Category

South Korea

Aug 14
0

Daily Brief South Korea: Kum Yang, Eoflow , Paradise Co Ltd and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Where & How to Check CFD Trading Data Starting Sept 1st
  • Merger Arb Mondays (14 Aug) – Eoflow, Chindata, OreCorp, Origin, Estia, InvoCare, Daiken, Kyoden
  • Paradise: Boost from End of Ban of Chinese Group Tours to Korea Vs Inspire Resort Opening in Incheon

Where & How to Check CFD Trading Data Starting Sept 1st

By Sanghyun Park

  • The CFD balance information (both overall and individual stock) will be provided by KOFIA and KOSCOM, starting from September 1st.
  • September 1st also marks the day when local brokerages that temporarily suspended CFD trading services will resume them.
  • With the disclosure of individual stock CFD balances starting from September 1st, there’s a high probability of another volatility turning point.

Merger Arb Mondays (14 Aug) – Eoflow, Chindata, OreCorp, Origin, Estia, InvoCare, Daiken, Kyoden

By Arun George

Paradise: Boost from End of Ban of Chinese Group Tours to Korea Vs Inspire Resort Opening in Incheon

By Douglas Kim

  • Paradise is one of the largest foreigners only casino operators in Korea which should benefit from the end of the ban of Chinese group tours to Korea.
  • However, Paradise will face additional competition from the opening of the new Inspire Entertainment Resort in Incheon which is expected to open by the end of 2023. 
  • Paradise is likely to benefit from a combination of higher earnings and valuation multiples in the coming months. 

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Aug 13
0

Daily Brief South Korea: Eoflow and more

By | Daily Briefs, South Korea

In today’s briefing:

  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: EOFlow, Invocare, Estia, Metro Pacific, Orecorp, Kyoden

(Mostly) Asia-Pac Weekly Risk Arb Wrap: EOFlow, Invocare, Estia, Metro Pacific, Orecorp, Kyoden

By David Blennerhassett

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Aug 12
0

Daily Brief South Korea: Hotel Shilla and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Hotel Shilla Pref: Discount Vs Common to Narrow and Boost from Chinese Group Tours to Korea

Hotel Shilla Pref: Discount Vs Common to Narrow and Boost from Chinese Group Tours to Korea

By Douglas Kim

  • Hotel Shilla, one of the largest operators of duty free shops in Korea, will be a major beneficiary of the return of the group tours from China to Korea.
  • We expect the consensus to raise the company’s sales estimates in 2024 to 2025 by about 3-7% and net profit estimates by 20-25%+ in this period. 
  • Currently, Hotel Shilla Pref/Common stock price ratio is 0.61 which is 22% below the five year average of 0.78. 

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Aug 11
0

Daily Brief South Korea: Ecopro Co Ltd, LG H&H and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Two Noteworthy Issues in Korea’s SSF/SSO Selection in September Round
  • LG H&H – A Key Beneficiary of the Return of Chinese Group Tours to Korea

Two Noteworthy Issues in Korea’s SSF/SSO Selection in September Round

By Sanghyun Park

  • Recent information leaked through local media reveals that KRX has ultimately opted not to list Ecopro Co’s SSF in the upcoming September round.
  • Given the unusually high trading volume of at-the-money (ATM) options in the local SSO market, the market’s interest in covered calls for dividend-yielding stocks can be substantial.
  • So, we should pay attention to stocks whose SSO is already listed or will be newly listed in September among those that have shifted their ex-dividend dates to post-dividend confirmation.

LG H&H – A Key Beneficiary of the Return of Chinese Group Tours to Korea

By Douglas Kim

  • In this insight, we lay out the thesis that LG H&H is likely to be one of the biggest beneficiaries of the return of Chinese group tours to Korea. 
  • LG H&H consistently generated more than 1 trillion won in operating profit from 2018 to 2021.
  • We expect LG H&H to generate 1 trillion won or more in operating profit in 2024 and 2025, which would be 20-25%+ higher than current consensus estimates in this period. 

