Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<h2>Subscription</h2><p>Hanwha Systems will issue a total of 78,689,000 shares in this capital increase. It got a total of 73,626,614 subscriptions with an oversubscription of 10,950,101, making the final subscription rate 107.48% with no forfeited share for a public subscription.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" style="width: 726.008px;" data-sheets-value='{"1":2,"2":"Subscription"}'>Subscription</td></tr>
<tr>
<td style="width: 352.5px;" data-sheets-value='{"1":2,"2":"Offering"}'>Offering</td>
<td style="text-align: right; width: 352.514px;" data-sheets-value='{"1":3,"3":78689000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>78,689,000 shares</td>
</tr>
<tr>
<td style="width: 352.5px;" data-sheets-value='{"1":2,"2":"Main subscription"}'>Subscription</td>
<td style="text-align: right; width: 352.514px;" data-sheets-value='{"1":3,"3":73626614}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=11736139+61890475">73,626,614 shares</td>
</tr>
<tr>
<td style="width: 352.5px;"> - ESOP</td>
<td style="text-align: right; width: 352.514px;">11,736,139 shares</td>
</tr>
<tr>
<td style="width: 352.5px;"> - Stockholders</td>
<td style="text-align: right; width: 352.514px;">61,890,475 shares</td>
</tr>
<tr>
<td style="width: 352.5px;" data-sheets-value='{"1":2,"2":"Over-subscription"}'>Over-subscription</td>
<td style="text-align: right; width: 352.514px;" data-sheets-value='{"1":3,"3":10950101}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>10,950,101 shares</td>
</tr>
<tr>
<td style="width: 352.5px;"><strong>- Allocation per over-subscription</strong></td>
<td style="text-align: right; width: 352.514px;"><strong>0.4623140918 share</strong></td>
</tr>
<tr>
<td style="width: 352.5px;" data-sheets-value='{"1":2,"2":"- Final subscription rate"}'><strong>Final subscription rate</strong></td>
<td style="text-align: right; width: 352.514px;" data-sheets-value='{"1":3,"3":1.0748225927385022}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[-3]C[0]+R[-2]C[0])/R[-4]C[0]"><strong>107.48%</strong></td>
</tr>
<tr><td colspan="2" style="width: 726.008px;" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><h2>Shares outstanding</h2><p>This is a massive offering at a capital increase rate of 71.39%. Accordingly, the total number of shares increased from 110,230,389 to 188,919,389. The stock dilution ratio for existing shareholders is 41.65%.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Shares outstanding"}'>Shares outstanding</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering"}'>Offering</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":78689000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-9]C[0]">78,689,000 shares</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase"}'><strong>Capital increase</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.7138594058667433}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[0]/R[2]C[0]"><strong>71.39%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dilution"}'>Dilution</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.41652156730191414}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-2]C[0]/(R[-2]C[0]+R[1]C[0])">41.65%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Shares outstanding before the offering"}'>Shares outstanding before the offering</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":110230389}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>110,230,389 shares</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Shares outstanding after the offering"}'><strong>Shares outstanding after the offering</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":188919389}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-4]C[0]+R[-1]C[0]"><strong>188,919,389 shares</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><h2>Float adjustment</h2><p>The major shareholders, Hanwha Aerospace and H Solution, announced their participation in this capital increase through <a href="http://dart.fss.or.kr/dsaf001/main.do?rcpNo=20210607000001" target="_blank" rel="noopener">a regulatory filing</a>. Their majority shareholding has declined slightly. But the free-float rate has also dropped slightly due to an increase in the shares owned by the ESOP.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td style="width: 217.273px;" data-sheets-value='{"1":2,"2":"Float adjustment"}'>Float adjustment</td>
<td style="text-align: right; width: 143.878px;" data-sheets-value='{"1":2,"2":"Before the offering"}'>Before the offering</td>
<td style="text-align: right; width: 88.5795px;" data-sheets-value='{"1":2,"2":"%"}'>%</td>
<td style="text-align: right; width: 103.665px;" data-sheets-value='{"1":2,"2":"After the offering"}'>After the offering</td>
<td style="text-align: right; width: 88.6364px;" data-sheets-value='{"1":2,"2":"%"}'>%</td>
</tr>
<tr>
<td style="width: 217.273px;" data-sheets-value='{"1":2,"2":"Hanwha Aerospace"}'><strong>Hanwha Aerospace</strong></td>
<td style="text-align: right; width: 143.878px;" data-sheets-value='{"1":3,"3":54000000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>54,000,000</strong></td>
<td style="text-align: right; width: 88.5795px;" data-sheets-value='{"1":3,"3":0.48988305756591316}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R15C2"><strong>48.99%</strong></td>
<td style="text-align: right; width: 103.665px;" data-sheets-value='{"1":3,"3":88289321}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[0]C[-2]+34289321"><strong>88,289,321</strong></td>
<td style="text-align: right; width: 88.6364px;" data-sheets-value='{"1":3,"3":0.4673385906409003}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R16C2"><strong>46.73%</strong></td>
</tr>
<tr>
<td style="width: 217.273px;" data-sheets-value='{"1":2,"2":"H Solution"}'><strong>H Solution</strong></td>
<td style="text-align: right; width: 143.878px;" data-sheets-value='{"1":3,"3":14785550}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>14,785,550</strong></td>
<td style="text-align: right; width: 88.5795px;" data-sheets-value='{"1":3,"3":0.13413315632951273}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R15C2"><strong>13.41%</strong></td>
<td style="text-align: right; width: 103.665px;" data-sheets-value='{"1":3,"3":24174187}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[0]C[-2]+9388637"><strong>24,174,187</strong></td>
