South Korea

• According to our valuation analysis, it suggests an implied price of 34,365 won, which is 27% higher than the high end of the IPO price range.
• We estimate The Born Korea to generate sales of 467.7 billion won (up 13.1% YoY) and operating profit of 31.4 billion won (up 22.8% YoY) in 2024.
• We believe a premium to comps’ valuation is appropriate for The Born Korea mainly due to its higher sales growth, higher ROE, stronger balance sheet, and higher profit margins.

• Got surprised by KRX adding POSCO Holdings to the Battery Index. Normally predictable rebalancing went off-script with this unexpected move.
• POSCO Holdings, not Posco Future M, replaced Ecopro BM. Plus, Alteogen Inc is replacing SK Biopharmaceuticals in the BBIG, driving notable flow.
• Consider a day trading long POSCO Holdings and short Ecopro BM. Also, a long-short futures basket could be worth exploring for names with big passive flows.

• Kangwon Land has received approval to expand its total casino area from 14,512 square metres previously to 20,260 square metres (up 40%). 
• The betting limits in the foreign players only zone will increase significantly from 300,000 won (about US$225) to 300 million won (about US$225,000). This represents a 1000x increase.
• We would argue that there is a high probability of Kangwon Land benefiting not just from higher sales and profits but also from higher valuation multiples. 

• The KOSPI 200 has corrected for 3 weeks in a row, reaching a low at 340.08 last week. It is WEEKLY OVERSOLD, according to our models.
• In a previous insight we theorized the index could go higher (but only for 1 week), however the rally never materialized. From there it went downhill, now it can bounce.
• The support area between the last Close and 320 offers strong support, according to our WEEKLY pattern models. 

• For this September reshuffle, fewer factors affected price impact, so outlier chances were low. Biggest price moves typically occur 30 days before the effective date, especially during LARGE↔MID transitions.
• Early positioning for this reshuffle paid off. Past trends suggest price action fades before the effective date, so consider exiting positions by tomorrow or early next week.
• Small→Mid migrants historically show weak price impacts, with no clear correlation observed in this September reshuffle either. I’m avoiding those plays targeting the effective date for now.

• The Born Korea is getting ready to complete its IPO in Korea in November. The total IPO offering is expected to range from 69 billion won to 84 billion won. 
• Based on the bankers’ valuation, the expected market cap of the company ranges from 357 billion won to 419 billion won. 
• The Born Korea was founded by Baek Jong-Won, the most famous celebrity chef in Korea. 

• Ecopro HN announced a ₩200 billion rights issue, offering 5.67 million shares (a 40% capital increase) with a stockholder allocation rate of 0.3 per share.
• The extended timeline likely results from the issuer’s 20% discount push, with Daishin, an underdog banker, extending it to boost subscriptions despite risking price stability.
• The strategy is to time entry when the stock rights and subscription costs create a solid spread versus the spot price, despite increased volatility making price predictions harder.

• On 4 September, Ecopro HN announced that it plans to conduct a rights offering capital raise of about 200 billion won. 
• The company plans to issue 5.67 million new shares and the expected rights offering price is 35,300 won (23% lower than current price). 
• We would not subscribe to this rights offering mainly due to lofty valuations, declining sales and profit growth, continued negative free cash flow, and concerns about excessive shares dilution. 

• A group of minority investors started to go activist on Hojeon (111110 KS), demanding that the company increase its treasury share buybacks/cancellations, dividends, and cut CEO’s salary.
• This coalition of minority investors has threatened to sell their shares to a competitor (Hansae) if the company does not abide by their demands.
• Hojeon has attractive valuations and are trading at low multiples. It had P/E of 5x, EV/EBITDA of 3.4x, and P/B of 0.5x in 2023.

• Key watchpoints: Will POSCO cancel the 3.4% treasury shares in Q4 and how will they replenish cash reserves after paying ₩1.5 trillion? Their moves could set trends.
• POSCO might cancel these shares to boost their value-up index weight. This could drive up the stock price, giving them an opening to improve their cash position through equity financing.
• Expect a short-term stock pivot with value-up index and ETFs driving inflows and price pops. After this, equity financing may signal stock peaks, with POSCO and others leading the trend.

