Category

South Korea

Nov 21
0

Daily Brief South Korea: Hyundai Motor and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Lowering Tick Sizes for KOSPI & KOSDAQ Starting Next January

Lowering Tick Sizes for KOSPI & KOSDAQ Starting Next January

By Sanghyun Park

  • KRX will lower the tick sizes for KOSPI and KOSDAQ starting next January to reduce actual transaction costs and increase market liquidity by attracting more high-frequency traders.
  • KRX’s acceptance of the market’s long-standing demand at this point can be seen as primarily driven by the purpose of resolving the problem of reduced market liquidity.
  • We need to design a setup that takes a tighter holding period of event and flow trading in the Korean local market from next year.

💡 Before it’s here, it’s on Smartkarma

Sign Up for Free

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

  • ✓ Unlimited Research Summaries
  • ✓ Personalised Alerts
  • ✓ Custom Watchlists
  • ✓ Company Data and News
  • ✓ Events & Webinars
Sign Up for Free
Nov 20
0

Daily Brief South Korea: LG Household & Health Care, Lotte Chemical and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Light at the End of the Dark Tunnel for Korean Cosmetics?
  • Lotte Chemical Offering Terms & Trading Angle Targeting K200 Inflow on Ex-Date

Light at the End of the Dark Tunnel for Korean Cosmetics?

By Douglas Kim

  • We believe that there is finally some light showing at the end of the dark tunnel for the two leading Korean cosmetics companies LG H&H and Amorepacific Corp.
  • These two stocks have underperformed the market in the past year but have started to outperform the market in the past three weeks. 
  • There are credible signs that indoor mask wearing in Korea will be eliminated in Korea on/near March 2023 and that the inbound visitors to Korea will continue to increase significantly.

Lotte Chemical Offering Terms & Trading Angle Targeting K200 Inflow on Ex-Date

By Sanghyun Park

  • Lotte Chemical offers 8.5M new shares, which is ₩1.1T based on the provisional price of ₩130,000. This is a capital increase rate of 24.8%.
  • This event has already been leaked in advance from early last week, so it isn’t easy to expect a significant return from the short-selling approach immediately after the announcement.
  • Instead, we should pay attention to the KOSPI 200 passive inflow that occurs the day before the ex-date. It is estimated to be approximately 0.8x ADTV.

💡 Before it’s here, it’s on Smartkarma

Sign Up for Free

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

  • ✓ Unlimited Research Summaries
  • ✓ Personalised Alerts
  • ✓ Custom Watchlists
  • ✓ Company Data and News
  • ✓ Events & Webinars
Sign Up for Free
Nov 18
0

Daily Brief South Korea: Lotte Chemical and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Lotte Chemical – Ready to Announce Rights Offering Close to 2 Trillion Won?

Lotte Chemical – Ready to Announce Rights Offering Close to 2 Trillion Won?

By Douglas Kim

  • Numerous local media mentioned today that Lotte Chemical (011170 KS) is getting ready to announce a major rights offering to acquire Iljin Materials.
  • The size of the rights offering has not been finalized but the range of the rights offering could be about 1 trillion won to 2 trillion won.
  • There are additional concerns about Lotte Chem funding additional capital into Lotte E&C, which could face more financial difficulties in the local construction sector.

💡 Before it’s here, it’s on Smartkarma

Sign Up for Free

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

  • ✓ Unlimited Research Summaries
  • ✓ Personalised Alerts
  • ✓ Custom Watchlists
  • ✓ Company Data and News
  • ✓ Events & Webinars
Sign Up for Free
Nov 17
0

Daily Brief South Korea: Samyang Holdings, Devsisters, Lotte Confectionery, WCP and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KOSPI200 Index Rebalance: Just One Change
  • KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises
  • KOSPI 200 & KOSDAQ 150 Rebalance Changes + KOSPI 200 & KOSDAQ 150 Exclusion Candidates in 2023
  • KOSPI 200 & KOSDAQ 150 Constituent Changes: Several Surprises

KOSPI200 Index Rebalance: Just One Change

By Brian Freitas

KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises

By Brian Freitas

  • There are 11 inclusions and 11 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance to be implemented at the close on 8 December.
  • We had forecast most of the changes (10 adds and 9 deletes), so there are a few surprises. The inclusion of SillaJen Inc (215600 KS) is the biggest one.
  • The adds to the index become short sell eligible from the open of trading on 9 December while the deletions will not be short sell eligible from the same time.

