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South Korea

Daily Brief South Korea: Yanolja and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Initial Thoughts on the Yanolja IPO


Initial Thoughts on the Yanolja IPO

By Douglas Kim

  • Yanolja is getting ready to complete its IPO in the US in the next several months. Softbank invested about US$1.7 billion in Yanolja in 2021.
  • The valuation of Yanolja could be between US$7 billion to US$9 billion. The company could raise nearly US$400 million in this IPO. 
  • Overall, we are concerned about the valuations of Yanolja if indeed the bankers push ahead with the IPO at the valuation range of US$7 billion to US$9 billion.

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Daily Brief South Korea: Shift Up, Lock&Lock and more

By | Daily Briefs, South Korea

In today’s briefing:

  • What Did FSS Point Out to Shift Up? & What Impact Would It Have on Bookbuilding Sentiment?
  • Affinity Equity Partners Seeking Delisting of Lock & Lock Through Comprehensive Stock Exchange


What Did FSS Point Out to Shift Up? & What Impact Would It Have on Bookbuilding Sentiment?

By Sanghyun Park

  • FSS wants Nikke’s MAU data to address revenue concerns. They also seek April and May sales data for Stellar Blade to address valuation concerns despite its recent launch.
  • Shift Up updated the prospectus with Nikke’s increasing MAU data but didn’t include Stellar Blade sales data. FSS may request further revisions, possibly delaying the IPO again.
  • Nikke’s MAU has risen but plateaued versus the previous quarter, and uncertainty surrounds Stellar Blade’s April-May sales, potentially impacting IPO pricing.

Affinity Equity Partners Seeking Delisting of Lock & Lock Through Comprehensive Stock Exchange

By Douglas Kim

  • On 5 June, Affinity Equity Partners (AEP) announced that it is seeking a delisting of Lock&Lock (115390 KS) shares through a comprehensive stock exchange. 
  • It has been reported that the second tender offer failed. Only 1.5% of the outstanding shares participated in the second tender offer, falling short of the 9.5% participation required.
  • Affinity plans to transfer the shares of Lock&Lock held by an overseas corporation to a domestic corporation (investment-in-kind) and then go through a comprehensive stock exchange procedure.

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Daily Brief South Korea: Shift Up, Hyundai Motor, Webtoon Entertainment and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Shift Up Delays the IPO and Stellar Blade Tops Number One Game in the US in April
  • Value-Up Tax Support Revealed by End of June: Local Market Eyes Corporate Tax Cut Beneficiaries
  • Webtoon Entertainment Pre-IPO – The Positives – Just Turned Profitable
  • Webtoon Entertainment Pre-IPO – The Negatives – Korea Revenue Declined, JP Acquisition to the Rescue


Shift Up Delays the IPO and Stellar Blade Tops Number One Game in the US in April

By Douglas Kim

  • On 5 June, Shift Up announced that it will be postponing its IPO to July. The original book building period for the institutional investors was from 3 to 13 June.  
  • The final book building date has been postponed to 27 June. The subsequent public offering subscription for general investors was also postponed to 2 to 3 July.
  • A major investment positive of Shift Up is enormous initial success of Stellar Blade which was the best selling game in the U.S. and numerous other countries in April 2024.

Value-Up Tax Support Revealed by End of June: Local Market Eyes Corporate Tax Cut Beneficiaries

By Sanghyun Park

  • A high-ranking official from the local financial regulatory authority has confirmed to several local media outlets that the tax benefits for the value-up program will be unveiled this month.
  • Corporate tax cuts and separate taxation on dividend income will be included. The short-term impact at the time of the announcement will likely be more significant for corporate tax cuts.
  • Local market is focused on screening large companies within the KOSPI 200 that have substantial pre-tax profits in anticipation of the corporate tax cut momentum to be announced this month.

Webtoon Entertainment Pre-IPO – The Positives – Just Turned Profitable

By Ethan Aw

  • Webtoon Entertainment (WBTN US) is looking to raise up to US$500m in its US IPO.
  • Webtoon Entertainment is a global storytelling platform where a community of creators and users discover, create and share new content. 
  • In this note, we talk about the positive aspects of the deal.

Webtoon Entertainment Pre-IPO – The Negatives – Korea Revenue Declined, JP Acquisition to the Rescue

By Ethan Aw

  • Webtoon Entertainment (WBTN US) is looking to raise up to US$500m in its US IPO.
  • Webtoon Entertainment is a global storytelling platform where a community of creators and users discover, create and share new content.
  • In this note, we talk about the not-so-positive aspects of the deal.

