Category

South Korea

Sep 27
0

Daily Brief South Korea: KB Financial, K Bank and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Lowdown from KRX’s Emergency Presser on the Value-Up Index Today
  • A Special Rebalancing Of Korea Value-Up Index Is Likely in December 2024
  • K Bank IPO (279570 KS): Index Inclusion Timeline

Lowdown from KRX’s Emergency Presser on the Value-Up Index Today

By Sanghyun Park

  • KRX faces challenges balancing the Value-Up Index as a benchmark while ensuring real disclosures, but passive inflows remain steady with local pension funds still interested.
  • KRX’s potential December mini rebalancing increases uncertainty but may just lead to minor tweaks, adding KB and Hana while removing a few stocks from Communication Services.
  • The Value-Up Index resembles the KOSPI 200, using 30-40% GICS stocks and KOSDAQ 150, which may spark trading strategies focused on performance gaps within sectors.

A Special Rebalancing Of Korea Value-Up Index Is Likely in December 2024

By Douglas Kim

  • On 26 September, the Korea Exchange announced that it is considering a “special rebalancing” of the Korea Value-Up Index in December 2024.
  • In our view, the probability of this special rebalancing occurring by the end of this year is high at about 85%+.
  • If there is a special rebalancing, KB Financial, Hana Financial, Samsung Life Insurance, SK Telecom, and KT could be considered the top candidates for inclusion. 

K Bank IPO (279570 KS): Index Inclusion Timeline

By Brian Freitas

  • K Bank (279570 KS) is looking to raise up to KRW 984bn (US$738m), valuing the company at KRW 5tn (US$3.75bn) at the top end of the IPO price range.
  • Close peer KakaoBank (323410 KS) and regional peer SBI Sumishin Net Bank (7163 JP) have been trading lower recently and the IPO could price lower than the top end.
  • The change in KOSPI2 INDEX Fast Entry rules will leave the stock out of the index till June 2025. Inclusion in global indices will have to wait a while too.

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Sep 26
0

Daily Brief South Korea: Huchems Fine Chemical, Korea Zinc, Samsung C&T and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Crunching Passive Impact Numbers for KRX Value-Up Index Names, Based on KRX’s Free-Float Rate Data
  • MBK Raises Tender Prices: ₩750,000 for Korea Zinc & ₩25,000 for Young Poong Precision
  • MBK Raises Tender Offer Price on Korea Zinc by 13.6% to 750,000 Won
  • NPS Sues Samsung’s Lee Jae-Yong
  • MBK Bumps Offers For Both Korea Zinc and Young Poong Precision

Crunching Passive Impact Numbers for KRX Value-Up Index Names, Based on KRX’s Free-Float Rate Data

By Sanghyun Park

  • KRX 300 hit 1 trillion won AUM fast, but with local pensions more aggressive, the value-up’s early AUM could top 1 trillion, hitting up to 3 trillion in six months.
  • Hanjin KAL, S1 Corp, Hyundai Elevator, Nice Info, and Huchems are set for strong price action. The financial sector also stands out, seeing the biggest impact compared to other sectors.
  • Small caps under 1 trillion won see little passive impact, but solid plays exist under 3 trillion, so splitting large and small caps won’t limit target options much.

MBK Raises Tender Prices: ₩750,000 for Korea Zinc & ₩25,000 for Young Poong Precision

By Sanghyun Park

  • Hankyung reports MBK will raise Korea Zinc’s tender offer to ₩750,000 (14%) and Young Poong Precision’s to ₩25,000 (25%) before today’s market opens.
  • Hankyung and Maeil are top sources for market scoops, so it’s almost certain MBK leaked the tender price hike ahead of today’s trading.
  • MBK leaves Choi just five trading days to respond. Korea Zinc plans to raise ₩400 billion, but it’s still not enough for a counter-bid.

MBK Raises Tender Offer Price on Korea Zinc by 13.6% to 750,000 Won

By Douglas Kim

  • MBK announced that it will raise the tender offer prices on Korea Zinc by 13.6% to 750,000 won and Young Poong Precision by 25% to 25,000 won. 
  • If 100% of the 3,024,881 shares of Korea Zinc tender offer is completed, at the revised tender offer price of 750,000 won, this would be 2.27 trillion won in amount.
  • In term of probabilities, we would put a 80-85% probability that MBK/Jang family successfully completes the tender offers and takes over the controlling stakes of these two companies.

