Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<p><a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener">Krafton Inc (259960 KS)</a> shares are currently trading at 497,000 won, which is nearly flat versus its IPO price of 498,000 won. It traded as low as 400,5000 won on 11 August but has rebounded since then. In this insight, we discuss the end of the one month lockup period for Krafton, which could be significant due to the potential selling by the institutional investors (especially among foreign investors). We also discuss how the valuation of NCsoft has fallen so much that now, there is a high probability of the valuation gap between these companies narrowing in the coming months. </p><div class="content-highlight"><p>Among the various lockup periods, the one month period is perhaps the most important for Krafton. There are 0.97 million shares of Krafton that are under the lockup period (2% of outstanding shares). However, among the overseas institutions, 100% of the shares that are locked up is for the one month period (0.68 million shares or 1.4% of the outstanding shares). As a result, the one month period after the IPO is perhaps the most important in terms of potential selling by the overseas investors. </p></div>

Krafton Inc (259960 KS) shares are currently trading at 497,000 won, which is nearly flat versus its IPO price of 498,000 won. It traded as low as 400,5000 won on 11 August but has rebounded since then. In this insight, we discuss the end of the one month lockup period for Krafton, which could be significant due to the potential selling by the institutional investors (especially among foreign investors). We also discuss how the valuation of NCsoft has fallen so much that now, there is a high probability of the valuation gap between these companies narrowing in the coming months. Among the various lockup periods, the one month period is perhaps the most important for Krafton. There are 0.97 million shares of Krafton that are under the lockup period (2% of outstanding shares). However, among the overseas institutions, 100% of the shares that are locked up is for the one month period (0.68 million shares or 1.4% of the outstanding shares). As a result, the one month period after the IPO is perhaps the most important in terms of potential selling by the overseas investors. 

End of the 1 Month Lockup Period for Krafton & An Excessive Pricing Gap Vs. NCsoft

