Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

I investigate special situations, pairs, and index rebalancing trades in Korea.

Korea / Special Sits, Pairs, Index Rebalancing

Cuckoo Electronics' Holdco/​Opco Demerger - Summary & Valuation Study

Update on Cuckoo Electronics' Spinoff Based Holdco Conversion Process

Event-Driven

Cuckoo Holdings made it official that it would do a tender offer to Cuckoo Homesys shareholders for ₩254.2bil.<div class="content-highlight">This is the link of the regulatory filing about this (source: DART). It was filed yesterday (Mar 21).<a href="https://dart.fss.or.kr/report/viewer.do?rcpNo=20180321000358&amp;dcmNo=6007372&amp;eleId=0&amp;offset=0&amp;length=0&amp;dtd=dart3.xsd" target="_blank">https://dart.fss.or.kr/report/viewer.do?rcpNo=20180321000358&amp;dcmNo=6007372&amp;eleId=0&amp;offset=0&amp;length=0&amp;dtd=dart3.xsd</a></div>Here is a summary of this regulatory filing.First, the below swap price for Cuckoo Homesys is the final one. Cuckoo Holdings targets a total of 1,424,000 Cuckoo Homesys shares at the swap price of ₩178,500.<div><table class="table table-striped"><tbody><tr><td colspan="2" style="width: 712px;">Cuckoo Homesys</td></tr><tr><td style="width: 418.38751220703125px;">Closing price on the most recent trading day (Mar 20) (A)</td><td style="text-align: right; width: 293.61248779296875px;">₩178,500</td></tr><tr><td style="width: 418.38751220703125px;">1W average (Mar 14-20) (B)</td><td style="text-align: right; width: 293.61248779296875px;">₩178,800</td></tr><tr><td style="width: 418.38751220703125px;">1M average (Feb 21-Mar 20) (C)</td><td style="text-align: right; width: 293.61248779296875px;">₩182,658</td></tr><tr><td style="width: 418.38751220703125px;">Arithmetic average (D=(A+B+C)/3)</td><td style="text-align: right; width: 293.61248779296875px;">₩179,986</td></tr><tr><td style="width: 418.38751220703125px;">Swap price per share (E=Min(A,D))</td><td style="text-align: right; width: 293.61248779296875px;">₩178,500</td></tr><tr><td style="width: 418.38751220703125px;">Target qty.</td><td style="text-align: right; width: 293.61248779296875px;">1,424,000 shares</td></tr><tr><td colspan="2" style="width: 712px;">Source: KIND</td></tr></tbody></table></div><table class="table table-striped"><colgroup></colgroup><tbody><tr><td colspan="2" style="width: 712px;" data-sheets-value='{"1":2,"2":"일자"}'>Cuckoo Homesys share price for Feb 21-Mar 20</td></tr><tr><td style="width: 417.3375244140625px;" data-sheets-value='{"1":3,"3":43179}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-03-20</td><td style="text-align: right; width: 294.6624755859375px;" data-sheets-value='{"1":3,"3":178500}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>178,500</td></tr><tr><td style="width: 417.3375244140625px;" data-sheets-value='{"1":3,"3":43178}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-03-19</td><td style="text-align: right; width: 294.6624755859375px;" data-sheets-value='{"1":3,"3":178500}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>178,500</td></tr><tr><td style="width: 417.3375244140625px;" data-sheets-value='{"1":3,"3":43175}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-03-16</td><td style="text-align: right; width: 294.6624755859375px;" data-sheets-value='{"1":3,"3":179000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>179,000</td></tr><tr><td style="width: 417.3375244140625px;" data-sheets-value='{"1":3,"3":43174}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-03-15</td><td style="text-align: right; width: 294.6624755859375px;" data-sheets-value='{"1":3,"3":181500}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>181,500</td></tr><tr><td style="width: 417.3375244140625px;" data-sheets-value='{"1":3,"3":43173}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-03-14</td><td style="text-align: right; width: 294.6624755859375px;" data-sheets-value='{"1":3,"3":176500}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>176,500</td></tr><tr><td style="width: 417.3375244140625px;" data-sheets-value='{"1":3,"3":43172}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-03-13</td><td style="text-align: right; width: 294.6624755859375px;" data-sheets-value='{"1":3,"3":179000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>179,000</td></tr><tr><td style="width: 417.3375244140625px;" data-sheets-value='{"1":3,"3":43171}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-03-12</td><td style="text-align: right; width: 294.6624755859375px;" data-sheets-value='{"1":3,"3":181500}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>181,500</td></tr><tr><td style="width: 417.3375244140625px;" data-sheets-value='{"1":3,"3":43168}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-03-09</td><td style="text-align: right; width: 294.6624755859375px;" data-sheets-value='{"1":3,"3":182000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>182,000</td></tr><tr><td style="width: 417.3375244140625px;" data-sheets-value='{"1":3,"3":43167}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-03-08</td><td style="text-align: right; width: 