Category

South Korea

Jul 21
0

Daily Brief South Korea: Samsung C&T and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Examining Market Interest in the Potential Samsung C&T and SDS Restructuring

Examining Market Interest in the Potential Samsung C&T and SDS Restructuring

By Sanghyun Park

  • Maximizing Lee Jae-yong’s dividend income is crucial, making Samsung SDS’s ₩5.5T cash assets key, thus prompting the merger of Samsung C&T and Samsung SDS’s BPO division.
  • With no legal risks for Lee Jae-yong, Samsung C&T needs the merger to increase assets and avoid forced holding company conversion, making the acquisition of Samsung SDS’s BPO division necessary.
  • We should target a setup for likely appraisal rights for C&T. Monitor and capture the spread between the stock price and appraisal rights exercise price.

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Jul 19
0

Daily Brief South Korea: KT Corp, SK Innovation and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Reasons Why KT’s Foreign Room Is Likely to Fall Below the 3.75% Cutoff Level
  • SK Innovation’s Merger with SK E&S: Bad Timing for SK Innovation and Higher Risks from RCPS

Reasons Why KT’s Foreign Room Is Likely to Fall Below the 3.75% Cutoff Level

By Sanghyun Park

  • KT’s foreign room has been exhausted due to value-up trading inflows, NPS selling shares, and KT canceling treasury stocks.
  • Hyundai Motor may sell 0.5% of its KT stake, likely to overseas investors. KT’s 700,000 share cancellation will lower foreign ownership to the low-4% range, possibly below 3.75% by November.
  • Focus on the stock price surge from ETF recall requests around the effective date, and note that passive outflow corrections typically occur afterward.

SK Innovation’s Merger with SK E&S: Bad Timing for SK Innovation and Higher Risks from RCPS

By Douglas Kim

  • On 17 July, SK Innovation (096770 KS) officially announced a merger with SK E&S. The merger ratio between SK Innovation and SK E&S has been set at 1 to 1.1917417.
  • We believe this is the wrong timing for this merger from SK Innovation’s point of view. SK Innovation is trading at near three year lows.
  • This merger is likely to generate backlash from KKR which holds SK E&S redeemable convertible preferred stock (RCPS) worth 3.1 trillion won.

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Jul 18
0

Daily Brief South Korea: Hyundai Glovis, SK Innovation, Sanil Electric and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Trading Opportunities Arising from the Enactment of The “Doosan Bobcat Prevention Law”
  • SK Innovation & SK E&S Merger Official Disclosure: Unexpected Merger Ratio
  • Sanil Electric IPO Book Building Results Analysis

Trading Opportunities Arising from the Enactment of The “Doosan Bobcat Prevention Law”

By Sanghyun Park

  • Korea’s majority party plans to amend the Capital Markets Act to base listed companies’ merger ratios on intrinsic rather than market value, dubbed the “Doosan Bobcat Prevention Law.”
  • Other conglomerates, like Hanwha and Hyundai Motor Group, may execute mergers just before this amendment.
  • We should expect shareholder-favorable merger ratios. So, we should position in such companies before announcements, ideally just before the new amendment’s enforcement.

SK Innovation & SK E&S Merger Official Disclosure: Unexpected Merger Ratio

By Sanghyun Park

  • The merger ratio, not as unfavorable to SK Innovation as feared, shows SK Group acting cautiously amid political and regulatory scrutiny.
  • SK Inc.’s stake will drop to mid-60s; the 1.2x merger ratio for SK E&S could positively affect SK Innovation’s stock price short-term.
  • Persuading KKR is crucial. SK E&S won’t convert ₩3T in RCPS or grant appraisal rights, potentially leading KKR to consider litigation, a significant risk to the merger.