<td style="text-align: right; width: 88.6364px;" data-sheets-value='{"1":3,"3":0.1279603280952809}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R16C2"><strong>12.80%</strong></td>
</tr>
<tr>
<td style="width: 217.273px;" data-sheets-value='{"1":2,"2":"Special affiliated persons"}'>Special affiliated persons</td>
<td style="text-align: right; width: 143.878px;" data-sheets-value='{"1":3,"3":37617}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=15601+10708+11308">37,617</td>
<td style="text-align: right; width: 88.5795px;" data-sheets-value='{"1":3,"3":0.00034125798104549915}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R15C2">0.03%</td>
<td style="text-align: right; width: 103.665px;" data-sheets-value='{"1":3,"3":59482}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=24669+17881+16932">59,482</td>
<td style="text-align: right; width: 88.6364px;" data-sheets-value='{"1":3,"3":0.00031485386605818424}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R16C2">0.03%</td>
</tr>
<tr>
<td style="width: 217.273px;" data-sheets-value='{"1":2,"2":"Executives"}'>Executives</td>
<td style="text-align: right; width: 143.878px;" data-sheets-value='{"1":3,"3":36514}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>36,514</td>
<td style="text-align: right; width: 88.5795px;" data-sheets-value='{"1":3,"3":0.0003312516659992917}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R15C2">0.03%</td>
<td style="text-align: right; width: 103.665px;" data-sheets-value='{"1":3,"3":36514}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[0]C[-2]">36,514</td>
<td style="text-align: right; width: 88.6364px;" data-sheets-value='{"1":3,"3":0.00019327820290589655}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R16C2">0.02%</td>
</tr>
<tr>
<td style="width: 217.273px;" data-sheets-value='{"1":2,"2":"ESOP"}'>ESOP</td>
<td style="text-align: right; width: 143.878px;" data-sheets-value='{"1":3,"3":2916933}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>2,916,933</td>
<td style="text-align: right; width: 88.5795px;" data-sheets-value='{"1":3,"3":0.026462149199165032}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R15C2">2.65%</td>
<td style="text-align: right; width: 103.665px;" data-sheets-value='{"1":3,"3":14653072}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[0]C[-2]+11736139">14,653,072</td>
<td style="text-align: right; width: 88.6364px;" data-sheets-value='{"1":3,"3":0.07756256294053544}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R16C2">7.76%</td>
</tr>
<tr>
<td style="width: 217.273px;" data-sheets-value='{"1":2,"2":"Treasury shares"}'>Treasury shares</td>
<td style="text-align: right; width: 143.878px;" data-sheets-value='{"1":3,"3":1926128}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>1,926,128</td>
<td style="text-align: right; width: 88.5795px;" data-sheets-value='{"1":3,"3":0.017473656924135505}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R15C2">1.75%</td>
<td style="text-align: right; width: 103.665px;" data-sheets-value='{"1":3,"3":1926128}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[0]C[-2]">1,926,128</td>
<td style="text-align: right; width: 88.6364px;" data-sheets-value='{"1":3,"3":0.01019550195559864}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R16C2">1.02%</td>
</tr>
<tr>
<td style="width: 217.273px;" data-sheets-value='{"1":2,"2":"- Non-float"}'><strong>- Non-float</strong></td>
<td style="text-align: right; width: 143.878px;" data-sheets-value='{"1":3,"3":73702742}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=sum(R[-6]C[0]:R[-1]C[0])"><strong>73,702,742</strong></td>
<td style="text-align: right; width: 88.5795px;" data-sheets-value='{"1":3,"3":0.6686245296657712}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R15C2"><strong>66.86%</strong></td>
<td style="text-align: right; width: 103.665px;" data-sheets-value='{"1":3,"3":129138704}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=sum(R[-6]C[0]:R[-1]C[0])"><strong>129,138,704</strong></td>
<td style="text-align: right; width: 88.6364px;" data-sheets-value='{"1":3,"3":0.6835651157012793}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R16C2"><strong>68.36%</strong></td>
</tr>
<tr>
<td style="width: 217.273px;" data-sheets-value='{"1":2,"2":"Free-float"}'><strong>Free-float</strong></td>
<td style="text-align: right; width: 143.878px;" data-sheets-value='{"1":3,"3":36527647}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-12]C[0]-R[-1]C[0]"><strong>36,527,647</strong></td>
<td style="text-align: right; width: 88.5795px;" data-sheets-value='{"1":3,"3":0.3313754703342288}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R15C2"><strong>33.14%</strong></td>
<td style="text-align: right; width: 103.665px;" data-sheets-value='{"1":3,"3":59780685}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-11]C[-2]-R[-1]C[0]"><strong>59,780,685</strong></td>
<td style="text-align: right; width: 88.6364px;" data-sheets-value='{"1":3,"3":0.31643488429872063}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R16C2"><strong>31.64%</strong></td>
</tr>
<tr><td colspan="5" rowspan="1" style="width: 726.008px;" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><h2>Remaining schedule</h2><p>The public subscription scheduled for June 4 is canceled. The payment date is June 9, and the first trading day is June 21. In other words, you can sell new shares from June 21, two trading days ahead of the listing day. Lastly, the listing date is June 23.</p><div><div><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Timetable"}'>Remaining schedule</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Public subscription"}'>Public subscription</td>
<td data-sheets-value='{"1":3,"3":44351}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>June 8 (Canceled)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'>Payment</td>
<td data-sheets-value='{"1":3,"3":44356}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>June 11</td>
</tr>
<tr>
<td><strong>First trading day</strong></td>
<td><strong>June 21</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'><strong>Listing</strong></td>
<td data-sheets-value='{"1":3,"3":44369}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>June 23</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table></div></div>

