Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Thematic (Sector/Industry)

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<p>In this insight, we discuss the best ways to position for the growth of REITs in South Korea. In the sections below, we have categorized four main ways in which we think investors would be best positioned to invest in the growing REIT market in Korea over the next 1-2 years, which include the following: </p>
<p>I) <a href="https://www.smartkarma.com/entities/esr-kendall-square-reit-co-ltd" target="_blank" data-smartkarma-citation="entities:32172:1" rel="noopener">ESR Kendall Square REIT (365550 KS)</a> </p>
<p>II) Major Korean Construction Companies Entering REIT Market</p>
<p>III) Upcoming New Listings in the REIT Market</p>
<p>IV) Other Notable REITs in Korea</p>
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In this insight, we discuss the best ways to position for the growth of REITs in South Korea. In the sections below, we have categorized four main ways in which we think investors would be best positioned to invest in the growing REIT market in Korea over the next 1-2 years, which include the following: 
I) ESR Kendall Square REIT (365550 KS) 
II) Major Korean Construction Companies Entering REIT Market
III) Upcoming New Listings in the REIT Market
IV) Other Notable REITs in Korea


Best Ways to Position for the Growth of REITs in Korea

Event-Driven

<p>Daelim Industrial's BOD and shareholders agreed to spin-off the company into <a href="https://www.smartkarma.com/entities/dl-e-c-co-ltd" target="_blank" data-smartkarma-citation="entities:31375:1" rel="noopener">DL E&amp;C Co Ltd (375500 KS)</a> and <a href="https://www.smartkarma.com/entities/daelim-industrial-co-ltd" target="_blank" data-smartkarma-citation="entities:18095:1" rel="noopener">DL Co Ltd (000210 KS)</a> in December 2020. DL E&amp;C and DL Corp shares started trading again on 25 January 2021. DL E&amp;C and DL Corp's market caps are 2.45 trillion won and 1.08 trillion won, respectively as of 26 January 2021. The combined market caps of the two companies are 3.53 trillion won, up more than 20% from the pre-spin off levels. DL E&amp;C makes some of the best apartments in Korea and this is their bread and butter business. </p><div>Hyundai E&amp;C, GS E&amp;C, HDC Hyundai Development, and Daewoo E&amp;C are the most appropriate comps to DL E&amp;C. These four comps are currently trading at P/E (2021E) ratios 11.8x, 6.1x, 5.6x, and 6.9x, respectively, using the consensus earnings estimates. The average P/E ratio of these four companies is 7.6x. If we apply 7.6x P/E on the estimated net profit of 660 billion won, this would suggest an implied market cap of 5.0 trillion won, which would be nearly 100% upside from the current market cap of 2.4 trillion won. If we use the lowest P/E multiple of the comps (5.6x) and apply to the estimated net profit of 660 billion won, this would suggest a market cap of 3.7 trillion won, which would be 51% higher than its current market cap. </div>

Daelim Industrial's BOD and shareholders agreed to spin-off the company into DL E&amp;C Co Ltd (375500 KS) and DL Co Ltd (000210 KS) in December 2020. DL E&amp;C and DL Corp shares started trading again on 25 January 2021. DL E&amp;C and DL Corp's market caps are 2.45 trillion won and 1.08 trillion won, respectively as of 26 January 2021. The combined market caps of the two companies are 3.53 trillion won, up more than 20% from the pre-spin off levels. DL E&amp;C makes some of the best apartments in Korea and this is their bread and butter business. Hyundai E&amp;C, GS E&amp;C, HDC Hyundai Development, and Daewoo E&amp;C are the most appropriate comps to DL E&amp;C. These four comps are currently trading at P/E (2021E) ratios 11.8x, 6.1x, 5.6x, and 6.9x, respectively, using the consensus earnings estimates. The average P/E ratio of these four companies is 7.6x. If we apply 7.6x P/E on the estimated net profit of 660 billion won, this would suggest an implied market cap of 5.0 trillion won, which would be nearly 100% upside from the current market cap of 2.4 trillion won. If we use the lowest P/E multiple of the comps (5.6x) and apply to the estimated net profit of 660 billion won, this would suggest a market cap of 3.7 trillion won, which would be 51% higher than its current market cap. 

Newly Spun-Off DL E&C and DL Corp Create Higher Value

South Korea

DL E&C Co.,Ltd. provides construction services. The Company builds industrial plants, infrastructure, high-rise residential buildings, low-rise apartments, villas, and other related areas. DL E&C offers services in Korea.

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DL E&C (375500 KS)

Best Ways to Position for the Growth of REITs in Korea

In this insight, we discuss the best ways to position for the growth of REITs in South Korea. ESR Kendall Square REIT is our top pick in this sector.

Douglas Kim

Newly Spun-Off DL E&C and DL Corp Create Higher Value

The newly spun off DL E&C and DL Corp have created higher value for the shareholders in the past month.Their combined market caps are 3.5 trillion...

Douglas Kim

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