Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>We provide a dividend outlook for LG Uplus in this insight. The potential dividend yield for LG Uplus ranges from 3.7% to 4.9% in 2021.</li>
<li>LG Uplus shares are trading at attractive valuation multiples. They are currently trading at EV/EBITDA of 3.3x and P/E of 8.2x using 2021 consensus earnings estimates.</li>
<li>Although LG Uplus has had a slower start into the metaverse industry as compared to SK Telecom, LG Uplus has recently announced several measures to expand into the metaverse business.</li>
</ul>


We provide a dividend outlook for LG Uplus in this insight. The potential dividend yield for LG Uplus ranges from 3.7% to 4.9% in 2021.
LG Uplus shares are trading at attractive valuation multiples. They are currently trading at EV/EBITDA of 3.3x and P/E of 8.2x using 2021 consensus earnings estimates.
Although LG Uplus has had a slower start into the metaverse industry as compared to SK Telecom, LG Uplus has recently announced several measures to expand into the metaverse business.


LG Uplus: Improving Dividend Outlook & An Expansion into Metaverse Businesses

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

<ul>
<li>There will be 6 additions and 7 deletions for the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a> at the December rebalance that will be implemented on 9 December.</li>
<li>
<a href="https://www.smartkarma.com/entities/hyundai-heavy-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:33808:1" rel="noopener">Hyundai Heavy Industries (329180 KS)</a> and <a href="https://www.smartkarma.com/entities/kakao-pay-corp" target="_blank" data-smartkarma-citation="entities:29675:1" rel="noopener">Kakao Pay (377300 KS)</a> are Fast Entry inclusions to the index, while <a href="https://www.smartkarma.com/entities/innocean-worldwide-inc" target="_blank" data-smartkarma-citation="entities:26925:1" rel="noopener">Innocean Worldwide (214320 KS)</a> is a deletion on liquidity.</li>
<li>Depending on the float used by KRX, there could be a sharp move higher on <a href="https://www.smartkarma.com/entities/kakao-pay-corp" target="_blank" data-smartkarma-citation="entities:29675:1" rel="noopener">Kakao Pay (377300 KS)</a> as passive trackers could buy up to 15% of real float.</li>
</ul>


There will be 6 additions and 7 deletions for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the December rebalance that will be implemented on 9 December.

Hyundai Heavy Industries (329180 KS) and Kakao Pay (377300 KS) are Fast Entry inclusions to the index, while Innocean Worldwide (214320 KS) is a deletion on liquidity.
Depending on the float used by KRX, there could be a sharp move higher on Kakao Pay (377300 KS) as passive trackers could buy up to 15% of real float.


KOSPI200 Index Rebalance: Mostly Expected, Couple of Surprises

Event-Driven

<ul>
<li>SK Telecom (017670 KS) reported slightly better than expected results in 3Q 2021.</li>
<li>SK Telecom and SK Square will relist in about two and half weeks on 29 November.</li>
<li>The combined estimated value of SK Square and SK Telecom post split is 31.4 trillion won, which is 41% higher than current market cap of SK Telecom (pre-split).</li>
</ul>


SK Telecom (017670 KS) reported slightly better than expected results in 3Q 2021.
SK Telecom and SK Square will relist in about two and half weeks on 29 November.
The combined estimated value of SK Square and SK Telecom post split is 31.4 trillion won, which is 41% higher than current market cap of SK Telecom (pre-split).


