Category

South Korea

Jun 07
0

Daily Brief South Korea: Korea Stock Exchange Kospi Index, SK Innovation, KT Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • No Foreigner ID/Trade Report Obligation Starting Dec 14: Impact on Event Trading in Korea
  • Higher Private Market Valuation of SK On: Positive Impact on SK Innovation
  • KT CORPORATION: Fines, Favoritism, and ESG Risks

No Foreigner ID/Trade Report Obligation Starting Dec 14: Impact on Event Trading in Korea

By Sanghyun Park

  • The abolition of the foreign investor registration system was approved in a Cabinet meeting. They will be promulgated on June 13th and implemented starting December 14th of this year.
  • This change is not just about reducing administrative tasks, as it also eliminates the reporting obligations of foreign investors, thereby reducing their position exposure risk.
  • This could improve event outcome and price prediction accuracy. Therefore, it is crucial to keep a close eye on event trading when this measure takes effect in December.

Higher Private Market Valuation of SK On: Positive Impact on SK Innovation

By Douglas Kim

  • It has been reported that SK On received 1.2 trillion won investment from a consortium led by MBK Partners and SNB Capital, valuing SK On at about 25 trillion won.
  • Our SoTP valuation of SK Innovation suggests a target price of 274,738 won per share, which represents a 38% higher levels than current price.
  • SK Innovation’s 96.5% stake in SK On (24.1 trillion won in value) is 130% higher than SK Innovation’s current market cap.

KT CORPORATION: Fines, Favoritism, and ESG Risks

By Heejeong (Hollie) Park

  • Domestic telecom company faced significant fines for false advertising of 5G, the second-largest penalty ever imposed. 
  • Investigations into the telecom market, dominated by a long-term duopoly, are expanding. 
  • Within KT Group’s subcontracting process, allegations of favoritism and manipulation in project allocation are currently under investigation by the prosecution.

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Jun 06
0

Daily Brief South Korea: Eoflow, Douzone Bizon and more

By | Daily Briefs, South Korea

In today’s briefing:

  • EOFLOW/Medtronic Tender: Risk/Reward Profile
  • Douzone Bizon: Deeply Oversold, Ready for a Turnaround

EOFLOW/Medtronic Tender: Risk/Reward Profile

By Arun George

  • Medtronic Plc (MDT US) aims to acquire Eoflow (294090 KS) through share purchase agreements (SPA), a share subscription agreement (SSA) and a public tender offer at KRW30,000.
  • The shares are trading wide to terms due to key risks – regulatory approvals and the minimum acceptance condition (Medtronic owns 53.02% of the post-SSA outstanding shares).
  • The regulatory approvals should be forthcoming due to minimum competition issues. The minimum acceptance condition requires a minority acceptance rate of 15.7%, which is achievable due to an attractive offer.

Douzone Bizon: Deeply Oversold, Ready for a Turnaround

By Douglas Kim

  • We believe shares of Douzone Bizon are deeply oversold and ready for a turnaround.
  • The company is increasingly buying back shares. Treasury shares as a percentage of total outstanding shares increased from 0% at end of 2021 to 9.3% at end of 1Q 2023. 
  • Korean government’s plans to boost the domestic software industry by spending more than 560 billion won in the software industry is also likely to positively benefit the company this year. 

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Jun 02
0

Daily Brief South Korea: Yg Entertainment, Eoflow and more

By | Daily Briefs, South Korea

In today’s briefing:

  • YG Entertainment: BabyMonster to Become the Next Black Pink?
  • Medtronic’s Delisting Offer For EOFlow

YG Entertainment: BabyMonster to Become the Next Black Pink?

By Douglas Kim

  • Despite the enormous demand for Black Pink concerts and the expected launch of the new girl-group band BabyMonster, we believe shares of Yg Entertainment (122870 KS) have overextended this year.
  • Black Pink remains a fan-favorite group and their contribution to sales and profits are likely to peak this year. Valuations for YG Entertainment is also unattractive.
  • Although BabyMonster is likely to become popular, the higher probability scenario is for them to fall below expectations. We do not believe BabyMonster could become the next Black Pink. 