SubscriptionHanwha Systems will issue a total of 78,689,000 shares in this capital increase. It got a total of 73,626,614 subscriptions with an oversubscription of 10,950,101, making the final subscription rate 107.48% with no forfeited share for a public subscription.





Subscription

Offering
78,689,000 shares


Subscription
73,626,614 shares


 - ESOP
11,736,139 shares


 - Stockholders
61,890,475 shares


Over-subscription
10,950,101 shares


- Allocation per over-subscription
0.4623140918 share


Final subscription rate
107.48%

Source: DART

Shares outstandingThis is a massive offering at a capital increase rate of 71.39%. Accordingly, the total number of shares increased from 110,230,389 to 188,919,389. The stock dilution ratio for existing shareholders is 41.65%.





Shares outstanding

Offering
78,689,000 shares


Capital increase
71.39%


Dilution
41.65%


Shares outstanding before the offering
110,230,389 shares


Shares outstanding after the offering
188,919,389 shares

Source: DART

Float adjustmentThe major shareholders, Hanwha Aerospace and H Solution, announced their participation in this capital increase through a regulatory filing. Their majority shareholding has declined slightly. But the free-float rate has also dropped slightly due to an increase in the shares owned by the ESOP.









Float adjustment
Before the offering
%
After the offering
%


Hanwha Aerospace
54,000,000
48.99%
88,289,321
46.73%


H Solution
14,785,550
13.41%
24,174,187
12.80%


Special affiliated persons
37,617
0.03%
59,482
0.03%


Executives
36,514
0.03%
36,514
0.02%


ESOP
2,916,933
2.65%
14,653,072
7.76%


Treasury shares
1,926,128
1.75%
1,926,128
1.02%


- Non-float
73,702,742
66.86%
129,138,704
68.36%


Free-float
36,527,647
33.14%
59,780,685
31.64%

Source: DART

Remaining scheduleThe public subscription scheduled for June 4 is canceled. The payment date is June 9, and the first trading day is June 21. In other words, you can sell new shares from June 21, two trading days ahead of the listing day. Lastly, the listing date is June 23.





Remaining schedule

Public subscription
June 8 (Canceled)


Payment
June 11


First trading day
June 21


Listing
June 23

Source: DART



Hanwha Systems Offering: SO/Float Changes & Index Treatment

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<p><a href="https://www.smartkarma.com/entities/hanwha-systems-co-ltd" target="_blank" data-smartkarma-citation="entities:28308:1" rel="noopener">Hanwha Systems Co Ltd (272210 KS)</a> announced on June 7th that it successfully completed its rights offering worth 1.2 trillion won. The company will use the proceeds to expand its aerospace investments. The expected uses of the funds from the rights offering are as follows: (M&amp;A/investments of other companies - 700 billion won; working capital - 390 billion won; and facility investments - 110 billion won).</p><p>The current share price of Hanwha Systems is 17,550 won, which is 18.9% higher than the rights offering price of 14,750 won. The shareholders that participated in the rights offering could gain some profits if the price does not drop much prior to the new shares listing date (June 23rd). </p><p>In recent years, Hanwha Aerospace has been investing in high quality overseas companies with technological expertise in the aerospace industry. In particular, the company has been showing a lot of interest in the urban air mobility (UAM) such as flying cars. The company plans to develop an air taxi aircraft by 2024 and start air taxi pilot operations from 2025. In addition to UAM, the company also plans to aggressively invest in satellite communications and digital platforms. </p><p>According to the company, it received 7.4% higher purchase orders for the rights offering than the amount raised in the subscription for the company's shareholders and ESOP on June 3rd and 4th. Although the demand from the ESOP fell a bit short of allotted amount, the overall rights offering was successful, driven by <a href="https://www.smartkarma.com/entities/hanwha-aerospace-co-ltd" target="_blank" data-smartkarma-citation="entities:504:1" rel="noopener">Hanwha Aerospace (012450 KS)</a> (largest shareholder with a 48.99% stake) and H Solution (2nd largest shareholder with a 13.4% stake) that subscribed 120% of their allocated amount. </p>

