Electric is target price of 58,593 won, which is 95% higher than the high end of the IPO price range (30,000 won).

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Jun 28
0

Daily Brief South Korea: LG Electronics, Ilooda, Webtoon Entertainment, Kolmar Korea Holdings and more

By | Daily Briefs, South Korea

In today’s briefing:

  • LG Electronics’ Indian Subsidiary Is Gearing up for an IPO on the Indian Stock Market
  • Arb Spread Has Opened Today in Classys & Ilooda Merger Swap: Checking Trade Feasibility
  • Webtoon Entertainment IPO Trading – Not Cheap Given the Lack of Growth
  • Kolmar Holdings: Aggressive Plans to Cancel Outstanding Shares + Improving Returns to Shareholders

LG Electronics’ Indian Subsidiary Is Gearing up for an IPO on the Indian Stock Market

By Sanghyun Park

  • LG Electronics’ Indian subsidiary, fully owned, saw 2023 sales grow 17% to ₩3.3T and net profit rise 14% to ₩231.3B, driven by strong appliance demand.
  • LG Electronics aims for a ₩5T-₩6T valuation, planning to sell 15-20% of their Indian subsidiary to raise at least $500M.
  • LG Electronics plans to invest the $500M raised into their EV components business, moving quickly with the IPO due to urgent funding needs in the downturn-hit sector.

Arb Spread Has Opened Today in Classys & Ilooda Merger Swap: Checking Trade Feasibility

By Sanghyun Park

  • The spread is appealing, and Classys’ shorting instrument’s liquidity issue shouldn’t be critical with a manageable position size. The concern is shareholder approval and the stock purchase cost under ₩30B.
  • Despite cancellation risks, there are reasons to stay interested. Bain Capital aims to merge with Ilooda to boost Classys’ valuation, suggesting the merger may proceed even if ₩30B is exceeded.
  • The deadline for dissenting votes and appraisal rights at Ilooda’s meeting is July 8th, ex-rights date July 9th. Shareholders’ meeting: August 13th; rights exercise: August 13th to September 2nd.

Webtoon Entertainment IPO Trading – Not Cheap Given the Lack of Growth

By Ethan Aw

  • Webtoon Entertainment (WBTN US) raised around US$315m in its US IPO, after pricing the deal at the top of the range at US$21/share.
  • 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 talk about the trading dynamics.

Kolmar Holdings: Aggressive Plans to Cancel Outstanding Shares + Improving Returns to Shareholders

By Douglas Kim

  • On 26 June, Kolmar Holdings announced it plans to cancel 2.5 million treasury shares (6.7% of outstanding shares) as part of its participation in the corporate value-up program.
  • Previously, Kolmar Holdings announced that it would return more than 50% of its net profit to shareholders in accordance with the shareholder return policy announced in July 2023. 
  • According to our NAV analysis, it suggests an implied NAV of 555 billion won or NAV per share of 15,088 won, which represents a 39% upside from current price.

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Jun 27
0

Daily Brief South Korea: Sanil Electric, Classys, Coupang and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Sanil Electric IPO – Strong Profitability Growth, but Highly Dependent on Its Top Customers
  • Merger Between Classys and Ilooda Likely to Reduce Local Competition
  • Coupang Inc.: Artificial Intelligence Integration & 5 Major Growth Drivers

Sanil Electric IPO – Strong Profitability Growth, but Highly Dependent on Its Top Customers

By Ethan Aw

  • Sanil Electric (062040 KS) is looking to raise up to US$164m in its Korean IPO.
  • Sanil Electric is a specialized company that manufactures and sells reactors, transformers, railway vehicle parts, and switchboards.  As an industrial transformer manufacturer, the company mainly manufactures power and distribution transformers.
  • In this note, we talk about the company’s historical performance.

Merger Between Classys and Ilooda Likely to Reduce Local Competition

By Douglas Kim

  • On 25 June, Classys (214150 KS) announced a merger with Ilooda (164060 KS). The merger ratio is set at 0.1405237 to 1 for Classys and Ilooda.
  • This merger aims to combine Classys’ expertise in high-intensity focused ultrasound (HIFU) with Ilooda’s in micro-needle radio frequency (RF) and laser technologies.
  • We have a positive view of this merger between Classys and Ilooda. This merger is likely to reduce the overall competition in the aesthetics devices market in Korea.

Coupang Inc.: Artificial Intelligence Integration & 5 Major Growth Drivers

By Baptista Research

  • Coupang has commenced 2024 with a notable performance that underscores both strengths and areas in need of meticulous attention.
  • During the first quarter, Coupang reported a robust 28% year-over-year growth in revenues in constant currency terms, attributed primarily to increased spending across customer cohorts, including its longest-standing customers.
  • This points to successful customer retention and the appealing nature of its offerings.

