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.

Equity Capital Markets

<p>This morning, multiple local news outlets reported that LG Chem and SK Innovation had finally reached a full agreement in the electric vehicle battery dispute.</p><p><strong>Official words will likely come out later today.</strong></p><p><a href="https://www.sedaily.com/NewsView/22L1IC823K" target="_blank" rel="noopener">Here is the news link.</a></p><p>According to SED, multiple officials who are familiar with the issue confirmed in a call interview that the two companies had reached an agreement, including the amount of compensation, and are currently finalizing the announcement's format.</p><div class="content-highlight">
<p><strong>Legal battle summary between LG Chem and SK Innovation:</strong></p>
<p>LG Chem (now LG Energy Solutions) filed a full complaint with the US International Trade Commission (ITC) in April 2019, claiming SK Innovation had infringed on its business secrets.</p>
<p>In February this year, the US ITC imposed a 10-year import ban, claiming that SK had violated the LG ES business secrets.</p>
<p>US President Joe Biden could veto the ITC's 10-year SK battery import ban, and the deadline is tomorrow.</p>
</div><p><strong>Why now?</strong></p><p>SK Innovation has reportedly concluded that President Biden wouldn't exercise his veto on this case (10-year import ban).</p><p>SK is said to have even considered shutting down the US factory in Georgia after the end of next year. But given the importance of the US market and the US-based partners, it finally made a last-minute decision.</p>

This morning, multiple local news outlets reported that LG Chem and SK Innovation had finally reached a full agreement in the electric vehicle battery dispute.Official words will likely come out later today.Here is the news link.According to SED, multiple officials who are familiar with the issue confirmed in a call interview that the two companies had reached an agreement, including the amount of compensation, and are currently finalizing the announcement's format.
Legal battle summary between LG Chem and SK Innovation:
LG Chem (now LG Energy Solutions) filed a full complaint with the US International Trade Commission (ITC) in April 2019, claiming SK Innovation had infringed on its business secrets.
In February this year, the US ITC imposed a 10-year import ban, claiming that SK had violated the LG ES business secrets.
US President Joe Biden could veto the ITC's 10-year SK battery import ban, and the deadline is tomorrow.
Why now?SK Innovation has reportedly concluded that President Biden wouldn't exercise his veto on this case (10-year import ban).SK is said to have even considered shutting down the US factory in Georgia after the end of next year. But given the importance of the US market and the US-based partners, it finally made a last-minute decision.

LG Chem & SK Innovation Reach an Agreement Right Before SK IET IPO Book Opens

SK IE Technology   / Equity Capital Markets

SK IE Technology, SK Innovation's most profitable subsidiary, finally put out the IPO book.It offers a total of 21.39M shares with a split of 40% primary and 60% secondary. The institutional allotment is 55%.Mirae and JPM are the main underwriters with a firm commitment.The book opens on April 13, and runs until April 23. The subscription follows on April 28.





Overview

Issuer
SK IE Technology


Ticker
361610


Bourse
KOSPI


Pre-IPO SO
62,741,592


- Common
62,741,592


- Pref (incl. RCPS)
0


Offering
21,390,000


- Common
21,390,000


- Pref
0


- % of SO
34.09%


- Institutional allotment
55.00%


Split
Yes


- Primary %
40.00%


- Primary qty.
8,556,000


- Secondary %
60.00%


- Secondary qty.
12,834,000


Post-IPO SO
71,297,592


Capital increase rate
13.64%


Dilution
12.00%


Cornerstones
No


Clawback
No


Greenshoe
No


Banker
Mirae, JPM, KIS, CS, SK, Samsung, &amp; NH


- Type
Firm commitment

Source: DART







Timetable

Book open
2021. 4. 13


Book close
2021. 4. 23


Allotment
2021. 4. 26


Subscription
2021. 4. 28


Payment
2021. 5. 3


Listing
TBA

Source: DART

The major shareholder, SK Innovation, will continue to retain 61.2% with a 6 month lock-up. Excluding 6% to be owned by the ESOP, at least 76% will be locked up from 6 months to 1 year.







Shareholding
Post IPO
Lock-up


SK Innovation
61.20%
6 months


Premier Superior Ltd.
8.80%
6 months


ESOP
6.00%
1 year


IPO
24.00%
-


Total
100.00%
-

Source: DART

The price band is ₩78,000~105,000, giving a base deal size of ₩1.67~2.25T at an implied MC of ₩5.56~7.49T.The IPO book valuation is ₩9.31T at a 48.12x EV/EBITDA, so the indicative price band is at a 19.6~40.3% discount.