NPS Sues Samsung’s Lee Jae-Yong

By Douglas Kim

  • NPS has filed a lawsuit against Samsung Group Chairman Lee Jae-Yong and others involved in the merger of Samsung C&T (028260 KS) and Cheil Industries nearly nine years ago.
  • NPS is trying to recover damages estimated at up to 675 billion won. 
  • If NPS is able to win in this lawsuit, it could result in other minority shareholders launching their own lawsuits which could further raise concerns on Samsung C&T. 

MBK Bumps Offers For Both Korea Zinc and Young Poong Precision

By David Blennerhassett

  • MBK Partners has increased the Tender Offer prices for Korea Zinc (010130 KS) by 13.6% to ₩750,000 and Young Poong Precision (036560 KS) by 25% to ₩25,000.
  • All other terms remain the same.  IF MBK secures the maximum 14.61% in KZ, this will be Korea’s largest-ever Tender Offer.
  • MBK made a public offering correction announcement today. The Choi family now has 5 business days in which to respond with a counteroffer.

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Sep 25
0

Daily Brief South Korea: Woori Financial Group , Samsung Electronics, K Bank, Korea Stock Exchange KOSPI 200, Green Cross and more

By | Daily Briefs, South Korea

In today’s briefing:

  • All the Scoop on the Korea Value-Up Index
  • Korea Exchange Announces The Korea Value Up Index
  • New Fast Entry Rule for KOSPI 200 & KOSDAQ 150: Post-IPO Price Swings Ramping Up
  • K Bank IPO: Valuation Insights
  • EQD | A Very Weak KOSPI 200 Is Ready to Pull Back Again
  • Green Cross (006280 KS): Alyglo Is Accelerating U.S. Market Entry; Base Business Shows Strength

All the Scoop on the Korea Value-Up Index

By Sanghyun Park

  • The index focuses on qualitative factors like capital efficiency and shareholder returns, but efforts to impose sector balance may have overextended its market benchmark role.
  • Some companies not fitting the ‘value-up’ narrative got included, while market favorites were sidelined by sector rankings, which is puzzling given the index’s original goal.
  • Still, with rebalancing cut down to once a year, we should expect the flow impact on the index names to hit harder than initially thought compared to their sector peers.

Korea Exchange Announces The Korea Value Up Index

By Douglas Kim

  • Korea Exchange announced the long awaited Korea Value Up Index (“K Value Up Index”) (composed of 100 stocks) today. 
  • Korea Exchange used a 5-step screening process to select the 100 companies in this index including market cap, profitability, shareholder returns, market evaluation, and capital efficiency. 
  • This Value Up index is part of the bigger “Corporate Value Up ” program in Korea. These efforts to improve Korea’s corporate governance policies is a marathon, not a sprint. 

New Fast Entry Rule for KOSPI 200 & KOSDAQ 150: Post-IPO Price Swings Ramping Up

By Sanghyun Park

  • Besides ranking in the top 50 by market cap, it must also meet a minimum float-adjusted cap for K200 fast entry: at least 50% of the 50th-ranked stock’s market cap.
  • Even if new stocks meet KRX’s float cap, their actual float share volume may still be low, risking inflation from local pension funds’ preemptive passive inflows post-listing.
  • This could reduce predictability for KOSPI 200 fast entry, increasing price swings post-listing and forcing traders to develop new volatility strategies after IPOs.

K Bank IPO: Valuation Insights

By Arun George

  • K Bank (279570 KS) is a Korean internet bank. It has launched an IPO to raise up to US$734 million.
  • We previously discussed the IPO in K Bank IPO: The Bear Case and K Bank IPO: The Bull Case.
  • We examine the syndicate’s valuation methodology. Our analysis suggests that K Bank is unattractively valued in the IPO price range. We would pass on the IPO.

