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

<div>
<p>Samsung Heavy Industries has entered a stock trading suspension from July 23 to August 9 due to the 5 to 1 capital reduction without refund.</p>
<div class="content-highlight"><p><strong>But this one is a par-value capital reduction without any refund. Only the par-value will be down from ₩5,000 to ₩1,000. So, the number of outstanding shares remains unchanged.</strong></p></div>
</div><div>
<table class="table table-striped">
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<td style="width: 227.273px;" data-sheets-value='{"1":2,"2":"Capital reduction "}'>Capital reduction details</td>
<td style="text-align: center; width: 227.273px;" data-sheets-value='{"1":2,"2":"Current"}'>Previous</td>
<td style="text-align: center; width: 227.273px;" data-sheets-value='{"1":2,"2":"After capital reduction"}'>After capital reduction</td>
</tr>
<tr>
<td style="width: 227.273px;" data-sheets-value='{"1":2,"2":"Ordinary shares"}'><strong>Ordinary shares</strong></td>
<td style="text-align: center; width: 227.273px;" data-sheets-value='{"1":3,"3":630000000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>630,000,000</strong></td>
<td style="text-align: center; width: 227.273px;" data-sheets-value='{"1":3,"3":630000000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong> 630,000,000</strong></td>
</tr>
<tr>
<td style="width: 227.273px;" data-sheets-value='{"1":2,"2":"Par value"}'>Par value</td>
<td style="text-align: center; width: 227.273px;" data-sheets-value='{"1":3,"3":5000}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'>₩5,000</td>
<td style="text-align: center; width: 227.273px;" data-sheets-value='{"1":3,"3":1000}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'>₩1,000</td>
</tr>
<tr>
<td style="width: 227.273px;" data-sheets-value='{"1":2,"2":"Capital"}'>Capital</td>
<td style="text-align: center; width: 227.273px;" data-sheets-value='{"1":3,"3":3150.574225}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}' data-sheets-formula="=R[2]C[-3]/1000000000">3,150.6</td>
<td style="text-align: center; width: 227.273px;" data-sheets-value='{"1":3,"3":630.114845}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}' data-sheets-formula="=R[2]C[-3]/1000000000">630.1</td>
</tr>
<tr>
<td style="width: 227.273px;" data-sheets-value='{"1":2,"2":"Trade suspension"}'><strong>Trade suspension</strong></td>
<td colspan="2" style="text-align: center; width: 475.455px;" data-sheets-value='{"1":2,"2":"2021. 07. 23 ~ 08. 09"}'><strong>2021. 07. 23 ~ 08. 09</strong></td>
</tr>
<tr><td colspan="3" style="width: 723.636px;">Source: DART</td></tr>
</tbody>
</table>
<div id="ember3630" data-message-id="386335"><div><div id="ember3631"><div><div><div>
<h2><strong>Why doing it?</strong></h2>
<p>Reducing the par value but without any refund simply moves capital to earnings surplus so that Samsung Heavy can avoid capital impairment. But the total shares remain the same.</p>
</div></div></div></div></div></div>
<div id="ember3641" data-message-id="386337"><div id="ember3642"><div><div>
<div class="content-highlight"><p>Capital impairment is when the company lost its asset, so the asset is lower than the stock of a company. One way to avoid capital impairment is a reduction of capital without any compensation. (Wikipedia)</p></div>
<p><strong>Another reason Samsung Heavy is making capital reduction is that the current law doesn't allow a company to issue new shares at a price below the par value. If it has to offer new shares below the par value, it will have to obtain special approval from the court.</strong></p>
<p><strong>Samsung Heavy's last close price is ₩6,540, and the previous par value is ₩5,000. It'd be very tight to offer new shares above ₩5,000, given the usual 20% discount. So, it reduces the par value ahead of new share issuance, which the local street expects to hit the market around November.</strong></p>
</div></div></div></div>
</div>


Samsung Heavy Industries has entered a stock trading suspension from July 23 to August 9 due to the 5 to 1 capital reduction without refund.
But this one is a par-value capital reduction without any refund. Only the par-value will be down from ₩5,000 to ₩1,000. So, the number of outstanding shares remains unchanged.









