Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

Equity Capital Markets

<ul>
<li>In this insight, we discuss the first day trading strategy of LG CNS which starts trading on 5 February.</li>
<li>On the first day of trading, we believe LG CNS's shares could trade at higher levels, overshooting its intrinsic valuations.</li>
<li>We recommend investors to take some profits off the table if the share price shoots higher by 30% to 50%+ from the IPO price on the first day.</li>
</ul>


In this insight, we discuss the first day trading strategy of LG CNS which starts trading on 5 February.
On the first day of trading, we believe LG CNS's shares could trade at higher levels, overshooting its intrinsic valuations.
We recommend investors to take some profits off the table if the share price shoots higher by 30% to 50%+ from the IPO price on the first day.


LG CNS: First Day Trading Strategy Post IPO

<ul>
<li>LG CNS reported a successful IPO book building results analysis. The IPO price has been finalized at 61,900 won per share (high end of the IPO price range).</li>
<li>The demand ratio from the institutional investors was 114 to 1. At the IPO price of 61,900 won, the expected market cap will be 6 trillion won. </li>
<li>According to our valuation analysis, it suggests a base case target price of 76,383 won per share, which represents a 23% upside from the IPO price of 61,900 won.</li>
</ul>


LG CNS reported a successful IPO book building results analysis. The IPO price has been finalized at 61,900 won per share (high end of the IPO price range).
The demand ratio from the institutional investors was 114 to 1. At the IPO price of 61,900 won, the expected market cap will be 6 trillion won. 
According to our valuation analysis, it suggests a base case target price of 76,383 won per share, which represents a 23% upside from the IPO price of 61,900 won.


LG CNS IPO Book Building Results Analysis

<ul>
<li>According to our updated valuation analysis of LG CNS, it suggests a base case implied market cap of 7.4 trillion won, representing target price of 76,383 won per share. </li>
<li>Our base case valuation target price of 76,383 won is 23% higher than the high end of the IPO price range. </li>
<li>We lowered our target price by 6%, mainly due to greater political risks arising from the recent cancelled martial law and ongoing impeachment of President Yoon.</li>
</ul>


According to our updated valuation analysis of LG CNS, it suggests a base case implied market cap of 7.4 trillion won, representing target price of 76,383 won per share. 
Our base case valuation target price of 76,383 won is 23% higher than the high end of the IPO price range. 
We lowered our target price by 6%, mainly due to greater political risks arising from the recent cancelled martial law and ongoing impeachment of President Yoon.


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>The KRW 5T-6T valuation and 13x-16x PER look solid compared to local peers like SDS and Hyundai AutoEver, with CNS possibly getting a premium due to its smaller captive stake.</li>
<li>Instos probably won’t push hard for lock-ups but will aggressively target pricing to secure larger allotments, knowing the company is likely to stick with a market-friendly price.</li>
<li>On a separate note, I wouldn’t expect much of a NAV discount reduction for LG Corp, as LG CNS’s stake isn’t significant enough to move the needle.</li>
</ul>


The KRW 5T-6T valuation and 13x-16x PER look solid compared to local peers like SDS and Hyundai AutoEver, with CNS possibly getting a premium due to its smaller captive stake.
Instos probably won’t push hard for lock-ups but will aggressively target pricing to secure larger allotments, knowing the company is likely to stick with a market-friendly price.
On a separate note, I wouldn’t expect much of a NAV discount reduction for LG Corp, as LG CNS’s stake isn’t significant enough to move the needle.


LG CNS IPO Details Out: My Read on This IPO

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>There are quite a few stocks in Korea that have underperformed their peers and could be deleted from global passive portfolios in February.</li>
<li>There are still 3 weeks left for the stocks to redeem themselves and avoid relegation from the K League, so watch out for big price moves.</li>
<li>Based on our estimate of passive assets, trackers will need to trade between US$45m to US$114m of the stocks. Impact will vary between 2.6x-30x of ADV to trade.</li>
</ul>


There are quite a few stocks in Korea that have underperformed their peers and could be deleted from global passive portfolios in February.
There are still 3 weeks left for the stocks to redeem themselves and avoid relegation from the K League, so watch out for big price moves.
Based on our estimate of passive assets, trackers will need to trade between US$45m to US$114m of the stocks. Impact will vary between 2.6x-30x of ADV to trade.


Korea: Potential Relegations from K League 1

South Korea

Posco DX Company Ltd. provides information and technology services. The Company provides computer systems design, computer and server merchant wholesale, computer and office machine repair and maintenance services. Posco DX also offers eic engineering, smart factory, wireless networking equipment, steel manufacturing, and digital video recorder manufacturing services.

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Posco DX (022100 KS)

LG CNS: First Day Trading Strategy Post IPO

We recommend investors to take some profits off the table on LG CNS if the share price shoots higher by 30% to 50%+ from the IPO price on the first...

Douglas Kim

LG CNS IPO Book Building Results Analysis

LG CNS reported a successful IPO book building results analysis. The IPO price has been finalized at 61,900 won per share (high end of the IPO...

Douglas Kim

LG CNS: Updated IPO Valuation Analysis

LG CNS completed its IPO book building for the institutional investors. The demand from the institutional investors was high enough that the IPO...

Douglas Kim

LG CNS IPO Details Out: My Read on This IPO

LG CNS’s IPO pricing looks set at the top of the range (₩61,900). Word’s out late tonight in the local market. Buzz is that domestic instos went...

Sanghyun Park

Korea: Potential Relegations from K League 1

The list of potential deletions for Korea next month continues to increase as markets remain weak. The stocks have, on average, traded flat over...

Brian Freitas

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