SK Telecom - Major Highlights of 3Q 2021 Earnings & Updated Valuation

HD Hyundai Heavy Industries  / Index Rebalance

<p>The Korea Exchange (KRX) will announce the results of the December 2021 review of the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a> later this month and the constituent changes will be effective after the close of trading on 9 December.</p><p>With the review period now complete, we see 7 potential inclusions (5 regular + 2 Fast Entry) and 8 potential deletions from the index. There is one extra deletion to keep the number of index constituents at 200 following the inclusion of SK Square in the index post its spin-off from <a href="https://www.smartkarma.com/entities/sk-telecom-co-ltd-bbccd86c-474d-4a4d-946d-10e911a225a2" target="_blank" data-smartkarma-citation="entities:395:1" rel="noopener">SK Telecom (017670 KS)</a>.</p><p>The potential regular inclusions are <a href="https://www.smartkarma.com/entities/f-f-co-ltd-new" target="_blank" data-smartkarma-citation="entities:33479:1" rel="noopener">F&amp;F (383220 KS)</a>, <a href="https://www.smartkarma.com/entities/skckolonpi-inc" target="_blank" data-smartkarma-citation="entities:9196:1" rel="noopener">Skckolonpi Inc (178920 KS)</a>, <a href="https://www.smartkarma.com/entities/meritz-financial-group-inc" target="_blank" data-smartkarma-citation="entities:11776:1" rel="noopener">Meritz Financial Group (138040 KS)</a>, <a href="https://www.smartkarma.com/entities/sl-corp" target="_blank" data-smartkarma-citation="entities:20694:1" rel="noopener">SL Corp (005850 KS)</a> and <a href="https://www.smartkarma.com/entities/myoung-shin-industrial-co-ltd" target="_blank" data-smartkarma-citation="entities:29698:1" rel="noopener">Myoung Shin Industrial Co.,Ltd (009900 KS)</a> while the potential Fast Entry inclusions are <a href="https://www.smartkarma.com/entities/hyundai-heavy-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:33808:1" rel="noopener">Hyundai Heavy Industries (329180 KS)</a> and <a href="https://www.smartkarma.com/entities/kakao-pay-corp" target="_blank" data-smartkarma-citation="entities:29675:1" rel="noopener">Kakao Pay (377300 KS)</a>.</p><p>The potential deletions are <a href="https://www.smartkarma.com/entities/samyang-foods-co-ltd" target="_blank" data-smartkarma-citation="entities:9100:1" rel="noopener">Samyang Foods (003230 KS)</a>, <a href="https://www.smartkarma.com/entities/ilyang-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:2789:1" rel="noopener">Ilyang Pharmaceutical Co., (007570 KS)</a>, <a href="https://www.smartkarma.com/entities/lx-holdings" target="_blank" data-smartkarma-citation="entities:33384:1" rel="noopener">LX Holdings (383800 KS)</a>, <a href="https://www.smartkarma.com/entities/lotte-himart-co-ltd" target="_blank" data-smartkarma-citation="entities:12895:1" rel="noopener">Lotte Himart (071840 KS)</a>, <a href="https://www.smartkarma.com/entities/f-f-co-ltd" target="_blank" data-smartkarma-citation="entities:15983:1" rel="noopener">F&amp;F Co Ltd (007700 KS)</a>, <a href="https://www.smartkarma.com/entities/dongwon-f-b-co-ltd" target="_blank" data-smartkarma-citation="entities:3274:1" rel="noopener">Dongwon F&amp;B (049770 KS)</a>, <a href="https://www.smartkarma.com/entities/lx-hausys-ltd" target="_blank" data-smartkarma-citation="entities:11613:1" rel="noopener">LX Hausys Ltd (108670 KS)</a> and <a href="https://www.smartkarma.com/entities/nexen-tire-corp" target="_blank" data-smartkarma-citation="entities:14206:1" rel="noopener">Nexen Tire Corp (002350 KS)</a>.</p><p>There are quite a few stocks that are close adds but just miss out on making the 85% cumulative market cap cut or the 90% of current stocks from the sector in the index cut.</p><p>The potential inclusions have outperformed the potential deletions since August. After giving up some gains and then consolidating, the potential inclusion have started to outperform the potential deletions again over the last week.</p>

