Category

South Korea

Mar 20
0

Daily Brief South Korea: Kakao Pay, Meritz Financial Group, SK Telecom and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Shorting Kakao Pay on K200 Sector Index Passive Outflow Due to GICS Change on June 8
  • Meritz Financial Group: A Large Share Buyback Amid Global Financials Uncertainties
  • Korean Government Reviews Rules to Ease Foreign Ownership Limits

Shorting Kakao Pay on K200 Sector Index Passive Outflow Due to GICS Change on June 8

By Sanghyun Park

  • Kakao Pay’s GICS sector movement from IT to FINANCIALS creates flow trading opportunities due to the subsequent transfer between KOSPI 200’s sector sub-indices.
  • An outflow of ₩24.6B or 410K shares will occur. This is 0.6x ADTV. Given that the recent trading volume has further decreased, the actual impact will likely exceed 1.0x DTV.
  • It will be a concentrated flow in a single trading day by a single ETF, which gives us plenty of reasons for preemptively designing a short position targeting this.

Meritz Financial Group: A Large Share Buyback Amid Global Financials Uncertainties

By Douglas Kim

  • On 17 March (after market close), Meritz Financial Group (138040 KS) announced a share buyback program worth 400 billion won, which represents 5.4% of its market cap.
  • Given the relative large size of this deal, it should have a positive impact on its share price, especially on a relative basis against its competitors. 
  • The collapse of SVB Financial and uncertain investors’ reactions on the purchase of Credit Suisse by UBS will likely add to the global investors’ negative sentiment on the financial sector. 

Korean Government Reviews Rules to Ease Foreign Ownership Limits

By Douglas Kim

  • In recent days, the Korean government announced that it is reviewing foreign ownership limit rules.  
  • The main reasons are to align South Korea’s financial policies in line with the global standards and improve the chances of South Korea becoming included in MSCI Developed country status.
  • Key companies that could benefit from potential raise of foreign ownership limit include SK Telecom, KT Corp, and SBS. 

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Mar 19
0

Daily Brief South Korea: S.M.Entertainment Co and more

By | Daily Briefs, South Korea

In today’s briefing:

  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: Oishi, AAG, Pushpay, GK Goh, Halcyon Agri, S.M.Entertainment

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Oishi, AAG, Pushpay, GK Goh, Halcyon Agri, S.M.Entertainment

By David Blennerhassett

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Mar 18
0

Daily Brief South Korea: Mirae Asset TIGER Secondary Cell ETF, Nice Information Service Co and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Flow Trading Targeting Cap Reversion in TIGER Battery ETF Rebalancing on April 13
  • Four Companies Likely to Switch Their Listing from KOSDAQ to KOSPI in 2023/2024

Flow Trading Targeting Cap Reversion in TIGER Battery ETF Rebalancing on April 13

By Sanghyun Park

  • There seems to be no constituent change this time. However, opportunities from cap reversion are likely to lead to noteworthy passive flows.
  • Ecopro BM and Ecopro Co will experience a weight movement of -4.35% and -3.68%p. On the other hand, SK Innovation will enjoy the most pleasant passive impact.
  • At KODEX Battery’s March rebalancing, the Long SK Innovation Short Ecopro BM position setup provided a return of more than 10% with a similar level of impact x ADTV.

Four Companies Likely to Switch Their Listing from KOSDAQ to KOSPI in 2023/2024

By Douglas Kim

  • In this insight, we discuss four companies that are likely to switch their listing from KOSDAQ to KOSPI in 2023/2024.
  • These four companies include Ecopro BM, Ecopro Co, BH Co, and Nice Information Service.
  • BH Co and Nice Information Service have included the agenda of transfer of the listing from KOSDAQ to KOSPI in their upcoming AGMs this month. 

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Mar 17
0

Daily Brief South Korea: Cosmo AM&T and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Cosmo AM&T: Strong Momentum from Likely Inclusion in MSCI Korea Standard in 2023

Cosmo AM&T: Strong Momentum from Likely Inclusion in MSCI Korea Standard in 2023

By Douglas Kim

  • We provide a fundamental analysis of Cosmo AM&T (005070 KS) (Cosmo Advanced Materials & Technology), which is increasingly likely to become included in MSCI Korea Standard index in 2023.
  • Cosmo AM&T is a borderline inclusion candidate for MSCI Korea Standard in May 2023. If it does not get included in May, it could get included in 2H 2023.
  • All in all, the increasing possibility of MSCI Korea Standard inclusion combined with strong sales and profit momentum could result in a further positive momentum on its share price.

