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>The screening results based on the average market cap for the screening period until the last closing price have seven additions/deletions.</li>
<li>LG Energy will make Fast Entry. The one to make room for LG Energy should be Dongwon F&amp;B, an additional deletion to the seven deletions through the preliminary filtering.</li>
<li>F&amp;F Holdings may fail to meet the minimum float rate. If it doesn't make KOSPI 200 this time, Hyundai Marine &amp; Fire Insurance will get to stay in the Index.</li>
</ul>


The screening results based on the average market cap for the screening period until the last closing price have seven additions/deletions.
LG Energy will make Fast Entry. The one to make room for LG Energy should be Dongwon F&amp;B, an additional deletion to the seven deletions through the preliminary filtering.
F&amp;F Holdings may fail to meet the minimum float rate. If it doesn't make KOSPI 200 this time, Hyundai Marine &amp; Fire Insurance will get to stay in the Index.


KOSPI 200 Rebalancing Screening: Prediction Likelihood, Special Issues, & Passive Impacts

<p>At 4 pm today, SK Chemicals announced that it would conduct a bonus issue.</p><p><a href="https://kind.krx.co.kr/common/disclsviewer.do?method=search&amp;acptno=20211007000382&amp;docno=&amp;viewerhost=&amp;viewerport=" target="_blank" rel="noopener">Here is the link to the regulatory filing at the KRX KIND</a>.</p><div class="content-highlight"><ul>
<li><strong>It will be a 50% capital increase ratio, which allocates 0.5 new shares per share.</strong></li>
<li><strong>The number of newly issued stocks is 5,869,384 common stocks and 656,759 preferred stocks, for a total of 6,526,143 shares.</strong></li>
<li><strong>The new stock allocation base date is October 22, and the expected listing date is November 9. </strong></li>
</ul></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/233/997/original/1.png?1633605858" class="editor-image img-responsive" data-smartkarma-image-id="233997"></figure><p></p></section><p></p><p>As a result, SK Chemicals' ordinary shares outstanding becomes 17,608,152 after the bonus issue, and the total number of preferred shares will be 1,970,278. Of course, 157,779 treasury shares (Ord: 12,628 and 1P: 145,151) are not allocated new shares.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/233/999/original/2.png?1633606196" class="editor-image img-responsive" data-smartkarma-image-id="233999"></figure><p></p></section><p>In addition, SK Chemicals has also introduced a new dividend policy.</p><p><a href="https://engkind.krx.co.kr/common/disclsviewer.do?method=search&amp;acptNo=20211007000423&amp;docno=&amp;formProcsCd=070&amp;language=english" target="_blank" rel="noopener">Here is the link to the regulatory filing at the KRX KIND</a>.</p><div class="content-highlight"><ul>
<li><strong>A dividend payout ratio of 30% from 2021 to 2023: SK Chemicals will use 30% of the de-consolidated net profit generated for three years from 2021 to 2023 for shareholder return.</strong></li>
<li><strong>In addition, SK Chemicals will actively consider interim dividends starting FY2022.</strong></li>
</ul></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/234/003/original/3.png?1633606720" class="editor-image img-responsive" data-smartkarma-image-id="234003"></figure></section>

At 4 pm today, SK Chemicals announced that it would conduct a bonus issue.Here is the link to the regulatory filing at the KRX KIND.
It will be a 50% capital increase ratio, which allocates 0.5 new shares per share.
The number of newly issued stocks is 5,869,384 common stocks and 656,759 preferred stocks, for a total of 6,526,143 shares.
The new stock allocation base date is October 22, and the expected listing date is November 9. 
As a result, SK Chemicals' ordinary shares outstanding becomes 17,608,152 after the bonus issue, and the total number of preferred shares will be 1,970,278. Of course, 157,779 treasury shares (Ord: 12,628 and 1P: 145,151) are not allocated new shares.In addition, SK Chemicals has also introduced a new dividend policy.Here is the link to the regulatory filing at the KRX KIND.
A dividend payout ratio of 30% from 2021 to 2023: SK Chemicals will use 30% of the de-consolidated net profit generated for three years from 2021 to 2023 for shareholder return.
In addition, SK Chemicals will actively consider interim dividends starting FY2022.


