Category

South Korea

Jan 25
0

Daily Brief South Korea: Douzone Bizon, Coway Co Ltd, Osstem Implant and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KRX New Deal Index Rebalance Preview: Some Big Impact Names
  • Coway Is a Prime Candidate for Corporate Activism in Korea
  • A Tender Offer of Osstem Implant by MBK & Unison Capital?
  • Detailing Maekyung Report on MBK’s Tender Offer to Osstem Implant Shareholders at a 20% Premium

KRX New Deal Index Rebalance Preview: Some Big Impact Names

By Brian Freitas

  • The review period for the March rebalance ends on 31 January, the changes will be announced towards end February and implemented at the close of trading on 9 March.
  • We forecast one add/delete for the Game Index, and a couple of adds/deletes for the BBIG Index. There will be a lot of capping changes.
  • The largest inflows are expected on Posco Chemical (003670 KS) and Douzone Bizon (012510 KS); the largest outflows are expected on SK Innovation (096770 KS) and KMW (032500 KS).

Coway Is a Prime Candidate for Corporate Activism in Korea

By Douglas Kim

  • In this insight, we discuss the major reasons why Coway Co Ltd (021240 KS) is a prime candidate for corporate activism in Korea.
  • Netmarble has done a poor job with Coway post its acquisition in 2019.
  • An action plan for Coway is to return at least half of its net profit through dividends and share buybacks/cancellations.

A Tender Offer of Osstem Implant by MBK & Unison Capital?

By Douglas Kim

  • On 24 January, it was reported in Maeil Business Daily that MBK and Unison Capital are ready to take over the management rights of Osstem Implant through a tender offer.
  • For now, Osstem Implant, MBK Partners, and Unison Capital have not confirmed on the validity of this news.
  • We would attach a 70-90% probability that indeed MBK Partners and Unison Capital Korea are ready to launch a tender offer on Osstem Implant.

Detailing Maekyung Report on MBK’s Tender Offer to Osstem Implant Shareholders at a 20% Premium

By Sanghyun Park

  • Maekyung exclusively reports MBK will do a tender offer to Osstem Implant shareholders at a 20% premium to buy a 15% stake.
  • As Maekyung is a first-tier news outlet in Korea, we have to see enough credibility in this report. We should expect to see it in an official regulatory filing soon.
  • We should design a play that actively utilizes the tender offer event very elaborately. Here, we need to consider immediate offerings and potential delisting from a longer-term perspective.

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Jan 24
0

Daily Brief South Korea: KB Financial and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Five Most Aggressive Corporate Activists Moving the Korean Market: Align, KCGI, FCP, Truston, & LIFE

Five Most Aggressive Corporate Activists Moving the Korean Market: Align, KCGI, FCP, Truston, & LIFE

By Douglas Kim

  • In this insight, we discuss the five most aggressive corporate activist firms that have been moving the Korean equity market in the past year.
  • They include Align Partners Capital Management, KCGI, Flashlight Capital Partners, Truston, and LIFE Asset Management.
  • Share prices of 15 companies that the corporate activist firms have invested in Korea are up on average 9.7% YTD, outperforming KOSPI which is up 7.1% in the same period.

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Jan 23
0

Daily Brief South Korea: LG Energy Solution and more

By | Daily Briefs, South Korea

In today’s briefing:

  • LG Energy Solution: Another MSCI Upweight Event Coming in May

LG Energy Solution: Another MSCI Upweight Event Coming in May

By Sanghyun Park

  • MSCI will likely reflect the ESOP selling in the upcoming rebalancing. Since MSCI’s rounding magnitude is 5%p, a similar passive impact as that of the previous IR may appear.
  • This means that the remarkable price rally up to last November’s announcement date can be repeated this time closer to the announcement time in May.
  • Conservatively assuming MSCI Korea’s tracking fund size to be ₩60T, LG Energy’s 5%p up-weight is expected to induce about ₩330B of passive inflow, which is 2.09x ADTV.

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Jan 22
0

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

By | Daily Briefs, South Korea

In today’s briefing:

  • Align Partners’ Lee Chang-Hwan Joins SM Entertainment as a Board Member

Align Partners’ Lee Chang-Hwan Joins SM Entertainment as a Board Member

By Douglas Kim

  • On 20 January, SM Entertainment announced that Lee Chang-Hwan, the CEO of Align Partners Capital will join the company as a board member. 
  • This will mark one of the first cases of an activist investor becoming a board member of a Korean company which already has a major shareholder.
  • We believe that Lee Chang-Hwan (CEO of APCM) joining SM Entertainment as a board member will have a positive impact on the company to meaningfully improve its corporate governance.

