In today’s briefing:
- 40 Names for Dividend Arbitrage in 1Q, Marking a Pioneering Initiative in Korea
- KOSDAQ150 Index Rebalance Preview: Potential Adds Soaring; Short Sell Ban Not Helping
- Hyundai Hyms IPO Bookbuilding Results Analysis
- Korean Air – US Blocking of JetBlue/Spirit Continues Trend of M&A Opposition
- Orion Corp: Concerns About Diversification into LegoChem Bioscience
- Dongwon Industries – Announces Cancellation of 22.5% of Outstanding Shares
40 Names for Dividend Arbitrage in 1Q, Marking a Pioneering Initiative in Korea
- K200 futures’ yearend contango exceeded expectations, triggering a surge in buy arbitrage. The subsequent selling pressure intensified, with strategic shifts observed in January futures/options, contributing to KOSPI’s underperformance this year.
- Still, significant closure of K200 futures buy arbitrage should come around March, impacting February or March single-stock futures, potentially introducing substantial contango and suggesting lucrative dividend arbitrage in select stocks.
- These 40 K200 constituents, with single-stock futures, are vital for our pioneering dividend arbitrage in Korea, directly influenced by buy arbitrage closures using K200 futures from last year.
KOSDAQ150 Index Rebalance Preview: Potential Adds Soaring; Short Sell Ban Not Helping
- With over 40% of the review period complete, there could be 15 changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance.
- There could be two changes before that if L&F Co Ltd (066970 KS) and HLB Inc (028300 KS) complete their transfer from the KOSDAQ market to the KOSPI market.
- The adds have outperformed the deletes and the KOSDAQ 150 Index since the start of the review period. The ban on short selling could lead to another leg up.
Hyundai Hyms IPO Bookbuilding Results Analysis
- Hyundai Hyms reported excellent IPO bookbuilding results. IPO price has been determined at 7,300 won per share, which is 16% higher than the high end of the IPO price range.
- A total of 2,099 institutional investors participated in this IPO book building. The demand ratio was 681 to 1. Hyundai Hyms IPO will start trading on 26 January.
- Given the solid upside, we expect investors to push up the share price above the high end of our IPO sensitivity analysis (9,092 won) in the first day of trading.
Korean Air – US Blocking of JetBlue/Spirit Continues Trend of M&A Opposition
- The US Supreme Court has just blocked JetBlue’s planned acquisition of Spirit Airlines, ruling on the side of the US DOJ, which had sued to block the proposed deal.
- Reuters has reported that the European Commission should approve Korean Air/Asiana imminently following analysis of concessions provided. However, the US and Japan also need to approve the deal.
- In “Korean Air – Plan B should Asiana merger fail to gain approval” on 26 October 2023, we highlighted Korean Air is well positioned to continue as a standalone entity.
Orion Corp: Concerns About Diversification into LegoChem Bioscience
- On 15 January, Orion Corp announced that its subsidiary PAN Orion Corp will purchase a 25.7% stake in Legochem Biosciences for 549 billion won.
- LegoChem Bio specializes in antibody-drug conjugate (ADC) technology. Legochem Bio signed a total of 13 technology transfer contracts amounting to 8.7 trillion won in the past 9 years.
- Most investors in Orion Corp would rather have the company focus on its core confectionery/snack business, rather than expand into high risk/high reward biotech business.
Dongwon Industries – Announces Cancellation of 22.5% of Outstanding Shares
- On 16 January, Dongwon Industries (006040 KS) announced that it will cancel 10.46 million shares, representing 22.5% of outstanding shares.
- We are positive on Dongwon Industries. This large amount of share cancellation will boost the company’s earnings per share and book value per share.
- The shares subject to cancellation are the treasury stocks acquired by Dongwon Industries when it merged with Dongwon Enterprises in 2022.
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