KOSPI 200 & KOSDAQ 150 Rebalance Changes + KOSPI 200 & KOSDAQ 150 Exclusion Candidates in 2023

By Douglas Kim

  • Korea Exchange announced the KOSPI 200, KOSDAQ 150, and KRX 300 rebalance changes today. Lotte Confectionery will be added and Samyang Holdings will be deleted from the KOSPI 200 index.
  • The rebalances of these Korean indices are regularly updated twice a year. The changes to these indices will be effective starting 9 December. 
  • The potential exclusion candidates for KOSPI 200 in 2023 include K Car, Handsome, HS Enterprise, Zinus, and Hyundai Home Shopping. 

KOSPI 200 & KOSDAQ 150 Constituent Changes: Several Surprises

By Sanghyun Park

  • For KOSDAQ 150, SillaJen and WCP made it to the index. As for deletions, Intron Biotechnology, Ebest I&S, and Devsisters are additional names to leave the index through regular review.
  • Lotte Confectionery and Samyang Holdings do not have sizeable DTV. And they were fully expected. Nevertheless, the passive impact is so significant that the LONG/SHORT approach still seems valid.
  • We should focus on KOSDAQ 150 inclusions whose return has been high due to the inflow to secure a borrow pool for short-selling on top of the preemptive rebalancing flow.

💡 Before it’s here, it’s on Smartkarma

Sign Up for Free

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

  • ✓ Unlimited Research Summaries
  • ✓ Personalised Alerts
  • ✓ Custom Watchlists
  • ✓ Company Data and News
  • ✓ Events & Webinars
Sign Up for Free
Nov 16
0

Daily Brief South Korea: Sungeel Hitech, HYBE, Ecopro Co Ltd and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KODEX Battery ETF Rebalancing & SungEel Hitech Trading Situation
  • HYBE Shorting Opportunity with a Lockup Release from Dunamu
  • Ecopro Group: Major Equity Grants for 2,706 Employees

KODEX Battery ETF Rebalancing & SungEel Hitech Trading Situation

By Sanghyun Park

  • Given SunEel’s market cap and the level of relevance to the rechargeable battery business, KODEX will likely include it this time around.
  • If you are looking for a short-selling opportunity, I recommend adjusting the timing after this KODEX ETF passive event.
  • If you are long targeting the KOSDAQ 150 inclusion, I recommend taking a slightly longer holding window to additionally target the passive inflow of the KODEX ETF.

HYBE Shorting Opportunity with a Lockup Release from Dunamu

By Sanghyun Park

  • Dunamu may not be in a financial situation that will allow it to hold HYBE shares. With FTX’s liquidity crisis, Upbit’s liquidity management risk will inevitably rise to the surface.
  • Doubts about whether the size of Upbit’s assets is sufficiently absorbing the shock of a bank run are still strongly raised in the local market.
  • These concerns are likely to affect HYBE’s share price as the December 9 release approaches, and yes, we need to design short position setups aimed at this.

Ecopro Group: Major Equity Grants for 2,706 Employees

By Douglas Kim

  • On 15 November, Ecopro Group announced a major equity grant for 2,706 employees that work for various affiliates of the Ecopro Group.
  • The company announced that it will provide equity grant shares worth about 10 million won per employee (for most of the Ecopro Group full time employees as of 30 September).
  • We like what Ecopro Group is trying to do with this equity grant program and we believe this equity grant program will positively impact Ecopro Co and Ecopro BM. 

💡 Before it’s here, it’s on Smartkarma

Sign Up for Free

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

  • ✓ Unlimited Research Summaries
  • ✓ Personalised Alerts
  • ✓ Custom Watchlists
  • ✓ Company Data and News
  • ✓ Events & Webinars
Sign Up for Free
Nov 15
0

Daily Brief South Korea: NCSOFT Corp, Bionote and more

By | Daily Briefs, South Korea

In today’s briefing:

  • A Pair Trade Between NCSoft & Netmarble Corp
  • Bionote IPO – Delayed Timeline & Updated Valuation Analysis

A Pair Trade Between NCSoft & Netmarble Corp

By Douglas Kim

  • In this insight, we discuss a pair trade between NCSOFT Corp (036570 KS) (go long) and Netmarble Corporation (251270 KS) (go short).
  • NCSoft is currently trading at lower valuation multiples (in terms of EV/EBITDA and P/E) than Netmarble, which we believe is not justified.
  • One of the key risk factors of Netmarble is that it could be excluded from the MSCI Korea Index in 2023/2024.

