Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

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<p><strong>It is not often that a Korean company goes activist on another publicly listed company so it pays attention to this new development where HYK Partners (with major investment backing from </strong><strong><a href="https://www.smartkarma.com/entities/kyungbang-ltd" target="_blank" data-smartkarma-citation="entities:16840:1" rel="noopener">Kyungbang Ltd (000050 KS)</a>) has publicly declared that it is going activist on <a href="https://www.smartkarma.com/entities/hanjin-transportation-co" target="_blank" data-smartkarma-citation="entities:12583:1" rel="noopener">Hanjin Transportation Co (002320 KS)</a>. </strong></p>
<p><a href="https://www.smartkarma.com/entities/hanjin-transportation-co" target="_blank" data-smartkarma-citation="entities:12583:1" rel="noopener">Hanjin Transportation Co (002320 KS)</a> is an interesting stock right now. Its fundamentals are improving as evidenced by higher sales and profits of its delivery/parcel, shipping, and unloading services. Plus, HYK Partners is going activist on Hanjin Transportation. Another hedge fund (KCGI) has been reducing its stake in Hanjin Transportation (down to 9.79% as of 6 November). There may be an increasing possibility that HYK Partners could partner with KCGI in trying to improve corporate governance of Hanjin Transportation. Meanwhile, Hanjin Transportation is trading at only 0.7x P/B. Overall, we think that there are numerous positive catalysts with Hanjin Transportation and it is a stock that we believe could outperform the market over the next 6-12 months. </p>
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It is not often that a Korean company goes activist on another publicly listed company so it pays attention to this new development where HYK Partners (with major investment backing from Kyungbang Ltd (000050 KS)) has publicly declared that it is going activist on Hanjin Transportation Co (002320 KS). 
Hanjin Transportation Co (002320 KS) is an interesting stock right now. Its fundamentals are improving as evidenced by higher sales and profits of its delivery/parcel, shipping, and unloading services. Plus, HYK Partners is going activist on Hanjin Transportation. Another hedge fund (KCGI) has been reducing its stake in Hanjin Transportation (down to 9.79% as of 6 November). There may be an increasing possibility that HYK Partners could partner with KCGI in trying to improve corporate governance of Hanjin Transportation. Meanwhile, Hanjin Transportation is trading at only 0.7x P/B. Overall, we think that there are numerous positive catalysts with Hanjin Transportation and it is a stock that we believe could outperform the market over the next 6-12 months. 


HYK Partners (Kyungbang) Goes Activist on Hanjin Transportation

Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

Cross Asset Strategy

<p><strong>Q3 delivered marked underperformance</strong></p><p>Our Q3-2020 Small-Mid Cap High-Risk list of stocks produced an average price increase of 0.3%. In comparison, the MSCI Asia Pacific Index posted an increase of 6.3% over the same period. 15 stocks appear in our Q4 2020 screen, versus 21 in Q3 2020. As we highlighted in the previous three quarters, we are specifically on the watch for the risk of deteriorating credit metrics during 2020. This screen presents names which are worthy of investigation as they present with fundamentals which are at risk.</p>

Q3 delivered marked underperformanceOur Q3-2020 Small-Mid Cap High-Risk list of stocks produced an average price increase of 0.3%. In comparison, the MSCI Asia Pacific Index posted an increase of 6.3% over the same period. 15 stocks appear in our Q4 2020 screen, versus 21 in Q3 2020. As we highlighted in the previous three quarters, we are specifically on the watch for the risk of deteriorating credit metrics during 2020. This screen presents names which are worthy of investigation as they present with fundamentals which are at risk.

Screening the Silk Road: Q4 2020 High Risk Names to Avoid

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Melco International Development / Event-Driven

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<p>This week in StubWorld ...</p>
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<p>Lawrence Ho has all-but sidestepped family succession issues since his father passed away earlier this year - Stanley fathered 17 children with four women, and I count at last three ongoing legal actions by the siblings  - and appears intent on developing his own brand. With <a href="https://www.smartkarma.com/entities/melco-international-development-ltd" target="_blank" data-smartkarma-citation="entities:809:1" rel="noopener">Melco International Development (200 HK)</a> languishing around its NAV lows, will he simply continue to (gradually) increase his stake in Melco, or propose a major restructuring. </p>
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<p>Preceding my comments on Toyota and Melco, are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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This week in StubWorld ...



Lawrence Ho has all-but sidestepped family succession issues since his father passed away earlier this year - Stanley fathered 17 children with four women, and I count at last three ongoing legal actions by the siblings  - and appears intent on developing his own brand. With Melco International Development (200 HK) languishing around its NAV lows, will he simply continue to (gradually) increase his stake in Melco, or propose a major restructuring. 



Preceding my comments on Toyota and Melco, are the weekly setup/unwind tables for Asia-Pacific Holdcos.





These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.