SK Chemicals Bonus Issue & New Shareholder Return Policy: Background & Impact

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<p>SK Chemicals announced after the market close that it will improve the company's dividend policy and complete a bonus issue. According to the company, these are part of the company's increased emphasis on ESG improvements. We believe these are positive catalysts that are likely to further boost SK Chemicals' share price.</p><p>If the company pays out 30% of its net income as dividends, this could suggest DPS of nearly 10,000 won per share, which means that its DPS could surge nearly five times versus last year. This would also suggest a dividend per share of 3.4% at current prices which would be much better than last year's level.</p><p>SK Chemicals also announced a bonus issue (0.5 new shares for 1 common share). The total number of newly issued shares will be 5.86 million (common shares) and 0.66 million (preferred shares). After the bonus issue, there will be 17.63 million common shares and 2.12 million preferred shares.</p><p><strong>SK Chemicals NAV Analysis - </strong>Our base case NAV valuation of SK Chemicals suggests a valuation of 530,140 won per share, representing an 82% upside from current levels. This is based on the current market valuation of SK Bioscience (68.4% stake), 8x OP of SK Chemicals' core business, and a 50% NAV discount. </p>

SK Chemicals announced after the market close that it will improve the company's dividend policy and complete a bonus issue. According to the company, these are part of the company's increased emphasis on ESG improvements. We believe these are positive catalysts that are likely to further boost SK Chemicals' share price.If the company pays out 30% of its net income as dividends, this could suggest DPS of nearly 10,000 won per share, which means that its DPS could surge nearly five times versus last year. This would also suggest a dividend per share of 3.4% at current prices which would be much better than last year's level.SK Chemicals also announced a bonus issue (0.5 new shares for 1 common share). The total number of newly issued shares will be 5.86 million (common shares) and 0.66 million (preferred shares). After the bonus issue, there will be 17.63 million common shares and 2.12 million preferred shares.SK Chemicals NAV Analysis - Our base case NAV valuation of SK Chemicals suggests a valuation of 530,140 won per share, representing an 82% upside from current levels. This is based on the current market valuation of SK Bioscience (68.4% stake), 8x OP of SK Chemicals' core business, and a 50% NAV discount. 

