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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

The Korea Exchange (KRX) will announce the results of the June 2021 review of the <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150 Index (KOSDQ150 INDEX)</a>  in May with the changes becoming effective after the close of trading on 10 June.We see 14 potential changes to the index in the June review and we are less than a third of the way through the review period. The end of the short sell ban in March could bring a lot more changes to the index.The potential inclusions are <a href="https://www.smartkarma.com/entities/tesna-inc" target="_blank" data-smartkarma-citation="entities:8792:1" rel="noopener">Tesna Inc (131970 KS)</a>, <a href="https://www.smartkarma.com/entities/unison-co-ltd-south-korea" target="_blank" data-smartkarma-citation="entities:18617:1" rel="noopener">Unison Co Ltd (018000 KS)</a>, <a href="https://www.smartkarma.com/entities/tse-co-ltd" target="_blank" data-smartkarma-citation="entities:17821:1" rel="noopener">Tse Co Ltd (131290 KS)</a>, ABPro Bio (195990 KS), <a href="https://www.smartkarma.com/entities/icure-pharm-inc" target="_blank" data-smartkarma-citation="entities:27142:1" rel="noopener">Icure Pharm Inc (175250 KS)</a>, <a href="https://www.smartkarma.com/entities/sam-kang-m-t-co-ltd" target="_blank" data-smartkarma-citation="entities:7263:1" rel="noopener">Sam Kang M&amp;T (100090 KS)</a>, <a href="https://www.smartkarma.com/entities/simmtech-co-ltd" target="_blank" data-smartkarma-citation="entities:28871:1" rel="noopener">SIMMTECH Co Ltd (222800 KS)</a>, <a href="https://www.smartkarma.com/entities/binex-co-ltd" target="_blank" data-smartkarma-citation="entities:1949:1" rel="noopener">Binex Co Ltd (053030 KS)</a>, Vaxcell Bio (323990 KS), <a href="https://www.smartkarma.com/entities/kmh-co-ltd" target="_blank" data-smartkarma-citation="entities:18525:1" rel="noopener">Kmh Co Ltd (122450 KS)</a>, <a href="https://www.smartkarma.com/entities/solid-inc" target="_blank" data-smartkarma-citation="entities:14701:1" rel="noopener">Solid Inc (050890 KS)</a>, PSK Inc (319660 KS), AJu IB Investment (027360 KS) and <a href="https://www.smartkarma.com/entities/kpm-tech-co-ltd" target="_blank" data-smartkarma-citation="entities:15948:1" rel="noopener">Kpm Tech Co Ltd (042040 KS)</a>. The potential exclusions are <a href="https://www.smartkarma.com/entities/stcube" target="_blank" data-smartkarma-citation="entities:4872:1" rel="noopener">Stcube (052020 KS)</a>, <a href="https://www.smartkarma.com/entities/daea-ti-co-ltd" target="_blank" data-smartkarma-citation="entities:1473:1" rel="noopener">Daea Ti Co Ltd (045390 KS)</a>, <a href="https://www.smartkarma.com/entities/spigen-korea-co-ltd" target="_blank" data-smartkarma-citation="entities:9852:1" rel="noopener">Spigen Korea (192440 KS)</a>, <a href="https://www.smartkarma.com/entities/jusung-engineering-co-ltd" target="_blank" data-smartkarma-citation="entities:12277:1" rel="noopener">Jusung Engineering (036930 KS)</a>, <a href="https://www.smartkarma.com/entities/advanced-process-systems-corporation" target="_blank" data-smartkarma-citation="entities:24087:1" rel="noopener">Advanced Process Systems (265520 KS)</a>, <a href="https://www.smartkarma.com/entities/saraminhr-co-ltd" target="_blank" data-smartkarma-citation="entities:8494:1" rel="noopener">Saraminhr (143240 KS)</a>, <a href="https://www.smartkarma.com/entities/vt-gmp-co-ltd" target="_blank" data-smartkarma-citation="entities:8056:1" rel="noopener">Gmp Co Ltd (018290 KS)</a>, <a href="https://www.smartkarma.com/entities/iriver-ltd" target="_blank" data-smartkarma-citation="entities:13005:1" rel="noopener">Iriver Ltd (060570 KS)</a>, <a href="https://www.smartkarma.com/entities/innox-advanced-materials-co-ltd" target="_blank" data-smartkarma-citation="entities:24223:1" rel="noopener">Innox Advanced Materials Co,Ltd. (272290 KS)</a>, <a href="https://www.smartkarma.com/entities/ebest-investment-securitie" target="_blank" data-smartkarma-citation="entities:18895:1" rel="noopener">Ebest Investment &amp; Securitie (078020 KS)</a>, <a href="https://www.smartkarma.com/entities/sangsangin-co-ltd" target="_blank" data-smartkarma-citation="entities:10494:1" rel="noopener">Sangsangin Co., Ltd. (038540 KS)</a>, <a href="https://www.smartkarma.com/entities/shinheung-sec" target="_blank" data-smartkarma-citation="entities:24426:1" rel="noopener">Shin Heung Energy &amp; Electronics Co (243840 KS)</a>, <a href="https://www.smartkarma.com/entities/neopharm-co-ltd" target="_blank" data-smartkarma-citation="entities:10273:1" rel="noopener">Neopharm Co Ltd (092730 KS)</a> and <a href="https://www.smartkarma.com/entities/hlscience-co-ltd" target="_blank" data-smartkarma-citation="entities:23629:1" rel="noopener">HLSCIENCE Co. (239610 KS)</a>.One-way turnover is estimated at 5.44%. While the impact of passive funds is not high on the expected inclusions, the impact on the expected exclusions is much higher.

