Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

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<a href="https://www.smartkarma.com/entities/korea-kolmar-co-ltd" target="_blank" data-smartkarma-citation="entities:7985:1" rel="noopener">Korea Kolmar (161890 KS)</a> is the seventh company we introduce in our 'Korea Small Cap Gem' series. We define small cap as companies with market cap of less than US$1 billion. Korea Kolmar has a market cap of $0.9 billion (1 trillion won). Korea Kolmar is one of the leading cosmetics ODM companies in Korea. It was the first company in Korea to introduce the ODM business for the cosmetics industry in 1993. Korea Kolmar currently owns a 50.7% stake in a private company called HK inno.N. This company was previously called CJ HealthCare which Korea Kolmar purchased in April 2018 for 1.3 trillion won ($1.2 billion) (100% stake) from CJ Cheiljedang.
The local media have mentioned that the estimated value of HK inno.N has risen to nearly 2 trillion won. A 50.7% stake of this would be worth nearly 1 trillion won, which would represent nearly the entire market cap of Korea Kolmar.
In other words, if the assessment of the value of HK inno.N is indeed about 2 trillion won, then investors would be getting the remaining Korea Komar's core businesses for free. Over the next one year, Korea Kolmar could be a major turnaround play with improving cosmetics operations along with an increasing focus on the IPO of HK inno.N in 2021.
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Korea Kolmar (161890 KS) is the seventh company we introduce in our 'Korea Small Cap Gem' series. We define small cap as companies with market cap of less than US$1 billion. Korea Kolmar has a market cap of $0.9 billion (1 trillion won). Korea Kolmar is one of the leading cosmetics ODM companies in Korea. It was the first company in Korea to introduce the ODM business for the cosmetics industry in 1993. Korea Kolmar currently owns a 50.7% stake in a private company called HK inno.N. This company was previously called CJ HealthCare which Korea Kolmar purchased in April 2018 for 1.3 trillion won ($1.2 billion) (100% stake) from CJ Cheiljedang.
The local media have mentioned that the estimated value of HK inno.N has risen to nearly 2 trillion won. A 50.7% stake of this would be worth nearly 1 trillion won, which would represent nearly the entire market cap of Korea Kolmar.
In other words, if the assessment of the value of HK inno.N is indeed about 2 trillion won, then investors would be getting the remaining Korea Komar's core businesses for free. Over the next one year, Korea Kolmar could be a major turnaround play with improving cosmetics operations along with an increasing focus on the IPO of HK inno.N in 2021.


Korea Small Cap Gem #7: Korea Kolmar - Get the Core Cosmetics Business for Free (Ex HK Inno.N)

Cross Asset Strategy

Review of Top 10 Issues Related to Korean stock market, economy, &amp; politics in June 2020:
<ul>
<li>SK Biopharm IPO</li>
<li>SK Holdings downgrade</li>
<li>Capital gains tax on stocks and funds in Korea</li>
<li>China scraps "Han Han Ryung" (Law that Banned Korean culture-related products/services)</li>
<li>A Surge in Value of Nikola Corp</li>
<li>North Korea suspends all communication with South Korea</li>
<li>Positioning ahead of KOSPI 200 &amp; KOSDAQ 150 Rebalance in December</li>
<li>IGIS Value Plus REIT &amp; IGIS Residence REIT IPOs</li>
<li>Korean preferred shares: Bamboo trees of Korean stock market</li>
<li>Korea Small Cap Gem #3: New Tree Co</li>
</ul>

Review of Top 10 Issues Related to Korean stock market, economy, &amp; politics in June 2020:

SK Biopharm IPO
SK Holdings downgrade
Capital gains tax on stocks and funds in Korea
China scraps "Han Han Ryung" (Law that Banned Korean culture-related products/services)
A Surge in Value of Nikola Corp
North Korea suspends all communication with South Korea
Positioning ahead of KOSPI 200 &amp; KOSDAQ 150 Rebalance in December
IGIS Value Plus REIT &amp; IGIS Residence REIT IPOs
Korean preferred shares: Bamboo trees of Korean stock market
Korea Small Cap Gem #3: New Tree Co


Korea Stock Market Monthly Recap #49 (June 2020)

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Thematic (Sector/Industry)

Consumer Staples are a good inflation hedge, but only if they can pass on the increase in raw material costs to end consumers. In a scenario of high unemployment and collapsing demand this may not always be possible.We have taken a look at the change in short interest on Asian consumer staples names across Hong Kong, Korea, Taiwan and Japan to identify stocks that the market is betting on and against.There is a fair bit of variability among the HK and Taiwan stocks, short interest has been broadly lower in Korea and has been plummeting in Japan. Investors can use the data as one of the inputs in identifying stocks that could benefit from an increase in inflation in the near/medium term.

Consumer Staples are a good inflation hedge, but only if they can pass on the increase in raw material costs to end consumers. In a scenario of high unemployment and collapsing demand this may not always be possible.We have taken a look at the change in short interest on Asian consumer staples names across Hong Kong, Korea, Taiwan and Japan to identify stocks that the market is betting on and against.There is a fair bit of variability among the HK and Taiwan stocks, short interest has been broadly lower in Korea and has been plummeting in Japan. Investors can use the data as one of the inputs in identifying stocks that could benefit from an increase in inflation in the near/medium term.

Asian Consumer Staples - Inflation Hedge?

