Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<div><p>Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, raised US$1.3bn in its South Korean IPO. Kakao held a 55% stake prior to listing, with Ant Financial holding the balance 45% stake.</p></div><div><p>We have covered most aspects of the deal in our earlier notes:</p></div><div><ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/kakao-pay-ipo-guided-by-ant-financial-to-be-a-mini-ant" target="_blank" rel="noopener">Kakao Pay IPO - Guided by Ant Financial to be a mini Ant,</a></li>
<li><a href="https://www.smartkarma.com/insights/kakao-pay-ipo-peer-comparison-local-and-international" target="_blank" rel="noopener">Kakao Pay IPO - Peer comparison - local and international, and</a></li>
</ul></div><div><ul style="list-style-type: disc;"><li><a href="https://www.smartkarma.com/insights/kakao-pay-ipo-valuation-and-likely-impact-of-latest-announcement" target="_blank" rel="noopener">Kakao Pay IPO - Valuation and Likely Impact of Latest Announcement</a></li></ul></div><div><ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/kakao-pay-ipo-low-end-still-appear-reasonable-but-stock-will-more-likely-be-driven-by-sentiment" target="_blank" rel="noopener">Kakao Pay IPO - Low-End Still Appear Reasonable but Stock Will More Likely Be Driven by Sentiment</a></li>
<li><a href="https://www.smartkarma.com/insights/kakao-pay-ipo-comparison-with-kakao-bank-and-an-alternate-look-at-valuation" target="_blank" rel="noopener">Kakao Pay IPO - Comparison with Kakao Bank and an Alternate Look at Valuation</a></li>
</ul></div><p>In this note, we will talk about the deal's trading dynamics.</p>

Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, raised US$1.3bn in its South Korean IPO. Kakao held a 55% stake prior to listing, with Ant Financial holding the balance 45% stake.We have covered most aspects of the deal in our earlier notes:
Kakao Pay IPO - Guided by Ant Financial to be a mini Ant,
Kakao Pay IPO - Peer comparison - local and international, and
Kakao Pay IPO - Valuation and Likely Impact of Latest Announcement
Kakao Pay IPO - Low-End Still Appear Reasonable but Stock Will More Likely Be Driven by Sentiment
Kakao Pay IPO - Comparison with Kakao Bank and an Alternate Look at Valuation
In this note, we will talk about the deal's trading dynamics.

Semiconductors, Memory and SSDs Specialist, Objective Analysis

Jim Handy

Semiconductors, Memory and SSDs Specialist

Objective Analysis

Objective Analysis offers third-party independent market research and data for the semiconductor industry and investors in the semiconductor industry.

Semiconductors, Memory and SSDs

Equity Bottom-Up

<p>Samsung announced near-record semiconductor revenues in its third quarter on 28 October 2021.  Management indicated that this strength, that has bolstered the firm's overall revenues, seems likely to continue into 2022.</p>

Samsung announced near-record semiconductor revenues in its third quarter on 28 October 2021.  Management indicated that this strength, that has bolstered the firm's overall revenues, seems likely to continue into 2022.

Samsung Reports Near-Record Semi Revenues With Strong Outlook

<p>SK hynix posted record revenues in 3Q21 despite lackluster performance from its DRAM business.  This provides the possibility that 4Q21 earnings, with continuing NAND flash success and the recovery of lost DRAM revenues, could be a stellar quarter for the company.</p>

SK hynix posted record revenues in 3Q21 despite lackluster performance from its DRAM business.  This provides the possibility that 4Q21 earnings, with continuing NAND flash success and the recovery of lost DRAM revenues, could be a stellar quarter for the company.

SK Hynix: Record Revenues, Promising Future

Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

Below is the amount of inheritance tax for Samsung founding family members. They were given a five-year grace period. So, one-sixth was paid on April 30th this year, the due date of payment, and the remaining five-sixths have to be paid by the end of each year over five years.In the case of Lee Jae-yong, the total inheritance tax is ₩2.90T, and he paid ₩0.48T in April of this year. And he has to make a total of 5 payments of ₩ 0.48T for five years from the end of this year.