Capital reduction details
Previous
After capital reduction


Ordinary shares
630,000,000
 630,000,000


Par value
₩5,000
₩1,000


Capital
3,150.6
630.1


Trade suspension
2021. 07. 23 ~ 08. 09

Source: DART



Why doing it?
Reducing the par value but without any refund simply moves capital to earnings surplus so that Samsung Heavy can avoid capital impairment. But the total shares remain the same.


Capital impairment is when the company lost its asset, so the asset is lower than the stock of a company. One way to avoid capital impairment is a reduction of capital without any compensation. (Wikipedia)
Another reason Samsung Heavy is making capital reduction is that the current law doesn't allow a company to issue new shares at a price below the par value. If it has to offer new shares below the par value, it will have to obtain special approval from the court.
Samsung Heavy's last close price is ₩6,540, and the previous par value is ₩5,000. It'd be very tight to offer new shares above ₩5,000, given the usual 20% discount. So, it reduces the par value ahead of new share issuance, which the local street expects to hit the market around November.



Samsung Heavy Industries Passive Flow Trade on Relisting, August 10

<p>Hyundai Oilbank has officially started the IPO process. It has reportedly sent out an RFP to local and overseas brokerages. The company is expected to pursue a listing on the KOSPI in early 2022.</p><div class="content-highlight">
<p>After stopping preparations for an IPO in 2019, it again seeks to enter the stock market after more than two years. This is the third challenge since 2012, when the first listing attempt was made.</p>
<ul>
<li><strong>In 2012, the company gave up halfway due to the sharp drop in international oil prices. </strong></li>
<li><strong>In 2017, Hyundai Oilbank was designated as a company subject to accounting supervision. So the IPO was again abandoned midway.</strong></li>
</ul>
</div><p>In January 2019, Hyundai Oilbank raised an equity investment worth ₩1.37T from Saudi Aramco for a 17% stake, and as a result, officially announced the suspension of the IPO. So, the estimated IPO valuation at this point is about ₩8.1T. <strong>The Aramco investment of ₩1.37T for a 17% stake translates into an ₩8.1T valuation.</strong></p><p><em>Hyundai Oilbank recorded an operating profit of ₩412.8B in the first quarter of this year, successfully turning to black compared to the previous quarter.</em></p>

Hyundai Oilbank has officially started the IPO process. It has reportedly sent out an RFP to local and overseas brokerages. The company is expected to pursue a listing on the KOSPI in early 2022.
After stopping preparations for an IPO in 2019, it again seeks to enter the stock market after more than two years. This is the third challenge since 2012, when the first listing attempt was made.

In 2012, the company gave up halfway due to the sharp drop in international oil prices. 
In 2017, Hyundai Oilbank was designated as a company subject to accounting supervision. So the IPO was again abandoned midway.

In January 2019, Hyundai Oilbank raised an equity investment worth ₩1.37T from Saudi Aramco for a 17% stake, and as a result, officially announced the suspension of the IPO. So, the estimated IPO valuation at this point is about ₩8.1T. The Aramco investment of ₩1.37T for a 17% stake translates into an ₩8.1T valuation.Hyundai Oilbank recorded an operating profit of ₩412.8B in the first quarter of this year, successfully turning to black compared to the previous quarter.

KOSE (Long) Vs. HHI Holdings (Short) Pair Trade on Hyundai Oilbank IPO

Research from Asian Century Stocks, Asian Century Stocks

Michael Fritzell

Research from Asian Century Stocks

Providing financial journalism in the Asia-Pacific

Asian Century Stocks

Asian Century Stocks is a newsletter providing financial journalism for companies and stocks in the Asia-Pacific. 
The Asian Century Stocks logotype “百” stands for “one hundred” or a “century”. The economic centre of gravity is moving towards Asia. Yet most global investors are missing out.

