Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Event-Driven

The HMG restructuring speculation is widely spreading in Korea. This isn't only market speculation. Some of Korea's established news outlets are putting out reports suggesting that the HMG restructuring is really imminent. CES first brought this up at the Carlyle meeting back in May. Then, two months later HMG had an overseas IR specifically designed for the restructuring. This kind of IR is certainly rare for HMG. Finally, what is being heard locally is that HMG demanded both Mobis and Glovis to put all the major projects on hold. This immediately sparked market wide speculation that the restructuring announcement is really just around corner.

The HMG restructuring speculation is widely spreading in Korea. This isn't only market speculation. Some of Korea's established news outlets are putting out reports suggesting that the HMG restructuring is really imminent. CES first brought this up at the Carlyle meeting back in May. Then, two months later HMG had an overseas IR specifically designed for the restructuring. This kind of IR is certainly rare for HMG. Finally, what is being heard locally is that HMG demanded both Mobis and Glovis to put all the major projects on hold. This immediately sparked market wide speculation that the restructuring announcement is really just around corner.

HMG Restructuring Speculation: HMG Ordered Mobis/Glovis to Put Major Projects on Hold

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

It was reported after the market close yesterday that <a href="https://www.smartkarma.com/entities/lg-corp" target="_blank" data-smartkarma-citation="entities:6653:1">LG Corp (003550 KS)</a> plans to sell 35% or more stake of LG CNS for about 1 trillion won. LG CNS is the system integration IT service unit of the LG Group.We believe that this announcement to sell about 35% stake of LG CNS will provide a further positive boost to LG Corp's share price since it could increase the probability of paying out higher dividends.LG CNS has relatively stable financials. It generated sales of 3.1 trillion won (up 3.8% YoY) and operating profit of 187.1 billion won (down 25.5% YoY) in 2018. The company's operating margin averaged 6.1% during this period.

It was reported after the market close yesterday that LG Corp (003550 KS) plans to sell 35% or more stake of LG CNS for about 1 trillion won. LG CNS is the system integration IT service unit of the LG Group.We believe that this announcement to sell about 35% stake of LG CNS will provide a further positive boost to LG Corp's share price since it could increase the probability of paying out higher dividends.LG CNS has relatively stable financials. It generated sales of 3.1 trillion won (up 3.8% YoY) and operating profit of 187.1 billion won (down 25.5% YoY) in 2018. The company's operating margin averaged 6.1% during this period.

Korea M&A Spotlight: LG Corp Plans to Sell 35% Stake of LG CNS for About 1 Trillion Won

Materials Analyst/Strategist, Janus Analysis

Gaius King

Materials Analyst/Strategist

Accelerating Tomorrow’s Independent Research

Boost Research

Boost Research Ltd is an appointed representative of Messels Ltd which is authorised and regulated by the FCA of the UK. 

This document is issued by Boost Research Limited solely for its clients. It may not be reproduced, redistributed or passed to any other person in whole or in part for any purpose without written consent of Boost Research. The material in this document is not intended for distribution or use outside the United Kingdom. This material is not directed at you if Boost Research is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you.

This document is provided for information purposes only and should not be regarded as an offer, solicitation, invitation, inducement or recommendation relating to the subscription, purchase or sale of any security or other financial instrument.  This document does not constitute, and should not be interpreted as, investment advice.  It is accordingly recommended that you should seek independent advice from a suitably qualified professional advisor before taking any decisions in relation to the investments detailed herein. All expressions of opinions and estimates constitute a judgement and, unless otherwise stated, are those of the author and the research department of Boost Research only, and are subject to change without notice. Boost Research is under no obligation to update the information contained herein. Whilst Boost Research has taken all reasonable care to ensure that the information contained in this document is not untrue or misleading at the time of publication, Boost Research cannot guarantee its accuracy or completeness, and you should not act on it without first independently verifying its contents. This document is not guaranteed to be a complete statement or summary of any securities, markets, reports or developments referred to herein. No representation or warranty either expressed or implied is made, nor responsibility of any kind is accepted, by Boost Research or any of its respective directors, officers, employees or analysts either as to the accuracy or completeness of any information contained in this document nor should it be relied on as such. No liability whatsoever is accepted by Boost Research or any of its respective directors, officers, employees or analysts for any loss, whether direct or consequential, arising whether directly or indirectly as a result of the recipient acting on the content of this document, including, without limitation, lost profits arising from the use of this document or any of its contents.

