Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Thematic (Sector/Industry)

There were nearly 30 notes on Japanese and Korean companies in the past week. The following are the highlights of the "must-see" reports on these names. <ul class=""><li>TOSHIBA - The biggest story in North Asia in the past week was Toshiba. <a href="https://www.smartkarma.com/profiles/25" target="_blank" data-smartkarma-citation="accounts:25">Travis Lundy</a> wrote about this company in his report, <a href="https://www.smartkarma.com/insights/toshiba-capital-raised" target="_blank" data-smartkarma-citation="insights:15462">Toshiba Capital Raised!</a> Following this deal, Travis is now tilting bullish Toshiba, Toshiba Plant &amp; Engineering, and Toshiba Tec. Travis believes that Toshiba shares are not likely a triple from here, but 6.6bn shares priced at say ¥300/share put the company at ¥2trln market cap with what appears to be a net cash balance sheet position on a forward basis (post-sale of TMC). </li></ul><a href="https://www.smartkarma.com/profiles/713" target="_blank" data-smartkarma-citation="accounts:713">Mio Kato, CFA</a> also wrote about Toshiba in his report, <a href="https://www.smartkarma.com/insights/toshiba-capital-brightens-outlook-significantly-opens-possibility-of-repairing-wdc-relationship" target="_blank" data-smartkarma-citation="insights:15506">Toshiba: Capital Brightens Outlook Significantly, Opens Possibility of Repairing WDC Relationship</a>. While Mio agrees with Travis regarding the shift in risks to the upside following Toshiba's recent capital raise, Mio believes that perhaps Toshiba was never truly invested in the sale of the memory business and that this capital raise and a victory by WDC in getting a preliminary injunction on the sale of TMC could lead to Toshiba, the INCJ and the DBJ replacing <a href="https://www.smartkarma.com/entities/16955" target="_blank" data-smartkarma-citation="entities:16955:1">SK Hynix Inc (000660 KS)</a> and some or all of the US-based investors who are involved in the deal (excluding Bain).<ul class=""><li>SUBARU - <a href="https://www.smartkarma.com/profiles/988" target="_blank" data-smartkarma-citation="accounts:988">Noriaki Hirakata, CFA</a> provided interesting insights in his note, <a href="https://www.smartkarma.com/insights/subaru-cfo-small-meeting-takeaway" target="_blank" data-smartkarma-citation="insights:15602">SUBARU：CFO Small Meeting Takeaway</a>. Noriaki has been able to make a breakthrough in breaking down the barriers as an Independent research provider and has been able to meet with Subaru's CFO in a small group meeting format. Some of the key highlights of the meeting were as follows: 1) US SAAR review - Current SAAR is viewed as artificially inflated with unsustainable incentive levels for the whole year. 2) Competition in the US - All the brands recently gave up pushing the Sedan / Hatchback segment and rushed into Cross-Over/ SUVs. 3) China issue - There is no change in the very competitive situation in China. SUBARU is struggling here but has limited options to improve the situation. 4) Shareholders’ return - CFO indicated a moderate dividend payout increase in the future. </li><li>JIN AIR - <a href="https://www.smartkarma.com/profiles/354" target="_blank" data-smartkarma-citation="accounts:354">Sanghyun Park</a> and I provided insights on the <a href="https://www.smartkarma.com/entities/26028" target="_blank" data-smartkarma-citation="entities:26028:1">Jin Air Co. Ltd (272450 KS)</a> IPO. I did not like this deal whereas Sanghyun did. In my note, <a href="https://www.smartkarma.com/insights/jin-air-ipo-part-2-unattractive-valuations-and-greater-competitive-pressures" target="_blank" data-smartkarma-citation="insights:15566">Jin Air IPO (Part 2) - Unattractive Valuations and Greater Competitive Pressures</a>, I explain that Jin Air does not deserve a premium valuation versus <a href="https://www.smartkarma.com/entities/26027" target="_blank" data-smartkarma-citation="entities:26027:1">Jeju Air Co., Ltd. (089590 KS)</a>. Sanghyun has more positive views of Jin Air IPO which you can see here: <a href="https://www.smartkarma.com/insights/jin-air-ipo-issue-check-intragroup-deal-cost-involving-korean-air" target="_blank" data-smartkarma-citation="insights:15492">Jin Air IPO Issue Check - Intragroup Deal Cost Involving Korean Air</a> and <a href="https://www.smartkarma.com/insights/jin-air-ipo-valuation-study" target="_blank" data-smartkarma-citation="insights:15253">Jin Air IPO Valuation Study</a>. </li></ul>

