Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>In this insight, we discuss the five most aggressive corporate activist firms that have been moving the Korean equity market in the past year.</li>
<li>They include Align Partners Capital Management, KCGI, Flashlight Capital Partners, Truston, and LIFE Asset Management.</li>
<li>Share prices of 15 companies that the corporate activist firms have invested in Korea are up on average 9.7% YTD, outperforming KOSPI which is up 7.1% in the same period.</li>
</ul>


In this insight, we discuss the five most aggressive corporate activist firms that have been moving the Korean equity market in the past year.
They include Align Partners Capital Management, KCGI, Flashlight Capital Partners, Truston, and LIFE Asset Management.
Share prices of 15 companies that the corporate activist firms have invested in Korea are up on average 9.7% YTD, outperforming KOSPI which is up 7.1% in the same period.


Five Most Aggressive Corporate Activists Moving the Korean Market: Align, KCGI, FCP, Truston, & LIFE

<ul>
<li>This insight provides the details of how a local asset management company called Truston Asset Mgmt has been able to win a corporate activism battle against Taekwang Industrial.</li>
<li>Taekwang Industrial has repeatedly been boggled down by numerous corporate governance related issues for more than a couple of decades.</li>
<li>The overall result should be a modest positive sentiment on Taekwang Industrial's shares in the <strong>near term</strong> which still trades at dirt cheap P/B multiple of 0.2x.</li>
</ul>


This insight provides the details of how a local asset management company called Truston Asset Mgmt has been able to win a corporate activism battle against Taekwang Industrial.
Taekwang Industrial has repeatedly been boggled down by numerous corporate governance related issues for more than a couple of decades.
The overall result should be a modest positive sentiment on Taekwang Industrial's shares in the near term which still trades at dirt cheap P/B multiple of 0.2x.


A Win for Truston Asset Mgmt: Corporate Activism Worked on Taekwang Industrial

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.

<p>Below is KOSPI 200's screening methodology for the regular bi-annual rebalancing. The rebalancing trading will occur at the close on <strong>December 9</strong>, and the review period is <strong>May 1 to October 31</strong>. We will likely hear the rebalancing results in late November.</p><table class="table table-striped">
<colgroup>
<col width="150">
<col width="800">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Status (₩B)"}'>KOSPI 200 bi-annual rebalancing</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Rebalancing"}'>Rebalancing</td>
<td data-sheets-value='{"1":2,"2":"Biannually"}' data-sheets-numberformat='{"1":2,"2":"#,##0"}'>Biannually</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Effective date"}'>- Effective date</td>
<td data-sheets-value='{"1":2,"2":"Next trading day of 2nd Thursday of June &amp; December"}' data-sheets-numberformat='{"1":2,"2":"#,##0"}'>Next trading day of 2nd Thursday of June &amp; December</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - December"}'>- Implementation</td>
<td data-sheets-value='{"1":3,"3":44540}' data-sheets-numberformat='{"1":5,"2":"mmmm d, yyyy","3":1}'>December 10, 2021</td>
</tr>
<tr>
<td><strong>- Rebalancing trading</strong></td>
<td><strong>December 9, 2021</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Review period"}'><strong>- Review period</strong></td>
<td data-sheets-value='{"1":2,"2":"May 1 to October 31, 2021"}'><strong>May 1 to October 31, 2021</strong></td>
</tr>
<tr>
<td rowspan="6" data-sheets-value='{"1":2,"2":"Screening"}'><div><strong>Screening</strong></div></td>
<td rowspan="6" data-sheets-value='{"1":2,"2":"Select candidates for each sector in order by the cumulative average daily market cap (the cumulative cut-off at the 15th percentile). Include the first company that crosses the 15th percentile mark. Exclude those whose cumulative average daily trading value is below the 15th percentile. Also, exclude those new entrants whose average daily market cap ranking is above 110%. If not reach a full 200 members in the first and second screenings, then re-select the current constituents whose average daily market cap ranking is within 110%. Select additional names among the unselected current constituents by the average daily market cap regardless of classification."}' data-sheets-numberformat='{"1":2,"2":"#,##0"}'><ul>
<li><strong>Select candidates for each sector in order by the cumulative average daily market cap (the cumulative cut-off at the 15th percentile).</strong></li>
<li><strong>Include the first company that crosses the 15th percentile mark. Exclude those whose cumulative average daily trading value is below the 15th percentile.</strong></li>
<li><strong>Also, exclude those new entrants whose average daily market cap ranking is above 110%.</strong></li>
<li><strong>If not reach 200 members in the first and second screenings, then re-select the current constituents whose average daily market cap ranking is within 110%.</strong></li>
<li><strong>Select additional names among the unselected current constituents by the average daily market cap regardless of classification.</strong></li>
</ul></td>
</tr>
<tr></tr>
<tr></tr>
<tr></tr>
<tr></tr>
<tr></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total float MC (₩B)"}'>Total float MC (₩B)</td>
<td data-sheets-value='{"1":3,"3":1247667.684}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>1,247,667.7</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/231/157/original/1.png?1632295209" class="editor-image img-responsive" data-smartkarma-image-id="231157"></figure></section>

Below is KOSPI 200's screening methodology for the regular bi-annual rebalancing. The rebalancing trading will occur at the close on December 9, and the review period is May 1 to October 31. We will likely hear the rebalancing results in late November.





