Global Healthcare Analyst

Tina Banerjee

Equity Bottom-Up

South Korea-based EuBiologics is the largest supplier of oral cholera vaccine in the world, representing more than 80% market share. By leveraging on market leadership positioning, amid increasing demand and capacity expansion, its oral cholera vaccine has become a stable cash cow for the company. This year, EuBiologics has started developing COVID-19 vaccine, EuCorVac-19, which is currently under clinical trial. The company is one of the frontrunners among the local COVID-19 vaccine developers. With just 2.5% of the people in low-income countries (EuBiologic’s core operating markets) receiving at least one dose of a COVID-19 vaccine, EuCorVac-19 has the potential of becoming second major revenue stream for EuBiologics. Demand for vaccinations will remain for years to come, as more populations become eligible for vaccinations and booster vaccines are rolled out. EuBiologics has a rich late-stage pipeline of typhoid and pneumococcal conjugate vaccines, which target a combined market size of more than KRW8 trillion.

South Korea-based EuBiologics is the largest supplier of oral cholera vaccine in the world, representing more than 80% market share. By leveraging on market leadership positioning, amid increasing demand and capacity expansion, its oral cholera vaccine has become a stable cash cow for the company. This year, EuBiologics has started developing COVID-19 vaccine, EuCorVac-19, which is currently under clinical trial. The company is one of the frontrunners among the local COVID-19 vaccine developers. With just 2.5% of the people in low-income countries (EuBiologic’s core operating markets) receiving at least one dose of a COVID-19 vaccine, EuCorVac-19 has the potential of becoming second major revenue stream for EuBiologics. Demand for vaccinations will remain for years to come, as more populations become eligible for vaccinations and booster vaccines are rolled out. EuBiologics has a rich late-stage pipeline of typhoid and pneumococcal conjugate vaccines, which target a combined market size of more than KRW8 trillion.   

EuBiologics (206650 KS): Cashing on Vaccine Business

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

The fight to acquire <a href="https://www.smartkarma.com/entities/hugel-inc" target="_blank" data-smartkarma-citation="entities:22860:1" rel="noopener">Hugel Inc (145020 KS)</a> is now finally down to between the GS Group led consortium and the <a href="https://www.mk.co.kr/news/stock/view/2021/08/787317/" target="_blank" rel="noopener">Goldman Sachs led consortium. </a>Hugel is a well-known Korean maker of Botox (botulinum toxin). Founded in 2001, Hugel exports its botulinum toxin product Botulax to more than 24 countries. Millions of people (mostly women) take botox shots in order to beautify their skins and make them wrinkle less. 
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The sharp appreciation in Hugel's share price this year until July 16th appear to be a combination of the M&amp;A expectation as well as the company's excellent financial results this year. However, the stock is trading at relatively high valuations (39x P/E in 2021) versus the average P/E ratio of 34x from 2016 to 2020.
Despite the nearly 70% market premium that Bain Capital will be able to receive from this sale, the minority shareholders will not be able to share in this M&amp;A premium. We think that post the actual announcement of the M&amp;A deal (to either consortium), there could be some additional selling on this stock among investors that sell on the news of the M&amp;A deal getting concluded and we would avoid this stock until it reaches a more attractive valuation (below 200,000 won per share). 
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The fight to acquire Hugel Inc (145020 KS) is now finally down to between the GS Group led consortium and the Goldman Sachs led consortium. Hugel is a well-known Korean maker of Botox (botulinum toxin). Founded in 2001, Hugel exports its botulinum toxin product Botulax to more than 24 countries. Millions of people (mostly women) take botox shots in order to beautify their skins and make them wrinkle less. 

The sharp appreciation in Hugel's share price this year until July 16th appear to be a combination of the M&amp;A expectation as well as the company's excellent financial results this year. However, the stock is trading at relatively high valuations (39x P/E in 2021) versus the average P/E ratio of 34x from 2016 to 2020.
Despite the nearly 70% market premium that Bain Capital will be able to receive from this sale, the minority shareholders will not be able to share in this M&amp;A premium. We think that post the actual announcement of the M&amp;A deal (to either consortium), there could be some additional selling on this stock among investors that sell on the news of the M&amp;A deal getting concluded and we would avoid this stock until it reaches a more attractive valuation (below 200,000 won per share). 


The Fight to Acquire Hugel - GS Group Led Consortium or Goldman Sachs Led Consortium?

