Category

South Korea

May 02
0

Daily Brief South Korea: Hyundai Rotem Company and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Contenders for MSCI Korea Inclusion in 2H 2023

Contenders for MSCI Korea Inclusion in 2H 2023

By Douglas Kim

  • We have provided a list of 10 stocks that could be included in the MSCI Korea index in 2H 2023.
  • Among these 10 companies, the top five companies with the highest free float based market cap have greater probabilities of becoming included in the index, in our view.
  • The five companies include Jyp Entertainment (035900 KS), Hyundai Rotem Company (064350 KS), DB Hitek Co., Ltd. (000990 KS), Cs Wind Corp (112610 KS), and LS Corp (006260 KS).

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Apr 30
0

Daily Brief South Korea: Posco Chemical Co Ltd, Daou Data Corp, Hotel Shilla and more

By | Daily Briefs, South Korea

In today’s briefing:

  • A Noteworthy Long Short Setup: Ecopro BM & Posco Future M
  • Insiders At Seoul City Gas and Daou Data Corp Sell Shares Before the Crash
  • Hotel Shilla: Wins New License to Operate Duty Free at Incheon International Airport for 10 Years

A Noteworthy Long Short Setup: Ecopro BM & Posco Future M

By Sanghyun Park

  • Currently, the market cap of Ecopro BM surpassed Posco Future M. As a result, Ecopro BM is in a position to replace Posco Future M in the K-New Deal rebalancing.
  • They are direct peers with a high price cointegration. We should consider using the rebalancing event of this index as an inflection point from a Long Short pair trading perspective.
  • The likelihood of Ecopro BM being included in the Solactive Lithium Index in October could potentially increase the expected return of taking this Long Short position more preemptively.

Insiders At Seoul City Gas and Daou Data Corp Sell Shares Before the Crash

By Douglas Kim

  • Key insiders at Seoul City Gas (017390 KS) and Daou Data Corp (032190 KS) sold their shares before the recent crash.
  • On 28 April, it was reported that Kim Young-Min (Seoul City Gas Chairman) sold 2% of Seoul City Gas on 20 April, resulting in net sales of 45.7 billion won.
  • These Korean companies are two of the eight stocks related to the CFD derivatives sell-down that have been crashing in the past week. 

Hotel Shilla: Wins New License to Operate Duty Free at Incheon International Airport for 10 Years

By Douglas Kim

  • We expect the consensus to increase their operating profit estimates for Hotel Shilla in 2023 and 2024 by as much as 10-20% in 2023 and 2024.  
  • Higher earnings will likely be driven by Hotel Shilla winning new licenses to operate duty free at the Incheon International Airport and much better than expected profits in 1Q 2023.
  • With improved momentum (both operationally and share price basis), we think that the Hotel Shilla (pref) could outperform Hotel Shilla (common) in the coming weeks. 

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Apr 29
0

Daily Brief South Korea: Dongwon Industries, Lionheart Studio and more

By | Daily Briefs, South Korea

In today’s briefing:

  • End of Mandatory Lock-Up Periods for 46 Companies in Korea in May 2023
  • Lionheart: Over Dependence on One-Single Game

End of Mandatory Lock-Up Periods for 46 Companies in Korea in May 2023

By Douglas Kim

  • We discuss the end of the mandatory lock-up periods for 46 stocks in Korea in May 2023, among which 4 are in KOSPI and 42 are in KOSDAQ.
  • These 46 stocks on average could be subject to further selling pressures in May and could underperform relative to the market. 
  • Among these 46 stocks, the top 6 market cap stocks include KG Mobility, Dongwon Industries, Hugel, Yunsung F&C, Enchem, and Jeio. 

Lionheart: Over Dependence on One-Single Game

By Shifara Samsudeen, ACMA, CGMA

  • Founded in 2018, Lionheart Studio (426630 KS) is a South Korean multiplayer online role-playing games developer for mobiles and PCs.
  • The company’s game Odin: Valhalla Rising was based on Nordic mythology and was a huge success. Lionheart is planning to add more expansions to Odin.
  • The company tried to go public in October 2022 on KOSDAQ however, it cancelled its listing plans due to negative market sentiments at the time.   

