Category

South Korea

Oct 27
0

Daily Brief South Korea: KT&G Corporation, Samsung C&T, Shinpoong Pharmaceutical and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Flashlight Capital Partners Goes Activist on KT&G
  • Samsung C&T: Soundly Beat Consensus Operating Profit Estimates by 68% in 3Q 2022
  • Shinpoong Pharmaceutical (019170 KS): Late Entry in COVID Drug Market; Legal Overhang Still Persists

Flashlight Capital Partners Goes Activist on KT&G

By Douglas Kim

  • On 26 October, a Singaporean private equity firm called Flashlight Capital Partners started to go activist on KT&G demanding that the company spin-off its ginseng business to improve shareholder value.
  • While a spin-off of the ginseng business is not likely near term, the company could buyback more shares and sell more non-core assets which could soothe Flashlight Capital Partners.
  • Back in June 2022, we wrote a prescient insight called KT&G Is a Prime Candidate for Corporate Activism in Korea. 

Samsung C&T: Soundly Beat Consensus Operating Profit Estimates by 68% in 3Q 2022

By Douglas Kim

  • Samsung C&T had outstanding results that soundly beat consensus estimates in 3Q 2022.
  • Samsung C&T generated operating profit of 796.8 billion won in 3Q 2022, up 465% YoY and 67.7% higher than the consensus estimates. 
  • The strong growth of sales and operating profit was led by the biologics, construction, fashion, and resort businesses.

Shinpoong Pharmaceutical (019170 KS): Late Entry in COVID Drug Market; Legal Overhang Still Persists

By Tina Banerjee

  • Shinpoong Pharmaceutical (019170 KS) is re-purposing its existing anti-malarial drug Pyramax as an oral treatment for the COVID-19. The company is conducting phase 3 study in six countries, including Korea.
  • South Korean oral COVID-19 treatment market is currently dominated by Paxlovid. Other domestic companies are also in race to develop homegrown oral COVID-19 drugs, thereby creating a crowded market.
  • With declining cases and hospitalizations, Pyramax has muted growth prospect as a treatment for COVID-19. Shinpoong is reporting operating loss due to accelerated R&D expenditures.  

💡 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
Oct 26
0

Daily Brief South Korea: LG Energy Solution and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Closing the Gap Between LG Energy Solution & LG Chem Pair Trade

Closing the Gap Between LG Energy Solution & LG Chem Pair Trade

By Douglas Kim

  • In this insight, we discuss a pair trade between LG Chem Ltd (051910 KS) (go long) and LG Energy Solution (373220 KS) (go short). 
  • LG Chem’s shares are trading at nearly 66% discount to its NAV which we believe to be excessive. 
  • Another major factor that could negatively impact LGES’ shares in the next several months is the end of the lock-up period for the company’s ESOA shares in about three months. 

💡 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
Oct 25
0

Daily Brief South Korea: LG Chem Ltd, SK Inc, Ecopro BM Co Ltd and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Solactive Lithium Review Results Out: Key Takeaways
  • SK Inc: Solid Dividends, Ongoing Buyback, and Emphasis on Value Should Lead to Outperformance
  • Alpha Generation Through Share Buybacks in Korea: October 2022

Solactive Lithium Review Results Out: Key Takeaways

By Sanghyun Park

  • Despite the WATCH list’s confusion, LG Energy Solution replaced LG Chem. In addition, Solactive excluded Iljin Materials, evidently due to its float-adjusted market cap size.
  • There are some somewhat elusive additions. The most prominent example is Japan Steel Works, which replaced LG Chem in the updated WATCH list at the last minute.
  • There was confusion about LG Chem’s deletion until the last minute, so, likely, the market has not sufficiently reflected this rebalancing factor in LG Energy/LG Chem’s LONG/SHORT.

SK Inc: Solid Dividends, Ongoing Buyback, and Emphasis on Value Should Lead to Outperformance

By Douglas Kim

  • Our base case target price of 276,567 won suggests a 37% upside from current levels for SK Inc. Our base case valuation assumes a 30% holdco discount.
  • At DPS of 8,000 won, this would represent dividend yield of 4% at current price of 202,000 won.
  • The three largest holdcos/quasi holdcos in Korea which include Samsung C&T, SK Inc, and LG Corp have strongly outperformed KOSPI this year. 

