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

Poongsan Holdings Stub Trade: Current Status & Trade Approach

Event-Driven

<ul>
<li>Poongsan Holdco/Sub duo is now at +277% of σ on a 20D MA. This is the highest in 120 days. Price ratio wise, they are a little above 120D mean. Holdco discount is 52% to NAV.</li>
<li>Sub share price has been closely correlated to the US-China trade war lately. Copper price is the single most important factor of Sub share price. US-China talks are currently affecting copper price enormously. Sub has again become a punching bag of short sellers amid fresh concerns over US-China trade.</li>
<li>Sub is now hitting a 9x PER on already harshly adjusted FY19 earnings. This level is substantially lower than FY18 yearend PER of 12.0x. Valuation wise, Sub shares seem to be hitting bottom at this point. Sub shares moving at least sideways will lead to a mean reversion on Holdco/Sub price ratio.</li>
<li>I expect it to happen at this point regardless of which direction the US-China talks are heading. Given Sub's current valuation, Sub wouldn't take more beating. I'd go long Sub and short Holdco now. Just, Holdco liquidity can be an issue to many of us here.</li>
</ul>


Poongsan Holdco/Sub duo is now at +277% of σ on a 20D MA. This is the highest in 120 days. Price ratio wise, they are a little above 120D mean. Holdco discount is 52% to NAV.
Sub share price has been closely correlated to the US-China trade war lately. Copper price is the single most important factor of Sub share price. US-China talks are currently affecting copper price enormously. Sub has again become a punching bag of short sellers amid fresh concerns over US-China trade.
Sub is now hitting a 9x PER on already harshly adjusted FY19 earnings. This level is substantially lower than FY18 yearend PER of 12.0x. Valuation wise, Sub shares seem to be hitting bottom at this point. Sub shares moving at least sideways will lead to a mean reversion on Holdco/Sub price ratio.
I expect it to happen at this point regardless of which direction the US-China talks are heading. Given Sub's current valuation, Sub wouldn't take more beating. I'd go long Sub and short Holdco now. Just, Holdco liquidity can be an issue to many of us here.


Poongsan Holdings Reverse Stub Trade: Current Status & Trade Approach

Poongsan Corp

Poongsan Holdings Reverse Stub Trade: Current Status & Trade Approach