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.

Index Rebalance

<ul>
<li>KOSPI Size Index Series rebalances twice a year in March and September. The base date is February 28. It is a three-month review, so, from December 1 to February 28.</li>
<li>In the KOSPI size index rebalancing, an increase in the buying volume of local institutions for stocks moving from LargeCap to MidCap is generally detected. </li>
<li>14 new MidCap entrants are expected to have a sizable passive impact.</li>
</ul>


KOSPI Size Index Series rebalances twice a year in March and September. The base date is February 28. It is a three-month review, so, from December 1 to February 28.
In the KOSPI size index rebalancing, an increase in the buying volume of local institutions for stocks moving from LargeCap to MidCap is generally detected. 
14 new MidCap entrants are expected to have a sizable passive impact.


KOSPI Size Index Series Rebalancing Screening Results

Event-Driven

<ul>
<li>The screening results based on the average market cap for the screening period until the last closing price have seven additions/deletions.</li>
<li>LG Energy will make Fast Entry. The one to make room for LG Energy should be Dongwon F&amp;B, an additional deletion to the seven deletions through the preliminary filtering.</li>
<li>F&amp;F Holdings may fail to meet the minimum float rate. If it doesn't make KOSPI 200 this time, Hyundai Marine &amp; Fire Insurance will get to stay in the Index.</li>
</ul>


The screening results based on the average market cap for the screening period until the last closing price have seven additions/deletions.
LG Energy will make Fast Entry. The one to make room for LG Energy should be Dongwon F&amp;B, an additional deletion to the seven deletions through the preliminary filtering.
F&amp;F Holdings may fail to meet the minimum float rate. If it doesn't make KOSPI 200 this time, Hyundai Marine &amp; Fire Insurance will get to stay in the Index.


KOSPI 200 Rebalancing Screening: Prediction Likelihood, Special Issues, & Passive Impacts

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<ul>
<li>In this report, we review our IPO investment research in 2021, including the performance of our calls.</li>
<li>We made 37 investment calls on IPOs this year, of which 28 had positive ratings on the IPOs and 9 had negative ratings.</li>
<li>The 28 stocks (positive ratings) were up 26.1% on average from their IPO prices. The 9 stocks (negative ratings) were up only 4.9% on average from their IPO prices.</li>
</ul>


In this report, we review our IPO investment research in 2021, including the performance of our calls.
We made 37 investment calls on IPOs this year, of which 28 had positive ratings on the IPOs and 9 had negative ratings.
The 28 stocks (positive ratings) were up 26.1% on average from their IPO prices. The 9 stocks (negative ratings) were up only 4.9% on average from their IPO prices.


SubscriptionIljin Hysolus was decided at ₩34,300, which is the upper end of the indicative price band. As a result, Iljin Hysolus raises ₩373.6B through this IPO, with a market cap of ₩1.25T.Aggressive IPO pricing could be expected from a fairly favorable institutional response in the bookbuilding. As the competition rate for institutional subscriptions recorded 1,471 to 1, it was again close to a historical record.Iljin Hysolus also raised more than ₩36T in margin in retail subscriptions. This is by far the highest level among IPOs of this size (around ₩1T).









Subscription by institution type
Institution
%
Demand
%


1. Local publicly raised funds
256
15.89%
1,442,953,000
16.37%


2. Local brokerages/investment advisories
19
1.18%
111,838,000
1.27%


3. Local pensions, funds managing proprietary assets, banks, and insurance companies
225
13.97%
1,198,819,000
13.60%


4. Local others (discretionary investment companies, mostly local hedge funds)
764
47.42%
4,215,805,000
47.83%


5. Foreign (foreign IPO funds &amp; hedge funds)
125
7.76%
674,141,000
7.65%


6. Foreign others (mostly local hot money)
222
13.78%
1,170,285,000
13.28%


Total
1,611
100.00%
8,813,841,000
100.00%


Institutional subscription rate
1,471.01

Source: DART

And virtually all institutions, regardless of institution type, put prices in the upper end of the indicative price band.








Pricing by institution type
Above the upper end + Unspecified
% of total demands
Holding tendencies


1. Local publicly raised funds
94.53%
15.83%
Long-term


2. Local brokerages/investment advisories
89.47%
1.16%
Short-term


3. Local pensions, funds managing proprietary assets, banks, and insurance companies
92.00%
12.84%
Long-term


4. Local others (discretionary investment companies, mostly local hedge funds)
95.68%
46.15%
Short-term


5. Foreign (foreign IPO funds &amp; hedge funds)
98.40%
7.65%
Long or short-term, depends


6. Foreign others (mostly local hot money)
91.44%
11.99%
Short-term

Source: DART

AllocationIn the ESOP subscription, more forfeited shares occurred than expected. As a result, institutional allocation rose to 66.9%, and retail took 30%. Compared to post-IPO SO, institutional investors will hold 20.07%, retail will retain 9%, and ESOP will sit on 0.93%.The allocation ratio among institutional investors is also quite ideal. The proportion of locally publicly raised funds and pension funds with long-term holding tendencies (nearly half of the institutional offering) is also not bad, given its size. In addition, it is a good start for a company of this size by securing foreign ownership of more than 7%, which can be said to be an indicator of increasing external credibility in the initial stage of listing.









