Category

South Korea

Dec 16
0

Daily Brief South Korea: Meritz Financial Group, Kakao Corp, Lotte Shopping Co and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Discussing Why Meritz Swap Spread Not Being Narrowed & When to Enter
  • Kakao Corp: FTC Going After Chairman Kim Beom-Su’s K Cube Holdings
  • Lotte Shopping: A Deep Value Stock Poised for a Turnaround

Discussing Why Meritz Swap Spread Not Being Narrowed & When to Enter

By Sanghyun Park

  • The swap arb spread has been consistently within the 3% to 5% band since November 23, when arb trading should have actually started.
  • Meritz Financial’s buyback seems to be making it difficult to build positions on expectations that the price gap relative to Fire and Securities will converge quickly with the swap ratio.
  • As the actual risk of repaying financial borrows is small, we should start building up positions two weeks before the end of January, aiming to exit in early or mid-February.

Kakao Corp: FTC Going After Chairman Kim Beom-Su’s K Cube Holdings

By Douglas Kim

  • On 15 December, it was announced that Korea’s FTC decided to refer K Cube Holdings (KCH) to the prosecution over alleged illegal execution of voting rights to Kakao companies.
  • This could signal that the financial regulators may become more forceful in enforcing numerous other regulatory pressures on Kakao Corp and its affiliated companies to reduce their monopolistic business practices
  • Our NAV valuation of Kakao Corp suggests NAV per share of 45,942 won, which is 17% lower than current price.

Lotte Shopping: A Deep Value Stock Poised for a Turnaround

By Douglas Kim

  • Lotte Shopping is a deep value stock poised for a turnaround. 
  • Lotte Shopping has clear turnaround catalysts, cheap valuations, and a solid technical setup. 
  • Perhaps the most important catalysts for Lotte Shopping include getting rid of the most restrictions/social distancing measures related to COVID-19 which have been in place in the past three years.

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Dec 15
0

Daily Brief South Korea: Douzone Bizon, Taekwang Industrial and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Alpha Generation Through Share Buybacks in Korea: December 2022
  • A Win for Truston Asset Mgmt: Corporate Activism Worked on Taekwang Industrial

Alpha Generation Through Share Buybacks in Korea: December 2022

By Douglas Kim

  • In this insight, we discuss the alpha generation through companies that have been buying back their shares in the Korean stock market in the past two months.
  • In addition to these share buybacks, there has also been more recent news flow regarding the share purchases of Samsung Electronics by numerous senior directors.
  • In the past month, some of the larger market cap companies including KT&G, Douzone Bizon, and Hyundai Elevator that have been buying back shares have been outperforming KOSPI. 

A Win for Truston Asset Mgmt: Corporate Activism Worked on Taekwang Industrial

By Douglas Kim

  • This insight provides the details of how a local asset management company called Truston Asset Mgmt has been able to win a corporate activism battle against Taekwang Industrial.
  • Taekwang Industrial has repeatedly been boggled down by numerous corporate governance related issues for more than a couple of decades.
  • The overall result should be a modest positive sentiment on Taekwang Industrial’s shares in the near term which still trades at dirt cheap P/B multiple of 0.2x.

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Dec 14
0

Daily Brief South Korea: LG Energy Solution, Temc, WCP, Akros Technologies and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Korean Pair Trades Review in 2022
  • TEMC IPO Preview
  • Recent IPOs Carrying Putback Option in Korea: Market’s Attention Is on WCP
  • Line Parent’s VC Firm Leads $2.3m Funding for Korean ETF Startup

Korean Pair Trades Review in 2022

By Douglas Kim

  • In this insight, we review all the 16 Korean pair trade ideas in 2022.
  • A few of the best performing pair trade ideas this year included long LG Chem/short LGES, long Doosan Corp/short Doosan Enerbility, and long KIH/short MFG.
  • Going forward in 2023, as the market continues to show higher volatility, there could be continued strong interest in pair trade ideas in Korea. 

TEMC IPO Preview

By Douglas Kim

  • TEMC is getting ready to complete its IPO in Korea in January 2023. TEMC is a materials company that produces specialty gases for the semiconductor and display production processes.
  • The IPO price range is from 32,000 won to 38,000 won and the expected market cap is expected to be from 361 billion won to 429 billion won. 
  • The company’s sales increased at a 57.4% CAGR from 2019 to 2021. Its sales exploded higher by 254% YoY to reach 238 billion won in 1Q-3Q 2022.

