Category

South Korea

Jan 15
0

Daily Brief South Korea: DearU and more

By | Daily Briefs, South Korea

In today’s briefing:

  • DearU’ Bubble + NCsoft’s Universe = The Largest K-Pop Fandom Platform in Korea

DearU’ Bubble + NCsoft’s Universe = The Largest K-Pop Fandom Platform in Korea

By Douglas Kim

  • DearU’s acquisition of NCSoft’s Universe K-Pop fandom platform will expand DearU Bubble’s number one position in the K-Pop fandom platform in Korea.
  • The sale of Universe by NCSoft is a win-win situation for both DearU and NCsoft.
  • Applying a 25x P/E to an estimated net profit of 50 billion won in 2024 would suggest an market cap of 1.25 trillion won for DearU, representing a 52% upside. 

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Jan 14
0

Daily Brief South Korea: OASIS Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Oasis Corp IPO Valuation Analysis

Oasis Corp IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation of Oasis Corp is EV of 605 billion won, implied market cap of 788 billion won, and target price of 24,847 won per share. 
  • This is 18.5% lower than the low end of the IPO price range. Given the lack of upside, we have a Negative View of the Oasis Corp IPO.
  • The end of COVID pandemic and relaxed regulations for hypermarkets in early morning delivery services are likely to have greater negative impact on Oasis Corp. 

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Jan 13
0

Daily Brief South Korea: OASIS Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Oasis Corp IPO Preview

Oasis Corp IPO Preview

By Douglas Kim

  • Oasis Corp is getting ready to complete its IPO on KOSDAQ in February 2023. Oasis Corp is a leading online/offline provider of organic foods and other groceries in Korea.
  • IPO price range is from 30,500 won to 39,500 won, with a total offering amount of 160 billion won to 207 billion won. 
  • Other than Coupang, the other three companies (bankers’ valuation) may not be appropriate comps, mainly because they operate in different markets around the world and are much bigger in size.

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Jan 12
0

Daily Brief South Korea: LG Energy Solution, Jb Financial Group, Kakao Entertainment, Classys and more

By | Daily Briefs, South Korea

In today’s briefing:

  • LG Energy Solution: Trading Strategy on End of ESOP Lockup & Valuation Comparisons
  • K200 ETFs’ Swap Trading on Meritz & Fresh Buy-In JB Financial on Jan 27
  • PIF and GIC Combined Invest About 1.2 Trillion Won in Kakao Entertainment
  • Classys (214150 KS): Will Continue To Remain On a Consistent Growth Path Through New Launches
  • Aequitas 2023 Asia IPO Pipeline – India, ADRs, Korea, Japan and ASEAN

LG Energy Solution: Trading Strategy on End of ESOP Lockup & Valuation Comparisons

By Douglas Kim

  • This insight provides a trading strategy on LG Energy Solution (373220 KS) with a focus on the end of the ESOP shares lockup period on 27 January.
  • Currently, LG Energy Solution is trading at P/E of 46.5x in 2024 which is more than 100% higher than the P/E multiples of CATL (20.4x) and Tesla (19.2x) in 2024.
  • Our view is that in the long-term, LG Energy Solution should not trade at such high valuation premium to Tesla given the latter company’s higher return on capital.

K200 ETFs’ Swap Trading on Meritz & Fresh Buy-In JB Financial on Jan 27

By Sanghyun Park

  • KOSPI 200 ETFs will have to sell Meritz FIRE and buy Meritz FINANCIAL at the close on January 27. JB Financial, the top reserved issue, will replace FIRE.
  • We should consider a Long Short for two Meritz companies just before the 27th. As a follow-up setup, we should aim for a potential widening of the swap arb spread.
  • As for the Long JB Financial, I would set the entry timing one week towards the implementation at the latest and look into Kodex Banks ETF (091170) for a hedge.

PIF and GIC Combined Invest About 1.2 Trillion Won in Kakao Entertainment

By Douglas Kim

  • On 11 January, it was announced that Kakao Entertainment (103260 KS) has attracted large scale investments from Saudi Arabia’s Sovereign Fund (Public Investment Fund – PIF) and GIC (Singapore).
  • Maekyung Business Daily reported that PIF and GIC combined invested about 1.1 trillion won to 1.2 trillion won in Kakao Entertainment, valuing the company at about 10 trillion won.
  • This major investment in Kakao Entertainment by PIF and GIC should have a positive impact on Kakao Corp (035720 KS), the controlling shareholder of the company.

Classys (214150 KS): Will Continue To Remain On a Consistent Growth Path Through New Launches

By Tina Banerjee

  • Classys (214150 KS) has started selling Volnewmer from the end of October 2022. With a safe and comfortable treatment experience, Volnewmer will become another strong growth engine.
  • The ratio of consumables sales to total sales is gradually increasing from 33% in Q1 2022 and 37% in Q2 2022 to 46% in Q3 2022, leading to improved profitability.
  • Classys recorded 30%+ revenue growth and margin improvement in Q3, with the cumulative sales in Q3 of this year exceeded 2021 annual sales, which was already the largest.

