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South Korea

South Korea: Doosan Heavy Industries & Construction, Kakao Pay and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Doosan Heavy Industries ₩1.5T Offering Details
  • Index Rebalance & ETF Flow Recap: FTSE, KOSPI2, KQ150, CSI300, STAR50, SSE50, CH50, CH A50, KakaoPay

Doosan Heavy Industries ₩1.5T Offering Details

By Sanghyun Park

  • Doosan Heavy issues 82.87M new shares at a tentative offering price of ₩18,100, which brings the offering value to ₩1.5T. It is one of the largest offerings in recent years.
  • The size is massive. ₩1.5T will hit the market. So, the subscription rights that will actually be floated around will be substantial.
  • I wouldn’t want to miss out on the abundant circulation of subscription rights. So, I would approach a little aggressively by entering before the subscription rights trading window.

Index Rebalance & ETF Flow Recap: FTSE, KOSPI2, KQ150, CSI300, STAR50, SSE50, CH50, CH A50, KakaoPay

By Brian Freitas

  • Lots of rebalance announcement in the past week: +6/-7 for KOSPI200, +15/-15 for KOSDAQ150, +5/-5 for STAR50, +28/-28 for CSI300. Plus a few review cutoffs.
  • The coming week has the implementation for MSCI, HSI, HSCEI plus announcements for the FTSE China50 and A50, Taiwan50, ASX200 and the FTSE EPRA Nareit. Plus review cutoff for SET50.
  • There was a lot of outflow from Asia focused ETFs in the last week with the largest outflows in China and Japan focused ETFs.

Before it’s here, it’s on Smartkarma

South Korea: Kakao Pay, Coupang, LG Uplus Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Kakao Pay: Big Impact of KOSPI200 Inclusion & Reduced Real Float for Next Index Inclusions
  • Coupang: The Mispricing Is Still Significant
  • LG Uplus: Improving Dividend Outlook & An Expansion into Metaverse Businesses

Kakao Pay: Big Impact of KOSPI200 Inclusion & Reduced Real Float for Next Index Inclusions

By Brian Freitas

  • Kakao Pay (377300 KS) will be added to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 9 December with a free float of 36%.
  • The high free float will require passive KOSPI200 trackers to buy nearly 15% of the real float on the stock. That could keep the stock supported in the short-term.
  • MSCI inclusion should take place in May, the KOSPI200 upweight in June, followed by inclusion in the FTSE All-World Index in mid-June. Passives will hold 23% of the real float.

Coupang: The Mispricing Is Still Significant

By Oshadhi Kumarasiri

  • Coupang (CPNG US) was mispriced during the IPO process as the market forgot to take in to account Coupang’s excessive 1P exposure.
  • After the first day pop, share price has declined more than 60% to partially correct the mispricing that happened during the IPO.
  • We think that the share price could potentially drop another 50% before Coupang’s valuation multiples (on comparable basis) fall in line with regional peers.

LG Uplus: Improving Dividend Outlook & An Expansion into Metaverse Businesses

By Douglas Kim

  • We provide a dividend outlook for LG Uplus in this insight. The potential dividend yield for LG Uplus ranges from 3.7% to 4.9% in 2021.
  • LG Uplus shares are trading at attractive valuation multiples. They are currently trading at EV/EBITDA of 3.3x and P/E of 8.2x using 2021 consensus earnings estimates.
  • Although LG Uplus has had a slower start into the metaverse industry as compared to SK Telecom, LG Uplus has recently announced several measures to expand into the metaverse business.

Before it’s here, it’s on Smartkarma

South Korea: Kakao Pay, Coocon Corp, SK Bioscience, SK Materials, NCSOFT Corp, K Car and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KOSPI200 Index Rebalance: Mostly Expected, Couple of Surprises
  • KOSDAQ150 Index Rebalance: Pullback Done; Buy Adds & Sell Deletes
  • KOSPI 200 December Rebalancing: Constituents with a Substantial Free Float Change
  • 7 Adds & 7 Deletes in KOSPI 200 Rebalancing: Passive Impact & Trade Setups
  • 15 Adds & 15 Deletes in KOSDAQ 150 Rebalancing: Passive Impact & Trade Approaches
  • NCSoft – Minnows Attract Sharks and Sharks Attract Whales
  • K Car’s Share Price Roars Higher Driven by a Greater Demand for Online Purchase of Used Vehicles

KOSPI200 Index Rebalance: Mostly Expected, Couple of Surprises

By Brian Freitas


KOSDAQ150 Index Rebalance: Pullback Done; Buy Adds & Sell Deletes

By Brian Freitas

  • There are 15 inclusions and 15 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the next rebalance to be implemented at the close on 9 December.
  • The inclusions were expected but there are a few surprises among the deletions as the Information Technology sector was spared at the expense of the Health Care sector.
  • Over the last couple of months, the inclusions have given up their early gains versus the deletions. With the announcement made, the inclusions could outperform over the next few weeks.