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/shenzhou-intl-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10415:1" rel="noopener">Shenzhou Intl Group Holdings (2313 HK)</a>, <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a>, <a href="https://www.smartkarma.com/entities/great-wall-motor-co-ltd-cb302af9-398c-4d2d-ba39-023e43287eef" target="_blank" data-smartkarma-citation="entities:128:1" rel="noopener">Great Wall Motor (2333 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-health-international-inc" target="_blank" data-smartkarma-citation="entities:29677:1" rel="noopener">JD Health (6618 HK)</a> and <a href="https://www.smartkarma.com/entities/cansino-biologics-inc" target="_blank" data-smartkarma-citation="entities:27739:1" rel="noopener">CanSino Biologics Inc (6185 HK)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</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/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a> and <a href="https://www.smartkarma.com/entities/xinyi-solar-holdings-ltd" target="_blank" data-smartkarma-citation="entities:318:1" rel="noopener">Xinyi Solar Holdings (968 HK)</a>. Shorts increased in the Health Care, Consumer Discretionary, Information Technology and Materials sectors while decreasing in the Financials and Communication Services sectors.</p></div><div><p>In Japan, stocks increased on <a href="https://www.smartkarma.com/entities/renesas-electronics-corp" target="_blank" data-smartkarma-citation="entities:15933:1" rel="noopener">Renesas Electronics (6723 JP)</a>, <a href="https://www.smartkarma.com/entities/shionogi-co-ltd" target="_blank" data-smartkarma-citation="entities:19535:1" rel="noopener">Shionogi &amp; Co (4507 JP)</a>, <a href="https://www.smartkarma.com/entities/advantest-corp" target="_blank" data-smartkarma-citation="entities:18107:1" rel="noopener">Advantest Corp (6857 JP)</a>, <a href="https://www.smartkarma.com/entities/toto-ltd" target="_blank" data-smartkarma-citation="entities:11028:1" rel="noopener">Toto Ltd (5332 JP)</a> and <a href="https://www.smartkarma.com/entities/shimano-inc" target="_blank" data-smartkarma-citation="entities:3777:1" rel="noopener">Shimano Inc (7309 JP)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/nippon-building-fund-inc" target="_blank" data-smartkarma-citation="entities:1900:1" rel="noopener">Nippon Building Fund (8951 JP)</a>, <a href="https://www.smartkarma.com/entities/kawasaki-kisen-kaisha-ltd" target="_blank" data-smartkarma-citation="entities:3548:1" rel="noopener">Kawasaki Kisen Kaisha (9107 JP)</a>, <a href="https://www.smartkarma.com/entities/freee-kk" target="_blank" data-smartkarma-citation="entities:28424:1" rel="noopener">freee (4478 JP)</a>, <a href="https://www.smartkarma.com/entities/welcia-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20895:1" rel="noopener">Welcia Holdings (3141 JP)</a> and <a href="https://www.smartkarma.com/entities/nisshinbo-holdings-inc" target="_blank" data-smartkarma-citation="entities:10561:1" rel="noopener">Nisshinbo Holdings (3105 JP)</a>. Shorts increased in the Information Technology, Industrials and Health Care sectors.</p></div><div><p>In Korea, shorts increased on <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a>, <a href="https://www.smartkarma.com/entities/hyundai-motor-co" target="_blank" data-smartkarma-citation="entities:155:1" rel="noopener">Hyundai Motor Co (005380 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-display-co-ltd" target="_blank" data-smartkarma-citation="entities:7145:1" rel="noopener">LG Display (034220 KS)</a>, <a href="https://www.smartkarma.com/entities/hmm-co-ltd" target="_blank" data-smartkarma-citation="entities:13494:1" rel="noopener">HMM Co., Ltd. (011200 KS)</a> and <a href="https://www.smartkarma.com/entities/amorepacific-corp" target="_blank" data-smartkarma-citation="entities:20854:1" rel="noopener">Amorepacific Corp (090430 KS)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a>, <a href="https://www.smartkarma.com/entities/ncsoft-corp" target="_blank" data-smartkarma-citation="entities:5169:1" rel="noopener">NCSOFT Corp (036570 KS)</a>, <a href="https://www.smartkarma.com/entities/doosan-heavy-industries-construction" target="_blank" data-smartkarma-citation="entities:7389:1" rel="noopener">Doosan Heavy Industries &amp; Construction (034020 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-chem-ltd" target="_blank" data-smartkarma-citation="entities:3583:1" rel="noopener">LG Chem Ltd (051910 KS)</a> and <a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a>. </p></div><div><p>In Taiwan, shorts increased on <a href="https://www.smartkarma.com/entities/novatek-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:10904:1" rel="noopener">Novatek Microelectronics Corp (3034 TT)</a>, <a href="https://www.smartkarma.com/entities/mediatek-inc" target="_blank" data-smartkarma-citation="entities:772:1" rel="noopener">Mediatek Inc (2454 TT)</a>, <a href="https://www.smartkarma.com/entities/innolux-corp" target="_blank" data-smartkarma-citation="entities:4509:1" rel="noopener">Innolux Corp (3481 TT)</a>, <a href="https://www.smartkarma.com/entities/yageo-corporation" target="_blank" data-smartkarma-citation="entities:13212:1" rel="noopener">Yageo Corporation (2327 TT)</a> and <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a> while shorts covered on <a href="https://www.smartkarma.com/entities/wan-hai-lines-ltd" target="_blank" data-smartkarma-citation="entities:14262:1" rel="noopener">Wan Hai Lines (2615 TT)</a>, <a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a>, <a href="https://www.smartkarma.com/entities/asia-cement-corp" target="_blank" data-smartkarma-citation="entities:15350:1" rel="noopener">Asia Cement (1102 TT)</a>, <a href="https://www.smartkarma.com/entities/shin-kong-financial-holding" target="_blank" data-smartkarma-citation="entities:15351:1" rel="noopener">Shin Kong Financial Holding (2888 TT)</a> and <a href="https://www.smartkarma.com/entities/ta-chen-stainless-pipe-co-ltd" target="_blank" data-smartkarma-citation="entities:2519:1" rel="noopener">TA Chen Stainless Pipe (2027 TT)</a>.</p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Shenzhou Intl Group Holdings (2313 HK), Xiaomi Corp (1810 HK), Great Wall Motor (2333 HK), JD Health (6618 HK) and CanSino Biologics Inc (6185 HK) while there was short covering on Alibaba Group (9988 HK), BYD (1211 HK), Tencent (700 HK), Ping An Insurance (H) (2318 HK) and Xinyi Solar Holdings (968 HK). Shorts increased in the Health Care, Consumer Discretionary, Information Technology and Materials sectors while decreasing in the Financials and Communication Services sectors.In Japan, stocks increased on Renesas Electronics (6723 JP), Shionogi &amp; Co (4507 JP), Advantest Corp (6857 JP), Toto Ltd (5332 JP) and Shimano Inc (7309 JP) while there was short covering on Nippon Building Fund (8951 JP), Kawasaki Kisen Kaisha (9107 JP), freee (4478 JP), Welcia Holdings (3141 JP) and Nisshinbo Holdings (3105 JP). Shorts increased in the Information Technology, Industrials and Health Care sectors.In Korea, shorts increased on Celltrion Inc (068270 KS), Hyundai Motor Co (005380 KS), LG Display (034220 KS), HMM Co., Ltd. (011200 KS) and Amorepacific Corp (090430 KS) while shorts were covered on Samsung Electronics (005930 KS), NCSOFT Corp (036570 KS), Doosan Heavy Industries &amp; Construction (034020 KS), LG Chem Ltd (051910 KS) and Kakao Corp (035720 KS). In Taiwan, shorts increased on Novatek Microelectronics Corp (3034 TT), Mediatek Inc (2454 TT), Innolux Corp (3481 TT), Yageo Corporation (2327 TT) and TSMC (2330 TT) while shorts covered on Wan Hai Lines (2615 TT), Evergreen Marine Corp (2603 TT), Asia Cement (1102 TT), Shin Kong Financial Holding (2888 TT) and TA Chen Stainless Pipe (2027 TT).

