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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

The KRX will announce the results of the September review of the BBIG indices in August and the changes will become effective after the close of trading on 9 September.The BBIG (secondary Battery, Bio, Internet and Gaming sectors) indices were launched late last year. ETFs were subsequently launched on the 5 indices and the BBIG ETF and the Secondary Battery ETF have gathered a significant amount of assets since then.At the September rebalance we expect the following changes:<ul>
<li>Secondary Battery ETF: <a href="https://www.smartkarma.com/entities/sk-ie-technology" target="_blank" data-smartkarma-citation="entities:29207:1" rel="noopener">SK IE Technology (361610 KS)</a> replaces <a href="https://www.smartkarma.com/entities/chunbo-co-ltd" target="_blank" data-smartkarma-citation="entities:27848:1" rel="noopener">Chunbo Co Ltd (278280 KS)</a>
</li>
<li>Bio ETF: <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> joins the index and the top 3 stocks. This moves <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals Co Ltd (326030 KS)</a> to the plus group; <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> joins the index and <a href="https://www.smartkarma.com/entities/seegene-inc" target="_blank" data-smartkarma-citation="entities:11483:1" rel="noopener">Seegene Inc (096530 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> are deleted.</li>
<li>Internet ETF: <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> replaces <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> </li>
<li>Game ETF: <a href="https://www.smartkarma.com/entities/devsisters-co-ltd" target="_blank" data-smartkarma-citation="entities:14096:1" rel="noopener">Devsisters (194480 KS)</a> replaces <a href="https://www.smartkarma.com/entities/neptune-company" target="_blank" data-smartkarma-citation="entities:28826:1" rel="noopener">Neptune Company (217270 KS)</a>.</li>
<li>BBIG ETF: <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> replaces <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals Co Ltd (326030 KS)</a> </li>
</ul>There could be more interesting changes if <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (1486402D KS)</a> lists before end July as expected.The first rebalance of the index took place in February this year and the inclusions outperformed the exclusions by nearly 8% between announcement of the changes and implementation. So this rebalance is something worth looking at.

The KRX will announce the results of the September review of the BBIG indices in August and the changes will become effective after the close of trading on 9 September.The BBIG (secondary Battery, Bio, Internet and Gaming sectors) indices were launched late last year. ETFs were subsequently launched on the 5 indices and the BBIG ETF and the Secondary Battery ETF have gathered a significant amount of assets since then.At the September rebalance we expect the following changes:
Secondary Battery ETF: SK IE Technology (361610 KS) replaces Chunbo Co Ltd (278280 KS)

Bio ETF: SK Bioscience (302440 KS) joins the index and the top 3 stocks. This moves SK Biopharmaceuticals Co Ltd (326030 KS) to the plus group; Hanmi Pharm (128940 KS) joins the index and Seegene Inc (096530 KS) and Green Cross (006280 KS) are deleted.
Internet ETF: KG Inicis Co Ltd (035600 KS) replaces Rsupport Co Ltd (131370 KS) 
Game ETF: Devsisters (194480 KS) replaces Neptune Company (217270 KS).
BBIG ETF: SK Bioscience (302440 KS) replaces SK Biopharmaceuticals Co Ltd (326030 KS) 
There could be more interesting changes if  Krafton Inc (1486402D KS) lists before end July as expected.The first rebalance of the index took place in February this year and the inclusions outperformed the exclusions by nearly 8% between announcement of the changes and implementation. So this rebalance is something worth looking at.