SK Chemicals - Announces A Big Improvement in Dividends and Bonus Issue

<p>SK Discovery is a pure holding company and consists of two major subsidiaries: </p><ul>
<li>
<a href="https://www.smartkarma.com/entities/sk-chemicals-co-ltd-new" target="_blank" data-smartkarma-citation="entities:26190:1" rel="noopener">SK Chemicals Co Ltd/New (285130 KS)</a> </li>
<li><a href="https://www.smartkarma.com/entities/sk-gas-ltd" target="_blank" data-smartkarma-citation="entities:4088:1" rel="noopener">SK Gas Ltd (018670 KS)</a></li>
</ul><p>Since the stake value of these two subsidiaries is almost the same at this point, SK Discovery's share price should be affected by the share price of these two subsidiaries in a 5:5 ratio.</p><table class="table table-striped">
<colgroup>
<col width="70">
<col width="70">
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Holdings"}'>Holdings</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Stake"}'>Stake</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Value"}'>Value</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"SK Chemicals Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'><strong>SK Chemicals Co Ltd</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"285130"}' data-sheets-numberformat='[null,2,"#,##0",1]' data-sheets-formula='="285130"'><strong>285130</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.3345}' data-sheets-numberformat='[null,3,"0.00%",1]'><strong>33.45%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1132.082485056}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula='=googlefinance(R[0]C[-2], "price")*googlefinance(R[0]C[-2], "shares")*R[0]C[-1]/1000000000'><strong>₩1,132.1B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"SK Gas Ltd."}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'><strong>SK Gas Ltd.</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"018670"}' data-sheets-numberformat='[null,2,"#,##0",1]' data-sheets-formula='="018670"'><strong>018670</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.722}' data-sheets-numberformat='[null,3,"0.00%",1]'><strong>72.20%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1139.584384728}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula='=googlefinance(R[0]C[-2], "price")*googlefinance(R[0]C[-2], "shares")*R[0]C[-1]/1000000000'><strong>₩1,139.6B</strong></td>
</tr>
<tr><td colspan="4"><strong> </strong></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Huvis Corp"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Huvis Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"079980"}' data-sheets-numberformat='[null,2,"#,##0",1]' data-sheets-formula='="079980"'>079980</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.255}' data-sheets-numberformat='[null,3,"0.00%",1]'>25.50%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":91.933875}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula='=googlefinance(R[0]C[-2], "price")*googlefinance(R[0]C[-2], "shares")*R[0]C[-1]/1000000000'>₩91.9B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Other - unlisted"}'>Other - unlisted</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,2,"#,##0",1]'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,3,"0.00%",1]'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":186.394}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=186.394">₩186.4B</td>
</tr>
<tr><td colspan="4" data-sheets-value='{"1":2,"2":"Source: KRX &amp; DART"}'>Source: KRX &amp; DART</td></tr>
</tbody>
</table><table class="table table-striped">
<colgroup>
<col width="70">
<col width="70">
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Assets"}'>Assets</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"% NAV"}'>% NAV</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"% GAV"}'>% GAV</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"% Holdings"}'>% Holdings</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"SK Chemicals Co Ltd"}' data-sheets-formula="=R[0]C[5]"><strong>SK Chemicals Co Ltd</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4642058632163233}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[7]/R13C[-3]"><strong>46.42%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4439548306409918}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[6]/R8C[-4]"><strong>44.40%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4439548306409918}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[5]/SUM(R2C[5]:R5C[5])"><strong>44.40%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"SK Gas Ltd."}' data-sheets-formula="=R[0]C[5]"><strong>SK Gas Ltd.</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4672819869608142}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[7]/R13C[-3]"><strong>46.73%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.44689675814391905}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[6]/R8C[-4]"><strong>44.69%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.44689675814391905}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[5]/SUM(R2C[5]:R5C[5])"><strong>44.69%</strong></td>
</tr>
<tr><td colspan="4"><strong> </strong></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Huvis Corp"}' data-sheets-formula="=R[0]C[5]">Huvis Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.037697115154189074}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[7]/R13C[-3]">3.77%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.03605257429963345}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[6]/R8C[-4]">3.61%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.03605257429963345}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[5]/SUM(R2C[5]:R5C[5])">3.61%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Other - unlisted"}' data-sheets-formula="=R[0]C[5]">Other - unlisted</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.07643010894569513}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[7]/R13C[-3]">7.64%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.07309583691545556}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[6]/R8C[-4]">7.31%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.07309583691545556}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[5]/SUM(R2C[5]:R5C[5])">7.31%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Operation"}' data-sheets-formula="=R[6]C[0]">Operation</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[6]C[2]/R13C[-3]">0.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[6]C[1]/R8C[-4]">0.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,3,"0.00%",1]'>-</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Holdco net cash/debt (deconsolidated)"}' data-sheets-formula="=R[6]C[0]">Holdco net cash/debt (deconsolidated)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.022470519277573812}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[6]C[2]/R13C[-3]">-2.25%</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,3,"0.00%",1]'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,3,"0.00%",1]'>-</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of pref shares"}' data-sheets-formula="=R[4]C[-3]">Value of pref shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.023144554999447935}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=-R[4]C[-3]/R13C[-3]">-2.31%</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,3,"0.00%",1]'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='[null,3,"0.00%",1]'>-</td>
</tr>
<tr><td colspan="4" data-sheets-value='{"1":2,"2":"Source: DART &amp; KRX"}'>Source: DART &amp; KRX</td></tr>
</tbody>
</table><p>However, a significant price divergence has recently occurred between SK Discovery and them. Even with SK Chemicals' recent price fluctuations caused by the activist fund (Metrica), SK Discovery did not fully synchronize. However, what is more striking is that SK Discovery's share price is not at all in sync with the recent surge in SK Gas's share price.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/230/636/original/1.png?1632009568" class="editor-image img-responsive" data-smartkarma-image-id="230636"></figure></section><p>SK Discovery is currently at a 61% discount to NAV. Of course, this discount rate is at a historic high.</p><table class="table table-striped">
<colgroup>
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"NAV"}' data-sheets-note="Sang Hyun Park: Cases when a company's net cash position and the value of its publically traded interests are worth more than its market cap create the opportunity of a stub trade, in which investors can take a view that the company's core business will rise by shorting the minority stakes whilst going long the underlying. Such an opportunity has arisen in the wake of the Alibaba listing which has seen early investing company Yahoo trade at a discount to the value of its stake in Alibaba.">NAV</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of listed holdings"}'>Value of listed holdings</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2363.600744784}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=SUM(R[0]C[10]:R[2])">₩2,363.6B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - % of Holdco market cap"}'>- % of Holdco market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2.4633468515379344}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[-1]C[0]/((R[3]C[-3]*R[0]C[-3])/1000000000)">246.33%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of unlisted holdings"}'>Value of unlisted holdings</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":186.394}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=SUM(R[1]C[10])">₩186.4B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stub value"}'>Stub value</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-1590.4868527840001}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=(R[1]C[-3]*R[-2]C[-3]/1000000000)-R[-3]C[0]-R[-1]C[0]">-₩1,590.5B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stub value per share"}'>Stub value per share</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-83543.3851546826}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]*1000000000/R[-3]C[-3]">-₩83,543</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of operating assets"}'>Value of operating assets</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=SUM(R[5]C[5])">₩0.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"GAV"}'>GAV</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2549.9947447840004}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-6]C[0]+R[-4]C[0]+R[-1]C[0]">₩2,550.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"GAV per share"}'>GAV per share</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":134028.83112132747}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]/R[4]C[-3]*1000000000">₩134,029</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Discount to GAV (excl. treasury shares)"}'>Discount to GAV (excl. treasury shares)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.6239615045633263}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-1]C[0]-R[-4]C[-3])/R[-1]C[0]">62.40%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Holdco net cash/debt (de-consolidated)"}'>Holdco net cash/debt (de-consolidated)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-54.8}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[2]C[5]">-₩54.8B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of pref shares"}'>Value of pref shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":56.44380525}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=(R[-5]C[-3]*R[-2]C[-3]+R[-5]C[-2]*R[-2]C[-2])/1000000000">₩56.4B</td>
</tr>
<tr><td colspan="2"></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"NAV"}'><strong>NAV</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2438.7509395340003}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-5]C[0]+R[-2]C[0]-R[-1]C[0]"><strong>₩2,438.8B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"NAV per share (excl. treasury shares)"}'><strong>NAV per share (excl. treasury shares)</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":128181.80840975358}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]/R[-1]C[-3]*1000000000"><strong>₩128,182</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Discount to NAV"}'><strong>Discount to NAV</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.606808480662963}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-1]C[0]-R[-9]C[-3])/R[-1]C[0]"><strong>60.68%</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: KRX &amp; DART","6":1}'>Source: KRX &amp; DART</td></tr>
</tbody>
</table><p>The sigma on a 20-day moving average calculated by synthesizing these two affiliates at 50:50 is -1.35 at present, and the relative price ratio compared to this synthesis has diverged sharply over the past two weeks.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/230/640/original/image_9329493321632010559259.png?1632010561" class="editor-image img-responsive" data-smartkarma-image-id="230640"></figure>