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Daily Brief South Korea: GS Retail and more

By | Daily Briefs, South Korea

In today’s briefing:

  • GS Retail: Equity Spin Off of Parnas Hotel and Freshmeat Subsidiaries


GS Retail: Equity Spin Off of Parnas Hotel and Freshmeat Subsidiaries

By Douglas Kim

  • On 3 June, GS Retail (007070 KS) announced that it will spin off Parnas Hotel and Freshmeat subsidiaries to simplify its business structure and enhance shareholder value.
  • The company plans to create a new entity tentatively called Parnas Holdings which will include Parnas hotel and Freshmeat (a meat processing company). 
  • We have a positive view of GS Retail’s decision to conduct this equity spin off which simplifies the business structures and it could raise the valuation multiples of GS Retail. 

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Daily Brief South Korea: Webtoon Entertainment, SK Inc, Korea Gas, Kakaopay and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Webtoon Entertainment IPO Preview
  • Impact on SK Inc Post Record Divorce Ruling for SK Group Chairman Chey Tae-Won
  • Korea Gas Corp: Drill Baby Drill
  • Kakao Pay Lockup Expiry – US$1bn Overhang from Alipay


Webtoon Entertainment IPO Preview

By Douglas Kim

  • Webtoon Entertainment is getting ready to complete its IPO on the NASDAQ exchange in 2H 2024. Webtoon Entertainment is a subsidiary of Naver Corp (035420 KS).
  • Webtoon is seeking to raise as much of US$500 million at a valuation of US$3 billion to US$4 billion.
  • Webtoon Entertainment is one of the largest Korean company related IPOs in 2024. 

Impact on SK Inc Post Record Divorce Ruling for SK Group Chairman Chey Tae-Won

By Douglas Kim

  • We discuss the outlook for the likely impact on SK Inc post record divorce ruling for the SK Group Chairman Chey Tae-Won and his estranged wife Roh So-Young. 
  • Last week, a South Korean appellate court ordered Chairman Chey to pay 1.38 trillion won to Roh. Chey is appealing this case and the Supreme Court’s ruling is still pending. 
  • It is in the best interest of SK Inc to raise the overall value of the company since the payment of the divorce is mostly based in cash.

Korea Gas Corp: Drill Baby Drill

By Douglas Kim

  • On 3 June, the shares of Korea Gas jumped limit up 30% to 38,700 won on huge volume (13.4 million), which was 37x higher than the previous day volume traded. 
  • This was driven by the announcement of the South Korean President Yoon giving the approval to conduct exploratory drilling for potentially vast oil and gas prospects near Pohang. 
  • The Korean government announced that there is a “very high” possibility the area contains as much as 14 billion barrels of oil and gas.

Kakao Pay Lockup Expiry – US$1bn Overhang from Alipay

By Sumeet Singh

  • Alipay will come out of its placement linked lockup for its remaining stake in Kakaopay (377300 KS) today.
  • Alipay (i.e. Alibaba Group (9988 HK)) had earlier sold some of its stake in Jun 2022 and Mar 2024. It still has over US$1bn worth of shares left to sell.
  • In this note, we talk about the deal dynamics and run the deal through our ECM framework.

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Daily Brief South Korea: Hanwha Ocean and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Hanwha Ocean’s June 22 Release of a 1.68% Stake Grabs Local Market Attention


Hanwha Ocean’s June 22 Release of a 1.68% Stake Grabs Local Market Attention

By Sanghyun Park

  • The June 22 lock-up release, involving a 1.68% stake by Eximbank, is drawing attention, with concerns these shares might hit the market immediately, impacting prices significantly.
  • Eximbank is likely to sell its shares quickly post-lock-up, fueling speculation and potential market reactions, as their focus is on financial stability, not long-term holdings.
  • The 1.68% block deal could significantly impact Hanwha Ocean’s price, similar to last year’s 6.4% drop after a smaller block deal announcement by the Korean Financial Services Commission.