The inheritance tax burden for each family member
Lee Jae-yong
Hong Ra-hee
Lee Bu-jin
Lee Seo-hyun


Total
₩2.90T
₩3.10T
₩2.60T
₩2.40T

 

: Already-paid (one-sixth) at April-end of 2021
₩0.48T
₩0.52T
₩0.43T
₩0.40T


Remaining (five-sixths)
₩2.42T
₩2.58T
₩2.17T
₩2.00T


: Due at the yearend of 2021
₩0.48T
₩0.52T
₩0.43T
₩0.40T

Source: DART &amp; KRX FIND

Of course, the inheritance tax of this size is not a small amount for them either. Their wealth consists mostly of stocks. Artworks and real estate are difficult to liquidate. Most of the cash consists of dividends, but short-term cash holdings are estimated to be negligible.Below are the shares they each hold.









Stake holding in %
Lee Jae-yong
Hong Ra-hee
Lee Bu-jin
Lee Seo-hyun


Samsung Electronics Co Ltd
1.63%
2.30%
0.93%
0.93%


Samsung Electronics Co Ltd Preference Shares Non Voting
0.02%
0.03%
0.02%
0.02%


Samsung C&amp;T Corp
18.13%
0.97%
6.24%
6.24%


Samsung Life Insurance co., Ltd
10.44%
0.00%
6.92%
3.46%


Samsung SDS Co Ltd
9.20%
0.00%
3.90%
3.90%

Source: DART &amp; KRX FIND

And below is the current market value of these shares. If we look at the value of their stakes, it is enough to pay the inheritance tax.









Stake holding in value
Lee Jae-yong
Hong Ra-hee
Lee Bu-jin
Lee Seo-hyun


Samsung Electronics Co Ltd
₩6.84T
₩9.63T
₩3.89T
₩3.89T


Samsung Electronics Co Ltd Preference Shares Non Voting
₩0.01T
₩0.01T
₩0.01T
₩0.01T


Samsung C&amp;T Corp
₩4.07T
₩0.22T
₩1.40T
₩1.40T


Samsung Life Insurance co., Ltd
₩1.47T
₩0.00T
₩0.97T
₩0.49T


Samsung SDS Co Ltd
₩1.12T
₩0.00T
₩0.47T
₩0.47T



: Total
₩13.50T
₩9.87T
₩6.75T
₩6.26T

Source: DART &amp; KRX FIND

The problem, however, is to pay the inheritance tax without compromising the control of the group.First, they appear to have covered their first payment in April by using dividends and credit loans.And they recently announced that they plan to cover the second payment at the end of this year through the sale of their shares. As shown below, they seem to have carefully chosen which to sell. In the case of Lee Bu-jin and Lee Seo-hyun (the daughters), the amount to be paid in the first and second payments and the amount raised by this year are roughly the same. Hong Ra-hee (the spouse) raised money (₩2.40T) that was significantly more than the amount owed right away (₩0.96T). The reason for this has not yet been clearly disclosed.









Personal financings
Lee Jae-yong
Hong Ra-hee
Lee Bu-jin
Lee Seo-hyun


Bank lines of credit: April 2021
₩0.00T
₩1.00T
₩0.33T
₩0.39T


: Annual interest rate
-
3.79%
2.40%
2.52%


: Annual interest payment
-
₩37.92B
₩7.94B
₩9.74B


: Lenders

Woori Bank, Hana Bank, KIC, &amp; Meritz Securities
Hana Bank &amp; KIC
Hana Bank, KIC, &amp; Hana Securities



Stake disposal (trust contract): October~December 2021
₩0.00T
₩1.40T
₩0.24T
₩0.48T


: Stake for sale
-
Samsung Electronics (0.33%)
Samsung SDS (1.95%)
Samsung SDS (1.95%) &amp; Samsung Life (1.73%)