Hanwha Systems Co Ltd (272210 KS) announced on June 7th that it successfully completed its rights offering worth 1.2 trillion won. The company will use the proceeds to expand its aerospace investments. The expected uses of the funds from the rights offering are as follows: (M&amp;A/investments of other companies - 700 billion won; working capital - 390 billion won; and facility investments - 110 billion won).The current share price of Hanwha Systems is 17,550 won, which is 18.9% higher than the rights offering price of 14,750 won. The shareholders that participated in the rights offering could gain some profits if the price does not drop much prior to the new shares listing date (June 23rd). In recent years, Hanwha Aerospace has been investing in high quality overseas companies with technological expertise in the aerospace industry. In particular, the company has been showing a lot of interest in the urban air mobility (UAM) such as flying cars. The company plans to develop an air taxi aircraft by 2024 and start air taxi pilot operations from 2025. In addition to UAM, the company also plans to aggressively invest in satellite communications and digital platforms. According to the company, it received 7.4% higher purchase orders for the rights offering than the amount raised in the subscription for the company's shareholders and ESOP on June 3rd and 4th. Although the demand from the ESOP fell a bit short of allotted amount, the overall rights offering was successful, driven by Hanwha Aerospace (012450 KS) (largest shareholder with a 48.99% stake) and H Solution (2nd largest shareholder with a 13.4% stake) that subscribed 120% of their allocated amount. 

Hanwha Systems: Rights Offering Results (Higher Short Term Volatility but Bullish Longer Term)

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>Our screen looks for high valuation multiples presented by companies with significant earnings growth forecasts, as well as financial indicators that suggest balance sheet stress. 34 stocks appear in our Q2 2021 screen, versus 25 in Q1 2021 and 15 in Q4 2020. Our Q2 2021 screen shows a reduction in average stock rank to 65.18 from 70.8 points compared to the Q1 2020 screen, placing the stocks lower into the second quartile of the market and showing a deterioration in fundamental and technical aspects. Whilst this is a 7.6% decline, we see this data as tainted by trailing fundamentals. As we highlighted in previous commentaries, we expect the market to see a defined separation of Quality, Value and Relative Momentum over the next few quarters. The erosion is not unexpected as we see a wave of updated forecasts.</p>

Our screen looks for high valuation multiples presented by companies with significant earnings growth forecasts, as well as financial indicators that suggest balance sheet stress. 34 stocks appear in our Q2 2021 screen, versus 25 in Q1 2021 and 15 in Q4 2020. Our Q2 2021 screen shows a reduction in average stock rank to 65.18 from 70.8 points compared to the Q1 2020 screen, placing the stocks lower into the second quartile of the market and showing a deterioration in fundamental and technical aspects. Whilst this is a 7.6% decline, we see this data as tainted by trailing fundamentals. As we highlighted in previous commentaries, we expect the market to see a defined separation of Quality, Value and Relative Momentum over the next few quarters. The erosion is not unexpected as we see a wave of updated forecasts.

