South Korea

Value Added Technologies (043150 KS) will replace Lutronic Corp (085370 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 14 September.
Passive trackers will need to buy over 1.5x ADV on Value Added Technologies (043150 KS). The impact is higher on Lutronic Corp (085370 KS) but the arbs will provide liquidity.
Value Added Technologies (043150 KS) appears to trade cheaper than its peers on all valuation parameters and there could be a re-rating following the index inclusion.

Doosan Robotics: Strong Initial Book Building Results

Chosun Business Daily mentioned today that initial results of Doosan Robotics book building have been very strong. The current IPO price range is from 21,000 won to 26,000 won.
There is a high probability that the IPO price will be set at 26,000 won or more and close to 30,000 won.
Our base case valuation per share of Doosan Robotics is 42,826 won, which is 65% higher than the high end of the IPO valuation range.

Doosan Robotics IPO – Updated Thoughts on Valuation – Sentiments Going Out of Control

By Ethan Aw

Doosan Robotics (454910 KS) is looking to raise up to US$318m in its Korean IPO.
Doosan Robotics (DR) manufactures and sells collaborative robots (Cobots). The firm’s product portfolio primarily includes different series of robot arms as well as its coffee module.
In our previous notes, we assessed the company’s past performance, undertook a peer comparison and shared our thoughts on valuation. In this note, we share our updated thoughts on valuation.

Seoul Guarantee Insurance Corp IPO Preview

Seoul Guarantee Insurance Corp is getting ready to complete its IPO in Korea in the next several weeks. The IPO price range is from 39,500 won to 51,800 won.
Market cap is from 2.8 trillion won to 3.6 trillion won. At the high end of the IPO price range, this could be the biggest IPO in Korea in 2023.
Many investors will be skeptical on the bankers including two overseas comps (Travelers and Coface) which have much higher valuations.

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Sep 12

Daily Brief South Korea: Doosan Corp, KB Financial, Classys and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Updated NAV Analysis of Doosan Corp Amid IPO of Doosan Robotics
FnGuide Top10 Index Rebalance Preview: Good Historical Performance; One Potential Change in December
Classys (214150 KS): Beautiful Growth Story Continues; No Sign of Slowing Down

Updated NAV Analysis of Doosan Corp Amid IPO of Doosan Robotics

Our updated NAV analysis of Doosan Corp (000150 KS) suggests implied market cap of 3.6 trillion won or target price of 217,392 won which is 47% higher than current price.
To value Doosan Corp, we have assumed a market value of 2.8 trillion won for Doosan Robotics (454910 KS).
The sharp increase in share price of Doosan Corp today (up 28%) is likely to have been a reflection of the initial strong demand for Doosan Robotics IPO.

FnGuide Top10 Index Rebalance Preview: Good Historical Performance; One Potential Change in December

The Mirae Asset Tiger Top 10 ETF (292150 KS) tracks the FnGuide Top 10 Index and has an AUM of over US$1bn.
We currently forecast one potential change at the next rebalance in December. There is another set of changes that could also take place.
There has been a big increase in short interest on a couple of stocks while the rise has been more gradual on the other stocks.

Classys (214150 KS): Beautiful Growth Story Continues; No Sign of Slowing Down

By Tina Banerjee

Classys (214150 KS) reported solid performance in 2Q23, with revenue and operating profit growing 40% and 52%, YoY, respectively, mainly driven by consumables sales in both domestic and overseas markets.
Despite increase in advertising and R&D expenses, operating profit margin expanded 370 basis points to 50.4%. Net profit increased 34% YoY to KRW18.6 billion.
With 1H23 revenue of KRW84.9 billion, Classys is on track to meet 2023 revenue guidance of KRW170 billion, representing year-over-year increase of 20%.

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Sep 11

Daily Brief South Korea: Eoflow , SK Square , Youngpoong Paper Mfg and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Merger Arb Mondays (11 Sep) – Eoflow, Mason, Liontown, Newcrest, United Malt, OreCorp, MPI
KRX Sector Index Series Rebalancing: Heavy Shorting on SK Square Is Anticipated
KOSPI Size Indices – Changes in September & Implications

Merger Arb Mondays (11 Sep) – Eoflow, Mason, Liontown, Newcrest, United Malt, OreCorp, MPI

By Arun George

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 111 Inc (YI US), Costa Group Holdings (CGC AU), Eoflow (294090 KS), Symbio Holdings (SYM AU), Mason Group Holdings (273 HK), Origin Energy (ORG AU).
Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Yaizu Suisankagaku Industry (2812 JP), Liontown Resources (LTR AU), T&K Toka Co Ltd (4636 JP), Itochu Techno Solutions (4739 JP).

