Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

Event-Driven

<ul>
<li>On 10 May, Cosmecca Korea (241710 KS) announced that it plans to switch its listing from KOSDAQ to KOSPI. </li>
<li>The company plans to convene an extraordinary general meeting of shareholders on 29 August to finalize on the switching of Cosmecca Korea listing from KOSDAQ to KOSPI. </li>
<li>Cosmecca Korea is one of the leading Korean ODM manufacturers of cosmetic products.</li>
</ul>


On 10 May, Cosmecca Korea (241710 KS) announced that it plans to switch its listing from KOSDAQ to KOSPI. 
The company plans to convene an extraordinary general meeting of shareholders on 29 August to finalize on the switching of Cosmecca Korea listing from KOSDAQ to KOSPI. 
Cosmecca Korea is one of the leading Korean ODM manufacturers of cosmetic products.


Cosmecca Korea Plans to Switch Listing from KOSDAQ to KOSPI

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

<ul>
<li>The last week was a very busy one. The coming week has some announcements and implementations but is a relatively quieter one.</li>
<li>The <a href="https://www.smartkarma.com/entities/sse-science-and-technology-innovation-board-50-index" target="_blank" data-smartkarma-citation="entities:29279:1" rel="noopener">SSE STAR50 (STAR50 INDEX)</a> and STAR100 Index changes for March will be implemented at the close on Friday, the 8th.</li>
<li>Another week of inflows for the <a href="https://www.smartkarma.com/entities/ishares-msci-emerging-markets-223f5da3-7054-4e4f-bc55-b7f0852c2581" target="_blank" data-smartkarma-citation="entities:31998:1" rel="noopener">iShares Emerging Markets ex-China (EMXC US)</a> ETF as creations cross US$2bn for 2024. ETF AUM has gone from US$420m in 2021 to US$11bn now!</li>
</ul>


The last week was a very busy one. The coming week has some announcements and implementations but is a relatively quieter one.
The SSE STAR50 (STAR50 INDEX) and STAR100 Index changes for March will be implemented at the close on Friday, the 8th.
Another week of inflows for the iShares Emerging Markets ex-China (EMXC US) ETF as creations cross US$2bn for 2024. ETF AUM has gone from US$420m in 2021 to US$11bn now!


Index Rebalance & ETF Flow Recap: STAR50/100, FXI, NIFTY/NEXT50, S&P500, KOSPI, Goodman, Ecopro BM

<ul>
<li>The review period for the March rebalance of the KOSPI Size Indices started 1 December and will end 29 February. The changes will be implemented at the close 14 March.</li>
<li>We see 3 migrations from MidCap to LargeCap, 4 new adds to LargeCap, 7 migrations from LargeCap to MidCap, and 11 migrations from SmallCap to MidCap.</li>
<li>On average, stocks migrating from SmallCap to MidCap have the lowest price to book value and have historically outperformed stocks migrating between other categories.</li>
</ul>


The review period for the March rebalance of the KOSPI Size Indices started 1 December and will end 29 February. The changes will be implemented at the close 14 March.
We see 3 migrations from MidCap to LargeCap, 4 new adds to LargeCap, 7 migrations from LargeCap to MidCap, and 11 migrations from SmallCap to MidCap.
On average, stocks migrating from SmallCap to MidCap have the lowest price to book value and have historically outperformed stocks migrating between other categories.


KOSPI Size Indices - Potential Migrations as Focus Is on Price to Book

Equity Bottom-Up

<ul>
<li>In this insight, we discuss 10 small cap cosmetic stocks in Korea, which are up on average 26.6% YTD, outperforming KOSPI which is up 10.9% YTD. </li>
<li>The drivers of their strong share price performances include reopening after the COVID-19 pandemic and ending of nearly all pandemic related restrictions (including wearing of face masks).</li>
<li>Among the 10 companies, we would focus on the top five small cap cosmetics stocks with the highest growth in operating profit in 1Q 2023 including Cosmecca Korea and Clio.</li>
</ul>


In this insight, we discuss 10 small cap cosmetic stocks in Korea, which are up on average 26.6% YTD, outperforming KOSPI which is up 10.9% YTD. 
The drivers of their strong share price performances include reopening after the COVID-19 pandemic and ending of nearly all pandemic related restrictions (including wearing of face masks).
Among the 10 companies, we would focus on the top five small cap cosmetics stocks with the highest growth in operating profit in 1Q 2023 including Cosmecca Korea and Clio.


Focus on 5 Korean Small Cap, Cosmetics Stocks With Significant Growth in Operating Profit in 1Q 2023

Equity Capital Markets

<ul>
<li>Our base case valuation of Manyo Factory is target price of 29,555 won per share, which represents 111% higher than the high end of the IPO price range.</li>
<li>We estimate the company to generate sales of 147.7 billion won in 2023 (up 45.1% YoY) and its operating margins to improve from 24.1% in 2022 to 24.7% in 2023. </li>
<li>We believe a 20% premium valuation multiple to the comps is appropriate due to its higher sales growth rate, higher operating margins, and higher ROE than the comps.</li>
</ul>


Our base case valuation of Manyo Factory is target price of 29,555 won per share, which represents 111% higher than the high end of the IPO price range.
We estimate the company to generate sales of 147.7 billion won in 2023 (up 45.1% YoY) and its operating margins to improve from 24.1% in 2022 to 24.7% in 2023. 
We believe a 20% premium valuation multiple to the comps is appropriate due to its higher sales growth rate, higher operating margins, and higher ROE than the comps.


South Korea

Aekyung Ind Co., Ltd. manufactures household cleaning products. The Company produces and sells kitchen and laundry detergents, dental care, creams, lotions, and skin care products. Aekyung Ind markets its products throughout Korea.

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Aekyung Industrial Co Ltd (018250 KS)

Cosmecca Korea Plans to Switch Listing from KOSDAQ to KOSPI

On 10 May, Cosmecca Korea (241710 KS) announced that it plans to switch its listing from KOSDAQ to KOSPI. Cosmecca Korea is one of the leading...

Douglas Kim

Index Rebalance & ETF Flow Recap: STAR50/100, FXI, NIFTY/NEXT50, S&P500, KOSPI, Goodman, Ecopro BM

This recap highlights Insights covering Asian index rebalances (announcements/ forecasts/ IPO Fast Entry/ M&A driven changes). We also highlight...

Brian Freitas

KOSPI Size Indices - Potential Migrations as Focus Is on Price to Book

We see 35 migrations and 7 new inclusions for the KOSPI Size indices. Stocks migrating higher have outperformed stocks migrating lower. Some stocks...

Brian Freitas

Focus on 5 Korean Small Cap, Cosmetics Stocks With Significant Growth in Operating Profit in 1Q 2023

We would focus on the top five Korean small cap cosmetics stocks with the highest growth in operating profit in 1Q 2023 including Cosmecca Korea...

Douglas Kim

Manyo Factory IPO Valuation Analysis

Our base case valuation of Manyo Factory is target price of 29,555 won per share, which represents 111% higher than the high end of the IPO price...

Douglas Kim

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