Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>On 5 April, Hanwha Aerospace (012450 KS) formally announced that it will spin off its semiconductor equipment and video surveillance units which contributed to about 16% of its revenue. </li>
<li>We are Negative on Hanwha Aerospace mainly due to valuations. Its share price has risen so much in the past year that its valuations are no longer attractive.</li>
<li>Hanwha Aerospace is trading at premium valuation to Lockheed Martin on an EV/EBITDA basis. Despite its recent strong growth, Hanwha Aerospace is no Lockheed Martin. </li>
</ul>


On 5 April, Hanwha Aerospace (012450 KS) formally announced that it will spin off its semiconductor equipment and video surveillance units which contributed to about 16% of its revenue. 
We are Negative on Hanwha Aerospace mainly due to valuations. Its share price has risen so much in the past year that its valuations are no longer attractive.
Hanwha Aerospace is trading at premium valuation to Lockheed Martin on an EV/EBITDA basis. Despite its recent strong growth, Hanwha Aerospace is no Lockheed Martin. 


Hanwha Aerospace: Spin Off of Semiconductor Equipment and Video Surveillance Units

Equity Bottom-Up

<ul>
<li>In the past several days, there have been numerous local news about a substantial defense cooperation between Saudi Arabia and South Korea. </li>
<li>This could result in billions of dollars in new military/defense related systems new orders for numerous companies in Korea in the coming decade. </li>
<li>If there are major long-term arms deal between Saudi Arabia and South Korea, it could benefit the top defense companies in Korea including Hanwha Aerospace and Korea Aerospace Industries. </li>
</ul>


In the past several days, there have been numerous local news about a substantial defense cooperation between Saudi Arabia and South Korea. 
This could result in billions of dollars in new military/defense related systems new orders for numerous companies in Korea in the coming decade. 
If there are major long-term arms deal between Saudi Arabia and South Korea, it could benefit the top defense companies in Korea including Hanwha Aerospace and Korea Aerospace Industries. 


A Major Defense Cooperation Between Saudi Arabia and South Korea Likely

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyzed the changes in short interest of KRX Stocks as of Apr 12th which has an aggregated short interest worth USD6.7bn.</li>
<li>We tabulate league table for top short by value and short as multiple of ADT, as well as weekly increases &amp; decreases in short value, short as multiple of ADT.</li>
<li>We highlight short interest changes in HMM, LG Electronics .</li>
</ul>


We analyzed the changes in short interest of KRX Stocks as of Apr 12th which has an aggregated short interest worth USD6.7bn.
We tabulate league table for top short by value and short as multiple of ADT, as well as weekly increases &amp; decreases in short value, short as multiple of ADT.
We highlight short interest changes in HMM, LG Electronics .


KRX Short Interest Weekly (Apr 12th): HMM, LG Electronics

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>Murakami to tender stake in <a href="https://www.smartkarma.com/entities/jsr-corp" target="_blank" data-smartkarma-citation="entities:17620:1" rel="noopener">JSR Corp (4185 JP)</a>? Maybe the "double arb": i.e. short on swap, long on cash, will tender the cash, remain short the back end.</li>
<li>
<a href="https://www.smartkarma.com/entities/austal-ltd" target="_blank" data-smartkarma-citation="entities:14420:1" rel="noopener">Austal Ltd (ASB AU)</a> rejected (for now) <a href="https://www.smartkarma.com/entities/hanwha-ocean-co-ltd" target="_blank" data-smartkarma-citation="entities:12531:1" rel="noopener">Hanwha Ocean (042660 KS)</a>'s bid based on regulatory concerns.  Hanwha reckons these should not be an issue.</li>
<li>If you can tolerate owning the mobile biz, buy <a href="https://www.smartkarma.com/entities/rakuten-group-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten (4755 JP)</a> on dips. If not, avoid Rakuten Group and Rakuten Bank short-term; buy Rakuten Bank on larger dips.</li>
</ul>


Murakami to tender stake in JSR Corp (4185 JP)? Maybe the "double arb": i.e. short on swap, long on cash, will tender the cash, remain short the back end.

Austal Ltd (ASB AU) rejected (for now) Hanwha Ocean (042660 KS)'s bid based on regulatory concerns.  Hanwha reckons these should not be an issue.
If you can tolerate owning the mobile biz, buy Rakuten (4755 JP) on dips. If not, avoid Rakuten Group and Rakuten Bank short-term; buy Rakuten Bank on larger dips.


Last Week in Event SPACE: JSR, Austal, Rakuten, Hyundai Home Shopping, Hanmi Science

<ul>
<li>We believe the new restructuring plan of the Hanwha Group is likely to have a positive impact on Hanwha Corp but could negatively impact Hanwha Ocean. </li>
<li>Our NAV analysis of Hanwha Corp suggests NAV of 3.2 trillion won or NAV per share of 43,168 won, which is 50% higher than current share price. </li>
<li>The biggest component of the valuation is Hanwha Corp's 34% stake in Hanwha Aerospace which is worth 4.1 trillion won. (187% of Hanwha Corp's market cap). </li>
</ul>


We believe the new restructuring plan of the Hanwha Group is likely to have a positive impact on Hanwha Corp but could negatively impact Hanwha Ocean. 
Our NAV analysis of Hanwha Corp suggests NAV of 3.2 trillion won or NAV per share of 43,168 won, which is 50% higher than current share price. 
The biggest component of the valuation is Hanwha Corp's 34% stake in Hanwha Aerospace which is worth 4.1 trillion won. (187% of Hanwha Corp's market cap). 


Hanwha Group's Restructuring to Positively Benefit Hanwha Corp but Negatively Impact Hanwha Ocean

South Korea

Hanwha Aerospace Co., Ltd. operates as an aircraft parts manufacturing company. The Company produces and sells aircraft gas turbine engine products, aircraft compressors, low pressure turbines, and other products. Hanwha Aerospace markets its products worldwide.

Hanwha Aerospace (012450 KS)

Hanwha Aerospace: Spin Off of Semiconductor Equipment and Video Surveillance Units

On 5 April, Hanwha Aerospace (012450 KS) formally announced that it will spin off its semiconductor equipment and video surveillance units. We are...

Douglas Kim

A Major Defense Cooperation Between Saudi Arabia and South Korea Likely

There is likely to be a major arms deal between Saudi Arabia and South Korea, which could benefit the top defense companies in Korea including...

Douglas Kim

KRX Short Interest Weekly (Apr 12th): HMM, LG Electronics

We analyzed KRX short interest report for the past week. We estimate the short interests were USD6.7bn and highlighted short interest changes in...

Ke Yan, CFA, FRM

Last Week in Event SPACE: JSR, Austal, Rakuten, Hyundai Home Shopping, Hanmi Science

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Hanwha Group's Restructuring to Positively Benefit Hanwha Corp but Negatively Impact Hanwha Ocean

We believe the new restructuring plan of the Hanwha Group is likely to have a positive impact on Hanwha Corp but could negatively impact Hanwha Ocean.

Douglas Kim