Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>The Korean government announced today that it will allow a fourth telco in Korea in order to reduce the oligopoly structure dominated by the three existing telcos.</li>
<li>This decision to allow another telco in Korea will have a major negative impact on the existing three telcos in Korea.</li>
<li>On a relative basis, we think that this could have a worse impact than LG Uplus as compared to SK Telecom due to greater price sensitivity of LG Uplus' customers.</li>
</ul>


The Korean government announced today that it will allow a fourth telco in Korea in order to reduce the oligopoly structure dominated by the three existing telcos.
This decision to allow another telco in Korea will have a major negative impact on the existing three telcos in Korea.
On a relative basis, we think that this could have a worse impact than LG Uplus as compared to SK Telecom due to greater price sensitivity of LG Uplus' customers.


The Rise of the Fourth Telco in Korea - Breaking the Oligopoly

<ul>
<li>Our NAV analysis of LG Corp suggests an implied market cap of 16.3 trillion won or 103,781 won per share which is 16% higher than current share price.</li>
<li>For holdco discount, we used a 50% holdco discount. If investors perceive improvement in value (such as through corporate governance improvements), the holdco discount on LG Corp would decline.</li>
<li>LG Corp's shares are up 5.9% in the past six months, outperforming all the major LG Group related companies including LG Chem, LG H&amp;H, LG Electronics, and LG Energy Solution. </li>
</ul>


Our NAV analysis of LG Corp suggests an implied market cap of 16.3 trillion won or 103,781 won per share which is 16% higher than current share price.
For holdco discount, we used a 50% holdco discount. If investors perceive improvement in value (such as through corporate governance improvements), the holdco discount on LG Corp would decline.
LG Corp's shares are up 5.9% in the past six months, outperforming all the major LG Group related companies including LG Chem, LG H&amp;H, LG Electronics, and LG Energy Solution. 


LG Corp: Updated NAV Analysis Amid Ongoing Corporate Value Up Program in Korea

Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

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

Event-Driven

<ul>
<li>As of last Friday, SKT has utilized 86.2 billion won out of the allotted 300 billion won for share buybacks, resulting in the acquisition of 1,810,242 shares.</li>
<li>If there are indications of the foreign room potentially falling to a risky level, SKT will likely proceed with an aggressive buyback, targeting 20-30% of the daily trading volume.</li>
<li>Another particularly intriguing observation is the absence of local retail flow directed towards SKT. This indicates there is still potential momentum for an upward price movement at this juncture.</li>
</ul>


As of last Friday, SKT has utilized 86.2 billion won out of the allotted 300 billion won for share buybacks, resulting in the acquisition of 1,810,242 shares.
If there are indications of the foreign room potentially falling to a risky level, SKT will likely proceed with an aggressive buyback, targeting 20-30% of the daily trading volume.
Another particularly intriguing observation is the absence of local retail flow directed towards SKT. This indicates there is still potential momentum for an upward price movement at this juncture.


Analyzing Proactive Flow Trading Targeting SK Telecom's Passive Movements

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

<ul>
<li>Foreign room in <a href="https://www.smartkarma.com/entities/sk-telecom-co-ltd-bbccd86c-474d-4a4d-946d-10e911a225a2" target="_blank" data-smartkarma-citation="entities:395:1" rel="noopener">SK Telecom (017670 KS)</a> increased above 15% in July and is currently just above 16%. Foreign investors have resumed buying again and foreign room is moving lower.</li>
<li>Foreign room staying above 15% for another month could result in passive buying at the end of November. <a href="https://www.smartkarma.com/entities/sk-telecom-co-ltd-bbccd86c-474d-4a4d-946d-10e911a225a2" target="_blank" data-smartkarma-citation="entities:395:1" rel="noopener">SK Telecom (017670 KS)</a> has outperformed peers over the last few weeks.</li>
<li>Foreign buying over the next month could lead to foreign room dropping below 15% in which case there will be no passive inflows. But the stock could be higher.</li>
</ul>


Foreign room in SK Telecom (017670 KS) increased above 15% in July and is currently just above 16%. Foreign investors have resumed buying again and foreign room is moving lower.
Foreign room staying above 15% for another month could result in passive buying at the end of November. SK Telecom (017670 KS) has outperformed peers over the last few weeks.
Foreign buying over the next month could lead to foreign room dropping below 15% in which case there will be no passive inflows. But the stock could be higher.


SK Telecom (017670 KS): Foreign Room & Passive Inflows

<ul>
<li>KT Corp (030200 KS)'s shares were up 4.1% today to 32,000 won driven by better than expected results in 2Q 2023 and the nomination of a new CEO. </li>
<li>KT has nominated Kim Young-Seop, the former CEO of LG CNS as the new CEO of the company.</li>
<li>KT Corp has attractive valuations. It is trading at only 2.6x EV/EBITDA, 6.7x P/E, and 0.5x P/B in 2023. These valuation multiples are much cheaper than SK Telecom.</li>
</ul>


KT Corp (030200 KS)'s shares were up 4.1% today to 32,000 won driven by better than expected results in 2Q 2023 and the nomination of a new CEO. 
KT has nominated Kim Young-Seop, the former CEO of LG CNS as the new CEO of the company.
KT Corp has attractive valuations. It is trading at only 2.6x EV/EBITDA, 6.7x P/E, and 0.5x P/B in 2023. These valuation multiples are much cheaper than SK Telecom.


KT Corp: A New CEO Nominated and Stronger Than Expected Results in 2Q 2023

South Korea

LG Uplus Corp., an affiliate of LG Group, provides a wide range of personal communications services (PCS) using code division multiple access (CDMA) technology.  The Company offers call forwarding, call and data transfer, call waiting, voice mail, Internet-phone, prepaid call, and authentication text-to-speech (TTS) services.

LG Uplus Corp (032640 KS)

The Rise of the Fourth Telco in Korea - Breaking the Oligopoly

The Korean government announced today that it will allow a fourth telco in Korea in order to reduce the oligopoly structure dominated by the three...

Douglas Kim

LG Corp: Updated NAV Analysis Amid Ongoing Corporate Value Up Program in Korea

Our NAV analysis of LG Corp suggests an implied market cap of 16.3 trillion won or 103,781 won per share which is 16% higher than current share price.

Douglas Kim

Analyzing Proactive Flow Trading Targeting SK Telecom's Passive Movements

This post examines proactive flow trading focused on SK Telecom's passive movements until the end of next month, with its ongoing share buyback...

Sanghyun Park

SK Telecom (017670 KS): Foreign Room & Passive Inflows

SK Telecom's foreign room is over 16% and the stock could see passive buying (and pre-positioning). Foreigners have resumed buying and the stock...

Brian Freitas

KT Corp: A New CEO Nominated and Stronger Than Expected Results in 2Q 2023

KT Corp (030200 KS)'s shares were up 4.1% today to 32,000 won driven by better than expected results in 2Q 2023 and the nomination of a new CEO.

Douglas Kim