Medtronic’s Delisting Offer For EOFlow

By David Blennerhassett

  • Back on the 25 May, healthcare company Medtronic Plc (MDT US) announced it had entered into a set of definitive agreements to acquire EOFlow (294090 KS).
  • Via a three-step process – SPAs, issuance of new shares, and a Tender Offer – Medtronic will seek majority control, together with a view to delisting EOFlow.
  • Completion is expected in 4Q23. Regulatory approvals –  domestic and foreign – form part of the conditions. Trading wide to terms. 

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Jun 01
0

Daily Brief South Korea: Hyundai Energy Solutions, Bionote, Hanjin KAL Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Flow Trading Opportunities Brought by the AI Rally: KRX Semicon Rebalancing in September
  • End of Mandatory Lock-Up Periods for 45 Companies in Korea in June 2023
  • Hanjin Kal: Fight For Control Amid FTC Regulatory Concerns of Korean Air & Asiana Airlines Merger

Flow Trading Opportunities Brought by the AI Rally: KRX Semicon Rebalancing in September

By Sanghyun Park

  • KRX Semicon has experienced a considerable increase in AUM due to the recent AI rally. Two ETFs tracking SEMICON have a combined AUM of ₩0.6T.
  • The following five stocks are screened as potential additions: ITM Semiconductor, Hyundai Energy Solutions, TEMC, Fine Semitech, and AT Technology.  
  • While it may not be a major flow event, it still presents a trading opportunity worth considering, especially in September, which is relatively less eventful in terms of flows.

End of Mandatory Lock-Up Periods for 45 Companies in Korea in June 2023

By Douglas Kim

  • We discuss the end of the mandatory lock-up periods for 45 stocks in Korea in June 2023, among which 6 are in KOSPI and 39 are in KOSDAQ.
  • These 45 stocks on average could be subject to further selling pressures in June and could underperform relative to the market. 
  • Among these 45 stocks, the top five market cap stocks include Won Tech, Voronoi, Zinus, Bionote, and NanoTIM.

Hanjin Kal: Fight For Control Amid FTC Regulatory Concerns of Korean Air & Asiana Airlines Merger

By Douglas Kim

  • There is a relatively high probability (70-80%+) that the FTCs in Europe and the United States will officially block the merger between Korean Air and Asiana Airlines in 2H 2023. 
  • This could result in the Korea Development Bank (KDB) selling its 10.58% stake in Hanjin KAL Corp which could result in a fight for the control of Hanjin Kal.
  • Our NAV analysis of Hanjin Kal suggests NAV of 3.8 trillion won or implied target price of 57,259 won per share, representing 13% upside from current levels.

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May 31
0

Daily Brief South Korea: Eoflow, Wemade Co., Ltd. and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Medtronic’s M&A, Tender Offer, and Taking Private of Eoflow
  • ESG Incident Report: Changing Trends in ESG Risks for Major Listed Game Companies in South Korea

Medtronic’s M&A, Tender Offer, and Taking Private of Eoflow

By Douglas Kim

  • In this insight, we provide the details of Medtronic’s M&A and tender offer for Eoflow. 
  • Currently, Eoflow is trading at 28,050 won which is 6.5% lower than the tender offer price of 30,000 won.
  • Eoflow’s share price is currently comfortably below 30,000 won and we believe this deal has 95-98%+ probability of getting completed within the current M&A framework.

ESG Incident Report: Changing Trends in ESG Risks for Major Listed Game Companies in South Korea

By Heejeong Park

  • Recently, a controversy surrounding substantial crypto investments in the political sphere has exerted downward pressure on the stock prices of major listed game companies in South Korea. 
  • In the past five years, there has been a shift in the gaming industry’s risk landscape, with social risks giving way to governance risks.
  • Some game companies have started publishing sustainability reports, but challenges arise due to the inconsistency in environmental data and the difficulties in comparing companies.

