Index Rebal Trades & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal Trades & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<p>Japan-based food delivery company <a href="https://www.smartkarma.com/entities/demae-can-co-ltd" target="_blank" data-smartkarma-citation="entities:10524:1" rel="noopener">Demae-Can Co., Ltd. (2484 JP)</a> launched a follow-on equity offering after market-close today to raise capital for business expansion. </p><p>In this offering the company will be issuing 55,436,400 new shares and selling 3,240,000 treasury shares out of which a total of 19,293,900 shares will be allocated to the public and 39,382,500 shares will be allocated for <a href="https://www.smartkarma.com/entities/z-holdings-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Z Holdings (4689 JP)</a> and South-Korea based <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a>. Based on today's closing price, the total size of this equity offering could be around ~¥105bn (US$950mn) and the portion allocated to public shareholders could be around ~¥35bn (US$315mn). However, the official announcement estimates the minimum size of the equity offering to be around ~¥80bn (US$726mn) and the above-mentioned allocation can change slightly depending on share price movement and public investor interest. </p><p>There is a really interesting event angle here which should pique the interest of investors. </p><p>More below.</p>

Japan-based food delivery company Demae-Can Co., Ltd. (2484 JP) launched a follow-on equity offering after market-close today to raise capital for business expansion. In this offering the company will be issuing 55,436,400 new shares and selling 3,240,000 treasury shares out of which a total of 19,293,900 shares will be allocated to the public and 39,382,500 shares will be allocated for Z Holdings (4689 JP) and South-Korea based Naver Corp (035420 KS). Based on today's closing price, the total size of this equity offering could be around ~¥105bn (US$950mn) and the portion allocated to public shareholders could be around ~¥35bn (US$315mn). However, the official announcement estimates the minimum size of the equity offering to be around ~¥80bn (US$726mn) and the above-mentioned allocation can change slightly depending on share price movement and public investor interest. There is a really interesting event angle here which should pique the interest of investors. More below.

Demae-Can's Latest Offering Preserves The Potential for TOPIX Inclusion

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Thematic (Sector/Industry)

<p>This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. </p><p><strong><em>Companies mentioned this week:</em></strong></p><p><a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a>, <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a>, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, <a href="https://www.smartkarma.com/entities/netease" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a>, <a href="https://www.smartkarma.com/entities/nio-inc" target="_blank" data-smartkarma-citation="entities:27399:1" rel="noopener">NIO Inc (NIO US)</a> </p>

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. Companies mentioned this week:Kakao Corp (035720 KS), Naver Corp (035420 KS), Tencent (700 HK), NetEase (9999 HK), NIO Inc (NIO US) 

Global Emerging Markets Weekly: 10 September 2021

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.

<p>The Fair Trade Commission has warned that it will intensively monitor the abuse of such big techs as Coupang, Naver, and Kakao. In particular, the Fair Trade Commission pointed out that these big techs are unfairly selling their own products/services by manipulating search algorithms on their platforms.</p><p>This was directly mentioned by Cho Sung-wook, chairman of the Fair Trade Commission. Chairman Cho Seong-wook mentioned at the European Chamber of Commerce in Korea breakfast meeting on Friday that the FTC's top priority for the second half of this year would be regulating local big tech platforms.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/229/193/original/Screen+Shot+2021-09-10+at+11.37.01+PM.png?1631331436" class="editor-image img-responsive" data-smartkarma-image-id="229193"></figure></section><div class="content-caption">(Courtesy Dong-A Ilbo)</div><div class="content-highlight"><p><a href="https://www.donga.com/news/Economy/article/all/20210911/109199629/1" target="_blank" rel="noopener">Here is the link to the news article by Dong-A Ilbo about this matter.</a></p></div><p>In addition, Kim Jae-shin, vice-chairman of the Fair Trade Commission, pointed out that “the possibility of platform operators manipulating the search algorithm in a way that is advantageous to them cannot be ruled out.” He also said, "The FTC will strictly respond to the platform operators' act of adjusting and distorting the rules to give preference to their products and services."</p><p>The following remarks from vice-chairman Kim are critical. He directly mentioned Coupang and Naver as examples of search algorithm manipulation. In fact, Coupang has been under investigation by the Fair Trade Commission since July on charges of manipulating the search algorithm to expose its own brand (PB) products before the products of 3rd-party sellers.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/229/199/original/Screen+Shot+2021-09-10+at+11.46.40+PM.png?1631332146" class="editor-image img-responsive" data-smartkarma-image-id="229199"></figure></section><div class="content-caption">(Courtesy Dong-A Ilbo)</div>