KRX BBIG Index Rebalance Preview: Worth a Look

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.<div><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.</div><div>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>.</div><div>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>.</div><div>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>.</div><div>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).</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

Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/27738" target="_blank" data-smartkarma-citation="entities:27738:1">Vespa Inc (299910 KS)</a>, one of Korea's rising star gaming company, offers a total 1.6M shares, of which 80% go to institutional investors. This IPO has no secondary distribution. Mirae Asset Daewoo is the banker.</li>
<li>Price band is set at ₩44,800~59,700, which puts the base deal size at ₩57.3~76.4bil. Implied market cap is ₩357.5~476.4bil. Book opens on Nov 15 and runs until Nov 16. Allotment will be announced on Nov 23 and payment will be Nov 26. Listing date is yet to be announced.</li>
<li>The banker used 7 valuation peers. But WeMade, Pearl Abyss and ME2ON should be outliers. At the Nov 7 closing prices of the 4 remaining valuation peers, average TTM PER is at 13.70x. At a 13.70x PER, Vespa's price comes down to ₩44,535 per share, which is even lower than the low end: 0.59% discount to the low end and 25.40% discount to the high end.</li>
</ul>



Vespa Inc (299910 KS), one of Korea's rising star gaming company, offers a total 1.6M shares, of which 80% go to institutional investors. This IPO has no secondary distribution. Mirae Asset Daewoo is the banker.
Price band is set at ₩44,800~59,700, which puts the base deal size at ₩57.3~76.4bil. Implied market cap is ₩357.5~476.4bil. Book opens on Nov 15 and runs until Nov 16. Allotment will be announced on Nov 23 and payment will be Nov 26. Listing date is yet to be announced.
The banker used 7 valuation peers. But WeMade, Pearl Abyss and ME2ON should be outliers. At the Nov 7 closing prices of the 4 remaining valuation peers, average TTM PER is at 13.70x. At a 13.70x PER, Vespa's price comes down to ₩44,535 per share, which is even lower than the low end: 0.59% discount to the low end and 25.40% discount to the high end.


Vespa IPO Pricing Approach: 25% Discount to High End

APAC IPOs & Placements

Zhen Zhou, Toh

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

<a href="https://www.smartkarma.com/entities/9940" target="_blank" data-smartkarma-citation="entities:9940:1">Wemade Entertainment Co Ltd (112040 KS)</a> is looking to sell 2.33m shares of <a href="https://www.smartkarma.com/entities/15002" target="_blank" data-smartkarma-citation="entities:15002:1">Kakao Corp (035720 KS)</a> for approximately US$172m (KRW193.1bn). This is a clean-up trade.The deal doesn't score well on our framework owing to Kakao's poor track record relative to peers and index. Its share price has also been trending down since touching its high in 2014. While Wemade hasn't been doing too well in the past two years, it has KRW200bn in cash and no debt on its balance sheet. Wemade's CEO has also…

Wemade Entertainment Co Ltd (112040 KS) is looking to sell 2.33m shares of Kakao Corp (035720 KS) for approximately US$172m (KRW193.1bn). This is a clean-up trade.The deal doesn't score well on our framework owing to Kakao's poor track record relative to peers and index. Its share price has also been trending down since touching its high in 2014. While Wemade hasn't been doing too well in the past two years, it has KRW200bn in cash and no debt on its balance sheet. Wemade's CEO has also…

