Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

Equity Bottom-Up

<ul>
<li>Three main reasons why SK Inc is our high conviction in 2026 include mandatory cancellation of treasury shares, deep discount to NAV, and the end of divorce for Chairman Chey. </li>
<li>SK Inc has 17.98 million shares in treasury, representing 24.8% of outstanding shares. Among the stocks included in KOSPI200, this is one of the highest percentage of treasury shares.</li>
<li>Our NAV valuation analysis suggests NAV of 28 trillion won or NAV per share of 386,469 won. This represents a 46% upside to its current price.</li>
</ul>


Three main reasons why SK Inc is our high conviction in 2026 include mandatory cancellation of treasury shares, deep discount to NAV, and the end of divorce for Chairman Chey. 
SK Inc has 17.98 million shares in treasury, representing 24.8% of outstanding shares. Among the stocks included in KOSPI200, this is one of the highest percentage of treasury shares.
Our NAV valuation analysis suggests NAV of 28 trillion won or NAV per share of 386,469 won. This represents a 46% upside to its current price.


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

Korea Stock Exchange KOSPI 200 / Event-Driven

Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY)

<ul>
<li>Korea banned all short selling in March 2020 and resumed short selling only on <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI 200</a> and <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150</a> index constituents in May 2021.</li>
<li>News reports indicate that there could be another short sell ban as soon as the coming week. Indications are that the ban could last 6 months.</li>
<li>There are many implications of a total short sell ban including futures backwardation, market manipulation, and no emerging to developed market promotion.</li>
</ul>


Korea banned all short selling in March 2020 and resumed short selling only on KOSPI 200 and KOSDAQ 150 index constituents in May 2021.
News reports indicate that there could be another short sell ban as soon as the coming week. Indications are that the ban could last 6 months.
There are many implications of a total short sell ban including futures backwardation, market manipulation, and no emerging to developed market promotion.


Korea Short Sell Ban: Background, Manipulation, Holdings, Flows, Short Interest, Implications

External broker reports(aggregated public sources), Mirae Asset Securities

Mirae Asset Securities

External broker reports(aggregated public sources)

Mirae Asset Securities Co.,Ltd. provides comprehensive wealth management services. The Company offers fixed income securities brokerage, securities dealing, equity underwriting, and other services. Mirae Asset Securities also deals with mergers and acquisitions, foreign currency, and financial derivatives

<ul><li>We maintain our Buy rating on SK Innovation with a target price of W156,000.</li><li>While near-term earnings improvement may be limited, we view the company’s medium/long-term business direction positively.</li><li>Key drivers include: 1) growth potential in the electrification value chain, where subsidiary SK Innovation E&amp;S’s gas sourcing capabilities can be leveraged; 2) the rebalancing of non-core assets, including the divestment of overseas chemical-related assets; 3) the transition to normal operations for the CB gas field project in 1Q26; and 4) a continued decline in net debt (from W28.5tr at end-2024 to W22.5tr at end-2025). </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We maintain our Buy rating on SK Innovation with a target price of W156,000.While near-term earnings improvement may be limited, we view the company’s medium/long-term business direction positively.Key drivers include: 1) growth potential in the electrification value chain, where subsidiary SK Innovation E&amp;S’s gas sourcing capabilities can be leveraged; 2) the rebalancing of non-core assets, including the divestment of overseas chemical-related assets; 3) the transition to normal operations for the CB gas field project in 1Q26; and 4) a continued decline in net debt (from W28.5tr at end-2024 to W22.5tr at end-2025). Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

SK Innovation (096770 KS/Buy)New Growth Strategy Taking Shape

Index Rebalance

<ul>
<li>The review period for the March rebalance ends on 31 January, the changes will be announced first week of March and implemented at the close of trading on 13 March.</li>
<li>We forecast constituent changes for the Battery, Bio, Internet and BBIG indices. Plus there will be capping changes for all indices.</li>
<li>The largest flows are expected in <a href="https://www.smartkarma.com/entities/samsung-sdi-co-ltd" target="_blank" data-smartkarma-citation="entities:503:1" rel="noopener">Samsung SDI</a>, <a href="https://www.smartkarma.com/entities/sk-innovation-co-ltd" target="_blank" data-smartkarma-citation="entities:1268:1" rel="noopener">SK Innovation</a>, Samsung Epis Holdings, <a href="https://www.smartkarma.com/entities/samsung-biologics-co-ltd" target="_blank" data-smartkarma-citation="entities:22932:1" rel="noopener">Samsung Biologics</a>, <a href="https://www.smartkarma.com/entities/ablbio-inc" target="_blank" data-smartkarma-citation="entities:35621:1" rel="noopener">ABLBio</a>, <a href="https://www.smartkarma.com/entities/alteogen-inc" target="_blank" data-smartkarma-citation="entities:15886:1" rel="noopener">Alteogen</a> and <a href="https://www.smartkarma.com/entities/l-f-co-ltd" target="_blank" data-smartkarma-citation="entities:14300:1" rel="noopener">L&amp;F</a>.</li>
</ul>


The review period for the March rebalance ends on 31 January, the changes will be announced first week of March and implemented at the close of trading on 13 March.
We forecast constituent changes for the Battery, Bio, Internet and BBIG indices. Plus there will be capping changes for all indices.
The largest flows are expected in Samsung SDI, SK Innovation, Samsung Epis Holdings, Samsung Biologics, ABLBio, Alteogen and L&amp;F.


KRX New Deal Index Rebalance Preview: Chunky Flows in Some Stocks

<ul><li>We maintain our Buy rating on SK Innovation and raise our target price to W156,000 (from W116,000), reflecting upward revisions to our earnings forecasts for both the refining and battery businesses as well as a decline in net debt.</li><li>Refining margins have been showing notable strength, reaching their highest level since Sep. 2023, and are expected to remain strong through the winter heating season.</li><li>Meanwhile, we expect the battery business to strengthen its overall business portfolio through ESS order wins. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We maintain our Buy rating on SK Innovation and raise our target price to W156,000 (from W116,000), reflecting upward revisions to our earnings forecasts for both the refining and battery businesses as well as a decline in net debt.Refining margins have been showing notable strength, reaching their highest level since Sep. 2023, and are expected to remain strong through the winter heating season.Meanwhile, we expect the battery business to strengthen its overall business portfolio through ESS order wins. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

SK Innovation (096770 KS/Buy)Battery portfolio to strengthen on ESS orders

South Korea

SK Innovation Co., Ltd. refines, markets, and distributes oil.  The Company produces a variety of petroleum products, such as gasoline, kerosene, liquefied petroleumgas (LPG), and diesel oil.  SK Energy also manufactures petrochemical p roducts, including paraxylene, synthetic resins, styrene monomer, and ethylene.

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SK Innovation (096770 KS)

2026 High Conviction Idea: SK Inc

SK Inc (034730 KS) just announced that it will cancel about 20% of its outstanding shares, representing 4.8 trillion won ($3.3 billion). This is...

Douglas Kim

Korea Short Sell Ban: Background, Manipulation, Holdings, Flows, Short Interest, Implications

Media reports indicate that there could be a temporary short sell ban in Korea. This could lead to futures backwardation, market manipulation and a...

Brian Freitas