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Aug 10
0

Daily Brief South Korea: Eoflow , Hotel Shilla, Hana Financial, Coupang and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Insulet Accuses EOFlow Of Stealing Trade Secrets
  • Summary of the Situation Regarding Insulet’s Lawsuit in the US Against Eoflow
  • Insulet’s Lawsuit Against Eoflow, Medtronic’s Tender Offer, and Eoflow’s “Special Sauce”
  • China to Finally Allow Group Tours to Korea and Japan?
  • South Korean Banks Screen; Stick with Hana Financial (086790 KS)
  • [Coupang (CPNG US, SELL, TP US$14.4) TP Change]: Margin Beat Due to Higher 3P Spend on Ads and FLC

Insulet Accuses EOFlow Of Stealing Trade Secrets

By David Blennerhassett

  • From the outset, EOFlow (294090 KS) has traded wide (~7% of average) to Medtronic Plc (MDT US)‘s Offer. An apparent delay in filing with Korean regulators formed one argument. 
  • Now there’s a compelling reason. Key insulin pump competitor Insulet  (PODD US) has filed a lawsuit accusing EOFlow of the misappropriation of trade secrets, patent infringement, and trademark dilution.
  • Singapore-Based Flex (FLEX US) and three ex-employees of Insulet are also defendants. This does not bode well for the transaction. 

Summary of the Situation Regarding Insulet’s Lawsuit in the US Against Eoflow

By Sanghyun Park

  • This signifies the official commencement of a lawsuit against Eoflow in the United States, which has been considered one of the most significant risks for Eoflow.
  • Eoflow is externally saying that the aspect of patents claimed by Insulet is actually based on previously expired patents. Hence, Eoflow believes they can win this patent lawsuit.
  • This lawsuit emerged before the acquisition decision by Medtronic suggesting a need to consider trading the current spread based on the inference that the tender offer is still valid.

Insulet’s Lawsuit Against Eoflow, Medtronic’s Tender Offer, and Eoflow’s “Special Sauce”

By Douglas Kim

  • Insulet Corp (PODD US)’s lawsuit against Eoflow (294090 KS) caused a sharp decline in Eoflow’s share price today (down 10.7% to 24,950 won).
  • Insulet is accusing Eoflow of hiring several senior personnel that have helped Eoflow to develop a product that could take away market share from Insulet. 
  • The most important factor may be Eoflow’s “special sauce” which is some kind of technology/mechanism that allows this 17% greater efficiency/convenience for the wearable EOPatch insulin device.

China to Finally Allow Group Tours to Korea and Japan?

By Douglas Kim

  • In the past several days, there have been numerous new flow that the Chinese government is likely to allow group tours to South Korea and Japan in the coming days. 
  • The group tours from China to South Korea which has been banned since March 2017, are expected to resume after six years, according to the Korean Embassy in China.
  • Nikkei Asia also reported on 9 August that the Chinese government is ready to allow group tours to Japan as early as this week.

South Korean Banks Screen; Stick with Hana Financial (086790 KS)

By Victor Galliano

  • In our latest South Korean banks screener; we stick with quality play Hana Financial but remove contrarian call Industrial Bank of Korea, due to fast rising credit quality headwinds
  • NPLs and precautionary quality credits continue on a rising trend, whilst Hana seems to be containing delinquency better than most
  • Hana has a low PBV ratio relative to its premium ROE, high post-provision returns, a sound CET1 ratio and a healthy LDR; Kakaobank is one for the watchlist

[Coupang (CPNG US, SELL, TP US$14.4) TP Change]: Margin Beat Due to Higher 3P Spend on Ads and FLC

By Shawn Yang

  • CPNG reported C2Q23 top-line, adjusted EBITDA, and GAAP net profit in-line, 45%, and 102% vs. our estimate, and 2%, 27%, and 49% vs. consensus, respectively.
  • Product commerce EBITDA margin rose 2ppts QoQ, which offset the 126% QoQ increase to developing offerings losses, which rose due to increased investment in its Taiwan business.
  • Given improved product commerce profitability, we raise our TP to US$ 14.4, but maintain SELL to reflect the impact of China e-commerce on CPNG.

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Aug 09
0

Daily Brief South Korea: Eoflow , Asiana Airlines and more

By | Daily Briefs, South Korea

In today’s briefing:

  • EOFLOW/Medtronic Tender: Insulet’s US Complaint Materially Increases Deal Break Risks
  • What Is KDB’s Plan B for Asiana Airlines?

EOFLOW/Medtronic Tender: Insulet’s US Complaint Materially Increases Deal Break Risks

By Arun George

What Is KDB’s Plan B for Asiana Airlines?

