Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Cross Asset Strategy

<p>One of the most important developments arising in Korea is the potential <strong>amendment of the</strong><strong><a href="https://n.news.naver.com/article/009/0004680246?cds=news_edit" target="_blank" rel="noopener">Fair Trade Act</a>,</strong> especially on the clause involving (일감몰아주기), which includes taking strict actions against excessive intra-affiliate transactions among large business groups. </p>
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<p>Overall, it appears that the potential changes to the Fair Trade Act could be very disruptive for so many top Korean companies. Plus, although the incumbent party (Democratic Party of Korea) has a lot of power in the National Assembly, it remains uncertain whether the government will actually be able to make the amendments since the changes in regulations could be so burdensome on so many top business groups in Korea. In addition, even if they pass the amendments, it is not all sure if the controlling shareholders will reduce their ownership in their companies. </p>
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One of the most important developments arising in Korea is the potential amendment of theFair Trade Act, especially on the clause involving (일감몰아주기), which includes taking strict actions against excessive intra-affiliate transactions among large business groups. 

Overall, it appears that the potential changes to the Fair Trade Act could be very disruptive for so many top Korean companies. Plus, although the incumbent party (Democratic Party of Korea) has a lot of power in the National Assembly, it remains uncertain whether the government will actually be able to make the amendments since the changes in regulations could be so burdensome on so many top business groups in Korea. In addition, even if they pass the amendments, it is not all sure if the controlling shareholders will reduce their ownership in their companies. 


Will SK Holdings Required to Sell a 25% Stake in SK Biopharm Due to Changes in the Fair Trade Act?

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/chindata-group-holdings-adr" target="_blank" data-smartkarma-citation="entities:29274:1" rel="noopener">Chindata (CD US)</a> is a data centre operator which is backed by Bain Capital (57.17% shareholder), APG Strategic Real Estate Pool/Dutch pension funds (10.43%) and <a href="https://www.smartkarma.com/entities/sk-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:393:1" rel="noopener">SK Holdings (034730 KS)</a> (8.94%). Chindata has launched its IPO at a price range of $11.50-13.50 per ADS. There is also a $135 million concurrent private placement with <a href="https://www.smartkarma.com/entities/country-garden-holdings-co" target="_blank" data-smartkarma-citation="entities:5225:1" rel="noopener">Country Garden Holdings Co (2007 HK)</a> ($65 million), Sequoia Capital ($40 million) and Mr Hui Wing Mau, Chairman of Shimao Group ($30 million). At the mid-point of the IPO price range and along with the concurrent private placement, Chindata will raise net proceeds of $597 million. </p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/chindata-group-ipo-initiation-where-the-cloud-meets-the-ground" target="_blank" rel="noopener">our initiation note</a>, we stated that Chindata is an attractive play on the favourable Asia-Pacific hyperscale data centre market dynamics. Overall, we would be inclined to participate in the IPO at the proposed price range. </p></div></div></div>

Chindata (CD US) is a data centre operator which is backed by Bain Capital (57.17% shareholder), APG Strategic Real Estate Pool/Dutch pension funds (10.43%) and SK Holdings (034730 KS) (8.94%). Chindata has launched its IPO at a price range of $11.50-13.50 per ADS. There is also a $135 million concurrent private placement with Country Garden Holdings Co (2007 HK) ($65 million), Sequoia Capital ($40 million) and Mr Hui Wing Mau, Chairman of Shimao Group ($30 million). At the mid-point of the IPO price range and along with the concurrent private placement, Chindata will raise net proceeds of $597 million. In our initiation note, we stated that Chindata is an attractive play on the favourable Asia-Pacific hyperscale data centre market dynamics. Overall, we would be inclined to participate in the IPO at the proposed price range. 

<p>In this insight, we provide the price action comparisons of <a href="https://www.smartkarma.com/entities/sk-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:393:1" rel="noopener">SK Holdings (034730 KS),</a><a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS),</a> and <a href="https://www.smartkarma.com/entities/netmarble-corporation" target="_blank" data-smartkarma-citation="entities:22839:1" rel="noopener">Netmarble Corporation (251270 KS)</a> prior to the IPOs and their bookbuilding dates of SK Biopharm, Kakao Games, and Big Hit Entertainment. </p>
<p>Unlike SK Holdings and Kakao Corp whose share price prices increased in the one and two weeks prior to the start of the bookbuilding of SK Biopharm and Kakao Games, Netmarble Corp's share price has been declining in the one and two weeks prior to the start of the bookbuilding of Big Hit Entertainment. </p>
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<p><strong>We believe this is a BAD sign for the Big Hit Entertainment IPO since it could signal that after analyzing the prospectus of Big Hit Entertainment IPO, many institutional investors may conclude this IPO will be disappointing. </strong></p>
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In this insight, we provide the price action comparisons of SK Holdings (034730 KS),Kakao Corp (035720 KS), and Netmarble Corporation (251270 KS) prior to the IPOs and their bookbuilding dates of SK Biopharm, Kakao Games, and Big Hit Entertainment. 
Unlike SK Holdings and Kakao Corp whose share price prices increased in the one and two weeks prior to the start of the bookbuilding of SK Biopharm and Kakao Games, Netmarble Corp's share price has been declining in the one and two weeks prior to the start of the bookbuilding of Big Hit Entertainment. 