The Fair Trade Commission has warned that it will intensively monitor the abuse of such big techs as Coupang, Naver, and Kakao. In particular, the Fair Trade Commission pointed out that these big techs are unfairly selling their own products/services by manipulating search algorithms on their platforms.This was directly mentioned by Cho Sung-wook, chairman of the Fair Trade Commission. Chairman Cho Seong-wook mentioned at the European Chamber of Commerce in Korea breakfast meeting on Friday that the FTC's top priority for the second half of this year would be regulating local big tech platforms.(Courtesy Dong-A Ilbo)Here is the link to the news article by Dong-A Ilbo about this matter.In addition, Kim Jae-shin, vice-chairman of the Fair Trade Commission, pointed out that “the possibility of platform operators manipulating the search algorithm in a way that is advantageous to them cannot be ruled out.” He also said, "The FTC will strictly respond to the platform operators' act of adjusting and distorting the rules to give preference to their products and services."The following remarks from vice-chairman Kim are critical. He directly mentioned Coupang and Naver as examples of search algorithm manipulation. In fact, Coupang has been under investigation by the Fair Trade Commission since July on charges of manipulating the search algorithm to expose its own brand (PB) products before the products of 3rd-party sellers.(Courtesy Dong-A Ilbo)

Korea FTC Says It Will Regulate Coupang on Search Algorithm Manipulation

<p>Today's drop in Kakao's share price has a different meaning than yesterday. Yesterday too, Kakao fell more than Naver, but it was not as much of a difference as today. Kakao is currently down 6.5%, while Naver is stopping the decline at 2.32%.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/228/799/original/Screen+Shot+2021-09-08+at+11.33.00+PM.png?1631161467" class="editor-image img-responsive" data-smartkarma-image-id="228799"></figure><p></p></section><p>Yesterday, a rather abstract view emerged that government-level regulations on big tech had begun in Korea, similar to China. Therefore, the market focused on understanding the short-term impact of the actual application and interpretation of the Financial Consumer Protection Act announced by the Financial Services Commission on big tech financial platform businesses.</p><p>So yesterday, the stock prices of Kakao and Naver, two of Korea's major big tech companies, fell together with a modest difference. This is because they all provide financial platform services that are highly likely to violate the Financial Consumer Protection Act in the immediate term.</p><div class="content-highlight"><ul>
<li><strong>But today, other concerns are spreading in the market. The FSC's decision is not to tame big tech in the Chinese style but to publicize big tech regulations externally as a political tool that can greatly benefit the ruling party ahead of the presidential election scheduled for March 9 of next year.</strong></li>
<li><strong>The important point here is that the local market speculates that the ruling party specifically targets Kakao as a political scapegoat.</strong></li>
</ul></div>

Today's drop in Kakao's share price has a different meaning than yesterday. Yesterday too, Kakao fell more than Naver, but it was not as much of a difference as today. Kakao is currently down 6.5%, while Naver is stopping the decline at 2.32%.Yesterday, a rather abstract view emerged that government-level regulations on big tech had begun in Korea, similar to China. Therefore, the market focused on understanding the short-term impact of the actual application and interpretation of the Financial Consumer Protection Act announced by the Financial Services Commission on big tech financial platform businesses.So yesterday, the stock prices of Kakao and Naver, two of Korea's major big tech companies, fell together with a modest difference. This is because they all provide financial platform services that are highly likely to violate the Financial Consumer Protection Act in the immediate term.
But today, other concerns are spreading in the market. The FSC's decision is not to tame big tech in the Chinese style but to publicize big tech regulations externally as a political tool that can greatly benefit the ruling party ahead of the presidential election scheduled for March 9 of next year.
The important point here is that the local market speculates that the ruling party specifically targets Kakao as a political scapegoat.