This document is provided with the understanding that Boost Research is not acting in a fiduciary capacity and it is not a personal recommendation to you. Investing in securities entails risks. Past performance is not necessarily a guide to future performance. The value of and the income produced by products may fluctuate, so that an investor may get back less than he invested. Investments in the entities and/or the securities or other financial instruments referred to are not suitable for all investors and this document should not be relied upon in substitution for the exercise of independent judgment in relation to any such investment. The stated price of any securities mentioned herein will generally be the closing price at the end of any of the three business days immediately prior to the publication date on this document. This stated price is not a representation that any transaction can be effected at this price.

Boost Research and its respective analysts are remunerated for providing investment research to professional investors, corporations, other research institutions and consultancy houses. Boost Research, or its respective directors, officers, employees and clients may have or take positions in the securities or entities mentioned in this document.  Any of these circumstances could create, or be perceived as creating, conflicts of interest. Boost Research’ analysts are not censored in any way and are free to express their personal opinions. As a result, Boost Research may have issued other documents that are inconsistent with and reach different conclusions from, the information contained in this document. Those documents reflect the different assumptions, views and analytical methods of their authors. No director, officer or employee of Boost Research is on the board of directors of any company referenced herein and no one at any such referenced company is on the board of directors of Boost Research.

Messels is authorised and regulated in the United Kingdom by the Financial Conduct Authority for the provision of investment advice. Residents of the United Kingdom should seek specific professional financial and investment advice from a stockbroker, banker, solicitor, accountant or other independent professional adviser authorised pursuant to the Financial Services and Markets Act 2000. This report is intended only for investors who are 'professional clients' as defined by the FCA, and may not, therefore, be redistributed to other classes of investors.

The content of this report is covered by our Policy of Independence which may be viewed at www.messels.com.

 

Analysts’ Certification

The analysts involved in the production of this document hereby certify that the views expressed in this document accurately reflect their personal views about the securities mentioned herein. The analysts point out that they may buy, sell or already have taken positions in the securities, and related financial instruments, mentioned in this document

Thematic (Sector/Industry)

<ul>
<li>Transportation industries Kodak Moment embracing Hybrids, modest near-term EV growth</li>
<li>Widespread adoption of Hydrogen considered unlikely</li>
<li>41% of Platinum &amp; 84% of Palladium reliant on autocatalyst demand</li>
<li>Hybrids in Europe up 107% in three years at 1:7 to diesel counterparts, without subsidies</li>
<li>Hybrid premium ~ 8% like-for-like over a combustion vehicle </li>
<li>Carpooling/ride-share platforms have hallmarks of being a macro-trend</li>
<li>W. Asian carpool CAGR of 77.6% over past 11 years</li>
<li>Est. by close 2019 &gt;62m people globally will utilise trans. platforms, forgoing car ownership
</li>
<li>Adverse impact on vehicle growth, models, drive-trains, R&amp;D, insurance &amp; finance </li>
<li>Logistics industry diesel transitioning will affect LT PGM demand, in particular platinum</li>
<li>Primary platinum-surplus to grow in time, downward pressure on price</li>
</ul>
Auto-catalysts make up the majority of platinums (41%) and in particular, palladium (84%) end use demand.  To determine the future demand profile for PGMs, therefore, we examined the types and likelihood of future drivetrains, as well as technologies affecting unit demand.
Hydrogen's key attraction is its potential green credentials, and if it was to ever became a reality, resultant PGM catalyst demand would outstrip all existing suppliers.  To achieve that noble aim, however, gargantuan energy resources would be needed to conduct electrolysis of water, thermodynamically, a very energy intensive process.  Our analysis concludes that hydrogen will remain a boutique industry, confined to economies with abundant hydrocarbon production, with conversion relying on steam reformation.  Overall impact of hydrogen on PGM demand, will be marginal at best.
Presently, EVs have substantial range and recharge hurdles to overcome before they could ever be a primary mode of transport for many; with global demand primarily driven by Chinese directives, not by the Western consumer.  In the short to medium-term, we do not expect EVs to impact PGM demand significantly.  However, we preface that statement by our belief that in the longer-term, the largest adopter of EVs will be within the commercial logistics sector, currently dominated by diesel power plants, which rely on a substantial amount of platinum within its auto-catalysts.  Widespread adoption of EVs and robotic drones and the replacement of traditional diesel drivetrains will only exacerbate current over-supply in platinum, in time, we forecast its price to fall substantially.
Hybrid sales are up 107% in Europe over the past three years without any state subsidies.  It is reasonable to assume that potential demand of PGMs have, and will continue to be, stymied by hybrid advances.  But we expect overall (even modest) growth in car volume sales should maintain current market dynamics, in the short to medium term.
Carpooling and a host of other transactional transport options are now a realistic, flexible and affordable life-style choice, that contradict the necessity of car ownership.  Especially among the inner-city urbanites, with Asia averaging a CAGR of 77.6% over the past decade.  Car manufacturers are already experiencing significant sales headwinds.  On average it has been found that members/fleet ratio (i.e. No. of cars divided by No. of members) range between 61 – 76, a fraction of unit demand when compared with an average Western family of three or four members, often owning two vehicles.  Using decade average regional CAGRs, projecting three years in advance, the potential number of decreased car sales globally could reach 62m by the close of 2019.  To put that into context, Volkswagen and Toyota produce between 10 to 11m  units each pa.  This raises the question of whether recent sluggish global car sales is somehow related to the almost exponential growth in carpooling/ride-share platforms?