We believe this is a BAD sign for the Big Hit Entertainment IPO since it could signal that after analyzing the prospectus of Big Hit Entertainment IPO, many institutional investors may conclude this IPO will be disappointing. 


Comparison of SK Holdings, Kakao, & Netmarble Prior to IPOs of SK Biopharm, Kakao Games, & Big Hit

APAC IPOs & Placements

Zhen Zhou, Toh

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.

<div><p><a href="https://www.smartkarma.com/entities/sk-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:393:1" rel="noopener">SK Holdings (034730 KS)</a> is looking to raise around US$326m via selling 3.6% of <a href="https://www.smartkarma.com/entities/esr-cayman-ltd" target="_blank" data-smartkarma-citation="entities:27983:1" rel="noopener">ESR Cayman (1821 HK)</a>. Post-selldown, SK Holdings will still have about 7.4% stake in the company.</p></div><div><p>We covered the company's first and second listing attempt extensively, you can find links to our coverage below. </p></div><div><p>In this insight, we will briefly look at the 1H 2020 results, discuss deal dynamics and run the deal through our ECM framework.</p></div><p>June placement:</p><ul><li>
<a href="https://www.smartkarma.com/insights/esr-cayman-placement-hasn-t-done-much-since-listing-liquidity-remains-tight" target="_blank" data-smartkarma-citation="insights:40084" rel="noopener">ESR Cayman Placement - Hasn't Done Much Since Listing, Liquidity Remains Tight</a> </li></ul><div><p>Links to our earlier insights:</p></div><div><ul>
<li>Company's business model and provided an overview of its operations, <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-a-giant-in-the-making" target="_blank" rel="noopener">ESR Cayman Pre-IPO - A Giant in the Making</a>; </li>
<li>Talked about the financials and the drivers for each of the three segments, <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-earnings-and-segment-analysis" target="_blank" rel="noopener">ESR Cayman Pre-IPO - Earnings and Segment Analysis</a>.</li>
<li>Derived valuation for each of the segments: <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-first-stab-at-valuation" target="_blank" rel="noopener">ESR Cayman Pre-IPO- First Stab at Valuation</a>
</li>
<li>Provided updates from the PHIP: <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-updates-from-phip-growth-remains-on-track" target="_blank" rel="noopener">ESR Cayman Pre-IPO - Updates from PHIP - Growth Remains on Track</a>
</li>
<li>Provided an update on valuations and key risks: <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-updated-valuation-and-key-risks" target="_blank" rel="noopener">ESR Cayman Pre-IPO - Updated Valuation and Key Risks</a>
</li>
<li>Did a quick comparison with peers: <a href="https://www.smartkarma.com/insights/esr-cayman-pre-ipo-peer-comparison-quick-take-bigger-than-some-much-smaller-than-others" target="_blank" rel="noopener">ESR Cayman Pre-IPO - Peer Comparison Quick Take - Bigger than Some, Much Smaller than Others</a>
</li>
<li>Details of the previous listing attempt and comments on final valuations: <a href="https://www.smartkarma.com/insights/esr-cayman-ipo-richly-valued" target="_blank" rel="noopener">ESR Cayman IPO - Richly Valued</a>
</li>
<li>Updates from the re-filed application proof: <a href="https://www.smartkarma.com/insights/esr-cayman-re-pre-ipo-the-more-things-change-the-more-they-remain-the-same" target="_blank" rel="noopener">ESR Cayman Re-Pre-IPO - The More Things Change, the More They Remain the Same</a>
</li>
<li>Re-look at valuations: <a href="https://www.smartkarma.com/insights/esr-cayman-re-pre-ipo-another-stab-at-valuation" target="_blank" rel="noopener">ESR Cayman Re-Pre-IPO - Another Stab at Valuation</a>
</li>
<li>Final comment on valuations post deal launch: <a href="https://www.smartkarma.com/insights/esr-cayman-re-ipo-trying-to-hitch-a-ride-on-momentum-other-cheaper-ways-to-play-on-e-commerce" target="_blank" rel="noopener">ESR Cayman Re-IPO - Trying to Hitch a Ride on Momentum. Other Cheaper Ways to Play on E-Commerce</a>
</li>
<li>Trading update at the time of listing: <a href="https://www.smartkarma.com/insights/esr-cayman-ipo-trading-riding-higher-on-momentum-some-book-colour-privatisation-comparison" target="_blank" rel="noopener">ESR Cayman IPO Trading - Riding (Higher) On Momentum - Some Book Colour, Privatisation Comparison</a>
</li>
</ul></div>