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Jun 26
0

Daily Brief South Korea: NCSOFT Corp, Sanil Electric and more

By | Daily Briefs, South Korea

In today’s briefing:

  • NCSoft: Corporate Split-Off of Two Divisions
  • Sanil Electric IPO Valuation Analysis

NCSoft: Corporate Split-Off of Two Divisions

By Douglas Kim

  • On 24 June, NCSoft announced a corporate split-off of two divisions called named NC QA Company and NC IDS Company.
  • NCSoft plans to hold a shareholders meeting where to vote on the split off decision on 14 August. Effective date of the company split is scheduled for 1 October 2024.
  • The consensus estimates sales of 2.0 trillion won (up 19.2% YoY) and operating profit of 272 billion won (up 155.2% YoY) in 2025.

Sanil Electric IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation of Sanil Electric is market cap of 1.8 trillion won or target price of 58,593 won (95% higher than the high end of the IPO price).
  • Sanil Electric has higher sales growth, operating margins, and ROE than the comps. 
  • We estimate Sanil Electric to generate sales of 283.4 billion won (up 32.1% YoY) and operating profit of 79 billion won (up 69.6% YoY) in 2024. 

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Jun 25
0

Daily Brief South Korea: Lotte Non Life Insurance Co and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Chronic Insider Trading in the Korean Tender Offer Market & Time Positions for Short-Term Targets

Chronic Insider Trading in the Korean Tender Offer Market & Time Positions for Short-Term Targets

By Sanghyun Park

  • There is a high likelihood of information leaking through the lead securities firm when the tender offer prospectus is provided to branches about three days before the disclosure.
  • With the FSS’s stricter stance, tender offer candidates may act swiftly before new regulations, prompting attention to potential surges in tender offers.
  • Our approach is clear: identify short-term tender offer candidates, monitor trading volumes for spikes, and use the three-day pre-disclosure surge to time our positions effectively.

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Jun 24
0

Daily Brief South Korea: Korea Stock Exchange KOSPI 200, LS Electric, Webtoon Entertainment and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Local Capital Market Movements Targeting July Implementation of Block Deal Pre-Disclosure Rule
  • Sanil Electric IPO Preview
  • ECM Weekly (24th June 2024)-Webtoon, Guzman, Black Ses, Johor Plant, Bajaj Housing, Infratil, Mizuho

Local Capital Market Movements Targeting July Implementation of Block Deal Pre-Disclosure Rule

By Sanghyun Park

  • The new pre-disclosure rule starting July 24th will reshape business practices. Local institutions are now preparing by launching dedicated block deal funds, targeting 40 to 80 deals annually.
  • No rule bars short-sellers from block deals post-pre-disclosure. Local institutions are planning to exploit this, anticipating sellers favoring club deals under new July rules, potentially stabilizing prices for hedge strategies.
  • Access to club deals will be crucial post-July in Korea’s block deal market. Effective short-selling instruments are also vital with the ban extended until March next year.

Sanil Electric IPO Preview

By Douglas Kim

  • Sanil Electric is getting ready to complete its IPO in late July in KOSPI. The IPO price range is from 24,000 won to 30,000 won per share. 
  • The company is planning is raise between 182.4 billion won and 228 billion won in this IPO. The book building for the institutional investors lasts from 9 to 15 July. 
  • Sanil Electric is best known for making special transformers used for special purposes in environments with severe weather changes, such as offshore wind power, solar power, and offshore plants. 

ECM Weekly (24th June 2024)-Webtoon, Guzman, Black Ses, Johor Plant, Bajaj Housing, Infratil, Mizuho

By Sumeet Singh

  • Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
  • On the IPO front, Guzman provided some hope to the Australian market, while Webtoon Entertainment (WBTN US) and Allied Blenders & Distillers will soon test their respective markets.
  • There was no dearth of placement this week, with large deals in Hong Kong, New Zealand and India.

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Jun 23
0

Daily Brief South Korea: Webtoon Entertainment and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Webtoon Entertainment IPO: Favorable Risk/Reward IPO Valuation and Limited Downside Potential

Webtoon Entertainment IPO: Favorable Risk/Reward IPO Valuation and Limited Downside Potential

By Andrei Zakharov

  • Webtoon Entertainment, a South Korean global storytelling platform and the world’s largest digital comics platform, filed for an IPO in the United States.
  • The company offers 15M shares at a price range between $18.00 and $21.00, implying a market cap of roughly $2.5B at the midpoint based on 129.3M outstanding shares.
  • I have a positive view of the upcoming Webtoon Entertainment IPO and I think risk/reward is more favorable for IPO investors given the company’s improving profitability and strong cash position.

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Jun 22
0

Daily Brief South Korea: Korea Stock Exchange KOSPI 200 and more

By | Daily Briefs, South Korea

In today’s briefing:

  • EQD | The KOSPI 200 Is Ready to Pullback (Again)

EQD | The KOSPI 200 Is Ready to Pullback (Again)

By Nico Rosti

  • After 3 weeks up in a row the KOSPI 200 is ripe for a pullback.
  • The reversal is probably going to begin this coming week.
  • If the index goes higher, look at 391 resistance targets to initiate SHORT trades or to cover your LONGs.

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Jun 21
0

Daily Brief South Korea: SK Innovation and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Digging into Chosun Ilbo’s Report on SK Group’s SK Innovation & SK E&S Merger Plans

Digging into Chosun Ilbo’s Report on SK Group’s SK Innovation & SK E&S Merger Plans

By Sanghyun Park

  • 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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