The Korea Exchange (KRX) will announce the results of the June 2021 review of the KOSDAQ 150 Index (KOSDQ150 INDEX)  in May with the changes becoming effective after the close of trading on 10 June.We see 14 potential changes to the index in the June review and we are less than a third of the way through the review period. The end of the short sell ban in March could bring a lot more changes to the index.The potential inclusions are Tesna Inc (131970 KS), Unison Co Ltd (018000 KS), Tse Co Ltd (131290 KS), ABPro Bio (195990 KS), Icure Pharm Inc (175250 KS), Sam Kang M&amp;T (100090 KS), SIMMTECH Co Ltd (222800 KS), Binex Co Ltd (053030 KS), Vaxcell Bio (323990 KS), Kmh Co Ltd (122450 KS), Solid Inc (050890 KS), PSK Inc (319660 KS), AJu IB Investment (027360 KS) and Kpm Tech Co Ltd (042040 KS). The potential exclusions are Stcube (052020 KS), Daea Ti Co Ltd (045390 KS), Spigen Korea (192440 KS), Jusung Engineering (036930 KS), Advanced Process Systems (265520 KS), Saraminhr (143240 KS), Gmp Co Ltd (018290 KS), Iriver Ltd (060570 KS), Innox Advanced Materials Co,Ltd. (272290 KS), Ebest Investment &amp; Securitie (078020 KS), Sangsangin Co., Ltd. (038540 KS), Shin Heung Energy &amp; Electronics Co (243840 KS), Neopharm Co Ltd (092730 KS) and HLSCIENCE Co. (239610 KS).One-way turnover is estimated at 5.44%. While the impact of passive funds is not high on the expected inclusions, the impact on the expected exclusions is much higher.

KOSDAQ150 Index Rebalance Preview: Lots of Changes Expected Already; More to Come

Korea Event-Driven and Corporate Governance, DewPoint Research

Yeaseul Lim

Korea Event-Driven and Corporate Governance

Independent Equity Research Provider - South Korea

DewPoint Research

At DewPoint, we aim to convey a clear understanding of a company’s approach to capital allocation. As a matter of corporate governance, capital allocation reflects whose interests a company prioritizes when making management decisions. Given the Korean context, it comes down to a question of whether the company undermines the interests of minority shareholders for private benefits of controlling shareholders. This is what we focus on as a fundamental starting point in our research.
 