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

The review period for the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a> June review ends on 30 April. The Korea Exchange (KRX) will announce the results of the June 2021 review of the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a> in May with the changes becoming effective after the close of trading on 10 June.There are currently 201 index constituents following the spin off of <a href="https://www.smartkarma.com/entities/daelim-industrial-co-ltd" target="_blank" data-smartkarma-citation="entities:18095:1" rel="noopener">DL Co Ltd (000210 KS)</a> and the inclusion of <a href="https://www.smartkarma.com/entities/dl-e-c-co-ltd" target="_blank" data-smartkarma-citation="entities:31375:1" rel="noopener">DL E&amp;C Co Ltd (375500 KS)</a> in the index. There will be 202 index constituents following the spin off of <a href="https://www.smartkarma.com/entities/lg-corp" target="_blank" data-smartkarma-citation="entities:6653:1" rel="noopener">LG Corp (003550 KS)</a> and the inclusion of LX Holdings in the index.We currently see 3 inclusions and 5 exclusions from the index. The potential inclusions are <a href="https://www.smartkarma.com/entities/hyosung-tnc-co-ltd" target="_blank" data-smartkarma-citation="entities:27749:1" rel="noopener">Hyosung TNC Co Ltd (298020 KS)</a>, <a href="https://www.smartkarma.com/entities/hyosung-advanced-materials-corporation" target="_blank" data-smartkarma-citation="entities:27751:1" rel="noopener">Hyosung Advanced Materials (298050 KS)</a> and <a href="https://www.smartkarma.com/entities/dongwon-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:1783:1" rel="noopener">Dongwon Industries (006040 KS)</a>, while the potential deletions are <a href="https://www.smartkarma.com/entities/taeyoung-engineering-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:18740:1" rel="noopener">Taeyoung Engineering &amp; Construction (009410 KS)</a>, <a href="https://www.smartkarma.com/entities/namsun-aluminum-co-ltd" target="_blank" data-smartkarma-citation="entities:17514:1" rel="noopener">Namsun Aluminum (008350 KS)</a>, <a href="https://www.smartkarma.com/entities/binggrae-co-ltd" target="_blank" data-smartkarma-citation="entities:16424:1" rel="noopener">Binggrae Co Ltd (005180 KS)</a>, <a href="https://www.smartkarma.com/entities/hanil-hyundai-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:14406:1" rel="noopener">Hanil Hyundai Cement (006390 KS)</a> and <a href="https://www.smartkarma.com/entities/samyang-corp" target="_blank" data-smartkarma-citation="entities:16321:1" rel="noopener">Samyang Corp (145990 KS)</a>. The expected Fast Entry of <a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a> could result in <a href="https://www.smartkarma.com/entities/spc-samlip" target="_blank" data-smartkarma-citation="entities:6007:1" rel="noopener">SPC Samlip (005610 KS)</a> being deleted from the index.The potential Fast Entry of <a href="https://www.smartkarma.com/entities/sk-ie-technology" target="_blank" data-smartkarma-citation="entities:29207:1" rel="noopener">SK IE Technology (SKIET KS)</a> could result in <a href="https://www.smartkarma.com/entities/aekyung-industrial-co-ltd" target="_blank" data-smartkarma-citation="entities:27129:1" rel="noopener">Aekyung Industrial Co Ltd (018250 KS)</a> being deleted from the index.<a href="https://www.smartkarma.com/entities/taihan-electric-wire-co-ltd" target="_blank" data-smartkarma-citation="entities:11551:1" rel="noopener">Taihan Electric Wire (001440 KS)</a> is a very close add - the next 5 trading days will decide if the stock is added to the index or not.Short selling in Korea is scheduled to resume on 3 May and there could be a fair amount of movement in the stocks ahead of the index review announcement and implementation date.

The review period for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) June review ends on 30 April. The Korea Exchange (KRX) will announce the results of the June 2021 review of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in May with the changes becoming effective after the close of trading on 10 June.There are currently 201 index constituents following the spin off of DL Co Ltd (000210 KS) and the inclusion of DL E&amp;C Co Ltd (375500 KS) in the index. There will be 202 index constituents following the spin off of LG Corp (003550 KS) and the inclusion of LX Holdings in the index.We currently see 3 inclusions and 5 exclusions from the index. The potential inclusions are Hyosung TNC Co Ltd (298020 KS), Hyosung Advanced Materials (298050 KS) and Dongwon Industries (006040 KS), while the potential deletions are Taeyoung Engineering &amp; Construction (009410 KS), Namsun Aluminum (008350 KS), Binggrae Co Ltd (005180 KS), Hanil Hyundai Cement (006390 KS) and Samyang Corp (145990 KS). The expected Fast Entry of SK Bioscience (302440 KS) could result in SPC Samlip (005610 KS) being deleted from the index.The potential Fast Entry of SK IE Technology (SKIET KS) could result in Aekyung Industrial Co Ltd (018250 KS) being deleted from the index.Taihan Electric Wire (001440 KS) is a very close add - the next 5 trading days will decide if the stock is added to the index or not.Short selling in Korea is scheduled to resume on 3 May and there could be a fair amount of movement in the stocks ahead of the index review announcement and implementation date.

