Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>After the spin-off and relisting of holdco/opco shares, we believe that there is a greater probability of OCI Co (opco) shares outperforming OCI Holdings (holdco).</li>
<li>However, the degree of outperformance of OCI Co vs OCI Holdings is not likely to be similar to other recent spin-offs such as F&amp;F Co and F&amp;F Holdings.</li>
<li>We have a long-term bullish view of OCI over the next one to two years. It is trading at P/E of 3.1x and P/B of 0.6x based 2022 earnings estimates.</li>
</ul>


After the spin-off and relisting of holdco/opco shares, we believe that there is a greater probability of OCI Co (opco) shares outperforming OCI Holdings (holdco).
However, the degree of outperformance of OCI Co vs OCI Holdings is not likely to be similar to other recent spin-offs such as F&amp;F Co and F&amp;F Holdings.
We have a long-term bullish view of OCI over the next one to two years. It is trading at P/E of 3.1x and P/B of 0.6x based 2022 earnings estimates.


OCI Spin-Off: Trade Opportunities Post Relisting, Valuations, & Impact on KOSPI 200

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.

<ul>
<li>Value accretion by unlocking the voting eligibility of treasury shares won't happen as the company holds no treasury share.</li>
<li>But KOSPI 200 passive flows will pose a noteworthy trading point. PASSIVE's selling outflow will be about 700-800K shares, 1.6x ADTV.</li>
<li>Market cap imbalance, primarily driven by the tender offer dynamic and the split ratio that is excessively focused on Holdco, will likely exacerbate Holdco → Opco migration after re-listing.</li>
</ul>


Value accretion by unlocking the voting eligibility of treasury shares won't happen as the company holds no treasury share.
But KOSPI 200 passive flows will pose a noteworthy trading point. PASSIVE's selling outflow will be about 700-800K shares, 1.6x ADTV.
Market cap imbalance, primarily driven by the tender offer dynamic and the split ratio that is excessively focused on Holdco, will likely exacerbate Holdco → Opco migration after re-listing.


Trading Considerations on the OCI Demerger

<ul>
<li>The results are pretty much in line with the predictions, except for Hanwha Aerospace which made it to LARGE instead of Hyundai Marine &amp; Fire Insurance.</li>
<li>Assuming that ten names, including Hyundai Marine, were traded in a LONG/SHORT basket with equal weight, the yield from August 17 to the last close would have been 4.6%.</li>
<li>I would still approach with an equal-weighted basket trading until this Thursday. This flow trading usually loses its effect rapidly after rebalancing. So, I wouldn't carry it beyond this Thursday.</li>
</ul>


The results are pretty much in line with the predictions, except for Hanwha Aerospace which made it to LARGE instead of Hyundai Marine &amp; Fire Insurance.
Assuming that ten names, including Hyundai Marine, were traded in a LONG/SHORT basket with equal weight, the yield from August 17 to the last close would have been 4.6%.
I would still approach with an equal-weighted basket trading until this Thursday. This flow trading usually loses its effect rapidly after rebalancing. So, I wouldn't carry it beyond this Thursday.


KOSPI Size Index Migration: Official Results & Trading Approach Towards Implementation

GS Engineering & Construction / Event-Driven

<ul>
<li>Eight stocks are highly likely to migrate with a substantial passive flow. Compared to the early phase of the screening period, GS Engineering &amp; Construction newly made the list.</li>
<li>Most names should show a quite substantial passive flow (x ADTV). In particular, KCC Corp and BGF Retail deserve our special attention for their expected passive impact.</li>
<li>The flow occurs on high potential migration stocks about 20 days before the effective date. So I would start building Long/Short Basket positions with the above eight names around mid-August.</li>
</ul>


Eight stocks are highly likely to migrate with a substantial passive flow. Compared to the early phase of the screening period, GS Engineering &amp; Construction newly made the list.
Most names should show a quite substantial passive flow (x ADTV). In particular, KCC Corp and BGF Retail deserve our special attention for their expected passive impact.
The flow occurs on high potential migration stocks about 20 days before the effective date. So I would start building Long/Short Basket positions with the above eight names around mid-August.


KOSPI Size Index Series Rebalancing in September: Eight Strong Targets

Index Rebalance

<ul>
<li>We generally detect an increase in the buying volume of local institutions for stocks moving from Large Cap to Mid Cap ahead of the KOSPI size index rebalancing.</li>
<li>At the last close, Mid→Large: Pan Ocean, Hyundai Mipo, BGF Retail, &amp; OCI / Large→Mid: Hanmi Science, KCC, DB Hitek, &amp; KEPCO E&amp;C
</li>
<li>The level of price impact/correlation in the last rebalancing was exceptionally high. This is reason enough for us to consider setting up a preemptive position for this rebalancing event.</li>
</ul>


We generally detect an increase in the buying volume of local institutions for stocks moving from Large Cap to Mid Cap ahead of the KOSPI size index rebalancing.
At the last close, Mid→Large: Pan Ocean, Hyundai Mipo, BGF Retail, &amp; OCI / Large→Mid: Hanmi Science, KCC, DB Hitek, &amp; KEPCO E&amp;C

The level of price impact/correlation in the last rebalancing was exceptionally high. This is reason enough for us to consider setting up a preemptive position for this rebalancing event.


KOSPI Size Index Series: September Rebalancing Preview

South Korea

OCI Holdings Company Ltd. operates chemical business. The Company manufactures inorganic chemicals, petroleum and coal chemicals, fine chemicals, renewable energy and insulation materials. OCI Holdings markets its products primarily throughout Korea with limited overseas.

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OCI Holdings (010060 KS)

OCI Spin-Off: Trade Opportunities Post Relisting, Valuations, & Impact on KOSPI 200

After the spin-off and relisting of holdco/opco shares, we believe that there is a greater probability of OCI Co (opco) shares outperforming OCI...

Douglas Kim

Trading Considerations on the OCI Demerger

This post details the OCI demerger structure and discusses trading considerations, primarily targeting the KOSPI 200 passive flows.

Sanghyun Park

KOSPI Size Index Migration: Official Results & Trading Approach Towards Implementation

This post looks at the official results of the KOSPI Size Index migration in the September rebalancing and discusses the noteworthy flow patterns...

Sanghyun Park

KOSPI Size Index Series Rebalancing in September: Eight Strong Targets

This post filters eight strong targets for long/short basket trading ahead of the September KOSPI Size Index Series rebalancing.

Sanghyun Park

KOSPI Size Index Series: September Rebalancing Preview

This post previews the upcoming rebalancing event of the KOSPI Size Index Series. Mid→Large: Pan Ocean, Hyundai Mipo, BGF Retail, & OCI /...

Sanghyun Park

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