Sanil Electric IPO Book Building Results Analysis

By Douglas Kim

  • Sanil Electric reported excellent IPO book building results. The IPO price has been determined at 35,000 won, which is 16.7% higher than the high end of the IPO price range.
  • The demand ratio from 2,205 institutional investors was 414 to 1. Sanil Electric (062040 KS) IPO will start trading on 29 July 2024. 
  • Our base case valuation of Sanil Electric is market cap of 1.8 trillion won or target price of 58,593 won (67% higher than the IPO price of 35,000 won).

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Jul 17
0

Daily Brief South Korea: Doosan Robotics , I-Scream Media and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Doosan Group: Index Implications of the Corporate Restructuring
  • I-Scream Media IPO Valuation Analysis

Doosan Group: Index Implications of the Corporate Restructuring

By Brian Freitas

I-Scream Media IPO Valuation Analysis

By Douglas Kim

  • Our valuation analysis suggests a base case implied market cap of 567 billion won or implied price per share of 41,450 won.
  • This suggests a 3% upside to the high end of the IPO price range. We would not subscribe to this IPO due to lack of upside.
  • Our base case valuation is based on P/E of 18.8x using the company’s net profit of 30.2 billion won in 2023.

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Jul 16
0

Daily Brief South Korea: Korea Stock Exchange KOSPI 200, SK Innovation and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Recently Observed Market Flow Movements Related to Korea’s Value-Up Initiatives
  • SK Innovation and SK E&S to Discuss a Potential Merger on 17 July

Recently Observed Market Flow Movements Related to Korea’s Value-Up Initiatives

By Sanghyun Park

  • Nine companies disclosed value-up plans, with four official and five pending disclosures. Initially, these announcements boosted stock prices, but long-term correlations were inconclusive. Yet, shareholder returns notably rose in H1.
  • NPS increased stakes in three of the nine recently announced value-up companies. They share traits in value-up trading (large caps & low PBR), potentially guiding our strategy as NPS enters.
  • BlackRock’s Hong Kong branch has recently engaged with six Korean asset management firms for potential entrustment of its Asian fund’s Korean investment portion, focusing on the value-up policy.

SK Innovation and SK E&S to Discuss a Potential Merger on 17 July

By Douglas Kim

  • SK Innovation (096770 KS) and SK E&S plan to hold a board meeting on 17 July to discuss the potential merger between the two companies.
  • If this merger is successful, it would create the eighth largest company in Korea with a combined assets of 106 trillion won (US$77 billion). 
  • Although the merger ratio is not yet available, we believe that this potential merger could potentially benefit SK E&S and SK Inc but could be negative on SK Innovation.

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Jul 15
0

Daily Brief South Korea: POSCO Holdings and more

By | Daily Briefs, South Korea

In today’s briefing:

  • POSCO Holdings: Announces Shares Buyback and Cancellation of Nearly 2 Trillion Won

POSCO Holdings: Announces Shares Buyback and Cancellation of Nearly 2 Trillion Won

By Douglas Kim

  • POSCO Holdings (005490 KS) announced a major shareholder return policy to buyback and cancel nearly 2 trillion won worth of treasury shares from 2024 to 2026. 
  • The company will cancel 5.25 million treasury shares representing 6.2% of outstanding shares (about 1.9 trillion won). It will also repurchase and cancel additional 100 billion won of shares.
  • POSCO Holdings has taken a major initiative to provide greater returns to its shareholders and this should have a positive impact on its share price. 

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Jul 14
0

Daily Brief South Korea: Sigong Tech, Sam Chun Dang Pharm and more

By | Daily Briefs, South Korea

In today’s briefing:

  • I-Scream Media IPO Preview
  • Sam Chun Dang Pharm (000250 KS): Positive Momentum to Continue

I-Scream Media IPO Preview

By Douglas Kim

  • I-Scream Media is getting ready to complete its IPO on KOSDAQ exchange in August. The IPO price range is from 32,000 won to 40,200 won. 
  • I-Scream Media is one of the the leading digital education platform companies in Korea. Its I-Scream S platform is used by more than 93% of elementary school classrooms in Korea.
  • Post IPO, Sigong Tech will have a 23.7% stake in I-Scream Media. Sigong Tech’s stake in I-Scream media (at high end of IPO value) is 157% of its market cap.

