Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<p>It was announced after the market close on 10 November that <a href="https://www.smartkarma.com/entities/gs-retail-co-ltd" target="_blank" data-smartkarma-citation="entities:3867:1" rel="noopener">GS Retail (007070 KS)</a> will merge with <a href="https://www.smartkarma.com/entities/gs-home-shopping-inc" target="_blank" data-smartkarma-citation="entities:3916:1" rel="noopener">Gs Home Shopping (028150 KS)</a>. GS Retail and GS Home Shopping have market caps of  2.6 trillion won (US$2.3 billion) and 0.9 trillion won (US$0.8 billion), respectively. GS Retail's main businesses include offline retail supermarkets (GS THE FRESH), CVS stores (GS 25), and logistics warehouses. GS Home Shopping's main businesses include home shopping and online e-commerce services. After the merger date, 4.2236834 common stock of GS Retail will be issued for 1 share of GS Home Shopping shares listed in GS Homeshopping's shareholder list. </p><p>We believe that the merger between GS Retail and GS Home Shopping is a positive catalyst. Both companies have been negatively impacted by the barrage of heavy competition, especially among e-commerce driven companies such as Coupang, Naver, and Kurly in the past several years. The traditional brick and mortar competitors including Emart and Lotte Shopping have also made drastic moves to restructure their businesses and integrate their online and offline businesses. Finally, we believe this merger will have a positive impact on GS Holdings, the controlling shareholder of the combined entity.</p>

It was announced after the market close on 10 November that GS Retail (007070 KS) will merge with Gs Home Shopping (028150 KS). GS Retail and GS Home Shopping have market caps of  2.6 trillion won (US$2.3 billion) and 0.9 trillion won (US$0.8 billion), respectively. GS Retail's main businesses include offline retail supermarkets (GS THE FRESH), CVS stores (GS 25), and logistics warehouses. GS Home Shopping's main businesses include home shopping and online e-commerce services. After the merger date, 4.2236834 common stock of GS Retail will be issued for 1 share of GS Home Shopping shares listed in GS Homeshopping's shareholder list. We believe that the merger between GS Retail and GS Home Shopping is a positive catalyst. Both companies have been negatively impacted by the barrage of heavy competition, especially among e-commerce driven companies such as Coupang, Naver, and Kurly in the past several years. The traditional brick and mortar competitors including Emart and Lotte Shopping have also made drastic moves to restructure their businesses and integrate their online and offline businesses. Finally, we believe this merger will have a positive impact on GS Holdings, the controlling shareholder of the combined entity.

Korea M&A Spotlight: A Merger Between GS Retail and GS Home Shopping

Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

<p>Aekyung was the only chaebol who publicly showed interest in Asiana. Now it looks like we have another chaebol chasing after Asiana. According to one local news report, Aekyung is asking GS to form a consortium. No further detail of this talking between the two chaebols was disclosed. But the news report speculates that Aekyung wants to take Asiana's LCCs (Air Seoul and Air Busan) and lets GS take Asiana. <a href="http://www.thebell.co.kr/free/Content/ArticleView.asp?key=201908200100032740002019" target="_blank" rel="noopener">Here is the link of this news report</a>. But to me, this report mis-speculates some of the important aspects surrounding the current situation. Here is my more factual view on this partnership.</p>

Aekyung was the only chaebol who publicly showed interest in Asiana. Now it looks like we have another chaebol chasing after Asiana. According to one local news report, Aekyung is asking GS to form a consortium. No further detail of this talking between the two chaebols was disclosed. But the news report speculates that Aekyung wants to take Asiana's LCCs (Air Seoul and Air Busan) and lets GS take Asiana. Here is the link of this news report. But to me, this report mis-speculates some of the important aspects surrounding the current situation. Here is my more factual view on this partnership.

More Factual View on Aekyung/GS Partnership for Asiana

Equity Bottom-Up

<p><strong>It was reported in the Korean media today that the government may regulate the Korean holding companies' brand royalty revenues.</strong> Currently, one of the major revenue sources of Korean holding companies such as <a href="https://www.smartkarma.com/entities/393" target="_blank" data-smartkarma-citation="entities:393:1">SK Holdings Co Ltd (034730 KS)</a>, <a href="https://www.smartkarma.com/entities/6653" target="_blank" data-smartkarma-citation="entities:6653:1">LG Corp (003550 KS)</a>, and <a href="https://www.smartkarma.com/entities/18524" target="_blank" data-smartkarma-citation="entities:18524:1">Gs Holdings (078930 KS)</a> is the brand royalties from their affiliates. For example, the annual brand royalty revenues of <a href="https://www.smartkarma.com/entities/393" target="_blank" data-smartkarma-citation="entities:393:1">SK Holdings Co Ltd (034730 KS)</a> , <a href="https://www.smartkarma.com/entities/6653" target="_blank" data-smartkarma-citation="entities:6653:1">LG Corp (003550 KS)</a> , and <a href="https://www.smartkarma.com/entities/18524" target="_blank" data-smartkarma-citation="entities:18524:1">Gs Holdings (078930 KS)</a> have typically ranged 200…</p>

