Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>S&amp;P DJI commenced a market consultation for the S&amp;P Global Water Index on 29 July and that could lead to quite a few changes to the index in October.</li>
<li>We currently see 14 deletions and 10 inclusions for the index in October. Most of the changes will have a high impact from passive fund trading.</li>
<li>There could be more changes in April 2023 once stocks listed in Emerging Markets are included in the index.</li>
</ul>


S&amp;P DJI commenced a market consultation for the S&amp;P Global Water Index on 29 July and that could lead to quite a few changes to the index in October.
We currently see 14 deletions and 10 inclusions for the index in October. Most of the changes will have a high impact from passive fund trading.
There could be more changes in April 2023 once stocks listed in Emerging Markets are included in the index.


S&P Global Water Index: Market Consultation Driven Potential Changes

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.

<ul>
<li>The local street hears KRX has bumped it up to 14.68%. With the 1% rounding applied, it becomes 15%.</li>
<li>It is extremely rare for a Fast Entry to come in with a float market cap of +₩10T. So, we will see significant weight adjustments for the other constituents.</li>
<li>As we move towards the implementation date, we can consider basket-shorting those high-impact names for LG Energy's long hedge.</li>
</ul>


The local street hears KRX has bumped it up to 14.68%. With the 1% rounding applied, it becomes 15%.
It is extremely rare for a Fast Entry to come in with a float market cap of +₩10T. So, we will see significant weight adjustments for the other constituents.
As we move towards the implementation date, we can consider basket-shorting those high-impact names for LG Energy's long hedge.


LG Energy's KOSPI 200 Float Is 15%: Weight Adjustment Trading for Other Constituents

<p>It is now clear that Netmarble sold part of its stake in Kakao Bank yesterday in the market to finance the acquisition of SpinX, a social casino company.</p><p>In other words, Netmarble sold its Kakao Bank stake because it needed immediate cash. <span>Earlier this month, Netmarble announced that it would purchase a 100% stake in Leonardo Interactive Holdings Limited, the parent company of SpinX.</span></p><div class="content-highlight"><p><strong>The 100% stake acquisition price is ₩2.513T.</strong></p></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/223/219/original/Screen+Shot+2021-08-11+at+1.48.24+AM.png?1628661029" class="editor-image img-responsive" data-smartkarma-image-id="223219"></figure></section><p>Netmarble said in a regulatory filing that it would pay 80% of the acquisition price at the time of contract termination and the remaining 20% ​​over the next four years.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/223/225/original/Screen+Shot+2021-08-11+at+1.51.07+AM.png?1628661602" class="editor-image img-responsive" data-smartkarma-image-id="223225"></figure></section><p><strong>It means that the total money Netmarble needs right now is ₩2.104T, which is 80% of the acquisition amount. Netmarble revealed that ₩1.779T of this ₩2.104T was covered by short-term borrowing. In other words, the immediate cash needed right now is ₩232B.</strong></p><p>However, Netmarble's cash assets at the end of this first quarter stood at ₩260B. Even ₩232B is a size that needs to use up all of its cash holdings, so it places a significant financial burden on Netmarble.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/223/228/original/Screen+Shot+2021-08-11+at+2.05.56+AM.png?1628662449" class="editor-image img-responsive" data-smartkarma-image-id="223228"></figure></section>

It is now clear that Netmarble sold part of its stake in Kakao Bank yesterday in the market to finance the acquisition of SpinX, a social casino company.In other words, Netmarble sold its Kakao Bank stake because it needed immediate cash. Earlier this month, Netmarble announced that it would purchase a 100% stake in Leonardo Interactive Holdings Limited, the parent company of SpinX.The 100% stake acquisition price is ₩2.513T.Netmarble said in a regulatory filing that it would pay 80% of the acquisition price at the time of contract termination and the remaining 20% ​​over the next four years.It means that the total money Netmarble needs right now is ₩2.104T, which is 80% of the acquisition amount. Netmarble revealed that ₩1.779T of this ₩2.104T was covered by short-term borrowing. In other words, the immediate cash needed right now is ₩232B.However, Netmarble's cash assets at the end of this first quarter stood at ₩260B. Even ₩232B is a size that needs to use up all of its cash holdings, so it places a significant financial burden on Netmarble.

Three Local Stocks Exposed to Netmarble's Stake Sale Risk: NCsoft, HYBE, & Kakao Games