Transportation industries Kodak Moment embracing Hybrids, modest near-term EV growth
Widespread adoption of Hydrogen considered unlikely
41% of Platinum &amp; 84% of Palladium reliant on autocatalyst demand
Hybrids in Europe up 107% in three years at 1:7 to diesel counterparts, without subsidies
Hybrid premium ~ 8% like-for-like over a combustion vehicle 
Carpooling/ride-share platforms have hallmarks of being a macro-trend
W. Asian carpool CAGR of 77.6% over past 11 years
Est. by close 2019 &gt;62m people globally will utilise trans. platforms, forgoing car ownership

Adverse impact on vehicle growth, models, drive-trains, R&amp;D, insurance &amp; finance 
Logistics industry diesel transitioning will affect LT PGM demand, in particular platinum
Primary platinum-surplus to grow in time, downward pressure on price

Auto-catalysts make up the majority of platinums (41%) and in particular, palladium (84%) end use demand.  To determine the future demand profile for PGMs, therefore, we examined the types and likelihood of future drivetrains, as well as technologies affecting unit demand.
Hydrogen's key attraction is its potential green credentials, and if it was to ever became a reality, resultant PGM catalyst demand would outstrip all existing suppliers.  To achieve that noble aim, however, gargantuan energy resources would be needed to conduct electrolysis of water, thermodynamically, a very energy intensive process.  Our analysis concludes that hydrogen will remain a boutique industry, confined to economies with abundant hydrocarbon production, with conversion relying on steam reformation.  Overall impact of hydrogen on PGM demand, will be marginal at best.
Presently, EVs have substantial range and recharge hurdles to overcome before they could ever be a primary mode of transport for many; with global demand primarily driven by Chinese directives, not by the Western consumer.  In the short to medium-term, we do not expect EVs to impact PGM demand significantly.  However, we preface that statement by our belief that in the longer-term, the largest adopter of EVs will be within the commercial logistics sector, currently dominated by diesel power plants, which rely on a substantial amount of platinum within its auto-catalysts.  Widespread adoption of EVs and robotic drones and the replacement of traditional diesel drivetrains will only exacerbate current over-supply in platinum, in time, we forecast its price to fall substantially.
Hybrid sales are up 107% in Europe over the past three years without any state subsidies.  It is reasonable to assume that potential demand of PGMs have, and will continue to be, stymied by hybrid advances.  But we expect overall (even modest) growth in car volume sales should maintain current market dynamics, in the short to medium term.
Carpooling and a host of other transactional transport options are now a realistic, flexible and affordable life-style choice, that contradict the necessity of car ownership.  Especially among the inner-city urbanites, with Asia averaging a CAGR of 77.6% over the past decade.  Car manufacturers are already experiencing significant sales headwinds.  On average it has been found that members/fleet ratio (i.e. No. of cars divided by No. of members) range between 61 – 76, a fraction of unit demand when compared with an average Western family of three or four members, often owning two vehicles.  Using decade average regional CAGRs, projecting three years in advance, the potential number of decreased car sales globally could reach 62m by the close of 2019.  To put that into context, Volkswagen and Toyota produce between 10 to 11m  units each pa.  This raises the question of whether recent sluggish global car sales is somehow related to the almost exponential growth in carpooling/ride-share platforms?