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Jan 21
0

Daily Brief South Korea: LG Chem Ltd, DGB Financial Group, LG Energy Solution, Osstem Implant and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Introducing KODEX Top 5 Plus ETF Rebalancing Event
  • KOSPI 200 Ad Hoc Rebalance for Meritz Securities: DGB Financial Will Be Added
  • ECM Weekly (20th Jan 23) – HK Brokers, Wuxi, IQIYI, Anycol, Adani, WM Mot, LG Ene, AIn, Oasis, Perta
  • KCGI Formally Goes Activist on Osstem Implant

Introducing KODEX Top 5 Plus ETF Rebalancing Event

By Sanghyun Park

  • At this point, one constituent change is expected, and LG Chem is expected to replace KT&G.
  • The return of the equal-weighted long/short basket trade for the constituent changes in the past two years was recorded from 2.3% to 3.8%.
  • Both LG Chem and KT&G are expected to have a significant rebalancing flow impact. It can be an event that brings a juicy day trading return.

KOSPI 200 Ad Hoc Rebalance for Meritz Securities: DGB Financial Will Be Added

By Sanghyun Park

  • With JB Financial Group gone for Meritz Fire, the next one in line will enter KOSPI 200 in place of Meritz Securities. And the lucky one is DGB Financial.
  • DGB can expect an inflow of 8.23x ADTV and will face a 2.8x ADTV in one day on March 31.
  • Given the size of the preemptive flow that JB Financial is currently attracting, we should prepare for DBG to start receiving a similar level of price impact earlier than usual.

ECM Weekly (20th Jan 23) – HK Brokers, Wuxi, IQIYI, Anycol, Adani, WM Mot, LG Ene, AIn, Oasis, Perta

By Sumeet Singh

  • Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
  • Things are starting to pickup on the IPO front with the first somewhat sizeable US ADR filing done this week.
  • Placements deal flow continued to stay strong this week, even as the performance didn’t.

KCGI Formally Goes Activist on Osstem Implant

By Douglas Kim

  • On 20 January, KCGI private equity fund formally started its corporate governance activist campaign on Osstem Implant (048260 KS).
  • KCGI officially going activist on the company, its strong fundamentals and deep discount valuations suggest that Osstem Implant’s price is likely to outperform KOSPI by a wide margin in 2023.
  • KCGI has demanded Kyoo-Ok Choi (Chairman of Osstem Implant) to resign.

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Jan 20
0

Daily Brief South Korea: Kakao Pay, Jb Financial Group, Korea Stock Exchange Kospi 200 Index, OASIS Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • MSCI Korea: Potential Inclusions & Exclusions in February 2023 Highlighted by Locals
  • KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)
  • EQD | KOSPI2 Index: Buy Calls/Call Spreads into CPI Release
  • Oasis Corporation IPO – Peer Comparison – Smallest in Scale but Largest in Profitability

MSCI Korea: Potential Inclusions & Exclusions in February 2023 Highlighted by Locals

By Douglas Kim

  • We discuss the potential inclusions and exclusions in the next MSCI Korea Index rebalance announcement (10 February) that are being highlighted by the locals. 
  • The potential candidates for inclusion in the MSCI Korea Index emphasized by locals in February 2023 include Kakao Pay and Hanwha Aerospace. 
  • The potential exclusion candidates in the MSCI Korea Index emphasized by locals include S-1 Corp, Celltrion Pharm, and Cheil Worldwide. 

KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)

By Brian Freitas

EQD | KOSPI2 Index: Buy Calls/Call Spreads into CPI Release

By Simon Harris

  • Korean equities have recovered from the December sell-off but are still playing catch up versus other Asian indices over the last year
  • We see the upcoming CPI release as an underpriced event in the vol space
  • We consider some cheap derivative strategies on the upside to play the disinflation theme

Oasis Corporation IPO – Peer Comparison – Smallest in Scale but Largest in Profitability

By Ethan Aw

  • OASIS Corp (370190 KS) is looking to raise up to US$166m in its upcoming Korea IPO.
  • Oasis Corporation is an early morning delivery service business that delivers fresh food to consumers. It runs an e-commerce platform named ‘Oasis Market’ as well as offline stores.
  • In our previous notes, we looked at the company’s past performance. In this note, we talk about peer comparison.

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Jan 19
0

Daily Brief South Korea: LG Energy Solution, Hanwha Aerospace, Jb Financial Group, Naver Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • LG Energy IPO Lock-Up – Last of the Lockups at US$3bn
  • Hanwha Aerospace: A Surprise in MSCI’s February QCIR?
  • KOSPI 200 Rebalance: JB Financial In & Meritz F&M Insurance Out
  • NAVER Corp: Back to the Lows

LG Energy IPO Lock-Up – Last of the Lockups at US$3bn

By Sumeet Singh

  • LG Energy Solution (373220 KS) (LGES) raised US$10.8bn in its South Korea IPO, after pricing at the top-end of the IPO price range.
  • The stock was listed on 27th Jan 22. Its one-year lockup is set to expire soon.
  • In this note, we will talk about the lock-up dynamics and updates since our last note

Hanwha Aerospace: A Surprise in MSCI’s February QCIR?

By Sanghyun Park

  • Hanwha Aerospace is still narrowly across the borderline. It is especially painful that the share price was corrected by more than 4% today.
  • But suppose the cutoff MC is set at less than ₩2.7T, and Aerospace succeeds in recovering slightly. In that case, it will likely manage to come within the borderline.
  • Given that the preemptive flow must not have been significant and the profit forecast has been upwards until recently, a price shooting may appear at the time of the announcement.

