Category

South Korea

Jul 13
0

Daily Brief South Korea: Ecopro Co Ltd, Fadu , Ymc Co Ltd and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Korea – A Look at Ecopro, Kumyang & JYP Entertainment
  • Fadu IPO – Thoughts on Valuation
  • Korea Small Cap Gem #22: YMC (Beneficiary of China’s Restriction of Gallium Exports)

Korea – A Look at Ecopro, Kumyang & JYP Entertainment

By Brian Freitas

Fadu IPO – Thoughts on Valuation

By Ethan Aw

  • Fadu (440110 KS) is looking to raise up to US$147m in its Korean IPO.
  • 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 our previous notes, we looked at the company’s past performance and undertook a peer comparison. In this note, we talk about valuation.

Korea Small Cap Gem #22: YMC (Beneficiary of China’s Restriction of Gallium Exports)

By Douglas Kim

  • On 3 July 2023, the Ministry of Commerce of China announced that it will restrict exports of gallium and germanium starting next month.
  • YMC is one of the key beneficiaries in Korea of China’s restriction of gallium exports. YMC makes silicon carbide which can be a substitute material for gallium.
  • YMC’s valuation is relatively cheap. Given that YMC currently has a market cap of 150 billion won, this would represent P/E of 7.3x (using 2022 net profit). 

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Jul 12
0

Daily Brief South Korea: LG Energy Solution, Posco DX, Fadu and more

By | Daily Briefs, South Korea

In today’s briefing:

  • LG Energy – Quick Thoughts on US$2bn EB Offering by Parent
  • LG Chem: To Issue Exchangeable Bonds Worth US$2 Billion
  • LG Chem Official ₩2.6T EB Issuance (1.6% of LG Energy SO): Details & Trading Considerations
  • POSCO DX Could Switch Its Listing from KOSDAQ to KOSPI by End of 2023
  • Fadu Pre-IPO – Peer Comparison – Hardly Comparable in Scale to Its Peers

LG Energy – Quick Thoughts on US$2bn EB Offering by Parent

By Sumeet Singh

  • LG Chem Ltd (051910 KS) aims to raise around US$2bn via offering 2028 and 2030 puttable USD exchangeable bonds for LG Energy Solution (373220 KS) shares.
  • LG Chem (LGC) had been rumoured to sell down some of its stake in LG Energy Solutions (LGES), hence, this deal will remove the overhang on LGES.
  • In this note, we have a quick look at the deal and provide our thoughts on the structure.

LG Chem: To Issue Exchangeable Bonds Worth US$2 Billion

By Douglas Kim

  • On 11 July, LG Chem announced that it would issue foreign currency exchangeable bonds worth US$2 billion to raise funs to expansion into its rechargeable battery materials. 
  • Investors in LG Energy Solution will likely have a more positive view of this EB issue rather than a block sale of common shares, because of lack of price discount.
  • We believe LG Chem is not done in selling its shares of LGES as we think LG Chem is likely to sell additional 5-10% stake in LGES in 3-5 years. 

LG Chem Official ₩2.6T EB Issuance (1.6% of LG Energy SO): Details & Trading Considerations

By Sanghyun Park

  • The exchange prices are ₩687,500 and ₩715,000 at a premium of 25-30% to the closing price of LG Energy Solution today.
  • The commencement date for both the 5-year and 7-year bonds’ exchange is August 28th.
  • We should design a strategic setup that targets a band play within the current price range and the low ₩700,000 range.

POSCO DX Could Switch Its Listing from KOSDAQ to KOSPI by End of 2023

By Douglas Kim

  • On 10 July, it was reported in the Hankyung Business Daily that Posco DX (022100 KS) could switch its listing from KOSDAQ to KOSPI by the end of 2023.
  • One of the key reasons for the change in the listing venue from KOSDAQ to KOSPI is that POSCO Group believes this could lead to improved valuations for the company.
  • We believe the valuations of Posco DX have become too high. Therefore, we have a Negative View of Posco DX at current prices. 

Fadu Pre-IPO – Peer Comparison – Hardly Comparable in Scale to Its Peers

By Ethan Aw

  • Fadu (440110 KS) is looking to raise up to US$147m in its Korean IPO.
  • 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 our previous notes, we looked at the company’s past performance. In this note, we talk about peer comparison.