There were nearly 30 notes on Japanese and Korean companies in the past week. The following are the highlights of the "must-see" reports on these names. TOSHIBA - The biggest story in North Asia in the past week was Toshiba. Travis Lundy wrote about this company in his report, Toshiba Capital Raised! Following this deal, Travis is now tilting bullish Toshiba, Toshiba Plant &amp; Engineering, and Toshiba Tec. Travis believes that Toshiba shares are not likely a triple from here, but 6.6bn shares priced at say ¥300/share put the company at ¥2trln market cap with what appears to be a net cash balance sheet position on a forward basis (post-sale of TMC). Mio Kato, CFA also wrote about Toshiba in his report, Toshiba: Capital Brightens Outlook Significantly, Opens Possibility of Repairing WDC Relationship. While Mio agrees with Travis regarding the shift in risks to the upside following Toshiba's recent capital raise, Mio believes that perhaps Toshiba was never truly invested in the sale of the memory business and that this capital raise and a victory by WDC in getting a preliminary injunction on the sale of TMC could lead to Toshiba, the INCJ and the DBJ replacing SK Hynix Inc (000660 KS) and some or all of the US-based investors who are involved in the deal (excluding Bain).SUBARU - Noriaki Hirakata, CFA provided interesting insights in his note, SUBARU：CFO Small Meeting Takeaway. Noriaki has been able to make a breakthrough in breaking down the barriers as an Independent research provider and has been able to meet with Subaru's CFO in a small group meeting format. Some of the key highlights of the meeting were as follows: 1) US SAAR review - Current SAAR is viewed as artificially inflated with unsustainable incentive levels for the whole year. 2) Competition in the US - All the brands recently gave up pushing the Sedan / Hatchback segment and rushed into Cross-Over/ SUVs. 3) China issue - There is no change in the very competitive situation in China. SUBARU is struggling here but has limited options to improve the situation. 4) Shareholders’ return - CFO indicated a moderate dividend payout increase in the future. JIN AIR - Sanghyun Park and I provided insights on the Jin Air Co. Ltd (272450 KS) IPO. I did not like this deal whereas Sanghyun did. In my note, Jin Air IPO (Part 2) - Unattractive Valuations and Greater Competitive Pressures, I explain that Jin Air does not deserve a premium valuation versus Jeju Air Co., Ltd. (089590 KS). Sanghyun has more positive views of Jin Air IPO which you can see here: Jin Air IPO Issue Check - Intragroup Deal Cost Involving Korean Air and Jin Air IPO Valuation Study. 

The Week That Was in NorthAsia@Smartkarma: Toshiba, Subaru, & Jin Air

Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Equity Capital Markets

DongYang Piston Co., Ltd. / Equity Capital Markets

Korea's No 1. vehicle engine piston manufacturer, which was founded in 1967, is finally set to go public. Its bookbuilding actually ends on Nov 23. <a href="https://www.smartkarma.com/entities/26039" target="_blank" data-smartkarma-citation="entities:26039:1">DongYang Piston Co., Ltd. (092780 KS)</a>'s market share in Korea's local market stands at a whopping 51%. Hyundai Motor Group's affiliates are its main customers as they still account for about 40% of its total sales. But it has also had many success with such prestigious major car makers other than Hyundai. Its overseas clients include Japan's Mitsubishi and Germany's BMW and Audi, just to name a few.Dong Yang Piston manufactures and sells almost all types of pistons used for all types of vehicles.<table class="table table-striped"><tbody><tr><td colspan="2" style="width: 725px;">Product line-up</td></tr><tr><td style="width: 293.915771484375px;">Compact pistons</td><td style="width: 431.084228515625px;">Gasoline, diesel, LPI, and hybrid engines used in passenger cars and SUVs</td></tr><tr><td style="width: 293.915771484375px;">Mid-size pistons</td><td style="width: 431.084228515625px;">Diesel and natural gas engines used in vans, mini buses, compact trucks, and buses</td></tr><tr><td style="width: 293.915771484375px;">Large-size pistons</td><td style="width: 431.084228515625px;">Gasoline engines used in medium and heavy duty trucks, construction equipment, and generators</td></tr><tr><td style="width: 293.915771484375px;">Other pistons</td><td style="width: 431.084228515625px;">Gasoline engines used in two-wheelers, military vehicles, vessels, agricultural vehicles</td></tr><tr><td colspan="2" style="width: 725px;">Source: Dong Yang Piston, Bloomberg </td></tr></tbody></table><div class="content-caption">(Dong Yang Piston's product line-up - Courtesy Dong Yang Piston)</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/038/918/original/1.png?1511360459" class="editor-image img-responsive" data-smartkarma-image-id="38918"></figure>But compact pistons for passenger cars account for nearly 80% of its total sales. Of this, pistons for diesel engines of passenger cars have been delivering very impressive growth over the past three years.<table class="table table-striped"><colgroup></colgroup><tbody><tr><td colspan="2" style="width: 65pt;" data-sheets-value='{"1":3,"3":10.29}'>Sales breakdown</td><td style="text-align: right; width: 65pt;">2014</td><td style="text-align: right; width: 65pt;">2015</td><td style="text-align: right; width: 65pt;">2016</td><td colspan="2" style="text-align: right; width: 65pt;">1H17</td></tr><tr><td rowspan="3" data-sheets-value='{"1":2,"2":"승용"}'>Pistons for passenger cars (gasoline)</td><td data-sheets-value='{"1":2,"2":"승용"}'>Local</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":65178}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>65,178</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":53223}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>53,223</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":43199}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>43,199</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":25023}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>25,023</td><td style="text-align: right;">19.68%</td></tr><tr><td data-sheets-value='{"1":2,"2":"(가솔린)"}'>Overseas</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":39591}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>39,591</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":37828}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>37,828</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":41909}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>41,909</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":23706}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>23,706</td><td style="text-align: right;">18.64%</td></tr><tr><td data-sheets-value='{"1":2,"2":"소 계"}'>Sub-total</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":104770}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>104,770</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":91051}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>91,051</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":85108}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>85,108</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":48729}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>48,729</td><td style="text-align: right;">38.31%</td></tr><tr><td rowspan="3" data-sheets-value='{"1":2,"2":"승용"}'>Pistons for passenger cars (diesel)</td><td data-sheets-value='{"1":2,"2":"승용"}'>Local</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":45888}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>45,888</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":53428}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>53,428</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":55149}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>55,149</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":26011}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>26,011</td><td style="text-align: right;">20.45%</td></tr><tr><td data-sheets-value='{"1":2,"2":"(디젤)"}'>Overseas</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":19160}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>19,160</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":32960}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>32,960</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":40620}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>40,620</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":22574}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>22,574</td><td style="text-align: right;">17.75%</td></tr><tr><td data-sheets-value='{"1":2,"2":"소 계"}'>Sub-total</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":65048}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>65,048</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":86388}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>86,388</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":95769}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>95,769</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":48585}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>48,585</td><td style="text-align: right;">38.20%</td></tr><tr><td rowspan="3" data-sheets-value='{"1":2,"2":"내 수"}'>Total</td><td data-sheets-value='{"1":2,"2":"내 수"}'>Local</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":146564}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>146,564</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":144212}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>144,212</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":138927}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>138,927</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":68215}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>68,215</td><td style="text-align: right;">53.64%</td></tr><tr><td data-sheets-value='{"1":2,"2":"수 출"}'>Overseas</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":82489}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>82,489</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":111883}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>111,883</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":120750}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>120,750</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":58966}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>58,966</td><td style="text-align: right;">46.36%</td></tr><tr><td data-sheets-value='{"1":2,"2":"소 계"}'>Total</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":229053}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>229,053</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":256095}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>256,095</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":259677}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>259,677</td><td style="text-align: right;" data-sheets-value='{"1":3,"3":127181}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>127,181</td><td style="text-align: right;">-</td></tr><tr><td colspan="7" data-sheets-value='{"1":2,"2":"소 계"}'>Source: DART</td></tr></tbody></table>

