Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>Com2us Corp (078340 KS) is the most likely corporate activist target in Korea's game industry.</li>
<li>Our base case valuation of Com2uS suggests a target price of 97,321 won which is 49% higher than current price.</li>
<li>Finally, the company is expected to launch at least 3-4 promising new games this year. All in all, we have a positive view of Com2uS Corp. </li>
</ul>


Com2us Corp (078340 KS) is the most likely corporate activist target in Korea's game industry.
Our base case valuation of Com2uS suggests a target price of 97,321 won which is 49% higher than current price.
Finally, the company is expected to launch at least 3-4 promising new games this year. All in all, we have a positive view of Com2uS Corp. 


Com2uS Corp: The Most Likely Corporate Activist Target in Korea's Game Industry

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

Index Rebalance

<ul>
<li>The review period for the March rebalance ends on 31 January, the changes will be announced towards end February and implemented at the close of trading on 9 March.</li>
<li>We forecast one add/delete for the Game Index, and a couple of adds/deletes for the BBIG Index. There will be a lot of capping changes.</li>
<li>The largest inflows are expected on <a href="https://www.smartkarma.com/entities/posco-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:12421:1" rel="noopener">Posco Chemical (003670 KS)</a> and <a href="https://www.smartkarma.com/entities/douzone-bizon-co-ltd" target="_blank" data-smartkarma-citation="entities:20161:1" rel="noopener">Douzone Bizon (012510 KS)</a>; the largest outflows are expected on <a href="https://www.smartkarma.com/entities/sk-innovation-co-ltd" target="_blank" data-smartkarma-citation="entities:1268:1" rel="noopener">SK Innovation (096770 KS)</a> and <a href="https://www.smartkarma.com/entities/kmw-co-ltd" target="_blank" data-smartkarma-citation="entities:2834:1" rel="noopener">KMW (032500 KS)</a>.</li>
</ul>


The review period for the March rebalance ends on 31 January, the changes will be announced towards end February and implemented at the close of trading on 9 March.
We forecast one add/delete for the Game Index, and a couple of adds/deletes for the BBIG Index. There will be a lot of capping changes.
The largest inflows are expected on Posco Chemical (003670 KS) and Douzone Bizon (012510 KS); the largest outflows are expected on SK Innovation (096770 KS) and KMW (032500 KS).


KRX New Deal Index Rebalance Preview: Some Big Impact Names

<ul>
<li>On 28 December, the Chinese regulators announced that it will allow import of 45 foreign video games in China, among which seven are Korean video games.</li>
<li>Now that the Chinese authorities have allowed greater imports of foreign games, this will act as a significant positive catalyst to boost share prices of Korean game companies.</li>
<li>Among the major Korean game companies, we believe that NCsoft and Netmarble are best positioned to capitalize on this catalyst.</li>
</ul>


On 28 December, the Chinese regulators announced that it will allow import of 45 foreign video games in China, among which seven are Korean video games.
Now that the Chinese authorities have allowed greater imports of foreign games, this will act as a significant positive catalyst to boost share prices of Korean game companies.
Among the major Korean game companies, we believe that NCsoft and Netmarble are best positioned to capitalize on this catalyst.


China Allows Import of 45 Foreign Video Games Including 7 Korean Games

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

<ul>
<li>K Car's major shareholder is Hahn &amp; Company, which has already fully recovered the initial investment. So, there is an actual probability that it will make an aggressive exit.</li>
<li>SingEel's 3-month IPO institutional and VCs will be released, 6.18% of SO. All of them are in a profit zone, there is a possibility that an aggressive overhang will occur.</li>
<li>Kakao's 47% holdings in Kakao Pay will be released. The possibility of lowering the stake seems quite low. Nevertheless, we must consider the risk that this will affect market sentiment.</li>
</ul>


K Car's major shareholder is Hahn &amp; Company, which has already fully recovered the initial investment. So, there is an actual probability that it will make an aggressive exit.
SingEel's 3-month IPO institutional and VCs will be released, 6.18% of SO. All of them are in a profit zone, there is a possibility that an aggressive overhang will occur.
Kakao's 47% holdings in Kakao Pay will be released. The possibility of lowering the stake seems quite low. Nevertheless, we must consider the risk that this will affect market sentiment.


Noteworthy Lockup Releases for the Next Two Months in Korea

Equity Capital Markets

Lionheart Studio  / Equity Capital Markets

<ul>
<li>Our base case valuation of Lionheart Studio is a target price of 19,362 won per share, which is 46% lower than the low end of the IPO price range.</li>
<li>Our IPO valuation assumes a 7.2x EV/EBITDA (comps' average) using 2023 estimated EBITDA of 145 billion won for the company.</li>
<li>All in all, we believe there is a strong probability of Lionheart Studio being forced to lower its IPO price range in order to attract more investors. </li>
</ul>


Our base case valuation of Lionheart Studio is a target price of 19,362 won per share, which is 46% lower than the low end of the IPO price range.
Our IPO valuation assumes a 7.2x EV/EBITDA (comps' average) using 2023 estimated EBITDA of 145 billion won for the company.
All in all, we believe there is a strong probability of Lionheart Studio being forced to lower its IPO price range in order to attract more investors. 


South Korea

Com2uS Corporation develops and markets game software based on digital convergence contents for internet mobile application.  The Company provides its products to domestic and overseas markets such as Asia, Europe, and North America.

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Com2us Corp (078340 KS)

Com2uS Corp: The Most Likely Corporate Activist Target in Korea's Game Industry

Com2us Corp (078340 KS) is the most likely corporate activist target in Korea's game industry in our view. The company is expected to launch at...

Douglas Kim

KRX New Deal Index Rebalance Preview: Some Big Impact Names

There are some high impact changes expected at the March rebalance of the New Deal indices mainly from changes to the top 3 stocks in the Battery...

Brian Freitas

China Allows Import of 45 Foreign Video Games Including 7 Korean Games

On 28 December, the Chinese regulators announced that it will allow import of 45 foreign video games in China, among which seven are Korean video...

Douglas Kim

Noteworthy Lockup Releases for the Next Two Months in Korea

This post investigates the noteworthy lockup releases on KOSPI and KOSDAQ for the next two months, October and November.

Sanghyun Park

Lionheart Studio IPO Valuation Analysis

Our base case valuation of Lionheart Studio is a target price of 19,362 won per share, which is 46% lower than the low end of the IPO price range.

Douglas Kim

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