South Korea

We discuss the end of the mandatory lock-up periods for 49 stocks in Korea in September 2023, among which 7 are in KOSPI and 42 are in KOSDAQ.
These 49 stocks on average could be subject to further selling pressures in September and could underperform relative to the market.
Among these 49 stocks, top five market cap stocks include Kakao Games (293490 KS), SK Oceanplant (100090 KS), Korea Zinc (010130 KS), Fadu (440110 KS), and Vaxcell-Bio Therapeutics (323990 KS).

Doosan Robotics IPO – Thoughts on Valuation – A Punt at Best, a Crash at Worst

Doosan Robotics (DOOSANROBO KS) is looking to raise up to US$314m 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 looked at the company’s past performance and undertook a peer comparison. In this note, we talk about valuation.

Doosan Robotics IPO: Valuation Insights

Doosan Robotics (454910 KS) is a global industrial and collaborative robotics leader. It has opened the books on an up to US$318 million IPO.
We previously discussed the IPO in Doosan Robotics IPO: The Bull Case and Doosan Robotics IPO: The Bear Case.
In this note, we look at the syndicate’s valuation methodology. Our valuation analysis suggests that the IPO price range is unattractive, and we would pass on the IPO.

Unveiling the Potential of Korea Zinc’s Emerging Proxy Battle

Korea’s local market is perceiving the present HMG investment as a crucial indicator, signaling the initiation of an intense proxy battle for Korea Zinc.
Given the relatively constrained nature of the neutral minority stakes, falling below 30%, there is considerable attention on the potential for a immediate-term share buying race.
This is expected to trigger momentum trading flows directed at Korea Zinc. Such a scenario might lead the stock price to venture into an overshooting zone.

(Mostly) Asia M&A, Aug 2023: Celltrion Inc/Healthcare, Itochu Techno, UMW, Boustead, SK Rent

For the month of August 2023, 11 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$29bn.
The average premium for the new deals announced (or first discussed) in August was 25%. The average YTD is 34%.
This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

Boryung Pharmaceutical (003850 KS): 2Q23 Marks Six Consecutive Quarters of Revenue Growth

By Tina Banerjee

Boryung Pharmaceutical (003850 KS) reported strong 2Q23 result, with revenue increasing 19% YoY to a record high of KRW216 billion, driven by 24% YoY growth in prescription drugs.
H1 2023 revenue and net profit progressed 52% and 62% of the annual target, respectively, marking the fastest semi-annual lap ever to annual target.
Boryung has reiterated guidance for 2023 revenue and operating profit of KRW810 billion and KRW61 billion, representing growth of 12% and 1%, YoY, respectively.

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Aug 31

Daily Brief South Korea: Doosan Robotics and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Doosan Robotics IPO: The Bear Case

Doosan Robotics IPO: The Bear Case

Doosan Robotics (DOOSANROBO KS) is a global industrial and collaborative robotics leader. It has opened the books on an up to US$318 million IPO.
In Doosan Robotics IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
The bear case rests on business plan forecasts based on shaky assumptions, high cash burn, rising cash collection cycle and deteriorating balance sheet strength.

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Aug 30

Daily Brief South Korea: Posco Future M, Doosan Robotics, Zeus Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Korea’s First Sector Inverse ETF: Discussing Flow Trading Impacts
Doosan Robotics IPO: The Bull Case
Zeus Co: Listing of JET Co Japanese Subsidiary and NAV Valuation
Zeus Co (079370 KS): Is J.E.T.’s Spin-Off Priced In?
Doosan Robotics IPO – Peer Comparison – Has Niche Offerings but Doesn’t Lack Competition

Korea’s First Sector Inverse ETF: Discussing Flow Trading Impacts

KB Asset Management has announced the release of an inverse ETF, containing the top 10 core stocks in the secondary battery sector.
Given the substantial fluctuations in SSF trading volume in Korea, the flow increase of this ETF might temporarily lead to an unusually high level of backwardation.
Also, we may observe a phenomenon known as ‘wag-the-dog’ as the flow of this inverse ETF could act as a triggering factor for a temporary spark.

Doosan Robotics IPO: The Bull Case

Doosan Robotics (DOOSANROBO KS) is a global industrial and collaborative robotics leader. It has opened the books on an up to US$318 million IPO.
The international bookbuilding will run from 28 August to 15 September, while the domestic book will be open from 11 to 15 September. Pricing will be announced on 19 September.
The bull case rests on the market share gains, rapid forecasted growth, the industry’s largest product lineup, rapid expansion in sales channels and key accounts growth.

Zeus Co: Listing of JET Co Japanese Subsidiary and NAV Valuation

Our NAV valuation of Zeus Co suggests an implied price target of 32,991 won, which is 13% lower than current share price.
Given the lack of upside, we would avoid Zeus shares at current prices.
Currently, JET Co is listed on Tokyo PRO Market Exchange. JET Co is expected to switch its listing to the Tokyo Standard Market Exchange.

Zeus Co (079370 KS): Is J.E.T.’s Spin-Off Priced In?