Aequitas 2023 Asia IPO Pipeline – India, ADRs, Korea, Japan and ASEAN

By Sumeet Singh

  • In this note, we will take a look at the Asia Pacific IPO pipeline for 2023, specifically for India, Asia-linked ADRs, Korea, Japan and ASEAN.
  • This list has been compiled on a best effort basis from tracking the company filings and through various other sources.
  • The deals you see in this note are only a part of our full IPO pipeline tracker. Feel free to drop us a message for additional information on these IPOs.

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Jan 11
0

Daily Brief South Korea: KT Corp, Korea Kolmar Holdings, LG Household & Health Care-Pref and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Foreign Ownership Limit Stocks in Korea: KT Is Again in the Limelight
  • Korea Kolmar Holdings: Shares Cancellation of 17% of Market Cap + Deep Discount to NAV
  • Discussing the Currently Widened Pref-Ord Disparity in Korea

Foreign Ownership Limit Stocks in Korea: KT Is Again in the Limelight

By Sanghyun Park

  • KT’s foreign room has been rising since early September last year. If this trend continues, it will likely approach the inclusion borderline of 15% within a month or two.
  • This trend is expected to continue for the time being as the tough relationship between the KT CEO and the government seems unlikely to be resolved in the short term.
  • The February inclusion is pretty tight, but May seems like we could be looking out for it.

Korea Kolmar Holdings: Shares Cancellation of 17% of Market Cap + Deep Discount to NAV

By Douglas Kim

  • On 10 January, Korea Kolmar Holdings (024720 KS) announced that it plans to cancel 1.1 million shares to be acquired through redemption of redeemable convertible preferred shares.
  • Korea Kolmar Holdings currently has a market cap of 314 billion won so this share cancellation represents nearly 17% of its market cap.
  • This large shares cancellation should have a positive impact on Korea Kolmar Holdings’ share price. It is also trading at 40% discount to its NAV. 

Discussing the Currently Widened Pref-Ord Disparity in Korea

By Sanghyun Park

  • Many of the PREFERRED shares in Korea entered the short-term oversold territory versus ORDINARY (on a 20-day moving average).
  • The liquidity boom that started in the local bond market at the beginning of the year seems to have led to the relative outperformance of ORDINARY.
  • We should consider collective trading, which utilizes the oversold condition across the entire PREF zone, rather than an individual approach to a specific PREF at this point.

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Jan 10
0

Daily Brief South Korea: Lotte Chemical, Kakao Pay, Shinhan Financial, Temc and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Lotte Chemical Offering: Schedule Clarifications & Trading Considerations
  • How Should We Play with Kakao Pay’s MSCI Inclusion Event?
  • Align Partners’ Corporate Activism on Korean Banks: A Media Presentation and Q&A Session
  • TEMC: Reduces IPO Price & Bookbuilding Results

Lotte Chemical Offering: Schedule Clarifications & Trading Considerations

By Sanghyun Park

  • The subscription starts on January 19, so the pricing is January 16, three trading days earlier. The shorting restriction runs until January 16, which means the 16th is inclusive.
  • There was no arb spread opening during the last four trading days of the subscription rights trade period. Nonetheless, this event had some impact on Lotte Chemical’s futures trading.
  • Considering this, the trade that can be considered at this point would be unhedged shorting. We target potential inflow to adjust the second issuing price downwardly and post-listing overhangs.

How Should We Play with Kakao Pay’s MSCI Inclusion Event?

By Sanghyun Park

  • Kakao Pay is the only possibility to be included in the February MSCI IR. It comfortably beats both the full market cap and float market cap hurdles.
  • It can be assumed that the full-fledged emergence of local institutional flows targeting MSCI inclusion contributed to some extent to Kakao Pay’s outperformance early this year.
  • More extreme reverse flow trading could emerge. In other words, there is a possibility that the share price will turn into a sell-off even before the MSCI announcement.

Align Partners’ Corporate Activism on Korean Banks: A Media Presentation and Q&A Session

By Douglas Kim

  • Align Partners Capital Management (APCM) held a media presentation and a Q&A session with both the investors community and the media today.
  • Align Partners’ corporate activism of the Korean banks has been one of the biggest stories in the Korean stock market this year.
  • The Korean banks are likely to outperform the market in 1H23. Nonetheless, if there are further signs of housing price declines in Korea, this outperformance may not continue in 2H23. 

TEMC: Reduces IPO Price & Bookbuilding Results

By Douglas Kim

  • TEMC announced its IPO price of 28,000 won, which was lower than the IPO price range of 32,000 won to 38,000 won.
  • There were 560 institutions that participated in the IPO bookbuilding survey and the demand ratio was 31.3 to 1.
  • Our base valuation is 38,363 won per share, representing a 37% upside to the IPO price of 28,000 won. The reduced IPO price has made the IPO more attractive.