Asia Shorts: Shenzhou, Xiaomi, BABA, BYD, Renesas, Shionogi, Freee, Celltrion, LGD, Novatek, Wan Hai

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.

<h2>Block deals regulatory filing summary</h2><p>It turned out that Netmarble's next target was the remaining 0.34% of its unlocked Kakao Bank shares. The company put out a regulatory filing after the market closed yesterday.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/226/139/original/Screen+Shot+2021-08-25+at+6.09.44+PM.png?1629929669" class="editor-image img-responsive" data-smartkarma-image-id="226139"></figure></section><p><strong>Netmarble revealed that it had sold 1</strong><strong>,619,591 shares through block deals during the pre-market trading on August 25 for ₩133.1B, suggesting a deal price per share of ₩82,200.</strong> This represents a 3.75% discount to the close price on August 24 and an 8.46% discount to the close price on August 23.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Block deal details"}'>Block deal details</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Shares sold"}'>Number of shares sold</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1619591}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>1,619,591</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total deal value"}'>Total deal value</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":133.1303802}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩133.1B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Deal price per share"}'><strong>Deal price per share</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":82199.99999999999}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}' data-sheets-formula="=R[-1]C[0]*1000000000/R[-2]C[0]"><strong>₩82,200</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Kakao Bank on August 24"}'><strong> - Discount to the price on August 24</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.03747072599531633}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[0]C[1]-R4C2)/R[0]C[1]"><strong>3.75%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Kakao Bank on August 23"}'><strong> - Discount to the price on August 23</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.08463251670378635}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[0]C[1]-R4C2)/R[0]C[1]"><strong>8.46%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Kakao Bank on August 20"}'> - Discount to the price on August 20</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.09670329670329686}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[0]C[1]-R4C2)/R[0]C[1]">9.67%</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX KIND"}'>Source: KRX KIND</td></tr>
</tbody>
</table><p>The following is the number of Kakao Bank stock purchases by investor type on August 25. Netmarble's counterparties can be seen as foreign institutional investors in that there is only "Foreign" other than local retail that has purchased more than 1.6M on this day. Of course, this is by no means unusual.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/226/142/original/Screen+Shot+2021-08-25+at+6.30.30+PM.png?1629930722" class="editor-image img-responsive" data-smartkarma-image-id="226142"></figure></section>

Block deals regulatory filing summaryIt turned out that Netmarble's next target was the remaining 0.34% of its unlocked Kakao Bank shares. The company put out a regulatory filing after the market closed yesterday.Netmarble revealed that it had sold 1,619,591 shares through block deals during the pre-market trading on August 25 for ₩133.1B, suggesting a deal price per share of ₩82,200. This represents a 3.75% discount to the close price on August 24 and an 8.46% discount to the close price on August 23.





