Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<ul>
<li>Our base case valuation of Socar is target price of 27,967 won, which is 18% lower than the low end of the IPO price range of 34,000 won.</li>
<li>Given the lack of upside, we would Pass on this IPO. Our valuation is also 23% lower than the valuation that Lotte Rental paid for its 13.9% stake in Socar.</li>
<li>We estimate Socar to generate sales of 396.4 billion won (up 37.2% YoY) and EBITDA margins of 12.6% in 2022. </li>
</ul>


Our base case valuation of Socar is target price of 27,967 won, which is 18% lower than the low end of the IPO price range of 34,000 won.
Given the lack of upside, we would Pass on this IPO. Our valuation is also 23% lower than the valuation that Lotte Rental paid for its 13.9% stake in Socar.
We estimate Socar to generate sales of 396.4 billion won (up 37.2% YoY) and EBITDA margins of 12.6% in 2022. 


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.

<ul>
<li>This IPO's valuation is the trickiest among Korea's recent IPOs. Whether all of these ten valuation peers have high enough business relevance to SOCAR is highly doubtful.</li>
<li>Whether SOCAR can evolve from a simple car sharing (or rental) operator to an in-vehicle software platform provider actually determines the success or failure of this IPO.</li>
<li>However, the IPO prospectus available to us lacks the evidence to favorably judge SOCAR's growth potential. So, I will consider taking this IPO as conservatively as possible.</li>
</ul>


This IPO's valuation is the trickiest among Korea's recent IPOs. Whether all of these ten valuation peers have high enough business relevance to SOCAR is highly doubtful.
Whether SOCAR can evolve from a simple car sharing (or rental) operator to an in-vehicle software platform provider actually determines the success or failure of this IPO.
However, the IPO prospectus available to us lacks the evidence to favorably judge SOCAR's growth potential. So, I will consider taking this IPO as conservatively as possible.


Event-Driven

<ul>
<li>We discuss the potential additions and deletions in the upcoming June 2022 KOSPI200 rebalance. The outbreak of war in Ukraine has impacted the potential additions/deletion candidates. </li>
<li>These top 10 potential inclusions are up on average 10.8% YTD, outperforming KOSPI which is down 9.1% YTD.</li>
<li>Among the potential inclusions, Ildong Pharm, Meritz F&amp;M Insurance, Hana Tour, Dongwon Systems, and Lotte Rental have been materially outperforming the market in the past three months. </li>
</ul>


We discuss the potential additions and deletions in the upcoming June 2022 KOSPI200 rebalance. The outbreak of war in Ukraine has impacted the potential additions/deletion candidates. 
These top 10 potential inclusions are up on average 10.8% YTD, outperforming KOSPI which is down 9.1% YTD.
Among the potential inclusions, Ildong Pharm, Meritz F&amp;M Insurance, Hana Tour, Dongwon Systems, and Lotte Rental have been materially outperforming the market in the past three months. 


KOSPI 200 Rebalance in June 2022 Amid Portfolio Changes Post Outbreak of War in Ukraine

<ul>
<li>Three local indexes in Korea face rebalancing trading on March 10, supposedly at the close.</li>
<li>They are 1. KOSPI 200 Fast Entry for LG Energy Solution, 2. KOSPI Size Index Series biannual rebalancing, and 3. KRX BBIG K-New Deal biannual rebalancing.</li>
<li>There are 18 stocks in total, which have an estimated passive flow of ±0.5x ADTV &amp; an average daily trade value of +₩5.0B.</li>
</ul>


Three local indexes in Korea face rebalancing trading on March 10, supposedly at the close.
They are 1. KOSPI 200 Fast Entry for LG Energy Solution, 2. KOSPI Size Index Series biannual rebalancing, and 3. KRX BBIG K-New Deal biannual rebalancing.
There are 18 stocks in total, which have an estimated passive flow of ±0.5x ADTV &amp; an average daily trade value of +₩5.0B.


Combined Rebalancing Flow Estimations of Three Indexes in Korea on March 10

<ul>
<li>KRX officially announced the rebalancing results of the KOSPI Size Index Series. The effective date is March 11.</li>
<li>Of these, new MidCap entrants are what matter the most. This rebalancing delivers a total of 26 new MidCap entrants.</li>
<li>The three stocks shown below have ADTV of over ₩5B and passive flow x ADTV of 1.0x or higher: CJ Logistics, GS Retail, and Lotte Rental.</li>
</ul>


KRX officially announced the rebalancing results of the KOSPI Size Index Series. The effective date is March 11.
Of these, new MidCap entrants are what matter the most. This rebalancing delivers a total of 26 new MidCap entrants.
The three stocks shown below have ADTV of over ₩5B and passive flow x ADTV of 1.0x or higher: CJ Logistics, GS Retail, and Lotte Rental.


KOSPI Size Index Series Rebalancing: Official Results & Passive Impacts

South Korea

Lotte Rental Co.,Ltd. provides car rental services. The Company offers passenger car rental, commercial car rental, used vehicle rental, and other related services. Lotte Rental offers services worldwide.

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Lotte Rental (089860 KS)

Socar IPO Valuation Analysis

Our base case valuation of Socar is target price of 27,967 won, which is 18% lower than the low end of the IPO price range of 34,000 won. Given the...

Douglas Kim

SOCAR IPO: Another Absurd Valuation

This post details the terms of the SOCAR IPO and discusses the irrational valuation done by the bankers, considering that the IPO prospectus...

Sanghyun Park

KOSPI 200 Rebalance in June 2022 Amid Portfolio Changes Post Outbreak of War in Ukraine

We discuss the potential additions and deletions in the upcoming June 2022 KOSPI200 rebalance. The outbreak of war in Ukraine has impacted the...

Douglas Kim

Combined Rebalancing Flow Estimations of Three Indexes in Korea on March 10

This post estimates the combined rebalancing flows of Korea's three local indexes, which should be seen on March 10, supposedly at the close.

Sanghyun Park

KOSPI Size Index Series Rebalancing: Official Results & Passive Impacts

KRX officially announced the rebalancing results of the KOSPI Size Index Series. This post specifically estimates the passive impacts of those new...

Sanghyun Park

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