Capital allocation principles and practices provide the foundation for a company’s sustainable value creation. Thus, investors need to be alert to any possible distortions in capital allocation, especially when they take a long-term perspective. They also want to find safe stocks with committed management, no separation between ownership and control, and robust business models. We seek to fulfill such needs in a disciplined manner.
 
We also work as a representative of foreign investors who are willing to exercise active ownership in their investee companies. Our service may include identifying stocks that are fundamentally strong but vulnerable to activist attacks.

Event-Driven

Last January, <a href="https://www.smartkarma.com/entities/soulbrain-co-ltd" target="_blank" data-smartkarma-citation="entities:16883:1" rel="noopener">Soulbrain (036830 KS)</a> announced to split the company into a holding company and an operating company. The shareholders' meeting for the approval will be held on May 12, 2020. 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/119/514/original/Soulbrain_structure%282%29.png?1582550900" class="editor-image img-responsive" data-smartkarma-image-id="119514"></figure>
<div class="content-caption">Soulbrain's Ownership Structure After the Split</div>
<a href="https://www.smartkarma.com/entities/soulbrain-co-ltd" target="_blank" data-smartkarma-citation="entities:16883:1" rel="noopener">Soulbrain (036830 KS)</a> is a manufacturer of semiconductor- and display-related chemicals. The company has shown robust operating performances over the years. Soulbrain is also capable of producing hydrogen fluoride, a liquid used by semiconductor makers to imprint silicon wafers. This explains why the company has garnered more attention especially after Japan announced to restrict exports of three chemicals (including hydrogen fluoride) to South Korea. 
<div class="content-highlight">
Investors must wonder what would happen to the company's profitable, growing businesses after the split. To sum up, there would be both gains and losses. 
Without the split, there would be a risk of cash flows generated by Soulbrain being used to finance the CEO's M&amp;A ambitions. After the split, the opco will be free from such risks. However, the opco would lose a steady stream of income because dividend-paying, profitable subsidiaries now belong to the holdco. This appears unconvincing given that those subsidiaries are vertically integrated with the opco. 
After all, the best scenario should be that <a href="https://www.smartkarma.com/entities/soulbrain-co-ltd" target="_blank" data-smartkarma-citation="entities:16883:1" rel="noopener">Soulbrain (036830 KS)</a> remains unsplit and the CEO focuses only on the company's core business. Neither the opco nor the holdco would be attractive enough to satisfy existing shareholders.
</div>
<ul>
<li>Since 2015, <a href="https://www.smartkarma.com/entities/soulbrain-co-ltd" target="_blank" data-smartkarma-citation="entities:16883:1" rel="noopener">Soulbrain (036830 KS)</a> has invested a total of 160 billion won in healthcare, cosmetics, and financial services. What makes it worse is that those M&amp;A deals have recorded a great loss. After the split, the holdco will be in charge of managing those acquired companies.</li>
<li>Under the holdco structure, the opco is not allowed to participate in a capital increase of the holdco, thereby creating a cross-shareholding. The opco is not allowed to make investments jointly with the holdco, either. Such that, after the demerger, there will be little risk that the holdco relies on the opco's strong cash flows to finance the holdco's M&amp;A activities. Given that, the opco may look safer to investors compared to <a href="https://www.smartkarma.com/entities/soulbrain-co-ltd" target="_blank" data-smartkarma-citation="entities:16883:1" rel="noopener">Soulbrain (036830 KS)</a>.</li>
<li>However, there is a key problem. Many subsidiaries that are vertically integrated with the opco are distributed to the holdco. In particular, we need to pay attention to an unconsolidated subsidiary called MS Solution. This company has generated stable cash flows and paid out substantial amounts of dividends (9 billion won) every year. Almost all of its revenue comes from internal transactions with Soulbrain. However, this subsidiary now belongs to the holdco.  It seems obvious that it will provide funds required for future acquisitions.</li>
<li>The company split may be deemed positive in that the opco would be able to keep its operating cash flows intact. It is very likely that the CEO's M&amp;A ambitions grow bigger in the future. It is more worrying because he seems to be interested in fields where he has no expertise. Investors attracted to Soulbrain's core business might be relieved that the holdco would incur such risks. However, the opco's earnings would decline due to unreasonable distribution of subsidiaries. </li>
</ul>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/119/517/original/Soulbrain_structure.png?1582551598" class="editor-image img-responsive" data-smartkarma-image-id="119517"></figure>
<div class="content-caption">Distribution of Subsidiaries</div>

