Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<ul>
<li>Socar, the largest car sharing platform in Korea, is getting ready to complete its IPO in KOSPI. The IPO base case offering size is from $120 million to $159 million.</li>
<li>The IPO price range is from 34,000 won to 45,000 won. The expected market cap of the company is from 1.2 trillion won to 1.6 trillion won.</li>
<li>Book building for the institutional investors starts on 1 August. Mirae Asset Securities and Samsung Securities are the lead underwriters in this IPO. </li>
</ul>


Socar, the largest car sharing platform in Korea, is getting ready to complete its IPO in KOSPI. The IPO base case offering size is from $120 million to $159 million.
The IPO price range is from 34,000 won to 45,000 won. The expected market cap of the company is from 1.2 trillion won to 1.6 trillion won.
Book building for the institutional investors starts on 1 August. Mirae Asset Securities and Samsung Securities are the lead underwriters in 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>On 20 May, we recommended selling <a href="https://www.smartkarma.com/entities/sk-telecom-co-ltd-bbccd86c-474d-4a4d-946d-10e911a225a2" target="_blank" data-smartkarma-citation="entities:395:1" rel="noopener">SK Telecom (017670 KS)</a> and buying <a href="https://www.smartkarma.com/entities/kt-corp" target="_blank" data-smartkarma-citation="entities:1112:1" rel="noopener">KT Corp (030200 KS)</a>. That trade is up 12% over the last month.</li>
<li>Foreign investors have sold 2.5m shares of <a href="https://www.smartkarma.com/entities/sk-telecom-co-ltd-bbccd86c-474d-4a4d-946d-10e911a225a2" target="_blank" data-smartkarma-citation="entities:395:1" rel="noopener">SK Telecom (017670 KS)</a> in the last month while buying 2.8m shares of <a href="https://www.smartkarma.com/entities/kt-corp" target="_blank" data-smartkarma-citation="entities:1112:1" rel="noopener">KT Corp (030200 KS)</a>. </li>
<li>With the price ratio trading at a 4 year low, we feel is is time to start unwinding the trade and waiting for a little bit before reversing it.</li>
</ul>


On 20 May, we recommended selling SK Telecom (017670 KS) and buying KT Corp (030200 KS). That trade is up 12% over the last month.
Foreign investors have sold 2.5m shares of SK Telecom (017670 KS) in the last month while buying 2.8m shares of KT Corp (030200 KS). 
With the price ratio trading at a 4 year low, we feel is is time to start unwinding the trade and waiting for a little bit before reversing it.


SK Telecom / KT Corp: Foreign Room, Passive Flow & Trade Update

<ul>
<li>It was reported that KT will provide an extra 15% to its employees who purchase KT's treasury shares worth 5 million won ($4,000) to 20 million won ($16,000).</li>
<li>We have a positive view of this extra 15% bonus for ESOP treasury shares purchase. It has the positive effect of increasing demand for KT shares among its employees.</li>
<li>If 10,000 employees purchase 10 million won per person, this would be 115 billion won in total (including 15% extra provided by KT). </li>
</ul>


It was reported that KT will provide an extra 15% to its employees who purchase KT's treasury shares worth 5 million won ($4,000) to 20 million won ($16,000).
We have a positive view of this extra 15% bonus for ESOP treasury shares purchase. It has the positive effect of increasing demand for KT shares among its employees.
If 10,000 employees purchase 10 million won per person, this would be 115 billion won in total (including 15% extra provided by KT). 


KT Grants Extra 15% for ESOP Treasury Shares Purchase

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 debating point is whether ADRs can be created from local underlying shares once the FOL is hit if the ADR issuance cap isn't entirely burned.</li>
<li>The answer is Yes. ADRs can still be created. That is one of the exceptions that the Korea FSS allows for exceeding the foreign ownership limit.</li>
<li>This is why we saw a hefty premium on KT ADR when it reached and stayed at zero foreign room since 2015 AND an increase in ADRs through DR creation.</li>
</ul>


The debating point is whether ADRs can be created from local underlying shares once the FOL is hit if the ADR issuance cap isn't entirely burned.
The answer is Yes. ADRs can still be created. That is one of the exceptions that the Korea FSS allows for exceeding the foreign ownership limit.
This is why we saw a hefty premium on KT ADR when it reached and stayed at zero foreign room since 2015 AND an increase in ADRs through DR creation.


SK Telecom: Clarifications over ADR Creation & Premium with Zero Foreign Room

Equity Bottom-Up

<ul>
<li>We analyzed the different share price movements of SK Telecom relative to KT and LG Uplus from 2005 to 2022 when foreign ownership of SK Telecom remained above 99%.</li>
<li>From 2005 to 2022, KT and LG Uplus outperformed SKT in 7 and 6 out of 11 periods, respectively when the foreign ownership of SKT was above 99%.</li>
<li>Once KT's foreign ownership rises to the 93-95% range, there will be more concerns about foreign ownership limit which means that LG Uplus could be in focus once again. </li>
</ul>


We analyzed the different share price movements of SK Telecom relative to KT and LG Uplus from 2005 to 2022 when foreign ownership of SK Telecom remained above 99%.
From 2005 to 2022, KT and LG Uplus outperformed SKT in 7 and 6 out of 11 periods, respectively when the foreign ownership of SKT was above 99%.
Once KT's foreign ownership rises to the 93-95% range, there will be more concerns about foreign ownership limit which means that LG Uplus could be in focus once again. 


Price Comparisons of SK Telecom, KT, & LG Uplus When SK Telecom Reaches 99%+ Foreign Ownership

South Korea

SK Telecom Co., Ltd. is a Korean mobile and telecommunications operator. The Company provides cellular voice, wireless data, and wireless internet services. SK Telecom also offers fixed line services and platform services.

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SK Telecom (017670 KS)

Socar IPO Preview

Socar, the largest car sharing platform in Korea, is getting ready to complete its IPO in KOSPI. The IPO base case offering size is from $120...

Douglas Kim

SK Telecom / KT Corp: Foreign Room, Passive Flow & Trade Update

SK Telecom has underperformed KT Corp by 12% over the last month. Foreign investors have been selling SK Tel & buying KT Corp. The price ratio is...

Brian Freitas

KT Grants Extra 15% for ESOP Treasury Shares Purchase

It was reported that KT will provide an extra 15% to its employees who purchase KT's treasury shares worth 5 million won ($4,000) to 20 million won...

Douglas Kim

SK Telecom: Clarifications over ADR Creation & Premium with Zero Foreign Room

This post clarifies whether ADRs can still be created for FOL stocks like SKT even when the foreign ownership limit is reached.

Sanghyun Park

Price Comparisons of SK Telecom, KT, & LG Uplus When SK Telecom Reaches 99%+ Foreign Ownership

We analyzed the different share price movements of SK Telecom relative to KT and LG Uplus from 2005 to 2022 when foreign ownership of SK Telecom...

Douglas Kim

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