KOSPI200 Index Rebalance Preview: Review Period Almost Complete; Short Selling Commences in a Week

Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Equity Capital Markets

Medytox, which used to be one of the bluechip names on KOSDAQ, announces a ₩130bil rights offering.It offers a total of 0.97M shares, which represent 16.26% of the SO. Also, the shareholders will get 0.2 bonus shares for each stock they own.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/148/271/original/1.png?1595888509" class="editor-image img-responsive" data-smartkarma-image-id="148271"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/148/275/original/2.png?1595888730" class="editor-image img-responsive" data-smartkarma-image-id="148275"></figure>September 1 will be the reference date for preliminary pricing. So, the ex-rights day falls two trading days later on September 3. You can trade the subscription rights for five trading days starting September 25 until October 5.Then, the final pricing will follow on October 8. The subscription is October 14, followed by the payment on October 22. The new shares will get listed on November 4.As for the bonus shares, the record date is October 23, followed by the listing on November 12, which is five trading days later.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/148/279/original/3.png?1595889173" class="editor-image img-responsive" data-smartkarma-image-id="148279"></figure>There is nothing unusual in pricing. It carries a usual 20% discount.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/148/280/original/5.png?1595889426" class="editor-image img-responsive" data-smartkarma-image-id="148280"></figure>

Medytox, which used to be one of the bluechip names on KOSDAQ, announces a ₩130bil rights offering.It offers a total of 0.97M shares, which represent 16.26% of the SO. Also, the shareholders will get 0.2 bonus shares for each stock they own.September 1 will be the reference date for preliminary pricing. So, the ex-rights day falls two trading days later on September 3. You can trade the subscription rights for five trading days starting September 25 until October 5.Then, the final pricing will follow on October 8. The subscription is October 14, followed by the payment on October 22. The new shares will get listed on November 4.As for the bonus shares, the record date is October 23, followed by the listing on November 12, which is five trading days later.There is nothing unusual in pricing. It carries a usual 20% discount.

After the market close today, it was reported that BK Medical Group’s Chairman Dr. Kim Byung-Gun and Dr. BK Corp will sell their 5.2% stake in <a href="https://www.smartkarma.com/entities/hugel-inc" target="_blank" data-smartkarma-citation="entities:22860:1" rel="noopener">Hugel Inc (145020 KS)</a> (224,781 shares), which currently has a market cap of 2.2 trillion won. Assuming a 7% discount to today's closing price of 518,200 won, this would represent 108 billion won ($90 million). The block deal discount rate is 7-10%. The lead manager on this placement is NH Investment &amp; Securities.<div class="content-highlight">Conclusion: We would avoid this placement of Hugel mainly because we believe the sharp appreciation of Hugel's shares in the past two weeks probably already reflect the increasing market share of BOTOX products in Korea as a result of the Ministry of Food and Drug Safety's cancellation of the permit (to sell) Medy Tox's Medytoxin BOTOX product. At current prices, Hugel's shares are trading at nearly 40x P/E (2021), which are relatively high valuations. Plus, despite the market share gains by Hugel from Medy Tox, the other competing players including Daewoong Pharm are also likely to take away market share in the BOTOX segment.</div>

After the market close today, it was reported that BK Medical Group’s Chairman Dr. Kim Byung-Gun and Dr. BK Corp will sell their 5.2% stake in Hugel Inc (145020 KS) (224,781 shares), which currently has a market cap of 2.2 trillion won. Assuming a 7% discount to today's closing price of 518,200 won, this would represent 108 billion won ($90 million). The block deal discount rate is 7-10%. The lead manager on this placement is NH Investment &amp; Securities.Conclusion: We would avoid this placement of Hugel mainly because we believe the sharp appreciation of Hugel's shares in the past two weeks probably already reflect the increasing market share of BOTOX products in Korea as a result of the Ministry of Food and Drug Safety's cancellation of the permit (to sell) Medy Tox's Medytoxin BOTOX product. At current prices, Hugel's shares are trading at nearly 40x P/E (2021), which are relatively high valuations. Plus, despite the market share gains by Hugel from Medy Tox, the other competing players including Daewoong Pharm are also likely to take away market share in the BOTOX segment.

South Korea

Medy-Tox Inc. is a biopharmaceutical company.  The Company researches, develops and manufactures biopharmaceutical products using clostridium botulinum which is a microorganism toxin.

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Medy Tox Inc (086900 KS)

EuBiologics (206650 KS): Cashing on Vaccine Business

Eubiologics is on a stable growth path, driven by increasing demand of its oral cholera vaccine business. Upcoming commercialization of COVID-19...

Tina Banerjee

The Fight to Acquire Hugel - GS Group Led Consortium or Goldman Sachs Led Consortium?

The fight to acquire Hugel Inc (145020 KS) is now finally down to between the GS Group led consortium and the Goldman Sachs led consortium.

Douglas Kim

KOSPI200 Index Rebalance Preview: Review Period Almost Complete; Short Selling Commences in a Week

There could be up to 6 inclusions and 8 exclusions at the KOSPI200 index review in June. The inclusions could outperform the exclusions as short...

Brian Freitas

Medytox Rights Offer: Terms & Situations

Medytox, which used to be one of the bluechip names on KOSDAQ, announces a ₩130bil rights offering.It offers a total of 0.97M shares, which...

Sanghyun Park

Hugel Placement: A 5.2% Block Deal Sale

After the market close today, it was reported that BK Medical Group’s Chairman Dr. Kim Byung-Gun and Dr. BK Corp will sell their 5.2% stake...

Douglas Kim

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