Bionote IPO – Delayed Timeline & Updated Valuation Analysis

By Douglas Kim

  • Bionote has delayed its IPO timeline. Now, the company expects to complete its IPO in late December. The book building for the institutional investors will now start on 8 December.
  • Our updated base case valuation is target price of 16,966 won per share, which is 6% lower than the low end of the IPO price range. 
  • Given the downside risk relative to the IPO price range, we have a Negative View of the BioNote IPO. 

💡 Before it’s here, it’s on Smartkarma

Sign Up for Free

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

  • ✓ Unlimited Research Summaries
  • ✓ Personalised Alerts
  • ✓ Custom Watchlists
  • ✓ Company Data and News
  • ✓ Events & Webinars
Sign Up for Free
Nov 12
0

Daily Brief South Korea: GS Engineering & Construction, Hyosung Advanced Materials and more

By | Daily Briefs, South Korea

In today’s briefing:

  • MSCI Korea Standard/Small Cap Rebalancing & Tradable Names
  • Hyosung Advanced Materials: Market Share Gains in Global Carbon Fiber Could Result in a Re-Rating

MSCI Korea Standard/Small Cap Rebalancing & Tradable Names

By Sanghyun Park

  • In addition to Hyundai Mipo Dockyard and LG Energy Solution, it is worth noting that Krafton will also have a significant passive inflow. 
  • GS E&C can become a more focused flow trading target as it is an unexpected one that the market must have failed to notice.
  • Since most deletions will have a relatively sizeable passive impact on considerable liquidity, building up a short position with a basket from now on wouldn’t be a flawed approach.

Hyosung Advanced Materials: Market Share Gains in Global Carbon Fiber Could Result in a Re-Rating

By Douglas Kim

  • We have a positive rating on Hyosung Advanced Materials. We believe the stock has a 25%+ upside over the next 12 months.
  • The company recently announced that it has succeeded in developing an ultra-high-strength carbon fiber which is 14 times stronger than steel.
  • There is an opportunity for the share price to be re-rated going forward if the company succeeds in grabbing higher share in the global carbon fiber market segment.

💡 Before it’s here, it’s on Smartkarma

Sign Up for Free

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

  • ✓ Unlimited Research Summaries
  • ✓ Personalised Alerts
  • ✓ Custom Watchlists
  • ✓ Company Data and News
  • ✓ Events & Webinars
Sign Up for Free
Nov 11
0

Daily Brief South Korea: LG Energy Solution, Coupang, Naver Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Assessing LG Energy Solution’s Flow Imbalance Situation
  • Coupang: Time Ditch EV/Sales and Focus on Profitability-Based Multiples
  • 2023 High Conviction: Naver Corp – “The Genius Turtle”

Assessing LG Energy Solution’s Flow Imbalance Situation

By Sanghyun Park

  • LG Energy’s virtually locked-up shares rise to nearly 95%. This should at least partially explain why its price has substantially outperformed the KOSPI in recent months, showing strong downward rigidity.
  • Additional long-term money equivalent to 2-3% of SO can come in for 5% float shares. There is no precedent for a float crunch of this magnitude among top-cap local stocks.
  • It seems necessary to reconsider taking a shorting position for LG Energy even after the 9th of next month when the short-term passives inflow situation is completed.

Coupang: Time Ditch EV/Sales and Focus on Profitability-Based Multiples

By Oshadhi Kumarasiri

  • South Korea’s largest e-commerce company, Coupang (CPNG US) is no longer a growth stock with revenue expected to start falling on a YoY basis from 4Q22 onwards.
  • Therefore, we think Coupang’s current valuation, which is based on inflated revenue estimates should become redundant.
  • We think a no-growth, low-margin business like Coupang does not deserve to trade north of 10.0x OP, whereas it is currently trading at 15.6x the best-case OP estimate.

2023 High Conviction: Naver Corp – “The Genius Turtle”

By Douglas Kim

  • Naver Corp (035420 KS) (market cap of 28.9 trillion won or $20.9 billion) is our 2023 high conviction play.
  • In this report, we provide a deep-dive analysis of Naver Corp and why we believe this stock has an attractive upside of 30%+ by the end of 2023. 
  • Having followed the company for many years, I often like to think of Naver as“The Genius Turtle.”