EQD | A Very Weak KOSPI 200 Is Ready to Pull Back Again

By Nico Rosti

  • The last 2 weeks have been painful for investors that were LONG the KOSPI 200 INDEX, and this week is not very promising either.
  • The index has advanced less than 3% since its last WEEKLY negative Close on September 6th.
  • The index is in its 3rd consecutive week up (to be confirmed this Friday at the Close) but the current pattern usually ends on the third week up and reverses.

Green Cross (006280 KS): Alyglo Is Accelerating U.S. Market Entry; Base Business Shows Strength

By Tina Banerjee

  • Green Cross (006280 KS) has gained access to 80% of privately insured members in the U.S. for blood product Alyglo, which has been included in formularies of three major insurers.
  • Green Cross targets to generate $50M revenue from Alyglo this year. The target seems to be conservative. The company further aims to sustain annual growth of 50%+, which is achievable.
  • The company reported sequential improvement in 2Q24, with 17% QoQ revenue growth and significant improvement in gross margin. Revenue growth of 7–8% is expected during 2024–2026.

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Sep 24
0

Daily Brief South Korea: SK Inc, Korea Zinc, K Bank and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Why MBK’s Move into Local Hostile Takeover Scene Matters: Focus on SK Inc and Lotte Corp
  • What Are Locals Saying About Potential Allies to Choi Family in Fight for Korea Zinc?
  • K Bank IPO – Peer Comparison – Lags Its Main Peer on Most Fronts

Why MBK’s Move into Local Hostile Takeover Scene Matters: Focus on SK Inc and Lotte Corp

By Sanghyun Park

  • The new 100% mandatory tender offer rule could push buyers to lower premiums for major shareholders, potentially increasing hostile takeover attempts as costs get shared with minority shareholders.
  • It looks like MBK is eyeing this situation as a chance to redefine their strategy. This really shows how serious MBK is about the Korea Zinc deal.
  • Watch for top-tier assets available via hostile takeovers, particularly companies like SK Inc and Lotte Corp, where low shareholder stakes may lead to management conflicts.

What Are Locals Saying About Potential Allies to Choi Family in Fight for Korea Zinc?

By Douglas Kim

  • In this insight, we discuss three particular allies that could help the Choi family that have been highlighted by the local media including Hanwha, KIS, and Softbank.
  • The Hanwha Group is one of the largest shareholders of Korea Zinc. In addition, Hanwha Group Vice Chairman Kim Dong-Kwan has a close relationship with Korea Zinc Chairman Choi Yoon-Beom.
  • Korea Zinc is planning to hold an important press conference on the 24 September to reveal its position on the tender offer of Korea Zinc shares by MBK.

K Bank IPO – Peer Comparison – Lags Its Main Peer on Most Fronts

By Sumeet Singh

  • K Bank (279570 KS) plans to raise up to US$740m in its upcoming South Korean IPO.
  • K Bank is one of three Internet-only banks in Korea. It provides a full range of commercial banking products and services.
  • In our previous note, we have looked at the company’s past performance. In this note, we will undertake a peer comparison.

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Sep 23
0

Daily Brief South Korea: Korea Zinc, HLB Therapeutics , Webtoon Entertainment and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Korea Zinc’s Latest Shareholder Roll & MBK’s Triggers to Sweeten Tender Price
  • KOSDAQ150 Index Adhoc Rebalance: HLB Therapeutics Replaces Jeisys Medical
  • Webtoon Entertainment: A Weakening USD Will Give A Lift To 3Q Earnings, Founder Picked Up 42K Shares

Korea Zinc’s Latest Shareholder Roll & MBK’s Triggers to Sweeten Tender Price

By Sanghyun Park

  • MBK is watching for a 1 million share trading volume, as that may prompt neutral institutional investors to sell rather than participate in the tender, triggering a price hike.
  • MBK may raise the tender price to ₩900,000, a 35% jump, with a local pension fund CIO suggesting it’s the sweet spot for participation.
  • MBK believes securing the minimum target would give them 44% voting rights, enough to push their proposals, indicating they’ll go all-in for that 7% stake in this first attempt.

