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

The Week That Was in NorthAsia@Smartkarma: Korea, Toshiba, and Korea

The Week That Was in NorthAsia@Smartkarma: Toshiba, a Failed Block Trade, and the Samsung Verdict

The Week That Was in NorthAsia@Smartkarma: Bean Counters, Dr. Copper, and Shin Ramyun

Thematic (Sector/Industry)

South korea Energy / Thematic (Sector/Industry)

Below is the full list of Japan/Korea related reports published last week on Smartkarma.DateInsight ProviderInsight TitleJapan4 SepNoriaki Hirakata, CFAAugust 2017 US Automotive Sales: Tropical Storm Harvey Reduced Selling Rate but by How Much?4 SepPelham SmithersHow Big Will the Global Music Industry Be in 2030?4 SepPelham SmithersFujifilm - Unloved, but Not Unlovable4 SepPelham SmithersNew Stem Cell Treatment for Parkinsons Positive for Catalent and Eisai4 SepPelham SmithersDid AstraZeneca Really Bid for Daiichi Sankyo, Did Daiichi Sankyo Really Turn Them Down?4 SepTravis LundyNakamoto Packs (7811) TOPIX Inclusion Event4 SepTravis LundyPro-Ship (3763 JP) TOPIX Inclusion Event4 SepMio Kato, CFAYaskawa Visit: Smartphones/Pricing Power Drive OPM Expansion, 2H Overshoot if IPhone 8 Delivers?5 SepPelham SmithersJapan Stock Market Strategy as We Head into the Last Third of the Year (Korea Permitting)5 SepTS LombardJapan – Adrift in a Sea of Profits5 SepTravis Lundy2017 Annual Nikkei 225 Rebalance Analyzed6 SepMio Kato, CFAToshiba: WDC Willingness to Swap TMC Stake for Improved JV Terms a Negative in Disguise?6 SepHenry SoediarkoBenesse Holding: Low Margin Business with Declining Customer6 SepDavid BlennerhassettStubWorld - Set-Up/Unwind Extremes: Japan Post, Wheelock (6 Sept 2017)6 SepMio Kato, CFAJapex: Bad News Out but Risk Remains with Oil Sands Just Above Cash Cost7 SepCustom Products GroupJapan and the Financial Sector in Asia Highly Correlated to the US....7 SepScott FosterMisumi Group (9962 JP): Consolidation Underway8 SepTravis LundyAkatsuki (3932 JP) TOPIX Inclusion - Low ADV to Buy but Lotsa Growth In There8 SepTravis LundyBesterra (1433 JP) TOPIX Inclusion - Not Inexpensive8 SepMio Kato, CFAJapex Visit: Some Incremental Positives but Lacking Large Catalyst to Draw Investor Attention8 SepMio Kato, CFAJDI Visit: Tough FY18 but Company Confident. We Feel Some Apple Business Will Remain in FY198 SepNew Street ResearchSoftbank - Accounting for the Vision Fund in Softbank9 SepScott FosterFujimi (5384 JP): Geared to Silicon Wafer DemandKorea4 SepDouglas KimThe Sixth Nuclear Weapons Test by North Korea - Implications (Biggest Global Geopolitical Risk?)4 SepManu BhaskaranGeo-Political Risks: What Will North Korea’s Provocations Lead To?4 SepJason TanSouth Korea: Deeper Structural Weaknesses Reflect Economic Malaise5 SepSanghyun ParkLotte Group Restructuring Part 5 - Issues Regarding Hotel Lotte &amp; Financial Affiliates5 SepDouglas KimMajor Rights Offerings Announced for Hyundai Electric &amp; Energy and Hyundai Construction Equipment5 SepYu MitsuhashiSector Capsule: Wearable Electronics in South Korea5 SepSanghyun ParkSunic System IPO Part 2 - Key Considerations for Bookbuilding6 SepSanghyun ParkHyundai E&amp;E &amp; Hyundai CE Rights Offerings - Specifics &amp; Market Reactions6 SepDouglas KimA Visit to Emart’s Starfield Goyang MegaMall6 SepThomas SchroederTrading NK Tensions7 SepPelham SmithersTrump Set to Pull Out of Free Trade Agreement with Korea7 SepJohn-Paul SmithKorea (Underweight):  Business as Usual Between the Government and the Chaebol (Part 3 of 6)7 SepKemp Dolliver, CFACelltrion Has Potential Manufacturing Headaches7 SepThomas SchroederSamsung Electronics Long Pair, Entry Levels and Macro Bull Targets7 SepSanghyun ParkSunic System IPO Part 3 - Bookbuilding Results8 SepDouglas KimTime to Take Profits on NCsoft8 SepKemp Dolliver, CFASurveying The Biosimilar Battlefield8 SepSanghyun ParkUTI IPO Summary - Unconventional History But Arouses Much Interest Among InvestorsTOPIX inclusion eventTravis touched on the stocks to be newly included in TOPIX on Oct 30 this year. Following are the names of these stocks and what he feels about them.Stocks to be included in TOPIXInclusion event will take placeShares to be bought by indexersGood trade?Nakamoto Packs Co Ltd (7811 JP)Oct 3020 days of ADVLooks pretty goodPro Ship Inc (3763 JP)Oct 3020 days of ADVLooks pretty goodAkatsuki Inc (3932 JP)Oct 30One day of volumePrima facie noBesterra (1433 JP)Oct 30One day of volumePrima facie noSource: Travis insightsTravis talked a little more about the two stocks that he thinks look pretty good, Nakamoto Packs Co Ltd (7811 JP) and Pro Ship Inc (3763 JP). As an event trade, he said he would suggest the price risks are still tilted to the upside. He added that he would buy any short-term underperformance of these two stocks.Great debate about NK's latest nuke testDouglas Kim again initiated a great debate about the North Korea nuke issue here in the Smartkarma community. How heated did this debate become among the Smartkarma's insight providers? This insight of Douglas attracted a total of 33 comments, making it Smartkarma's most commented insight last week.Doug says the nuclear weapons testings typically has not had a significant impact on the Korean