KOSPI 200 bi-annual rebalancing

Rebalancing
Biannually


- Effective date
Next trading day of 2nd Thursday of June &amp; December


- Implementation
December 10, 2021


- Rebalancing trading
December 9, 2021


- Review period
May 1 to October 31, 2021


Screening

Select candidates for each sector in order by the cumulative average daily market cap (the cumulative cut-off at the 15th percentile).
Include the first company that crosses the 15th percentile mark. Exclude those whose cumulative average daily trading value is below the 15th percentile.
Also, exclude those new entrants whose average daily market cap ranking is above 110%.
If not reach 200 members in the first and second screenings, then re-select the current constituents whose average daily market cap ranking is within 110%.
Select additional names among the unselected current constituents by the average daily market cap regardless of classification.








Total float MC (₩B)
1,247,667.7

Source: KRX



KOSPI 200 Bi-Annual Rebalancing Preview (December 9)

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/chandra-asri-petrochemical" target="_blank" data-smartkarma-citation="entities:2556:1" rel="noopener">Chandra Asri Petrochemical (TPIA IJ)</a> , a subsidiary of <a href="https://www.smartkarma.com/entities/barito-pacific-tbk-pt" target="_blank" data-smartkarma-citation="entities:8851:1" rel="noopener">Barito Pacific (BRPT IJ)</a> , has witnessed its share price almost doubled in the past 12 months thanks to the increased in the PE multiples.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/112/474/original/image_81014932921578042342591.png?1578042341" class="editor-image img-responsive" data-smartkarma-image-id="112474"></figure>
<p>Its valuation is very rich compared to its peers such as <a href="https://www.smartkarma.com/entities/lotte-chemical-titan-holding-berhad" target="_blank" data-smartkarma-citation="entities:24159:1" rel="noopener">Lotte Chemical Titan Holding (TTNP MK)</a> or <a href="https://www.smartkarma.com/entities/taekwang-industrial-co-ltd" target="_blank" data-smartkarma-citation="entities:6291:1" rel="noopener">Taekwang Industrial (003240 KS)</a> despite the similarity in profit margin level. Indonesia is still in a big deficit of the company's main product. Being the largest petrochemical producer in the country has attracted investors to own the company's shares. The question is whether the company can turn profitable given the upcoming headwinds such as rising oil price, a tighter corporate governance requirement from Indonesian Exchange and potential for a share sale to fund CapEx. </p>
<p>For existing Long-Only shareholders, selling it at the current valuation would make sense considering the profit that will be realized and the upcoming headwinds. </p>

Chandra Asri Petrochemical (TPIA IJ) , a subsidiary of Barito Pacific (BRPT IJ) , has witnessed its share price almost doubled in the past 12 months thanks to the increased in the PE multiples.

Its valuation is very rich compared to its peers such as Lotte Chemical Titan Holding (TTNP MK) or Taekwang Industrial (003240 KS) despite the similarity in profit margin level. Indonesia is still in a big deficit of the company's main product. Being the largest petrochemical producer in the country has attracted investors to own the company's shares. The question is whether the company can turn profitable given the upcoming headwinds such as rising oil price, a tighter corporate governance requirement from Indonesian Exchange and potential for a share sale to fund CapEx. 
For existing Long-Only shareholders, selling it at the current valuation would make sense considering the profit that will be realized and the upcoming headwinds. 

Chandra Asri (TPIA): Take Your Profit and Go!