Sam Chun Dang Pharm (000250 KS): Positive Momentum to Continue

By Tina Banerjee

  • Sam Chun Dang Pharm (000250 KS) secured exclusive 10-year contract to supply Eylea biosimilar (SCD411) to nine European countries. The company will receive 55% of gross sales of the product.
  • Last month, the company placed 500K shares (~2% of issued capital) to Shinhan Investment Securities to raise KRW71.4B. Proceeds will be utilized to fund the company’s global clinical trial cost.
  • The company has started exporting generic glaucoma eye drop to the U.S. and expects to start exporting at least two more generic ophthalmic products in the U.S. this year.

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Jul 13
0

Daily Brief South Korea: Doosan Bobcat Inc, SK Innovation, Korea Stock Exchange KOSPI 200 and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Reorganization of the Doosan Group: Why Delist Doosan Bobcat (Jewel of Doosan Group)?
  • SK Innovation & SK E&S: Summary of the Controversy Surrounding the Merger Ratio
  • EQD | KOSPI 200 Sell-Off Could Accelerate This Week, But It’s A BUY

Reorganization of the Doosan Group: Why Delist Doosan Bobcat (Jewel of Doosan Group)?

By Douglas Kim

  • On 11 July, the Doosan Group announced a major business structure reorganization, including the delisting of Doosan Bobcat Inc (241560 KS).
  • In our view (over the next 3-6 months), these transactions appear to be value-destroying for Doosan Bobcat and Doosan Enerbility minority shareholders but positive for Doosan Robotics shareholders.
  • Doosan Robotics plans to acquire the remaining 54% stake in Doosan Bobcat through a tender offer. Once Doosan Robotics fully owns Doosan Bobcat, its shares will be delisted.

SK Innovation & SK E&S: Summary of the Controversy Surrounding the Merger Ratio

By Sanghyun Park

  • Interest in this merger is emerging from an unexpected angle, especially regarding the merger ratio’s fairness. There’s a risk it could unfavorably affect SK Innovation’s stock price.
  • SK Innovation at ₩108,000/share; SK E&S at ₩290,000/share based on strong profits. SK plans ratios around 1.3x total value and 2.7x per share. SK Inc may reach mid-70% stake post-merger.
  • SK Innovation’s stock may face short-term decline. Securing shareholder approval, with SK Inc at 36%, overseas investors 22%, local institutions 15%, local retail 20%, and NPS 7%, poses challenges.

EQD | KOSPI 200 Sell-Off Could Accelerate This Week, But It’s A BUY

By Nico Rosti

  • The KOSPI 200 INDEX started a modest pullback and is entering a BUY area, but it could fall further this coming week, caution is advised.
  • The support levels to buy are between 383-371, this coming week.
  • Alternatively buy the Close, if the WEEKLY Close is negative, next Friday.

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Jul 12
0

Daily Brief South Korea: Doosan Robotics , Netmarble , JUNJIN Construction & Robot, Alteogen Inc and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Details of Two Doosan Mergers Involving Enerbility, Robotics, & Bobcat
  • Trading Setup Targeting the Netmarble PSR Contract, as Seen in the Case of Doosan Bobcat
  • Junjin Construction and Robot IPO Preview
  • Alteogen (196170 KS): Transitioning Toward Becoming Commercial Stage Biotech Company

Details of Two Doosan Mergers Involving Enerbility, Robotics, & Bobcat

By Sanghyun Park

  • The restructuring plan of Doosan Group announced today primarily consists of two merger events aimed at transferring the stake in Doosan Bobcat held by Doosan Enerbility to Doosan Robotics.
  • The 50% price cut on Doosan Enerbility’s share price for merging with Doosan Robotics boosts Robotics’ advantage. This resulted in a swap spread opening with Doosan Bobcat.
  • Considering an arbitrage strategy in the Doosan Robotics and Doosan Bobcat swap needs caution due to shareholder approval risks, especially with Doosan Enerbility’s low controlling stake potentially complicating the process.