KOSDAQ150 Index Adhoc Rebalance: HLB Therapeutics Replaces Jeisys Medical

By Brian Freitas

Webtoon Entertainment: A Weakening USD Will Give A Lift To 3Q Earnings, Founder Picked Up 42K Shares

By Andrei Zakharov

  • Webtoon Entertainment, a Korean the world’s largest digital comics platform, has successfully completed IPO and private placement in June.
  • The NAVER-backed storytelling platform has raised ~$359M and priced its IPO and concurrent private placement at $21.00 per share, at the top end of price range.  
  • However, Webtoon Entertainment shares significantly underperformed with shares down ~48% below IPO offer price.

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Sep 22
0

Daily Brief South Korea: Samsung KODEX Samsung Group ETF, K Bank and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Unique Rebalancing Pattern & Unique Trading Angle of the KODEX Samsung Group ETF
  • K Bank IPO: The Bear Case

Unique Rebalancing Pattern & Unique Trading Angle of the KODEX Samsung Group ETF

By Sanghyun Park

  • This KODEX Samsung Group ETF sees 30% AUM outflows pre-rebalancing, with the same chunk flowing back in after, especially noticeable during December.
  • Over three years, local brokers sold stock baskets before rebalancing, causing notable price impacts. During this time, Samsung affiliates in the ETF delivered 3-4% returns.
  • ChatGPT said:ChatGPTThis isn’t typical NAV arbitrage; it’s likely an unhedged play. Nonetheless, given the consistent price impact and accessible stock futures, it’s worth considering.

K Bank IPO: The Bear Case

By Arun George

  • K Bank (279570 KS) is a Korean internet bank. It has launched an IPO to raise up to US$734 million.
  • In K Bank IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
  • The bear case rests on rising competitive intensity, the smallest deposit base among Internet banks, below-peer loan book growth, and a high-risk crypto play due to the Dunamu partnership.

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Sep 21
0

Daily Brief South Korea: Korea Zinc, HLB Therapeutics and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Young Poong Precision (036560 KS) Also Now Trading Through Terms
  • Details of MBK’s Four Major Concerns on Management of Korea Zinc
  • Will New KOSDAQ 150 Member HLB Therapeutics Show Webzen-Like Price Moves?

Young Poong Precision (036560 KS) Also Now Trading Through Terms

By David Blennerhassett

  • On the 13th September, MBK joined Young Poong (000670 KS) in seeking control of Korea Zinc (010130 KS) via Partial Tender Offers for KZ and Young Poong Precision (036560 KS).
  • This situation has been canvassed by analysts here at Smartkarma; with increasing expectation the Choi family makes a counterbid.
  • This insight analyses the fair value of YPP. No matter how you slice it, the Offer Price is punchy. Perhaps not punchier enough.

Details of MBK’s Four Major Concerns on Management of Korea Zinc

By Douglas Kim

  • In this insight, we discuss in detail MBK’s four major concerns on the management of Korea Zinc. 
  • We believe that MBK has legitimate concerns on especially the three factors including poor investments, deteriorating profitability, and increase in equity capital/disposal of treasury shares. 
  • If and when the 2 trillion won+ is raised, then it could lead to another tender offer and the four concerns highlighted in this insight become much more important.

Will New KOSDAQ 150 Member HLB Therapeutics Show Webzen-Like Price Moves?

By Sanghyun Park

  • Jeisys Medical’s getting booted from the KOSDAQ 150, and HLB Therapeutics is stepping in as the new addition. This change will officially hit the book on Wednesday, September 25.
  • HLB Therapeutics, with a ₩0.70T market cap and 87% float, is set for a 0.51% weight in KOSDAQ 150, triggering over 2 million shares in passive buying: 3.26x 30-day ADTV.
  • With today’s after-hours volume spike in HLB Therapeutics, we’re likely to see some price action from early movers spilling into Monday’s open, similar to what we saw with Webzen.