Kakao Corp Placement - Poor Track Record and Seems to Be an Unexpected Deal

Portfolio Manager/Head of Equity Investment, Tandem Investors Limited

Jason Oh

Portfolio Manager/Head of Equity Investment

Tandem Investors Limited

Equity Bottom-Up

Pioneer of the mobile game in Korea even before the emergence of smartphone  <a href="https://www.smartkarma.com/entities/13102" target="_blank" data-smartkarma-citation="entities:13102:1">Com2us Corp (078340 KS)</a> is one of the major mobile game developer and publisher in Korea. Due to the industry initiative even before the emergence of the smartphone, the company has been the market leader and pioneer in many aspects. The company's strength is on the optimization and operating experiences specialized in the mobile platform, where the resources are limited. Based on the domestic success with Baseball and Fishing game, the company successfully penetrated into the global market by its flagship RPG game, named 'Summoners War', posting over 70mn download and USD 800mn revenue since 2015.The Cheapest Mobile Game stock on the planet  The company's shares are trading on absurd valuation around 3.5x of P/E excluding cash on hand, amounting over USD 500mn as of 3Q16, accounting for about 55% of the market cap. Allegedly, there are some reasons such as 1) short life cycles of the mobile games, 2) stake overhang of KBAM, 3) corporate governance issue related to no dividend payout in the past. We believe the worries are overdone and the discount is rootless given the description below. We expect the discount to narrow down as the company shows the counterproofs to nullify the worries.It's time to see the real growth story in the mobile game industry  The mobile game industry's growth was highly underrated due to short life cycles of the games and thereby uncertainty on the sustained growth. However, as the capacity of the platform increases, the recent introduction of RPGs(Role Playing Games), such as 'Summoners War' of the company and 'Lineage' of <a href="https://www.smartkarma.com/entities/22839" target="_blank" data-smartkarma-citation="entities:22839:1">Netmarble Games Corp (0965576D KS)</a> , will be the catalyst to re-rate the potential, due to stickiness and scalability of RPGs. In addition, the penetration of on-line players into mobile market won't be easy, given the NCSoft's licensing to Netmarble in 'Lineage II: Revolution'.

Pioneer of the mobile game in Korea even before the emergence of smartphone  Com2us Corp (078340 KS) is one of the major mobile game developer and publisher in Korea. Due to the industry initiative even before the emergence of the smartphone, the company has been the market leader and pioneer in many aspects. The company's strength is on the optimization and operating experiences specialized in the mobile platform, where the resources are limited. Based on the domestic success with Baseball and Fishing game, the company successfully penetrated into the global market by its flagship RPG game, named 'Summoners War', posting over 70mn download and USD 800mn revenue since 2015.The Cheapest Mobile Game stock on the planet  The company's shares are trading on absurd valuation around 3.5x of P/E excluding cash on hand, amounting over USD 500mn as of 3Q16, accounting for about 55% of the market cap. Allegedly, there are some reasons such as 1) short life cycles of the mobile games, 2) stake overhang of KBAM, 3) corporate governance issue related to no dividend payout in the past. We believe the worries are overdone and the discount is rootless given the description below. We expect the discount to narrow down as the company shows the counterproofs to nullify the worries.It's time to see the real growth story in the mobile game industry  The mobile game industry's growth was highly underrated due to short life cycles of the games and thereby uncertainty on the sustained growth. However, as the capacity of the platform increases, the recent introduction of RPGs(Role Playing Games), such as 'Summoners War' of the company and 'Lineage' of Netmarble Games Corp (0965576D KS) , will be the catalyst to re-rate the potential, due to stickiness and scalability of RPGs. In addition, the penetration of on-line players into mobile market won't be easy, given the NCSoft's licensing to Netmarble in 'Lineage II: Revolution'. 

Com2us: The Cheapest Mobile Game Company on the Planet

South Korea

Wemade Co., Ltd. develops and markets on-line games that enable users to play over the internet.  The Company also provides computer game software and mobile games for cellular phone users.

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Wemade Co (112040 KS)

KRX BBIG Index Rebalance Preview: Worth a Look

There are lots of changes expected to the KRX BBIG indices at the September review. With a large amount of assets tracking the indices, some of the...

Brian Freitas

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

Vespa IPO Pricing Approach: 25% Discount to High End

Vespa Inc (299910 KS), one of Korea's rising star gaming company, offers a total 1.6M shares, of which 80% go to institutional investors. This...

Sanghyun Park

Kakao Corp Placement - Poor Track Record and Seems to Be an Unexpected Deal

Wemade Entertainment Co Ltd (112040 KS) is looking to sell 2.33m shares of Kakao Corp (035720 KS) for approximately US$172m (KRW193.1bn). This is a...

Zhen Zhou, Toh

Com2us: The Cheapest Mobile Game Company on the Planet

Pioneer of the mobile game in Korea even before the emergence of smartphone Com2us Corp (078340 KS) is one of the major mobile game developer and...

Jason Oh

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