StubWorld: Melco (200 HK) At NAV Trough Levels

Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Equity Capital Markets

Hanjin Transportation Co / Equity Capital Markets

<p>Hanjin Kal's other subsidiary, Hanjin T, also goes for an offering.</p><p>It offers 2.97M shares at a capital increase rate of 24.83%.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/151/560/original/1.png?1597000642" class="editor-image img-responsive" data-smartkarma-image-id="151560"></figure><p>80% goes to the stockholders, so the per share allocation is 0.2.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/151/561/original/2.png?1597000655" class="editor-image img-responsive" data-smartkarma-image-id="151561"></figure><p>This offering proceeds pretty much simultaneously with Jin Air's event, only three days apart between them.</p><p>September 16 will be the first round pricing, followed by the ex-rights two trading days later. The subscription rights will be trading on October 13~19.</p><p>We will have a final price on October 23, then followed by a subscription on October 28. Listing is November 18.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/151/562/original/3.png?1597001581" class="editor-image img-responsive" data-smartkarma-image-id="151562"></figure><p>There is nothing unusual in pricing. This one also carries a usual 20% discount.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/151/563/original/5.png?1597001591" class="editor-image img-responsive" data-smartkarma-image-id="151563"></figure>

Hanjin Kal's other subsidiary, Hanjin T, also goes for an offering.It offers 2.97M shares at a capital increase rate of 24.83%.80% goes to the stockholders, so the per share allocation is 0.2.This offering proceeds pretty much simultaneously with Jin Air's event, only three days apart between them.September 16 will be the first round pricing, followed by the ex-rights two trading days later. The subscription rights will be trading on October 13~19.We will have a final price on October 23, then followed by a subscription on October 28. Listing is November 18.There is nothing unusual in pricing. This one also carries a usual 20% discount.

Hanjin Trnspt Rights Offer: Trading Dynamics with Maj Shareholder's 150% Over-Subscription

<p style="text-align: start;"><strong>Time to remove the upper market cap limit as risk increases.</strong></p><ul>
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<strong>Our screen from this quarter onwards is for all stocks</strong><a href="applewebdata://17FB2464-550F-48C5-BBBA-E248B1412D29#_ftn1" target="_blank" rel="noopener"><strong>[1]</strong></a><strong> above a market capitalisation of US$500m </strong>as we now encounter possibly one of the riskier periods in our market history. With this in mind, we have removed our Small-Mid Cap focus (US$500m-US$10bn market capitalisation) from our screens. </li>
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<strong>21</strong><strong> stocks appear in our Q3 2020 screen</strong>. The average stock rank in our list has maintained a ranking of 63.5 points compared to 68 in Q2 2020 placing the stocks lower in the second quartile of the market, suggesting deteriorating fundamentals and a strong possibility of lagging performance.</li>
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<strong>As we highlighted in Q1, watch for the risk of deteriorating credit metrics over 2020: </strong>In Q3, the Altman Z score is at a market-cap-weighted 1.44 times, versus 1.31 in Q2. Whilst marginally improved, since earnings continue to be adjusted by analysts and there is limited visibility of their bottoming, the potential for a lower Z score in Q4 2020 and H1 2021is increased.</li>
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Time to remove the upper market cap limit as risk increases.

Our screen from this quarter onwards is for all stocks[1] above a market capitalisation of US$500m as we now encounter possibly one of the riskier periods in our market history. With this in mind, we have removed our Small-Mid Cap focus (US$500m-US$10bn market capitalisation) from our screens. 

21 stocks appear in our Q3 2020 screen. The average stock rank in our list has maintained a ranking of 63.5 points compared to 68 in Q2 2020 placing the stocks lower in the second quartile of the market, suggesting deteriorating fundamentals and a strong possibility of lagging performance.

As we highlighted in Q1, watch for the risk of deteriorating credit metrics over 2020: In Q3, the Altman Z score is at a market-cap-weighted 1.44 times, versus 1.31 in Q2. Whilst marginally improved, since earnings continue to be adjusted by analysts and there is limited visibility of their bottoming, the potential for a lower Z score in Q4 2020 and H1 2021is increased.


Screening the Silk Road: Q3 2020 High Risk Names to Avoid

South Korea

Hanjin Transportation Co., Ltd. provides integrated transportation and logistics services.  The Company operates truck transportation, stevedoring, coastal shipping, passenger buses, and international freight services.

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Hanjin Transportation Co (002320 KS)

HYK Partners (Kyungbang) Goes Activist on Hanjin Transportation

HYK Partners (with major investment backing from Kyungbang Ltd (000050 KS)) has publicly declared that it is going activist on Hanjin...

Douglas Kim

Screening the Silk Road: Q4 2020 High Risk Names to Avoid

Our Q3 screen delivered 600bps of under performance. With volatility is set to increase as we head into H1 2020, which stocks are most at risk in...

David Lepper

StubWorld: Melco (200 HK) At NAV Trough Levels

his week in StubWorld ... Commercial real estate (in the world's most expensive city) - check. Hotel exposure - check. Marine services -...

David Blennerhassett

Hanjin Trnspt Rights Offer: Trading Dynamics with Maj Shareholder's 150% Over-Subscription

Hanjin Kal's other subsidiary, Hanjin T, also goes for an offering.It offers 2.97M shares at a capital increase rate of 24.83%.80% goes to the...

Sanghyun Park

Screening the Silk Road: Q3 2020 High Risk Names to Avoid

Time to remove the upper market cap limit as risk increases. Our screen from this quarter onwards is for all stocks[1] above a market...

David Lepper

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