Trading Setup Targeting the Netmarble PSR Contract, as Seen in the Case of Doosan Bobcat

By Sanghyun Park

  • This block deal has an unusual PSR (price swap return) contract at ₩58,200, the July 10th closing price, likely preventing Netmarble’s typical stock price correction today.
  • In 2022, a similar-sized local PSR transaction involved Doosan Bobcat Inc, with 9.9 million shares and a PSR swap price of ₩37,500.
  • As for Doosan Bobcat, the stock initially dropped but rebounded near the PSR swap price, prompting local brokerages, focused on PSR fee income, to sell rather than realize capital gains.

Junjin Construction and Robot IPO Preview

By Douglas Kim

  • Junjin Construction & Robot is getting ready to complete its IPO in KOSPI in August. The IPO price range is from 13,800 won to 15,700 won. 
  • The IPO offering is from 42.5 billion won to 48.3 billion won. The book building for the institutional investors is from 30 July to 5 August. 
  • The integration of robotics into construction processes is a cornerstone of Junjin’s operations. Its main product is the concrete pump vehicle which pumps cement or concrete at a construction site.

Alteogen (196170 KS): Transitioning Toward Becoming Commercial Stage Biotech Company

By Tina Banerjee

  • Alteogen Inc (196170 KS) received approval for first product, Tergase, a recombinant human hyaluronidase liquid product, in Korea. Tergase increases penetration during intramuscular or subcutaneous injection and local anesthesia.
  • With excellent safety profile compared to existing animal-derived hyaluronidase products, Tergase stands to emerge as a promising alternative in the global hyaluronidase market estimated to be $1B in near future.
  • Alteogen’s subsidiary, Altos Biologics submitted marketing authorization approval to the European Medicines Agency for Eylea biosimilar. Approval is expected by next year.

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Jul 11
0

Daily Brief South Korea: Shift Up, Shinsung Tongsang, Doosan Enerbility and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Trading Strategy of Shift Up on the First Day of IPO
  • Shinsung Tongsang (005390 KS)’s Cheeky Delisting Offer
  • Doosan Enerbility: A Key Beneficiary of Potential Nuclear Power Projects Win in the Czech Republic

Trading Strategy of Shift Up on the First Day of IPO

By Douglas Kim

  • In this insight, we discuss a trading strategy for Shift Up which starts trading on 11 July. Shift Up is one of the most anticipated IPOs in Korea this year.
  • Our base case (6 months – 1 year) target price of Shift Up is 95,510 won, which is 59% higher than the IPO price.
  • We recommend investors to take some profits (about 50% of invested capital) if the share price shoots higher by 100% or more from the IPO price on the first day.

Shinsung Tongsang (005390 KS)’s Cheeky Delisting Offer

By David Blennerhassett

  • Last month, apparel play Shinsung Tongsang (005390 KS) announced a Tender Offer from Canaan Co for 22.02% of shares out, at ₩2,300/share, a 15.84% premium to undisturbed.
  • Canaan Co. and related parties hold a combined stake of 77.68%, which increases to 99.7% IF the Offer is successful. Canaan needs 95% to force delisting. 
  • Shinsung’s share price has languished over the past 12 months or so, despite improving market share and earnings. Getting to 95% might be a stretch. In need of a bump?

Doosan Enerbility: A Key Beneficiary of Potential Nuclear Power Projects Win in the Czech Republic

By Douglas Kim

  • The Czech Republic government is in the final stages of selecting companies to build four nuclear power plants which could cost nearly US$30 billion.
  • A Korean consortium including KHNP, Doosan Enerbility, KEPCO E&C, and Daewoo E&C is competing mainly against EDF, a French government owned electric utility company. 
  • If the KHNP consortium is able to win this new order, Doosan Enerbility will be a key beneficiary as it will supply the nuclear reactors and steam generators.

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