Screening the Silk Road: Q2 2021 High Risk Names to Avoid

<p>I track a total of 141 sector pairs in Korea. Starting this insight, I grouped them into three groups: 1. Financials, 2. Retail, and 3. Industrials.</p><hr><h2>Financials</h2><p>4 pairs from the Financials group have a 180-day correlation coefficient above 0.75 (or close) and a 180-day daily price return beta above 0.70 while sitting below -1.0σ on a 20-day moving average. Of these, <strong>Hana Financial/Shinhan Financial</strong> and <strong>Hyundai Marine/DB Insurance</strong> warrant attention.</p><table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
<col width="70">
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr>
<td style="width: 241.818px;" data-sheets-value='{"1":2,"2":"Comp 1 (Long)"}'>Comp 1 (Long)</td>
<td style="width: 190px;" data-sheets-value='{"1":2,"2":"Comp 2 (Short)"}'>Comp 2 (Short)</td>
<td style="text-align: right; width: 64.5455px;" data-sheets-value='{"1":2,"2":"Sigma on a 20-day moving average"}'>Sigma on a 20-day moving average</td>
<td style="text-align: right; width: 60.9091px;" data-sheets-value='{"1":2,"2":"180-day correlation coefficient"}'>180-day correlation coefficient</td>
<td style="text-align: right; width: 82.7273px;" data-sheets-value='{"1":2,"2":"Cointegration coefficient (180-day price Δ beta)"}'>Cointegration coefficient (180-day price Δ beta)</td>
</tr>
<tr>
<td style="width: 241.818px;" data-sheets-value='{"1":2,"2":"Mirae Asset Securities Co Ltd"}' data-sheets-formula="=Data!R[-1]C[1]">Mirae Asset Securities Co Ltd</td>
<td style="width: 190px;" data-sheets-value='{"1":2,"2":"Samsung Securities Co Ltd"}' data-sheets-formula="=Data!R[-1]C[1]">Samsung Securities Co Ltd</td>
<td style="text-align: right; width: 64.5455px;" data-sheets-value='{"1":3,"3":-1.222273476903716}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]">-1.22</td>
<td style="text-align: right; width: 60.9091px;" data-sheets-value='{"1":3,"3":0.7539862250329782}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[0]C[3]">0.75</td>
<td style="text-align: right; width: 82.7273px;" data-sheets-value='{"1":3,"3":0.6991098567863366}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[2]C[-3]">0.70</td>
</tr>
<tr>
<td style="width: 241.818px;" data-sheets-value='{"1":2,"2":"Mirae Asset Securities Co Ltd"}' data-sheets-formula="=Data!R[-2]C[3]">Mirae Asset Securities Co Ltd</td>
<td style="width: 190px;" data-sheets-value='{"1":2,"2":"NH Investment &amp; Securities Co Ltd"}' data-sheets-formula="=Data!R[-2]C[3]">NH Investment &amp; Securities Co Ltd</td>
<td style="text-align: right; width: 64.5455px;" data-sheets-value='{"1":3,"3":-1.1519173688233821}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]">-1.15</td>
<td style="text-align: right; width: 60.9091px;" data-sheets-value='{"1":3,"3":0.7418291376039101}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[2]C[3]">0.74</td>
<td style="text-align: right; width: 82.7273px;" data-sheets-value='{"1":3,"3":0.7031067314990199}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[1]C[3]">0.70</td>
</tr>
<tr>
<td style="width: 241.818px;" data-sheets-value='{"1":2,"2":"Hana Financial Group Inc"}' data-sheets-formula="=Data!R[-3]C[5]"><strong>Hana Financial Group Inc</strong></td>
<td style="width: 190px;" data-sheets-value='{"1":2,"2":"Shinhan Financial Group Co., Ltd."}' data-sheets-formula="=Data!R[-3]C[5]"><strong>Shinhan Financial Group Co., Ltd.</strong></td>
<td style="text-align: right; width: 64.5455px;" data-sheets-value='{"1":3,"3":-1.0788984328569544}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]"><strong>-1.08</strong></td>
<td style="text-align: right; width: 60.9091px;" data-sheets-value='{"1":3,"3":0.9401716746799647}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[2]C[3]"><strong>0.94</strong></td>
<td style="text-align: right; width: 82.7273px;" data-sheets-value='{"1":3,"3":1.021970873112603}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[0]C[5]"><strong>1.02</strong></td>
</tr>
<tr>
<td style="width: 241.818px;" data-sheets-value='{"1":2,"2":"Hyundai Marine &amp; Fire Insurance Co., Ltd"}' data-sheets-formula="=Data!R[-4]C[7]"><strong>Hyundai Marine &amp; Fire Insurance Co., Ltd</strong></td>
<td style="width: 190px;" data-sheets-value='{"1":2,"2":"DB Insurance Co Ltd"}' data-sheets-formula="=Data!R[-4]C[7]"><strong>DB Insurance Co Ltd</strong></td>
<td style="text-align: right; width: 64.5455px;" data-sheets-value='{"1":3,"3":-1.0725124068124459}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]"><strong>-1.07</strong></td>
<td style="text-align: right; width: 60.9091px;" data-sheets-value='{"1":3,"3":0.9161479896868121}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[2]C[3]"><strong>0.92</strong></td>
<td style="text-align: right; width: 82.7273px;" data-sheets-value='{"1":3,"3":0.756650231829711}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[-1]C[7]"><strong>0.76</strong></td>
</tr>
<tr><td colspan="5" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><h2>Retail</h2><p>2 pairs from the Retail group have a 180-day correlation coefficient above 0.75 and a 180-day daily price return beta above 0.70 while sitting below -1.0σ on a 20-day moving average: <strong>Lotte Shopping/GS Retail</strong> and <strong>Lotte Shopping/Hyundai Department</strong>.</p><table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
<col width="70">
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Comp 1 (Long)"}'>Comp 1 (Long)</td>
<td data-sheets-value='{"1":2,"2":"Comp 2 (Short)"}'>Comp 2 (Short)</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Sigma on a 20-day moving average"}'>Sigma on a 20-day moving average</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"180-day correlation coefficient"}'>180-day correlation coefficient</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Cointegration coefficient (180-day price Δ beta)"}'>Cointegration coefficient (180-day price Δ beta)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Lotte Shopping Co Ltd"}' data-sheets-formula="=Data!R[-1]C[1]"><strong>Lotte Shopping Co Ltd</strong></td>