Alpha Generation Through Share Buybacks in Korea: October 2022

By Douglas Kim

  • The sharp decline in the Korean stock market this year has led to more Korean companies conducting share buybacks. 
  • As of 23 October, the number of companies in Korea seeking share buybacks in Korea increased by 41% YoY with 308 companies announcing share buyback programs.
  • In the past month, some of the larger market cap companies including Ecopro BM and SKC that have announced share buybacks have significantly outperformed the market.

💡 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
Oct 24
0

Daily Brief South Korea: WCP and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Issues with WCP & SillaJen for KOSDAQ 150 Special Entry in December

Issues with WCP & SillaJen for KOSDAQ 150 Special Entry in December

By Sanghyun Park

  • Two other names aim at Special Entry: WCP and SillaJen. Their listing dates are September 30 and October 13. So, they are technically eligible. But they each have their issues.
  • As for WCP, MSCI has not yet assigned a GICS sector. It is unlikely that KRX will put WCP into the KOSDAQ 150 without GICS confirmation.
  • SillaJen is technically eligible as its ADMINISTRATIVE designation got terminated. But the rule allowing for KRX’s arbitrary judgment can act as an uncertainty factor.

💡 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
Oct 22
0

Daily Brief South Korea: Meritz Financial Group, Bionote and more

By | Daily Briefs, South Korea

In today’s briefing:

  • MSCI Korea Rebalance: Bottom 5% Continue to Underperform
  • Bionote Pre-IPO – The Negatives – Fortunes Generated from a Sole Related Party

MSCI Korea Rebalance: Bottom 5% Continue to Underperform

By Douglas Kim

  • In this insight, we provide a ranking system for targeting the bottom 5% of potential exclusion candidates in the upcoming MSCI Korea index rebalance in November.
  • The ranking system is based on a combined weighted rankings based on MSCI weight, market cap, and ADTV.
  • The six stocks that have received lowest weights include Meritz Financial Group, S 1 Corp, Amorepacific Group, CJ Corp, Green Cross Corp,  and LG Household & Health Care-Pref. 

Bionote Pre-IPO – The Negatives – Fortunes Generated from a Sole Related Party

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. Based on its unique recombinant antigen and antibody manufacturing technology, the firm researches and develops diagnostic reagent products.
  • A large part of the firm’s fortunes came from supplying to a sole customer, which is also a related party. Margins have since come under pressure as well.

💡 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
Oct 19
0

Daily Brief South Korea: HYBE, LG Electronics and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Netmarble Debt Risk Victim: HYBE or NCsoft or Both?
  • A Pair Trade Between LG Corp & LG Electronics

Netmarble Debt Risk Victim: HYBE or NCsoft or Both?

By Sanghyun Park

  • Netmarble did a one-year rollover for the stock loan used for the SpinX acquisition. The maturity is again one year, and the principal amount is ₩1.5T.
  • The HYBE stake is newly included as collateral at an estimated LTV ratio of 50% because the value of NCsoft’s stake further declined, and the LTV ratio was subsequently lowered.
  • Applying the 140% loss cut ratio to HYBE and NCsoft will lead to a margin call when each stock declines 30% from the current price.

A Pair Trade Between LG Corp & LG Electronics

By Douglas Kim

  • In this insight, we discuss a pair trade between LG Corp (003550 KS) (go long) and LG Electronics (066570 KS) (go short).
  • LG Electronics is likely to have continued weakening results, due to rising interest rates on the household disposable income in major countries.
  • Our base case valuation analysis of LG Corp suggests an implied price of 93,905 won per share, representing 19% upside from current levels.

💡 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
Oct 18
0

Daily Brief South Korea: HYBE, Bionote and more

By | Daily Briefs, South Korea

In today’s briefing:

  • HYBE: Korean Govt Mandates BTS Members to Enlist in Military – 50% Further Downside Risk Ahead
  • BioNote IPO Valuation Analysis

HYBE: Korean Govt Mandates BTS Members to Enlist in Military – 50% Further Downside Risk Ahead

By Douglas Kim

  • On 17 October, the Korean government made a final official decision to have the BTS members serve in the mandatory military service.
  • We believe this will have a major negative impact on the sales and profits of HYBE in the next several years.
  • As a result of the Korean government formalizing the BTS members to enlist in the military, we believe that HYBE’s share price could fall more than 50% from current levels.