Block deal details

Number of shares sold
1,619,591


Total deal value
₩133.1B


Deal price per share
₩82,200


 - Discount to the price on August 24
3.75%


 - Discount to the price on August 23
8.46%


 - Discount to the price on August 20
9.67%

Source: KRX KIND

The following is the number of Kakao Bank stock purchases by investor type on August 25. Netmarble's counterparties can be seen as foreign institutional investors in that there is only "Foreign" other than local retail that has purchased more than 1.6M on this day. Of course, this is by no means unusual.

Netmarble Again Sold Kakao Bank: Real-World Float Change & Additional Stake Sale Possibility

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/geely-automobile-holdings-ltd" target="_blank" data-smartkarma-citation="entities:127:1" rel="noopener">Geely Auto (175 HK)</a>, <a href="https://www.smartkarma.com/entities/postal-savings-bank-of-china" target="_blank" data-smartkarma-citation="entities:22848:1" rel="noopener">Postal Savings Bank of China (1658 HK)</a>, <a href="https://www.smartkarma.com/entities/cansino-biologics-inc" target="_blank" data-smartkarma-citation="entities:27739:1" rel="noopener">CanSino Biologics Inc (6185 HK)</a> and <a href="https://www.smartkarma.com/entities/zhongan-online-p-c-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:23681:1" rel="noopener">ZhongAn Online P&amp;C Insurance (6060 HK)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>, <a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 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/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> and <a href="https://www.smartkarma.com/entities/china-overseas-land-invest" target="_blank" data-smartkarma-citation="entities:419:1" rel="noopener">China Overseas Land &amp; Investment Ltd (688 HK)</a>. Shorts increased in the Consumer Discretionary, Health Care, Information Technology and Financials sectors while decreasing in the Communication Services, Real Estate and Consumer Staples sectors.</p></div><div><p>In Japan, stocks increased on <a href="https://www.smartkarma.com/entities/japan-post-bank-co-ltd" target="_blank" data-smartkarma-citation="entities:838:1" rel="noopener">Japan Post Bank (7182 JP)</a>, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a>, <a href="https://www.smartkarma.com/entities/yaskawa-electric-corp" target="_blank" data-smartkarma-citation="entities:2458:1" rel="noopener">Yaskawa Electric (6506 JP)</a>, <a href="https://www.smartkarma.com/entities/odakyu-electric-railway-co-ltd" target="_blank" data-smartkarma-citation="entities:5405:1" rel="noopener">Odakyu Electric Railway (9007 JP)</a> and <a href="https://www.smartkarma.com/entities/mitsui-osk-lines-ltd" target="_blank" data-smartkarma-citation="entities:20717:1" rel="noopener">Mitsui Osk Lines (9104 JP)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/freee-kk" target="_blank" data-smartkarma-citation="entities:28424:1" rel="noopener">freee (4478 JP)</a>, <a href="https://www.smartkarma.com/entities/sharp-corp" target="_blank" data-smartkarma-citation="entities:391:1" rel="noopener">Sharp Corp (6753 JP)</a>, <a href="https://www.smartkarma.com/entities/kawasaki-kisen-kaisha-ltd" target="_blank" data-smartkarma-citation="entities:3548:1" rel="noopener">Kawasaki Kisen Kaisha (9107 JP)</a>, <a href="https://www.smartkarma.com/entities/nabtesco-corp" target="_blank" data-smartkarma-citation="entities:13176:1" rel="noopener">Nabtesco Corp (6268 JP)</a> and <a href="https://www.smartkarma.com/entities/tokyo-electric-power-co-inc" target="_blank" data-smartkarma-citation="entities:15457:1" rel="noopener">Tokyo Electric Power Co (9501 JP)</a>. Shorts increased in the Industrials, Financials and Information Technology sectors.