Zeus Co Ltd (079370 KS), a maker of semiconductor equipment, flat panel display equipment, and facility automation solutions, intends to spin off 95%-held J.E.T. Co (6228 JP) next month.
J.E.T., a semiconductor etching equipment play, will list on the 25 September. Pricing is expected around the 5 September.
Zeus’ share price has fallen 33% in the past month. That may be justified.

Doosan Robotics IPO – Peer Comparison – Has Niche Offerings but Doesn’t Lack Competition

Doosan Robotics (DOOSANROBO KS) is looking to raise up to US$314m 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 talked about the company’s past performance. In this note, we undertake a peer comparison.

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Aug 29

Daily Brief South Korea: HLB Inc, Tcc Steel, Doosan Robotics, Millie’s Library and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Positioning for the Timing of HLB, the Latest Target in the KOSDAQ Exodus
KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December
Doosan Robotics IPO – The Positives – More than Doubled Its Revenue
Doosan Robotics IPO Valuation Analysis
Millie’s Library IPO Analysis
Doosan Robotics IPO – The Negatives – But Losses Continue to Widen

Positioning for the Timing of HLB, the Latest Target in the KOSDAQ Exodus

HLB’s process of selecting a lead underwriter for the KOSPI listing has been witnessed in Yeouido.
The price impact becomes most evident on the board approval date as the point at which this impact is most pronounced is substantially accelerated due to the market’s learning effect.
There is a strong likelihood that HLB will have its board decision by mid-September, necessitating our preparation for a position setup targeting this timing.

KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December

By Brian Freitas

Nearly two-thirds of the way through the review period, we see nine potential changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the December rebalance.
The potential adds are dominated by the Materials sector while the potential deletions are mainly from the Consumer Discretionary sector.
The impact on the potential inclusion ranges from 0.14-12 days of ADV while the impact on the potential deletions varies from 3.1-30 days of ADV.

Doosan Robotics IPO – The Positives – More than Doubled Its Revenue

Doosan Robotics (DOOSANROBO KS) is looking to raise up to US$314m 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 this note, we will talk about the positive aspects of the deal.

Doosan Robotics IPO Valuation Analysis

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.
We estimate Doosan Robotics to generate sales of 61.7 billion won (up 37.2% YoY) in 2023 and 97.7 billion won (up 58.2% YoY) in 2024.
If Doosan Robotics is compared to Fanuc, Doosan Robotics’ valuation would be much lower. However, one could argue that Doosan Robotics should have higher valuation than Rainbow Robotics.

Millie’s Library IPO Analysis

Millie’s Library is trying to complete its IPO again in September 2023, after a failed attempt in November 2022. The IPO price range is from 20,000 won to 23,000 won.
Founded in 2016, Millie’s Library is a reading platform company that introduced the first monthly e-book subscription service in Korea in October 2017.
Our valuation analysis suggests base case target price of 31,769 won per share, which is 38% higher than the high end of the IPO price range of 23,000 won.

Doosan Robotics IPO – The Negatives – But Losses Continue to Widen

Doosan Robotics (DOOSANROBO KS) is looking to raise up to US$314m 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 this note, we will talk about the not-so-positive aspects of the deal.

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Aug 28

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

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Merger Arb Mondays (28 Aug) – Eoflow, UMW, Boustead, Costa, Estia, Pacific Current, Golden Eagle
EQD | KOSPI 200 Index’s Decisive Week: New WEEKLY LONG Supports

Merger Arb Mondays (28 Aug) – Eoflow, UMW, Boustead, Costa, Estia, Pacific Current, Golden Eagle

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), ENM Holdings (128 HK), Symbio Holdings (SYM AU), Mason Group Holdings (273 HK), JSR.
Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Celltrion Healthcare (091990 KS), T&K Toka Co Ltd (4636 JP), Yaizu Suisankagaku Industry (2812 JP), Sanei Architecture Planning (3228 JP).

EQD | KOSPI 200 Index’s Decisive Week: New WEEKLY LONG Supports

By Nico Rosti

The KOSPI 200 INDEX has reached a tipping point: the previous Bull run trend is cracking, there is a high chance the index will drop.
The current MRM WEEKLY pattern is bearish: if the index falls for more than 1 week it may tailspin into a 4-6 weeks correction in September.
Cover your LONG holdings, support can be found at 325 (Q2), 315 (Q3) and 297 (Inner Fence).

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Aug 27

Daily Brief South Korea: Eoflow , Lunit and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

(Mostly) Asia-Pac Weekly Risk Arb Wrap: SK Rent A Car, UMW, BPlant, E Guardian, EOflow, Oishi
Lunit (Specializes in AI-Based Cancer Diagnosis and Treatment): Rights Offering of 202 Billion Won

(Mostly) Asia-Pac Weekly Risk Arb Wrap: SK Rent A Car, UMW, BPlant, E Guardian, EOflow, Oishi

I tally 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Three new deals this week: SK Rent A Car (068400 KS)‘s Tender Offer; Sime Darby (SIME MK)‘s Offer for UMW (UMWH MK); KLK‘s Offer for Boustead Plantations (BPLANT MK).
Key updates took place for Golden Eagle Retail (3308 HK), JSR Corp (4185 JP), E Guardian Inc (6050 JP), Eoflow (294090 KS), and Oishi Group PCL (OISHI TB).