294.6624755859375px;" data-sheets-value='{"1":3,"3":182000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>182,000</td></tr><tr><td style="width: 417.3375244140625px;" data-sheets-value='{"1":3,"3":43166}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-03-07</td><td style="text-align: right; width: 294.6624755859375px;" data-sheets-value='{"1":3,"3":187000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>187,000</td></tr><tr><td style="width: 417.3375244140625px;" data-sheets-value='{"1":3,"3":43165}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-03-06</td><td style="text-align: right; width: 294.6624755859375px;" data-sheets-value='{"1":3,"3":188000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>188,000</td></tr><tr><td style="width: 417.3375244140625px;" data-sheets-value='{"1":3,"3":43164}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-03-05</td><td style="text-align: right; width: 294.6624755859375px;" data-sheets-value='{"1":3,"3":188500}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>188,500</td></tr><tr><td style="width: 417.3375244140625px;" data-sheets-value='{"1":3,"3":43161}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-03-02</td><td style="text-align: right; width: 294.6624755859375px;" data-sheets-value='{"1":3,"3":191500}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>191,500</td></tr><tr><td style="width: 417.3375244140625px;" data-sheets-value='{"1":3,"3":43159}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-02-28</td><td style="text-align: right; width: 294.6624755859375px;" data-sheets-value='{"1":3,"3":178000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>178,000</td></tr><tr><td style="width: 417.3375244140625px;" data-sheets-value='{"1":3,"3":43158}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-02-27</td><td style="text-align: right; width: 294.6624755859375px;" data-sheets-value='{"1":3,"3":181000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>181,000</td></tr><tr><td style="width: 417.3375244140625px;" data-sheets-value='{"1":3,"3":43157}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-02-26</td><td style="text-align: right; width: 294.6624755859375px;" data-sheets-value='{"1":3,"3":183500}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>183,500</td></tr><tr><td style="width: 417.3375244140625px;" data-sheets-value='{"1":3,"3":43154}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-02-23</td><td style="text-align: right; width: 294.6624755859375px;" data-sheets-value='{"1":3,"3":185000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>185,000</td></tr><tr><td style="width: 417.3375244140625px;" data-sheets-value='{"1":3,"3":43153}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-02-22</td><td style="text-align: right; width: 294.6624755859375px;" data-sheets-value='{"1":3,"3":184500}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>184,500</td></tr><tr><td style="width: 417.3375244140625px;" data-sheets-value='{"1":3,"3":43152}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-02-21</td><td style="text-align: right; width: 294.6624755859375px;" data-sheets-value='{"1":3,"3":185000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>185,000</td></tr><tr><td colspan="2" style="width: 712px;" data-sheets-value='{"1":3,"3":43152}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>Source: KIND</td></tr></tbody></table>Now, what is still to be finalized is Cuckoo Holdings' price per share to be swapped with Cuckoo Homesys' shares.In the regulatory filing, Cuckoo Holdings' price per share is tentatively set at ₩98,275, which is "tentatively" calculated based on the following formula.<div class="content-highlight">VWAP from Mar 14 to 16 with no discount</div><table class="table table-striped"><tbody><tr><td data-sheets-value='{"1":2,"2":"일 자"}'>Date</td><td style="text-align: right;" data-sheets-value='{"1":2,"2":"종가"}'>Closing price (₩)</td><td style="text-align: right;" data-sheets-value='{"1":2,"2":"거래량(B)"}'>Trade volume </td><td style="text-align: right;" data-sheets-value='{"1":2,"2":"거래금액(A)"}'>Trade value (₩)</td></tr><tr><td data-sheets-value='{"1":3,"3":43175}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-03-16</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":98200}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>98,200</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":11541}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>11,541</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":1136291700}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>1,136,291,700</td></tr><tr><td data-sheets-value='{"1":3,"3":43174}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-03-15</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":98200}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>98,200</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":7279}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>7,279</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":711964200}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>711,964,200</td></tr><tr><td