SK Discovery is a pure holding company and consists of two major subsidiaries: 

SK Chemicals Co Ltd/New (285130 KS) 
SK Gas Ltd (018670 KS)
Since the stake value of these two subsidiaries is almost the same at this point, SK Discovery's share price should be affected by the share price of these two subsidiaries in a 5:5 ratio.








Holdings
Ticker
Stake
Value


SK Chemicals Co Ltd
285130
33.45%
₩1,132.1B


SK Gas Ltd.
018670
72.20%
₩1,139.6B

 

Huvis Corp
079980
25.50%
₩91.9B


Other - unlisted
-
-
₩186.4B

Source: KRX &amp; DART










Assets
% NAV
% GAV
% Holdings


SK Chemicals Co Ltd
46.42%
44.40%
44.40%


SK Gas Ltd.
46.73%
44.69%
44.69%

 

Huvis Corp
3.77%
3.61%
3.61%


Other - unlisted
7.64%
7.31%
7.31%


Operation
0.00%
0.00%
-


Holdco net cash/debt (deconsolidated)
-2.25%
-
-


Value of pref shares
-2.31%
-
-

Source: DART &amp; KRX

However, a significant price divergence has recently occurred between SK Discovery and them. Even with SK Chemicals' recent price fluctuations caused by the activist fund (Metrica), SK Discovery did not fully synchronize. However, what is more striking is that SK Discovery's share price is not at all in sync with the recent surge in SK Gas's share price.SK Discovery is currently at a 61% discount to NAV. Of course, this discount rate is at a historic high.





