Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Nearly 25 years of experience in analyzing hundreds of companies, especially in Asia. Deep expertise in the following sectors:
- Technology (E-commerce, SaaS, Internet)
- Consumer 
- Special Situations/Deep Value Plays
- Holdcos/Stubs
- Asian Unicorns/Private Companies

Korea/Asia, Events, IPOs

Metrica's Activist Move on SK Chemical Is a Well-Thought-Out Strategy

SK Chemicals' Timely Spinoff Announcement Amid Metrica's Activist Move: What to Make of It

SK Chemicals - Spinning Off Its Utility Business & Creating Higher Value

SK Bioscience: Stock Price Up 393% Since IPO & 6 Months Lockup Period Ending in 1 Month

Initial Thoughts on the SK Bioscience IPO - Backed by Bill Gates

SK Chemicals - Its Market Cap Is Only 19% of Its Stake in SK Bioscience

COVID-19 Vaccinations in Korea: Digging the Details

Event-Driven

<p>A Singapore based activist hedge fund called Metrica Partners wrote a letter to the BOD of Sk Chemicals Co Ltd/New (285130 KS) which has become publicly available. The key highlights of the letter is that SK Chemicals should take partial profits on its stake in SK Bioscience (302440 KS) and pay higher dividends. Today, there was a big divergence in the share prices of SK Chemicals (up 8.8%) and SK Bioscience (down 6.7%). </p><p>Basically, the hedge fund believes that the shares of SK Chemicals are excessively undervalued, given its big stake (68.4%) in SK Bioscience. Metrica Partners currently has less than 5% stake in SK Chemicals. </p><div class="content-highlight">
<div>We believe that a higher probability scenario is for SK Chemicals to sell down about 3-5% stake in SK Bioscience which could be announced in the next 3-6 months. SK Bioscience currently has a market cap of 21.95 trillion won (287,000 won), If we take a 10% discount to this amount, it would be 19.76 trillion won and a 5% stake sale would involve 1 trillion won. </div>
<div></div>
<div>In other words, we would put a higher probability of SK Chemicals selling about 5% of its stake in SK Bioscience which could raise about 1 trillion won for the company. While this would be laudable, it would be much smaller than the measures proposed by Metrica. Of the 1 trillion won, we think that the BOD of SK Chemicals could allocate about 30-40% of this amount for special dividends.</div>
</div><div>All in all, a hedge fund going activist on SK Chemicals is likely to further rally the share price and we believe that the price gap between SK Chemicals and SK Bioscience is likely to narrow further in the weeks ahead. </div>

A Singapore based activist hedge fund called Metrica Partners wrote a letter to the BOD of Sk Chemicals Co Ltd/New (285130 KS) which has become publicly available. The key highlights of the letter is that SK Chemicals should take partial profits on its stake in SK Bioscience (302440 KS) and pay higher dividends. Today, there was a big divergence in the share prices of SK Chemicals (up 8.8%) and SK Bioscience (down 6.7%). Basically, the hedge fund believes that the shares of SK Chemicals are excessively undervalued, given its big stake (68.4%) in SK Bioscience. Metrica Partners currently has less than 5% stake in SK Chemicals. 
We believe that a higher probability scenario is for SK Chemicals to sell down about 3-5% stake in SK Bioscience which could be announced in the next 3-6 months. SK Bioscience currently has a market cap of 21.95 trillion won (287,000 won), If we take a 10% discount to this amount, it would be 19.76 trillion won and a 5% stake sale would involve 1 trillion won. 

In other words, we would put a higher probability of SK Chemicals selling about 5% of its stake in SK Bioscience which could raise about 1 trillion won for the company. While this would be laudable, it would be much smaller than the measures proposed by Metrica. Of the 1 trillion won, we think that the BOD of SK Chemicals could allocate about 30-40% of this amount for special dividends.
All in all, a hedge fund going activist on SK Chemicals is likely to further rally the share price and we believe that the price gap between SK Chemicals and SK Bioscience is likely to narrow further in the weeks ahead. 

Metrica Partners Urges SK Chemicals to Partially Sell SK Bioscience & Pay Higher Dividends