PGMs: Facing Technological Obsolescence? (P. 2)

The top 10 events impacting the Korean stock market, economy, &amp; politics in March were as follows:<ul>
<li>SEMICONDUCTOR SECTOR WARNINGS</li>
<li>KOREAN AIR &amp; ASIANA AIR CHAIRMEN ARE THROWN OUT/QUIT</li>
<li>HYUNDAI AUTOEVER IPO</li>
<li>KOREAN COMPANIES SHUTTING DOWN &amp; RESTRUCTURING OPERATIONS IN CHINA</li>
<li>NEXON M&amp;A</li>
<li>KOSPI 200 &amp; KOSDAQ 150 REBALANCING</li>
<li>CONSERVATIVES VS. LIBERALS POPULARITY IN KOREA</li>
<li>FINE DUST PROBLEM</li>
<li>CLOSING OUT THE HYOSUNG TNC/HYOSUNG CORP PAIR TRADE</li>
<li>BURNING SUN</li>
</ul><hr>The top three reports we wrote in March related to the Korean market were as follows (in terms of views &amp; appreciates): <ul>
<li><a href="https://www.smartkarma.com/insights/nexon-valuation-analysis" target="_blank" data-smartkarma-citation="insights:28306">Nexon Valuation Analysis</a></li>
<li><a href="https://www.smartkarma.com/insights/a-list-of-major-korean-companies-shutting-down-or-restructuring-their-operations-in-china" target="_blank" data-smartkarma-citation="insights:28745">A List of Major Korean Companies Shutting Down or Restructuring Their Operations in China</a></li>
<li><a href="https://www.smartkarma.com/insights/hyundai-autoever-ipo-valuation-analysis" target="_blank" data-smartkarma-citation="insights:28398">Hyundai Autoever IPO Valuation Analysis</a></li>
</ul>Our model portfolio was up 0.3% in March (cash is 35% of model portfolio), outperforming KOSPI which was down 2.5% in March. Our model portfolio is equal-weighted at the beginning of each month. The top performing stocks in our model portfolio in March included <a href="https://www.smartkarma.com/entities/15983" target="_blank" data-smartkarma-citation="entities:15983:1">F&amp;F Co Ltd (007700 KS)</a>, <a href="https://www.smartkarma.com/entities/14122" target="_blank" data-smartkarma-citation="entities:14122:1">Nongshim Co Ltd (004370 KS)</a>, and <a href="https://www.smartkarma.com/entities/5169" target="_blank" data-smartkarma-citation="entities:5169:1">NCsoft Corp (036570 KS)</a>.

The top 10 events impacting the Korean stock market, economy, &amp; politics in March were as follows:
SEMICONDUCTOR SECTOR WARNINGS
KOREAN AIR &amp; ASIANA AIR CHAIRMEN ARE THROWN OUT/QUIT
HYUNDAI AUTOEVER IPO
KOREAN COMPANIES SHUTTING DOWN &amp; RESTRUCTURING OPERATIONS IN CHINA
NEXON M&amp;A
KOSPI 200 &amp; KOSDAQ 150 REBALANCING
CONSERVATIVES VS. LIBERALS POPULARITY IN KOREA
FINE DUST PROBLEM
CLOSING OUT THE HYOSUNG TNC/HYOSUNG CORP PAIR TRADE
BURNING SUN
The top three reports we wrote in March related to the Korean market were as follows (in terms of views &amp; appreciates): 
Nexon Valuation Analysis
A List of Major Korean Companies Shutting Down or Restructuring Their Operations in China
Hyundai Autoever IPO Valuation Analysis
Our model portfolio was up 0.3% in March (cash is 35% of model portfolio), outperforming KOSPI which was down 2.5% in March. Our model portfolio is equal-weighted at the beginning of each month. The top performing stocks in our model portfolio in March included F&amp;F Co Ltd (007700 KS), Nongshim Co Ltd (004370 KS), and NCsoft Corp (036570 KS). 