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May 30
0

Daily Brief South Korea: Sam Chun Dang Pharm, Jeisys Medical, Almac and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Full Details & Trading Ramifications of Official Revisions to CFD Trade Rules in Korea
  • Jeisys Medical (287410 KS): Solid Q1 Result; New Product Launch and China Expansion to Drive Growth
  • Almac IPO Valuation Analysis

Full Details & Trading Ramifications of Official Revisions to CFD Trade Rules in Korea

By Sanghyun Park

  • It’s crucial to note that margin balances from CFDs will also be disclosed through each brokerage’s Home Trading System (HTS), providing insight into the risk of margin call-triggered covering trades.
  • It has been challenging to discern which are being targeted for illegal trading operations using CFDs. The disclosure of CFD margin balances can be an indicator to address this issue.
  • This may lead to a short-term selling spiral on suspected stocks, where illegal trading forces rush to liquidate their positions, and additional selling pressure targeting such activities exacerbates the situation.

Jeisys Medical (287410 KS): Solid Q1 Result; New Product Launch and China Expansion to Drive Growth

By Tina Banerjee

  • Jeisys Medical (287410 KS) recorded 15% YoY revenue growth in 1Q23, mainly driven by a 25% YoY growth in consumables due to the increasing number of aesthetic procedures globally.
  • As of 1Q23, cumulative sales of two major devices of Jeisys, LinearFirm/LinearZ and Potenza reached 3,411 and 2,431 units, respectively. Expanding installed base should further drive consumables revenue growth.
  • Jeisys has launched a new device in domestic market and Japan in current quarter. The company aims to accelerate growth momentum through entry in to new market, including China.

Almac IPO Valuation Analysis

By Douglas Kim

  • Our target price of Almac is 58,573 won per share, which is 30% higher than the high end of the IPO price range of 45,000 won. 
  • Our target price is based on 14.8x P/E using our estimated net profit of 25.4 billion won in 2024. 
  • Almac ranks first in domestic market share (Korea) in the aluminum extruded module cases that protect batteries from external shocks.

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May 27
0

Daily Brief South Korea: Eoflow, ISC Co Ltd, Classys and more

By | Daily Briefs, South Korea

In today’s briefing:

  • EOFlow Tender Offer: Preconditions for Closure, Cancellation Risk, & Targetable Allocation
  • ISC’s Tender Offer Possibility Is Decreasing, Indicating a Potential Shorting Opportunity
  • Classys (214150 KS): Strong 1Q23 Result Lifted by Overseas Performance and Consumables Sales

EOFlow Tender Offer: Preconditions for Closure, Cancellation Risk, & Targetable Allocation

By Sanghyun Park

  • The likelihood of the merger review not being approved appears to be low. Additionally, the purchase of only 3.8M additional shares is required, leading to a negligible cancellation risk.
  • It is particularly noteworthy that the offering price of ₩30,000, targeting minority shareholders, may be adjusted upward depending on future share price increases.
  • While there is a potential allocation risk, as Medtronic aims to delist the company, they are unlikely to lower the target quantity in the tender offer to a risky level.

ISC’s Tender Offer Possibility Is Decreasing, Indicating a Potential Shorting Opportunity

By Sanghyun Park

  • The possibility of SKC securing additional shares other than the planned 40% through a tender offer seems low. This is a basis for the recent short position build-up in ISC.
  • ISC began to experience an influx of short selling, leading to it being designated as an overheated short-selling stock, and short selling was restricted for one day on the 26th.
  • We need to pay attention to the potential disappointment in the market, which could lead to a sustained downward correction in the stock price.

Classys (214150 KS): Strong 1Q23 Result Lifted by Overseas Performance and Consumables Sales

By Tina Banerjee

  • Classys (214150 KS) reported solid performance in 1Q23, with double-digit revenue growth, driven by expansion of domestic consumables sales for Shrink Universe and growth in overseas device and consumables sales.
  • Operating profit increased 19% YoY to KRW 19.9 billion, leading to 380 basis point margin expansion to 51%. Net profit increased 46% YoY to KRW 18.8 billion.
  • Classys continues to strengthen its competitiveness through product line and geography expansion. The company has reiterated 2023 revenue guidance of KRW170 billion, representing year-over-year increase of 20%.