KOSPI 200 December Rebalancing: Constituents with a Substantial Free Float Change

By Sanghyun Park

  • The upcoming rebalancing should feature a total of 12 constituents having a ±5%p free float change: eight members with +5%p or greater and four members with -5%p or harsher.
  • It seems better to outright trade individual liquidity-rich stocks: SK Bioscience, SKIET, Kakao Bank, and Krafton.
  • Considering that SKIET’s recent share price correction was severe, we may want to take a relatively long trading window for SKIET while taking a tighter approach to the rest.

7 Adds & 7 Deletes in KOSPI 200 Rebalancing: Passive Impact & Trade Setups

By Sanghyun Park

  • KOSPI 200 rebalancing results are out – 7 Additions: 4 (regular) + 2 (Fast Entry) + 1 (split) & 7 Deletions: 6 (regular) + 1 (Fast Entry)
  • The passive impact of all additions is pretty significant. In particular, Meritiz, SL, and Kakao Pay are relatively larger.
  • For the deletes, it is worth considering approaching these stocks as an equal-weighted basket. Since their share prices have not been significantly corrected recently.

15 Adds & 15 Deletes in KOSDAQ 150 Rebalancing: Passive Impact & Trade Approaches

By Sanghyun Park

  • The KRX officially unveiled the results of the December rebalancing for KOSDAQ 150. We have a total of 15 additions and 15 deletions from the regular rebalancing.
  • The following trade-suitable stocks among the additions are Bioneer Corp, TK Chemical, AptaBio Therapeutics, Cellid, and Ecopro HN.
  • Among the deletions, these are worthy of our attention: SK Materials, Crystal Genomics, G-TreeBNT, and Icure Pharmaceutical

NCSoft – Minnows Attract Sharks and Sharks Attract Whales

By Ken S. Kim

  • NCSoft moved on the following positives from their call – 1) NFT game in 2022 and 2 success of Lineage W thus far
  • One thing problematic was the concentration bet by one whale
  • Has the worst passed for NCsoft? The monetization of Lineage W will be key

K Car’s Share Price Roars Higher Driven by a Greater Demand for Online Purchase of Used Vehicles

By Douglas Kim

  • After a terrible IPO book building results, K Car’s shares have rallied nicely in the past several days. 
  • The company generated sales of 1,400.6 billion won (up 42% YoY) and operating profit of 56.9 billion won (up 88.8% YoY) in 1Q-3Q 2021.
  • Our base to high case valuation of K Car is 38,809 won and 46,959 won, respectively, which represent 12% and 35% higher upside versus current price.

Before it’s here, it’s on Smartkarma

South Korea: SK Inc, Hanssem Co Ltd, Celltrion Inc and more

By | Daily Briefs, South Korea

In today’s briefing:

  • SK Inc Merger: KOSPI 200 Passive Impact at the Close on November 28
  • Hanssem Situation Checkup Amid a New Shareholder Return Policy
  • FSC Finally Reviews Accounting Fraud Allegations of Celltrion Group After 3 Years of Investigation

SK Inc Merger: KOSPI 200 Passive Impact at the Close on November 28

By Sanghyun Park

  • Attention is now being drawn on index rebalancing trading for SK Inc ahead of the trading suspension of SK Materials’ stocks, which begins on November 29.
  • The KRX will apply SK Inc’s increase in the number of shares on the start date of the trading suspension (November 29), not the new stock listing date (December 27).
  • Combining the above two, we should expect a passive inflow of about ₩14.4Bat the close on November 28, representing 0.30x 30-day ADTV.

