Category

South Korea

Feb 28
0

Daily Brief South Korea: Ecopro BM Co Ltd and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Shorting Entry Point on Ecopro BM with KODEX Battery ETF Rebalancing on March 10

Shorting Entry Point on Ecopro BM with KODEX Battery ETF Rebalancing on March 10

By Sanghyun Park

  • Ecopro BM’s weight has expanded to 22%. Since the probability of receiving a 15% cap is virtually 100%, it will inevitably undergo a weight change of up to nearly 7%p.
  • If the ongoing rally subsides before March 10th and returns to the January DTV level, the price impact could surge up to 0.3-0.4x daily for three trading days.
  • This seems to be a sufficient level for a shorting entry point. It may be worth considering an outright short position on Ecopro BM or Long Short with SK Innovation.

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Feb 26
0

Daily Brief South Korea: Kum Yang Co Ltd, Hyundai Motor (2nd Pref) and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Index Rebalance & ETF Flow Recap: KOSPI200, SET50, SMM SP, HSI, HSCI
  • Dividend Record Date Changes Already in Progress in Korea: Trading Ramifications

Index Rebalance & ETF Flow Recap: KOSPI200, SET50, SMM SP, HSI, HSCI

By Brian Freitas

  • The changes to the Hang Seng family of indices and the SSE STAR50 (STAR50 INDEX) were announced post market close on Friday.
  • Busy start to the coming week with the MSCI implementation at the close on 28 February and a few announcements to other indices later in the week.
  • There were outflows from Tracker Fund of Hong Kong Ltd (2800 HK) during the week taking the YTD outflows to over US$1bn.

Dividend Record Date Changes Already in Progress in Korea: Trading Ramifications

By Sanghyun Park

  • Notable names that have proposed amendments to their articles of association for changing the dividend record date at this year’s AGM include Hyundai Motor Group, POSCO Holdings, and Kakao Corp.
  • There were skeptical views on how much response local big-name companies would show to Korea FSC’s plan. However, the response from large companies has been unexpectedly positive and aggressive.
  • We should consider the possibility that the preferred stock premium of companies whose dividend visibility has improved through this may continue to improve compared to those that have not.

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Feb 24
0

Daily Brief South Korea: KT&G Corporation, DB Hitek Co., Ltd., LIG Nex1 Co and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Oasis Management Invests in KT&G
  • Never-Seen Price Pattern Detected in a Split-Off Event Granting Appraisal Rights in Korea
  • LIG Nex1: 10x Increase in Operating Profit from 2019 to 2022 Not Adequately Reflected in Share Price

Oasis Management Invests in KT&G

By Douglas Kim

  • It was reported on 22 February in numerous local Korean media that Oasis Management has invested about 1.5% stake in KT&G Corporation (033780 KS).
  • This investment in KT&G is reportedly Oasis Mgmt’s first investment in Korea. For now, Oasis Mgmt has not made any public announcement about its investment in KT&G.
  • With Oasis Mgmt investing 1.5% stake in KT&G, we believe it is increasingly likely that it could start its activist campaign on KT&G sometime in 2023.

Never-Seen Price Pattern Detected in a Split-Off Event Granting Appraisal Rights in Korea

By Sanghyun Park

  • A rather unusual price movement came out on February 20 for HLB. On the first trading day after the board of directors’ decision, the price reached the upper daily limit.
  • The short covering got to a temporarily excessive level in the process of securing appraisal rights should be the reason that led to the upper limit.
  • We should design a trading setup targeting excessive short covering-triggered price overheating in split-off events. At this point, the most likely candidate to pursue a split-off is DB Hitek.

LIG Nex1: 10x Increase in Operating Profit from 2019 to 2022 Not Adequately Reflected in Share Price

By Douglas Kim

  • LIG Nex1 produces a wide range of advanced precision electronic systems, including missile, radars, electronic warfare, avionics, tactical communication systems, fire control systems, and naval combat systems.
  • LIG Nex1’s operating profit has jumped by nearly 10x from 2019 to 2022. However, its share price has not adequately reflected this growth.
  • The company reached its highest ever order backlog of 12.2 trillion won at the end of 2022. The company is benefiting from increased demand for precision guided weapons worldwide.

