Daily Brief South Korea: Posco Chemical Co Ltd, Daou Data Corp, Hotel Shilla and more

In today’s briefing:

A Noteworthy Long Short Setup: Ecopro BM & Posco Future M
Insiders At Seoul City Gas and Daou Data Corp Sell Shares Before the Crash
Hotel Shilla: Wins New License to Operate Duty Free at Incheon International Airport for 10 Years

A Noteworthy Long Short Setup: Ecopro BM & Posco Future M

Currently, the market cap of Ecopro BM surpassed Posco Future M. As a result, Ecopro BM is in a position to replace Posco Future M in the K-New Deal rebalancing.
They are direct peers with a high price cointegration. We should consider using the rebalancing event of this index as an inflection point from a Long Short pair trading perspective.
The likelihood of Ecopro BM being included in the Solactive Lithium Index in October could potentially increase the expected return of taking this Long Short position more preemptively.

Key insiders at Seoul City Gas (017390 KS) and Daou Data Corp (032190 KS) sold their shares before the recent crash.
On 28 April, it was reported that Kim Young-Min (Seoul City Gas Chairman) sold 2% of Seoul City Gas on 20 April, resulting in net sales of 45.7 billion won.
These Korean companies are two of the eight stocks related to the CFD derivatives sell-down that have been crashing in the past week.

We expect the consensus to increase their operating profit estimates for Hotel Shilla in 2023 and 2024 by as much as 10-20% in 2023 and 2024.
Higher earnings will likely be driven by Hotel Shilla winning new licenses to operate duty free at the Incheon International Airport and much better than expected profits in 1Q 2023.
With improved momentum (both operationally and share price basis), we think that the Hotel Shilla (pref) could outperform Hotel Shilla (common) in the coming weeks.

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