The Korea Exchange (KRX) will announce the results of the December 2021 review of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) later this month and the constituent changes will be effective after the close of trading on 9 December.With the review period now complete, we see 7 potential inclusions (5 regular + 2 Fast Entry) and 8 potential deletions from the index. There is one extra deletion to keep the number of index constituents at 200 following the inclusion of SK Square in the index post its spin-off from SK Telecom (017670 KS).The potential regular inclusions are F&amp;F (383220 KS), Skckolonpi Inc (178920 KS), Meritz Financial Group (138040 KS), SL Corp (005850 KS) and Myoung Shin Industrial Co.,Ltd (009900 KS) while the potential Fast Entry inclusions are Hyundai Heavy Industries (329180 KS) and Kakao Pay (377300 KS).The potential deletions are Samyang Foods (003230 KS), Ilyang Pharmaceutical Co., (007570 KS), LX Holdings (383800 KS), Lotte Himart (071840 KS), F&amp;F Co Ltd (007700 KS), Dongwon F&amp;B (049770 KS), LX Hausys Ltd (108670 KS) and Nexen Tire Corp (002350 KS).There are quite a few stocks that are close adds but just miss out on making the 85% cumulative market cap cut or the 90% of current stocks from the sector in the index cut.The potential inclusions have outperformed the potential deletions since August. After giving up some gains and then consolidating, the potential inclusion have started to outperform the potential deletions again over the last week.

KOSPI200 Index Rebalance Preview:  Review Period Complete & Trades Performing Well

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.

<p>Post-split valuation will be an essential factor in determining whether to invest after SK Telecom's relisting. From a short-term point of view, event trading will have the most significant impact on the share price, but whether the spin-off will unlock valuation soon after relisting is bound to emerge as the most crucial factor.</p><hr><p>So, let's take a look at each valuation of SK Telecom and SK Square. As shown below, each post-split company takes the following subsidiaries.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"SK Telecom"}'>SK Telecom</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"SK Investment"}'>SK Square</td>
</tr>
<tr>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"SK Broadband"}'><strong>SK Broadband</strong></td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"SK Hynix"}'>SK Hynix</td>
</tr>
<tr>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"SK Telink"}'><strong>SK Telink</strong></td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":" ADT Caps"}'>ADT Caps</td>
</tr>
<tr>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"PS&amp;Marketing"}'>PS&amp;Marketing</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"11st Street"}'>11st Street</td>
</tr>
<tr>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"F&amp;S Credit Info"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>F&amp;S Credit Info</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"T Map Mobility"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>T Map Mobility</td>
</tr>
<tr>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"Servie Top"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>Service Top</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"One Store"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>One Store</td>
</tr>
<tr>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"Service Ace"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>Service Ace</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":" Contents Wavve"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>Contents Wavve</td>
</tr>
<tr>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"SK O&amp;S"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>SK O&amp;S</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"Dream Us Company"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>Dream Us Company</td>
</tr>
<tr>
<td style="text-align: center;" data-sheets-numberformat='{"1":3,"2":"0.00000%"}'></td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"SK Planet"}'>SK Planet</td>
</tr>
<tr>
<td style="text-align: center;" data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'></td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"FSK L&amp;S"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>FSK L&amp;S</td>
</tr>
<tr>
<td style="text-align: center;" data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'></td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"Incross"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>Incross</td>
</tr>
<tr>
<td style="text-align: center;" data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'></td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"NanoNtech"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>Nano N Tech</td>
</tr>
<tr>
<td style="text-align: center;" data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'></td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"Spark Plus"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>Spark Plus</td>
</tr>
<tr>
<td style="text-align: center;" data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'></td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"SK Telecom CST1"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'><div>SK Telecom CST1</div></td>
</tr>
<tr>
<td style="text-align: center;" data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'></td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"SK Telecom TMT Investment"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'><div>SK Telecom TMT Investment</div></td>
</tr>
<tr>
<td style="text-align: center;" data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'></td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"ID Quantique"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>ID Quantique</td>
</tr>
<tr>
<td style="text-align: center;" data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'></td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"Techmaker"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>Techmaker</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: SED"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>Source: SK Telecom</td></tr>
</tbody>
</table><p>Assuming the company's equity-based split ratio (60.74% for SK Telecom and 39.26% for SK Square) reflects the fair value of both companies, post-split SK Telecom currently has a valuation of ₩13.61T and SK Square is valued at ₩8.80T.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Valuation"}'>Valuation</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"SK Telecom"}'>SK Telecom</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"SK Telecom, post-split"}'>SK Telecom, post-split</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"SK Square, post-split"}'>SK Square, post-split</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Split ratio"}'>Split ratio</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>100.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.6074}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Valuation!R[43]C[-1]">60.74%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.3926}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Valuation!R[43]C[-1]">39.26%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Current market cap"}'><strong>Current market cap</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":22.410704473}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula='=googlefinance("017670", "price")*googlefinance("017670", "shares")/1000000000000'><strong>₩22.41T</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":13.6122618969002}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula="=R[0]C[-1]*R[-1]C[0]"><strong>₩13.61T</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":8.7984425760998}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula="=R[0]C[-2]*R[-1]C[0]"><strong>₩8.80T</strong></td>
</tr>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Source: SK Telecom &amp; KRX"}'>Source: SK Telecom &amp; KRX</td></tr>
</tbody>
</table><hr><p>Then, let's examine whether these valuations properly reflect the intrinsic value of both companies. </p><div class="content-highlight"><p><strong>Yes, as you can imagine, SK Square is relatively much easier to value, given that it is essentially a holding company. Then, the key thing should be how we value the traditional telecom business (network operation + media) that will remain in SK Telecom.</strong></p></div>