Hanssem Situation Checkup Amid a New Shareholder Return Policy

By Sanghyun Park

  • Hanssem announced a new shareholder return policy: 1. raised the minimum dividend payout ratio to 50%, 2. quarterly dividend starting next year, and 3. ₩60B worth of share buyback
  • IMM PE needed a way to raise the share price for the acquisition financing. For this, it introduced a remarkably improved shareholder return policy, which is virtually the only card.
  • If the stock price does not rise as expected, the uncertainty issue of financing the acquisition may rise again above the water. It may then open up a shorting opportunity.

FSC Finally Reviews Accounting Fraud Allegations of Celltrion Group After 3 Years of Investigation

By Douglas Kim

  • There was a major news flow regarding the Celltrion Group companies today regarding the FSC finally reviewing the potential accounting fraud allegations at the Celltrion Group of companies. 
  • As a result of this investigation by the FSC, the proposed merger of the three Celltrion companies will now be delayed further.
  • The FSC may announce a final ruling on this topic sometime in 1H 2022. Until then, there could be further negative pressures on the Celltrion companies. 

Before it’s here, it’s on Smartkarma

South Korea: Samsung Fire & Marine Insurance (Pref), Kumho Petro Chemical, Hanssem Co Ltd and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Korea Prefs Yearend Dividend Plays
  • Yearend Dividend-Hunt Buying Vs. Majority Shareholder Transfer Tax-Triggered Selling
  • Hanssem – Share Buyback Worth 60 Billion Won, Higher Dividend Payout, & Teton Capital Going Active

Korea Prefs Yearend Dividend Plays

By Sanghyun Park

  • Based on last Friday’s closing price, the three stocks with a 20D MA sigma below -1.0 are LG Electronics 1P, Samsung SDI 1P, and Samsung E-M 1P.
  • Among the preferred shares with a yearend dividend yield of 5% or higher based on the FnGuide consensus, Kumho Petro Chemical 1P has a dividend yield of close to 10%.
  • Four prefs have a Pref/Ord dividend yield spread of more than 2%p among those with a yearend dividend yield of more than 5%.

Yearend Dividend-Hunt Buying Vs. Majority Shareholder Transfer Tax-Triggered Selling

By Sanghyun Park

  • Another thing to consider in strategic trades aimed at the buying trend for yearend dividend hunting is the ₩1B majority shareholder transfer tax-triggered selling trend.
  • But the degree of direct conflict between the buying force targeting dividends and this factor at the point close to the ex-dividend date should not be as large as expected.
  • Considering a gradual preemptive sale of yearend tax evasion until the ex-dividend, we should consider shortening the trading time frame of the yearend dividend play close to the ex-dividend.

Hanssem – Share Buyback Worth 60 Billion Won, Higher Dividend Payout, & Teton Capital Going Active

By Douglas Kim

  • After the market close today, Hanssem, one of the largest furniture companies in Korea, announced that it will conduct a share buyback worth 60 billion won and raise dividend payouts.
  • Hanssem will start to provide quarterly dividend payments starting 1Q 2022. A 50% dividend payout on estimated net profit of 84.7 billion won would be 1,800 won in DPS.
  • The combination of share buyback, higher dividend payouts, and a change to quarterly dividend payments is likely to result in positive capital inflow to Hanssem. 

Before it’s here, it’s on Smartkarma

South Korea: SK IE Technology and more

By | Daily Briefs, South Korea

In today’s briefing:

  • FTSE All-World/All-Cap Index Rebalance: A Lot of Inclusions but There Could Be More

FTSE All-World/All-Cap Index Rebalance: A Lot of Inclusions but There Could Be More

By Brian Freitas

  • For Asia, there are a lot of inclusions to the FTSE All-World and All-Cap indices that will be implemented after the close of trading on 17 December.
  • Most of the inclusions are expected, but there are a couple of names that have not been included and a few names that were not expected inclusions but were added.
  • FTSE will increase the shares in issue and investability weight for WH Soul Patterson following its merger with Milton. Passive FTSE trackers will need to buy 11 days of ADV.

Before it’s here, it’s on Smartkarma

South Korea: Icure Pharm Inc and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Icure Pharm (175250 KS): High Hope for Transdermal Patch-Type Dementia Treatment Option

Icure Pharm (175250 KS): High Hope for Transdermal Patch-Type Dementia Treatment Option

By Tina Banerjee

  • Icure Pharm Inc (175250 KS) obtained marketing approval for world’s first donepezil patch, a treatment of Alzheimer’s-type dementia in Korea. Donepezil accounts for 80% of the local Alzheimer’s treatment market.
  • For the domestic market, donepezil is expected to generate revenue of KRW 3.4 billion, equivalent to nearly 10% of existing annual revenue, with significantly higher profitability.
  • The company is currently negotiating for sales right contract in the U.S. and aims to launch the product by 2024 in the U.S.  