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Feb 23
0

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

By | Daily Briefs, South Korea

In today’s briefing:

  • SM Entertainment: Provides a Detailed Analysis of a Strategic Partnership with Kakao
  • EuBiologics (206650 KS): Accelerated Double-Digit Sales Growth In 2022; Strong Demand to Continue

SM Entertainment: Provides a Detailed Analysis of a Strategic Partnership with Kakao

By Douglas Kim

  • Today (22 February), S.M.Entertainment Co (041510 KS) provided a detailed analysis of the strategic partnership with Kakao from shareholders and fans perspectives.
  • The timing of this detailed strategic partnership announcement is a bit unusual since it comes BEFORE the actual tender offer announcement and potential capital injection into SM Entertainment by Kakao.
  • Our call on this M&A remains consistent. In the last week of February/early March, Kakao could make a tender offer at prices of at least 140,000/150,000 won, in our view.

EuBiologics (206650 KS): Accelerated Double-Digit Sales Growth In 2022; Strong Demand to Continue

By Tina Banerjee

  • In 2022, Eubiologics (206650 KS) reported revenue growth of 41% YoY to KRW55.47B, driven by increased supply of cholera vaccine to UNICEF following the outbreak of cholera worldwide.
  • In 2022, more than 29 countries reported cholera cases or outbreaks, up from 20 countries five year ago. Globally cholera vaccine is in short supply.
  • Eubiologic’s vaccine manufacturing capacity is expected to go up to 90 million doses after completion of the expansion project this year, which will drive sustainable sales growth.

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Feb 22
0

Daily Brief South Korea: SK Telecom, DGB Financial Group, Samyang Foods and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Foreign Room Race for MSCI Re-Inclusion: SK Telecom Is Unexpectedly Rising
  • KOSPI200 Index Rebalance Preview: Changes in April & June
  • Samyang Foods: KOSPI 200 Inclusion & Improving Fundamentals

Foreign Room Race for MSCI Re-Inclusion: SK Telecom Is Unexpectedly Rising

By Sanghyun Park

  • Looking at the recent pattern, SKT’s fast-rising is quite noticeable. Its foreign room rose to 12.08%. On the other hand, KT’s foreign room growth seems to be slowing somewhat.
  • SKT’s pace is fast. If the current pace continues, there will be even the possibility of inclusion with a full adjustment factor of 1.0, exceeding 25%, by the August review. 
  • We should design a momentum trading setup targeting the point when SKT’s foreign room decline trend will be reflected into an MSCI re-inclusion momentum.

KOSPI200 Index Rebalance Preview: Changes in April & June

By Brian Freitas

Samyang Foods: KOSPI 200 Inclusion & Improving Fundamentals

By Douglas Kim

  • On 20 February, KRX announced that effective 13 April 2023, Samyang Foods will be included in the KOSPI 200 index and Hyundai Greenfood will be excluded.
  • We have a positive view on Samyang Foods and we believe this stock will outperform KOSPI leading into the week of KOSPI 200 inclusion (13 April). 
  • We think that expectation will play a bigger role and some investors may choose to buy this stock ahead of the actual inclusion date.

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Feb 21
0

Daily Brief South Korea: Ecopro Co Ltd, S.M.Entertainment Co, TY Holdings Co, Kia Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Ecopro Co: Shorting Entry Points on CB Conversion Event
  • SM Entertainment Mgmt’s Response on Its Opposition to HYBE’s Tender Offer
  • Korea Small Cap Gem #19: TY Holdings
  • KIA Corp (000270 KS): Response to LT Trend Channel Resistance (78500) Is Key to a Bullish Outlook

Ecopro Co: Shorting Entry Points on CB Conversion Event

By Sanghyun Park

  • For the recent conversion, the listing date is March 3rd, involving 500K shares. Despite the ongoing rally, there is a possibility of a significant price impact due to the volume.
  • We still have 1,632,333 shares to be converted. This represents 6.5% of the SO. There is a high likelihood that these will also be applied for conversion soon.
  • Assuming that it occurs in increments of 400-500K, there could be roughly 3-4 opportunities for shorting.