SK Holdings (034730 KS) is looking to raise around US$326m via selling 3.6% of ESR Cayman (1821 HK). Post-selldown, SK Holdings will still have about 7.4% stake in the company.We covered the company's first and second listing attempt extensively, you can find links to our coverage below. In this insight, we will briefly look at the 1H 2020 results, discuss deal dynamics and run the deal through our ECM framework.June placement:
ESR Cayman Placement - Hasn't Done Much Since Listing, Liquidity Remains Tight Links to our earlier insights:
Company's business model and provided an overview of its operations, ESR Cayman Pre-IPO - A Giant in the Making; 
Talked about the financials and the drivers for each of the three segments, ESR Cayman Pre-IPO - Earnings and Segment Analysis.
Derived valuation for each of the segments: ESR Cayman Pre-IPO- First Stab at Valuation

Provided updates from the PHIP: ESR Cayman Pre-IPO - Updates from PHIP - Growth Remains on Track

Provided an update on valuations and key risks: ESR Cayman Pre-IPO - Updated Valuation and Key Risks

Did a quick comparison with peers: ESR Cayman Pre-IPO - Peer Comparison Quick Take - Bigger than Some, Much Smaller than Others

Details of the previous listing attempt and comments on final valuations: ESR Cayman IPO - Richly Valued

Updates from the re-filed application proof: ESR Cayman Re-Pre-IPO - The More Things Change, the More They Remain the Same

Re-look at valuations: ESR Cayman Re-Pre-IPO - Another Stab at Valuation

Final comment on valuations post deal launch: ESR Cayman Re-IPO - Trying to Hitch a Ride on Momentum. Other Cheaper Ways to Play on E-Commerce

Trading update at the time of listing: ESR Cayman IPO Trading - Riding (Higher) On Momentum - Some Book Colour, Privatisation Comparison



ESR Cayman Placement - Even More to Come Soon

<p><a href="https://www.smartkarma.com/entities/chindata-group-holdings-adr" target="_blank" data-smartkarma-citation="entities:29274:1" rel="noopener">Chindata (CD US)</a> is a data centre operator. It is the largest carrier-neutral hyperscale data centre operator in Asia-Pacific emerging markets as measured by capacity in service, with 21.5% market share out of a total market size of 829 MW, according to Frost &amp; Sullivan. Chindata is backed by Bain Capital (57.17% shareholder), APG Strategic Real Estate Pool/Dutch pension funds (10.43%) and <a href="https://www.smartkarma.com/entities/sk-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:393:1" rel="noopener">SK Holdings (034730 KS)</a> (8.94%). It is seeking to raise up to $800 million (primary and secondary sale) through a Nasdaq IPO, according to press reports. </p><div class="content-highlight"><p>The Asia-Pacific hyperscale data centre market is a structural growth market in part due to the increasing prevalence of outsourcing data centre services, rising client demand for higher power density and scalability, and increasing compliance and regulatory requirements on data security. Overall, we think that Chindata is an attractive play on these favourable market dynamics. </p></div>

Chindata (CD US) is a data centre operator. It is the largest carrier-neutral hyperscale data centre operator in Asia-Pacific emerging markets as measured by capacity in service, with 21.5% market share out of a total market size of 829 MW, according to Frost &amp; Sullivan. Chindata is backed by Bain Capital (57.17% shareholder), APG Strategic Real Estate Pool/Dutch pension funds (10.43%) and SK Holdings (034730 KS) (8.94%). It is seeking to raise up to $800 million (primary and secondary sale) through a Nasdaq IPO, according to press reports. The Asia-Pacific hyperscale data centre market is a structural growth market in part due to the increasing prevalence of outsourcing data centre services, rising client demand for higher power density and scalability, and increasing compliance and regulatory requirements on data security. Overall, we think that Chindata is an attractive play on these favourable market dynamics. 

Chindata Group IPO Initiation: Where the Cloud Meets the Ground

South Korea

SK Holdings Co., Ltd. is a holdings company that is engaged in various industries including energy, chemicals, information technology, semiconductors, marketing, and services businesses in South Korea and internationally.

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SK Inc (034730 KS)

Will SK Holdings Required to Sell a 25% Stake in SK Biopharm Due to Changes in the Fair Trade Act?

One of the most important developments arising in Korea is the potential amendment of the Fair Trade Act, which includes taking strict actions...

Douglas Kim

Chindata Group IPO: Valuation Insights

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Arun George

Comparison of SK Holdings, Kakao, & Netmarble Prior to IPOs of SK Biopharm, Kakao Games, & Big Hit

We believe this is a BAD sign for the Big Hit Entertainment IPO since it could signal that after analyzing the prospectus of Big Hit Entertainment...

Douglas Kim

ESR Cayman Placement - Even More to Come Soon

A group of shareholders, including Warburg Pincus, aim to raise around US$177m via selling 2.7% of ESR Cayman (1821 HK). We had covered the...

Zhen Zhou, Toh

Chindata Group IPO Initiation: Where the Cloud Meets the Ground

Chindata is a data centre operator. It is the largest carrier-neutral hyperscale data centre operator in Asia-Pacific emerging markets as measured...

Arun George

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