It was reported in the Korean media today that the government may regulate the Korean holding companies' brand royalty revenues. Currently, one of the major revenue sources of Korean holding companies such as SK Holdings Co Ltd (034730 KS), LG Corp (003550 KS), and Gs Holdings (078930 KS) is the brand royalties from their affiliates. For example, the annual brand royalty revenues of SK Holdings Co Ltd (034730 KS) , LG Corp (003550 KS) , and Gs Holdings (078930 KS) have typically ranged 200…

Government May Regulate Korean Holding Companies' Brand Royalty Revenues

<p>Lotte Holdco is officially launched today. It held a press meeting today to announce the launch of Lotte Holdco.</p><div class="content-caption">(Lotte Holdco press meeting today - Courtesy Chosun Ilbo)</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/035/565/original/1.jpg?1507787209" class="editor-image img-responsive" data-smartkarma-image-id="35565"></figure><p>Lotte Holdco's total assets amount to ₩6,357.6bil with ₩4,886.1bil worth of equity. It has a total of 138 subsidiaries, of which 42 are the local subsidiaries and 96 are the overseas subsidiaries. The number of circular shareholding links now stands at 13, a substantial fall from the previous 50. </p><table class="table table-striped"><tbody>
<tr><td colspan="2" style="width: 733px;">Lotte Holdco quick summary</td></tr>
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<td style="width: 373.51904296875px;"><em><strong>Assets</strong></em></td>
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</tbody></table>…

Lotte Holdco is officially launched today. It held a press meeting today to announce the launch of Lotte Holdco.(Lotte Holdco press meeting today - Courtesy Chosun Ilbo)Lotte Holdco's total assets amount to ₩6,357.6bil with ₩4,886.1bil worth of equity. It has a total of 138 subsidiaries, of which 42 are the local subsidiaries and 96 are the overseas subsidiaries. The number of circular shareholding links now stands at 13, a substantial fall from the previous 50. 
Lotte Holdco quick summary

Assets

…

Lotte Group Restructuring Part 9 - Official Launch of Lotte Holdco

<p><a href="https://www.smartkarma.com/entities/393" target="_blank" data-smartkarma-citation="entities:393:1">SK Holdings Co Ltd (034730 KS)</a> or <a href="https://www.smartkarma.com/entities/395" target="_blank" data-smartkarma-citation="entities:395:1">SK Telecom (017670 KS)</a>? Which one should we buy? To answer this question, we'd surely have to understand and consider the complex dynamics of SK restructuring process. That is, we have to take into account many internal factors that can't be easily and clearly quantified. So, I will discuss these internal factors and driving forces in a separate report after I do more diggings and thinkings.</p><div class="content-highlight"><p><em><strong>But in order for me to help you and myself see more clearly where these SK stocks really stand compared with their peers, I decided to take a look at another set of data that shows SK stocks' 'relative' valuation.</strong></em></p></div>

SK Holdings Co Ltd (034730 KS) or SK Telecom (017670 KS)? Which one should we buy? To answer this question, we'd surely have to understand and consider the complex dynamics of SK restructuring process. That is, we have to take into account many internal factors that can't be easily and clearly quantified. So, I will discuss these internal factors and driving forces in a separate report after I do more diggings and thinkings.But in order for me to help you and myself see more clearly where these SK stocks really stand compared with their peers, I decided to take a look at another set of data that shows SK stocks' 'relative' valuation.

SK Group Restructuring - More Data Analysis (Relative Valuations)

South Korea

GS Holdings is a holding company, which operates subsidiaries including GS Caltex Oil, GS Power, GS Home Shopping, GS Retail, and GS Sports.

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GS Holdings (078930 KS)

Korea M&A Spotlight: A Merger Between GS Retail and GS Home Shopping

We believe that the merger between GS Retail and GS Home Shopping is a positive move and also it will likely have a positive impact on GS Holdings,...

Douglas Kim

More Factual View on Aekyung/GS Partnership for Asiana

Aekyung was the only chaebol who publicly showed interest in Asiana. Now it looks like we have another chaebol chasing after Asiana. According to...

Sanghyun Park

Government May Regulate Korean Holding Companies' Brand Royalty Revenues

It was reported in the Korean media today that the government may regulate the Korean holding companies' brand royalty revenues. Currently, one of...

Douglas Kim

Lotte Group Restructuring Part 9 - Official Launch of Lotte Holdco

Lotte Holdco is officially launched today. It held a press meeting today to announce the launch of Lotte Holdco.Lotte Holdco's total assets amount...

Sanghyun Park

SK Group Restructuring - More Data Analysis (Relative Valuations)

SK Holdings Co Ltd (034730 KS) or SK Telecom (017670 KS)? Which one should we buy? To answer this question, we'd surely have to understand and...

Sanghyun Park

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