Concerns Are Growing that Kakao Becomes a Political Scapegoat Ahead of the Presidential Election

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<div><p>Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, aims to raise up to US$1.3bn in its South Korean IPO. Kakao held a 55% stake prior to listing, with Ant Financial holding the balance 45% stake.</p></div><div><p>As of 1H21, KP had a total of 36m users and around 20m monthly active users (MAU). It processed a total GMV of KRW66.9tn in 2020 and it had already generated KRW47.9tn GMV in 1H21 itself. As of the end of 1H21, it had dealings with more than 610,000 affiliated stores and 100 financial institutions.</p></div><div><p>Since spinning out from Kakao in 2017, the number of MAUs have grown 14x from 2Q17 to 2Q21, while the quarterly transaction amount grew 61x from KRW0.4tn in 2Q17 to KRW24.5tn in 2Q21. </p></div><div><p>Over the past few years the company has been expanding its offering beyond payment processing to include other financial products. On the back of this, its revenue has been growing faster than its GMV.</p></div><div>
<p>We have covered most aspects of the deal in our earlier notes, <a href="https://www.smartkarma.com/insights/kakao-pay-ipo-guided-by-ant-financial-to-be-a-mini-ant" target="_blank" rel="noopener">Kakao Pay IPO - Guided by Ant Financial to be a mini Ant </a>and  <a href="https://www.smartkarma.com/insights/kakao-pay-ipo-peer-comparison-local-and-international" target="_blank" rel="noopener">Kakao Pay IPO - Peer comparison - local and international</a>.</p>
<p>In this note we will talk about valuations and the latest announcement by the regulators.</p>
</div>

Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, aims to raise up to US$1.3bn in its South Korean IPO. Kakao held a 55% stake prior to listing, with Ant Financial holding the balance 45% stake.As of 1H21, KP had a total of 36m users and around 20m monthly active users (MAU). It processed a total GMV of KRW66.9tn in 2020 and it had already generated KRW47.9tn GMV in 1H21 itself. As of the end of 1H21, it had dealings with more than 610,000 affiliated stores and 100 financial institutions.Since spinning out from Kakao in 2017, the number of MAUs have grown 14x from 2Q17 to 2Q21, while the quarterly transaction amount grew 61x from KRW0.4tn in 2Q17 to KRW24.5tn in 2Q21. Over the past few years the company has been expanding its offering beyond payment processing to include other financial products. On the back of this, its revenue has been growing faster than its GMV.
We have covered most aspects of the deal in our earlier notes, Kakao Pay IPO - Guided by Ant Financial to be a mini Ant and  Kakao Pay IPO - Peer comparison - local and international.
In this note we will talk about valuations and the latest announcement by the regulators.


Kakao Pay IPO - Valuation and Likely Impact of Latest Announcement

South Korea

Naver Corp. provides Internet site with web portal services, such as search engine, online game and content development.  The Company also offers marketing service through text and banner advertisement.

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Naver Corp (035420 KS)

Demae-Can's Latest Offering Preserves The Potential for TOPIX Inclusion

Japan-based food delivery company Demae-Can announced a large equity offering to boost their marketing expenditure and defend their market share in...

Janaghan Jeyakumar, CFA

Global Emerging Markets Weekly: 10 September 2021

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity...

Wium Malan, CFA

Korea FTC Says It Will Regulate Coupang on Search Algorithm Manipulation

The FTC has warned that it will intensively monitor the abuse of such big techs as Coupang for their search algorithm manipulation. We should use...

Sanghyun Park

Concerns Are Growing that Kakao Becomes a Political Scapegoat Ahead of the Presidential Election

This post discusses the newly emerging concern that Kakao may have become a political scapegoat ahead of the presidential election.

Sanghyun Park

Kakao Pay IPO - Valuation and Likely Impact of Latest Announcement

Kakao Pay, one of South Korea’s largest payment and financial services apps, aims to raise up to US$1.3bn in its South Korean IPO. Kakao held a 55%...

Sumeet Singh

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