: Trust institution
-
KB Bank
KB Bank
KB Bank


: Contract date
-
2021. 10. 05
2021. 10. 05
2021. 10. 05


: Contract ends
-
2022. 04. 25
2022. 04. 25
2022. 04. 25


: Disposal deadline
-
N/A
N/A
2021. 12. 24



: Total
₩0.00T
₩2.40T
₩0.57T
₩0.87T

Source: DART

And most importantly, Lee Jae-yong hasn't raised a dime this year. He appears to have made up his first payment with only the cash he had (probably financed mainly through dividends).Therefore, the market is interested in Lee Jae-yong's financing plan to pay the upcoming inheritance tax payments, which might have been one of the reasons why the stock prices of Samsung Electronics and Samsung SDS have continued to underperform the market.In the end, Jae-Yong Lee's only options for financing are dividends, bank loans, and the sale of shares. In the case of stake sale, Samsung Electronics and Samsung SDS are the only stakes that can be sold without damaging management rights.

Samsung Lee Family Inheritance Tax Payment Situation & Suggested Trading Positions

TMT & Consumer Independent Equity Research Analyst, Obex Capital Research

Aaron Gabin

TMT & Consumer Independent Equity Research Analyst

TMT & Consumer Independent Equity Research

Obex Capital Research

“Obex” is Latin for Barriers to Entry. Obex Capital Management’s investment philosophy is driven by an intense focus on which business model’s Barriers to Entry are able to withstand the ever increasing competitive disruption in the TMT and Consumer Sectors.

<p>Intel’s CEO Pat Gelsinger is a religious man. In the 2000s, he wrote “Balancing Your Family, Faith, and Work” and “The Juggling Act: Bringing Balance to Your Faith, Family, and Work.” If one is an Intel investor today, you too need to have deep faith and believe that miracles are possible.  Like believing that Intel, who will have grown revenues at a 3.7% CAGR from 2011–2021 (inclusive of acquiring MobileEye and Altera), has lost its way on process manufacturing, and is hemorrhaging market share to AMD and ARM-based CPUs is poised to grow revenues at a 10–12% CAGR over the next 4-5 years. We are not believers.</p><div class="content-highlight"><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div>

Intel’s CEO Pat Gelsinger is a religious man. In the 2000s, he wrote “Balancing Your Family, Faith, and Work” and “The Juggling Act: Bringing Balance to Your Faith, Family, and Work.” If one is an Intel investor today, you too need to have deep faith and believe that miracles are possible.  Like believing that Intel, who will have grown revenues at a 3.7% CAGR from 2011–2021 (inclusive of acquiring MobileEye and Altera), has lost its way on process manufacturing, and is hemorrhaging market share to AMD and ARM-based CPUs is poised to grow revenues at a 10–12% CAGR over the next 4-5 years. We are not believers.Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

South Korea

Samsung Electronics Co., Ltd. manufactures a wide range of consumer and industrial electronic equipment and products such as semiconductors, personal computers, peripherals, monitors, televisions, and home appliances including air conditioners and microwave ovens. The Company also produces Internet access network systems and telecommunications equipment including mobile phones.

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Samsung Electronics (005930 KS)

Kakao Pay IPO Trading - Won't Be Chasing

Kakao Pay, one of South Korea’s largest payment and financial services apps, raised around US$1.3bn in its South Korean IPO. Kakao held a 55% stake...

Sumeet Singh

Samsung Reports Near-Record Semi Revenues With Strong Outlook

Like its competitors Micron and SK hynix, Samsung has profited well from memories and promises to continue along this path, perhaps to replicate...

Jim Handy

SK Hynix: Record Revenues, Promising Future

Despite stumbling in DRAM, SK hynix posted record revenues, and seems poised to do even better in 4Q21. NAND flash is finally making important...

Jim Handy

Samsung Lee Family Inheritance Tax Payment Situation & Suggested Trading Positions

This post examines the latest situation of the Samsung founding family's inheritance tax payment and explores appropriate trading positions.

Sanghyun Park

Intel 3Q21: Delusions of a Madman

If one is an Intel investor today, you too need to have deep faith and believe that miracles are possible. Like believing Intel is poised to grow...

Aaron Gabin

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