<ul>
<li><strong>It was finally announced today that <a href="https://www.smartkarma.com/entities/1113" target="_blank" data-smartkarma-citation="entities:1113:1">LG Uplus Corp (032640 KS)</a> will acquire a 50 percent + one share in <a href="https://www.smartkarma.com/entities/1111" target="_blank" data-smartkarma-citation="entities:1111:1">Cj Hellovision (037560 KS)</a> for 800 billion won.</strong></li>
<li>LG Uplus' acquisition of CJ Hellovision is likely to further accelerate the consolidation of the Korean cable TV/media sector. <a href="https://www.smartkarma.com/entities/1112" target="_blank" data-smartkarma-citation="entities:1112:1">KT Corp (030200 KS)</a> is now likely to aggressively try to acquire D'Live cable company. <a href="https://www.smartkarma.com/entities/395" target="_blank" data-smartkarma-citation="entities:395:1">SK Telecom (017670 KS)</a> has shown some interests in acquiring Tbroad cable company. </li>
<li>Potential M&amp;A Valuation Price for Tbroad- If we assume our base case EV/EBITDA valuation multiple to be 5.5x for Tbroad and assume annualized EBITDA of 181.8 billion won in 2018, this would suggest an implied EV of 1.0 trillion won. After adjusting for net cash, the implied market cap would be 1.2 trillion won for Tbroad. Thus, if Taekwang Industrial decides to sell just over 50% stake in Tbroad, this could potentially be worth about 600 billion won. Taekwang Industrial currently has a market cap of 1.7 trillion won so its stake (53.9% stake in Tbroad) could be nearly 35% the value of its entire market cap.</li>
<li>The long battle to acquire CJ Hellovision has been completed (with the final stamp of approval from FTC). This move should help to consolidate the cable TV industry with SK Telecom and KT potentially battling out for either Tbroad or D'Live. In the midst of these uncertainties, there could be some further positive momentum for <a href="https://www.smartkarma.com/entities/6291" target="_blank" data-smartkarma-citation="entities:6291:1">Taekwang Industrial (003240 KS)</a>, the majority owner of Tbroad.</li>
</ul>


It was finally announced today that LG Uplus Corp (032640 KS) will acquire a 50 percent + one share in Cj Hellovision (037560 KS) for 800 billion won.
LG Uplus' acquisition of CJ Hellovision is likely to further accelerate the consolidation of the Korean cable TV/media sector. KT Corp (030200 KS) is now likely to aggressively try to acquire D'Live cable company. SK Telecom (017670 KS) has shown some interests in acquiring Tbroad cable company. 
Potential M&amp;A Valuation Price for Tbroad- If we assume our base case EV/EBITDA valuation multiple to be 5.5x for Tbroad and assume annualized EBITDA of 181.8 billion won in 2018, this would suggest an implied EV of 1.0 trillion won. After adjusting for net cash, the implied market cap would be 1.2 trillion won for Tbroad. Thus, if Taekwang Industrial decides to sell just over 50% stake in Tbroad, this could potentially be worth about 600 billion won. Taekwang Industrial currently has a market cap of 1.7 trillion won so its stake (53.9% stake in Tbroad) could be nearly 35% the value of its entire market cap.
The long battle to acquire CJ Hellovision has been completed (with the final stamp of approval from FTC). This move should help to consolidate the cable TV industry with SK Telecom and KT potentially battling out for either Tbroad or D'Live. In the midst of these uncertainties, there could be some further positive momentum for Taekwang Industrial (003240 KS), the majority owner of Tbroad.


Korea M&A Spotlight: LGUplus to Acquire CJ Hellovision: What's Next for Tbroad and D'Live?

South Korea

Taekwang Industrial Co., Ltd. manufactures synthetic yarns, petrochemical products, and textiles.  The Company's products include acrylic yarns, nylons, spandex, carbon fibers, spun yarns, polyester materials, and blankets.  Taekwang also produces electric equipment, such as audio equipment, and cordless telephones.  In addition, The Company operates real estate business.

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Taekwang Industrial (003240 KS)

Five Most Aggressive Corporate Activists Moving the Korean Market: Align, KCGI, FCP, Truston, & LIFE

In this insight, we discuss the five most aggressive corporate activist firms that have been moving the Korean equity market in the past year.

Douglas Kim

A Win for Truston Asset Mgmt: Corporate Activism Worked on Taekwang Industrial

This insight provides the details of how a local asset management company called Truston Asset Mgmt has been able to win a corporate activism...

Douglas Kim

KOSPI 200 Bi-Annual Rebalancing Preview (December 9)

This post previews the upcoming regular bi-annual rebalancing of KOSPI 200, whose rebalancing trading will take place on December 9.

Sanghyun Park

Chandra Asri (TPIA): Take Your Profit and Go!

Chandra Asri Petrochemical (TPIA IJ) , a subsidiary of Barito Pacific (BRPT IJ) , has witnessed its share price almost doubled in the past 12...

Henry Soediarko

Korea M&A Spotlight: LGUplus to Acquire CJ Hellovision: What's Next for Tbroad and D'Live?

It was finally announced today that LG Uplus Corp (032640 KS) will acquire a 50 percent + one share in Cj Hellovision (037560 KS) for 800 billion...

Douglas Kim

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52-week Range

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