Lunit (Specializes in AI-Based Cancer Diagnosis and Treatment): Rights Offering of 202 Billion Won

On 24 August, Lunit announced a rights offering capital increase of 202 billion won.
Lunit’s current share price is 155,700 won and its market cap is 1.9 trillion won. The expected rights offering price is 30% discount to current price.
We have a positive view of Lunit and its rights offering. Lunit is one of the leading companies in Korea that specializes in AI-based cancer diagnosis and treatment solutions.

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Aug 26

Daily Brief South Korea: Soulbrain, Revu Corporation and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Overlooked by the Market: A Compelling Long Short Opportunity in Newly-Listed ETF Rebal in Korea
Revu Corporation IPO Preview

Overlooked by the Market: A Compelling Long Short Opportunity in Newly-Listed ETF Rebal in Korea

In the inaugural constituent selection, FnGuide revealed a noteworthy pattern. Given the smaller market capitalization of the electrolyte suppliers, FnGuide has included only the largest among them in this ETF.
SoulBrain, categorized by FnGuide as an electrolyte supplier like Chunbo, has significantly outperformed Chunbo. As a result, there is a considerable likelihood that SoulBrain will replace Chunbo in December.
The price impact from ETF rebalancing trading has disappeared substantially in Korea. We should focus on the first rebalancing of newly listed ETFs that haven’t yet established a learning effect.

Revu Corporation IPO Preview

Revu Corporation is the number one influencer platform company in Korea with the largest number of influencer members in the industry.
The IPO price range is from 11,500 won to 13,200 won. The maximum total offering amount is 29.5 billion won.
The bankers used three companies including DearU, Silicon2, and Connectwave as comparable companies for Revu Corp. The average P/E of the comps is 32.6x.

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Aug 25

Daily Brief South Korea: Hanwha Ocean, Samsung Electronics and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Hanwha Ocean: Big Shares Dilution from Rights Offering of 2 Trillion Won
Is Samsung M&A About to Happen?

Hanwha Ocean: Big Shares Dilution from Rights Offering of 2 Trillion Won

After the market close on 23 August, Hanwha Ocean (042660 KS) confirmed that it will conduct a massive rights offering of 2 trillion won.
The expected rights offering price is 22,350 won, which is 36% discount to current price.
We believe this rights offering is likely to dilute the existing shareholders and negatively impact Hanwha Ocean’s share price.

Is Samsung M&A About to Happen?

By Ken S. Kim

Local press states that Samsung Electronics Pref Shares (005935 KS)sold shares as they look to invest in their future capex
The capex amount for 2023 will be around 40-50 trillion KRW and it doesn’t seem like W3 trillion is a needle mover
With a new 3 year shareholder return plan, I would think maybe cash is needed to secure ammunition for M&A

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Aug 24

Daily Brief South Korea: Eoflow , Hanwha Ocean, Doosan Robotics and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

EOFlow/Medtronic: What Lawsuit?
Korea – Positioning in Ecopro, JYP Entertainment, Hanwha Ocean, Hanmi Semi, CJ Corp, E-Mart
EOFLOW/Medtronic Tender: Irrational Exuberance
Doosan Robotics IPO Preview

EOFlow/Medtronic: What Lawsuit?

On the 8th of August, Insulet Corp (PODD US) filed a lawsuit accusing Eoflow (294090 KS) of the misappropriation of trade secrets, patent infringement, and trademark dilution.
The filing was pretty heavy on accusations. EOFlow declined ~11% on the news.
Undeterred, Medtronic (MDT US) continues to preach all is peachy, suggesting the EOFlow merger is a go, and Medtronic will deal with the lawsuit, as and when.

Korea – Positioning in Ecopro, JYP Entertainment, Hanwha Ocean, Hanmi Semi, CJ Corp, E-Mart

By Brian Freitas

Ecopro (086520 KS), Jyp Entertainment (035900 KS), Hanwha Ocean (042660 KS), Hanmi Semiconductor (042700 KS), CJ Corp (001040 KS) and E Mart (139480 KS) have been on investors/traders radars recently.
There will be liquidity demand on the stocks in a week and there is pre-positioning on a lot of the stocks.
Since 10 August, retail investors have net bought Jyp Entertainment and E Mart, foreigners have net bought Ecopro, Hanwha Ocean and Hanmi Semiconductor, while local institutions have net bought CJ Corp.

EOFLOW/Medtronic Tender: Irrational Exuberance

Eoflow (294090 KS) shares were up 4.4% on the back of Medtronic Plc (MDT US)’s earnings call comment that it expects the acquisition to close at the end of 2023.
The bear view is that Medtronic’s messaging remained unchanged as it is still assessing Insulet Corp (PODD US) lawsuit and the potential impact on the timing and/or pricing.
The bull view is that Medtronic’s comment underscores its commitment to close the transaction. It’s tough to take a call on risk/reward profile – at best it’s a brave buy.

Doosan Robotics IPO Preview