Last January, Soulbrain (036830 KS) announced to split the company into a holding company and an operating company. The shareholders' meeting for the approval will be held on May 12, 2020. 

Soulbrain's Ownership Structure After the Split
Soulbrain (036830 KS) is a manufacturer of semiconductor- and display-related chemicals. The company has shown robust operating performances over the years. Soulbrain is also capable of producing hydrogen fluoride, a liquid used by semiconductor makers to imprint silicon wafers. This explains why the company has garnered more attention especially after Japan announced to restrict exports of three chemicals (including hydrogen fluoride) to South Korea. 

Investors must wonder what would happen to the company's profitable, growing businesses after the split. To sum up, there would be both gains and losses. 
Without the split, there would be a risk of cash flows generated by Soulbrain being used to finance the CEO's M&amp;A ambitions. After the split, the opco will be free from such risks. However, the opco would lose a steady stream of income because dividend-paying, profitable subsidiaries now belong to the holdco. This appears unconvincing given that those subsidiaries are vertically integrated with the opco. 
After all, the best scenario should be that Soulbrain (036830 KS) remains unsplit and the CEO focuses only on the company's core business. Neither the opco nor the holdco would be attractive enough to satisfy existing shareholders.


Since 2015, Soulbrain (036830 KS) has invested a total of 160 billion won in healthcare, cosmetics, and financial services. What makes it worse is that those M&amp;A deals have recorded a great loss. After the split, the holdco will be in charge of managing those acquired companies.
Under the holdco structure, the opco is not allowed to participate in a capital increase of the holdco, thereby creating a cross-shareholding. The opco is not allowed to make investments jointly with the holdco, either. Such that, after the demerger, there will be little risk that the holdco relies on the opco's strong cash flows to finance the holdco's M&amp;A activities. Given that, the opco may look safer to investors compared to Soulbrain (036830 KS).
However, there is a key problem. Many subsidiaries that are vertically integrated with the opco are distributed to the holdco. In particular, we need to pay attention to an unconsolidated subsidiary called MS Solution. This company has generated stable cash flows and paid out substantial amounts of dividends (9 billion won) every year. Almost all of its revenue comes from internal transactions with Soulbrain. However, this subsidiary now belongs to the holdco.  It seems obvious that it will provide funds required for future acquisitions.
The company split may be deemed positive in that the opco would be able to keep its operating cash flows intact. It is very likely that the CEO's M&amp;A ambitions grow bigger in the future. It is more worrying because he seems to be interested in fields where he has no expertise. Investors attracted to Soulbrain's core business might be relieved that the holdco would incur such risks. However, the opco's earnings would decline due to unreasonable distribution of subsidiaries. 


Distribution of Subsidiaries

Soulbrain's Demerger & Distribution of Subsidiaries: The Loss Is Bigger Than The Gain

Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Equity Capital Markets

Sunic System Ltd. / Equity Capital Markets

The most important question for Sunic's IPO bookbuilding that is currently in progress is whether Sunic will receive more orders from LGD for the small-sized OLED panel production lines that will be housed in LGD's P10. Samsung Display won't do business with Sunic any time soon. In addition, those Chinese and Taiwanese display makers are still some years aways from turning to 6GH. Of course, mid capacity equipment is also an important element for Sunic's overall sales performance. But its success with this product segment also highly depends on its success in the large capacity equipment market since this allows Sunic to gain further trust even from mid capacity equipment buyers. So once again, the whole focus of this IPO bookbuilding is whether Sunic can get orders from LGD for P10 and if so how many.

