Daily Brief South Korea: Gemvax & Kael, Kcc Corp, Hanon Systems, FnGuide Inc, Samsung Fire & Marine Insurance, Seoul Credit Rating & Info, Kakao Corp, Korea Airport Service, LG CNS, Meritz Financial Group and more

• MTD screening results with 5 trading days left point to 2 names going out and 2 names coming in: Gemvax and Wonik IPS replace Dongjin Semichem and Jusung Engineering.
• Unlike last April’s tariff-distorted +1.3% rebalance, this time we expect cleaner, more meaningful price action.
• No pre-positioning seen, so I’ll target ETF rebalance day (Oct 10) and maybe take an anticipatory position a day earlier.

• On 23 September, Hankyung Business Daily reported that Kcc Corp (002380 KS) plans to issue about 430 billion won worth of exchangeable bonds (EB) based on its own treasury shares.
• We believe the overall impact on this EB issue on KCC is likely to be more negative as compared to the EB issue it conducted in July 2025. 
• Our NAV valuation of KCC Corp suggests NAV per share of 508,467 won, which is 22% higher than current price.

• Hanon Systems announced that it has finalized a rights offering capital increase of 900 billion won. This capital raise will involve 347.5 million common shares (51.2% of outstanding shares)
• The expected rights offering price is 2,590 won per share, which is 18.4% lower than current price of 3,175 won. 
• We remain Negative on Hanon Systems (018880 KS). There is a high probability that this rights offering deal will likely be a dilutive deal for the Hanon System shareholders.

• FnGuide holds a dominant position in South Korea’s rapidly expanding sector-themed ETF index market, a key growth driver for the company.
• Despite consistent revenue growth, the company experienced a significant 47.6% drop in net income in FY 2024, raising concerns about profitability and operational efficiency.
• A shareholder dispute in 2024 and subsequent management changes have introduced corporate governance risks and uncertainty regarding the company’s future strategic direction.

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• Market Leader with Strong Financials: Samsung Fire & Marine Insurance (SFMI) is the leading non-life insurer in South Korea with a market share of approximately 22%. The company exhibits a robust capital position, reflected by the highest solvency ratio among domestic peers (280% as of March 2024), and has a strong track record of profitability and shareholder returns.
• Strategic Shift Towards Profitability and Shareholder Value: In response to regulatory changes (IFRS 17/K-ICS) and a maturing domestic market, SFMI is focusing on high-margin, protection-type long-term insurance products and enhancing shareholder returns. The company announced a comprehensive ‘value-up’ plan, targeting a 50% total shareholder return by 2028 and a significant reduction in treasury shares.
• Stable Outlook Amidst Industry Headwinds: While the South Korean non-life insurance industry faces challenges from slowing auto insurance growth and capital pressures from new regulations, SFMI is well-positioned to navigate these headwinds. Its strong brand, extensive distribution network, digital leadership, and prudent risk management provide a stable foundation for moderate, profitability-focused growth.

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• Seoul Credit Rating & Info (SCI) is a diversified credit information services provider in South Korea, with operations spanning credit ratings, debt collection, and credit reporting. This diversification provides multiple revenue streams, though the company holds a minor position in the main bond rating market.
• The South Korean credit rating industry is a highly regulated oligopoly dominated by three major players. While this creates high barriers to entry, SCI’s market share in the core ratings business is significantly smaller than its main competitors, positioning it as a niche player.
• Financial performance has shown significant volatility, with recent quarterly results indicating a strong recovery in revenue and profitability after a challenging period in 2023. Future growth will likely depend on the health of the South Korean bond market and the company’s ability to expand its ancillary credit information services.

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• Kakao Corp. stands as a dominant force in South Korea’s digital landscape, built upon the ubiquitous KakaoTalk messaging app. Its integrated ecosystem, spanning fintech, mobility, and content, creates a powerful network effect and a wide economic moat.
• Significant corporate governance risk clouds the company’s outlook. The founder, Brian Kim, faces serious legal charges of stock price manipulation, which has led to stock volatility and could have long-term implications for the company’s financial subsidiaries and investor confidence.
• Future growth is contingent on strategic initiatives in artificial intelligence, including the launch of an AI agent, and a major redesign of the core KakaoTalk application. Success in these areas is crucial for enhancing user engagement and unlocking new revenue streams to counter slowing growth and increasing competition.

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• Strong Post-Pandemic Recovery: Korea Airport Service (KAS) has demonstrated a robust recovery following the COVID-19 pandemic, with significant year-over-year growth in revenue and a return to profitability, driven by the resurgence in domestic and international air travel.
• Dominant Market Position with Diversified Services: As a subsidiary of Korean Air, KAS holds a commanding position in the South Korean airport ground handling market. The company’s services extend beyond core aviation support to include a diversified portfolio of businesses such as mineral water production and livestock farming, which provides some revenue stability.
• Attractive Valuation with Reinstated Dividends: The company trades at a low valuation relative to its earnings and book value. The reinstatement of dividends in 2023 signals improving financial health and a renewed commitment to shareholder returns, though the negative free cash flow trend warrants monitoring.

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• LG CNS is a major player in South Korea’s rapidly growing IT services market, capitalizing on the national push for digital and AI transformation. Its strategic focus on high-growth areas like cloud, AI, smart factories, and logistics, coupled with a strong relationship with the LG Group, positions it for sustained growth.
• The company’s recent foray into emerging technologies, particularly its potential involvement in the stablecoin platform market, has generated significant investor interest and stock price momentum. However, this opportunity is accompanied by high regulatory uncertainty.
• A key overhang risk is the potential sale of a significant stake by Macquarie Group. While the company’s fundamentals are solid, this technical factor could lead to share price volatility in the near term. The company’s valuation appears reasonable compared to peers, but the market is pricing in high expectations for future growth.

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• Meritz Financial Group has demonstrated exceptional growth in profitability and market capitalization, driven by a strong performance from its core insurance and securities subsidiaries and a highly effective shareholder return policy.
• The company is strategically positioned to benefit from the evolving South Korean insurance landscape under the new IFRS 17 and K-ICS regulatory frameworks, focusing on high-margin protection-type products.
• Led by Chairman Cho Jung-ho, the management team has a proven track record of value creation, emphasizing a performance-based culture and shareholder value, though potential corporate governance risks related to insider trading allegations warrant monitoring.

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