SM Entertainment Mgmt’s Response on Its Opposition to HYBE’s Tender Offer

By Douglas Kim

  • In this insight, we discuss our thoughts on S.M.Entertainment Co (041510 KS) management’s official response on why it is opposing HYBE (352820 KS)’s tender offer offer.
  • Currently, about 85% of SM’s employees oppose HYBE’s proposed acquisition of nearly 40% stake in SM Entertainment. 
  • In the last week of February/early March, Kakao Group could make an official tender offer at prices of at least 140,000/150,000 won, in our view.

Korea Small Cap Gem #19: TY Holdings

By Douglas Kim

  • TY Holdings (363280 KS) is the 19th company in our Korea Small Cap Gems series.
  • Our NAV analysis of TY Holdings suggests NAV of 925.5 billion won or NAV per share of 18,172 won per share, which is 47.4% higher than current share price.
  • The key catalysts include earnings improvements at SBS and Ecorbit, potential corporate activism on SBS, and potential change in regulation to allow foreigners to invest in SBS (terrestrial broadcasting company). 

KIA Corp (000270 KS): Response to LT Trend Channel Resistance (78500) Is Key to a Bullish Outlook

By David Coloretti, CMT

  • At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
  • The bullish response to the 50% Fibonacci retracement at 61750 in Q1 2023 has been impulsive. 
  • KIA Corp is set to challenge the top of the 2021/2023 parallel downtrend channel around 78500. A break above the channel will confirm aggressive topside targets (90000/100000).

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Feb 19
0

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

By | Daily Briefs, South Korea

In today’s briefing:

  • Last Week in Event SPACE: S.M.Entertainment, Adani Group, Star Entertainment, Dai Nippon, Citizen

Last Week in Event SPACE: S.M.Entertainment, Adani Group, Star Entertainment, Dai Nippon, Citizen

By David Blennerhassett

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Feb 18
0

Daily Brief South Korea: Hanwha Solutions, Classys, KakaoBank and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Index Corporate Actions for Hanwha Solutions Split: Passive Flow Size & Schedule
  • Classys (214150 KS): Record-High Sales and Profit in 2022; Geography Expansion to Accelerate Growth
  • President Yoon Calls for Greater Competition and Social Contribution by the Korean Banks

Index Corporate Actions for Hanwha Solutions Split: Passive Flow Size & Schedule

By Sanghyun Park

  • Hanwha Solutions received shareholder approval for its proposed demerger on February 13. The demerger will split Hanwha Solutions into two separate entities: Hanwha Galleria and Hanwha Solutions.
  • Hanwha Solutions will experience a passive outflow of 0.92x ADTV at the closing price on February 24 for KOSPI 200. A similar passive inflow will occur on March 31.
  • MSCI Standard will deliver an outflow of 0.43x ADTV at the close on March 31 as the weight of Hanwha Solutions, an existing constituent, will be reduced.

Classys (214150 KS): Record-High Sales and Profit in 2022; Geography Expansion to Accelerate Growth

By Tina Banerjee

  • Classys (214150 KS) reported strong performance in 2022, with highest ever revenue and profit, driven by increased sales of equipment and consumables due to increased global awareness of major products.
  • Revenue from export recorded a CAGR of 30% during 2017–2022, mainly driven by strong growth in Brazil. Classys launched Shrink Universe in Korea and Ultraformer MPT in global market.
  • For 2023, Classys has guided for revenue of KRW170B (+20% YoY), driven by Shrink Universe’s expansion into the global market, full-fledged domestic sales of Volumemers, and increasing volume of consumables.