Equity Bottom-Up

<section class="figure">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/214/158/original/1.png?1624239576" class="editor-image img-responsive" data-smartkarma-image-id="214158"></figure>
</section>
<p>I just read the book <a href="https://www.amazon.com/Samsung-Rising-Inside-Korean-Conquer-ebook/dp/B07T9WTTZC/ref=sr_1_1?dchild=1&amp;keywords=samsung+rising&amp;qid=1623743594&amp;sr=8-1" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.amazon.com/Samsung-Rising-Inside-Korean-Conquer-ebook/dp/B07T9WTTZC/ref%3Dsr_1_1?dchild%3D1%26keywords%3Dsamsung%2Brising%26qid%3D1623743594%26sr%3D8-1&amp;source=gmail&amp;ust=1624323969123000&amp;usg=AFQjCNGC2aiiwDMsNjEfaxR0gESTgnBzqg" rel="noopener">Samsung Rising</a> by Geoffrey Cain and found it enlightening.</p>
<p>Samsung is a unique company: one of the best brand names to ever come out of East Asia.</p>
<p>This post will give you a brief history of how Samsung made the journey from a post-war trading company to an international technology giant. I will then describe where Samsung is today and where it could be heading in the future.</p>




I just read the book Samsung Rising by Geoffrey Cain and found it enlightening.
Samsung is a unique company: one of the best brand names to ever come out of East Asia.
This post will give you a brief history of how Samsung made the journey from a post-war trading company to an international technology giant. I will then describe where Samsung is today and where it could be heading in the future.

<p>Samsung Heavy Industries began the day with a gap down at -20.95%. But it manages to climb back up to -10.33%. Now it is settling at -16.20% as I'm writing this post. Yes, the trading volume exploded as expected. It is now 5.24 times its 30-day average daily trading volume, representing 11.56% of the total shares. Today's price range also soared to 14.13%p, nearly 4 times the usual range of 3.8%p.</p><table class="table table-striped">
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<col width="100">
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<tr><td colspan="2" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Samsung Heavy Industries Co.,Ltd"}' data-sheets-formula='=googlefinance(R[1]C[1], "name")'>Samsung Heavy Industries Co., Ltd</td></tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"MC (₩B)"}'>Current market cap</td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":3780}' data-sheets-numberformat='[null,2,"#,##0.0"]' data-sheets-formula='=googlefinance(R[-1]C[0], "price")*googlefinance(R[-1]C[0], "shares")/1000000000'>₩3,780.0B</td>
</tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"x DTV"}'><strong>Today trading volume so far as a % of 30-day average daily trading volume</strong></td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":5.239735194175107}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula='=googlefinance(R[-3]C[0], "volume")/googlefinance(R[-3]C[0], "volumeavg")'><strong>5.24x</strong></td>
</tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"TV/SO"}'><strong>Today trading volume so far as a % of shares outstanding</strong></td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":0.11557541746031746}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula='=googlefinance(R[-5]C[0], "volume")/googlefinance(R[-5]C[0], "shares")'><strong>11.56%</strong></td>
</tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"Close"}'>Current price</td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":6000}' data-sheets-numberformat='[null,4,"[$₩-412]#,##0"]' data-sheets-formula='=googlefinance(R[-6]C[0], "price")'>₩6,000</td>
</tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"Δ Daily"}'><strong>Δ Daily</strong></td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":-0.16201117318435754}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R8C2-R[2]C[1])/R[2]C[1]"><strong>-16.20%</strong></td>
</tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"Gap"}'><strong>Gap</strong></td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":-0.20949720670391062}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-2]C[1]-R[1]C[1])/R[1]C[1]"><strong>-20.95%</strong></td>
</tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"x Open"}'><strong>Today's high - low as a %point</strong></td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":0.1413427561837456}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-2]C[1]-R[-1]C[1])/R[-3]C[1]"><strong>14.13%p</strong></td>
</tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"U Wick"}'>Today's upper wick</td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":-0.525}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=if((R[-5]C[0]-R[-5]C[1])&gt;0, (R[-5]C[0]-R[-4]C[1])/(R9C[1]-R[-3]C[1]), (R[-5]C[1]-R[-4]C[1])/(R9C[1]-R[-3]C[1]))">-52.50%</td>
</tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"Body"}'>Today's body</td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":0.425}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-6]C[0]-R[-6]C[1])/(R9C[1]-R[-4]C[1])">42.50%</td>
</tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"D Wick"}'>Today's lower wick</td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":0.05}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=if((R[-7]C[0]-R[-7]C[1])&gt;0, (R[-7]C[1]-R[-5]C[1])/(R9C[1]-R[-5]C[1]), (R[-7]C[0]-R[-5]C[1])/(R9C[1]-R[-5]C[1]))">5.00%</td>
</tr>
<tr><td colspan="2" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><p>The share price is plummeting today, bringing down the 20-day price gain to -20.63%. But it is still at a flat level on a 120-day span. The 180-day price gain is still 6.01%.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/204/590/original/chart.png?1620278461" class="editor-image img-responsive" data-smartkarma-image-id="204590"></figure></section>