Recent IPOs Carrying Putback Option in Korea: Market’s Attention Is on WCP

By Sanghyun Park

  • WCP has the largest gap between the exercise and current prices (-16%). And its retail allocation is also the largest (5.44% of SO). In addition, it is subject to short-selling.
  • The deadline is January 2nd. A large-scale option exercise will be unavoidable if the share price does not exceed ₩54,000 by that date.
  • It is very likely that WCP’s share price will experience strong downward pressure for a week after January 2nd. We need to consider a position setup that actively utilizes this.

Line Parent’s VC Firm Leads $2.3m Funding for Korean ETF Startup

By Tech in Asia

  • Akros Technologies, a South Korea-based fintech firm, has raised US$2.3 million in a strategic funding round.
  • The fundraise was led by ZVC – the investment arm of Line Corporation parent Z Holdings.
  • Founded last year, Akros Technologies manages its own exchange-traded funds (ETFs) powered by machine learning models. 

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Dec 13
0

Daily Brief South Korea: Dongkuk Steel Mill, Bionote and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Dongkuk Steel Mill: Demerger Details & Passive Outflow Trading
  • Bionote: IPO Price Reduced Significantly & Bookbuilding Results

Dongkuk Steel Mill: Demerger Details & Passive Outflow Trading

By Sanghyun Park

  • The size of treasury shares in the Dongkuk Steel demerger event is not too large to expect a value accretion to the combined market cap after the split.
  • Based on the current market cap, all three companies will likely leave the KOSPI 200. To this end, K200 trackers must dispose of Dongkuk Steel right before the trade suspension.
  • The size of rebalancing trading before trade suspension should be about ₩40T. We should consider setting our entry into flow trading as early as two weeks towards the trade suspension.

Bionote: IPO Price Reduced Significantly & Bookbuilding Results

By Douglas Kim

  • Bionote slashed its IPO price to 9,000 won, which is 50% lower than the low end of the previous IPO valuation range. 
  • Our base case valuation has been revised down to 12,741 won per share in target price, which is 41% higher than the IPO price of 9,000 won.
  • The company is expected to have more than 615 billion in net cash post the IPO, which is expected to represent nearly 65% of its market cap!

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Dec 12
0

Daily Brief South Korea: LG Energy Solution and more

By | Daily Briefs, South Korea

In today’s briefing:

  • LG Energy: ESOP Lockup Release (3.5% of SO) & Contrarian Approach Targeting NPS

LG Energy: ESOP Lockup Release (3.5% of SO) & Contrarian Approach Targeting NPS

By Sanghyun Park

  • The ESOP’s 3.5% stake will be released on January 27. Considering the extremely tight flow situation, this is by no means small. 3.48% is 20 times the recent ADTV.
  • NPS will likely move toward a minimum stake of 6% again for LG Energy, irrespective of LG Energy’s current valuation, despite its recent selling.
  • We should consider the possibility that NPS will contrarily utilize this ESOP lockup release, and we should also design a contrarian position for this lockup release.

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Dec 09
0

Daily Brief South Korea: Ecopro Co Ltd, SK Telecom, Korea Stock Exchange Kospi 200 Index and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KODEX Battery Rebalancing Results Out: From Today to Next Tuesday
  • Targetable Names on KOSPI for Dividend Arbitrage: DPS Estimates & Current Basis
  • EQD | KOSPI2 Index: Short-Term Trading Opportunity Using Derivatives

KODEX Battery Rebalancing Results Out: From Today to Next Tuesday

By Sanghyun Park

  • As expected, Sungeel Hitech (365340) made it to the index. And C&I System (222080) and Wonik PNE (217820) were added, whereas Ecopro (086520) and Dongwha Enterprise (025900) were deleted.
  • Among the existing constituents, Samsung SDI (006400), Ecopro BM (247540), SK Innovation (096770), L&F (066970), and SKC (011790) are expected to have a relatively significant impact.
  • Looking at the last rebalancing, the impact/price correlation was most significant on Day 1. So, we should consider aiming for LONG/SHORT today for those with a high relative impact.