data-sheets-value='{"1":3,"3":43173}' data-sheets-numberformat='{"1":5,"2":"yyyy-mm-dd","3":1}'>2018-03-14</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":98400}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>98,400</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":9863}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>9,863</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":970540040}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>970,540,040</td></tr><tr><td data-sheets-value='{"1":2,"2":"총 거래금액 (A)"}'>Total trade value (₩)</td><td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":3,"3":2818795940}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>2,818,795,940</td></tr><tr><td data-sheets-value='{"1":2,"2":"총 거래량 (B)"}'>Total trade volume</td><td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":3,"3":28683}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>28,683</td></tr><tr><td data-sheets-value='{"1":2,"2":"가중평균주가 (A/B)"}'>3-day VWAP (₩)</td><td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":3,"3":98274.1}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'>98,274.10</td></tr><tr><td data-sheets-value='{"1":2,"2":"할인율"}'>Discount</td><td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='{"1":3,"2":"0%","3":1}'>0%</td></tr><tr><td data-sheets-value='{"1":2,"2":"신주 발행가액 (원미만 절상)"}'>Tentatively set swap price (₩ - rounded off)</td><td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":3,"3":98275}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>98,275</td></tr><tr><td colspan="4" data-sheets-value='{"1":2,"2":"신주 발행가액 (원미만 절상)"}'>Source: KIND</td></tr></tbody></table>So, since this ₩98,275 is a tentative price, the number and amount of total new rights to be offered are also "tentative". It means all the numbers in the below table are just estimates.<div><table class="table table-striped"><tbody><tr><td>Item</td><td style="text-align: right;">Tentative</td><td style="text-align: right;">Final (to be finalized on Apr 17)</td></tr><tr><td>"Tentative" price per share to be offered</td><td style="text-align: right;">₩98,275</td><td style="text-align: right;">???</td></tr><tr><td>"Tentative" number of new rights to be offered</td><td style="text-align: right;">2,586,456 common shares</td><td style="text-align: right;">???</td></tr><tr><td>"Tentative" amount of new rights to be offered</td><td style="text-align: right;">₩254,183,963,400</td><td style="text-align: right;">???</td></tr><tr><td colspan="3">Source: KIND</td></tr></tbody></table></div>Then, when will Cuckoo Holdings' swap price be finalized? It will be finalized on Apr 17 based on the following formula.<div class="content-highlight">VWAP from Apr 13 to 17 with no discount</div>So, once we finalize Cuckoo Holdings' swap price on Apr 17,<div class="content-highlight">then we will subsequently get a total number/amount of Cuckoo Holdings new rights to be offered based on the following formula.<ul><li>A = Cuckoo Homesys 1,424,000 shares x ₩178,500</li><li>B = Cuckoo Holdings' share price to be swapped</li><li>C = Number of Cuckoo Holdings shares to be offered = A / B</li><li>D = Amount of Cuckoo Holdings shares to be offered = B × C</li></ul></div>In the end, Cuckoo Holdings' shareholding structure will look like this.<table class="table table-striped"><tbody><tr><td colspan="2" style="width: 712px;">Cuckoo Holdings' shareholding structure post rights offering/tender offer</td></tr><tr><td style="width: 412.13751220703125px;">New rights offering</td><td style="text-align: right; width: 299.86248779296875px;">2,586,456</td></tr><tr><td style="width: 412.13751220703125px;">Current number of issued shares</td><td style="text-align: right; width: 299.86248779296875px;">5,315,894</td></tr><tr><td style="width: 412.13751220703125px;">Number of issued shares post rights offering/tender offer</td><td style="text-align: right; width: 299.86248779296875px;">7,902,350</td></tr><tr><td colspan="2" style="width: 712px;">Source: KIND</td></tr></tbody></table>Below is the schedule for the upcoming events that we do not want to miss.<div><table class="table table-striped"><tbody><tr><td colspan="2" style="width: 711px;">Upcoming event schedule</td></tr><tr><td style="width: 414.2250061035156px;">Board resolution</td><td style="text-align: right; width: 296.7749938964844px;">Mar 21</td></tr><tr><td style="width: 414.2250061035156px;">Price determination (3-day VWAP)</td><td style="text-align: right; width: 296.7749938964844px;">Apr 13-17</td></tr><tr><td style="width: 414.2250061035156px;">Subscription (tendering period)</td><td style="text-align: right; width: 296.7749938964844px;">Apr 20 - May 9</td></tr><tr><td style="width: 414.2250061035156px;">Settlement (payment)</td><td style="text-align: right; width: 296.7749938964844px;">May 14</td></tr><tr><td style="width: 414.2250061035156px;">Allocation</td><td style="text-align: right; width: 296.7749938964844px;">May 31</td></tr><tr><td style="width: 414.2250061035156px;">Listing</td><td style="text-align: right; width: 296.7749938964844px;">June 1</td></tr><tr><td style="width: 414.2250061035156px;">Banker</td><td style="text-align: right; width: 296.7749938964844px;">KIS</td></tr><tr><td colspan="2" style="width: 711px;">Source: KIND</td></tr></tbody></table></div>