</p></div><div><p>In Korea, shorts increased on <a href="https://www.smartkarma.com/entities/ncsoft-corp" target="_blank" data-smartkarma-citation="entities:5169:1" rel="noopener">NCSOFT Corp (036570 KS)</a>, <a href="https://www.smartkarma.com/entities/netmarble-corporation" target="_blank" data-smartkarma-citation="entities:22839:1" rel="noopener">Netmarble Corporation (251270 KS)</a>, <a href="https://www.smartkarma.com/entities/db-hitek-co-ltd" target="_blank" data-smartkarma-citation="entities:18926:1" rel="noopener">DB Hitek Co., Ltd. (000990 KS)</a>, <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> and <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/amorepacific-corp" target="_blank" data-smartkarma-citation="entities:20854:1" rel="noopener">Amorepacific Corp (090430 KS)</a>, <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/sk-innovation-co-ltd" target="_blank" data-smartkarma-citation="entities:1268:1" rel="noopener">SK Innovation (096770 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-household-health-care" target="_blank" data-smartkarma-citation="entities:6501:1" rel="noopener">LG Household &amp; Health Care (051900 KS)</a> and <a href="https://www.smartkarma.com/entities/kt-corp" target="_blank" data-smartkarma-citation="entities:1112:1" rel="noopener">KT Corp (030200 KS)</a>.</p></div><div><p>In Taiwan, shorts increased on <a href="https://www.smartkarma.com/entities/yageo-corporation" target="_blank" data-smartkarma-citation="entities:13212:1" rel="noopener">Yageo Corporation (2327 TT)</a>, <a href="https://www.smartkarma.com/entities/mediatek-inc" target="_blank" data-smartkarma-citation="entities:772:1" rel="noopener">Mediatek Inc (2454 TT)</a>, <a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a>, <a href="https://www.smartkarma.com/entities/innolux-corp" target="_blank" data-smartkarma-citation="entities:4509:1" rel="noopener">Innolux Corp (3481 TT)</a> and <a href="https://www.smartkarma.com/entities/nuvoton-technology-corp" target="_blank" data-smartkarma-citation="entities:15913:1" rel="noopener">Nuvoton Technology (4919 TT)</a> while shorts covered on <a href="https://www.smartkarma.com/entities/taiwan-cement" target="_blank" data-smartkarma-citation="entities:19736:1" rel="noopener">Taiwan Cement (1101 TT)</a>, <a href="https://www.smartkarma.com/entities/ctbc-financial-holding-co-ltd" target="_blank" data-smartkarma-citation="entities:436:1" rel="noopener">Ctbc Financial Holding (2891 TT)</a>, <a href="https://www.smartkarma.com/entities/yang-ming-marine-transport" target="_blank" data-smartkarma-citation="entities:8502:1" rel="noopener">Yang Ming Marine Transport (2609 TT)</a>, <a href="https://www.smartkarma.com/entities/nanya-technology-corp" target="_blank" data-smartkarma-citation="entities:3269:1" rel="noopener">Nanya Technology (2408 TT)</a> and <a href="https://www.smartkarma.com/entities/wan-hai-lines-ltd" target="_blank" data-smartkarma-citation="entities:14262:1" rel="noopener">Wan Hai Lines (2615 TT)</a>.</p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Meituan (3690 HK), Geely Auto (175 HK), Postal Savings Bank of China (1658 HK), CanSino Biologics Inc (6185 HK) and ZhongAn Online P&amp;C Insurance (6060 HK) while there was short covering on Ping An Insurance (H) (2318 HK), Kuaishou Technology (1024 HK), NetEase (9999 HK), Country Garden Services Holdings (6098 HK) and China Overseas Land &amp; Investment Ltd (688 HK). Shorts increased in the Consumer Discretionary, Health Care, Information Technology and Financials sectors while decreasing in the Communication Services, Real Estate and Consumer Staples sectors.In Japan, stocks increased on Japan Post Bank (7182 JP), Toshiba Corp (6502 JP), Yaskawa Electric (6506 JP), Odakyu Electric Railway (9007 JP) and Mitsui Osk Lines (9104 JP) while there was short covering on freee (4478 JP), Sharp Corp (6753 JP), Kawasaki Kisen Kaisha (9107 JP), Nabtesco Corp (6268 JP) and Tokyo Electric Power Co (9501 JP). Shorts increased in the Industrials, Financials and Information Technology sectors.In Korea, shorts increased on NCSOFT Corp (036570 KS), Netmarble Corporation (251270 KS), DB Hitek Co., Ltd. (000990 KS), SK Telecom (017670 KS) and Samsung Electronics (005930 KS) while shorts were covered on Amorepacific Corp (090430 KS), Kakao Corp (035720 KS), SK Innovation (096770 KS), LG Household &amp; Health Care (051900 KS) and KT Corp (030200 KS).In Taiwan, shorts increased on Yageo Corporation (2327 TT), Mediatek Inc (2454 TT), Evergreen Marine Corp (2603 TT), Innolux Corp (3481 TT) and Nuvoton Technology (4919 TT) while shorts covered on Taiwan Cement (1101 TT), Ctbc Financial Holding (2891 TT), Yang Ming Marine Transport (2609 TT), Nanya Technology (2408 TT) and Wan Hai Lines (2615 TT).