Targetable Names on KOSPI for Dividend Arbitrage: DPS Estimates & Current Basis

By Sanghyun Park

  • Targetable names on KOSPI for dividend arbitrage: SK Telecom (017670), Woori Financial (316140), SK Hynix (000660), KB Financial (105560), Korea Zinc (010130), and HMM (011200) 
  • Samsung Electronics (005930)‘ basis does not reflect special dividends, even though speculations have not disappeared entirely.
  • As the current basis hasn’t widened to an entirely sufficient level, we need to target arb trade openings focusing on the above stocks a bit more aggressively.

EQD | KOSPI2 Index: Short-Term Trading Opportunity Using Derivatives

By Simon Harris

  • KOSPI2 Index failed to break above the 200dma and has retreated
  • The index has now fallen back towards the 50dma and we see an short-term opportunity to play the upside
  • Use weekly options to play a short-term bounce and get the best risk-reward

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Dec 08
0

Daily Brief South Korea: Woori Financial Group and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Yearend Dividend Play on Korean Stocks with High Yield/Borrow Rate

Yearend Dividend Play on Korean Stocks with High Yield/Borrow Rate

By Sanghyun Park

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Dec 07
0

Daily Brief South Korea: LG CNS, Yuhan Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • 2023 Major IPOs Pipeline in Korea
  • Yuhan Corp (000100 KS): Progress of Anti-Cancer Drug Leclaza Is the Main Growth Engine

2023 Major IPOs Pipeline in Korea

By Douglas Kim

  • This is our 8th “Annual Edition of the Major Korean IPOs Pipeline Preview” at Smartkarma! 
  • This insight will feature 50 of the biggest potential IPOs in Korea in 2023. 
  • The overall IPO market in Korea is likely to continue to be weak in 1H 2023, although there are some potential for a rebound in 2H 2023. 

Yuhan Corp (000100 KS): Progress of Anti-Cancer Drug Leclaza Is the Main Growth Engine

By Tina Banerjee

  • Yuhan Corp (000100 KS) has launched in-house developed drug Lazertinib in the domestic under the brand name Leclaza in July 2021 as a second-line treatment for NSCLC in Korea.
  • Going forward, Yuhan aims to place Leclaza as the first-line treatment for NSCLC patients. Leclaza is in late-stage global trial for global approval as a combined or monotherapy for NSCLC.
  • In September, Yuhan has acquired a 60% stake in microbiome developer AtoGen for KRW 10B. This acquisition will enable Yuhan to strengthen its probiotics business and development of microbiome treatments.

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Dec 06
0

Daily Brief South Korea: LG Energy Solution and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KOSPI 200 Passive Flow Breakdown, Feat. NPS Size & Trade Window Pattern

KOSPI 200 Passive Flow Breakdown, Feat. NPS Size & Trade Window Pattern

By Sanghyun Park

  • We should set the minimum level of the target size to estimate the flow impact on T-1 Effective at ₩15T from ETFs.
  • We then need to pay attention to the recent trend that an additional flow from NPS appears post-Effective, with a significant portion on T+1~3.
  • We should revise down our expected rate of return on our early-phase setup aiming at the preemptive trading (T-6W Effective) by NPS.

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Dec 05
0

Daily Brief South Korea: SK REITs, HPSP, KakaoBank and more

By | Daily Briefs, South Korea

In today’s briefing:

  • FTSE EPRA Nareit Index Rebalance: Now One Add for Korea
  • Recap of Our IPO Research in 2022
  • Kakao Bank – Only Major Internet Bank

FTSE EPRA Nareit Index Rebalance: Now One Add for Korea

By Brian Freitas

Recap of Our IPO Research in 2022

By Douglas Kim

  • In this report, we review our IPO investment research in 2022, including the performance of our calls.
  • The accuracy rate of our calls on IPOs this year was 79% (15 calls right, 4 calls wrong), higher than our average accurate rate of 77% from 2017 to 2022.
  • In 2022, the 12 stocks (positive ratings) were up 50.1% on average from their IPO prices. The 7 stocks (negative ratings) were down 11.2% on average from their IPO prices. 

Kakao Bank – Only Major Internet Bank

By Daniel Tabbush

  • KKBank is one of the only major internet banks in Asia-Pacific
  • Operating metrics show increasing core income momentum and strong ALM
  • Credit metrics have not yet proven to be a concern, as we near end of rising rates

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