• Hyundai Motor India reported an 8% decline in monthly dispatch volumes ahead of India’s festive season, coinciding with a sharp increase in shipments by competitors in the SUV space.
• Mahindra & Mahindra (MM IN) , Toyota Kirloskar Motor ( Toyota Motor (7203 JP) JV), and Kia Corp (000270 KS) each posted high double-digit volume growth in August.
• Overall, India’s domestic Passenger Vehicle sales growth for the April-August period has slowed year-on-year after two years of strong post-COVID momentum.

• Samsung C&T’s holding company ratio is closing in on 50%, driven by the Biologics rally, which has Samsung on high alert for a forced conversion.
• Watch Samsung’s moves to avoid forced holding company status. The old Biologics-for-Electronics swap isn’t viable, so they’ll likely sell Biologics shares to lower the ratio.
• Samsung C&T might sell Biologics shares at a ₩80T market cap. They’ve boosted construction to manage assets and the holding ratio, but beyond ₩80T, risks increase.

• In this insight, we discuss the potential sale of SK Specialty by SK Inc (034730 KS) which owns 100% stake in the company. 
• If SK Inc could sell SK Specialty at about 3 trillion won to 4 trillion won, this could reduce significantly reduce debt burden of SK Inc.
• Our base case NAV value per share for SK Inc is 203,288 won per share, representing 38% upside from current levels.

• We provide an updated NAV analysis of Samsung C&T, discuss the reduced overhang post final Lee family inheritance tax payment, and also provide further details of its Corporate Value-Up announcement. 
• Given 2025 will be the last year of major inheritance tax payment for the Lee family, there is likely to be reduced overhang associated with inheritance tax issue next year.
• Our NAV analysis of Samsung C&T suggests NAV of 39.9 trillion won or NAV per share of 224,249 won which is 45% higher from current levels.

• Today’s surge in Korean battery stocks stems from sector rotation and improved fundamentals, with SK On’s healthier balance sheet and Samsung SDI’s new U.S. plant fueling optimism.
• But with POSCO affiliates showing standout performance relative to their peers., the value-up factor is once again shaking things up and driving those differences in relative performance.
• Today’s price action suggests using the value-up factor for long-short strategies, especially with KRX hinting at sector quotas in the value-up index.

• On 29 August, the three major POSCO Group companies including POSCO Holdings announced that they plan to provide detailed explanations of their Corporate Value Up plans in 4Q 2024. 
• In general, the companies that have provided more detailed plans for their Corporate Value Up plans have done better recently. 
• However, now there are cases such as the three main POSCO Group companies whose share prices are rising just by announcing that they will provide Corporate Value Up plans later.

• Recent media reports on declining passenger vehicle (PV) sales in India for August are based on wholesale data and reflect expected weakness due to high dealer inventory levels.
• Hyundai Motor India (1342Z IN)‘s  dispatches dropped by 8% in August, yet the company remains strong in the SUV segment, with the Creta, launched in January 2024, driving growth.
• Outlook for the passenger vehicle segment is cautiously optimistic, supported by monsoon impact, festive season, new product launches, but challenges like heavy rainfall, high inventory levels, and economic uncertainties persist.

• In this insight, we discuss the alpha generation through companies that have been buying back their shares in the Korean stock market in July and August 2024.
• On average, the share buyback announcements by 46 companies represented 2% of outstanding shares.
• Major companies that have announced share buybacks in Korea in the past two months include KT&G, Mirae Asset Securities, and POSCO Holdings. 

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• China Vanke
• Shui On Land
• SK Hynix
• Yankuang Energy Group

• Construction and semiconductors are key targets due to their low value-up representation. For shareholder returns, keep an eye on Samsung C&T and SK Square.
• Expect announcements before the mid-September value-up index, with early September releases mirroring LG Electronics’ prior notices and detailed plans arriving by Q4.
• Even with prior notices, details will leak. Samsung C&T and SK Square are likely to prioritize short-term shareholder returns over long-term growth, potentially leading to a bigger price impact.