Asia Shorts: Meituan, Geely, Kuaishou, COLI, Toshiba, Freee, NCSOFT, SK Tel, Yang Ming, Wan Hai, EMC

Equity Bottom-Up

<div class="content-highlight">
<p>We believe that the sales and profit estimates for Krafton in 2022 is based on the company near-perfectly executing its business plans and also the regulators in China not enforcing any major new rules that could result in reduced playing time of the company's games in China.</p>
<p>As a result, we think that the probability of Krafton being able to reach the consensus sales and profit estimates in 2022 is likely to be reduced further in the coming months causing its stock price to remain relatively weak. We maintain our Negative view of Krafton.</p>
</div><h2>Krafton 2Q 2021 Earnings Comparison</h2><p>Krafton reported its first quarterly earnings report after its IPO in the past week. Krafton reported sales of 459.3 billion won (up 7% YoY and down 0.4% QoQ) and operating profit of 174.2 billion won (down 0.3% YoY and down 23.3% QoQ) in 2Q 2021. Operating margins declined from 40.7% in 2Q 2020 to 37.9% in 2Q 2021. </p><table class="table table-striped">
<colgroup>
<col>
<col span="5">
</colgroup>
<tbody>
<tr>
<td colspan="3" style="width: 207pt;"><strong>Krafton 2Q 2021 Earnings Comparison</strong></td>
<td style="width: 60pt;"></td>
<td style="width: 60pt;"></td>
<td style="width: 60pt;"></td>
</tr>
<tr>
<td><strong>(Won bn)</strong></td>
<td style="text-align: right;"><strong>2Q 2020</strong></td>
<td style="text-align: right;"><strong>2Q 2021</strong></td>
<td style="text-align: right;"><strong>% Change YoY</strong></td>
<td style="text-align: right;"><strong>1Q 2021</strong></td>
<td style="text-align: right;"><strong>% Change QoQ</strong></td>
</tr>
<tr>
<td><strong>Sales</strong></td>
<td style="text-align: right;"><strong>429.4</strong></td>
<td style="text-align: right;"><strong>459.3</strong></td>
<td style="text-align: right;"><strong>7.0%</strong></td>
<td style="text-align: right;"><strong>461.0</strong></td>
<td style="text-align: right;"><strong>-0.4%</strong></td>
</tr>
<tr>
<td>Operating Profit</td>
<td style="text-align: right;">174.8</td>
<td style="text-align: right;">174.2</td>
<td style="text-align: right;">-0.3%</td>
<td style="text-align: right;">227.2</td>
<td style="text-align: right;">-23.3%</td>
</tr>
<tr>
<td>Net Profit</td>
<td style="text-align: right;">121.2</td>
<td style="text-align: right;">141.3</td>
<td style="text-align: right;">16.6%</td>
<td style="text-align: right;">194.0</td>
<td style="text-align: right;">-27.2%</td>
</tr>
<tr>
<td></td>
<td style="text-align: right;"></td>
<td style="text-align: right;"></td>
<td style="text-align: right;"></td>
<td style="text-align: right;"></td>
<td style="text-align: right;"></td>
</tr>
<tr>
<td><strong>Profit Margins</strong></td>
<td style="text-align: right;"><strong>2Q 2020</strong></td>
<td style="text-align: right;"><strong>2Q 2021</strong></td>
<td style="text-align: right;"></td>
<td style="text-align: right;"><strong>1Q 2021</strong></td>
<td style="text-align: right;"></td>
</tr>
<tr>
<td><strong>Operating Margin</strong></td>
<td style="text-align: right;"><strong>40.7%</strong></td>
<td style="text-align: right;"><strong>37.9%</strong></td>
<td style="text-align: right;"></td>
<td style="text-align: right;"><strong>49.3%</strong></td>
<td style="text-align: right;"></td>
</tr>
<tr>
<td>Net Margin</td>
<td style="text-align: right;">28.2%</td>
<td style="text-align: right;">30.8%</td>
<td style="text-align: right;"></td>
<td style="text-align: right;">42.1%</td>
<td style="text-align: right;"></td>
</tr>
<tr>
<td colspan="2">Source: Company data</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/223/912/original/image_61680225921629098950166.png?1629098951" class="editor-image img-responsive" data-smartkarma-image-id="223912"></figure><div class="content-caption">Earnings CSource: Company data</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/223/913/original/image_45611897931629099016561.png?1629099016" class="editor-image img-responsive" data-smartkarma-image-id="223913"></figure><div class="content-caption">Sales Breakdown (Source: Company data)</div>