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Sep 20
0

Daily Brief South Korea: Samsung Fire & Marine Insurance, Korea Zinc and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Why Samsung Fire Is Shaping Up to Be the Hottest Dividend Play Ahead of the Value-Up Disclosure
  • Korea Investment Securities to Step up as the White Knight for Choi Family at Korea Zinc
  • Main Takeaways from Today’s MBK Press Briefing About the Korea Zinc Tender
  • Digging into the News Flow on KIS Jumping in as the White Knight for Choi in the Korea Zinc Deal

Why Samsung Fire Is Shaping Up to Be the Hottest Dividend Play Ahead of the Value-Up Disclosure

By Sanghyun Park

  • With the 15% ownership cap complicating buybacks, Samsung Fire’s more likely to roll out a dividend-focused value-up play instead.
  • They’ve flagged a mix of shareholder returns and investments, but the big question is how much will be funneled into returns this year.
  • If Samsung Fire hits a 50% shareholder return this year, DPS could jump to ₩23,000–₩25,000 with a 6.5% yield, potentially boosting the stock price by 20–30%.

Korea Investment Securities to Step up as the White Knight for Choi Family at Korea Zinc

By Douglas Kim

  • Hankyung Business Daily reported that Korea Investment Securities (KIS) is in a serious discussion with the Choi family of Korea Zinc to step up as a white knight.
  • KIS/Choi family are considering a plan to launch a counterbid against Jang family and MBK by investing around 2 trillion won+ along with other private equity funds.
  • It is probable that tender offer price of Korea Zinc could be raised by 15-25% due to a likely counterbid and current price trading 7% higher than tender offer price.

Main Takeaways from Today’s MBK Press Briefing About the Korea Zinc Tender

By Sanghyun Park

  • MBK’s funding plan for Korea Zinc involves using ₩1T from their 6th Buyout Fund and the rest via debt. This setup leaves room to potentially increase the tender price.
  • The key question is if there’s enough upside at this price. MBK’s silence on abandoning Youngpoong suggests they’re unlikely to fully bail on Korea Zinc even if the tender fails.
  • With MBK’s strategy leaked, institutions may hesitate, fearing less price drop risk, suggesting a proxy battle could heat up. We should consider spread trading and post-tender price moves.

Digging into the News Flow on KIS Jumping in as the White Knight for Choi in the Korea Zinc Deal

By Sanghyun Park

  • The key issue is if KIS can form a consortium. PEFs are saying the timeline is too tight and are concerned about the unclear exit strategy.
  • To make this work, PEFs need Choi’s 15.65% Korea Zinc stake as collateral, but much of it is already tied up, limiting cash-raising potential.
  • They’ll likely continue to leak news to boost the price and buy time. But this will also push MBK to sweeten their offer sooner.

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Sep 19
0

Daily Brief South Korea: Korea Zinc, Dongwon Industries, K Bank and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Trading Insights from Today’s Dramatic Developments in the Korea Zinc Event
  • Quiddity Leaderboard KOSPI 200 Dec 24: Up to 4 ADDs & 5 DELs Possible
  • K Bank IPO: The Bull Case
  • K Bank IPO – The Negatives – Ample Issues Along with Crypto Exposure & Lockup

Trading Insights from Today’s Dramatic Developments in the Korea Zinc Event

By Sanghyun Park

  • As of today, it’s clear Choi is struggling to secure white knights, pushing him to double down on political lobbying to stay in the game.
  • Choi’s aiming for the National Pension Service’s 7.57% voting rights, but with its legal neutrality, the chances of it caving to political pressure are slim.
  • MBK’s statement today shows confidence that Choi won’t get Fair Trade Commission approval, and that, like Hanwha and LG, Hyundai Motor won’t back him either.

Quiddity Leaderboard KOSPI 200 Dec 24: Up to 4 ADDs & 5 DELs Possible

By Travis Lundy

  • KOSPI 200 is a Korean blue-chip index that tracks the 200 largest and most-liquid names listed in the KOSPI section of the Korea Exchange (KRX).
  • In this insight, we take a look at the names leading the race to become ADDs and DELs during the upcoming semiannual review in December 2024.
  • We expect up to four ADDs and five DELs for the KOSPI 200 index during this index rebal event based on the latest available data. And we have a trade.