The most important question for Sunic's IPO bookbuilding that is currently in progress is whether Sunic will receive more orders from LGD for the small-sized OLED panel production lines that will be housed in LGD's P10. Samsung Display won't do business with Sunic any time soon. In addition, those Chinese and Taiwanese display makers are still some years aways from turning to 6GH. Of course, mid capacity equipment is also an important element for Sunic's overall sales performance. But its success with this product segment also highly depends on its success in the large capacity equipment market since this allows Sunic to gain further trust even from mid capacity equipment buyers. So once again, the whole focus of this IPO bookbuilding is whether Sunic can get orders from LGD for P10 and if so how many.

Sunic System IPO Part 2 - Key Considerations for Bookbuilding

In this piece, I summarized <a href="https://www.smartkarma.com/entities/10046" target="_blank" data-smartkarma-citation="entities:10046:1">Innox Corp (088390 KS)</a>'s regulatory filing for demerger into holdo and opco. Innox is undoubtedly one of the hottest stocks in Korea. Today alone, Innox was up 4.58%. Its price is now at 52-week high, and it is up 89.8% just in three months. Comparing to the price a year ago, the current price is up a whopping 339%. Is this really because of business demerger into opco and holdco?Let's find out what it is really up to with this demerger:

In this piece, I summarized Innox Corp (088390 KS)'s regulatory filing for demerger into holdo and opco. Innox is undoubtedly one of the hottest stocks in Korea. Today alone, Innox was up 4.58%. Its price is now at 52-week high, and it is up 89.8% just in three months. Comparing to the price a year ago, the current price is up a whopping 339%. Is this really because of business demerger into opco and holdco?Let's find out what it is really up to with this demerger:

Summary of Innox Corp's Holdco/Opco Demerger

Philoptics Co Ltd. / Equity Capital Markets

In this Part 2 insight of <a href="https://www.smartkarma.com/entities/24114" target="_blank" data-smartkarma-citation="entities:24114:1">Philoptics Co. Ltd. (161580 KS)</a> IPO, I summarized the company's new sales guidance (based on Samsung Display's new A4 OLED fab line construction) and bookbuilding results along with its business strengths.

In this Part 2 insight of Philoptics Co. Ltd. (161580 KS) IPO, I summarized the company's new sales guidance (based on Samsung Display's new A4 OLED fab line construction) and bookbuilding results along with its business strengths.

Philoptics IPO Part 2 - Bookbuilding Results & Sunnier Sales Guidance

South Korea

Advanced Process Systems Corporation manufactures semiconductor equipments. The Company produces rapid thermal processing systems, laser equipments, and flat panel displys equipment devices. Advanced Process Systems serves clients in Korea.

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Advanced Process Systems (265520 KS)

KOSDAQ150 Index Rebalance Preview: Lots of Changes Expected Already; More to Come

Less than a third of the way through the review period, we see 14 potential inclusions and exclusions from the KOSDAQ150 index. The resumption of...

Brian Freitas

Soulbrain's Demerger & Distribution of Subsidiaries: The Loss Is Bigger Than The Gain

Last January, Soulbrain (036830 KS) announced to split the company into a holding company and an operating company. The shareholders' meeting for...

DewPoint Research

Sunic System IPO Part 2 - Key Considerations for Bookbuilding

The most important question for Sunic's IPO bookbuilding that is currently in progress is whether Sunic will receive more orders from LGD for the...

Sanghyun Park

Summary of Innox Corp's Holdco/Opco Demerger

In this piece, I summarized Innox Corp (088390 KS)'s regulatory filing for demerger into holdo and opco. Innox is undoubtedly one of the hottest...

Sanghyun Park

Philoptics IPO Part 2 - Bookbuilding Results & Sunnier Sales Guidance

In this Part 2 insight of Philoptics Co. Ltd. (161580 KS) IPO, I summarized the company's new sales guidance (based on Samsung Display's new A4...

Sanghyun Park

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