Cuckoo Holdings made it official that it would do a tender offer to Cuckoo Homesys shareholders for ₩254.2bil.This is the link of the regulatory filing about this (source: DART). It was filed yesterday (Mar 21).https://dart.fss.or.kr/report/viewer.do?rcpNo=20180321000358&amp;dcmNo=6007372&amp;eleId=0&amp;offset=0&amp;length=0&amp;dtd=dart3.xsdHere is a summary of this regulatory filing.First, the below swap price for Cuckoo Homesys is the final one. Cuckoo Holdings targets a total of 1,424,000 Cuckoo Homesys shares at the swap price of ₩178,500.Cuckoo HomesysClosing price on the most recent trading day (Mar 20) (A)₩178,5001W average (Mar 14-20) (B)₩178,8001M average (Feb 21-Mar 20) (C)₩182,658Arithmetic average (D=(A+B+C)/3)₩179,986Swap price per share (E=Min(A,D))₩178,500Target qty.1,424,000 sharesSource: KINDCuckoo Homesys share price for Feb 21-Mar 202018-03-20178,5002018-03-19178,5002018-03-16179,0002018-03-15181,5002018-03-14176,5002018-03-13179,0002018-03-12181,5002018-03-09182,0002018-03-08182,0002018-03-07187,0002018-03-06188,0002018-03-05188,5002018-03-02191,5002018-02-28178,0002018-02-27181,0002018-02-26183,5002018-02-23185,0002018-02-22184,5002018-02-21185,000Source: KINDNow, what is still to be finalized is Cuckoo Holdings' price per share to be swapped with Cuckoo Homesys' shares.In the regulatory filing, Cuckoo Holdings' price per share is tentatively set at ₩98,275, which is "tentatively" calculated based on the following formula.VWAP from Mar 14 to 16 with no discountDateClosing price (₩)Trade volume Trade value (₩)2018-03-1698,20011,5411,136,291,7002018-03-1598,2007,279711,964,2002018-03-1498,4009,863970,540,040Total trade value (₩)2,818,795,940Total trade volume28,6833-day VWAP (₩)98,274.10Discount0%Tentatively set swap price (₩ - rounded off)98,275Source: KINDSo, since this ₩98,275 is a tentative price, the number and amount of total new rights to be offered are also "tentative". It means all the numbers in the below table are just estimates.ItemTentativeFinal (to be finalized on Apr 17)"Tentative" price per share to be offered₩98,275???"Tentative" number of new rights to be offered2,586,456 common shares???"Tentative" amount of new rights to be offered₩254,183,963,400???Source: KINDThen, when will Cuckoo Holdings' swap price be finalized? It will be finalized on Apr 17 based on the following formula.VWAP from Apr 13 to 17 with no discountSo, once we finalize Cuckoo Holdings' swap price on Apr 17,then we will subsequently get a total number/amount of Cuckoo Holdings new rights to be offered based on the following formula.A = Cuckoo Homesys 1,424,000 shares x ₩178,500B = Cuckoo Holdings' share price to be swappedC = Number of Cuckoo Holdings shares to be offered = A / BD = Amount of Cuckoo Holdings shares to be offered = B × CIn the end, Cuckoo Holdings' shareholding structure will look like this.Cuckoo Holdings' shareholding structure post rights offering/tender offerNew rights offering2,586,456Current number of issued shares5,315,894Number of issued shares post rights offering/tender offer7,902,350Source: KINDBelow is the schedule for the upcoming events that we do not want to miss.Upcoming event scheduleBoard resolutionMar 21Price determination (3-day VWAP)Apr 13-17Subscription (tendering period)Apr 20 - May 9Settlement (payment)May 14AllocationMay 31ListingJune 1BankerKISSource: KIND

Cuckoo Holdings & Cuckoo Homesys Tender Offer Event Summary