• The arbitrage is clear: it’s the difference between stock rights/subscription costs and short hedge price. Kumyang’s high market interest and volatility amplify this, suggesting unusual trading angles.
• Kumyang’s futures also show extreme volatility, likely causing excessive backwardation around the ex-rights date and stock rights window, affecting futures-based short hedge positions.
• This opens up the possibility that, depending on entry points, our futures-based short hedge position might temporarily enter an unusual profitable zone relative to the stock rights and subscription costs.

• In the past week, there were numerous local news accounts about a rights offering of nearly 800 billion won by Kum Yang. This has not been confirmed by the company. 
• Although Kum Yang has not committed to a rights offering, there is a high probability of such capital raise in 4Q24 which is likely to dilute existing shareholders. 
• Kum Yang remains a highly speculative stock. The management has lost so much credibility in the past year. We would stay away from it as far as possible.

• During NCSoft’s exercise period starting August 14, the spread was tight, with NPS likely to exercise rights if it widens above 5% in the final days.
• NPS is unlikely to exercise its full 6.3% stake, but may sell 2% if the stock price drops below ₩180,000, widening the spread over 5%.
• This may increase NCSoft’s division costs and overhang risk, potentially amplifying stock price decline. Monitoring NCSoft’s stock early next week is crucial.

• We discuss the end of the mandatory lock-up periods for 49 stocks in Korea in September 2024, among which 3 are in KOSPI and 46 are in KOSDAQ.
• These 49 stocks on average could be subject to further selling pressures in September and could underperform relative to the market.
• The top three market cap stocks including those of which at least 1% of outstanding shares could be sold in September include LS Materials, CIS, and Kyobo Securities.

• On 29 August, LG Corp announced that it plans to purchase about 200 billion won worth of LG Electronics and about 300 billion won worth of LG Chem.
• After these share purchases, LG Corp’s stake in LG Electronics will increase from 30.47% to 31.59%, and its stake in LG Chem will increase from 30.06% to 31.29%.
• LG Corp plans to purchases these shares starting 1 November 2024. The share purchases will be conducted in two stages and will be completed by 31 March 2025. 

• Hyundai Rotem is right on the edge for Small Cap→Standard, so it is the only one having a real chance of being included in the November review.
• Doosan Robotics’ float rate will rise to 40% after issuing 20,219,376 new shares, making it a top candidate for inclusion among Outside IMI and comfortably surpassing the cutoff.
• With high trading volume volatility, it’s early to predict passive impact. Watch for momentum buildup like LS Electric and monitor the trading volume of Hyundai Rotem and Robotics closely.

• Maekyung reported that Doosan Robotics and Bobcat will cancel their merger, but the merger between Robotics and Enerbility’s spun-off company will proceed.
• The merger’s risks have been overblown in Robotics’ stock, which might rebound. Bobcat’s stock outlook is uncertain, with fading merger hopes potentially hurting short-term sentiment.
• The Robotics-Enerbility merger might also be canceled under regulatory pressure, but this could hurt Enerbility’s stock due to debt concerns; forcing the merger may increase costs.

• On 29 August, the Doosan Group announced that it is cancelling the merger between Doosan Robotics (454910 KS) and Doosan Bobcat Inc (241560 KS).
• However, the plan to split Doosan Enerbility into a newco and then merge Doosan Bobcat with the newco will remain in place.
• Doosan Group is still trying to complete the first two portions of reorganization (Split of Doosan Enerbility and Merger Swap Between Doosan Enerbility and Doosan Robotics), resulting in continued uncertainty.  

• LG Corp has announced it will buy ₩300B of LG Chem shares during trading hours, marking the first use of the new 30-day advance notice rule.
• LG Corp will buy LG Chem shares in two stages with 30-day advance notices. So, today’s announcement is a preliminary notice ahead of these 30-day advance notices.
• This transaction’s flow impact on LG Chem doesn’t seem substantial. But this first two-stage advance notice could provide key insights into price impact patterns.