<td data-sheets-value='{"1":2,"2":"GS Retail Co Ltd"}' data-sheets-formula="=Data!R[-1]C[1]"><strong>GS Retail Co Ltd</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-1.5275880593828013}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]"><strong>-1.53</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.8726370244086025}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[0]C[3]"><strong>0.87</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.8778679151859091}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[2]C[-3]"><strong>0.88</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Lotte Shopping Co Ltd"}' data-sheets-formula="=Data!R[-3]C[5]"><strong>Lotte Shopping Co Ltd</strong></td>
<td data-sheets-value='{"1":2,"2":"Hyundai Department Store Co Ltd"}' data-sheets-formula="=Data!R[-3]C[5]"><strong>Hyundai Department Store Co Ltd</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-1.126049210184334}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]"><strong>-1.13</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.9181905655104922}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[1]C[3]"><strong>0.92</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.8654420144103113}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[0]C[3]"><strong>0.87</strong></td>
</tr>
<tr><td colspan="5" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><h2>Industrials</h2><p>4 pairs from the Retail group have a 180-day correlation coefficient above 0.75 and a 180-day daily price return beta above 0.70 (or close) while sitting below -1.0σ on a 20-day moving average.</p><p>Of these, the Celltrion siblings are the most correlated/cointegrated ones with a substantial diversion. I mentioned their trading dynamics in the previous insight. I will cover <strong>KAI/Hanwha Aerospace </strong>and <strong>Korea Shipbuilding/Hyundai Mipo</strong> in this post.</p><table class="table table-striped">
<colgroup>
<col width="70">
<col width="70">
<col width="70">
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr>
<td style="width: 230px;" data-sheets-value='{"1":2,"2":"Comp 1 (Long)"}'>Comp 1 (Long)</td>
<td style="width: 194.545px;" data-sheets-value='{"1":2,"2":"Comp 2 (Short)"}'>Comp 2 (Short)</td>
<td style="text-align: right; width: 80px;" data-sheets-value='{"1":2,"2":"Sigma on a 20-day moving average"}'>Sigma on a 20-day moving average</td>
<td style="text-align: right; width: 58.1818px;" data-sheets-value='{"1":2,"2":"180-day correlation coefficient"}'>180-day correlation coefficient</td>
<td style="text-align: right; width: 77.2727px;" data-sheets-value='{"1":2,"2":"Cointegration coefficient (180-day price Δ beta)"}'>Cointegration coefficient (180-day price Δ beta)</td>
</tr>
<tr>
<td style="width: 230px;" data-sheets-value='{"1":2,"2":"Korea Aerospace Industries Ltd"}' data-sheets-formula="=Data!R[-1]C[1]"><strong>Korea Aerospace Industries Ltd</strong></td>
<td style="width: 194.545px;" data-sheets-value='{"1":2,"2":"Hanwha Aerospace Co Ltd"}' data-sheets-formula="=Data!R[-1]C[1]"><strong>Hanwha Aerospace Co Ltd</strong></td>
<td style="text-align: right; width: 80px;" data-sheets-value='{"1":3,"3":-1.2612782453636326}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]"><strong>-1.26</strong></td>
<td style="text-align: right; width: 58.1818px;" data-sheets-value='{"1":3,"3":0.9151301901660448}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[2]C[3]"><strong>0.92</strong></td>
<td style="text-align: right; width: 77.2727px;" data-sheets-value='{"1":3,"3":0.6164208180229479}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[2]C[1]"><strong>0.62</strong></td>
</tr>
<tr>
<td style="width: 230px;" data-sheets-value='{"1":2,"2":"Celltrion, Inc."}' data-sheets-formula="=Data!R[-2]C[3]">Celltrion, Inc.</td>
<td style="width: 194.545px;" data-sheets-value='{"1":2,"2":"Celltrion HealthCare Co Ltd"}' data-sheets-formula="=Data!R[-2]C[3]">Celltrion HealthCare Co Ltd</td>
<td style="text-align: right; width: 80px;" data-sheets-value='{"1":3,"3":-1.178153322167809}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]">-1.18</td>
<td style="text-align: right; width: 58.1818px;" data-sheets-value='{"1":3,"3":0.8365102631201596}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[2]C[3]">0.84</td>
<td style="text-align: right; width: 77.2727px;" data-sheets-value='{"1":3,"3":0.7643376618440517}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[1]C[3]">0.76</td>
</tr>
<tr>
<td style="width: 230px;" data-sheets-value='{"1":2,"2":"Celltrion Pharm Inc"}' data-sheets-formula="=Data!R[-3]C[5]">Celltrion Pharm Inc</td>
<td style="width: 194.545px;" data-sheets-value='{"1":2,"2":"Celltrion HealthCare Co Ltd"}' data-sheets-formula="=Data!R[-3]C[5]">Celltrion HealthCare Co Ltd</td>
<td style="text-align: right; width: 80px;" data-sheets-value='{"1":3,"3":-1.066075796850893}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]">-1.07</td>
<td style="text-align: right; width: 58.1818px;" data-sheets-value='{"1":3,"3":0.8799929165201812}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[3]C[3]">0.88</td>
<td style="text-align: right; width: 77.2727px;" data-sheets-value='{"1":3,"3":0.7823707069161424}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[0]C[7]">0.78</td>
</tr>
<tr>
<td style="width: 230px;" data-sheets-value='{"1":2,"2":"Korea Shipbuilding &amp;Offshore Engn Co Ltd"}' data-sheets-formula="=Data!R[-5]C[9]"><strong>Korea Shipbuilding &amp;Offshore Engn Co Ltd</strong></td>
<td style="width: 194.545px;" data-sheets-value='{"1":2,"2":"Hyundai Mipo Dockyard Co., Ltd."}' data-sheets-formula="=Data!R[-5]C[9]"><strong>Hyundai Mipo Dockyard Co., Ltd.</strong></td>
<td style="text-align: right; width: 80px;" data-sheets-value='{"1":3,"3":-1.0295619383635715}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]"><strong>-1.03</strong></td>
<td style="text-align: right; width: 58.1818px;" data-sheets-value='{"1":3,"3":0.9657685058341984}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[3]C[3]"><strong>0.97</strong></td>
<td style="text-align: right; width: 77.2727px;" data-sheets-value='{"1":3,"3":0.6811111503062213}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[-2]C[11]"><strong>0.68</strong></td>
</tr>
<tr><td colspan="5" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table>

