In today’s briefing:
- SK Telecom – Major Share Buyback & Cancellation
- KRX Autos Sept Rebalancing: Less Known, Still Juicy Trading Event with 4 Constituent Changes
- EOFLOW/Medtronic Tender: Assessing the Wide Spread
- A Long Short Arb Event on SKT & LG U+ Targeting SKT’s Index Inclusion in November with Buyback
- LGES: Slowing Sales in Europe & A Turning Point in Momentum for Korean Rechargeable Battery Sector?
- Samsung Biologics (207940 KS): Strong Momentum in 2Q23- Revenue Up 33%; Net Profit Jumps 22%
SK Telecom – Major Share Buyback & Cancellation
- On 27 July, SK Telecom announced a sizeable share buyback worth 300 billion won (including shares cancellation of 200 billion won) and quarterly dividend of 181 billion won.
- SK Telecom will pay a quarterly DPS of 830 won, which represents 1.8% of its current price of 45,900 won.
- SK Telecom is trying to boost its share price which has been negatively impacted by the regulators’ pressure to cut telecom tariff rates and also increase competition.
KRX Autos Sept Rebalancing: Less Known, Still Juicy Trading Event with 4 Constituent Changes
- At the current stage, with the three-month review period almost complete, there will likely be two additions and two deletions:
- Additions: KG Mobility (003620 KS) & Nexen Tire Corp (002350 KS) Deletions: Sebang Global Battery (004490 KS) & Kumho HT Inc (214330 KS)
- In the past few years, KRX Autos has shown a significant price impact for constituent changes on the rebalancing trading day. This pattern will likely repeat in the upcoming rebalancing.
EOFLOW/Medtronic Tender: Assessing the Wide Spread
- Medtronic Plc (MDT US) aims to acquire Eoflow (294090 KS) through share purchase agreements (SPA), a share subscription agreement (SSA) and a public tender offer at KRW30,000.
- Since the deal announcement on 26 May, the spread has widened, reflecting deal risk around patent litigation risk, regulatory approvals and the minimum acceptance condition.
- Our assessment of these risks suggests a low probability of a deal break. At the last close, the gross spread is an attractive 8.5%.
A Long Short Arb Event on SKT & LG U+ Targeting SKT’s Index Inclusion in November with Buyback
- The chances of SKT’s inclusion in the August MSCI Review seem slim. SKT narrowly missed meeting the 15% threshold on both Day 1 and Day 2 during this review.
- SK Telecom’s buyback completion can be accelerated to align with the MSCI November Review period, just like the previous case of KT Corp back in April.
- The estimated size of passive funds flowing into SKT is approximately ₩160 billion, which is expected to be around 5.5 times the average daily trading volume (ADTV).
LGES: Slowing Sales in Europe & A Turning Point in Momentum for Korean Rechargeable Battery Sector?
- LGES provided a lower sales guidance in 3Q 2023 due to slower sales in Europe. LGES expects its sales in 3Q 2023 to decline in a QoQ basis.
- The share prices of the top 12 rechargeable battery names in Korea are down on average 13.9% in the past two trading days.
- We believe that the overall sentiment on the rechargeable battery sector in Korea has started to turn sour which could have a further negative impact on companies such as LGES.
Samsung Biologics (207940 KS): Strong Momentum in 2Q23- Revenue Up 33%; Net Profit Jumps 22%
- Samsung Biologics (207940 KS) reported record-high revenue and operating profit of KRW866 billion and KRW253 billion, up 33% and 49%, YoY, respectively in 2Q23, aided by contract signing spree.
- With continued orders from the leading global pharmas, the company’s total cumulative CMO contracts reached to $11.3B in July, up 19% from $9.5B at the end of 2022.
- Outlook for H2 is more positive with revenue from Plant 4 will be reflected from Q3. Two new biosimilars launch in the U.S. and EU will also add to revenue.
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