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Jan 09
0

Daily Brief South Korea: Samsung Kodex Banks ETF and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Dissecting KRX Annual ETF Market Report & Noteworthy Trends for ETF Arbitrages

Dissecting KRX Annual ETF Market Report & Noteworthy Trends for ETF Arbitrages

By Sanghyun Park

  • Korea’s ETF market achieved top-line growth last year as well. AUM increased by 7% YoY, a significant achievement considering that global ETF AUM has shrunk by 8%.
  • Since one-third of local ACTIVE ETFs are equity types (particularly SECTOR), we can conclude that the local equity ETF market has not shrunk but has migrated to ACTIVE.
  • Recently listed sector ETFs are expected to play an accelerating role in expanding the scope of these arb opportunities as they expand beyond electric vehicles/secondary batteries to groups/defense.

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Jan 08
0

Daily Brief South Korea: LG Electronics, Samsung Biologics and more

By | Daily Briefs, South Korea

In today’s briefing:

  • LG Electronics: A SELL Candidate Amid Difficult Business Condition for Consumer Electronics in 2023
  • Samsung Biologics (207940 KS): Near-Term Key Positive Catalysts

LG Electronics: A SELL Candidate Amid Difficult Business Condition for Consumer Electronics in 2023

By Douglas Kim

  • After a disappointing earnings results in 4Q 2022, we believe LG Electronics (066570 KS) is a SELL candidate.
  • The decline in housing prices in major countries such as the US and South Korea have negatively impacted consumers’ purchases of consumer appliances. 
  • With the consensus that is likely to cut their operating profit estimates significantly in 2023, we think that LG Electronics’ shares could fall another 20-25% over the next year. 

Samsung Biologics (207940 KS): Near-Term Key Positive Catalysts

By Tina Banerjee

  • Samsung Biologics (207940 KS) is expected to report strong Q4 results, with double-digit revenue growth. Partial operation of Plant 4 will impact profitability, which will be continued through H12023.
  • The Chairman of the company has been selling shares, causing recent pullback in the stock, which should be considered as an attractive entry point.
  • The long-term growth story remains intact, with all eyes being on upcoming conference where the company may unfold its capex plan amid stellar order book and industry demand.

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Jan 07
0

Daily Brief South Korea: KakaoBank, Megastudyedu Co, Ltd. and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Potential Block Deal Targets in Korea for a Preemptive Position Buildup
  • Adoption of Digital Textbooks (Korea in 2025 & Japan in 2024)

Potential Block Deal Targets in Korea for a Preemptive Position Buildup

By Sanghyun Park

  • TPG and Anchor experienced EOD risk due to the recent plunge in Kakao Bank’s stock price. So, they will sell shares if the current price rise continues a little further.
  • All three PEs of Shinhan Financial are currently expected to be seeking an early exit although they expressed last year that they would remain strategic shareholders.
  • Other notable targets are Hahn & Co’s Hanon Systems and K Car and MBK Partners’ ConnectWave, likely via a phased stake sale in tranches.

Adoption of Digital Textbooks (Korea in 2025 & Japan in 2024)

By Douglas Kim

  • The Korean Department of Education announced on 5 January that Korea will start to adopt customized digital school textbooks starting 2025.
  • These 11 Korean stocks that are well positioned to capitalize on the digital textbooks are up on average 5.3% YTD, strongly outperforming KOSPI which is up 2.4% YTD.
  • Japan is implementing the adoption of digital textbooks in elementary, junior, and high schools starting in 2024, ahead of Korea.

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Jan 06
0

Daily Brief South Korea: SK Square, Amorepacific Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Korea M&A Outlook in 2023: What’s for Sale?
  • Backtracing Korea NPS Trades on Local Stocks Through KRX FAIR

Korea M&A Outlook in 2023: What’s for Sale?

By Douglas Kim

  • More than 20 trillion won (US$16 billion) worth of deals are up for M&As in 2023.
  • However, due to high interest rates and differences on valuations among buyers and sellers, the M&A market in Korea is likely to continue to be weak in 2023.
  • In this insight, we discuss 24 companies that are up for M&As this year in Korea, including Hanon Systems, SK Shieldus, and K Car.

Backtracing Korea NPS Trades on Local Stocks Through KRX FAIR

By Sanghyun Park

  • Last year, NPS raised the weighting of defense, renewables, and reopening (entertainment and leisure) stocks. In contrast, NPS mainly reduced exposure to construction, banking, and semiconductors.
  • In December, NPS is building a fairly aggressive long position in China Reopening. In addition, trading assumed to be portfolio rebalancing for the local chemical sector was detected.
  • NPS’ stake in most major holdings exceeds 5%. This allows us to monitor NPS’ trading history almost in real time through KRX FAIR.

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