I track a total of 141 sector pairs in Korea. Starting this insight, I grouped them into three groups: 1. Financials, 2. Retail, and 3. Industrials.Financials4 pairs from the Financials group have a 180-day correlation coefficient above 0.75 (or close) and a 180-day daily price return beta above 0.70 while sitting below -1.0σ on a 20-day moving average. Of these, Hana Financial/Shinhan Financial and Hyundai Marine/DB Insurance warrant attention.









Comp 1 (Long)
Comp 2 (Short)
Sigma on a 20-day moving average
180-day correlation coefficient
Cointegration coefficient (180-day price Δ beta)


Mirae Asset Securities Co Ltd
Samsung Securities Co Ltd
-1.22
0.75
0.70


Mirae Asset Securities Co Ltd
NH Investment &amp; Securities Co Ltd
-1.15
0.74
0.70


Hana Financial Group Inc
Shinhan Financial Group Co., Ltd.
-1.08
0.94
1.02


Hyundai Marine &amp; Fire Insurance Co., Ltd
DB Insurance Co Ltd
-1.07
0.92
0.76

Source: KRX

Retail2 pairs from the Retail group have a 180-day correlation coefficient above 0.75 and a 180-day daily price return beta above 0.70 while sitting below -1.0σ on a 20-day moving average: Lotte Shopping/GS Retail and Lotte Shopping/Hyundai Department.









Comp 1 (Long)
Comp 2 (Short)
Sigma on a 20-day moving average
180-day correlation coefficient
Cointegration coefficient (180-day price Δ beta)


Lotte Shopping Co Ltd
GS Retail Co Ltd
-1.53
0.87
0.88


Lotte Shopping Co Ltd
Hyundai Department Store Co Ltd
-1.13
0.92
0.87

Source: KRX

Industrials4 pairs from the Retail group have a 180-day correlation coefficient above 0.75 and a 180-day daily price return beta above 0.70 (or close) while sitting below -1.0σ on a 20-day moving average.Of these, the Celltrion siblings are the most correlated/cointegrated ones with a substantial diversion. I mentioned their trading dynamics in the previous insight. I will cover KAI/Hanwha Aerospace and Korea Shipbuilding/Hyundai Mipo in this post.









Comp 1 (Long)
Comp 2 (Short)
Sigma on a 20-day moving average
180-day correlation coefficient
Cointegration coefficient (180-day price Δ beta)


Korea Aerospace Industries Ltd
Hanwha Aerospace Co Ltd
-1.26
0.92
0.62


Celltrion, Inc.
Celltrion HealthCare Co Ltd
-1.18
0.84
0.76


Celltrion Pharm Inc
Celltrion HealthCare Co Ltd
-1.07
0.88
0.78


Korea Shipbuilding &amp;Offshore Engn Co Ltd
Hyundai Mipo Dockyard Co., Ltd.
-1.03
0.97
0.68