💡 Before it’s here, it’s on Smartkarma

Sign Up for Free

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

  • ✓ Unlimited Research Summaries
  • ✓ Personalised Alerts
  • ✓ Custom Watchlists
  • ✓ Company Data and News
  • ✓ Events & Webinars
Sign Up for Free
Nov 10
0

Daily Brief South Korea: KT&G Corporation and more

By | Daily Briefs, South Korea

In today’s briefing:

  • An Interview with Flashlight Capital Patners CEO Lee Sanghyun on KT&G

An Interview with Flashlight Capital Patners CEO Lee Sanghyun on KT&G

By Douglas Kim

  • This past week, I had an interview with Lee Sanghyun, the founder and CEO of Flashlight Capital Partners (FCP) which is currently an activist investor on KT&G Corporation (033780 KS).
  • Our interview focused on five key issues including valuation, buyback & dividends, ginseng business spin-off, investment horizon, and aligning management’s interests with those of its shareholders.
  • FCP’s shareholder return plan is to 3x higher than the one currently proposed by the company. For further details, see FCP’s website https://flashlightcap.com/. 

💡 Before it’s here, it’s on Smartkarma

Sign Up for Free

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

  • ✓ Unlimited Research Summaries
  • ✓ Personalised Alerts
  • ✓ Custom Watchlists
  • ✓ Company Data and News
  • ✓ Events & Webinars
Sign Up for Free
Nov 09
0

Daily Brief South Korea: LG Energy Solution, SK Telecom, Bionote, Sungeel Hitech and more

By | Daily Briefs, South Korea

In today’s briefing:

  • TIGER Top 10 Rebalancing: A Big Change Awaits
  • A Pair Trade Between SK Telecom & LG Uplus
  • Bionote Pre-IPO – Thoughts on Valuation
  • Sungeel Hitech: Timing Trading Angle (End of Lock Up Period & Early Inclusion of KOSDAQ 150)

TIGER Top 10 Rebalancing: A Big Change Awaits

By Sanghyun Park

  • The two names in LONG (LG Energy Solution and Celltrion) and the two names in SHORT (Shinhan Financial and KB Financial) are almost a foregone conclusion.
  • POSCO Holdings is now ahead of Kakao Corp due to the recent sharp rise in its share price. But the gap between them is still quite tight.
  • This rebalancing will likely aggravate LG Energy’s flow crunch as it also awaits an MSCI up-weight (2x ADTV) in end-November and a KOSPI 200 up-weight (2x ADTV) on December 8.

A Pair Trade Between SK Telecom & LG Uplus

By Douglas Kim

  • At current prices, we like a pair trade between SK Telecom (go long) and LG Uplus (go short). 
  • We believe the share price gap has widened too much in the past month in favor of LG Uplus and this gap is likely to close in the coming weeks.
  • While LG Uplus tries to expand its non-telecom businesses, this may involve greater spending on marketing and promotions (as % of sales), which could be a drag on its earnings.

Bionote Pre-IPO – Thoughts on Valuation

By Clarence Chu

  • Bionote (377740 KS) is looking to raise approximately US$200m in its Korean IPO. The IPO would consist of both a primary and secondary selldown.
  • Bionote is an integrated producer of diagnostics test products and biocontent products. 
  • In this note, we will look at deal dynamics, assumptions, and share our thoughts on valuation.

Sungeel Hitech: Timing Trading Angle (End of Lock Up Period & Early Inclusion of KOSDAQ 150)

By Douglas Kim

  • An ideal timing of selling/shorting Sungeel Hitech would be after its stock is included in KOSDAQ 150 but before the end of the 6 months lock up period. 
  • Sungeel Hitech is a likely candidate for an early entry in KOSDAQ 150 in December.
  • Sungeel Hitech’s 6 months end of lock-up period is on 28 January 2023. There are 0.31 million shares (2.6% of total outstanding shares) that can be sold after this period.

💡 Before it’s here, it’s on Smartkarma

Sign Up for Free

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

  • ✓ Unlimited Research Summaries
  • ✓ Personalised Alerts
  • ✓ Custom Watchlists
  • ✓ Company Data and News
  • ✓ Events & Webinars
Sign Up for Free