KRX Sector Index Series Rebalancing: Heavy Shorting on SK Square Is Anticipated

The most noteworthy developments include Samsung Electronics being newly added to the Semicon sector, while SK Square has been removed.
We must be mindful of the potential concentration of shorting flow on SK Square as most names expected to experience negative flows do not fall under the KS200/KQ150 membership.
Our strategic approach can take three directions: 1. aim at only those receiving positive flows, 2. heavy shorting SK Square, and 3. long-short the four with the most flow size.

KOSPI Size Indices – Changes in September & Implications

There are 8 migrations from MidCap to LargeCap, 7 LargeCap to MidCap, 8 new additions to MidCap, 17 SmallCap to MidCap, 23 MidCap to SmallCap, 5 new additions to SmallCap.
The migrations from SmallCap to MidCap have outperformed the stocks migrating between other segments by a huge margin over the last few months.
Given the huge outperformance and looking at how the migrations have performed historically, we’d expect the stocks migrating to MidCap to underperform post implementation of the changes.

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Sep 10

Daily Brief South Korea: Celltrion Inc, Eubiologics and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Progress of Merger Between Celltrion Inc and Celltrion Healthcare & Appraisal Rights Issue
EuBiologics (206650 KS): Solid 1H23 Performance; Oral Cholera Vaccine on A Consistent Growth Path

Progress of Merger Between Celltrion Inc and Celltrion Healthcare & Appraisal Rights Issue

The appraisal right prices of Celltrion Inc (068270 KS) is 150,813 won (2.2% higher than current price) and Celltrion Healthcare (091990 KS) is 67,251 won (1.9% higher than current price).
Celltrion Inc has mentioned that the merger could be cancelled if the total amount of appraisal share purchase amount exceeds 1 trillion won.
Although some investors are likely to exercise their appraisal rights in this merger, we would attach a higher probability of this merger getting completed (80-90%+).

EuBiologics (206650 KS): Solid 1H23 Performance; Oral Cholera Vaccine on A Consistent Growth Path

By Tina Banerjee

Eubiologics (206650 KS) recorded 24% YoY revenue growth to KRW31B in 1H23, due to strong export demand of oral cholera vaccine. Operating profit jumped 6x, while net profit surged 3x.
In May 2023, Eubiologics and its partner have launched Euvichol-Plus in India. With a huge unmet need, Euvichol, an effective cholera vaccine is expected to see strong uptrend in India.
Eubiologics has signed a technology transfer agreement with DEK Vaccines to enable the domestic production and supply of the cholera vaccine in Ghana. This opens additional revenue stream for Eubiologics.

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Sep 09

Daily Brief South Korea: DearU and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

KRX BBIG K-New Deal Rebalancing: Official Results & Passive Flow Impacts

KRX BBIG K-New Deal Rebalancing: Official Results & Passive Flow Impacts

After results were transitioned to non-public information, it has been observed that results are reflected in prices significantly later, with substantial price impact occurring close to the rebalancing trading day.
Even though the AUMs have recently decreased, the passive impact size is quite substantial, considering a recent pattern of price impact concentrating within a maximum of about two trading days.
A heavy Long-Short setup on these pairs, DearU / Douzone Bizon and SK Biopharmaceuticals / SK Bioscience (302440 KS), is something we should very actively consider.

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Sep 08

Daily Brief South Korea: Hana Micron Inc and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Hana Micron’s Boost From Samsung/Nvidia Agreement
Hana Micron: Semiconductor Chips Packaging Company With Solid Fundamentals and FOMO Trading

Hana Micron’s Boost From Samsung/Nvidia Agreement

By David Blennerhassett

US graphics chip designer NVIDIA Corp (NVDA US) has, to date, sourced HBM3 chips exclusively from SK Hynix (000660 KS).
Shares in Samsung Electronics (005930 KS) promptly popped ~6% last Friday on news it had been added as a supplier to NVIDIA.
Hana Micron Inc (067310 KS), which boasts Samsung as its largest customer, similarly jumped, and is up 45% in the past week. Too much too quickly?

Hana Micron: Semiconductor Chips Packaging Company With Solid Fundamentals and FOMO Trading

Due to the sharp appreciation of Hana Micron’s share price this year, its valuation discount to companies such as HPSP has narrowed substantially.
Samsung Electronics is one of the major customers of Hana Micron. Samsung recently reported that it has successfully secured the right to supply advanced memory chips to NVIDIA.
We do not believe Hana Micron’s valuations are attractive right now. Rather than chasing after its shares, we would rather wait for its shares to retreat (20-30%) a bit.

