Category

South Korea

Daily Brief South Korea: DS Dansuk, Shift Up and more

By | Daily Briefs, South Korea

In today’s briefing:

  • DS Dansuk: Block Deal Sale by Stonebridge Capital
  • Shift Up IPO: The Investment Case
  • Shift Up IPO – Thoughts on Valuations – Bear/Base/Bull


DS Dansuk: Block Deal Sale by Stonebridge Capital

By Douglas Kim

  • After the market close on 28 May, it was announced that Stonebridge Capital plans to conduct a block deal sale of a portion of its stake in DS Dansuk.
  • This deal involves 210,000 to 290,000 shares of DS Dansuk. The block deal price range is from 99,800 won to 101,400 won, which represents 7.06% to 8.52% discount.
  • After this second block deal, there will be further overhang concerns about additional sales of DS Dansuk by Stonebridge Capital in the coming months. 

Shift Up IPO: The Investment Case

By Arun George

  • Shift Up (462870 KS) is Korea’s leading game development studio. It is seeking to raise up to US$320 million.    
  • Shift Up now focuses only on game development and has a policy of publishing games in cooperation with global partners such as Tencent (700 HK) and Sony Corp (6758 JP)
  • The investment case rests on a stellar game development track record, several growth drivers, high profitability and cash generation.

Shift Up IPO – Thoughts on Valuations – Bear/Base/Bull

By Sumeet Singh

  • Shift Up (462870 KS) plans to raise up to US$320m in its South Korean IPO.
  • Shift Up is a South Korean games developer, which as released three games so far for the global markets.
  • We have looked at the company’s performance in our past notes. In this note, we talk about valuations.

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Daily Brief South Korea: S.M.Entertainment Co, APR, Celltrion Inc, Shift Up and more

By | Daily Briefs, South Korea

In today’s briefing:

  • HYBE: Block Deal Sale of SM Entertainment
  • An Early Look at Potential Deletions and Additions to KOSPI200 in December 2024
  • FnGuide Top 5 Plus Index Rebalance Preview: Celltrion Could Replace KT&G
  • Shift Up IPO – Peer Comparison – Small in Size but Ranks High on Growth and Margins


HYBE: Block Deal Sale of SM Entertainment

By Douglas Kim

  • After the market close on 27 May, HYBE (352820 KS) announced that it will conduct a block deal sale of 0.75 million to 0.94 million shares of SM Entertainment.
  • The block deal sale price discount is 4% to 5.5% discount to the closing price on 27 May (95,800 won). 
  • One of the major positive, recent issues facing the Korean K-Pop related stocks has been the potential easing of Korean content restrictions by China.

An Early Look at Potential Deletions and Additions to KOSPI200 in December 2024

By Douglas Kim

  • In this insight, we provide an early look at the potential additions and deletions to KOSPI200 rebalance in December 2024.
  • The seven potential additions are up on average 53.9% from end of 2023. The seven potential deletion candidates are down on average 14.2% YTD. 
  • The average market cap of the seven potential additions is 2.2 trillion won. The average market cap of the seven potential deletion candidates is 0.7 trillion won. 

FnGuide Top 5 Plus Index Rebalance Preview: Celltrion Could Replace KT&G

By Brian Freitas


Shift Up IPO – Peer Comparison – Small in Size but Ranks High on Growth and Margins

By Sumeet Singh

  • Shift Up (462870 KS) plans to raise up to US$320m in its upcoming South Korean IPO.
  • Shift Up is a South Korean games developer, which as released three games so far for the global markets.
  • In our previous note, we looked at the company’s past performance. In this note, we will undertake a peer comparison.

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Daily Brief South Korea: Korea Stock Exchange Kospi Index, Techwing Inc, HLB Life Science, CosmoAM&T and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KRX Announces Final Version of Value-Up Disclosure Guidelines Alongside Dedicated Website Launch
  • KOSDAQ150 Index Rebalance: Short Sell Ban Definitely Helping
  • What’s Still Concerning in the HLB Situation & HLB Life Science’s Stock Rights Trading Next Week
  • KOSPI200 Index Rebalance: Index Committee Knows Best; Cosmo AM&T the Winner


KRX Announces Final Version of Value-Up Disclosure Guidelines Alongside Dedicated Website Launch

By Sanghyun Park

  • Starting May 27th, KRX-listed firms can voluntarily disclose value-up details, publicly available on the website. Additionally, view five investment indicators for all KRX-listed companies below.
  • Finalized version similar to draft, with added content requested by listed companies, like R&D investment growth rate. Tax incentives excluded, awaiting alignment with Ministry’s plan in July.
  • KRX keeps a screening framework for the index akin to March’s criteria, with ROE likely having the highest weight. Recent signals hint at increasing dividend weighting.

