China/Asia TMT

Shawn Yang

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

<ul>
<li>We estimate that the re-approval of PUBG Mobile in the India will contribute to a 5% increase in Krafton’s annual revenue/profit.</li>
<li>Despite being banned in India for several times, PUBG Mobile is expected to receive a warm welcome from local players due to its high quality gameplay and good device compatibility.</li>
<li>We upgraded our rating to "Buy" in Feb.2023, citing reasons such as PUBG Mobile stabilizing in key markets and Bluehole's new product schedule. Currently, we remain optimistic view about Krafton</li>
</ul>


We estimate that the re-approval of PUBG Mobile in the India will contribute to a 5% increase in Krafton’s annual revenue/profit.
Despite being banned in India for several times, PUBG Mobile is expected to receive a warm welcome from local players due to its high quality gameplay and good device compatibility.
We upgraded our rating to "Buy" in Feb.2023, citing reasons such as PUBG Mobile stabilizing in key markets and Bluehole's new product schedule. Currently, we remain optimistic view about Krafton


Krafton Inc (259960 KS)： PUBG's Re-Approval in India Could Bring 5% Revenue/Profit Upside

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>The review period for the March rebalance ended on 31 January, changes will be announced in the next few days and implemented at the close of trading on 9 March.</li>
<li>We forecast one add/delete for the Secondary Battery Index and Game Index, and a couple of adds/deletes for the BBIG Index. There will be a lot of capping changes.</li>
<li>The largest inflows are expected on <a href="https://www.smartkarma.com/entities/posco-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:12421:1" rel="noopener">Posco Chemical (003670 KS)</a> and <a href="https://www.smartkarma.com/entities/douzone-bizon-co-ltd" target="_blank" data-smartkarma-citation="entities:20161:1" rel="noopener">Douzone Bizon (012510 KS)</a>; the largest outflows are expected on <a href="https://www.smartkarma.com/entities/sk-innovation-co-ltd" target="_blank" data-smartkarma-citation="entities:1268:1" rel="noopener">SK Innovation (096770 KS)</a> and <a href="https://www.smartkarma.com/entities/kmw-co-ltd" target="_blank" data-smartkarma-citation="entities:2834:1" rel="noopener">KMW (032500 KS)</a>.</li>
</ul>


The review period for the March rebalance ended on 31 January, changes will be announced in the next few days and implemented at the close of trading on 9 March.
We forecast one add/delete for the Secondary Battery Index and Game Index, and a couple of adds/deletes for the BBIG Index. There will be a lot of capping changes.
The largest inflows are expected on Posco Chemical (003670 KS) and Douzone Bizon (012510 KS); the largest outflows are expected on SK Innovation (096770 KS) and KMW (032500 KS).


KRX New Deal Index Rebalance Preview: Potential Flows as Announcement Looms

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>Krafton has announced a meaningful shareholder return policy including shares buyback, cancellation, and share based compensation in the next three years.</li>
<li>The combination of improving shareholder return policy along with new games development and China's opening up of its game industry to overseas game makers are likely to positively impact Krafton.</li>
<li>Given Krafton's current market cap of 8.9 trillion won, the estimated share buybacks of 713 billion won would represent 8% of market cap over three years. </li>
</ul>


Krafton has announced a meaningful shareholder return policy including shares buyback, cancellation, and share based compensation in the next three years.
The combination of improving shareholder return policy along with new games development and China's opening up of its game industry to overseas game makers are likely to positively impact Krafton.
Given Krafton's current market cap of 8.9 trillion won, the estimated share buybacks of 713 billion won would represent 8% of market cap over three years. 


Krafton: Improving Corporate Governance Through Shares Cancellation & Stock Based Compensation

<ul>
<li>We upgrade Krafton to BUY because of: 1) better-than-expected performance of PUBG China in 4Q22 and 1Q23 ; 2) market expectation hit low point. </li>
<li>We cut our TP by 11% because we are still worried about Krafton’s development and global publishing capability. However, our latest TP is still about 12% higher than current price.</li>
<li>Our 4Q22’s revenue and adj. net income are 7% and 44% higher than cons., respectively. We suggest HFs to cover short position ahead of 4Q22 earning</li>
</ul>


We upgrade Krafton to BUY because of: 1) better-than-expected performance of PUBG China in 4Q22 and 1Q23 ; 2) market expectation hit low point. 
We cut our TP by 11% because we are still worried about Krafton’s development and global publishing capability. However, our latest TP is still about 12% higher than current price.
Our 4Q22’s revenue and adj. net income are 7% and 44% higher than cons., respectively. We suggest HFs to cover short position ahead of 4Q22 earning


KRAFTON (KRX:259960)：PUBG China Has Better Performance, UG to BUY

<ul>
<li>The review period for the March rebalance ends on 31 January, the changes will be announced towards end February and implemented at the close of trading on 9 March.</li>
<li>We forecast one add/delete for the Game Index, and a couple of adds/deletes for the BBIG Index. There will be a lot of capping changes.</li>
<li>The largest inflows are expected on <a href="https://www.smartkarma.com/entities/posco-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:12421:1" rel="noopener">Posco Chemical (003670 KS)</a> and <a href="https://www.smartkarma.com/entities/douzone-bizon-co-ltd" target="_blank" data-smartkarma-citation="entities:20161:1" rel="noopener">Douzone Bizon (012510 KS)</a>; the largest outflows are expected on <a href="https://www.smartkarma.com/entities/sk-innovation-co-ltd" target="_blank" data-smartkarma-citation="entities:1268:1" rel="noopener">SK Innovation (096770 KS)</a> and <a href="https://www.smartkarma.com/entities/kmw-co-ltd" target="_blank" data-smartkarma-citation="entities:2834:1" rel="noopener">KMW (032500 KS)</a>.</li>
</ul>


The review period for the March rebalance ends on 31 January, the changes will be announced towards end February and implemented at the close of trading on 9 March.
We forecast one add/delete for the Game Index, and a couple of adds/deletes for the BBIG Index. There will be a lot of capping changes.
The largest inflows are expected on Posco Chemical (003670 KS) and Douzone Bizon (012510 KS); the largest outflows are expected on SK Innovation (096770 KS) and KMW (032500 KS).


KRX New Deal Index Rebalance Preview: Some Big Impact Names

South Korea

Krafton, Inc. operates as a game development company. The Company develops console games, mobile games, computer games, and other related products. Krafton markets its products throughout South Korea.

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Krafton (259960 KS)

Krafton Inc (259960 KS)： PUBG's Re-Approval in India Could Bring 5% Revenue/Profit Upside

We estimate that the re-approval of PUBG Mobile in the India will contribute to a 5% increase in Krafton’s annual revenue/profit.

Blue Lotus Research Institute

KRX New Deal Index Rebalance Preview: Potential Flows as Announcement Looms

We forecast one change to the Secondary Battery and Game indices and two changes to the BBIG Index. There are big flows and impact on a few stocks....

Brian Freitas

Krafton: Improving Corporate Governance Through Shares Cancellation & Stock Based Compensation

Krafton has announced a meaningful shareholder return policy including shares buyback, cancellation, and share based compensation in the next three...

Douglas Kim

KRAFTON (KRX:259960)：PUBG China Has Better Performance, UG to BUY

We upgrade Krafton to BUY because of: 1) better-than-expected performance of PUBG China in 4Q22 and 1Q23; 2) market expectation hit low point.

Blue Lotus Research Institute

KRX New Deal Index Rebalance Preview: Some Big Impact Names

There are some high impact changes expected at the March rebalance of the New Deal indices mainly from changes to the top 3 stocks in the Battery...

Brian Freitas

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