Pricing (₩B)
Low
High


Price (₩)
₩78,000
₩105,000


Base deal size
1,668.4
2,246.0


- Institutional allotment
917.6
1,235.3


Implied market cap
5,561.2
7,486.2


- Discount
40.27%
19.59%

Source: DART







Valuation (₩B)

Ticker
361610


SO
71,297,592


Reference value (EBITDA)
196.6


Reference valuation multiple (EV/EBITDA)
48.12


EV
9,459.1


Interest-bearing debt
515.8


Cash &amp; cash equivalents
367.1


Net borrowings
148.7


Market cap
9,310.4


Price per share
₩130,586

Source: DART












Valuation (₩B)
Yunnan Energy New Material Co Ltd
Ecopro BM Co Ltd
Iljin Materials Co Ltd
Posco Chemical Co Ltd
Chunbo Co Ltd


Ticker
SHE:002812
247540
020150
003670
278280


SO
887,716,765
21,035,166
46,110,835
60,988,220
10,000,000


Reference value (EBITDA)
326.5
91.6
85.3
124.7
41.3


Reference valuation multiple (EV/EBITDA)
52.20
37.80
35.60
77.80
37.20


Average
48.12

Source: DART













Financials (₩B)
SK IE Technology
Yunnan Energy New Material Co Ltd
Ecopro BM Co Ltd
Iljin Materials Co Ltd
Posco Chemical Co Ltd
Chunbo Co Ltd


Assets
1,991.6
3,535.5
791.8
1,076.6
2,088.1
260.7


- Current assets
566.8
1,496.5
306.0
519.1
810.6
140.1


- Non-current assets
1,424.9
2,039.0
485.8
557.6
1,277.4
120.6


Liabilities
783.4
1,542.7
330.5
211.5
1,064.4
36.2


- Current liabilities
272.6
737.2
187.8
94.4
220.6
19.8


- Non-current liabilities
510.7
805.5
142.7
117.1
843.8
16.3


Equity
1,208.3
1,908.1
437.7
614.0
1,000.7
224.5


- Capital
62.7
152.4
10.5
23.1
30.5
5.1


- Retained earnings
151.5
472.1
131.7
196.3
778.9
142.4


Sales
469.3
736.1
854.7
536.9
1,566.2
155.5


OP
125.2
265.1
54.5
51.0
60.3
30.1


NP
88.2
191.7
42.7
44.2
29.6
27.4


EPS
₩1,521
₩216
₩2,065
₩959
₩485
₩2,742


OPM
26.68%
36.02%
6.38%
6.38%
9.50%
3.85%


NPM
18.79%
26.05%
4.99%
4.99%
8.23%
1.89%


ROA
4.43%
5.42%
5.39%
5.39%
4.11%
1.42%


ROE
7.30%
10.05%
9.75%
9.75%
7.20%
2.96%


Current ratio
207.88%
203.00%
162.99%
162.99%
549.85%
367.38%


Debt ratio
64.84%
80.85%
75.51%
75.51%
34.45%
106.37%

Source: DART



SK IE Technology IPO: Key Info & Issues at Hand

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<div class="content-highlight"><ul>
<li>SK IET plans to complete its IPO in May.  The IPO price range is from 78,000 won to 105,000 won. The IPO base deal size is from $1.5 billion to $2.0 billion. According to the bankers' valuation, the expected market cap of SK IET is from 5.6 trillion won to 7.5 trillion won. SK IET IPO will be the biggest IPO in Korea so far this year, beating <a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a> which recently raised $1.3 billion in its IPO in March. </li>
<li>The company will offer 21.39 million shares in the IPO (8.56 million new shares and 12.83 million old shares). The offered shares of 21.39 million represents nearly 30% of the outstanding shares (post IPO), which is large relative to its total outstanding shares. SK Innovation, which has a 90% stake in SK IET, plans to sell a 22.7% stake in the company in this IPO. In September 2020, SK Innovation sold a 10% stake in <a href="https://www.kedglobal.com/newsView/ked202009220004" target="_blank" rel="noopener">SK IET</a> for 300 billion won to Premier Partners, a local fund management company. </li>
<li>SK IET generated 197 billion won in EBITDA in 2020. Applying a 48.1x EV/EBITDA multiple (average valuation multiple of the company's comps), this results in an EV of 9,458 billion won and implied market cap of 9,309 billion won (130,572 won per share). After applying IPO discount 19.6% - 40.3%, this results in an IPO price range of 78,000 - 105,000 won. </li>
</ul></div>