NAV

Value of listed holdings
₩2,363.6B


- % of Holdco market cap
246.33%


Value of unlisted holdings
₩186.4B


Stub value
-₩1,590.5B


Stub value per share
-₩83,543


Value of operating assets
₩0.0B


GAV
₩2,550.0B


GAV per share
₩134,029


Discount to GAV (excl. treasury shares)
62.40%


Holdco net cash/debt (de-consolidated)
-₩54.8B


Value of pref shares
₩56.4B



NAV
₩2,438.8B


NAV per share (excl. treasury shares)
₩128,182


Discount to NAV
60.68%

Source: KRX &amp; DART

The sigma on a 20-day moving average calculated by synthesizing these two affiliates at 50:50 is -1.35 at present, and the relative price ratio compared to this synthesis has diverged sharply over the past two weeks.

SK Discovery in a Massive Price Divergence Vs. The Synthetic Involving SK Gas

<p>SK Chemicals will spin out the electricity and steam (utility) supply business unit through a physical division, which means the newly created entity will be SK Chemicals' wholly-owned subsidiary. The name of the subsidiary is SK Multi-Utility Co., Ltd. (tentative name).</p><div class="content-highlight"><p><strong>This announcement came out at 4:30 pm after the market close today.</strong></p></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/229/531/original/Screen+Shot+2021-09-13+at+8.19.49+AM.png?1631536475" class="editor-image img-responsive" data-smartkarma-image-id="229531"></figure></section><p>SK Multi-Utility has been producing the energy necessary for plant operation at the SK Chemicals Ulsan plant. It<span> has been supplying the energy needed for the Ulsan plant and selling the surplus energy to SK chemicals' affiliates. Last year, the division's sales were ₩37.3B. </span>If the spin-off is approved at the SK Chemicals extraordinary general meeting held on October 25, SK multi-utility will be officially launched on December 1.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/229/550/original/Screen+Shot+2021-09-13+at+9.04.36+AM.png?1631538429" class="editor-image img-responsive" data-smartkarma-image-id="229550"></figure></section><p><strong>Then, the closing date of the shareholder register for the general meeting was set as September 28.</strong></p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/229/552/original/Screen+Shot+2021-09-13+at+9.03.31+AM.png?1631538441" class="editor-image img-responsive" data-smartkarma-image-id="229552"></figure></section><p>In addition, SK Chemicals announced that after this split, SK Multi-Utility would invest ₩428.1B in facilities to convert the current business structure to an eco-friendly business structure. This investment will begin in May next year.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/229/553/original/Screen+Shot+2021-09-13+at+9.09.51+AM.png?1631538608" class="editor-image img-responsive" data-smartkarma-image-id="229553"></figure></section>

SK Chemicals will spin out the electricity and steam (utility) supply business unit through a physical division, which means the newly created entity will be SK Chemicals' wholly-owned subsidiary. The name of the subsidiary is SK Multi-Utility Co., Ltd. (tentative name).This announcement came out at 4:30 pm after the market close today.SK Multi-Utility has been producing the energy necessary for plant operation at the SK Chemicals Ulsan plant. It has been supplying the energy needed for the Ulsan plant and selling the surplus energy to SK chemicals' affiliates. Last year, the division's sales were ₩37.3B. If the spin-off is approved at the SK Chemicals extraordinary general meeting held on October 25, SK multi-utility will be officially launched on December 1.Then, the closing date of the shareholder register for the general meeting was set as September 28.In addition, SK Chemicals announced that after this split, SK Multi-Utility would invest ₩428.1B in facilities to convert the current business structure to an eco-friendly business structure. This investment will begin in May next year.

SK Chemicals' Timely Spinoff Announcement Amid Metrica's Activist Move: What to Make of It

South Korea

SK Discovery Co.,Ltd. wholesales and distributes natural gas. The Company wholesales and distributes propylene, propane, and other natural gas SK Discovery markets its products throughout South Korea.

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Sk Discovery (006120 KS)

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