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

Equity Bottom-Up

1. Why 37.5 percent? Why not taking only 3.0 percent?This does not necessarily mean that this move is the step towards creating a financial intermediary holding company. It is important to note that Samsung Card’s current share price is at the lowest since 2008. That is, this is a good time to buy Samsung Card shares at a cheap price. Already, Samsung Card share price started rising. Samsung Life can use its Samsung Card shares, which it acquired at a cheap price, to acquire additional shares of its affiliated financial firms, for instance, Samsung Securities (016360) shares.2. When and how will Korea’s Fair Trade Act be amended?Samsung’s recent moves are strong indications that the Fair Trade Act amendment may be passed before the general election. Samsung will then complete the creation of a financial intermediary holding company in the next one or two years. Samsung definitely needs to create a financial intermediary holding company before anything to facilitate the entire succession process. Now, the question is at what cost Korea’s Fair Trade Act will be amended to favor Samsung Group. For this, please refer to my previous note on this issue: “<a href="https://www.smartkarma.com/insights/samsung-electronics-005930-totally-new-view-on-samsung-s-electric-vehicle-business" target="_blank">Samsung Electronics (005930): Totally New View on Samsung’s Electric Vehicle Business</a>”3. Who will take 2.21 percent of SEC shares from Samsung Life?Samsung Life will sell only 2.21 percent of SEC shares just to meet the regulations for qualifying as a financial intermediary holding company. This means that Samsung Life has less intention of waiting until 2020 when the second phase of IFRS for insurance firms will be in effect because it has less problems associated with distributing its profits from selling SEC shares to its insurance policy holders. Nonetheless, Samsung top management and Vice Chairman Lee still need to come up with a viable solution to take 2.21 percent of SEC shares from Samsung Life.My recommendation at this moment: In the short-term, I see a strong upside potential of Samsung Card. In the long-term, I strongly advise you to pay attention to which financial affiliated companies will get most benefits from Samsung’s determination to create synergies between SEC and its financial affiliated companies.

1. Why 37.5 percent? Why not taking only 3.0 percent?This does not necessarily mean that this move is the step towards creating a financial intermediary holding company. It is important to note that Samsung Card’s current share price is at the lowest since 2008. That is, this is a good time to buy Samsung Card shares at a cheap price. Already, Samsung Card share price started rising. Samsung Life can use its Samsung Card shares, which it acquired at a cheap price, to acquire additional shares of its affiliated financial firms, for instance, Samsung Securities (016360) shares.2. When and how will Korea’s Fair Trade Act be amended?Samsung’s recent moves are strong indications that the Fair Trade Act amendment may be passed before the general election. Samsung will then complete the creation of a financial intermediary holding company in the next one or two years. Samsung definitely needs to create a financial intermediary holding company before anything to facilitate the entire succession process. Now, the question is at what cost Korea’s Fair Trade Act will be amended to favor Samsung Group. For this, please refer to my previous note on this issue: “Samsung Electronics (005930): Totally New View on Samsung’s Electric Vehicle Business”3. Who will take 2.21 percent of SEC shares from Samsung Life?Samsung Life will sell only 2.21 percent of SEC shares just to meet the regulations for qualifying as a financial intermediary holding company. This means that Samsung Life has less intention of waiting until 2020 when the second phase of IFRS for insurance firms will be in effect because it has less problems associated with distributing its profits from selling SEC shares to its insurance policy holders. Nonetheless, Samsung top management and Vice Chairman Lee still need to come up with a viable solution to take 2.21 percent of SEC shares from Samsung Life.My recommendation at this moment: In the short-term, I see a strong upside potential of Samsung Card. In the long-term, I strongly advise you to pay attention to which financial affiliated companies will get most benefits from Samsung’s determination to create synergies between SEC and its financial affiliated companies.

Samsung Fire & Marine Insurance (000810 KS)

Samsung Electronics (005930): Three Points to Consider from Sale of Samsung Card Shares