Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

Equity Bottom-Up

<ul>
<li>Despite the higher probability of the cancellation of treasury shares by Lotte Corp, we believe that its worsening balance sheet is a greater concern. </li>
<li>There does not appear to be a rapid business turnaround of its major affiliates including Lotte Chemical. As a result, we are concerned about further credit downgrades in 2026/2027.</li>
<li>Our base case NAV valuation of Lotte Corp is market cap of 2.2 trillion won or target price of 20,918 won per share, which is 29% lower than current price.</li>
</ul>


Despite the higher probability of the cancellation of treasury shares by Lotte Corp, we believe that its worsening balance sheet is a greater concern. 
There does not appear to be a rapid business turnaround of its major affiliates including Lotte Chemical. As a result, we are concerned about further credit downgrades in 2026/2027.
Our base case NAV valuation of Lotte Corp is market cap of 2.2 trillion won or target price of 20,918 won per share, which is 29% lower than current price.


Lotte Corp: Worsening Balance Sheet Offset by Its High Treasury Shares Level

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

<ul>
<li>The proposed bill fully closes the treasury-share loopholes, bans all exchangeable/pledge uses, blocks M&amp;A allocations, and imposes strict cancellation deadlines—1 year for new buys, 6 months for existing.</li>
<li>The amendment tightens disposal rules: no cancellation means pro-rata sales to existing shareholders only, shutting down selective deals and closing the wide-open disposal gap under current law.</li>
<li>The proposal is far tougher than expected, likely to become the final version, and should drive a near-term mandatory-cancel narrative and notable price action in governance-sensitive holding-co names.</li>
</ul>


The proposed bill fully closes the treasury-share loopholes, bans all exchangeable/pledge uses, blocks M&amp;A allocations, and imposes strict cancellation deadlines—1 year for new buys, 6 months for existing.
The amendment tightens disposal rules: no cancellation means pro-rata sales to existing shareholders only, shutting down selective deals and closing the wide-open disposal gap under current law.
The proposal is far tougher than expected, likely to become the final version, and should drive a near-term mandatory-cancel narrative and notable price action in governance-sensitive holding-co names.


Ruling Party Unveils Key Details of 3rd Commercial Act Amendment: Mandatory Treasury-Share Disposal

<ul>
<li>Market focus is now on retroactive impact — existing treasury holdings above 10% must be canceled within a year, flipping earlier expectations that they’d be exempt.</li>
<li>DP’s fast-tracking the bill, targeting a September vote and mid-October go-live, with this Commercial Act tweak topping their legislative priority list.</li>
<li>Excel below shows 230 stocks above the 10% treasury cap, including 35 large-caps — prime candidates for momentum trades as the mandatory buyback burn bill gains steam.</li>
</ul>


Market focus is now on retroactive impact — existing treasury holdings above 10% must be canceled within a year, flipping earlier expectations that they’d be exempt.
DP’s fast-tracking the bill, targeting a September vote and mid-October go-live, with this Commercial Act tweak topping their legislative priority list.
Excel below shows 230 stocks above the 10% treasury cap, including 35 large-caps — prime candidates for momentum trades as the mandatory buyback burn bill gains steam.


Treasury Cancellation Bill Latest: 10% Holding Cap for Existing Ones — Targets Screened in Excel

<ul>
<li>After the market close on 26 June, LOTTE Corporation (004990 KS) announced that it sold 5% of its outstanding shares worth 145 billion won to its affiliate Lotte Moolsan. </li>
<li>This is poor corporate governance since the company should be cancelling the treasury shares instead.</li>
<li>Major reason why Lotte Corp sold its 5% stake in the company to Lotte Moolsan is to have the Lotte Group Chairman's Shin family maintain control over the Lotte Group. </li>
</ul>


After the market close on 26 June, LOTTE Corporation (004990 KS) announced that it sold 5% of its outstanding shares worth 145 billion won to its affiliate Lotte Moolsan. 
This is poor corporate governance since the company should be cancelling the treasury shares instead.
Major reason why Lotte Corp sold its 5% stake in the company to Lotte Moolsan is to have the Lotte Group Chairman's Shin family maintain control over the Lotte Group. 