President Yoon Calls for Greater Competition and Social Contribution by the Korean Banks

By Douglas Kim

  • We discuss the increasing likelihood of formation of another Internet bank, challenger banks, and other measures to foster competition and increase social contribution on the Korean banking sector in 2023.  
  • The Korean banks underperformed in the past week due to President Yoon pointing out “banks and telcos need to share the increasing living costs.”
  • We believe Kakao Bank is likely to underperform the market in the next several months as investors fear about greater competitive pressure, especially on the existing Internet banks.

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Feb 17
0

Daily Brief South Korea: Samsung C&T and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Samsung C&T Shareholder Return: Directly Related to Lee Family’s Inheritax Tax Issue
  • A Pair Trade Between Samsung C&T and Samsung Electronics Amid Big Share Cancellation at Samsung C&T

Samsung C&T Shareholder Return: Directly Related to Lee Family’s Inheritax Tax Issue

By Sanghyun Park

  • The target volume is 24,718,099 ordinary shares (13.2%) and 159,835 preferred shares (9.8%). That is, C&T will cancel all of its treasury shares in the next five years.
  • C&T’s decision to cancel treasury shares clearly indicates that the family’s fundraising strategy is focused on stake sales rather than dividend increases.
  • The number of shares inherited will be the volume Lee Seo-hyun will sell in the short term as this is within the range that minimizes the tax liability through LIFO.

A Pair Trade Between Samsung C&T and Samsung Electronics Amid Big Share Cancellation at Samsung C&T

By Douglas Kim

  • Samsung C&T announced the cancellation of its entire treasury shares over the next five years. It has 24.7 million shares of common shares (accounting for 13.2% of common shares outstanding).
  • We like a pair trade between Samsung C&T (go long) and Samsung Electronics (go short). Samsung C&T’s share cancellation is likely to have a positive impact on its shares.
  • The recent sell-down of most of its shares in TSMC by Berkshire Hathaway is also likely to be viewed negatively by some investors in Samsung Electronics. 

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Feb 16
0

Daily Brief South Korea: S.M.Entertainment Co, Korea Stock Exchange Kospi 200 Index, SOCAR and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Who Wants SM Entertainment More? Kim Bum-Soo (Kakao) Or Bang Si-Hyuk (Hybe)?
  • EQD | KOSPI2 Index: Reloading on Upside Calls
  • SoCar Lock-Up – US$242m Pre-IPO Lock-Up Expiry, Expect Scattered Selling

Who Wants SM Entertainment More? Kim Bum-Soo (Kakao) Or Bang Si-Hyuk (Hybe)?

By Douglas Kim

  • It has been reported that Kakao has hired local brokerage firms to discuss the details of another tender offer of SM Entertainment shares (at more than 130,000 won).
  • We believe that this has been the key reason why SM Entertainment’s shares rose an additional 5% on 15 February.
  • We believe that eventually Kakao Group will win the M&A fight for SM Entertainment and shares of SM could rise further in the coming weeks. 

EQD | KOSPI2 Index: Reloading on Upside Calls

By Simon Harris

  • KOSPI2 Index trading off the highs but supported by the 200-dma
  • Implied vols are trading cheap offering a good entry point
  • Options continue to be priced cheaply and we look at simple upside plays

SoCar Lock-Up – US$242m Pre-IPO Lock-Up Expiry, Expect Scattered Selling

By Ethan Aw

  • SOCAR (403550 KS) was listed on 22nd Aug 2022, where it raised US$78m in its Korea IPO. Its six-month lockup will expire on 21st Feb 2023. 
  • SoCar is a Korean car sharing business which aims to become an all-in-one mobility solutions provider beyond car sharing, with approximately 78% domestic market share in the car sharing space.
  • Coming up for six-month lockup expiry are the firm’s pre-IPO investors, but the bulk of the shares unlocked will come from its strategic investors.

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