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Jul 11
0

Daily Brief South Korea: Hyundai G.F. Holdings, Konan Technology, PhilEnergy and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Hyundai G.F. Holdings: A Holdco Creation With In-Kind Investment in HDS & Hyundai Green Food
  • Posco DX’s KOSPI Transfer Listing: Hankyung Exclusive Report
  • PhilEnergy IPO: Trading Strategy on the First Day of Trading

Hyundai G.F. Holdings: A Holdco Creation With In-Kind Investment in HDS & Hyundai Green Food

By Douglas Kim

  • Last week, Hyundai Dept Store Group announced that it will establish a single holding company structure with Hyundai G.F. Holdings controlling all of the group affiliates.
  • Hyundai G.F. Holdings plans to make an in-kind investment in Hyundai Department Store (HDS) to make Hyundai Green Food and Hyundai Department Store as subsidiaries.
  • This in-kind investment in HDS and Hyundai Green Food by Hyundai G.F. Holdings is not a deal that adds clear-cut value to Hyundai G.F. Holdings’ shareholders. 

Posco DX’s KOSPI Transfer Listing: Hankyung Exclusive Report

By Sanghyun Park

  • Posco DX has begun the selection process for its lead underwriter for its transfer to the KOSPI market and plans to complete the transfer listing within this year.
  • Considering the recent retail insanity witnessed in most local large-cap battery stocks, Posco DX will likely experience further intensified short-term price fluctuations with this new development as a catalyst.
  • The likely replacement for Posco DX’s KOSDAQ 150 spot is Konan Technology, which has become a top reserved issue in Posco DX’s GICS sector (Information Technology) in the previous review.

PhilEnergy IPO: Trading Strategy on the First Day of Trading

By Douglas Kim

  • PhilEnergy IPO will start trading this Friday on 14 July. We believe that PhilEnergy’s share price will surge higher on the first day of trading.
  • We believe PhilEnergy’s shares could OVERSHOOT by more than 200% versus the IPO price on the first day of trading, which would be more than 102,00 won or more.
  • Our trading strategy on PhilEnergy on the first day of trading would be to take partial profits (30-50%) if its price overshoots higher (by 200% or more than IPO price).

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Jul 09
0

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

By | Daily Briefs, South Korea

In today’s briefing:

  • KRX Official: Key Points of Earlier Derivatives Market Opening & Market Impacts to Consider
  • ALT Co IPO Valuation Analysis

KRX Official: Key Points of Earlier Derivatives Market Opening & Market Impacts to Consider

By Sanghyun Park

  • The derivatives market will commence trading 15 minutes earlier, starting from July 31st. On July 7, KRX published guidelines that consolidate crucial factors for traders to consider regarding this alteration.
  • From a theoretical standpoint, the early discovery of derivative prices influenced by pre-market external variables can help mitigate excessive shocks in the spot market.
  • Considering suspected matched order fraud, particularly involving large-cap battery stocks, we should anticipate attempts to further exacerbate volatility in the early stages of the spot market using this earlier opening.

ALT Co IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation of ALT is 33,365 won per share, which represents 63% higher than the high end of the IPO price range of 20,500 won.
  • We estimate the company to generate sales of 69.7 billion won (up 57.3% YoY) in 2023 and 92.2 billion won (up 32.3% YoY) in 2024.
  • ALT’s main business is in the testing of non-memory semiconductor value chain products including Display Drive IC, CMOS image sensor, and Power Management IC.

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Jul 07
0

Daily Brief South Korea: Samsung Heavy Industries Pref, Hyundai Green Food, LG Uplus Corp, Fadu , Korea Stock Exchange KOSPI 200 and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Delisting of 5 Korean Preferred Stocks on 17 July
  • Hyundai G.F. Holdings’ Stock Swap with Hyundai Green Food & Hyundai Dept Store
  • The Rise of the Fourth Telco in Korea – Breaking the Oligopoly
  • Fadu Pre-IPO – Stupendous Revenue Growth but Heavily Reliant on Two Key Customers
  • EQD | KOSPI 200 Index WEEKLY: Time to Go LONG?

Delisting of 5 Korean Preferred Stocks on 17 July

By Douglas Kim

  • The Korea Exchange officially announced today that the following five preferred stocks will be delisted on 17 July.
  • These five stocks including Samsung Heavy Industries Pref, SK Networks Pref,  DB Hitek Pref, Hyundai BNG Steel Pref, and Heungkuk Fire & Marine Insurance Pref 2B fell sharply today.   
  • Despite the warning by the Korea Exchange since end of May, it was not until today that these five stocks dropped sharply. On average, these five stocks fell 44% today. 