KOSDAQ150 Index Rebalance: Short Sell Ban Definitely Helping

By Brian Freitas

  • There are 13 inclusions and 13 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance to be implemented at the close on 13 June.
  • For the second consecutive review, Fadu (440110 KS) and Shinsung DeltaTech (065350 KS) have been kept out of the index. Not sure what the index committee’s beef with them is.
  • The adds have outperformed the deletes and the KOSDAQ150 since the start of the review period. This has been helped, in no small, part by the ban on short selling.

What’s Still Concerning in the HLB Situation & HLB Life Science’s Stock Rights Trading Next Week

By Sanghyun Park

  • HLB expects Jiangsu Hengrui to receive another CRL from the FDA, but specifics on CMC issues remain unclear. Due to the lack of clarity, it’s advisable to avoid trading HLB.
  • HLB IR stated they’ll apply for KOSPI transfer listing after FDA approval when asked by local media, suggesting it’s currently not under consideration.
  • We should instead consider short-term trading opportunities in HLB Life Science. Anticipate a surge in forfeited shares from Day 1, reminiscent of last year’s CJ CGV rights offer event.

KOSPI200 Index Rebalance: Index Committee Knows Best; Cosmo AM&T the Winner

By Brian Freitas

  • There will be 6 additions and 6 deletions for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the June rebalance that will be implemented on 13 June.
  • The index committee has used a boatload of discretion in the inclusion of CosmoAM&T (005070 KS) and the deletion of some of the stocks.
  • The adds and deletes from the Information Technology sector will also have passive flow from the sector ETF and will increase the impact of the changes.

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Daily Brief South Korea: Eoflow and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Last Week in Event SPACE: Mitsui Matsushima, L’Occitane, Prosus/Tencent, EOFlow


Last Week in Event SPACE: Mitsui Matsushima, L’Occitane, Prosus/Tencent, EOFlow

By David Blennerhassett

  • Murakami-San now owns far more in Mitsui Matsushima (1518 JP) than he can easily get out of other than by corporate action. Murakami-san is not a dumb guy. He knows this.
  • The unique investigative shareholder register confirms what has been long rumoured about a certain shareholder activist in L’Occitane (973 HK). It is also informative for what isn’t present.
  • Prosus (PRX NA)‘s discount to NAV and implied stub widened after Fabricio Bloisi’s CEO appointment the previous week. But the sell-down of Tencent (700 HK) to buy-back Prosus will continue.

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Daily Brief South Korea: Hanmi Semiconductor, DB Hitek Co., Ltd. and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KOSPI200 June ’24 Rebalance: Index Changes Released, 6 Additions & 6 Deletions
  • Unexpected Inclusion of Cosmo AM&T in KOSPI 200 Sparks Notable One-Day Flow Via KOSPI 200 IT


KOSPI200 June ’24 Rebalance: Index Changes Released, 6 Additions & 6 Deletions

By Charlotte van Tiddens, CFA

  • The KRX have announced the index changes for the KOSPI200 June review.
  • The index will be rebalanced in the closing auction on Thursday the 13th of June.
  • There will be 6 additions to the index and 6 deletions.

Unexpected Inclusion of Cosmo AM&T in KOSPI 200 Sparks Notable One-Day Flow Via KOSPI 200 IT

By Sanghyun Park

  • Unexpectedly, KRX included Cosmo AM&T (005070 KS) despite not meeting the market cap cutoff and excluded DB Hitek (000990 KS) and Lotte Energy Materials (020150 KS).
  • Cosmo AM&T’s unexpected inclusion triggers a significant one-day passive flow event through the KOSPI 200 IT, the sector index with the largest AUM.
  • Sector index rebalancing, a single-day event managed by one ETF operator, more significantly correlates flow direction with price impact. We should consider a long-short setup for these on June 13th.