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Sep 07

Daily Brief South Korea: Mirae Asset Tiger Top 10 ETF, Doosan Robotics, RevuCorporation and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Single-Day ETF Flow Event Not to Be Missed in Korea in December
Doosan Robotics: Bankers Provide Additional P/S Valuation and Surge in Price of Rainbow Robotics
Revu Corporation IPO Valuation Analysis

Single-Day ETF Flow Event Not to Be Missed in Korea in December

Ecopro Co will replace Celltrion Inc. Their float market cap difference is nearly 5 trillion won, so it doesn’t seem likely that this will reverse by the end of November.
Ecopro may not have a very significant passive impact x ADTV, given its still high trading volume. On the other hand, Celltrion seems likely to be the target of traders.
From a trading perspective, it’s important to focus on the potential price impact of this flow event on Celltrion, which could be amplified depending on the possibility of merger cancellation.

Doosan Robotics: Bankers Provide Additional P/S Valuation and Surge in Price of Rainbow Robotics

The bankers provided additional valuation framework using P/S basis for Doosan Robotics and based on this methodology, the IPO price range is from 19,000 won to 24,000 won.
This does not mean that the bankers have actually lowered the IPO price range but rather they have provided another framework to value the company.
We continue to have a Positive view of the Doosan Robotics IPO.

Revu Corporation IPO Valuation Analysis

Our base case valuation of Revu Corp is target price of 19,403 won, which is 47% higher than the high end of the IPO price range (13,200 won).
Revu’s main business is marketing using influencers who are major content providers in the SNS advertising market.
The influencer based marketing/advertising is one of the highest growing segments and we believe Revu Corp has an attractive platform to further expand its business on a profitable basis.

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Sep 06

Daily Brief South Korea: Doosan Robotics, Shinsung ST and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Changes to a Points Based System for IPO Subscriptions in Korea
Shinsung ST IPO Preview
Shinsung ST IPO Valuation Analysis

Changes to a Points Based System for IPO Subscriptions in Korea

In order to reduce fake subscriptions for IPOs in Korea, the financial regulators have changed the IPO subscription system to extend the number of subscription days from two to five.
Plus, points based system is implemented so that investors will be given higher points for subscribing on the first day as opposed to the fifth day.
Doosan Robotics will be a key company to look out for in terms of how this book building changes could impact its IPO as most upcoming IPOs are small caps.

Shinsung ST IPO Preview

The IPO price range of Shinsung ST is from 22,000 won to 25,000 won and the expected IPO offering amount is from 44 billion won to 50 billion won.
Shinsung ST produces busbars that connect currents of electric components in secondary battery batteries for EVs and ESSs, and module cases that protect battery cells from external shocks.
The total order backlog of the company’s products reached 1.5 trillion won at the end of 2022. Order backlog ratio is 14x, which is very high.

Shinsung ST IPO Valuation Analysis

Our base case valuation is implied price per share of 51,050 won, which is 104% higher than the high end of the IPO price range of 25,000 won.
We estimate Shinsung ST to generate sales of 133.9 billion won (up 25.7% YoY) and operating profit of 15.4 billion won (up 94.6% YoY) in 2023.
Our valuation sensitivity analysis suggests an IPO price range of 41,351 won to 61,771 won per share.

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Sep 05

Daily Brief South Korea: EcoPro Materials and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Korea’s Latest IPO Rule Change: Daily Differential Allocation

Korea’s Latest IPO Rule Change: Daily Differential Allocation

Korea FSS has provided guidelines to assign different weights to IPO orders from Day 1 to Day 5. Bookrunners should give higher weights to institutions that place their orders early.
The question of whether this will deter the rush to place bulk orders close to the deadline and lead to a higher weighting of essential pricing is generating significant interest.
The volume of orders and allocation by price range could serve as practical clues for assessing post-IPO pricing, making it a crucial factor in formulating post-IPO trading strategies.

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Sep 04

Daily Brief South Korea: Eoflow , Lunit , Korea Stock Exchange KOSPI 200 and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Merger Arb Mondays (04 Sep) – Eoflow, JSR, Seiko PMC, ENM, NWS, Costa, Symbio, Origin
KOSDAQ150 Index Rebalance Preview: Strong Momentum Leads to Outperformance
EQD | KOSPI 200 Index Approaching Resistance

Merger Arb Mondays (04 Sep) – Eoflow, JSR, Seiko PMC, ENM, NWS, Costa, Symbio, Origin

By Arun George

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – Seiko Pmc Corp (4963 JP), 111 Inc (YI US), Costa Group Holdings (CGC AU), Symbio Holdings (SYM AU), Eoflow (294090 KS), Orecorp Ltd (ORR AU).
Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Pacific Current (PAC AU), T&K Toka Co Ltd (4636 JP), Allkem Ltd (AKE AU), Celltrion Healthcare (091990 KS).

KOSDAQ150 Index Rebalance Preview: Strong Momentum Leads to Outperformance