Post-split valuation will be an essential factor in determining whether to invest after SK Telecom's relisting. From a short-term point of view, event trading will have the most significant impact on the share price, but whether the spin-off will unlock valuation soon after relisting is bound to emerge as the most crucial factor.So, let's take a look at each valuation of SK Telecom and SK Square. As shown below, each post-split company takes the following subsidiaries.






SK Telecom
SK Square


SK Broadband
SK Hynix


SK Telink
ADT Caps


PS&amp;Marketing
11st Street


F&amp;S Credit Info
T Map Mobility


Service Top
One Store


Service Ace
Contents Wavve


SK O&amp;S
Dream Us Company



SK Planet



FSK L&amp;S



Incross



Nano N Tech



Spark Plus



SK Telecom CST1



SK Telecom TMT Investment



ID Quantique



Techmaker

Source: SK Telecom

Assuming the company's equity-based split ratio (60.74% for SK Telecom and 39.26% for SK Square) reflects the fair value of both companies, post-split SK Telecom currently has a valuation of ₩13.61T and SK Square is valued at ₩8.80T.








Valuation
SK Telecom
SK Telecom, post-split
SK Square, post-split


Split ratio
100.00%
60.74%
39.26%


Current market cap
₩22.41T
₩13.61T
₩8.80T

Source: SK Telecom &amp; KRX

Then, let's examine whether these valuations properly reflect the intrinsic value of both companies. Yes, as you can imagine, SK Square is relatively much easier to value, given that it is essentially a holding company. Then, the key thing should be how we value the traditional telecom business (network operation + media) that will remain in SK Telecom.

South Korea

SK Telecom Co., Ltd. is a Korean mobile and telecommunications operator. The Company provides cellular voice, wireless data, and wireless internet services. SK Telecom also offers fixed line services and platform services.

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

SK Telecom (017670 KS)

LG Uplus: Improving Dividend Outlook & An Expansion into Metaverse Businesses

In this insight, we discuss the improving dividend outlook & an expansion into metaverse businesses for LG Uplus. The potential dividend yield for...

Douglas Kim

KOSPI200 Index Rebalance: Mostly Expected, Couple of Surprises

There are 6 adds and 7 deletes for the KOSPI200 at the Dec rebalance. Most of the changes were expected, but there are a couple of surprises. Kakao...

Brian Freitas

SK Telecom - Major Highlights of 3Q 2021 Earnings & Updated Valuation

SK Telecom reported slightly better than expected results in 3Q 2021. We provide an updated valuation on SK Square and SK Telecom on post split...

Douglas Kim

KOSPI200 Index Rebalance Preview: Review Period Complete & Trades Performing Well

The review period for the KOSPI200 Dec rebalance is complete and we see 6 potential adds and 8 potential deletes. Most are high probability changes...

Brian Freitas

SK Telecom Post-Split Valuation Studies

This post is a valuation study on SK Telecom after the relisting: SK Telecom's network operation+media (post-split SK Telecom) + SK Square.

Sanghyun Park

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)