By Douglas Kim

  • There have been increasing local news flows about KDB’s potential “Plan B” for Asiana Airlines in case the merger between Asiana Airlines and Korean Air Lines is finally cancelled.
  • The final decisions by the European and US regulators on whether to pass/block this merger are likely to take place in 4Q 2023. 
  • The higher probability scenarios are for one or both of these regulators to block this deal. As such, KDB will need to come up with Plan B.

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Aug 08
0

Daily Brief South Korea: Samsung Electronics Pref Shares, Nexteel, Korea Stock Exchange KOSPI 200, KT Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Samsung Electronics: Prefs Need to Catch Up
  • Nexteel IPO Book Building Results Analysis
  • EQD | KOSPI 200 Index WEEKLY Trend Analysis
  • KT Corp: A New CEO Nominated and Stronger Than Expected Results in 2Q 2023

Samsung Electronics: Prefs Need to Catch Up

By Brian Freitas

  • Over the last year, the discount of Samsung Electronics Pref Shares (005935 KS) to Samsung Electronics (005930 KS) has increased from 5% to 17%.
  • The preferred shares have adequate liquidity, a large issue market cap, and now trade at a much higher dividend yield. A special dividend will further increase the dividend yield differential.
  • Breaking from history, the preferred shares discount has continued to increase as the stock has moved higher. With the preferred shares trading near its widest discount, that could change.

Nexteel IPO Book Building Results Analysis

By Douglas Kim

  • Nexteel reported disappointing IPO book building results from institutional investors. The IPO price has been confirmed at 11,500 won which is at the low end of the IPO valuation range.
  • A total of 700 institutions participated, with a demand ratio of 236 to 1. It is scheduled to be listed on the KOSPI exchange on 21 August. 
  • Despite the weak IPO book building results, we maintain our positive view of the Nexteel IPO. Our base case valuation of Nexteel is implied market cap of 485.8 billion won.

EQD | KOSPI 200 Index WEEKLY Trend Analysis

By Nico Rosti

  • The KOSPI 200 index last week closed down (CC=-1). This particular pattern is very bullish: 78% of the time the index closes the week up after -1 week down.
  • The index has been stuck sideways between 348 and 330 for weeks, we still see a buy-the-dip opportunity to ride the continuation of the Bull run from here.
  • Main support area to go LONG, based on the Market Reversal Matrix’s readings, is between 337 and 335. Time+space estimated probability of success is between 64% and 76%.

KT Corp: A New CEO Nominated and Stronger Than Expected Results in 2Q 2023

By Douglas Kim

  • KT Corp (030200 KS)’s shares were up 4.1% today to 32,000 won driven by better than expected results in 2Q 2023 and the nomination of a new CEO. 
  • KT has nominated Kim Young-Seop, the former CEO of LG CNS as the new CEO of the company.
  • KT Corp has attractive valuations. It is trading at only 2.6x EV/EBITDA, 6.7x P/E, and 0.5x P/B in 2023. These valuation multiples are much cheaper than SK Telecom.

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Aug 07
0

Daily Brief South Korea: Kum Yang and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Korea – Positioning in Ecopro, Kumyang, JYP Entertainment, Hanwha Ocean, Hanmi Semi, Posco DX

Korea – Positioning in Ecopro, Kumyang, JYP Entertainment, Hanwha Ocean, Hanmi Semi, Posco DX

By Brian Freitas

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Aug 05
0

Daily Brief South Korea: SK Inc, Fadu , Naver Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Finally, a Risk-Free Dividend Arbitrage Trading Opportunity Is Presented in Korea: Feat. SK Inc
  • Fadu IPO Trading – Strong Subscription Rates Compared to Recent Korean IPOs
  • Naver Webtoon to List on NASDAQ in 2024

Finally, a Risk-Free Dividend Arbitrage Trading Opportunity Is Presented in Korea: Feat. SK Inc

By Sanghyun Park

  • In a surprising move, SK Inc confirmed the interim dividend amount (₩1,500) on July 26, and the ex-dividend date is set for August 10.
  • As a result, this enables risk-free dividend arb trading in Korea as SK Inc carries single-stock futures, whose liquidity level is around 70% of the spot since July 26.
  • The backwardation level has not yet pushed this arbitrage to a profitable level. Nevertheless, it’s still possible to observe the basis spread moving to a meaningful extent before the ex-date.

