In today’s briefing:
- Shift Up IPO Book Building Results Analysis
- Korean Holdcos Vs Opcos Gap Trading Opportunities in 3Q 2024
- Gap Trades in Korean Prefs Vs Common Share Pairs in 3Q 2024
- Shift Up IPO: Details, Bookbuilding & Index Inclusion
- Sanil Electric IPO: The Bear Case
Shift Up IPO Book Building Results Analysis
- Shift Up reported solid IPO book building results. Shift Up’s IPO price has been determined at 60,000 won won, which is at the high end of the IPO price range.
- According to Hankyung Business Daily, the demand ratio was 223 to 1. Shift Up will start trading on 11 July.
- Our base case valuation of Shift Up is market cap of 5.7 trillion won or target price of 95,510 won (59% higher than the IPO price of 60,000 won).
Korean Holdcos Vs Opcos Gap Trading Opportunities in 3Q 2024
- In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 3Q 2024.
- Of the 38 pair trades, 21 of them involved holdcos outperforming opcos in the past six months, suggesting increased capital allocation to Korean holdcos relative to their opcos.
- These pairs could generate trading opportunities in terms of their pricing gaps closing reversal (Doosan Corp vs. Doosan Enerbility; Hyundai Mobis vs Hyundai Motor).
Gap Trades in Korean Prefs Vs Common Share Pairs in 3Q 2024
- In this insight, we discuss numerous gap trades involving Korean preferred and common shares in 3Q 2024.
- The recent push for Korea Value Up program has helped to push up prices of numerous Korean preferred stocks including Hyundai Motor (005385 KS).
- On a longer timeframe (3-4 years), we believe this discount could narrow further to the 20-25% range, which provides additional opportunities for the Korean preferred shares to further make gains.
Shift Up IPO: Details, Bookbuilding & Index Inclusion
- Shift Up (462870 KS) will raise KRW 435bn (US$315m) in its IPO, valuing the company at KRW 3,482bn (US$2.52bn). Listing is expected later this month.
- Competition for the shares has been fierce with institutional investors indicating demand for 226x the number of shares on offer at prices higher than the top end of the range.
- Inclusion in the KOSPI 200 looks likely in June 2025, while inclusion in global indices is likely in December. But there could be some passive inflows in September.
Sanil Electric IPO: The Bear Case
- Sanil Electric (062040 KS), a Korean industrial transformer manufacturer, is seeking to raise up to US$165 million.
- In Sanil Electric 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 rapidly slowing growth, high customer concentration, mid-tier revenue growth and mid-tier FCF margin compared to peers.
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