Brief Korea: Starboard Value. The Game Changing Activist Investor That Doesn’t Take No For An Answer. and more

In this briefing:

  1. Starboard Value. The Game Changing Activist Investor That Doesn’t Take No For An Answer.
  2. Hyundai Autoever IPO Bookbuilding: Surprising Results, Local Street Bets on Autoever/Glovis Merger
  3. A Trading Strategy for Hyundai Autoever Post IPO
  4. Woori Bank: Overhang Versus Valuation

1. Starboard Value. The Game Changing Activist Investor That Doesn’t Take No For An Answer.

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New York based activist investor firm Starboard Value has been intricately involved in shaping the  fortunes and futures of two high profile technology companies in recent years, Marvell and Mellanox. The firm first to prominence some five years ago when they were the first among their peers to accomplish the extraordinary feat of replacing the CEO and entire board of Fortune 500 restaurant group Darden, while holding less than 10% of the company’s shares.

In the wake of their Darden coup, the firm has gone from strength to strength. To date the firm has taken positions in a total of 105 publicly listed companies, replacing or adding some 211 directors on over 60 corporate boards.

On March 7’th 2019, Starboard Value announced the acquisition of a 4% stake in US comms infrastructure firm Zayo. In the intervening period, Zayo’s share price has risen by 14% as canny investors scramble to partake in the goodness that will surely be extracted by the activist firm that simply doesn’t take no for an answer. 

2. Hyundai Autoever IPO Bookbuilding: Surprising Results, Local Street Bets on Autoever/Glovis Merger


  • Subscription rate is 797 to 1. Offer price was fixed at ₩48,000, substantially higher than the upper end. Deal size is now ₩168.5bil. Company value is put at slightly higher than ₩1tril. Demands are spread out pretty well between long-term funds and hot money and local and foreign investors as well. All of the orders are universally placed at 75% of upper end or higher.
  • Local street is betting on Autoever/Glovis merger not long after this IPO. That is, HMG is still wanting the initial Glovis/Mobis merger plan. To better manage to win shareholder support, they must be thinking that bigger Glovis can be an answer. This means HMG should do whatever it takes to make Autoever bigger in the immediate future.
  • This is what local street is betting on and why they went really aggressive on this IPO. As witnessed in the bookbuilding results, this street mentalitywon’t be changed any time soon. We should expect even stronger prices after new shares are listed on Mar 28.

3. A Trading Strategy for Hyundai Autoever Post IPO

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In this report, we provide a trading strategy for Hyundai Autoever Corp (0978519D KS) IPO, which is expected to start trading on March 28th. The IPO price has been finalized at 48,000 won, which is 9% higher than the high-end of the original IPO price of 44,000 won. The institutional investors’ demand for the Hyundai Autoever IPO was very strong at 797 to 1.

Given the very strong institutional demand for this IPO, it appears that our base case valuation (59,454 won), which is 24% higher than the IPO price, may be too conservative. A more likely scenario now is that the stock reaches about 60,000 won to 65,000 won in the first few hours of trading on the first day, overshooting its intrinsic value and sells off a bit for a few days/weeks, enters a consolidation phase and then resumes its higher share price again. 

Of the 913 institutional investors that participated in the Hyundai Autoever IPO survey, 89% of them thought that the intrinsic value of the company should be more than the high end of the IPO price range (44,400 won), which provides a strong vote of confidence that this IPO should do well once it starts trading. 

4. Woori Bank: Overhang Versus Valuation

Given overhang risk, investors have been bailing out of Woori or taking short positions. Woori Bank Employees Stock Ownership Association seems to have absorbed part of the selling from the likes of Blackrock, Samsung Asset, SEB Investment, Northern Trust, State Street, Russell Investment, and JP Morgan Asset. We do note though that Vanguard and TIAA have increased their position during the HoldCo transition.

There is still to come the 12% stake in Woori Holdings that Woori Bank receives relating to the transfer of the credit card entity that needs to be sold. KDIC’s 18% stake adds to the overhang risk. With Sanghyun Park has detailed the risk.

We delve into the latest financials of Woori Financial Group. The picture is mixed. While efficiency advances were the main positive standout, we highlight sharply higher funding costs and a build-up of precautionary loans as main areas of concern. The bottom line was also boosted by much lower loan loss provisions as headline NPLs fell.

A constructive view of the Group is thus based on the credibility of what appears to be underlying asset improvement and the benefits of returning to HoldCo status.

We conclude that despite the overhang risk, shares are not expensive. Shares inhabit the highest decile of our global VFM (Valuation, Fundamentals, Momentum) rankings. There may though be a better entry point for bargain hunters.

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