Event-Driven

Estee Lauder Companies Cl A / Event-Driven

<a href="https://www.smartkarma.com/entities/estee-lauder-companies-cl-a" target="_blank" data-smartkarma-citation="entities:8713:1" rel="noopener">Estee Lauder Companies Cl A (EL US)</a> announced on November 18th that it will purchase a 66.7% stake in Have &amp; Be Co., a leading Korean cosmetics maker which was established in 2005.Although the exact <a href="https://n.news.naver.com/article/015/0004243576" target="_blank" rel="noopener">purchase price</a> was not announced, the value of the total 100% stake in Have &amp; Be is estimated to be about 2 trillion won, which would result in the 66.7% stake in the company being valued at about 1.3 trillion ($1.1 billion). This is one of the biggest M&amp;A deals in the Korean cosmetics sector this year and it is the first major acquisition of an Asian brand cosmetics company in Asia by Estee Lauder. The company has fantastic financials backed by strong revenue growth rate and high profit margins. In 2018, Have &amp; Be achieved revenue of 469.1 billion won (up 29.3% YoY), operating profit of 111.9 billion won (up 19.5% YoY), and operating margin of 23.8%).

Estee Lauder Companies Cl A (EL US) announced on November 18th that it will purchase a 66.7% stake in Have &amp; Be Co., a leading Korean cosmetics maker which was established in 2005.Although the exact purchase price was not announced, the value of the total 100% stake in Have &amp; Be is estimated to be about 2 trillion won, which would result in the 66.7% stake in the company being valued at about 1.3 trillion ($1.1 billion). This is one of the biggest M&amp;A deals in the Korean cosmetics sector this year and it is the first major acquisition of an Asian brand cosmetics company in Asia by Estee Lauder. The company has fantastic financials backed by strong revenue growth rate and high profit margins. In 2018, Have &amp; Be achieved revenue of 469.1 billion won (up 29.3% YoY), operating profit of 111.9 billion won (up 19.5% YoY), and operating margin of 23.8%).

Korea M&A Spotlight: Estee Lauder Acquires Have & Be for More Than $1 Billion

Equity Capital Markets

Pumtech Korea Co Ltd / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/28101" target="_blank" data-smartkarma-citation="entities:28101:1">Pumtech Korea Co Ltd (251970 KS)</a>, the second largest manufacturer of cosmetics containers in Korea, is getting ready for an IPO in the next several weeks. The company's major customers include <a href="https://www.smartkarma.com/entities/6501" target="_blank" data-smartkarma-citation="entities:6501:1">Lg Household &amp; Health Care (051900 KS)</a>, <a href="https://www.smartkarma.com/entities/20854" target="_blank" data-smartkarma-citation="entities:20854:1">Amorepacific Corp (090430 KS)</a>, and Carver Korea (AHC brand). Of the 0.64 million shares sold in the IPO, 0.37 million are treasury shares, 0.14 million are shares held by private equity firms, and 0.13 million shares are held by insiders. The fact that nearly 58% of this amount is from the treasury shares are likely to be viewed positively since this would not involve shares dilution. The company's sales increased 21.1% CAGR from 2015 to 2018. In 2018, the company generated sales of 151.1 billion won (up 13.1% YoY) and operating profit of 24.5 billion won (up 27.9% YoY). The company's operating margin averaged 13.2% from 2015 to 2018.

Pumtech Korea Co Ltd (251970 KS), the second largest manufacturer of cosmetics containers in Korea, is getting ready for an IPO in the next several weeks. The company's major customers include Lg Household &amp; Health Care (051900 KS), Amorepacific Corp (090430 KS), and Carver Korea (AHC brand). Of the 0.64 million shares sold in the IPO, 0.37 million are treasury shares, 0.14 million are shares held by private equity firms, and 0.13 million shares are held by insiders. The fact that nearly 58% of this amount is from the treasury shares are likely to be viewed positively since this would not involve shares dilution. The company's sales increased 21.1% CAGR from 2015 to 2018. In 2018, the company generated sales of 151.1 billion won (up 13.1% YoY) and operating profit of 24.5 billion won (up 27.9% YoY). The company's operating margin averaged 13.2% from 2015 to 2018. 

South Korea

Kolmar Korea Co., Ltd. manufactures and distributes personal care products. The Company produces cosmetics. Kolmar Korea also produces medicine and healthcare products.

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Kolmar Korea (161890 KS)

Korea Small Cap Gem #7: Korea Kolmar - Get the Core Cosmetics Business for Free (Ex HK Inno.N)

Over the next one year, Korea Kolmar could be a major turnaround play with improving cosmetics operations along with an increasing focus on the IPO...

Douglas Kim

Korea Stock Market Monthly Recap #49 (June 2020)

Review of Top 10 Issues Related to Korean stock market, economy, & politics in June 2020: SK Biopharm IPO SK Holdings downgrade Capital gains...

Douglas Kim

Asian Consumer Staples - Inflation Hedge?

Consumer Staples are a good inflation hedge, but only if they can pass on the increase in raw material costs to end consumers. In a scenario of...

Brian Freitas

Korea M&A Spotlight: Estee Lauder Acquires Have & Be for More Than $1 Billion

Estee Lauder Companies Cl A (EL US) announced on November 18th that it will purchase a 66.7% stake in Have & Be Co., a leading Korean cosmetics...

Douglas Kim

Pumtech Korea IPO Preview

Pumtech Korea Co Ltd (251970 KS), the second largest manufacturer of cosmetics containers in Korea, is getting ready for an IPO in the next several...

Douglas Kim

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