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Apr 28
0

Daily Brief South Korea: Yunsung F&C, Samchully, Kiwoom Securities, Samsung Biologics and more

By | Daily Briefs, South Korea

In today’s briefing:

  • One Unnoticed Addition to KOSDAQ 150: Yunsung F&C Through Special Inclusion
  • Korea Investment & Securities’ Suspension of Credit Loans for Stock Purchases – The Trigger Event?
  • We Should Aim at Kiwoom Securities’ Potential Legal Risk-Induced Stock Price Decline
  • Samsung Biologics (207940 KS): Slow Start of 2023; Stronger Growth in H2; 2023 Guidance Raised

One Unnoticed Addition to KOSDAQ 150: Yunsung F&C Through Special Inclusion

By Sanghyun Park

  • Due to the matched order fraud incident in recent days, there has been a significant change in the KOSDAQ top 50 rankings, presenting a great opportunity for Yunsung F&C.
  • The estimated size of the passive inflow that it is likely to receive is approximately 0.5-0.8x ADTV for ETFs alone, and 1.2-1.5x when expanded to all passive funds.
  • We should note that the level of market exposure to inclusion possibility has been significantly low. Therefore, we can expect a significant price impact at the time of the announcement.

Korea Investment & Securities’ Suspension of Credit Loans for Stock Purchases – The Trigger Event?

By Douglas Kim

  • The reduction of credit loans by Korea Investment & Securities and Kiwoom Securities in the past week may have accelerated unwinding of positions of 8 stocks related to CFD selling.  
  • The balance of credit loans for KOSPI increased 12.7% YTD. On the other hand, the balance of credit loans for KOSDAQ increased by 36.1% YTD. 
  • As local securities companies further reduce credit loans and regulators also restrict CFD related leverage, a sound pair trade could be to go long KOSPI 200 and short KOSDAQ 150. 

We Should Aim at Kiwoom Securities’ Potential Legal Risk-Induced Stock Price Decline

By Sanghyun Park

  • The recent matched order operation’s ringleader called in local major broadcasting companies for an interview and claimed the sell orders through SG on Monday were not from their CFD accounts.
  • The trigger is Kiwoom Securities’ Chairman Kim, who created a continuous and rapid decline in stock prices and led to a vicious cycle of endless margin calls and covering orders.
  • Rather than fishing for a bottom for the eight stocks from this point on, it seems necessary to actively design positions aimed at Kiwoom Securities’ legal risk-induced stock price decline.

Samsung Biologics (207940 KS): Slow Start of 2023; Stronger Growth in H2; 2023 Guidance Raised

By Tina Banerjee

  • Samsung Biologics (207940 KS) reported year-over-year improvement in sales and operating profit in 1Q23. However, net profit declined 4% YoY due to one-off factor stemming from an acquisition last year.
  • The company expects stronger growth in H2 due to revenue contribution of Plant 4 and the launch of Humira biosimilar in the U.S.  
  • Based on the strength of CMO business, Samsung Biologics has raised 2023 revenue growth guidance to 15–20% YoY from 10–15% YoY announced in January.

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Apr 27
0

Daily Brief South Korea: Seoul City Gas, Hyundai Motor and more

By | Daily Briefs, South Korea

In today’s briefing:

  • A Crash in 8 Korean Stocks Related to CFD Derivatives: Margin Call in Korea
  • Hyundai Motor: Highest Operating Profit Among All Korean Companies in 2023

A Crash in 8 Korean Stocks Related to CFD Derivatives: Margin Call in Korea

By Douglas Kim

  • The biggest story in the Korean stock market in the past three days has been the crash in 8 stocks related to CFD derivatives.
  • As a result of the CFD related margin call selling, the following are the major impact on the 8 related stocks and the overall Korean stock market in our view.
  • They include a) overshooting on the downside on 8 related names, b) negative impact on the major rechargeable battery names, and c) negative impact on the overall Korean stock market. 

Hyundai Motor: Highest Operating Profit Among All Korean Companies in 2023

By Douglas Kim

  • We discuss the importance of Hyundai Motor generating nearly 11.5 trillion won in operating profit in 2023, which is likely to be the highest among all Korean companies. 
  • Hyundai Motor and Kia Corp combined are expected to generate operating profit of 20.7 trillion won in 2023, representing 57% of total operating profit of the top 10 Korean companies.
  • In 2023, Hyundai Motor plans a full-scale world-wide roll-out of its EV Ioniq 6. Furthermore, it set a dividend payout ratio at 25% or higher.

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Apr 26
0

Daily Brief South Korea: Mntech Co Ltd, Lutronic Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively
  • KOSDAQ150 Index Rebalance Preview: Adds Starting to Crack (After Huge Outperformance)

Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively

By Sanghyun Park

  • The local ghost hedge fund began to excessively invest in credit, which leveraged 2.5 to 3 times when the eight manipulated stocks started to increase rapidly in price.
  • Then, the Financial Supervisory Service deemed this excessively-leveraged trading behavior as unusual, and news of an investigation into their activities broke out and triggered them to dump the shares.
  • The key now is identifying in advance the stocks that will experience similar selling patterns. To do so, we need to prioritize selecting stocks with high-margin balances in recent times.