Allocation by investor type
Initial allocation
% of the institutional offering
% of the total offering
% of post-IPO SO


Institutional
55.00%
66.90%
66.90%
20.07%


1. Local publicly raised funds
-
36.20%
24.22%
7.26%


2. Local Br/IA
-
1.66%
1.11%
0.33%


3. Local pension, etc.
-
11.20%
7.49%
2.25%


4. Local others
-
15.94%
10.67%
3.20%


5. Foreign
-
34.65%
23.18%
6.95%


6. Foreign, other
-
0.35%
0.23%
0.07%


Retail
25.00%
-
30.00%
9.00%


ESOP
20.00%
-
3.10%
0.93%

Source: DART



Iljin Hysolus IPO: Allocation, Lockups, & Float Schedule

<div class="content-highlight">
<p>Iljin Hysolus reduced its IPO price range. The company announced that it will reduce the IPO price range from 30,300 won to 37,300 won previously to 25,700 won to 34,300 won, respectively. This represents a decline of 8% to 15%.</p>
<p>The IPO deal size has been revised down to US$243 million to US$325 million. The expected market cap after the IPO is from 933 billion won (low) to 1,245 billion won (high). The book building for the institutional investors starts on 19 August 2021. </p>
<p><strong>Our revised base case valuation of Iljin Hysolus is implied market cap of 940 billion won or 25,898 won per share, which represents 1% higher than the low end of the IPO price range of 25,700 won. Given the lack of upside, we continue to maintain a NEGATIVE view of this IPO and we would avoid this IPO. </strong></p>
</div><table class="table table-striped">
<colgroup>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td style="width: 240pt;">Deal Specifics of the Iljin Hysolus IPO (Revised):</td>
<td style="width: 238pt;"> </td>
</tr>
<tr>
<td style="width: 240pt;">Lead underwriters of the IPO: </td>
<td style="width: 238pt;">Mirae Asset Securities, Samsung Securities</td>
</tr>
<tr>
<td style="width: 240pt;">Expected IPO price per share: </td>
<td style="width: 238pt;">25,700 won (low)/34,300 won (high)</td>
</tr>
<tr>
<td style="width: 240pt;">Number of Shares for IPO:</td>
<td style="width: 238pt;">10.89m shares (7.26m new shares and 3.63m old shares)</td>
</tr>
<tr>
<td style="width: 240pt;">IPO base deal size: </td>
<td style="width: 238pt;">US$243 mn (low);  US$325 mn (high)</td>
</tr>
<tr>
<td style="width: 240pt;">Expected common shares outstanding, fully diluted (post-IPO):  </td>
<td style="width: 238pt;">36.31m shares</td>
</tr>
<tr>
<td style="width: 240pt;">Expected market cap after IPO:</td>
<td style="width: 238pt;">933 billion won (low)/1,245 billion won (high)</td>
</tr>
<tr>
<td style="width: 240pt;">Book open: </td>
<td style="text-align: left; width: 238pt;">19-Aug-21</td>
</tr>
<tr>
<td style="width: 240pt;">Book closed:</td>
<td style="text-align: left; width: 238pt;">20-Aug-21</td>
</tr>
<tr>
<td style="width: 240pt;">Listing date: </td>
<td style="text-align: left; width: 238pt;">TBD</td>
</tr>
<tr>
<td style="width: 240pt;">Source: Company data</td>
<td style="width: 238pt;"> </td>
</tr>
</tbody>
</table>


Iljin Hysolus reduced its IPO price range. The company announced that it will reduce the IPO price range from 30,300 won to 37,300 won previously to 25,700 won to 34,300 won, respectively. This represents a decline of 8% to 15%.
The IPO deal size has been revised down to US$243 million to US$325 million. The expected market cap after the IPO is from 933 billion won (low) to 1,245 billion won (high). The book building for the institutional investors starts on 19 August 2021. 
Our revised base case valuation of Iljin Hysolus is implied market cap of 940 billion won or 25,898 won per share, which represents 1% higher than the low end of the IPO price range of 25,700 won. Given the lack of upside, we continue to maintain a NEGATIVE view of this IPO and we would avoid this IPO. 







Deal Specifics of the Iljin Hysolus IPO (Revised):
 


Lead underwriters of the IPO: 
Mirae Asset Securities, Samsung Securities


Expected IPO price per share: 
25,700 won (low)/34,300 won (high)


Number of Shares for IPO:
10.89m shares (7.26m new shares and 3.63m old shares)


IPO base deal size: 
US$243 mn (low);  US$325 mn (high)


Expected common shares outstanding, fully diluted (post-IPO):  
36.31m shares


Expected market cap after IPO:
933 billion won (low)/1,245 billion won (high)


Book open: 
19-Aug-21


Book closed:
20-Aug-21


Listing date: 
TBD


Source: Company data
 




South Korea

Iljin Hysolus Co Ltd operates environmental problem solving businesses. The Company provides hydrogen solutions, CNG solutions, diesel solutions and other services. Iljin Hysolus conducts businesses in South Korea.

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Iljin Hysolus (271940 KS)

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