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Mar 16
0

Daily Brief South Korea: Kuk Il Paper Mfg, LG Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KOSDAQ150 Ad Hoc Index Rebalance: Lake Materials (281740) To Replace Kuk Il Paper (078130)
  • An Increasing Probability of LG Corp Preferred Shares Cancellation

KOSDAQ150 Ad Hoc Index Rebalance: Lake Materials (281740) To Replace Kuk Il Paper (078130)

By Brian Freitas

  • Following Kuk Il Paper Mfg (078130 KS)‘s designation as an Administrative Issue, the stock will be deleted from the KOSDAQ 150 Index and replaced with Lake Materials (281740 KS).
  • The timing of the index change is currently uncertain but will be implemented latest by the close of trading on 6 April.
  • Lake Materials (281740 KS) was up today and is nearing its highs. There could be another leg higher on the inclusion but we’d be wary of chasing the stock higher.

An Increasing Probability of LG Corp Preferred Shares Cancellation

By Douglas Kim

  • In this insight, we discuss an increasing probability of the cancellation of LG Corp preferred shares.
  • We provide five major reasons as to why LG Corp should cancel its entire preferred shares and how this could have a positive impact on LG Corp’s share price. 
  • We believe a 5-10% buyback and cancellation of LG Corp’s preferred shares in the next 1-2 years is a higher probability.

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Mar 15
0

Daily Brief South Korea: S.M.Entertainment Co and more

By | Daily Briefs, South Korea

In today’s briefing:

  • SM Entertainment: Kakao’s Tender Offer Proration Analysis
  • SM Ent Tendering P&L & Allocation Risk for a 30% Spread Opening

SM Entertainment: Kakao’s Tender Offer Proration Analysis

By Douglas Kim

  • In this insight, we provide a proration analysis of the S.M.Entertainment Co (041510 KS) tender offer by Kakao Corp (035720 KS).
  • Our base case assumes 71.4% of outstanding shares will participate in the tender offer, including HYBE, NPS, KB Asset Mgmt, Com2Us, and 70% of the remaining local and overseas investors.
  • There is a very high probability of a successful tender offer of SM Entertainment shares by Kakao. Post end of tender offer, its share price could fall about 5-10%, however. 

SM Ent Tendering P&L & Allocation Risk for a 30% Spread Opening

By Sanghyun Park

  • The target volume is 47.6% of the nominally estimated tendering pool size. It may go up due to retail investors’ typically low participation in tendering.
  • Other factors MAY OFFSET this. Most notable is the tendering possibility of HYBE (18.45%) and Lee Soo-man (4.96%). Combining these, the allocation rate will likely be between 50% and 60%.
  • Using this 50-60% band as a reference point, we should assess the risk of mismatching between the degree of post-tendering price correction and our loss buffer range for non-tendered shares.

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Mar 14
0

Daily Brief South Korea: K Car, LX International, SK Networks, Hanwha Aerospace, Lutronic Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Names for a Preemptive Long Short Setup for KOSPI 200 June Rebalancing
  • Shorting Event on LX International’s Potential Rights Offer for HMM Takeover
  • SK Networks: 100 Billion Won in Share Buyback + 70 Billion Won in Treasury Shares Cancellation
  • MSCI Korea Potential Adds & Deletes in May 2023 Amid Heightened Market Volatility
  • Lutronic Corp (085370 KS): Record-High Performance in 2022; Litigation May Limit Upside Potential

Names for a Preemptive Long Short Setup for KOSPI 200 June Rebalancing

By Sanghyun Park

  • Kum Yang and Youlchon Chemical are within the borderline for inclusion, whereas Hwaseung Enterprise and K Car are in the deletion zone.
  • Since the review period has reached 75%, it seems reasonable to consider a somewhat aggressive buildup for them.
  • We can also consider setting up preemptive positions only for Kum Yang and Hwaseung Enterprise and then sequentially look for entry opportunities for Youlchon and K Car later on.

Shorting Event on LX International’s Potential Rights Offer for HMM Takeover

By Sanghyun Park

  • The opinion rapidly spreading in the local market is that LX International is increasing its available shares by twice the amount to plan a paid-in increase for the HMM acquisition.
  • The size of an offering is estimated at ₩1.2T to ₩1.5T. The short-term price impact will undoubtedly be significant for LX International having a market cap of ₩1.2T.
  • The market has already witnessed a preemptive position buildup targeting this. However, since there is a time gap until the offering announcement, an entry point opportunity may still be available.

SK Networks: 100 Billion Won in Share Buyback + 70 Billion Won in Treasury Shares Cancellation

By Douglas Kim

  • SK Networks announced that it will repurchase 100 billion won in common shares and also cancel nearly 70 billion won of existing treasury shares.
  • The combined share buyback and treasury shares cancellation will represent nearly 14% of the company’s total outstanding shares.  
  • The combined share buyback and treasury shares cancellation which will represent nearly 14% of the company’s total outstanding shares, will likely have a positive impact on SK Network’s share price.

