Daily Brief South Korea: Hanwha Corporation, Kakaopay , Taekwang Industrial and more

In today’s briefing:

Minority Shareholders of Hanwha Corp Preferred Shares Demand Better Protection
Payment Companies – Introducing the Sector Scorecard
Taekwang Industrial: Issuing EB Worth 319 Billion Won Based on Its Treasury Shares [Poor Governance]

Minority Shareholders of Hanwha Corp Preferred Shares Demand Better Protection

Minority shareholders of Hanwha Corp preferred shares are demanding better protection (such as converting preferred shares into common shares) and are criticizing the potential delisting of its shares.
We provide four major scenarios that could occur for Hanwha Corp preferred shares (000885 KS) in the coming weeks.
The fact that Hanwha Group companies are on such positive momentum, it would be in the best interest for Hanwha to improve shareholder value of the Hanwha Corp’s preferred shares.

We introduce our payments scorecard in this report, in which we apply weightings to our metrics of valuation, margins, EBITDA growth estimates and valuation-to-growth to deliver rankings
We keep PagSeguro and Nexi on the buy list, both of these are in the top three in the scorecard; we add PayPal to the buys, replacing the mega-cap Visa
We remove our sell rating on Affirm, replacing it with Kakao Pay; Kakao Pay stock has rallied hard on stablecoin speculation, but our concern is that investors under-estimate regulatory risk

After the market close on 27 June, Taekwang Industrial (003240 KS) announced that it is issuing an exchangeable bond (EB) worth 319 billion won based on its treasury shares.
Taekwang Industrial announced it will issue EBs with the 271,769 treasury stocks representing 24.41% of the issued shares. This is poor corporate governance and not shareholder friendly.
Going forward, we believe its shares are likely to underperform the market in the next 1-2 years.

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