BioNote IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation is target price of 16,182 won per share, which is 10% lower than the low end of the IPO price range. 
  • We estimate BioNote to generate sales of 535.2 billion won (down 14% YoY) in 2022 and 349 billion won (down 34.8% YoY) in 2023. 
  • 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
Oct 16
0

Daily Brief South Korea: LOTTE Corporation, Samsung C&T, Kakao Games Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • MSCI Korea November SAIR: Three Adds & Four Deletes
  • Korean Holdcos Vs Opcos Gap Spreads Opportunities Amid Market Carnage
  • ECM Weekly (16th Oct 2022) – Socionext, Betagro, Lionheart, Five-Star, Giant Biogene, GLP J-REIT

MSCI Korea November SAIR: Three Adds & Four Deletes

By Sanghyun Park

  • As the recent share price volatility has grown, there have been significant changes in those on the borderline at the MSCI November SAIR.
  • Additions: Hyundai Mipo Dockyard (010620), LOTTE Corp (004990),  and Ecopro (086520) & Deletions: Meritz Financial Group (138040), Amorepacific Group (002790), SK Chemicals (285130), and Green Cross (006280).
  • We must wait on many names until the end, making the price impact more dramatic than usual, as the flow can be concentrated after the announcement.

Korean Holdcos Vs Opcos Gap Spreads Opportunities Amid Market Carnage

By Douglas Kim

  • In this insight, we highlight the pricing gap divergence of the major Korean holdcos and opcos amid market carnage.
  • In general, more holdcos/quasi-holdcos have been outperforming the opcos in the past year, as compared to the previous years as more investors seek value-oriented, deep NAV discount stocks.
  • We highlight 26 pair trades that involve Korean holdcos and opcos.

ECM Weekly (16th Oct 2022) – Socionext, Betagro, Lionheart, Five-Star, Giant Biogene, GLP J-REIT

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.
  • On the IPO front, Socionext (6526 JP) provided a welcome respite with a positive listing, while South Korean IPOs continued to struggle.
  • There was only one large placement this week, with GLP J-REIT (3281 JP) deciding to brave the markets.

💡 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
Oct 15
0

Daily Brief South Korea: Seegene Inc, Yunsung F&C and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Seegene (096530 KS): Recovery of Non-COVID Sales to Drive Future Growth
  • Yunsung F&C IPO Preview

Seegene (096530 KS): Recovery of Non-COVID Sales to Drive Future Growth

By Tina Banerjee

  • Seegene Inc (096530 KS) reported a 30% y/y growth in revenue from non-COVID products to KRW69.5 billion in H1 2022. Q2 non-COVID product revenue was up 21% compared to Q1.
  • The company expects strong demand for respiratory virus testing in fall and winter as the flu season starts in its key markets of Europe and North America.
  • Seegene stock is trading near its lows, mainly due to muted financial performance. Seegene can be a value pick and long-term play on the non-COVID product recovery.  

Yunsung F&C IPO Preview

By Douglas Kim

  • Yunsung F&C is a leading maker of materials mixing equipment that are used in the rechargeable battery production.
  • The IPO price range is from 53,000 won to 62,000 won and offering amount is from 106 billion won to 124 billion won. The book building starts on 26 October. 
  • According to the bankers’ valuation, the expected IPO market cap range is from 423 billion won to 495 billion won. 

💡 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
Oct 13
0

Daily Brief South Korea: SillaJen Inc, Lionheart Studio and more

By | Daily Briefs, South Korea

In today’s briefing:

  • SillaJen Trade Resumption: Day Trading Setup Betting on Shooting Star Pattern
  • Lionheart IPO – Thoughts on Valuation

SillaJen Trade Resumption: Day Trading Setup Betting on Shooting Star Pattern

By Sanghyun Park

  • We should pay attention to two significant flows. INFLOW: Covering of those holding short positions & OUTFLOW: Rebalancing of local PASSIVEs that failed to remove SillaJen.
  • Osstem, which was in a similar situation, showed this shooting star pattern on its trade resumption day. Of course, this setup will work limitedly because SillaJen is shorting-restricted.
  • Nevertheless, SillaJen will likely show this pattern more dramatically in the shooting phase as its short interest is more than three times that of Osstem.

Lionheart IPO – Thoughts on Valuation

By Sumeet Singh

  • Lionheart Studio (426630 KS), a game development studio based in South Korea,  aims to raise around US$420m via its South Korean IPO.
  • The company is majority owned by Kakao Games Corp (293490 KS), which after having recently hiked its stake, owned 54.94% of the company prior to listing.  
  • We spoke about the company’s past performance and undertook a peer comparison in our previous note. In this note, we’ll talk about our earnings estimates and valuation.

💡 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