Hyundai G.F. Holdings’ Stock Swap with Hyundai Green Food & Hyundai Dept Store

By Sanghyun Park

  • Hyundai G.F. Holdings will conduct a tender offer to Hyundai Green Food and Hyundai Dept Store shareholders. The tendering period is August 11-September 1.
  • The target volume is 10,125,700 (Hyundai Green Food) and 4,669,556 (Hyundai Dept Store), corresponding to 29.89% and 19.95% of the outstanding shares, respectively.
  • We should approach this event trading with caution, taking into account the risk of an unhedged setup while monitoring the potential widening of the spread opening during the tendering period.

The Rise of the Fourth Telco in Korea – Breaking the Oligopoly

By Douglas Kim

  • The Korean government announced today that it will allow a fourth telco in Korea in order to reduce the oligopoly structure dominated by the three existing telcos.
  • This decision to allow another telco in Korea will have a major negative impact on the existing three telcos in Korea.
  • On a relative basis, we think that this could have a worse impact than LG Uplus as compared to SK Telecom due to greater price sensitivity of LG Uplus’ customers.

Fadu Pre-IPO – Stupendous Revenue Growth but Heavily Reliant on Two Key Customers

By Ethan Aw

  • Fadu (440110 KS) is looking to raise up to US$147m in its Korean IPO.
  • 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. 
  • Fadu’s revenue growth has been stupendous, to say the least. However, the firm’s revenues are derived mainly from two customers, which exposes it to a large degree of concentration risk.

EQD | KOSPI 200 Index WEEKLY: Time to Go LONG?

By Nico Rosti

  • The Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY) has been (mildly) falling for 4 weeks, it may be now ready to resume its multi-month uptrend.
  • Friday July 7th would be a good time to enter this LONG trade at support prices between 337 and 333 (ideal range; it’s riskier below 333).
  • Hedge your bets in case the market keeps falling more next week and the following (it shouldn’t… but it can).

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Jul 06
0

Daily Brief South Korea: Mini Kospi 200 Futures, SKC Co Ltd and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Impact of Allowing Negotiated Block Trades for Eight Futures Spreads, Incl. SSF SP
  • SKC: Aggressive Plans to Expand Rechargeable Battery & Semiconductor Materials – But At What Price?

Impact of Allowing Negotiated Block Trades for Eight Futures Spreads, Incl. SSF SP

By Sanghyun Park

  • It is highly probable that SP trading will increase after July 31st, as this will provide a more conducive environment for the seamless rollover of large positions.
  • Considering the actual impact on the market, we may have to pay more attention to the potential surge in trading volume for single-stock futures SP.
  • We see a rise in aggressive position setups in event trading, including rights offerings. This may lead to a more substantial price impact by increasing the intensity of such trading.

SKC: Aggressive Plans to Expand Rechargeable Battery & Semiconductor Materials – But At What Price?

By Douglas Kim

  • SKC announced aggressive plans to expand its rechargeable battery, semiconductor, and ecofriendly materials and it plans to invest about 5 trillion to 6 trillion won in these businesses by 2027. 
  • We believe that the company will use a combination of asset sales, sale of its treasury shares, and additional debt and equity raising in the next 3-5 years. 
  • While the market welcomes sale of non-core businesses such as SK Pucore and sale of treasury shares, it is likely to have greater concerns about additional debt and equity raising. 

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Jul 05
0

Daily Brief South Korea: PhilEnergy, Samsung Electronics, Fadu , Celltrion Inc and more

By | Daily Briefs, South Korea

In today’s briefing:

  • PhilEnergy IPO Bookbuilding Results Analysis
  • At the Core Lies Why Anything Named Samsung Deserves a Discount
  • Fadu IPO Valuation Analysis
  • Celltrion (068270 KS): Humira Biosimilar Launch in US; Filed New Biosimilar Marketing Application

PhilEnergy IPO Bookbuilding Results Analysis

By Douglas Kim

  • PhilEnergy’s IPO price has been determined a 34,000 won. The company will raise 95.6 billion won in this IPO offering. 
  • A total of 1,955 institutional investors participated in the IPO offering with a competition demand ratio of 1,812 to 1. 
  • Given the exceptional book building results, it is highly likely that PhilEnergy will have a strong price performance once it starts trading. 