stock market in the past. But he argues that there are three major factors that are different from the North Korean nuclear weapon testing yesterday as compared to five previous weapons testings.Trump's rhetoric to enforce maximum economic sanctionsThe global community's response against North Korea's nuclear threatsThe most powerful nuke testing yetSo, this is his conclusion.Xi Jinping does not want to disrupt China's powerful economic machine. China wants peace, not war. Xi Jinping wants to save face of China's political might &amp; influence. In the midst of these challenges, the next probable event is for China and the US to work together to go one up on economic sanctions - and that is a partial cut off of oil supplies to North Korea.Of the great and thoughtful comments made by Smartkarma insight providers on the NK nuke issue in this insight, I particularly like to introduce the one made by Howard J Klein. I took the liberty of summarizing it.NK has put Xi in an impossible situation from which there is no easy exit strategy unless he finally comes to the conclusion that to put China at economic or demographic risk by massive NK refugee crisis, cannot be stopped without his making some kind of deal with Trump, all is lost. One difference from the past US stance: Nobody is for one minute under any illusions about Trump--for all his misfires diplomatically--will not hesitate to take military action if any US interests or ally in Asia is actually attacked by NK. The danger here I believe is in the lunatic miscalculations of NK that they actually think their bloviating threats have the slightest impact on intimidating the US. It is the exact opposite. The more NK tweaks and tests, the more determined Trump will be to act. And it won't be a slap on the wrist either. The scenarios are all set depending on the NK act, but they all can spell only one result: The end of NK period in very short order. Not pretty, not anything anyone wants to see, mostly Xi. It would not surprise me if a sudden side meeting occurred between Trump and Xi this autumn during Trump's trip and out of that came some kind of draconian sanction deal that both countries could live with politically as a last ditch effort to settle this insanity.Mio's company visitsMio Kato, CFA paid a visit to several key companies that garnered attention from the market in Japan. They are Yaskawa Electric Corp (6506 JP), Japan Petroleum Exploration (1662 JP) and Japan Display Inc (6740 JP). Below are what we currently have and will likely see from these three Japanese companies.Companies Mio visitedWhat we currently haveWhat we will likely seeYaskawa Electric Corp (6506 JP)Current demand from China is heavily iPhone driven and that 1Q is likely to be a short term peak. However, Many of Yaskawa's medium term efforts will start to generate positive results.Yaskawa is anticipating potential follow-on demand from Chinese smartphone manufacturers if the iPhone 8 proves to be a success.Japan Petroleum Exploration (1662 JP)Ignoring oil price fluctuations it appears that the company's earnings base is relatively steady through cost reduction and small bumps to domestic profit longer term from the expansion of production at Yufutsu and the start of power production at Soma.By the 2H2018 production should reach its maximum level of about 20,000 barrels/day and once this happens the company's profit sensitivity is likely to almost double at the OP level.Japan Display Inc (6740 JP)Conditions for the current year look difficult with panel pricing having resumed its decline since Apr and the company expects that it will be the end of the year at the earliest before we start to see some stabilization.Apparently, the company has managed to successfully negotiate a contract with Apple to supply at least 1 model of the iPhone next year. With a significantly lowered fixed cost base and the retention of what should be a significant amount of business to Apple on top of likely profitability improvements from the switch to Full Active, the company's 3% OPM target next year may be feasible.Source: Mio's insightsMio also discussed Japex' recent announcement of a JPY8.7bn charge to terminate plans to construct a pipeline and LNG facility in Canada due to prevailing Asian LNG prices.Initially the company had plans to import LNG from this facility for use at its Soma LNG terminal which is to supply its pipeline and truck/rail based LNG network in Northern Japan, as well as the Soma combined cycle gas power plant which is being constructed right next to the terminal.Current market conditions make replacement of the LNG supply relatively easy but the write-off highlights the tough conditions faced by the company, particularly in its North American operations.Despite looking cheap, the stub trade remains risky as crude prices dropping below US$40 would make the company's shale oil operations in Canada unprofitable on a cash basis and the low level of profitability for many of its operations that are typically low-risk, low-return skew potential returns downwards.-&gt; More insight summaries can be found below!

The Week That Was in NorthAsia@Smartkarma: NK Nuke, Topix, Nikkei 225, & HHI Recapitalization