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<p><a href="https://www.smartkarma.com/entities/netmarble-corporation" target="_blank" data-smartkarma-citation="entities:22839:1" rel="noopener">Netmarble Corporation (251270 KS) </a>announced today after the market close that it has agreed to purchase a 100% stake of a Hong-Kong based game company <a href="https://financialpost.com/pmn/business-pmn/s-koreans-netmarble-buys-hong-kong-based-casino-game-app-co-spinx-for-2-19-bln" target="_blank" rel="noopener">SpinX for $2.19 billion</a> (2.5 trillion won). This is the biggest ever overseas M&amp;A deal by a Korean game company. According to Netmarble, it has agreed purchased SpinX in order to diversify its game portfolios and strengthen its global business competitiveness. </p><p data-dvp_reel_position="top" data-dvp_title_trim="90" data-dvp_desc_trim="40" data-dvp_zindex_base="1" data-dvp_reel_thumbs="4" data-dvp_reel_clickout="1" data-dvp_dockspec="br/400/225" data-dvp_docktrigger="oov" data-dvp_closescope="pageview" data-dvp_closedelay="15">We believe that the acquisition of SpinX is an excellent deal for Netmarble and this deal is likely to have a positive impact on Netmarble's share price in the coming weeks. Netmarble is leveraging up to acquire SpinX, which is experiencing very fast sales growth with solid profit margins. Netmarble is raising 1.8 trillion won in debt.</p><div class="content-highlight"><p><strong>SpinX's ROE in 2020 was super high at about 90%. So if the company can raise debt at 3-4% and acquire a company that has 90% ROE would be spending capital wisely.</strong></p></div>

Netmarble Corporation (251270 KS) announced today after the market close that it has agreed to purchase a 100% stake of a Hong-Kong based game company SpinX for $2.19 billion (2.5 trillion won). This is the biggest ever overseas M&amp;A deal by a Korean game company. According to Netmarble, it has agreed purchased SpinX in order to diversify its game portfolios and strengthen its global business competitiveness. We believe that the acquisition of SpinX is an excellent deal for Netmarble and this deal is likely to have a positive impact on Netmarble's share price in the coming weeks. Netmarble is leveraging up to acquire SpinX, which is experiencing very fast sales growth with solid profit margins. Netmarble is raising 1.8 trillion won in debt.SpinX's ROE in 2020 was super high at about 90%. So if the company can raise debt at 3-4% and acquire a company that has 90% ROE would be spending capital wisely.

Netmarble Buys SpinX for $2.2 Billion: Biggest Ever Overseas M&A Deal by a Korean Game Company

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/coway-co-ltd" target="_blank" data-smartkarma-citation="entities:3022:1" rel="noopener">Coway Co Ltd (021240 KS)</a>, the leading water- and air purifier rental company in South Korea was traditionally an attractive dividend yield play until early 2020 when ownership, and strategy, changed from upstreaming cash to private equity towards investing for longer-term sustainable growth. </p><p>Since mid-2020 its share price has been under pressure given doubts on management’s ability to execute on reigniting growth, as well as perceptions around domestic market share losses. Even after its recent positive share price move, post 1Q21 results, Coway is still trading on just 12.3x NTM PE which is more than one standard deviation below its 5-year historical average trading range. This implies a PEG ratio of just over 1.5x, which is certainly not demanding for a company that delivers ROEs of well above 20%, is highly cash generative, and commands leading market share in its domestic and key overseas markets. </p><p>In this insight I look at recent results, and catch up with management, to look for evidence that the strategy could be working and assess whether the potential for longer-term value unlock exists.</p>

Coway Co Ltd (021240 KS), the leading water- and air purifier rental company in South Korea was traditionally an attractive dividend yield play until early 2020 when ownership, and strategy, changed from upstreaming cash to private equity towards investing for longer-term sustainable growth. Since mid-2020 its share price has been under pressure given doubts on management’s ability to execute on reigniting growth, as well as perceptions around domestic market share losses. Even after its recent positive share price move, post 1Q21 results, Coway is still trading on just 12.3x NTM PE which is more than one standard deviation below its 5-year historical average trading range. This implies a PEG ratio of just over 1.5x, which is certainly not demanding for a company that delivers ROEs of well above 20%, is highly cash generative, and commands leading market share in its domestic and key overseas markets. In this insight I look at recent results, and catch up with management, to look for evidence that the strategy could be working and assess whether the potential for longer-term value unlock exists.

Coway: Transitioning from Dividend Play to Growth Stock

South Korea

Coway Co Ltd develops, manufactures, maintains, and markets environment-related products, such as water purifiers, air cleaners, and water softeners.The Company also provides water testing service.

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Coway Co Ltd (021240 KS)

S&P Global Water Index: Market Consultation Driven Potential Changes

S&P DJI's market consultation for the S&P Global Water Index could lead to quite a few changes to the index in October. There are a few potential...

Brian Freitas

LG Energy's KOSPI 200 Float Is 15%: Weight Adjustment Trading for Other Constituents

KRX has bumped up LG Energy's float to 15%. As a result, we will see a more substantial passive impact on LG Energy. Also, we should see...

Sanghyun Park

Three Local Stocks Exposed to Netmarble's Stake Sale Risk: NCsoft, HYBE, & Kakao Games

Netmarble will continue to need short-term cash. Perhaps, for this reason, the stock prices of all three stocks exposed to this risk have undergone...

Sanghyun Park

Netmarble Buys SpinX for $2.2 Billion: Biggest Ever Overseas M&A Deal by a Korean Game Company

Netmarble Corporation (251270 KS) announced today after the market close that it has agreed to purchase a 100% stake of a Hong-Kong based game...

Douglas Kim

Coway: Transitioning from Dividend Play to Growth Stock

In this insight I look at Coway’s recent results, and catch up with management, to look for evidence that the new strategy is working and whether...

Wium Malan, CFA

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