Samsung Heavy Industries began the day with a gap down at -20.95%. But it manages to climb back up to -10.33%. Now it is settling at -16.20% as I'm writing this post. Yes, the trading volume exploded as expected. It is now 5.24 times its 30-day average daily trading volume, representing 11.56% of the total shares. Today's price range also soared to 14.13%p, nearly 4 times the usual range of 3.8%p.





Samsung Heavy Industries Co., Ltd

Current market cap
₩3,780.0B


Today trading volume so far as a % of 30-day average daily trading volume
5.24x


Today trading volume so far as a % of shares outstanding
11.56%


Current price
₩6,000


Δ Daily
-16.20%


Gap
-20.95%


Today's high - low as a %point
14.13%p


Today's upper wick
-52.50%


Today's body
42.50%


Today's lower wick
5.00%

Source: KRX

The share price is plummeting today, bringing down the 20-day price gain to -20.63%. But it is still at a flat level on a 120-day span. The 180-day price gain is still 6.01%.

Samsung Heavy Situation: Discussing 3 Key Issues at This Point

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<p>Short selling has finally resumed in Korea and it has been a busy couple of days on that front with foreign investors piling into stocks that have run up more than their peers over the last year and are potentially overvalued.</p><p>Long/short pairs could be implemented in Korea during the short sell ban if you had long inventory or if there were listed single stock futures on the short leg.</p><p>With short selling permitted on constituents 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>, we take a look at long/short pairs where both stocks are members of the index. These pairs belong to the same GICS sub-industry, are correlated and exhibit mean-reversion. We also use short sale data from the last couple of trading sessions to see which stocks are being targeted by short sellers.</p>

Short selling has finally resumed in Korea and it has been a busy couple of days on that front with foreign investors piling into stocks that have run up more than their peers over the last year and are potentially overvalued.Long/short pairs could be implemented in Korea during the short sell ban if you had long inventory or if there were listed single stock futures on the short leg.With short selling permitted on constituents of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX), we take a look at long/short pairs where both stocks are members of the index. These pairs belong to the same GICS sub-industry, are correlated and exhibit mean-reversion. We also use short sale data from the last couple of trading sessions to see which stocks are being targeted by short sellers.

Korea Pair Trades: High Risk/Reward Names with Short Sell Screen

South Korea

Samsung Heavy Industries Co., Ltd. manufactures crude oil tankers, container vessels, bulk carriers, cruisers, and passenger ferries.  The Company also produces steel and bridge structures, and material handling equipment.  In addition, Samsung Heavy Industries provides civil engineering, architectural, and plant construction services.

Price Gauge
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Samsung Heavy Industries (010140 KS)

Samsung Heavy Industries Passive Flow Trade on Relisting, August 10

The passive funds systematically tracking the KOSPI 200 were supposed to dispose of Samsung Heavy shares at the close on July 23. At the close on...

Sanghyun Park

KOSE (Long) Vs. HHI Holdings (Short) Pair Trade on Hyundai Oilbank IPO

Hyundai Oilbank has started the IPO process, likely acting as a discount factor on HHIH's share price. So, from a swing trade perspective, Long...

Sanghyun Park

Samsung Is In A Crucial Transition

Samsung is a unique company: one of the best brand names to ever come out of East Asia, covering Samsung's history, where it is today and its future

Asian Century Stocks

Samsung Heavy Situation: Discussing 3 Key Issues at This Point

This post discusses the three key issues of the Samsung Heavy Industries situation ahead of the preannounced rights offering event.

Sanghyun Park

Korea Pair Trades: High Risk/Reward Names with Short Sell Screen

With the resumption of short selling in Korea, we highlight correlated pairs from the same GICS sub-industry that are near reversion points and...

Brian Freitas

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52-week Range

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