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>Netmarble did a one-year rollover for the stock loan used for the SpinX acquisition. The maturity is again one year, and the principal amount is ₩1.5T.</li>
<li>The HYBE stake is newly included as collateral at an estimated LTV ratio of 50% because the value of NCsoft's stake further declined, and the LTV ratio was subsequently lowered.</li>
<li>Applying the 140% loss cut ratio to HYBE and NCsoft will lead to a margin call when each stock declines 30% from the current price.</li>
</ul>


Netmarble did a one-year rollover for the stock loan used for the SpinX acquisition. The maturity is again one year, and the principal amount is ₩1.5T.
The HYBE stake is newly included as collateral at an estimated LTV ratio of 50% because the value of NCsoft's stake further declined, and the LTV ratio was subsequently lowered.
Applying the 140% loss cut ratio to HYBE and NCsoft will lead to a margin call when each stock declines 30% from the current price.


Netmarble Debt Risk Victim: HYBE or NCsoft or Both?

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>In this insight, we discuss a pair trade of going long on CJ ENM and going short on HYBE. </li>
<li>CJ ENM's valuations are much more attractive and offer higher value as compared to HYBE. CJ ENM shares are trading at EV/EBITDA of 2.7x versus 10.9x for HYBE in 2023. </li>
<li>The Korean government is likely to require BTS members to conscript for military service which is likely to lead to sharp decline in earnings estimates for HYBE.</li>
</ul>


In this insight, we discuss a pair trade of going long on CJ ENM and going short on HYBE. 
CJ ENM's valuations are much more attractive and offer higher value as compared to HYBE. CJ ENM shares are trading at EV/EBITDA of 2.7x versus 10.9x for HYBE in 2023. 
The Korean government is likely to require BTS members to conscript for military service which is likely to lead to sharp decline in earnings estimates for HYBE.


Korea Consumer Discretionary: A Pair Trade (Long CJ ENM and Short HYBE)

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

Lionheart Studio  / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/lionheart-studio-corporation" target="_blank" data-smartkarma-citation="entities:36417:1" rel="noopener">Lionheart Studio (426630 KS)</a>, a game development studio based in South Korea,  aims to raise around US$420m via its South Korean IPO.</li>
<li>The company is majority owned by <a href="https://www.smartkarma.com/entities/kakao-games-corp" target="_blank" data-smartkarma-citation="entities:26730:1" rel="noopener">Kakao Games Corp (293490 KS)</a> , which after having recently hiked its stake, owned 54.94% of the company prior to listing.  </li>
<li>In this note, we will talk about the not-so-positive aspects of the deal.</li>
</ul>



Lionheart Studio (426630 KS), a game development studio based in South Korea,  aims to raise around US$420m via its South Korean IPO.
The company is majority owned by Kakao Games Corp (293490 KS) , which after having recently hiked its stake, owned 54.94% of the company prior to listing.  
In this note, we will talk about the not-so-positive aspects of the deal.


LionHeart Studio Pre-IPO - The Negatives - Appears to Be Well past Its Peak, Founder Cashed In $700m

<ul>
<li>
<a href="https://www.smartkarma.com/entities/lionheart-studio-corporation" target="_blank" data-smartkarma-citation="entities:36417:1" rel="noopener">Lionheart Studio (426630 KS)</a>, a game development studio based in South Korea,  aims to raise around US$420m via its South Korean IPO.</li>
<li>The company is majority owned by <a href="https://www.smartkarma.com/entities/kakao-games-corp" target="_blank" data-smartkarma-citation="entities:26730:1" rel="noopener">Kakao Games Corp (293490 KS)</a>, which after having recently hiked its stake, owned 54.94% of the company prior to listing.  </li>
<li>In this note, we will talk about the positive aspects of the deal.</li>
</ul>



Lionheart Studio (426630 KS), a game development studio based in South Korea,  aims to raise around US$420m via its South Korean IPO.
The company is majority owned by Kakao Games Corp (293490 KS), which after having recently hiked its stake, owned 54.94% of the company prior to listing.  
In this note, we will talk about the positive aspects of the deal.


Lion Heart Studio Pre-IPO - The Positives - Got One Hit

<ul>
<li>Our base case valuation of Lionheart Studio is a target price of 19,362 won per share, which is 46% lower than the low end of the IPO price range.</li>
<li>Our IPO valuation assumes a 7.2x EV/EBITDA (comps' average) using 2023 estimated EBITDA of 145 billion won for the company.</li>
<li>All in all, we believe there is a strong probability of Lionheart Studio being forced to lower its IPO price range in order to attract more investors. </li>
</ul>


Our base case valuation of Lionheart Studio is a target price of 19,362 won per share, which is 46% lower than the low end of the IPO price range.
Our IPO valuation assumes a 7.2x EV/EBITDA (comps' average) using 2023 estimated EBITDA of 145 billion won for the company.
All in all, we believe there is a strong probability of Lionheart Studio being forced to lower its IPO price range in order to attract more investors. 


South Korea

Netmarble Corporation develops and publishes mobile games. The Company develops and publishes casual games, action, sports games, strategy, simulation games, and social casino games. Netmarble offers services worldwide.

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Netmarble (251270 KS)

Netmarble Debt Risk Victim: HYBE or NCsoft or Both?

This post details Netmarble's stock loan rollover for the SpinX acquisition and how this poses a margin call risk for HYBE and NCsoft.

Sanghyun Park

Korea Consumer Discretionary: A Pair Trade (Long CJ ENM and Short HYBE)

In this insight, we discuss a pair trade of going long on CJ ENM and going short on HYBE. CJ ENM's valuations are much more attractive and offer...

Douglas Kim

LionHeart Studio Pre-IPO - The Negatives - Appears to Be Well past Its Peak, Founder Cashed In $700m

Lionheart Studio, a game development studio based in South Korea, aims to raise around US$420m via its South Korean IPO. In this note, we talk...

Sumeet Singh

Lion Heart Studio Pre-IPO - The Positives - Got One Hit

Lionheart Studio, a game development studio based in South Korea, aims to raise around US$420m via its South Korean IPO. The company is majority...

Sumeet Singh

Lionheart Studio IPO Valuation Analysis

Our base case valuation of Lionheart Studio is a target price of 19,362 won per share, which is 46% lower than the low end of the IPO price range.

Douglas Kim

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