SK IET plans to complete its IPO in May.  The IPO price range is from 78,000 won to 105,000 won. The IPO base deal size is from $1.5 billion to $2.0 billion. According to the bankers' valuation, the expected market cap of SK IET is from 5.6 trillion won to 7.5 trillion won. SK IET IPO will be the biggest IPO in Korea so far this year, beating SK Bioscience (302440 KS) which recently raised $1.3 billion in its IPO in March. 
The company will offer 21.39 million shares in the IPO (8.56 million new shares and 12.83 million old shares). The offered shares of 21.39 million represents nearly 30% of the outstanding shares (post IPO), which is large relative to its total outstanding shares. SK Innovation, which has a 90% stake in SK IET, plans to sell a 22.7% stake in the company in this IPO. In September 2020, SK Innovation sold a 10% stake in SK IET for 300 billion won to Premier Partners, a local fund management company. 
SK IET generated 197 billion won in EBITDA in 2020. Applying a 48.1x EV/EBITDA multiple (average valuation multiple of the company's comps), this results in an EV of 9,458 billion won and implied market cap of 9,309 billion won (130,572 won per share). After applying IPO discount 19.6% - 40.3%, this results in an IPO price range of 78,000 - 105,000 won. 


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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

<p>The Korea Exchange (KRX) launched 5 indices last year following the New Deal initiative that the Government launched to digitalise social infrastructure and jumpstart the transition to green energy.</p><p>The KRX created 4 indices tracking the Secondary Battery, Biotech, Internet and Gaming sectors that are expected to benefit from the New Deal initiative plus an additional index (BBIG) that includes the top 3 stocks from each sector.</p><p>All indices have performed well since then. The KRX announced changes to the 5 indices late last week and the changes become effective post the close of trading on 25 February.</p><div><p><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> replaces <a href="https://www.smartkarma.com/entities/pearl-abyss-corp" target="_blank" data-smartkarma-citation="entities:24391:1" rel="noopener">Pearl Abyss (263750 KS)</a> in the BBIG Index.</p></div><div><p>In the Secondary Battery index, <a href="https://www.smartkarma.com/entities/soulbrain-co-ltd" target="_blank" data-smartkarma-citation="entities:16883:1" rel="noopener">Soulbrain (036830 KS)</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 Co Ltd (066970 KS)</a> replace <a href="https://www.smartkarma.com/entities/doosan-solus-co-ltd" target="_blank" data-smartkarma-citation="entities:28947:1" rel="noopener">Doosan Solus Co Ltd (336370 KS)</a> and <a href="https://www.smartkarma.com/entities/foosung-co-ltd" target="_blank" data-smartkarma-citation="entities:16811:1" rel="noopener">Foosung Co Ltd (093370 KS)</a>.</p></div><div><p>In the Biotech index, <a href="https://www.smartkarma.com/entities/shinpoong-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:7296:1" rel="noopener">Shinpoong Pharmaceutical (019170 KS)</a> and <a href="https://www.smartkarma.com/entities/green-cross-corp" target="_blank" data-smartkarma-citation="entities:2969:1" rel="noopener">Green Cross (006280 KS)</a> replace <a href="https://www.smartkarma.com/entities/alteogen-inc" target="_blank" data-smartkarma-citation="entities:15886:1" rel="noopener">Alteogen Inc (196170 KS)</a> and <a href="https://www.smartkarma.com/entities/hanmi-pharm-co-ltd" target="_blank" data-smartkarma-citation="entities:12476:1" rel="noopener">Hanmi Pharm (128940 KS)</a>.</p></div><div><p>In the Internet index, <a href="https://www.smartkarma.com/entities/ace-technologies-corp" target="_blank" data-smartkarma-citation="entities:7868:1" rel="noopener">Ace Technologies (088800 KS)</a> and <a href="https://www.smartkarma.com/entities/rsupport-co-ltd" target="_blank" data-smartkarma-citation="entities:14783:1" rel="noopener">Rsupport Co Ltd (131370 KS)</a> replace <a href="https://www.smartkarma.com/entities/kg-inicis-co-ltd" target="_blank" data-smartkarma-citation="entities:5234:1" rel="noopener">KG Inicis Co Ltd (035600 KS)</a> and <a href="https://www.smartkarma.com/entities/ubiquoss-inc" target="_blank" data-smartkarma-citation="entities:14341:1" rel="noopener">Ubiquoss Holding (078070 KS)</a>.</p></div><div><p>In the Gaming index, <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> and <a href="https://www.smartkarma.com/entities/neptune-company" target="_blank" data-smartkarma-citation="entities:28826:1" rel="noopener">Neptune Company (217270 KS)</a> replace <a href="https://www.smartkarma.com/entities/neowiz-games-corp" target="_blank" data-smartkarma-citation="entities:12425:1" rel="noopener">Neowiz Games (095660 KS)</a> and Golfzon (215000 KS).</p></div>