Fadu IPO Trading – Strong Subscription Rates Compared to Recent Korean IPOs

By Ethan Aw

  • Fadu (440110 KS) raised US$151m in its Korean IPO, after the deal was priced at KRW31,000/share, the top end of its IPO price range.
  • Fadu is a South Korean fabless semiconductor maker mainly engaged in flash storage technology innovation. Its core products are Enterprise Solid State Drive (SSD) and Enterprise SSDs. 
  • In this note, we will talk about the demand for the deal and other trading dynamics.

Naver Webtoon to List on NASDAQ in 2024

By Douglas Kim

  • Naver Corp (035420 KS) is planning to complete an IPO of Naver Webtoon on NASDAQ in 2024.
  • Naver Webtoon generated sales of 548.9 billion won (up 54.5% YoY) and net profit of 68.6 billion won (up 17.1% YoY) in 2022.
  • Naver Corp’s Contents unit which includes the Naver Webtoon business posted solid revenue growth of 40.1% YoY to reach 420.4 billion won in 2Q 2023.

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Aug 04
0

Daily Brief South Korea: Korea Stock Exchange KOSPI 200, KT&G Corporation, Kakaopay , Ecopro BM , HK inno.N and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Preparing for ATS Arrival in Korea: Strategies to Adapt to Changing Intraday Flow Patterns
  • KT&G: First Shares Cancellation in 14 Years
  • Kakao Pay: Worsening Profit Margins Due to Heightened Competition
  • Overhang Concerns from Remaining Irum TNC Exchangeable Bonds Conversion on Ecopro BM Shares
  • HK Inno.N (195940 KS): 2Q23 Result Shows Strong Sequential Improvement; K-CAB Continues to Fly High

Preparing for ATS Arrival in Korea: Strategies to Adapt to Changing Intraday Flow Patterns

By Sanghyun Park

  • Nextrade aims to secure the business permit within the next year’s second half. They intend to launch their services by the end of next year or early the following year.
  • All eyes are focused on the proposal to be operational from 8:30 AM to 11:59 PM, with the afternoon call auction session running from 3:00 PM to 6:00 PM.
  • It would be crucial to observe how the elongation of the time period for specific issues to be reflected in prices could potentially lead to changes in intraday flow patterns.

KT&G: First Shares Cancellation in 14 Years

By Douglas Kim

  • KT&G announced that it will buy back 3.47 million shares (2.5% of outstanding shares) and cancel them. This would be the first share cancellation for KT&G in 14 years. 
  • If the company’s DPS is 5,200 won for 2023 fiscal year, this would represent dividend yield of 6.2% at current prices.
  • Although we have a positive view on KT&G’s share buyback and cancellation of 3.47 million shares, the company could do much more to improve its shareholder returns to its shareholders. 

Kakao Pay: Worsening Profit Margins Due to Heightened Competition

By Douglas Kim

  • We believe the added threat from Apple Pay has been one of the reasons for the worsening profit margins and lower than expected sales growth of Kakao Pay in 2Q23. 
  • After the poor earnings results in 2Q 2023,the consensus is likely to reduce Kakao Pay’s sales estimate in 2024 by 3-5% and positive operating profit to be postponed to 2025. 
  • We continue to be Bearish on Kakao Pay due to its high valuations, likelihood of consensus earnings downgrades, heightened competition, and concerns about continued profit margin weakness.   

Overhang Concerns from Remaining Irum TNC Exchangeable Bonds Conversion on Ecopro BM Shares

By Douglas Kim

  • It has been reported in local media that investors in exchangeable bonds issued by Irum TNC converted about 0.24 million shares of EBs into Ecopro BM equity on 26 July.
  • There are increasing concerns that the remaining EB could be released into the market in the coming months. 
  • After the poor 2Q 2023 results, we believe the consensus is likely to reduce sales and profit estimates of Ecopro BM from 2023 to 2025.

HK Inno.N (195940 KS): 2Q23 Result Shows Strong Sequential Improvement; K-CAB Continues to Fly High

By Tina Banerjee

  • HK inno.N (195940 KS) recorded impressive sequential improvement in 2Q23 result, while YoY comparison is negatively impacted by high base due to one-off cervical cancer vaccine revenue recorded in 2Q22.
  • In 2Q23, revenue increased 11% QoQ to KRW204B and operating profit grew 172% QoQ to KRW15B. Growth was mainly driven by a 19% QoQ growth in K-CAB domestic revenue.
  • HK inno targets KRW1T K-CAB revenue by entering 100 countries globally by 2028. The company is adding new growth engines such as IV fluids products, MSD vaccine, and biosimilars.

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