Source: KRX



Korea Sector Pair Trade: Financials, Retail, & Industrials

<p>Hanwha Systems' ₩1.2T offering subscription rights trade begins <strong>May 13 (this Thursday)</strong>. It will last for 5 trading sessions until May 20.</p><table class="table table-striped"><tbody>
<tr><td colspan="2" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Timetable"}'>Timetable</td></tr>
<tr>
<td style="width: 364.545px;" data-sheets-value='{"1":2,"2":"Subscription rights trade beginning"}'><strong>Subscription rights trade</strong></td>
<td style="text-align: right; width: 338.182px;" data-sheets-value='{"1":3,"3":44329}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 5. 13 ~ 5. 20</strong></td>
</tr>
<tr>
<td style="width: 364.545px;" data-sheets-value='{"1":2,"2":"Final pricing"}'><strong>Final pricing</strong></td>
<td style="text-align: right; width: 338.182px;" data-sheets-value='{"1":3,"3":44347}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 5. 31</strong></td>
</tr>
<tr>
<td style="width: 364.545px;">Subscription</td>
<td style="text-align: right; width: 338.182px;">2021. 6. 03</td>
</tr>
<tr>
<td style="width: 364.545px;">Payment</td>
<td style="text-align: right; width: 338.182px;">2021. 6. 11</td>
</tr>
<tr>
<td style="width: 364.545px;" data-sheets-value='{"1":2,"2":"Listing"}'><strong>Listing</strong></td>
<td style="text-align: right; width: 338.182px;" data-sheets-value='{"1":3,"3":44370}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 6. 23</strong></td>
</tr>
<tr><td colspan="2" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody></table><p><strong>The 1st round price settled at ₩15,800, giving an 11.73% discount to the last close</strong>. This price of ₩15,800 will likely serve as our ceiling price in this offering.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"1st round pricing"}'>1st round pricing</td></tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"Calculation period"}'>Calculation period</td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":2,"2":"2021.03.20 ~ 2021.04.19"}'><div><div>2021.03.20 ~ 2021.04.19</div></div></td>
</tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"Reference date"}'><strong>Reference date</strong></td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":3,"3":44305}' data-sheets-numberformat='{"1":5,"2":"mmmm d","3":1}'><strong>April 19</strong></td>
</tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"1-month volume weighted average price"}'>1-month volume-weighted average price (VWAP)</td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":3,"3":20817}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'>₩20,817</td>
</tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"1-week volume weighted average price"}'>1-week volume-weighted average price (VWAP)</td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":3,"3":20222}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'>₩20,222</td>
</tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"1-day close on April 19"}'>1-day close on April 19</td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":3,"3":20600}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'>₩20,600</td>
</tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"(A+B+C)/3"}'>(A+B+C)/3</td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":3,"3":20546}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'>₩20,546</td>
</tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"Reference price: Min(C,D)"}'><strong>Reference Price: Min(C,D)</strong></td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":3,"3":20546}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}' data-sheets-formula="=R[-1]C[0]"><strong>₩20,546</strong></td>
</tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"Discount rate"}'>Discount rate</td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":3,"3":0.15}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>15.00%</td>
</tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"Capital increase rate"}'>Capital increase rate</td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":2,"2":"71,39%"}'>71,39%</td>
</tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"1st round price: Reference Price × (1 - 15%) / [1 + (71.39% × 15%)]"}'><strong>1st round price: Reference Price × (1 - 15%) / [1 + (71.39% × 15%)]</strong></td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":3,"3":15800}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'><strong>₩15,800</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><hr><p><strong>Why does this subscription rights trade deserve attention?</strong></p><div><ul>
<li>Korea now has the short-selling restriction to ban short-sellers from participating in a rights offer. Those having shorted between a day after an offering announcement day and an offering price-fixing day face the restriction.</li>
<li>But this restriction applies only to the offerings announced after April 6. <strong>This Hanwha Systems offering allows us to enjoy the loophole for the last time,</strong> as the offering announcement was made on <strong>March 29</strong>.</li>
</ul></div>

Hanwha Systems' ₩1.2T offering subscription rights trade begins May 13 (this Thursday). It will last for 5 trading sessions until May 20.
Timetable

Subscription rights trade
2021. 5. 13 ~ 5. 20


Final pricing
2021. 5. 31


Subscription
2021. 6. 03


Payment
2021. 6. 11


Listing
2021. 6. 23

Source: DART
The 1st round price settled at ₩15,800, giving an 11.73% discount to the last close. This price of ₩15,800 will likely serve as our ceiling price in this offering.





1st round pricing

Calculation period
2021.03.20 ~ 2021.04.19


Reference date
April 19


1-month volume-weighted average price (VWAP)
₩20,817


1-week volume-weighted average price (VWAP)
₩20,222


1-day close on April 19
₩20,600


(A+B+C)/3
₩20,546


Reference Price: Min(C,D)
₩20,546


Discount rate
15.00%


Capital increase rate
71,39%


1st round price: Reference Price × (1 - 15%) / [1 + (71.39% × 15%)]
₩15,800

Source: DART

Why does this subscription rights trade deserve attention?
Korea now has the short-selling restriction to ban short-sellers from participating in a rights offer. Those having shorted between a day after an offering announcement day and an offering price-fixing day face the restriction.
But this restriction applies only to the offerings announced after April 6. This Hanwha Systems offering allows us to enjoy the loophole for the last time, as the offering announcement was made on March 29.


Hanwha Systems Subscription Rights Trading Begins May 13: Should Aim at the First Day

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.

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