Before it’s here, it’s on Smartkarma

South Korea: Jcontentree Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Korea’s Local Metaverse ETFs Rebalancing Preview: Implementation on December 13

Korea’s Local Metaverse ETFs Rebalancing Preview: Implementation on December 13

By Sanghyun Park

  • Korean local metaverse stocks are emerging as the hottest stocks recently. As a result, the AUM of metaverse ETFs is also rapidly increasing.
  • Since the AUM isn’t substantial yet, the passive impact on large-cap stocks wouldn’t be significant. Therefore, constituents with relatively small market caps and significant index weight changes deserve special attention.
  • As a result, it is worth paying attention to the following five stocks: Jcontentree, NEW, Keyeast, APS Holdings, and XIIlab.

Before it’s here, it’s on Smartkarma

South Korea: SK IE Technology, Kumho Petro Chemical, Shinhan Seobu T&D REIT and more

By | Daily Briefs, South Korea

In today’s briefing:

  • SKIET Float Rate Adjustment for KOSPI 200 & MSCI Resulting from Block Deals
  • Potential Yearend Short-Covering Stocks in Korea
  • Shinhan Seobu T&D REIT IPO Preview

SKIET Float Rate Adjustment for KOSPI 200 & MSCI Resulting from Block Deals

By Sanghyun Park

  • The SKIET block deals results are just out. It still fell short of the initial target of selling up to 4.8%. Also, the 7.82% discount is practically the ceiling.
  • Additional overhang risks will continue to exert structural downward pressure on SKIET’s share price.
  • However, we will see temporary events that will lead to a share price rebound. Likely, the index float rate of the KOSPI 200 and MSCI Standard will be adjusted upward.

Potential Yearend Short-Covering Stocks in Korea

By Sanghyun Park

  • In Korea’s local stock market, intense short-covering at the yearend dividend season has been consistently observed since mid-November. So, this post screens potential short-covering stocks.
  • KOSPI stocks meeting these screening factors include Kumho Petro Chemical, SK Inc, Lotte Shopping, Mirae Asset Securities, CJ Corp, and HiteJinro.
  • In the KOSDAQ, we can obtain the following results if the same screening factors are applied: LX Semicon, BH Co Ltd, and Seegene.

Shinhan Seobu T&D REIT IPO Preview

By Douglas Kim

  • Shinhan Seobu T&D REIT (404990 KS) IPO is expected to be completed in early December. The IPO deal size is about $114 million. 
  • The estimated annual dividend yield of this REIT is 6.25% for five years (2022-2026). 
  • The company’s main properties include Incheon Square One Shopping Mall and Yongsan SDC Grand Mercure Residence Hotel.

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South Korea: Kakao Pay, NCSOFT Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Applying MSCI Float Calculations for Krafton & SD Biosensor to Latest IPOs, Incl. Kakao Pay
  • KRX Investigates Potential Price Manipulation on NCsoft on Nov 11th

Applying MSCI Float Calculations for Krafton & SD Biosensor to Latest IPOs, Incl. Kakao Pay

By Sanghyun Park

  • The biggest surprise at MSCI Korea’s SAIR is the float of Krafton and SD Biosensor: 45% and 35%, which is far from what MSCI has applied so far.
  • The same pattern is found in both cases: MSCI holds the shares of non-locked pre-IPO shareholders as non-float only for a grace period of 3 months instead of 1 year.
  • This makes a massive difference for Kakao Pay. At its current market cap, the probability of entering the MSCI Korea Standard in the February index review is almost 100%.

KRX Investigates Potential Price Manipulation on NCsoft on Nov 11th

By Sanghyun Park

  • The KRX has found that an individual retail investor net bought 500,000 NCsoft shares in a single account on November 11 when NCsoft hit the daily upper limit (+30%).
  • For now, no one knows the answer to this. We have no choice but to wait for the results of the investigation by the KRX monitoring team.
  • Until then, NCsoft’s share price is expected to inevitably fluctuate due to the NFT fever and this unprecedented retail trading.

Before it’s here, it’s on Smartkarma