Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Thematic (Sector/Industry)

<ul>
<li>On August 22nd, the South Korean government announced that it has decided to terminate the GSOMIA (General Security of Military Information Agreement) with the Japanese government. As a result of the South Korean government's decision to terminate GSOMIA, this will likely to further fuel the discord the political relations between Japan and South Korea and the Korean stock market is likely to face further weakness, especially companies that are negatively impacted by this conflict.</li>
<li>
Cho Kuk has been the most discussed person in South Korea in the past two weeks. He is a nominee to become the next Justice Minister in South Korea. However, he and his family/relatives have been mired in numerous allegations which could make it difficult for him to become the next Justice Minister. On August 27th, the<a href="http://www.koreaherald.com/view.php?ud=20190827000730" target="_blank" rel="noopener"> government prosecutors</a> raided universities, a medical center and other facilities to investigate Justice Minister nominee Cho Kuk and his family.</li>
<li>
<a href="https://www.smartkarma.com/profiles/brian-freitas" target="_blank" data-smartkarma-citation="accounts:4091" rel="noopener">Brian Freitas</a> puts out a weekly on the Japan short interest data. The short notional in the market for the week ended 23 August is US$24.95bn with the largest short positions in <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" data-smartkarma-citation="entities:18448:1" rel="noopener">Itochu Corp (8001 JP)</a>, <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (7203 JP)</a>, <a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a>,  <a href="https://www.smartkarma.com/entities/taiyo-yuden-co-ltd" target="_blank" data-smartkarma-citation="entities:9924:1" rel="noopener">Taiyo Yuden (6976 JP)</a> and <a href="https://www.smartkarma.com/entities/sumitomo-mitsui-financial-gr" target="_blank" data-smartkarma-citation="entities:217:1" rel="noopener">Sumitomo Mitsui Financial (8316 JP)</a>. Most shorted stocks as a percentage of free float are Amazia, <a href="https://www.smartkarma.com/entities/extreme-co-ltd" target="_blank" data-smartkarma-citation="entities:5311:1" rel="noopener">Extreme Co Ltd (6033 JP)</a>, <a href="https://www.smartkarma.com/entities/taiyo-yuden-co-ltd" target="_blank" data-smartkarma-citation="entities:9924:1" rel="noopener">Taiyo Yuden (6976 JP)</a> and <a href="https://www.smartkarma.com/entities/leopalace21-corp" target="_blank" data-smartkarma-citation="entities:8244:1" rel="noopener">Leopalace21 Corp (8848 JP)</a>. </li>
<li>
MEGVII TECHNOLOGY IPO - <a href="https://www.smartkarma.com/profiles/arun-george" target="_blank" data-smartkarma-citation="accounts:1680" rel="noopener">Arun George</a> wrote about this company in his note, <a href="https://www.smartkarma.com/insights/megvii-ipo-initiation-anonymous-no-more" target="_blank" data-smartkarma-citation="insights:32041" rel="noopener">Megvii IPO Initiation: Anonymous No More</a>. <a href="https://www.smartkarma.com/entities/megvii-technology" target="_blank" data-smartkarma-citation="entities:28272:1" rel="noopener">Megvii Technology (1737211D HK)</a> is a Chinese AI company best known for its facial recognition platform Face++. It is backed by Ant Financial (15.1% shareholder), <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group Holding (BABA US)</a> (14.3% shareholder) and <a href="https://www.smartkarma.com/entities/lenovo-group-ltd" target="_blank" data-smartkarma-citation="entities:13359:1" rel="noopener">Lenovo (992 HK)</a> (1.2% shareholder). Overall, Arun believes Megvii is a decent “new economy” growth story as the positives outweigh the negatives. </li>
</ul>


On August 22nd, the South Korean government announced that it has decided to terminate the GSOMIA (General Security of Military Information Agreement) with the Japanese government. As a result of the South Korean government's decision to terminate GSOMIA, this will likely to further fuel the discord the political relations between Japan and South Korea and the Korean stock market is likely to face further weakness, especially companies that are negatively impacted by this conflict.

Cho Kuk has been the most discussed person in South Korea in the past two weeks. He is a nominee to become the next Justice Minister in South Korea. However, he and his family/relatives have been mired in numerous allegations which could make it difficult for him to become the next Justice Minister. On August 27th, the government prosecutors raided universities, a medical center and other facilities to investigate Justice Minister nominee Cho Kuk and his family.

Brian Freitas puts out a weekly on the Japan short interest data. The short notional in the market for the week ended 23 August is US$24.95bn with the largest short positions in Itochu Corp (8001 JP), Toyota Motor (7203 JP), Canon Inc (7751 JP),  Taiyo Yuden (6976 JP) and Sumitomo Mitsui Financial (8316 JP). Most shorted stocks as a percentage of free float are Amazia, Extreme Co Ltd (6033 JP), Taiyo Yuden (6976 JP) and Leopalace21 Corp (8848 JP). 