KOSPI 200 Rebalance: JB Financial In & Meritz F&M Insurance Out

By Douglas Kim

  • On 18 January, the KRX announced rebalance to KOSPI 200 index. The new addition to KOSPI 200 is JB Financial Group and the deletion is Meritz Fire & Marine Insurance.
  • We expect JB Financial to continue to outperform the market in the first half of this year.
  • However, we do not expect the sharp appreciation of JB Financial versus the other leading Korean banking stocks post JB Financial’s inclusion in KOSPI 200 on 30 January. 

NAVER Corp: Back to the Lows

By Steven Holden

  • Big declines in NAVER Corp holdings among active Asia Ex-Japan investors in 2022
  • Allocation drop part of broader rotation out of South Korea, but NAVER Corp the most aggressively sold.
  • Current exposure close to the lowest on record, but past trends suggests this could represent a turning point.

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Jan 18
0

Daily Brief South Korea: OASIS Corp, Meritz Fire & Marine Insurance, Mirae Asset TIGER Fn Metaverse ETF and more

By | Daily Briefs, South Korea

In today’s briefing:

  • OASIS IPO Pricing Is Not Even Worth Reviewing: Strongly Recommend Avoiding It
  • Meritz Fire & Marine Insurance: Treasury Shares Cancellation of 5.9% of Outstanding Shares
  • ETF Arbitrage in Korea: Names Suitable for Pair Trades
  • Oasis Corporation IPO – Sole Profitable Player but Maybe Not for Long

OASIS IPO Pricing Is Not Even Worth Reviewing: Strongly Recommend Avoiding It

By Sanghyun Park

  • Of the four peers, only Coupang adopts the gross method. Since the others adopt the net method, it is impossible to compare PSR with OASIS, which uses the gross method.
  • If they really want to use PSR, it should only be compared with Coupang. Even if we apply CPNG’s current EV/Sales multiple (1.36x), it would only slightly exceed ₩0.5T.
  • A more logical way would be to use EV/GMV. Even in this case, it wouldn’t be easy to expect a valuation higher than ₩0.5T.

Meritz Fire & Marine Insurance: Treasury Shares Cancellation of 5.9% of Outstanding Shares

By Douglas Kim

  • After the market close today, Meritz Fire & Marine Insurance announced that it will cancel 6.57 million treasury shares, representing 5.9% of its outstanding shares. 
  • This treasury shares cancellation by Meritz F&M Insurance should have a continued positive impact on its share price. 
  • Share cancellation by Meritz F&M Insurance and the need to adjust to higher merger ratio are likely to lead to Meritz F&M Insurance outperforming MFG in the next few days.

ETF Arbitrage in Korea: Names Suitable for Pair Trades

By Sanghyun Park

  • As for the one using the creation/redemption mechanism, the tracking error (market value – NAV) is still too tight to call this an arbitrage opening.
  • Then, at this point, we need to pay attention to ETF arbitrage from a pair trade perspective. There are a total of 3 pairs we can consider for this.
  • The mean reversion cycle is still not short. However, the diversion range is not extensive, so we can aim for a relatively stable setup in a market with increased volatility.

Oasis Corporation IPO – Sole Profitable Player but Maybe Not for Long

By Ethan Aw

  • OASIS Corp (1799513D KS) is looking to raise up to US$166m in its upcoming Korea IPO. 
  • Oasis Corporation is an early morning delivery service business that delivers fresh food to consumers. It runs an e-commerce platform named ‘Oasis Market’ as well as offline stores.
  • Oasis Corporation aims to boost its sales and presence by further improving on its omnichannel strategy. However, its explosive growth appears likely to have been driven by COVID-induced lockdown measures. 

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Jan 17
0

Daily Brief South Korea: Osstem Implant and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Osstem Implant: Potential M&A Fight Between KCGI And Founder Choi

Osstem Implant: Potential M&A Fight Between KCGI And Founder Choi

By Douglas Kim

  • The case involving KCGI (a local corporate activist private equity fund) and Osstem Implant (048260 KS) is one of the more interesting situations rising in the Korea’s M&A/corporate activism markets. 
  • Osstem Implant is the number one dental implant company in Korea/Asia and the fourth largest player in this segment globally. 
  • We believe Osstem Implant could outperform the market in 2023 due to improving fundamentals, cheap valuations, and a potential M&A fight between KCGI and Chairman Choi.

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Jan 16
0

Daily Brief South Korea: Samchully and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Misunderstandings & Truth About Samchully & Daesung Holdings Entering KOSPI 200

Misunderstandings & Truth About Samchully & Daesung Holdings Entering KOSPI 200

By Sanghyun Park

  • Hankyung’s report is a clear misunderstanding under the current index methodology. The possibility of Samchully and Daesung Holdings’ KOSPI 200 inclusion is NONE.
  • However, the issue of deteriorating the market representation of the K200 index, which is caused by the top stocks outside the index, is gaining attention in the local financial space.
  • So, we should prepare for the possibility that KRX will revise the methodology. In this case, an intense preemptive flow for the top names outside the KOSPI 200 can appear.

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