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Daily Brief South Korea: Hanwha Ocean , Korea Stock Exchange KOSPI 200 and more

By | Daily Briefs, South Korea

In today’s briefing:

  • End of Mandatory Lock-Up Periods for 45 Companies in Korea in June 2024
  • Hot Topic Among Local Institutions in Recent Days: Utilizing COE in Value-Up Investing


End of Mandatory Lock-Up Periods for 45 Companies in Korea in June 2024

By Douglas Kim

  • We discuss the end of the mandatory lock-up periods for 45 stocks in Korea in June 2024, among which 5 are in KOSPI and 40 are in KOSDAQ.
  • These 45 stocks on average could be subject to further selling pressures in June and could underperform relative to the market.
  • The top three market cap stocks including those of which at least 1% of outstanding shares could be sold in June include Hanwha Ocean, LS Materials, and Komico. 

Hot Topic Among Local Institutions in Recent Days: Utilizing COE in Value-Up Investing

By Sanghyun Park

  • Local institutional investors were disappointed Kiwoom omitted COE from their value-up disclosure. They seek clearer plans to address low-yield assets and reduce COE.
  • Rapidly rising interest in COE among local institutional investors is now shaping the screening criteria for the Korea Exchange’s value-up index, possibly using COE as a primary factor for inclusion.
  • Competition likely centers on selecting and weighting stocks, including those beyond KOSPI 200. Key metric: COE linked with ROE.

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Daily Brief South Korea: SK Inc, Shift Up, Shinsegae and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Detailed Summary of Today’s Second Trial Ruling in Chey Tae-Won’s Divorce Case Involving SK Inc
  • Shift Up IPO: Valuation Insights
  • Legal Complications on Put Options on SSG.Com to Result in Ongoing Concerns for Emart and Shinsegae


Detailed Summary of Today’s Second Trial Ruling in Chey Tae-Won’s Divorce Case Involving SK Inc

By Sanghyun Park

  • The first trial in December 2022 ordered Chey to pay 67.5 billion KRW; today’s ruling increased this to 1.38 trillion KRW plus 2 billion KRW, including splitting SK Inc. shares.
  • The increased settlement and SK Inc. share split could spark a management rights battle, causing SK Inc.’s stock price to jump as investors and shareholders react.
  • It may take a year for the final verdict, making a sustained stock price increase unlikely. Yet, differences between trial rulings could alter Chey’s SK Inc. stake, sustaining market interest.

Shift Up IPO: Valuation Insights

By Arun George

  • Shift Up (462870 KS) is Korea’s leading game development studio. It is seeking to raise up to US$320 million.
  • We previously discussed the IPO in Shift Up IPO: The Investment Case
  • We examine the syndicate’s valuation methodology. Our analysis suggests that Shift Up is attractively valued in the IPO price range. We would participate in the IPO.

Legal Complications on Put Options on SSG.Com to Result in Ongoing Concerns for Emart and Shinsegae

By Douglas Kim

  • Emart and Shinsegae are facing concerns about put options of nearly 1 trillion won on private equity investors’ investment in SSG.com nearly six years ago. 
  • From AEP and BRV’s point of views, they want to get their money back through put options since an IPO is not likely in the near term.
  • The most probable result appears to be that this is likely to be dragged on for some time, which will cause continued concerns on both Emart and Shinsegae. 

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

By | Daily Briefs, South Korea

In today’s briefing:

  • Latest Info on Value-Up Index Involving KRX & NPS: Potential Flow Trading Patterns
  • Block Deal Prospects Arising from SK Group’s Corporate Reshuffle


Latest Info on Value-Up Index Involving KRX & NPS: Potential Flow Trading Patterns

By Sanghyun Park

  • The value-up index aims to align closely with the KOSPI 200’s composition, adjusting stock weights based on factors from KRX Governance Leaders 100 and KRX ESG Dividend Opportunities Index.
  • Insiders confirm NPS will create new funds to track the value-up index, needing SAA adjustments and Fund Management Committee approval. Despite hurdles, government backing suggests smooth NPS involvement.
  • Buybacks could cause passive outflows in KOSPI 200 rebalancing and inflows in value-up index rebalancing. This timing discrepancy could create a consistent passive flow pattern for these stocks.

Block Deal Prospects Arising from SK Group’s Corporate Reshuffle

By Sanghyun Park

  • The declining appeal of the separator business prompts SK to seek buyers for SKIET through block deals amid financial pressures. The first deal is anticipated despite recent stock price drops.
  • SK Ecoplant looks to sell its 37.6% stake in SK Oceanplant. Negotiations stall over the former major shareholder’s 20% stake, prompting consideration of a block deal.
  • SK Bioscience, under SK Discovery, faces possible sale amid SK’s bio company reshuffle. SK Chemicals may bring SK Biopharm under its wing to help SK Inc focus on semiconductors/batteries.

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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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