Korea's No 1. vehicle engine piston manufacturer, which was founded in 1967, is finally set to go public. Its bookbuilding actually ends on Nov 23. DongYang Piston Co., Ltd. (092780 KS)'s market share in Korea's local market stands at a whopping 51%. Hyundai Motor Group's affiliates are its main customers as they still account for about 40% of its total sales. But it has also had many success with such prestigious major car makers other than Hyundai. Its overseas clients include Japan's Mitsubishi and Germany's BMW and Audi, just to name a few.Dong Yang Piston manufactures and sells almost all types of pistons used for all types of vehicles.Product line-upCompact pistonsGasoline, diesel, LPI, and hybrid engines used in passenger cars and SUVsMid-size pistonsDiesel and natural gas engines used in vans, mini buses, compact trucks, and busesLarge-size pistonsGasoline engines used in medium and heavy duty trucks, construction equipment, and generatorsOther pistonsGasoline engines used in two-wheelers, military vehicles, vessels, agricultural vehiclesSource: Dong Yang Piston, Bloomberg (Dong Yang Piston's product line-up - Courtesy Dong Yang Piston)But compact pistons for passenger cars account for nearly 80% of its total sales. Of this, pistons for diesel engines of passenger cars have been delivering very impressive growth over the past three years.Sales breakdown2014201520161H17Pistons for passenger cars (gasoline)Local65,17853,22343,19925,02319.68%Overseas39,59137,82841,90923,70618.64%Sub-total104,77091,05185,10848,72938.31%Pistons for passenger cars (diesel)Local45,88853,42855,14926,01120.45%Overseas19,16032,96040,62022,57417.75%Sub-total65,04886,38895,76948,58538.20%TotalLocal146,564144,212138,92768,21553.64%Overseas82,489111,883120,75058,96646.36%Total229,053256,095259,677127,181-Source: DART

Dong Yang Piston IPO Summary - Solid but Not So Exciting Engine Piston Maker

South Korea

DongYang Piston Co., Ltd. manufactures automotive parts. The Company develops and sells automotive pistons, small diesels, large diesels. large bore diesels, gasoline engines, industrial engines, and other products. DongYang Piston markets its products throughout Korea.

DongYang Piston Co., Ltd. (092780 KS)

The Week That Was in NorthAsia@Smartkarma: Toshiba, Subaru, & Jin Air

There were nearly 30 notes on Japanese and Korean companies in the past week. The following are the highlights of the "must-see" reports on these...

Douglas Kim

Dong Yang Piston IPO Summary - Solid but Not So Exciting Engine Piston Maker

Korea's No 1. vehicle engine piston manufacturer, which was founded in 1967, is finally set to go public. Its bookbuilding actually ends on Nov 23....

Sanghyun Park