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May 26
0

Daily Brief South Korea: Sam A Aluminum, Almac and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Early Targetable Names in KOSPI 200 December Rebalancing
  • Almac IPO Preview

Early Targetable Names in KOSPI 200 December Rebalancing

By Sanghyun Park

  • Based on the average daily full market cap up until the last close, the following additions have been identified as high-probability candidates: Sam A Aluminum, Dentium, and Dongwon Industries.
  • Three constituents will likely leave as they rank at the bottom in descending order of full market cap among those failing the screening: Cuckoo Homesys, Zinus, and Hyundai Home Shopping.
  • Dongwon Industries seems to be the most attractive, but given the uncertainty surrounding its inclusion, it may be more appropriate to target Dentium.

Almac IPO Preview

By Douglas Kim

  • Almac is getting ready to complete its IPO on KOSDAQ in June. Almac is one of the leading aluminum parts company for the electric vehicles. 
  • The company ranks first in domestic market share in the aluminum extruded module cases that protect batteries from external shocks.
  • The company is offering 1 million new shares in this IPO. The IPO price range is from 40,000 won to 45,000 won.

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May 25
0

Daily Brief South Korea: Manyo Factory and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Manyo Factory IPO Bookbuilding Results Analysis

Manyo Factory IPO Bookbuilding Results Analysis

By Douglas Kim

  • Manyo Factory IPO price has been finalized at 16,000 won. The demand ratio for this IPO among institutional investors was very high at 1,800 to 1.
  • Our base case valuation of Manyo Factory is target price of 29,555 won per share, which represents 85% higher than the the IPO price of 16,000 won. 
  • We believe a premium valuation multiple to the comps is appropriate due to Manyo Factory’s higher sales growth rate, operating margins, and ROE than the comps in 2020 to 2023.

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May 24
0

Daily Brief South Korea: Youlchon Chemical, Lutronic Corp, Dongkuk Steel Mill, Eubiologics and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill
  • Two of KS200/KQ150 Additions Are Prime-Targeted for Shorting Due to Their Inflated Float Shares
  • KOSPI 200 Ad-Hoc Changes for Dongkuk Steel Spinoff: Discussing Flow Trading Timeline
  • EuBiologics (206650 KS): Capacity Expansion Amid Global Supply Shortage to Accelerate Growth

KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill

By Brian Freitas

Two of KS200/KQ150 Additions Are Prime-Targeted for Shorting Due to Their Inflated Float Shares

By Sanghyun Park

  • Lutronic Corp and Jeisys Medical have considerably lower DTV in comparison to their float shares. It is highly probable that they have artificially increased their float shares.
  • Coincidentally, these two stocks are the ones that have experienced the most dramatic increase in borrow balance after the result announcement.
  • These two stocks are being targeted for short-selling from a post-event perspective because the market believes they will exhibit abnormal passive (price) impact due to their inflated float shares.

KOSPI 200 Ad-Hoc Changes for Dongkuk Steel Spinoff: Discussing Flow Trading Timeline

By Sanghyun Park

  • Applying the T+3 relisting date as the effective date will again lead to noteworthy changes to the timeline of rebalancing flow trading.
  • It seems unnecessary to concentrate shorting on the trading halt day for Dongkuk Steel. We should aim for price corrections driven by passive flows on the T+2 period before effective.
  • Despite the Dongkuk Steel shareholders’ approval on the 12th, Youlchon Chemical’s price experienced a significant decline. The ongoing risk of major shareholder stake sales appears to have overshadowed this event.

EuBiologics (206650 KS): Capacity Expansion Amid Global Supply Shortage to Accelerate Growth

By Tina Banerjee

  • Due to the surging cholera cases globally, demand for cholera vaccines for public market continues to grow. According to GAVI, shortage of cholera vaccine is likely to continue through 2025.
  • To respond to surging vaccine demand, Eubiologics (206650 KS) plans to increase its production capacity from the current 33M doses per year to a maximum of 90M doses in 2027.
  • Eubiologics, in partnership with TechInvention is launching Euvichol-Plus in India. India is among the top cholera-endemic countries, with an estimated incidence rate of 1.64 per 1,000 people.

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