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Daily Brief South Korea: Eoflow, Korea Stock Exchange KOSPI 200, Shift Up, S.M.Entertainment Co and more

By | Daily Briefs, South Korea

In today’s briefing:

  • EOFlow (294090 KS): Suitably Pumped
  • FSS Head Lee Made an Urgent TV Appearance Today to Discuss the Resumption of Short Selling
  • Shift Up IPO – The Positives – All Games Have Done Well
  • Shift Up IPO – The Negatives – Changing Monetisation Model, Censorship Issues
  • A Pop in Major K-Pop Stocks Driven by Potential Easing of Korean Contents Restrictions by China


EOFlow (294090 KS): Suitably Pumped

By David Blennerhassett

  • For a company that strives to improve people’s lives, investors in EOFlow (294090 KS) shares have mostly faced a world of pain over the past year. 
  • After Insulet Corp (PODD US) filed a lawsuit on the 8th August 2023, accusing EOFlow of misappropriating trade secrets, patent infringement, and trademark dilution, shares declined ~88% by year-end.
  • Earlier this month, the courts quashed Insulet’s preliminary injunction. EOFlow is up 200%. Insulet is up 3% (?).  And Medtronic (MDT US), EOFlow’s prior suitor, is no doubt weighing options.

FSS Head Lee Made an Urgent TV Appearance Today to Discuss the Resumption of Short Selling

By Sanghyun Park

  • Lee urgently appeard on TV today and said, “In June, we will explain whether and when short selling will be resumed, and what criteria we might use for the resumption.”
  • He noted considering flexible partial short selling resumption even if only some conditions are met, contrasting the Presidential Office’s stance from two days ago.
  • Presidential Office led short selling ban, now likely under FSC/FSS jurisdiction for resumption.

Shift Up IPO – The Positives – All Games Have Done Well

By Sumeet Singh

  • Shift Up plans to raise up to US$320m in its upcoming South Korean IPO.
  • Shift Up is a South Korean games developer, which as released three games so far for the global markets.
  • In this note, we talk about the positive aspects of the deal.

Shift Up IPO – The Negatives – Changing Monetisation Model, Censorship Issues

By Sumeet Singh

  • Shift Up (462870 KS) plans to raise up to US$320m in its upcoming South Korean IPO.
  • Shift Up is a South Korean games developer, which as released three games so far for the global markets.
  • In this note, we talk about the not-so-positive aspects of the deal.

A Pop in Major K-Pop Stocks Driven by Potential Easing of Korean Contents Restrictions by China

By Douglas Kim

  • The major K-Pop stocks had the biggest up day so far this year on 23 May, driven by potential easing of Korean cultural contents restrictions by the Chinese government. 
  • In the past nine years, there has been a ban on Korean singers’ performances in China.
  • Among the major K-Pop stocks, we continue to have a Positive View on S.M.Entertainment Co (041510 KS) but bearish on HYBE (352820 KS) and YG Entertainment (122870 KS).

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Daily Brief South Korea: Korea Stock Exchange KOSPI 200, Shift Up and more

By | Daily Briefs, South Korea

In today’s briefing:

  • July Short Selling Resumption in Korea: Local Market Info & Trading Considerations
  • Shift Up IPO Valuation Analysis


July Short Selling Resumption in Korea: Local Market Info & Trading Considerations

By Sanghyun Park

  • According to market information confirmed so far, the resumption is set for July 1st, and short selling will be restricted to the constituents of KOSPI 200 and KOSDAQ 150.
  • The surge in trading volume likely stemmed from the return of long-short positions post-short-selling ban, leading to an overall market volume increase.
  • Another critical factor is the buying pressure on value-up stocks resuming in early July. We should aim at the price impacts of intersecting long-short flows and value-up stock purchases.

Shift Up IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation of Shift Up is target price of 95,510 won, which is 59% higher than the high end of the IPO price range (60,000 won).
  • We believe Shift Up deserves higher valuation multiples than its peers mainly due to higher sales growth, much higher operating margins, and higher ROE.
  • Since its launch in April of this year, Stellar Blade (PS console game) has ranked first in sales in eight countries, including the United States, United Kingdom, Canada, and Japan.

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Daily Brief South Korea: Kia Corp, Ls Industrial Systems and more

By | Daily Briefs, South Korea

In today’s briefing:

  • A Plausible Explanation for Korea NPS’s Unusually Large Outflow on Local Stocks in May
  • KOSPI Size Indices: Potential Migrations in September Are Moving


A Plausible Explanation for Korea NPS’s Unusually Large Outflow on Local Stocks in May

By Sanghyun Park

  • NPS’s May net selling of ₩700B likely stems from retrieving outsourced management funds to allocate to the newly selected three value-up outsider managers.
  • These value-up managers will start investing in Q3. NPS’s May net selling matches their allocations. We should design a setup targeting the likely inflow into value-up targets starting early July.
  • In particular, we should watch non-financial value-up stocks like Kia Corp and Hyundai Motor, which had more significant May price impacts likely due to NPS outflow.