Lotte Corp Sells 145 Billion Won Worth of Treasury Shares to Lotte Moolsan  - Negative Governance

Research from Asian Century Stocks, Asian Century Stocks

Michael Fritzell

Research from Asian Century Stocks

Providing financial journalism in the Asia-Pacific

Asian Century Stocks

Asian Century Stocks is a newsletter providing financial journalism for companies and stocks in the Asia-Pacific. 
The Asian Century Stocks logotype “百” stands for “one hundred” or a “century”. The economic centre of gravity is moving towards Asia. Yet most global investors are missing out.

Thematic (Sector/Industry)

<ul>
<li>
In the past year, cocoa prices have spiked to elevated levels.
</li>
<li>
The culprit has been heavy rainfall in West Africa, leading to poor cocoa crops.
</li>
<li>
There’s nothing suggesting that the tightness in the cocoa market will end anytime soon. 
</li>
</ul>



In the past year, cocoa prices have spiked to elevated levels.


The culprit has been heavy rainfall in West Africa, leading to poor cocoa crops.


There’s nothing suggesting that the tightness in the cocoa market will end anytime soon. 



South Korea

LOTTE Corporation is a pure holding company of Lotte Group Korea. It was established in 2017. Lotte Group Korea develops various high quality products and services in the five main business areas: food production/sales, distribution, sightseeing service, heavy chemical/construction and finance/investment.

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LOTTE Corporation (004990 KS)

Lotte Corp: Worsening Balance Sheet Offset by Its High Treasury Shares Level

Despite the higher probability of the cancellation of treasury shares by Lotte Corp, we believe that its worsening balance sheet is a greater concern.

Douglas Kim

Treasury Cancellation Bill Latest: 10% Holding Cap for Existing Ones — Targets Screened in Excel

This post breaks down the latest on the mandatory treasury cancellation bill — 10% holding cap now applies to legacy treasury stock.

Sanghyun Park

Lotte Corp Sells 145 Billion Won Worth of Treasury Shares to Lotte Moolsan - Negative Governance

After the market close on 26 June, LOTTE Corp announced that it sold 5% of its outstanding shares worth 145 billion won to its affiliate Lotte...

Douglas Kim

The cocoa question

In the past year, cocoa prices have spiked to elevated levels. The culprit has been heavy rainfall in West Africa, leading to poor cocoa crops.

Asian Century Stocks

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52-week Range

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Lotte Corp: Worsening Balance Sheet Offset by Its High Treasury Shares Level

Despite the higher probability of the cancellation of treasury shares by Lotte Corp, we believe that its worsening balance sheet is a greater concern.

Douglas Kim

Ruling Party Unveils Key Details of 3rd Commercial Act Amendment: Mandatory Treasury-Share Disposal

This post covers the full structure of the Ruling Party’s full 3rd Commercial Act amendment draft, outlining mandatory treasury-share disposal.

Sanghyun Park

Treasury Cancellation Bill Latest: 10% Holding Cap for Existing Ones — Targets Screened in Excel

This post breaks down the latest on the mandatory treasury cancellation bill — 10% holding cap now applies to legacy treasury stock.

Sanghyun Park

Lotte Corp Sells 145 Billion Won Worth of Treasury Shares to Lotte Moolsan - Negative Governance

After the market close on 26 June, LOTTE Corp announced that it sold 5% of its outstanding shares worth 145 billion won to its affiliate Lotte...

Douglas Kim

The cocoa question

In the past year, cocoa prices have spiked to elevated levels. The culprit has been heavy rainfall in West Africa, leading to poor cocoa crops.

Asian Century Stocks