The Korea Exchange (KRX) launched 5 indices last year following the New Deal initiative that the Government launched to digitalise social infrastructure and jumpstart the transition to green energy.The KRX created 4 indices tracking the Secondary Battery, Biotech, Internet and Gaming sectors that are expected to benefit from the New Deal initiative plus an additional index (BBIG) that includes the top 3 stocks from each sector.All indices have performed well since then. The KRX announced changes to the 5 indices late last week and the changes become effective post the close of trading on 25 February.Kakao Games Corp (293490 KS) replaces Pearl Abyss (263750 KS) in the BBIG Index.In the Secondary Battery index, Soulbrain (036830 KS) and L&amp;F Co Ltd (066970 KS) replace Doosan Solus Co Ltd (336370 KS) and Foosung Co Ltd (093370 KS).In the Biotech index, Shinpoong Pharmaceutical (019170 KS) and Green Cross (006280 KS) replace Alteogen Inc (196170 KS) and Hanmi Pharm (128940 KS).In the Internet index, Ace Technologies (088800 KS) and Rsupport Co Ltd (131370 KS) replace KG Inicis Co Ltd (035600 KS) and Ubiquoss Holding (078070 KS).In the Gaming index, Kakao Games Corp (293490 KS) and Neptune Company (217270 KS) replace Neowiz Games (095660 KS) and Golfzon (215000 KS).

KRX BBIG K-NewDeal Index Rebalance: First Set of Changes Announced

Cross Asset Strategy

<p>NPS has been selling big in Korea in recent weeks. It was reported that NPS and other local pension funds sold nearly 6.5 trillion won of Korean stocks this year (as of 21 January). The NPS has net sold for 18 consecutive trading days.</p><p>The local retail investors and foreign investors have been increasing their stakes in the major Korean stocks this year driving the Korean stock market higher. However, there are some growing concerns that NPS has been selling big in Korea and may continue to do so in the near future, as many Korean stocks reach their all time highs. </p><p>Furthermore, among the 50 top stocks in Korea, NPS added to its position on just 4 of these stocks and reduced its stake in 17 of them (of the ones that have shown changes in ownership stake in the dart system). These four stocks (including NCsoft, SK Innovation, Samsung F&amp;M Insurance, and POSCO Chemical) that NPS added to its positions are worth further reviews since it shows that NPS is especially more bullish on the outlook of these companies. These four stocks are up on average 20.7% YTD, outperforming KOSPI which is up 9.3% YTD.</p>

NPS has been selling big in Korea in recent weeks. It was reported that NPS and other local pension funds sold nearly 6.5 trillion won of Korean stocks this year (as of 21 January). The NPS has net sold for 18 consecutive trading days.The local retail investors and foreign investors have been increasing their stakes in the major Korean stocks this year driving the Korean stock market higher. However, there are some growing concerns that NPS has been selling big in Korea and may continue to do so in the near future, as many Korean stocks reach their all time highs. Furthermore, among the 50 top stocks in Korea, NPS added to its position on just 4 of these stocks and reduced its stake in 17 of them (of the ones that have shown changes in ownership stake in the dart system). These four stocks (including NCsoft, SK Innovation, Samsung F&amp;M Insurance, and POSCO Chemical) that NPS added to its positions are worth further reviews since it shows that NPS is especially more bullish on the outlook of these companies. These four stocks are up on average 20.7% YTD, outperforming KOSPI which is up 9.3% YTD.

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)

LG Chem & SK Innovation Reach an Agreement Right Before SK IET IPO Book Opens

LG Chem and SK Innovation reached an agreement in the fierce battery dispute right before the SK IET IPO book opens on April 13. Official words...

Sanghyun Park

SK IE Technology IPO: Key Info & Issues at Hand

This post has the key information of SK IE Technology IPO, filed last night. Also, it examines the key issues at hand, which will get a lot of...

Sanghyun Park

SK IET IPO Preview

SK IET plans to complete its IPO in May. The IPO price range is from 78,000 won to 105,000 won. The IPO base deal size is from $1.5 billion to...

Douglas Kim

KRX BBIG K-NewDeal Index Rebalance: First Set of Changes Announced

The KRX has announced changes to the KRX New Deal indices that will be effective after the close of trading on 25 February. Pearl Abyss is...

Brian Freitas

NPS Is Selling Big in Korea - Why?

NPS has been selling big in Korea in recent weeks. It was reported that NPS and other local pension funds sold nearly 6.5 trillion won of Korean...

Douglas Kim

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