At the Core Lies Why Anything Named Samsung Deserves a Discount

By Ken S. Kim

Fadu IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation analysis suggests implied market cap of 2.2 trillion won or 43,676 won per share, representing 41% higher than the high end of the IPO price range. 
  • At the high end of our valuation sensitivity analysis, it suggests implied price of 62,893 won per share, representing 103% higher than the high end of the IPO price range.
  • Fadu is a system semiconductor fabless company specializing in data centers, which is experiencing a strong growth due to higher data demand for cloud, AI/Big data, 5G, and autonomous driving.

Celltrion (068270 KS): Humira Biosimilar Launch in US; Filed New Biosimilar Marketing Application

By Tina Banerjee

  • Celltrion Inc (068270 KS) has launched Humira biosimilar Yuflyma in the U.S. market, with a list price of $6,576.50 per month, 5% cheaper than Humira.
  • Yuflyma is a citrate-free formulation that is highly concentrated. More than 80% of patients treated with Humira in the U.S. rely on a high-concentration and citrate-free formulation.
  • Celltrion has submitted marketing application to the FDA for Eylea biosimilar candidate, CT-P42. The company plans to file for approval for the same in Europe and other countries later.

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Jul 04
0

Daily Brief South Korea: Fadu , Lutronic Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Fadu IPO Preview
  • (Mostly) Asia M&A, June 2023:  DDH1, Dali Foods, NWS Holdings, JSR Corp, Lutronic, Chindata

Fadu IPO Preview

By Douglas Kim

  • Fadu is getting ready to complete its IPO in Korea in August. Fadu is one of the most highly anticipated IPOs in Korea in 2023. 
  • The expected market cap at the top end of the IPO price range is 1.6 trillion won. The IPO price range is from 26,000 won to 31,000 won.
  • Fadu is a system semiconductor fabless company specializing in data centers.

(Mostly) Asia M&A, June 2023:  DDH1, Dali Foods, NWS Holdings, JSR Corp, Lutronic, Chindata

By David Blennerhassett

  • For the month of June, 13 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$9bn.
  • The average premium for the new deals announced (or first discussed) in June was 42%.
  • 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.

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Jul 03
0

Daily Brief South Korea: ST Pharm Co Ltd and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KRX’s Official Selection Results of SSF & SSO Adds/Deletes: New Rules & Trading Ramifications

KRX’s Official Selection Results of SSF & SSO Adds/Deletes: New Rules & Trading Ramifications

By Sanghyun Park

  • The latest update will feature the addition of 25 single stock futures, as well as five single stock options from KOSPI. Eight single stock futures will be removed.
  • The selection will now take place twice a year, in March and September. Also, the selection requirement includes being included in the KOSPI 200 and KOSDAQ Global.
  • The shortened selection cycle and the significant potential for the change range to vary based on index review results can indeed have a notable impact.

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Jul 01
0

Daily Brief South Korea: Lunit , Nexteel and more

By | Daily Briefs, South Korea

In today’s briefing:

  • End of Mandatory Lock-Up Periods for 41 Companies in Korea in July 2023
  • Nexteel IPO Preview

End of Mandatory Lock-Up Periods for 41 Companies in Korea in July 2023

By Douglas Kim

  • We discuss the end of the mandatory lock-up periods for 41 stocks in Korea in July 2023, among which 6 are in KOSPI and 35 are in KOSDAQ.
  • These 41 stocks on average could be subject to further selling pressures in June and could underperform relative to the market. 
  • Among these 41 stocks, the top five market cap stocks include Lunit, Sungeel Hitech, KG Mobility, Enchem, and E&D Co. 

Nexteel IPO Preview

By Douglas Kim

  • Nexteel is getting ready to complete its IPO in Korea in August. Nexteel is a steel pipe manufacturing company. The IPO price range is from 11,500 won to 12,500 won. 
  • The IPO offering size is from 80.5 billion won to 87.5 billion won. The expected market cap is from 299 billion won to 325 billion won.
  • Nexteel’s sales increased at a CAGR of 76.4% from 2020 to 2022. The company’s operating profit surged from 1.5 billion won in 2020 to 181.3 billion won in 2022. 

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