We believe that the sales and profit estimates for Krafton in 2022 is based on the company near-perfectly executing its business plans and also the regulators in China not enforcing any major new rules that could result in reduced playing time of the company's games in China.
As a result, we think that the probability of Krafton being able to reach the consensus sales and profit estimates in 2022 is likely to be reduced further in the coming months causing its stock price to remain relatively weak. We maintain our Negative view of Krafton.
Krafton 2Q 2021 Earnings ComparisonKrafton reported its first quarterly earnings report after its IPO in the past week. Krafton reported sales of 459.3 billion won (up 7% YoY and down 0.4% QoQ) and operating profit of 174.2 billion won (down 0.3% YoY and down 23.3% QoQ) in 2Q 2021. Operating margins declined from 40.7% in 2Q 2020 to 37.9% in 2Q 2021. 






Krafton 2Q 2021 Earnings Comparison





(Won bn)
2Q 2020
2Q 2021
% Change YoY
1Q 2021
% Change QoQ


Sales
429.4
459.3
7.0%
461.0
-0.4%


Operating Profit
174.8
174.2
-0.3%
227.2
-23.3%


Net Profit
121.2
141.3
16.6%
194.0
-27.2%










Profit Margins
2Q 2020
2Q 2021

1Q 2021



Operating Margin
40.7%
37.9%

49.3%



Net Margin
28.2%
30.8%

42.1%



Source: Company data






Earnings CSource: Company dataSales Breakdown (Source: Company data)

Krafton - Consensus Likely to Reduce Earnings Estimates in 2022

South Korea

NCSOFT Corporation develops and markets on-line games that enable users to play over the Internet and computer software, such as web editing software.  The Company also designs and constructs databases, Intranet, and commercial Internet access systems.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

NCSOFT Corp (036570 KS)

End of the 1 Month Lockup Period for Krafton & An Excessive Pricing Gap Vs. NCsoft

In this insight, we discuss the end of the one month lockup period for Krafton, which could be significant due to the potential selling by...

Douglas Kim

Asia Shorts: Shenzhou, Xiaomi, BABA, BYD, Renesas, Shionogi, Freee, Celltrion, LGD, Novatek, Wan Hai

The Insight looks at movements in short interest across HK, Japan, Korea and Taiwan stocks and highlights large increases/decreases in shorts to...

Brian Freitas

Netmarble Again Sold Kakao Bank: Real-World Float Change & Additional Stake Sale Possibility

This post details Netmarble's block deals involving its remaining unlocked shares of Kakao Bank. The post examines Kakao Bank's real-world float...

Sanghyun Park

Asia Shorts: Meituan, Geely, Kuaishou, COLI, Toshiba, Freee, NCSOFT, SK Tel, Yang Ming, Wan Hai, EMC

The Insight looks at large short interest movements across HK, Japan, Korea and Taiwan stocks and highlights large increases/decreases in shorts to...

Brian Freitas

Krafton - Consensus Likely to Reduce Earnings Estimates in 2022

We think that the probability of Krafton being able to reach the consensus sales and profit estimates in 2022 is likely to be reduced further in...

Douglas Kim

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)