MSCI Korea Potential Adds & Deletes in May 2023 Amid Heightened Market Volatility

By Douglas Kim

  • In this insight, we discuss the potential inclusions and exclusions in the next MSCI Korea Index rebalance announcement in May 2023 amid heightened market volatility.
  • The potential inclusions (high probability) in the MSCI Korea index in May are Hanwha Aerospace and Ecopro. Potential adds (low probability) include POSCO International, Cosmo AM&T, and SM Entertainment.
  • The three most likely exclusions in the MSCI Korea index in May include Lotte Shopping, SD Biosensor, and S1 Corporation.

Lutronic Corp (085370 KS): Record-High Performance in 2022; Litigation May Limit Upside Potential

By Tina Banerjee

  • Lutronic Corp (085370 KS) recorded its highest ever revenue and operating profit in 2022, driven by strong performance of overseas business, which contributed 88% of revenue and grew 62% YoY.
  • Overall, business has recovered with the reopening of the dermatology clinics and resumption of elective procedures globally. In addition to product sales, sales of consumables and services are steadily increasing.
  • Despite stellar performance in 2022, ongoing lawsuit against U.S.-based competitor remains an overhang on Lutronic’s overseas growth aspirations, especially in the U.S.

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Mar 13
0

Daily Brief South Korea: S.M.Entertainment Co, Bukwang Pharmaceutical and more

By | Daily Briefs, South Korea

In today’s briefing:

  • HYBE Gives Up the M&A Fight for SM Entertainment: Impact on Kakao’s Tender Offer
  • Bukwang Pharmaceutical (003000 KS): High R&D Cost Put Pressure on Profit; Pain to Continue in Future

HYBE Gives Up the M&A Fight for SM Entertainment: Impact on Kakao’s Tender Offer

By Douglas Kim

  • On 12 March, HYBE (352820 KS) announced that it is no longer pursuing S.M.Entertainment Co (041510 KS) in an M&A battle with Kakao Corp (035720 KS).
  • This will result in a very high probability of Kakao winning the M&A battle of SM Entertainment.
  • Many institutional investors are likely to have pushed back on HYBE’s capital raising efforts, which seems to have been the clincher of HYBE backing out of this M&A for SM. 

Bukwang Pharmaceutical (003000 KS): High R&D Cost Put Pressure on Profit; Pain to Continue in Future

By Tina Banerjee

  • Bukwang Pharmaceutical (003000 KS) has reported operating loss of KRW1.2 billion in 2022 due to the increased R&D cost, driven by the clinical progress of JM-010.
  • Bukwang’s subsidiary, Contera Pharma, is developing JM-010 as a treatment for dyskinesia in patients with Parkinson’s disease. JM-010 is in phase 2 clinical trial in the U.S. and Europe.
  • Bukwang has been aiming to list Contera Pharma to secure funds for clinical research, which has still not materialized. With current low-risk appetite, Contera Pharma IPO may not sail smooth.

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Mar 12
0

Daily Brief South Korea: Douzone Bizon, S.M.Entertainment Co and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Index Rebalance & ETF Flow Recap: MSCI China, S&P/ASX, KOSDAQ150, KOSPI, CPSE/Bharat22, YES, OZL
  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: Invocare, Yashili, Pushpay Holdings, S.M.Entertainment

Index Rebalance & ETF Flow Recap: MSCI China, S&P/ASX, KOSDAQ150, KOSPI, CPSE/Bharat22, YES, OZL

By Brian Freitas

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Invocare, Yashili, Pushpay Holdings, S.M.Entertainment

By David Blennerhassett

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Mar 11
0

Daily Brief South Korea: Sun Kwang, LG Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Long Short Setup on KOSDAQ 150 Ad Hoc Change with SK Oceanplant’s KOSPI Transfer Listing
  • LG Corp: A Family Feud! (Mother & Sisters Sue Their Chairman Son) Enter the Private Equity Dragons?

Long Short Setup on KOSDAQ 150 Ad Hoc Change with SK Oceanplant’s KOSPI Transfer Listing

By Sanghyun Park

  • SK Oceanplant will likely be listed on KOSPI in late May or early June. There are no clear reasons for KRX to oppose SK Ocean Plant’s move to KOSPI.
  • The top reserved issue in INDUSTRIALS, Sun Kwang (003100 KS), will replace it in KOSDAQ 150. The effective date is the delisting day.
  • The impact size on the delisting day alone may be well above 1x ADTV for both companies, so we will likely see a significant price movement.

LG Corp: A Family Feud! (Mother & Sisters Sue Their Chairman Son) Enter the Private Equity Dragons?

By Douglas Kim

  • There is a major family feud on LG Group. Koo Kwang-Mo (Chairman of LG Group)’s mum and sisters are suing Chairman Koo to demand more money. 
  • We believe that this family feud among the members of the LG Group regarding the inheritance recovery is likely to heighten the importance of the controlling stake in LG Corp.
  • Similar to what has happened with Osstem Implant, it is very possible that mum and sisters are discussing various strategies with some of the biggest private equity dragons in Asia/globally. 

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