K Bank IPO: The Bull Case

By Arun George

  • K Bank (279570 KS) is a Korean internet bank. It has launched an IPO to raise up to US$734 million. 
  • K Bank began operations in April 2017 as the first internet-only bank in Korea. KT Corp (030200 KS) and Woori Bank (000030 KS) are the two largest shareholders.
  • The bull case rests on rising market share, solid deposit growth, robust loan book growth, stable NIM, rising margins and a low NPL ratio.

K Bank IPO – The Negatives – Ample Issues Along with Crypto Exposure & Lockup

By Sumeet Singh

  • K Bank (279570 KS) plans to raise up to US$740m in its upcoming South Korean IPO.
  • K Bank is one of three Internet-only banks in Korea. It provides a full range of commercial banking products and services.
  • In this note, we talk about the not-so-positive aspects of the deal.

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Sep 18
0

Daily Brief South Korea: HK inno.N, Young Poong Precision, K Bank, Celltrion Inc, Samsung Electronics and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Korea Value-Up Index Drops on the 24th: Hunt for the Winners in the KOSDAQ Global Index
  • NAV Valuation of Young Poong Precision and A Case Study for Future Tender Offers in Korea
  • K Bank IPO Valuation Analysis
  • Celltrion Inc (068270 KS)– Is the Sell-Side’s Bullishness Justified?
  • K Bank IPO – The Positives – Fast Growth
  • Samsung Electronics (005930-KR): Quality Generative AI Play, Trading at a Discount

Korea Value-Up Index Drops on the 24th: Hunt for the Winners in the KOSDAQ Global Index

By Sanghyun Park

  • KOSDAQ stocks are expected to make up 10-15% of the Value-Up Index, with 10-15 names benefiting. Even with smaller passive funds, the impact on these stocks could be significant.
  • KOSDAQ Global Index criteria overlap with the Value-Up Index, and KRX’s push suggests many KOSDAQ Global stocks will also appear in the Value-Up Index.
  • In the past 30 days, the KOSDAQ Global Index dropped 5.14%, but 5 of the top 10 gainers either announced value-ups or received value-up picks from brokers.

NAV Valuation of Young Poong Precision and A Case Study for Future Tender Offers in Korea

By Douglas Kim

  • Our NAV valuation of Young Poong Precision suggests NAV of 325 billion won or NAV per share of 20,657 won which is 70% higher than current price.
  • Young Poong Precision tender offer could become one of the most important case studies for future tender offers in Korea. 
  • The biggest component of the NAV is Young Poong Precision’s 1.85% stake in Korea Zinc which is worth 255 billion won (133% of its current market cap). 

K Bank IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation of K Bank is target price of 9,151 won per share, which is 4% lower than the low end of the IPO price range. 
  • Given the lack of upside in our target price relative to the IPO price range, we would avoid in subscribing to the IPO.
  • Our base case valuation is based on 1.6x P/B multiple using the company’s equity post IPO (2.35 trillion won). 

Celltrion Inc (068270 KS)– Is the Sell-Side’s Bullishness Justified?

By Avien Pillay

  • The biosimilar market is forecast to grow three to four times faster than the generic drug market over the next five years.
  • However, we believe that this high growth will not necessarily imply good profitability, given the early stage of the biosimilar market, complications and competition.
  • We also believe that the company’s guidance is too optimistic resulting in an expensive multiple. We prefer some room for error.  

K Bank IPO – The Positives – Fast Growth

By Sumeet Singh

  • K Bank (279570 KS) plans to raise up to US$740m in its upcoming South Korean IPO.
  • K Bank is one of three Internet-only banks in Korea. It provides a full range of commercial banking products and services.
  • In this note, we talk about the positive aspects of the deal.

Samsung Electronics (005930-KR): Quality Generative AI Play, Trading at a Discount

By Wium Malan, CFA

  • Samsung Electronics (005930 KS) is a leading beneficiary of the recovery in global Smartphone demand, and strength in Memory prices, driven by the proliferation of Gen AI demand.
  • Global Memory prices have recovered by up to +80%y/y driven by demand from hyperscaler customers for leading-technology DDR5, HBM, and other high-value-added memory products.
  • Samsung Electronics trades more than one standard deviation below its 5-year historic average trading range, a historically proved to be an excellent buying point.

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