KOSDAQ150 Index Rebalance Preview: Adds Starting to Crack (After Huge Outperformance)

By Brian Freitas

  • With 3 trading days left in the review period for the June rebalance, we see 8 potential changes and 2 close adds for the KOSDAQ 150 Index (KOSDQ150 INDEX). 
  • There are two potential transfers from the KOSDAQ Market to KOSPI Market that could lead to more changes in May and/or June.
  • Nearly all potential deletions are trading near their lows and short interest has been increasing on some of the stocks. That will be covered closer to implementation of the rebalance.

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Apr 25
0

Daily Brief South Korea: Youlchon Chemical, Kcc Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KOSPI200 Index Rebalance Preview: Materials to Replace Consumer Stocks
  • KCC: Plans to IPO Its Subsidiary Momentive Performance Materials in the US as Early as 2023

KOSPI200 Index Rebalance Preview: Materials to Replace Consumer Stocks

By Brian Freitas

KCC: Plans to IPO Its Subsidiary Momentive Performance Materials in the US as Early as 2023

By Douglas Kim

  • On 24 April, KCC Corp announced that it plans to IPO its subsidiary Momentive Performance Materials Inc. in the US stock market as early as 2023.
  • In 2021, KCC raised its stake in MOM Holding from 50% + 1 share to 60%. Momentive EBITDA increased from $300 million in 2018 to $450 million in 2022.
  • Our valuation of KCC Corp suggests an NAV of 3.1 trillion won (post 50% discount) or NAV per share of 347,633 won per share, representing 49% higher than current price.

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Apr 24
0

Daily Brief South Korea: Doubleugames Co, Ltd. and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Overlooked Trading Angle in K-New Deal Rebalancing Event: Two LONG SHORT Pairs to Watch

Overlooked Trading Angle in K-New Deal Rebalancing Event: Two LONG SHORT Pairs to Watch

By Sanghyun Park

  • Two pairs of constituent changes marked in squares in INTERNET and GAME may offer meaningful trading opportunities: Seojin System IN / Ahnlab OUT and Com2us IN / Doubleugames OUT.
  • Along with TIGER ETF, stealth index funds follow these indices. So, constituent changes in INTERNET and GAME create a flow impact of 0.3~0.6x DTV, even not in the Top 3.
  • Also, INTERNET and GAME have less passive flow impact degradation risk due to momentum trading flows compared to BATTERY and BIO.

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Apr 23
0

Daily Brief South Korea: LG Energy Solution and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Nationalization of Lithium Industry in Chile – Impact on Korean Rechargeable Batteries Value Chain

Nationalization of Lithium Industry in Chile – Impact on Korean Rechargeable Batteries Value Chain

By Douglas Kim

  • On 20 April, Chile’s government announced that it will be nationalizing the country’s lithium industry. Chile is the second largest producer of lithium in the world. 
  • The nationalization of the lithium industry in Chile will likely have a long-term negative impact on the rechargeable batteries related companies in Korea.
  • This is mainly due to greater challenges of getting access to lithium at more affordable prices. 

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Apr 22
0

Daily Brief South Korea: Dongwon Industries, Ts Corporation and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Aggressive Shorting on Dongwon Industries, Which Has Not Been Noticed as a K200 Deletion
  • Korea Small Cap Gem #21: TS Corp – Addicted to Sugar

Aggressive Shorting on Dongwon Industries, Which Has Not Been Noticed as a K200 Deletion

By Sanghyun Park

  • Dongwon Industries’ float rate is less than 10% (1 – 63.15% – 27.65% = 9.20%), which makes it ineligible for KOSPI 200. KRX will reflect this in the June review.
  • The passive outflow size due to K200 deletion is expected to be about 50 billion won, which will cause an impact of about 28x ADTV.
  • Considering this deletion has not been sufficiently exposed in the market, the actual price impact may be even more significant and preemptive.

Korea Small Cap Gem #21: TS Corp – Addicted to Sugar

By Douglas Kim

  • Ts Corporation (001790 KS) is the 21st company in our Korea Small Cap Gems series.
  • TS Corp is one of the largest sugar refining companies in Korea. Rising raw sugar prices generally have a positive impact on TS Corp’s sales and profits. 
  • TS Corp owns very valuable real estate assets that are much larger than its current market cap (299 billion won).

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