MEGVII TECHNOLOGY IPO - Arun George wrote about this company in his note, Megvii IPO Initiation: Anonymous No More. Megvii Technology (1737211D HK) is a Chinese AI company best known for its facial recognition platform Face++. It is backed by Ant Financial (15.1% shareholder), Alibaba Group Holding (BABA US) (14.3% shareholder) and Lenovo (992 HK) (1.2% shareholder). Overall, Arun believes Megvii is a decent “new economy” growth story as the positives outweigh the negatives. 


The Week That Was @ Smartkarma in Korea, Japan, China/HK: Megvii, GSOMIA, Cho Kuk, & Sony

Event-Driven

It was reported on August 26th that<a href="https://finance.naver.com/item/news_read.nhn?article_id=0003608935&amp;office_id=011&amp;code=067170&amp;sm=title_entity_id.basic" target="_blank" rel="noopener"> Scion Asset Management</a>(a hedge fund based in the U.S.) started to "go activist" on a small-cap Korean company called <a href="https://www.smartkarma.com/entities/autech-corp" target="_blank" data-smartkarma-citation="entities:14684:1" rel="noopener">Autech Corp (067170 KS)</a>which has a market cap of 180 billion won ($148 million). According to recent filings (<a href="http://www.dart.fss.or.kr" target="_blank" rel="noopener">www.dart.fss.or.kr</a>), Scion Asset Mgmt's ownership of Autech recently increased from 8.62% to 9.75% (as of August 23rd, 2019). While Scion Asset Mgmt has mentioned that it wants to participate in the management of the company, it has yet to provide full details of its proposals.Normally, a foreign hedge fund going activist on such a small company Korea would not generate much interest, but Scion Asset Mgmt is relatively well-known in the global financial community (including in Korea) partly because the founder of the hedge fund (Dr. Michael J. Burry) and Scion Asset Mgmt. were featured in the 2015 movie, "The Big Short" (Actor Christian Bale played the role of Michael Burry).Autech Corp makes different kinds of special purpose vehicles, including ambulances, police vehicles, delivery trucks, dump trucks, recreation vehicles, and ice making trucks. It also makes air conditioners (Carrier brand) as well as various retail and industrial refrigeration products. The company also provides parking system services. The company generated revenue of 918.7 billion won (up 11.5% YoY) and operating profit of 29.8 billion won (down 18% YoY) in 2018. It also generated revenue of 528.7 billion won (up 17.3% YoY) and operating profit of 22.2 billion won (up 46.9% YoY) in 1H19.

It was reported on August 26th that Scion Asset Management(a hedge fund based in the U.S.) started to "go activist" on a small-cap Korean company called Autech Corp (067170 KS)which has a market cap of 180 billion won ($148 million). According to recent filings (www.dart.fss.or.kr), Scion Asset Mgmt's ownership of Autech recently increased from 8.62% to 9.75% (as of August 23rd, 2019). While Scion Asset Mgmt has mentioned that it wants to participate in the management of the company, it has yet to provide full details of its proposals.Normally, a foreign hedge fund going activist on such a small company Korea would not generate much interest, but Scion Asset Mgmt is relatively well-known in the global financial community (including in Korea) partly because the founder of the hedge fund (Dr. Michael J. Burry) and Scion Asset Mgmt. were featured in the 2015 movie, "The Big Short" (Actor Christian Bale played the role of Michael Burry).Autech Corp makes different kinds of special purpose vehicles, including ambulances, police vehicles, delivery trucks, dump trucks, recreation vehicles, and ice making trucks. It also makes air conditioners (Carrier brand) as well as various retail and industrial refrigeration products. The company also provides parking system services. The company generated revenue of 918.7 billion won (up 11.5% YoY) and operating profit of 29.8 billion won (down 18% YoY) in 2018. It also generated revenue of 528.7 billion won (up 17.3% YoY) and operating profit of 22.2 billion won (up 46.9% YoY) in 1H19.

Scion Asset Mgmt "Goes Activist" On Autech Corp

South Korea

Autech Corp. manufactures and sells a variety of special purpose vehicles.  The Company's products include delivery trucks, ambulances, dump trucks, police vehicles, recreation vehicles, and ice making trucks.

Autech Corp (067170 KS)

The Week That Was @ Smartkarma in Korea, Japan, China/HK: Megvii, GSOMIA, Cho Kuk, & Sony

On August 22nd, the South Korean government announced that it has decided to terminate the GSOMIA (General Security of Military Information...

Douglas Kim

Scion Asset Mgmt "Goes Activist" On Autech Corp

It was reported on August 26th that Scion Asset Management(a hedge fund based in the U.S.) started to "go activist" on a small-cap Korean company...

Douglas Kim