KOSPI Size Indices: Potential Migrations in September Are Moving

By Brian Freitas

  • The review period for the September rebalance of the KOSPI Size Indices will run from 1 June to 31 August.
  • We see 6 migrations from MidCap to LargeCap, 1 new addition to LargeCap, 6 stocks moving from SmallCap to MidCap and 3 new additions to MidCap.
  • Stocks migrating upward have outperformed stocks migrating lower. But there are still stocks trading at a Price to Book of less than 1.

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Daily Brief South Korea: EcoPro Materials, Shift Up, KB Financial, Hansol Logistics and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Block Deal Sales of 200 Billion Won Worth of Ecopro Materials by BRV Capital
  • Shift Up IPO Preview
  • FnGuide Top10 Index Rebalance Preview: Two Changes Possible in June
  • Hansol Holdings Announces a Tender Offer of 18.53% Stake in Hansol Logistics


Block Deal Sales of 200 Billion Won Worth of Ecopro Materials by BRV Capital

By Douglas Kim

  • After the market close on 20 May, it was reported that Blue Run Ventures (BRV) sold 204.1 billion won (US$150 million) worth of EcoPro Materials in a block deal sale. 
  • The block deal sale price was 93,000 won, a 9.7% discount to the closing price on 20 May (103,000 won).
  • This block deal sale at a big discount is likely to raise overhang concerns about further block deal sales by BRV Capital in the coming years. 

Shift Up IPO Preview

By Douglas Kim

  • Shift Up (462870 KS) is getting ready to complete its IPO in KOSPI in June 2024. Established in 2013, Shift Up is one of the leading game developers in Korea.
  • The IPO price range is 47,000 won to 60,000 won. The IPO offering amount is 340.8 billion won to 435 billion won.
  • According to the bankers’ valuation, the market capitalization range of the company ranges from 2.73 trillion won to 3.4 trillion won. This is the second largest IPO in Korea YTD.

FnGuide Top10 Index Rebalance Preview: Two Changes Possible in June

By Brian Freitas

  • The Mirae Asset Tiger Top 10 ETF (292150 KS) tracks the FnGuide Top 10 Index and has an AUM of around US$1.2bn.
  • We currently forecast two potential changes at the next rebalance in June – one change is high probability while one could change depending on price moves over the next week.
  • The trade has performed well historically with positive performance till implementation followed by reversion post implementation.

Hansol Holdings Announces a Tender Offer of 18.53% Stake in Hansol Logistics

By Douglas Kim

  • After the market close on 20 May, Hansol Holdings announced that it is pursuing a tender offer for an additional 18.53% stake in its affiliate Hansol Logistics.
  • The tender offer price is 3,000 won, which is 22% higher than the close price on 20 May. The tender offer period is from 21 May to 10 June.
  • We have a positive view of this tender offer. Hansol Logistics trades at EV/EBITDA of 1.8x, P/E of 3.7x, and P/B of 0.6x based on 2023 figures.

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Daily Brief South Korea: Korea Stock Exchange KOSPI 200, HD Hyundai Heavy Industries and more

By | Daily Briefs, South Korea

In today’s briefing:

  • FSS Head’s Aggressive Remarks for Value-Up at NY Event, Incl. Short Selling Resumption Late June
  • ECM Weekly (20th May 2024) -Lalatech, Go Digit, Aadhar, TBO Tek, Ecopro, Nexus, Modec, Hyundai Heavy


FSS Head’s Aggressive Remarks for Value-Up at NY Event, Incl. Short Selling Resumption Late June

By Sanghyun Park

  • Lee Bok-hyun hopes for short selling to resume by late June. Given his influence on the Value-up policy, it’s likely to happen.
  • Lee expects key tax incentives for the value-up program to be included in the July tax reform bill, showing a market-friendly stance.
  • Yesterday’s New York event had a very positive atmosphere with more attendees than expected, showing genuine investor interest, likely ensuring sustained interest in Korea’s Value-up program.

ECM Weekly (20th May 2024) -Lalatech, Go Digit, Aadhar, TBO Tek, Ecopro, Nexus, Modec, Hyundai Heavy

By Sumeet Singh

  • Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
  • On the IPO front, Indian IPOs continued to do well, we also looked at two upcoming deals in Hong Kong.
  • On the placement front, last week ended up being one of the busiest ones so far this year with five deals live just on Thursday night alone. 

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