Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<ul>
<li>KT's foreign ownership declined since January, below 7.5% by last month. If it remains, the adjustment factor halves to 0.25, impacting KT's Global Index weight.</li>
<li>With the May review screening date estimated for April 17th, swift reversal of foreign inflows seems improbable. Thus, KT's adjustment factor dropping to 0.25 is likely.</li>
<li>This could lead to an outflow of 1.6M shares, approximately 3x ADTV. Given the prolonged price impact on telcos, exploring a long-short setup with SKT might be prudent.</li>
</ul>


KT's foreign ownership declined since January, below 7.5% by last month. If it remains, the adjustment factor halves to 0.25, impacting KT's Global Index weight.
With the May review screening date estimated for April 17th, swift reversal of foreign inflows seems improbable. Thus, KT's adjustment factor dropping to 0.25 is likely.
This could lead to an outflow of 1.6M shares, approximately 3x ADTV. Given the prolonged price impact on telcos, exploring a long-short setup with SKT might be prudent.


KT's Foreign Room Below 7.5%, Weight Down-Adjustment Expected in May, Resulting in 3x ADTV Outflow

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>Hyundai Motor Group has become the largest shareholder of KT Corp, as the National Pension Service has recently reduced its stake in KT from 8.53% previously to 7.51%. </li>
<li>Despite this recent change in the largest shareholder status of KT Corp, this requires the approval from the Korean Ministry of Science and ICT. </li>
<li>Although the Hyundai Motor Group (HMG) has become the largest owner in KT Corp, the most likely scenario is for HMG to remain a passive investor in KT.</li>
</ul>


Hyundai Motor Group has become the largest shareholder of KT Corp, as the National Pension Service has recently reduced its stake in KT from 8.53% previously to 7.51%. 
Despite this recent change in the largest shareholder status of KT Corp, this requires the approval from the Korean Ministry of Science and ICT. 
Although the Hyundai Motor Group (HMG) has become the largest owner in KT Corp, the most likely scenario is for HMG to remain a passive investor in KT.


Hyundai Motor Group Becomes the Largest Shareholder of KT Corp

Equity Bottom-Up

<ul>
<li>KT Corp (030200 KS)'s shares were up 4.1% today to 32,000 won driven by better than expected results in 2Q 2023 and the nomination of a new CEO. </li>
<li>KT has nominated Kim Young-Seop, the former CEO of LG CNS as the new CEO of the company.</li>
<li>KT Corp has attractive valuations. It is trading at only 2.6x EV/EBITDA, 6.7x P/E, and 0.5x P/B in 2023. These valuation multiples are much cheaper than SK Telecom.</li>
</ul>


KT Corp (030200 KS)'s shares were up 4.1% today to 32,000 won driven by better than expected results in 2Q 2023 and the nomination of a new CEO. 
KT has nominated Kim Young-Seop, the former CEO of LG CNS as the new CEO of the company.
KT Corp has attractive valuations. It is trading at only 2.6x EV/EBITDA, 6.7x P/E, and 0.5x P/B in 2023. These valuation multiples are much cheaper than SK Telecom.


KT Corp: A New CEO Nominated and Stronger Than Expected Results in 2Q 2023

ESG Analyst, Who's Good

Heejeong (Hollie) Park

ESG Analyst

ASIA’S FIRST AI-DRIVEN ESG INSIGHT PROVIDER

Who's Good

Using AI technologies and public data, Who’s Good provides objective and up-to-date corporate ESG insights on Asian companies.

WHY WHO'S GOOD

* Time-sensitive: Time is the essence in finance. Artificial Intelligence (AI) can process vast amount of information in a short span of time. Our powerful algorithm offers real-time in-depth corporate ESG analysis with out compromising its quality.
* Objective: We turned to public big data and news big data as source to base our analysis on and to preserve impartiality. We leverage 350 public big data sources and 93 news data sources in Korea to uncover insights.
* Insightful: Who’s Good ESG analysis coverage extends to all listed and non-listed companies in Korea. This allows us to provide a comprehensive insight into the Korean market.
* Global approach to ESG: Our ESG research framework is built on international standards and principles including UN Global Compact, ISO 26000, ICGN and CFA Guidelines on Corporate Governance to meet the global standards.

<ul>
<li>Domestic telecom company faced significant fines for false advertising of 5G, the second-largest penalty ever imposed. </li>
<li>Investigations into the telecom market, dominated by a long-term duopoly, are expanding. </li>
<li>Within KT Group's subcontracting process, allegations of favoritism and manipulation in project allocation are currently under investigation by the prosecution.</li>
</ul>


Domestic telecom company faced significant fines for false advertising of 5G, the second-largest penalty ever imposed. 
Investigations into the telecom market, dominated by a long-term duopoly, are expanding. 
Within KT Group's subcontracting process, allegations of favoritism and manipulation in project allocation are currently under investigation by the prosecution.


KT CORPORATION: Fines, Favoritism, and ESG Risks

Cross Asset Strategy

<ul>
<li>FSC Chairman Kim Joo-hyun mentioned that too many companies in Korea are trading below book value and the FSC plans to implement changes to improve upon this issue. </li>
<li>According to Korea Exchange, 1,111 companies out of total listed in KOSPI and KOSDAQ in Korea (2,538) are trading at below 1x book value (PBR) (liquidation value). </li>
<li>According to the Capital Group, about 39% of companies in the TOPIX trade below book value, compared to just 5% for companies in the S&amp;P 500 Index. </li>
</ul>


FSC Chairman Kim Joo-hyun mentioned that too many companies in Korea are trading below book value and the FSC plans to implement changes to improve upon this issue. 
According to Korea Exchange, 1,111 companies out of total listed in KOSPI and KOSDAQ in Korea (2,538) are trading at below 1x book value (PBR) (liquidation value). 
According to the Capital Group, about 39% of companies in the TOPIX trade below book value, compared to just 5% for companies in the S&amp;P 500 Index. 


44% of Korean Stocks Are Trading Below Book Value - FSC Wants to Improve This (Following Japan)

South Korea

KT Corporation provides telecommunication services including local, long distance, and international calling, satellite communication, data transmission, and wireless telephone services in South Korea.  The Company also offers network portal and high-speed Internet access services using asymmetric digital subscriber lines (ADSLs).

KT Corp Sp Adr (KT US)

KT's Foreign Room Below 7.5%, Weight Down-Adjustment Expected in May, Resulting in 3x ADTV Outflow

Screening base date is likely on April 17th. KT's FIF cut to 25% is certain. 3 additions might join the Global Index despite stricter extreme price...

Sanghyun Park

Hyundai Motor Group Becomes the Largest Shareholder of KT Corp

Hyundai Motor Group has become the largest shareholder of KT Corp, as the National Pension Service has recently reduced its stake in KT from 8.53%...

Douglas Kim

KT Corp: A New CEO Nominated and Stronger Than Expected Results in 2Q 2023

KT Corp (030200 KS)'s shares were up 4.1% today to 32,000 won driven by better than expected results in 2Q 2023 and the nomination of a new CEO.

Douglas Kim

KT CORPORATION: Fines, Favoritism, and ESG Risks

Examining ESG Risks: KT CORPORATION (030200 KS), a leading Korean telecom company, under scrutiny for false 5G ads and favoritism investigation

Heejeong (Hollie) Park

44% of Korean Stocks Are Trading Below Book Value - FSC Wants to Improve This (Following Japan)

A 44% of Korean stocks are trading below book value. FSC wants to improve this, following Japan's "name and shame" policy.

Douglas Kim