Korea Stock Market Monthly Recap #34 (March 2019)

Equity Capital Markets

Hyundai Autoever  / Equity Capital Markets

<ul>
<li>Subscription rate is 797 to 1. Offer price was fixed at ₩48,000, substantially higher than the upper end. Deal size is now ₩168.5bil. Company value is put at slightly higher than ₩1tril. Demands are spread out pretty well between long-term funds and hot money and local and foreign investors as well. All of the orders are universally placed at 75% of upper end or higher.</li>
<li>Local street is betting on Autoever/Glovis merger not long after this IPO. That is, HMG is still wanting the initial Glovis/Mobis merger plan. To better manage to win shareholder support, they must be thinking that bigger Glovis can be an answer. This means HMG should do whatever it takes to make Autoever bigger in the immediate future.</li>
<li>This is what local street is betting on and why they went really aggressive on this IPO. As witnessed in the bookbuilding results, this street mentalitywon't be changed any time soon. We should expect even stronger prices after new shares are listed on Mar 28.</li>
</ul>


Subscription rate is 797 to 1. Offer price was fixed at ₩48,000, substantially higher than the upper end. Deal size is now ₩168.5bil. Company value is put at slightly higher than ₩1tril. Demands are spread out pretty well between long-term funds and hot money and local and foreign investors as well. All of the orders are universally placed at 75% of upper end or higher.
Local street is betting on Autoever/Glovis merger not long after this IPO. That is, HMG is still wanting the initial Glovis/Mobis merger plan. To better manage to win shareholder support, they must be thinking that bigger Glovis can be an answer. This means HMG should do whatever it takes to make Autoever bigger in the immediate future.
This is what local street is betting on and why they went really aggressive on this IPO. As witnessed in the bookbuilding results, this street mentalitywon't be changed any time soon. We should expect even stronger prices after new shares are listed on Mar 28.


Hyundai Autoever IPO Bookbuilding: Surprising Results, Local Street Bets on Autoever/Glovis Merger

South Korea

Hyundai Autoever Corp. provides information technology services. The Company offers system integration, system management, information system development, and other services. Hyundai Autoever offers services worldwide.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Hyundai Autoever (307950 KS)

HMG Restructuring Speculation: HMG Ordered Mobis/Glovis to Put Major Projects on Hold

The HMG restructuring speculation is widely spreading in Korea. This isn't only market speculation. Some of Korea's established news outlets are...

Sanghyun Park

Korea M&A Spotlight: LG Corp Plans to Sell 35% Stake of LG CNS for About 1 Trillion Won

It was reported after the market close yesterday that LG Corp (003550 KS) plans to sell 35% or more stake of LG CNS for about 1 trillion won. LG...

Douglas Kim

PGMs: Facing Technological Obsolescence? (P. 2)

Transportation industries Kodak Moment embracing Hybrids, modest near-term EV growth Widespread adoption of Hydrogen considered unlikely 41% of...

Boost Research

Korea Stock Market Monthly Recap #34 (March 2019)

The top 10 events impacting the Korean stock market, economy, & politics in March were as follows: SEMICONDUCTOR SECTOR WARNINGS KOREAN AIR...

Douglas Kim

Hyundai Autoever IPO Bookbuilding: Surprising Results, Local Street Bets on Autoever/Glovis Merger

Subscription rate is 797 to 1. Offer price was fixed at ₩48,000, substantially higher than the upper end. Deal size is now ₩168.5bil. Company...

Sanghyun Park

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)